Walmart using its superstores as cross docks for its smaller stores. Aivars Lode avantce

Wal-Mart predicts sales will grow faster next year

BY JESSICA WOHL

Tue Oct 15, 2013 6:03pm EDT

(Reuters) - Wal-Mart Stores Inc (WMT.N) expects slightly stronger sales growth next year as it makes changes such as opening more smaller U.S. stores and shutting 50 poorly performing stores in Brazil and China, executives said on Tuesday.

The Wal-Mart company logo is seen outside a Wal-Mart Stores Inc company distribution center in Bentonville, Arkansas June 6, 2013.

CREDIT: REUTERS/RICK WILKING

The world's largest retailer sees a "tough" and "unpredictable" economy around the world, Chief Executive Officer Mike Duke said, a week after the International Monetary Fund trimmed its outlook for global growth.

Wal-Mart expects its overall sales to rise to $475 billion to $480 billion this fiscal year, a gain of about 1.9 percent to 3 percent over last year's $466.11 billion. For fiscal 2015, which begins in February, it is targeting 3 percent to 5 percent growth, Chief Financial Officer Charles Holley said at the company's meeting with investors and analysts in Arkansas. The meeting was also webcast.

Positive economic signs such as a declining unemployment rate, along with Wal-Mart's efforts such as better merchandising plans, new stores and ecommerce plans, makes the company confident it can grow sales faster next year, Holley said.

Still, U.S. customers remain under pressures from higher income taxes, gas and food prices, plus the government shutdown, and they are trying to stick to budgets.

Wal-Mart is not waiting for the holiday season to get aggressive on pricing. Walmart U.S., its largest business by far, is promoting low prices on everything from Kraft's (KRFT.O) Velveeta cheese and PepsiCo Inc's (PEP.N) Doritos chips to Procter & Gamble Co's (PG.N) Pampers diapers and Bounty paper towels this month, while Sam's Club will have another discount booklet for members starting on October 30, as both chains try to boost sales early in the fourth quarter.

More than 1 million people have already signed up for holiday layaway, which allowsWalmart U.S. shoppers to put items on hold and pay for them over time. Four of the top five items on layaway are devices including Google Inc (GOOG.O) Nexus tablets, HP's (HPQ.N) HP 2000 laptop, the Hisense Sero 7 tablet and Fuhu Inc's nabi 2 Kids' tablets, Holley told reporters.

FURLOUGH IMPACT

Walmart U.S. feels pretty good about its profit but is not satisfied with its sales, Simon said.

Same-store sales at Walmart U.S. unexpectedly fell 0.3 percent in the 13-week period that ended in late July. Same-store sales at the bottom 10 percent of its large U.S. supercenters were down 7.5 percent in that period, he added.

Walmart U.S. said it is testing using its supercenter stores as "cross docks" to supply nearby smaller stores, a move that could help it keep goods in stock and cut costs. The system is set to roll out in the first of three unnamed markets in March.

Using the back room of a supercenter as a "little mini warehouse" for daily deliveries to smaller stores would eliminate the need to send 53-foot trucks from distribution centers to smaller stores, Walmart U.S. CEO Bill Simon said.

"I think it's a fundamental shift in their real estate strategy" to look at things market-by-market rather than store-by-store and is a "sophisticated development," said Stewart Samuel, program director at IGD, who attended Tuesday's meeting.

Those types of efforts, plus continued investment in ecommerce, should pay off over time, Samuel said. Wal-Mart, which is opening more ecommerce fulfillment centers and filling some orders from stores, expects $13 billion in ecommerce sales in fiscal 2015, up from $10 billion or more this year.

Thousands of federal workers have been furloughed in the impasse over the U.S. budget and Walmart U.S. CEO Bill Simon said that if people were not getting paid, they were not shopping as much. Sam's Club CEO Rosalind Brewer said that just over 40,000 people came to shop at its warehouse clubs after the chain waived its usual fee for those who could not access military commissaries closed in the shutdown.

Wal-Mart shares ended the day down 31 cents, or 0.42 percent, at $74.37. Through Monday, the shares were up 10 percent this year, underperforming the 19.7 percent gain in the S&P 500 .SPX.

SLOWING INTERNATIONAL GROWTH

Bentonville, Arkansas-based Wal-Mart is still committed to trying to grow operating expenses at a slower rate than sales. Overall, capital spending is set to be $12 billion to $13 billion this year and $11.8 billion to $12.8 billion next year.

The company is closing about 50 under-performing stores out of hundreds it has in the major emerging markets of Brazil and China, said Walmart International Chief Executive Doug McMillon. The company said the stores set to close represent about 2 percent to 3 percent of its sales in each of those markets, although it is still opening new stores as well.

For the first time, Walmart U.S. plans to open more smaller-format stores than supercenters. Walmart U.S. plans to open 235 to 265 stores in fiscal year 2015, about 120 to 150 of them small stores. It is planning for about 245 openings this year, slightly above an earlier forecast.

Wal-Mart now plans to open 34 million square feet of new store space this year, down from its original forecast of 36 million to 40 million square feet. For next year, it targeted 33 million to 37 million in new store space, with more than half of the space being added in Walmart U.S., which will open more smaller stores than larger ones. The pace of growth internationally may continue to slow.

Soap Opera: Amazon Moves In With P&G

 P&G warehouses should be attached to the factory, so previously P&G would not ship eachs just full truck loads to a DC.  Now they have engaged with Amazon to do eachs (cartons) from the closest point of manufacture  to the customer. Aivars Lode avantce

Soap Opera: Amazon Moves In With P&G

E-Commerce Giant Sets Up Shop Inside Warehouses of Suppliers

By Serena Ng

Updated Oct. 14, 2013 10:52 p.m. ET

TUNKHANNOCK, Pa.—Atop a hill at the end of a road called P&G Warehouse Way sits a warehouse stocked with Pampers diapers, Bounty paper towels and other items made by Procter & Gamble Co. PG -1.45%It also houses an ambitious experiment by Amazon.comInc. AMZN -1.38%

Each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them.

The e-commerce giant is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo.

The under-the-tent arrangement is one Amazon's competitors don't currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals including discount chains, club stores and grocers.

Logistics have long been crucial to success in retail. Years ago, Wal-Mart Stores Inc. WMT -0.42% set up a system that lets suppliers monitor what needs to be replenished.

Amazon instead is going out to its suppliers with a program it calls Vendor Flex. By piggybacking on their warehouses and distribution networks, Amazon is able to reduce its own costs of moving and storing goods, better compete on price with Wal-Mart and club stores like Costco Wholesale Corp., and cut the time it takes to get items to doorsteps.

A few of Amazon's rivals have caught wind of the arrangement and aren't happy about it. "Retailers don't like things that benefit their competitor but not them," said Anne Zybowski, vice president of retail insights at consulting firm Kantar Retail.

Yannis Skoufalos, P&G's global product supply officer, said the company values its relationships with all its customers and works closely with many retailers to help reduce costs in their supply chains and meet their unique needs. For example, P&G works with warehouse clubs to keep its products in stock without taking up too much storage space inside the stores.

Household staples have traditionally been considered too bulky or cheap to justify the cost of shipping. Americans currently buy just 2% of such goods online, retail analysts estimate. Yet even that sliver of business was worth $16 billion in 2012, according to Nielsen Holdings NV, and the research firm believes online sales will grow by 25% a year to $32 billion in 2015.

Consumer-products makers selling through Amazon like the idea of locking shoppers into their brands with the subscription program, and in some cases help fund the discounts. AFP/Getty Images

More efficient distribution and changing consumer habits are unlocking the market. If online sales of consumer packaged goods could rise to the 6% share the Internet claims of retail overall, Amazon could generate an extra $10 billion in revenue selling nonfood consumer goods, up from less than $2 billion currently, estimates Mark Mahaney, an Internet stocks analyst at RBC Capital Markets in San Francisco.

"This is one of the biggest growth areas for Amazon," Mr. Mahaney said.

"We continue to innovate on behalf of our customers to offer fast delivery, low prices, and vast selection," an Amazon spokeswoman said.

The company signaled its interest in selling consumer staples online with its $500 million acquisition in 2011 of Quidsi Inc., the owner of Diapers.com and Soap.comthat subsequently added sites selling toys and pet supplies, among other things.

P&G began sharing warehouse space with Amazon around three years ago and has expanded the practice. Amazon is now inside at least seven P&G distribution centers world-wide, including spots in Japan and Germany, said a person familiar with the matter.

The economics of the arrangement benefit both sides. For Amazon, co-location reduces the cost of storing bulky items like diapers and toilet paper and frees up space for the Web retailer to stock higher-margin goods in its own distribution centers. The location in northeastern Pennsylvania is 5 miles from one of P&G's largest plants, which makes diapers, paper towels and toilet paper, and within a day's drive of major cities in the U.S. Northeast and Canada. The warehouse also stocks other P&G products from pet food to razors to shampoo.

P&G, meanwhile, saves on the transportation costs that it would have incurred trucking products to Amazon's regional distribution centers. Plus, it gets Amazon's help in boosting online sales, a priority for many in the industry.

Amazon is already inside or in talks to enter the warehouses of companies including Seventh Generation Inc., Kimberly Clark Corp. KMB -0.42%and Georgia Pacific Corp., people familiar with the matter said.

Seventh Generation said it is in talks with Amazon to ship its diapers, baby wipes and cleaning products directly from its warehouses. Chief Executive John Replogle said more than 20% of the Burlington, Vt., company's sales come via the Internet—a percent that has doubled from five years ago, he said.

"This is the fastest-growing part of our business," Mr. Replogle said.

Kimberly Clark and Georgia Pacific declined to comment.

Amazon—which posted $61 billion in sales in 2012, up 27% from a year earlier—has a service called Subscribe & Save to tap into that area of growth. With items like vitamins, cereal and toilet paper, Amazon automatically ships them to customer's doorsteps on a regular schedule. Shoppers that buy at least five eligible items per shipment get a 15% discount.

Consumer-products makers selling through Amazon like the idea of locking shoppers into their brands with the subscription program, and in some cases help fund the discounts.

Clorox Co., whose Brita water filters, Burt's Bees skin-care products, and namesake disinfecting wipes are increasingly sold online, often via Amazon, is expecting companywide sales from e-commerce to hit $200 million in 2020, up from $75 million in the fiscal year ended in June.

A.G. Lafley, P&G's recently returned CEO, has identified e-commerce as one of the biggest opportunities for the Cincinnati-based company, which is trying to accelerate sales in an economic environment where growth is hard to find. P&G doesn't disclose what percentage of its sales come via the Internet, but the growth is faster than other retail channels, notes Bernstein Research analyst Ali Dibadj. P&G's Pampers and Luvs diapers, Duracell batteries, Gillette razor cartridges and Braun shavers are among the items that consumers are increasingly buying online, company executives say.

In recent years, P&G's online sales of diapers have grown sharply. The company's goal is to get consumers who buy diapers online to add more of its products like skin cream and laundry detergent to their orders as well.

P&G has long honed its ability to sell products in physical stores with shrewd in-store marketing and packaging designs. But it is a neophyte in the world of online sales and could use Amazon's help.

"They need to figure out what they can do to influence online sales," said Mr. Dibadj. "This is a whole new world for P&G."

—Greg Bensinger contributed to this article.

  

Strengthening health care’s supply chain: A five-step plan

With globalization countries boarders are expanded. Aivars Lode avantce

Strengthening health care’s supply chain: A five-step plan

Dramatically changing the sector’s inefficient supply chain may eliminate the dangers posed by counterfeiting and medication errors.

September 2013 | byThomas Ebel, Erik Larsen, and Ketan Shah

The manufacturing of pharmaceuticals and medical devices is becoming increasingly complex. Companies are expanding their product portfolios to meet rapidly changing markets and lengthening product life cycles. Emerging economies want more affordable products. Quality and compliance issues are rising because products are more complex and regulatory scrutiny is stricter. And the number of drug recalls is increasing. Yet the supply chain remains fragmented and incomplete, with weaknesses that put patients at risk, cost billions in value, and lessen the health-care sector’s ability to take on the challenges it faces. (For more, see our video interview with McKinsey director Katy George on how improving the health-care supply chain will benefit companies across the industry.)

 

The good news is that models do exist to strengthen and improve the health-care supply chain. We believe that by learning from the experience of industries such as fast-moving consumer goods (FMCG), the health-care sector could cut production lead times and obsolescence, while manufacturers, distributors, hospitals, and pharmacies could carry significantly smaller inventories (Exhibit 1). Improving the health-care supply chain also could give millions of people around the world access to safer and more affordable health care, reduce costs, and provide new revenue sources for manufacturers.

Exhibit 1

Operational metrics suggest huge opportunities.

• Enlarge

Our research identified five specific capabilities that can have a dramatic impact on performance and bottom lines:

• better segmentation of products, markets, and customers
• greater agility, to reduce costs and increase flexibility
• measurement and benchmarking
• alignment with global standards
• collaboration across the health-care value chain

Now, we recognize that transforming supply chains isn’t easy. In our experience, limited improvement efforts yield poor results, while comprehensive, integrated efforts are complex. But the payoff can be significant. Supply chains now account for nearly 25 percent of pharmaceutical costs and more than 40 percent of medical-device costs. The annual spending is so vast—about $230 billion on pharmaceuticals and $122 billion on devices—that even minor efficiency gains could free up billions of dollars for investments elsewhere. In fact, if the sector adopted straightforward advances well established in other industries, we estimate that total costs (from the supply chain and external areas, such as patient care) could fall by $130 billion.

Industry research, together with our own experience serving clients, has revealed opportunities to boost profitability throughout the value chain. The improvement from better-performing supply chains would range from about 6 percent for retailers to 20 percent for hospitals and producers of devices and medical supplies (Exhibit 2).

Exhibit 2

Opportunities from the transformation of supply chains can be found across the whole value chain.

• Enlarge

Easing shortages, improving safety

The cost of the shortcomings of today’s supply chain is substantial. Since 2005, drug shortages have nearly tripled in the United States and added more than half a billion dollars in costs for hospitals worldwide. Supply issues also create opportunities for counterfeiters and gray-market vendors, threatening patient safety and cutting into the revenues of legitimate companies. Supply-chain security breaches are increasing by an average of more than 33 percent every year, rising not only in emerging markets such as China, India, and Brazil but also in the developed world.

In addition, medication errors in the developed world occur in roughly 10 to 20 percent of all inpatient hospital admissions. About 1 in 10,000 patients admitted dies from adverse drug events, which, we estimate, add $20 billion to $90 billion in costs to the health-care system globally. Better supply-chain processes are central to increasing patient safety. We estimate that adopting a common global data standard and upgrading supply-chain processes could slash counterfeiting in half, returning $15 billion to $30 billion in revenue (by 2016) to legitimate companies for reinvestment in further improvements to patient care.

Building a new health-care supply chain

A typical Asian laptop manufacturer can accept an order on a Monday and deliver a pallet of freshly assembled customized computers to a European customer little more than a week later. In contrast, a typical pharmaceutical manufacturer has a lead time of about 75 days. How can medical-device and pharmaceutical manufacturers close the gap? Of the five comprehensive transformations we have identified, three can be accomplished internally. Two others—alignment and collaboration—are potentially the most powerful but require a company to work together with its customers, suppliers, and even competitors. Here’s what must be done.

Internal factors

1. Segmentation. Many pharmaceutical and medical-device companies come close to running one-size-fits-all supply chains. In practice, however, there can be significant differences in profitability, value per unit of weight, demand, the importance of a drug or device to patients, a customer’s cost to serve, and service expectations. Forcing products with such varied characteristics through a single set of supply-chain processes creates multiple inefficiencies, such as high inventories for some products while others are in short supply, the use of expensive air freight when slower surface modes would do, or a need to reschedule production campaigns hastily to meet urgent delivery requirements. Leading companies tackle these problems by intelligently segmenting their supply chains according to the characteristics of products and the requirements of customers. They then develop forecasting, production, and distribution strategies for each category.

2. Agility. This means more than just being fast when there’s an emergency; it means building an operating model that can better respond to demand shifts and customer wishes—at the same or even reduced cost. As we mentioned, the replenishment lead time from pharmaceutical plants to distribution centers is 75 days, on average. But leading companies in sectors such as fast-moving consumer goods take a fraction of that time, often without additional investments. Companies must better align the production cycle with the patterns of patient demand and increase the low frequency of their manufacturing processes. The average stock-keeping unit (SKU) is packaged every two to three months; only about 10 percent are packaged every two weeks or less.

An agile supply-chain model also requires stability in production, replenishment, and visibility. Many health-care companies need to make deliveries from third parties and in-house plants more reliable and to upgrade their sales- and operations-planning capabilities to the standards of the fast-moving-consumer-goods industry. The necessary improvements include a more disciplined cross-functional process, a better understanding of demand-and-supply scenarios and of underlying assumptions, more effective communication, and transparency on potential supply issues and bottlenecks.

3. Measurement. Health-care companies need to increase the transparency of their costs, including manufacturing, transport, warehousing, inventory holding, staff, and obsolescence—moves that could cut operational costs and optimize route-to-market approaches and product portfolios. Improvements are also needed in structural drivers or capabilities: responsiveness, manufacturing frequency, reliability of supply, and stability are mostly not systematically measured or managed across the network. Consumer-goods companies are clearly more advanced: they watch metrics such as the manufacturing-frequency index to measure the share of SKUs that are produced with high frequency. Finally, companies must standardize metrics across countries and plants. Commercially available benchmarking tools and approaches provide rough guidance for high-level opportunities in services, costs, and inventories, but not fully comparable results or tangible recommendations on how to capture value.

External factors

While internal optimization can deliver better service at lower cost, companies have even more to gain from optimizing externally. To do so, they must align processes and improve collaboration.

4. Alignment. Manufacturers of fast-moving consumer goods use point-of-sale information from retail customers to build production plans. The grocery industry, for example, has created billions of dollars in value by adopting standard barcodes. To build a cost-effective supply chain, the health-care sector could align around a single set of global standards that support data interchange, processes, and capabilities. Doing so may increase efficiency and patient safety by making it harder for counterfeiters to operate, by reducing medication errors, and by improving recall processes.

5. Collaboration. While the use of common standards is part of the challenge, supply-chain partners must find ways to collaborate more effectively to reap the full benefit. Barriers to improvement are often cultural rather than technical—transactional relationships must be transformed into something more ambitious. In our experience observing successful collaboration projects, six essential steps can make the difference between a productive collaboration and a frustrating one: companies must collaborate in areas where they have a solid footing; agree on sophisticated benefit-sharing models; select partners for the potential value of the collaboration, as well as their capabilities and willingness to act as a team; dedicate resources to the collaboration and involve senior leadership in it; jointly manage performance and measure impact; and start out with a long-term perspective.

At a recent meeting of senior supply-chain executives in the pharmaceutical and medical-device industries, we asked attendees which of these five supply-chain changes offered the greatest opportunity. More than 70 percent specified improved collaboration.

Transforming the health-care supply chain can do much more than improve the bottom line. By embracing the challenge of supply-chain leadership, pharmaceutical and medical-device companies can provide safer, more affordable access to products that enhance or even save the lives of people across the world.

For more on this research, download the full report, Building new strengths in the health-care supply chain (PDF–871KB). You can find further information on the topic of standardization by downloading the related report Strength in unity: The promise of global standards in health care (PDF–3.3MB).

Interview: Gousto combines convenience, quality and value

The food supply chain being disrupted in the UK. Aivars Lode avantce

Interview: Gousto combines convenience, quality and value

By Katy Askew | 27 August 2013

One-year-old Gousto is a fledgling company with a unique proposition. Consumers order online from a variety of menu options and Gousto delivers dinner kits, complete with recipe cards and all the ingredients, direct to the door. The company, which has expanded rapidly through its own website, has just entered a partnership with online retailer Ocado. Katy Askew spoke to Gousto co-owner Timo Schmidt about the company's ambitions.

Gousto is a company with a mission. Founded by Timo Schmidt and James Carter last year, it aims to make it easier for busy families to cook healthy, tasty meals from quality ingredients.

Part online retailer, part meal solution provider, the company has rapidly grown its business through its website were consumers select a weekly menu from ten menu options - which change from week-to-week. Gousto delivers the ready-to-cook meal components and recipe cards throughout the UK.

Speaking to just-food today (27 August), co-founder and co-owner Schmidt suggests that the company has hit on a trifecta of elements that meet the needs of time-poor consumers: quality, value and convenience. This, he says, makes Gousto a "real alternative to supermarkets and restaurants".

"James and I started Gousto one year ago to overcome our own everyday issue of not being able to cook delicious and healthy meals with quality ingredients. When you live a busy life, running after toddlers and working long hours, it's difficult to cook beyond the six dish repertoire. Supermarket meals, pizza delivery and ready meals are full of additives and hidden stuff, and they cost quite a bit," he suggests.

"Gousto is all about making home cooking with natural ingredients easy. Quality matters a lot - remember the horse meat scandal - so we only work with a number of farms we trust, and all our veg is organic."

Focusing on quality and traceability at a time when consumers are growingly concerned about issues of provenance, Gousto sources all of its ingredients direct from farms and the company has built up a relationship with the farmers with whom it works.

"It's 100% traceable. Gousto sources all its meat from a farm in Devon, the fish comes from Scotland and our veg is organic and accredited by the Soil Association. We know all of our farmers really well and know that they share our passion for natural food free of additives, animal welfare and sustainable farming."

Perhaps most importantly, Gousto makes it really easy to cook good food.

"Every week, our team of chefs develop ten recipes, so you only eat what you really like. We tell you the time it will take to cook, the calories, country of origin and more important information so you can always cook according to your preferences.

"We have a pretty rigorous production process: first, our chefs are suggesting new ideas taking into account seasonality. Then we test cook the recipe once and the entire team gets to comment on it. Then our sourcing team gets involved to make sure we can actually get all the ingredients. Then we do four more rounds of test cooking, including team test cooking, to make absolutely sure that the recipe works in various kitchens and homes."

And, perhaps surprisingly for what seems an up-market concept, Schmidt insists that Gousto also offers good value for money. "At GBP4-7 per portion, the price is pretty good, delivery is free and you don't have to worry about any food waste. There's no comparable offering at the moment, and our customers are very loyal because we focus on quality so much."

Schmidt emphasises that part of the value-for-money proposition comes from the fact that Gousto's pre-measured portions help tackle the related issue food waste. "Over 10% of food is wasted, so the average person looses GBP1,000 per year on food waste, which is very sad."

While the "vast majority" of Gousto's business comes through its own website, the company recently entered into a partnership agreement with Ocado that sees a limited menu selection offered to Ocado customers. While Ocado's offering is limited, it offers greater flexibility when it comes to delivery - making Gousto's products available to a broader assortment of consumers.

"Our Gousto boxes have sold out every day so far on Ocado and it's great to know that their customers like our recipes," Schmidt says.

Schmidt expects Gousto to benefit from the continued growth of the online retail space which, she says is "doubling in size every few years" - despite an economy that is not in growth.

"We are all undergoing a seismic shift from grocery shopping offline to online. I think in 20 years you and I will look back and laugh about how we did shopping back in 2013. I believe that Gousto's value proposition - great recipes, quality, and convenience - will be of growing  importance today and over the next 20 years."

As Gousto looks to leverage its unique proposition in the growing online grocery market in the UK, the company is working to develop its offering.

"We are 100% committed to... turning Gousto into a strong household brand that's loved by customers. Customer experience is everything to us, and we are working hard to improve it continuously. We will introduce a lot of new features to the customer experience over the next year, to make sure that the experience gets better and better."

While Gousto is currently bent on UK expansion, Schmidt sees potential for the company to expand internationally. "Gousto makes life so much easier and cooking more fun, so it's easy to see how this could work outside the UK."

Smartphone Cameras at 41 Megapixels Pressure Canon, Nikon

Digital photography now being disrupted by smartphones. Aivars Lode avantce


Smartphone Cameras at 41 Megapixels Pressure Canon, Nikon


The global camera business, centered in Japan, is headed for a shakeout.

 
A member of the media tries out a Sony Corp. Xperia Z1 smartphone mounted with a lens-style digital camera Cyber-shot DSC-QX100 after a news conference in Tokyo on Sept. 13, 2013.
July 11 (Bloomberg) -- Bloomberg's Rich Jaroslovsky reviews Sony Corp.'s Xperia Z phone. The water-resistant mobile device, already a huge hit in Japan, arrives in the U.S. on July 17 through an exclusive deal with T-Mobile. 
 The Nikon Corp. D5200 digital single lens reflex (DSLR) camera is arranged for a photograph at the 2013 Consumer Electronics Show in Las Vegas.

A visitor wears a surgical mask as he tests a Canon Inc. digital single lens reflex (DSLR) camera at the CP+ Camera and Photo Imaging Show in Yokohama City.




The global camera business, centered in Japan, is headed for a shakeout.

A member of the media tries out a Sony Corp. Xperia Z1 smartphone mounted with a lens-style digital camera Cyber-shot DSC-QX100 after a news conference in Tokyo on Sept. 13, 2013. Photographer: Yuriko Nakao/Bloomberg

July 11 (Bloomberg) -- Bloomberg's Rich Jaroslovsky reviews Sony Corp.'s Xperia Z phone. The water-resistant mobile device, already a huge hit in Japan, arrives in the U.S. on July 17 through an exclusive deal with T-Mobile. (Source: Bloomberg)

The Nikon Corp. D5200 digital single lens reflex (DSLR) camera is arranged for a photograph at the 2013 Consumer Electronics Show in Las Vegas. Photographer: David Paul Morris/Bloomberg

A visitor wears a surgical mask as he tests a Canon Inc. digital single lens reflex (DSLR) camera at the CP+ Camera and Photo Imaging Show in Yokohama City. Photographer: Kiyoshi Ota/Bloomberg

With industry revenue falling to the lowest level in a decade amid surging smartphone sales, Nikon Corp. (7731), the world’s No. 2 camera maker, has cut prices to lure consumers. Market leaderCanon Inc. (7751) may follow suit to keep pace, according to UBS AG, putting pressure on smaller producers and possibly leading them to retreat from the business.
“There are too many players,” said Ryosuke Katsura, an analyst at UBS in Tokyo. “It’s going to be tough for smaller camera makers even to remain in the business as competition between Canon and Nikon will likely intensify,” said Katsura, who recommends selling shares of both industry leaders.
Since Apple Inc. introduced the iPhone in 2007, Canon and Nikon stocks have lost more than half their value as demand has withered in an industry they have dominated for over a decade. Nikon is the worst performer in the Nikkei 225 (NKY) index this year, falling 34 percent.
Sales of compact models have slumped as smartphones displace the point-and-shoots that were the biggest part of the market. Now higher margin single-lens reflex models -- a market 80 percent controlled by Canon and Nikon -- are slowing as well.
To keep sales moving, Nikon has been discounting many models. The Nikon 1 J2, introduced a year ago, now sells for as little as 23,485 yen ($240), 64 percent below its initial price, according to Japanese online comparison site Kakaku.com. The high-end D600, also introduced last September, has declined 26 percent to 145,975 yen.
Army Binoculars
Camera shipments are likely to fall 30 percent this year to 69 million units, according to Morgan Stanley MUFG Securities Co., even as manufacturers try to slow the decline by adding smartphone-like features such as Wi-Fi and Bluetooth. Nikon in August cut its 2013 net income target by 23 percent while Canon lowered profit and sales forecasts in July.
Nikon says it cut prices to reduce inventory as demand falls, and that the company is scaling back production to boost profitability. Canon says it doesn’t plan to chase short-term market share gains by cutting prices.
Founded in 1917, Nikon supplied binoculars and optical gear to the Japanese military. After World War II the company focused on consumer products and in 1959 introduced its first SLR camera with an interchangeable lens, the Nikon F. Today it gets 84 percent of operating profit from imaging.
Buddhist Goddess
Canon started in an apartment in the Tokyo district of Roppongi in 1933. The next year, the company built its first 35 millimeter camera, called the Kwanon after the Buddhist goddess of Mercy. Its EOS Rebel, introduced in 1993, helped Canon cement its lead in the market by attracting a younger generation to high-end SLRs.
“Camera makers need to seek a new growth driver,” said Hirosuke Takayama, an analyst for SMBC Nikko Securities Inc. in Tokyo. Medical equipment that uses their image-capturing sensors and processors is “the area the companies are all looking at.”
Olympus Corp. (7733), which started as a maker of microscopes and thermometers in 1919, produced its first camera in 1936. In 1950, it made an early endoscope -- for taking pictures inside the body -- and the company is now the world’s largest producer of such devices. Olympus plans to stop SLR development and this year closed a Beijing camera plant and suspended its cheapest compact camera line. In April Olympus started a venture withSony Corp. (6758) to develop medical equipment.
$1 Brownie
Fujifilm Holdings Corp. (4901), a Tokyo-based photographic film maker, is shifting away from consumer cameras to medical systems and display components. Panasonic Corp. (6752), which produces the Lumix brand, will shrink its compact camera business, Chief Executive Officer Kazujiro Tsuga said in an interview.
Both industry leaders have ample resources to fund new ventures and takeovers. Canon had cash and equivalents of 755 billion yen in June while Nikon’s cash holdings were 121 billion yen, according to data compiled by Bloomberg.
“Changes in the camera market may tell them it’s time for them to take risks to do something drastic to change their earnings structure,” said Hisashi Moriyama, an analyst at JPMorgan Chase & Co. in Tokyo.
The shift to smartphones could be similar to the transition from film to digital photography, which weeded out companies slow to adapt. Konica Minolta Holdings Inc. sold its SLR business to Sony in 2006 to focus on office equipment. Pentax Corp. was acquired in 2007 by Hoya Corp (7741), which sold the camera operation to Ricoh Co. (7752) four years later. Eastman Kodak Co., the photography pioneer that introduced the $1 Brownie Camera more than a century ago, is now bankrupt.
41 Megapixels
Smartphone cameras are getting more sophisticated. Samsung Electronics Co. (005930)’s Galaxy S4 is equipped with a 13-megapixel sensor. Sony’s latest Xperia Z1 has a 20.7 megapixel camera and an optional zoom-lens attachment. Nokia Oyj (NOK1V) in July unveiled its Lumia 1020 with a 41-megapixel camera. By contrast, Canon’s EOS-1D X, which sells for $6,799 on the company’s U.S. website, has an 18.1-megapixel sensor -- though pixel count is only one of many factors that affect image quality.
As Nikon and and Canon consider diversification, earnings are going to remain under pressure as smartphones cannibalize compacts and margins on SLRs shrink, said Amir Anvarzadeh, a manager of Japanese equity sales at BGC Partners Inc. (BGCP)in Singapore.
“This is not,” he said, “going to reverse anytime soon.”

Amazon Bets On Web Groceries, Expands AmazonFresh To L.A

Amazon now disrupting fresh food buying and delivery. Aivars Lode avantce


Amazon Bets On Web Groceries, Expands AmazonFresh To L.A


Posted Jun 10, 2013 by Sarah Perez (@sarahintampa)

Amazon Prime members can test the service under a free 90-day trial, then will be charged $299 for the next year, and annually after that, the AmazonFresh website explains. This charge, though seemingly high, actually includes the $79 Amazon Prime membership, too, which offers other member discounts like free two-day shipping, Amazon Prime Instant Video access, Kindle Lending Library access and more. Still, the price for Amazon Prime Fresh will still dissuade bargain shoppers for now, instead targeting those who value convenience more than others. That should also keep the user base from expanding at too rapid a rate, possibly outpacing the number of orders Amazon can feasibly handle at this point.

Confirming reports from earlier this month, Amazon has today expanded its online grocery service AmazonFresh to it first non-Seattle market: Los Angeles. The company homepage was quietly updated this morning with news of the expansion, and the AmazonFresh mobile applications for iOS and Android have been refreshed as well, announcing the new availability. L.A. customers will now have access to AmazonFresh’s over 500,000 products, the company says.

Earlier in June, a Reuters report stated that Amazon would be bringing AmazonFresh to L.A. and San Francisco this year, with twenty more markets scheduled for 2014, including some outside the U.S. Now the first of those expansions is live, in select L.A. zip codes.

After all these years, the $568 billion grocery market is still ripe for disruption by online retailers like Amazon, especially as it and others are now beginning to figure out the logistics and opportunities surrounding same-day delivery. Google, eBay, Walmart, and even startups have been experimenting with similar same day delivery services, all looking to tap into consumers’ desire for conveniences on-call with a tap of a button.

But with grocery items, there are a number of hurdles to overcome – perishable grocery inventory has to be stored and transported refrigerated, which is costly. Getting the margins right is key, and it’s something which Amazon has been working on for years. You may remember all the way back in 2007, the company had announced AmazonFresh as an invite-only service in Seattle, while memories of dot-com flameout Webvan were still in recent memory.

Amazon has had half a decade to trial, test and iterate, which gives it an advantage. But it could also face serious competition from Walmart, which though now the world’s largest brick-and-mortar merchant, has been losing ground to Amazon online. Last week, Walmart CEO Mike Duke announced the company was poised to hit $10 billion in e-commerce sales this year, but the retailer also recently said that it has no immediate plans to expand its U.S. grocery delivery operations outside of tests in California right now, because it’s not convinced there is significant consumer demand at this time.

That hasn’t stopped other companies from reading the tea leaves and launching services betting on online grocery trends, most recently mySupermarket.com which just today announced the expansion of its “Kayak for web groceries” service, now available in the U.S.