Apple model for Zara, H&M
Also in today’s edition: Young Chinese hit country roads; Home building boom in small cities; Swipe sweeps streaming; Aping Berkshire Hathaway
Good morning! Is this the age of peak pop-stars? Music charts, concert tours, and now theatre halls, no avenue is untouched by their stardom. Variety reports that Beyonce’s concert film, Renaissance, is raking in the moolah at the US box office with an opening of $21 million on its first weekend. Interestingly enough, Beyoncé has taken a page out of Taylor Swift’s book by partnering with AMC Theatres for the distribution of the film. For traditional studios, the message is clear: they’re not irreplaceable.
Adarsh Singh and Venkat Ananth also contributed to today’s edition.
The Signal Daily team could not produce a new episode for today due to an emergency. We'll be back tomorrow. In the meantime, tune in to these timeless stories on Thai queer dramas, and AI coming for India's saas-bahu serials. Listen to The Signal Daily on Spotify, Apple Podcasts, Amazon Music, Google Podcasts, or wherever you get your podcasts.
The Market Signal*
Stocks & Economy: As expected, the Bharatiya Janata Party’s state election victories supercharged Indian equities, taking their total value to $4 trillion for the first time. Adani Group stocks added more than $10 billion in a single day to founder Gautam Adani’s wealth, which has now crossed $70 billion.
The run-up could mean traders might book profits on Tuesday and indices could fall. The GIFT Nifty was hinting at a weak opening. Asian markets started in the red following dull US equities.
After skyrocketing in the past few months, US inflation is giving way to deflation. Although prices are falling for consumer goods such as home appliances, furniture and used cars, no one is expecting it to widen to other goods.
It means the US Fed has successfully steered the economy into calm waters and will have a better grip of the wheel when it chooses to reverse its policy direction.
After a long lull, investors are also rushing back to cryptocurrencies.
RETAIL
Bigger, Better, Apple-like
Retract that eulogy; in-store shopping is alive. The rise of e-commerce and the pandemic seemingly sealed physical retail’s fate but store chains are opening bigger, more expensive outlets to woo customers. Zara and H&M shut stores and opened new ones with multiple floors housing a larger inventory, specialty cafes, even salons and repair stations.
Bang for your buck: Retailers are aping Apple whose stores are meant to drive brand awareness, not necessarily sales. H&M is measuring store performance by footfalls and time spent, rather than sales while Zara’s parent firm Inditex has spent more money to open fewer stores but has had a 16% bump in sales per square foot.
Supersize me: Indian retailers are following suit. Share of stores <2,000 square feet in size declined to 52% of India’s total retail space this year while that of stores sized 10-15,000 square feet grew the most.
ECONOMY
Fear and Loathing in China
Life for China’s young workers is grim: homes paid for aren’t getting built, big-city jobs aren’t available, and loans can’t be repaid.
Young graduates, unable to find jobs, are moving to the countryside. They’re taking up civil service jobs and government loans and internships, making do with smaller salaries, disappointed parents, and a slower pace.
Out of money: A record 8.54 million Chinese borrowers–nearly 1% of the working population–have defaulted on loans. The state has now banned them from various economic activities such as making online payments or buying flight tickets; this could further hurt the economy.
Home-less: Some of these defaults are deliberate. Affluent homeowners are refusing to make mortgage payments as bankrupt developers fail to hand them their homes. Real estate major Evergrande is waiting to be liquidated. Smaller, unlisted developers are selling off their distressed debt and refusing help to protesting would-be owners.
REAL ESTATE
Trickling Down, Brick By Brick
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The demand for land is rising again as people seek to build individual cocoons in a post-pandemic world. The trend has picked up in tier II and tier III cities and property developers, as usual, are in the lead.
How much: Between January 2022 and October 2023, developers bought 3,294 acres of land, nearly 45% of which was in tier II and tier III cities. Over 91% or 1,339 acres of the small-city land purchased are earmarked to be divided into plots and sold to individuals, The Economic Times reports.
The uptick is largely in places such as Nagpur, Palghar, Panipat, Khalapur, Panchkula, and Ludhiana. It’s perhaps not a coincidence that some of them are also home to newly minted millionaires.
The Signal
Construction was a major driver of GDP growth in the July-September quarter and is likely to be one in this quarter as well. The sector grew by 13.3% in the second quarter compared to 5.7% during the same period the previous year. Building activity picking up in smaller cities is a good sign as it will help neutralise the downturn in farming. Unpredictable weather patterns have taken a toll on farming, which grew by just 1.2% in the quarter. That means more farm workers will be searching for jobs. The construction sector is usually the first port of call for casual labour looking for work. It will also provide a fillip to materials suppliers and skilled workers such as masons, electricians, and plumbers.
MEDIA
Now streaming: Cancellations!
Call it subscription fatigue or inflationary woes, streaming in the USA is not in a good place. Data from a new report suggests that customers in the US are cancelling their streaming services in record numbers.
Subscriber cancellation rate rose to 5.7% in October, the highest on record. Paramount+, Discovery+ and Starz were the biggest losers, with Disney+, Apple TV+, Hulu and Peacock all reporting dwindling figures. Only Netflix has managed to stave off this great fleeing of subscribers; its churn rate was less than a third of everyone else’s.
Endless entertainment: Another possible theory is the rise of Social TV. Social media platforms like Instagram, YouTube, TikTok have morphed into TVs of today, with their never-ending vertical feeds catered to your taste for free. Quality original content from creators and traditional producers alike, plus the presence of legacy IP on these platforms have left users spoilt for choice.
CORPORATE
Roll-up Software Giant
E-commerce platform Shopify might be the flagbearer of Canada’s tech industry, but a 26-year-old IT services company — Constellation Software — is fast closing in on its $50 billion market value.
Its speciality? Rolling up hundreds of small software companies (860 to be precise), for which it has shelled out $8.7 billion since 2005, The Economist noted.
Say, what? Mirroring the legendary Berkshire Hathaway’s perpetual ownership model, Constellation has been mopping up companies with a median deal value of $3 million (it spent $700m for a hospital business software in 2022). Those could help its revenues top $8 billion this year.
But how? It targets well-managed, preferably founder-led companies with over $5 million in revenue and a competitive edge. It brings them under one of its six subsidiaries that serve specific markets. The revenue these subsidiaries generate is used by the parent to make…more acquisitions.
FYI
Scraping the barrel: Byju Raveendran, founder of beleaguered edtech BYJU’S, has reportedly pledged his multiple Bengaluru homes to raise money to pay salaries.
💰💰 pledge: Adani Green Energy will invest $22 billion more to quintuple capacity by 2030, CEO Amit Singh said on the sidelines of COP28 climate talks in Dubai.
Let off: The Securities Appellate Tribunal (SAT) has set aside a Sebi order and penalty on Mukesh Ambani and Reliance Industries (RIL) for allegedly manipulating Reliance Petroleum stock price ahead of a merger with RIL. SAT said the regulator acted too late.
Pink slips: Music streamer Spotify will send away about 1,500 employees or 17% of its workforce. This is the third time the company has cut jobs this year.
Power up: Japanese electronics maker TDK will set up a manufacturing unit in Haryana that will make lithium-ion batteries for Apple iPhones.
Battered and bruised: Cyclone Michaung, which has brought heavy rains and 100 km-per-hour gusts to Chennai, has shut down iPhone plants operated by Foxconn and Pegatron.
Encashed: Mark Zuckerberg sold Meta shares worth $185 million, his first sale of shares in two years.
THE DAILY DIGIT
₹1.66 lakh crore
Or ~$19.91 billion. That’s India’s average monthly GST collection this fiscal year so far. It’s up 1.75x from FY21’s monthly average. (Business Standard)
FWIW
Checking the fact-checker: Guinness World Records is perhaps the best bookkeeper of our collective conscience. Where else will you find information about the stinkiest flowers, widest mouths and largest chicken nuggets. But even the best have their bad days and Guinness seemingly had theirs. Their crowning of the oldest dog ever to Bobi, who lived for 31 years, is being challenged. Some have raised questions about faulty paperworks while veterinarians are pointing to Bobi’s rotund figure in confusion. Naysayers though dismiss it as a dog-food lobbying effort. Who knew Guinness had such a tough job.
Fantasy football: Long before the footballing world began its brouhaha about Saudi Arabia, there was China. The country followed the familiar strategy of throwing bucket-loads of money on big-name players. However, none of that razzmatazz held up to its promise. A slew of policy changes like a ‘luxury tax’ on transfers and a salary cap on teams effectively dried investments into the league. Piling onto the misery, COVID and the collapse of the real estate industry, where most of the owners made their fortune, effectively destroyed the footballing ambitions of China. For now.
Stop pelting: That’s the message from celebrities to fans. After Harry Styles, Ariana Grande, Billie Eilish, Florence Pugh has become the latest celebrity to be hit by objects thrown by fans while onstage. This not-so-welcome trend has caused major injuries, with Bebe Rexha getting stitches. There’s no apparent explanation though. Some fans who have been caught in the act have defended themselves by saying it's funny. But not everyone is taking this lying down. Cardi B has hit back (literally) and Adele has issued a warning to fans. Crazy times!