Restaurants ring up Big Data to drive sales

Restaurants ring up Big Data to drive sales

We’ve said it before and odds are we will say it again – applications for our Disruptive Innovators can come from a number of areas, including ones that are less than obvious. Big Data and its use in the restaurant industry is such an example as those companies look to overcome flat traffic trends and drive incremental purchases. How? By knowing what your preference are thanks to Big Data, mobile apps, and loyalty programs, which allow them to notify you when your preferred items, or ones that match your profile, are on sale. This likely means more pop-ups for last minute, impulse item additions like the extra guac from Chipotle courtesy of DoorDash. And yes, Chipotle is in the process of rolling out its own loyalty program.


Data is emerging as a powerful weapon in the increasingly competitive battle for the restaurant consumer. An explosion of food vendors—and menu items—is giving diners more choices than ever. Some restaurants say using customer data to tailor menus to their tastes can give them a leg up.

“Total restaurant traffic is not growing, so anything restaurants can do to offer a better customer experience differentiates them from the competition,” says David Portalatin, a food-industry adviser at market-research firm NPD Group Inc.

Many restaurants collect customer data through their loyalty programs, which diners can sign up for online or via an app. (After customers make a certain number of visits, they earn points that can be redeemed for discounted items or at no charge.) But the data that companies collect through such programs offer a window into the habits of only their most loyal customers, who aren’t the ones they really need to convince to return. And there are limitations to some online loyalty programs: Restaurants that collect email addresses without logging specific purchases can only send out emails about promotions to the whole customer base. An email for half-priced Frappuccinos, for example, would be wasted on someone who only ever orders coffee.

By contrast, individuals’ purchases are easier to track on mobile-order apps. Starbucks Corp. realized that its mobile app, which had only been accessible to members of its Starbucks Rewards loyalty program, could be more effective if it were open to everyone. Starbucks had 15 million active Rewards members, but it had another 60 million monthly customers it knew nothing about. Starbucks in March opened the app to everyone.

Source: How Restaurants Are Using Big Data as a Competitive Tool – WSJ

Discounts & coupons are the primary driver behind growth in mobile app shopping

Discounts & coupons are the primary driver behind growth in mobile app shopping

A new report from App Annie confirms what we’ve already suspected when it comes to our Connected Socity – that consumers are increasingly using mobile apps to shop. Per the report, consumer spending has more than doubled, exceeding $86 billion in 2017, up more than 105% since 2015. Interestingly, while time spent in apps increased by 30% over that same time frame, which means consumers are increasingly using apps as a shopping destination rather than casual browsing.

The largest reason for this shift to mobile app shoppng, a part of our Connected Society and Cashless Consumption investing themes?

Our Cash-strapped Consumer investing theme – discounts, coupons and credits.

Consumers love mobile apps: In fact, there were 175 billion downloads globally in 2017 — a 60 percent growth from 2015, according to App Annie’s end-of-year retrospective report.

  • A little more than two in 10 shoppers of large format shoppers — or 22 percent — say the biggest reason they use their retailer’s mobile app is because they receive discounts, coupons and credits.
  • 13 percent of customers of large format stores say the biggest reason they use their retailer’s mobile app is because they can get product information.
  • 12 percent of large format shoppers say the biggest reason they use their retailer’s mobile app is because they can find a product while they are in a store.
  • 12 percent of large format shoppers say the biggest reason they use their retailer’s mobile app is because they can buy products through the app.
  • A little under one in 10 — or 9 percent — of large format shoppers say the biggest reason they use a retailer’s mobile app is because they can pay for products when they are in the store.

Source: Shoppers Use Retail Apps Because Of Discounts |

Cash-strapped consumer want more digital coupons

In a recent Thematic Signal post, we shared that Apple (AAPL) is making in roads with Apple Pay as smartphones account for a growing percentage of digital commerce. We lamented on the lack of loyalty program support in Apple Pay, but it is becoming increasingly clear that shoppers want digital couponing. Currently there are third party apps that “clip” digital coupons, but wouldn’t it be convenient to have all those coupons alongside your payment cards in Apple’s iOS Wallet… especially if it were tied into Reminders with a “use by” date. Maybe in iOS 12? Such a move by Apple might actually prompt more food and consumer product companies to offer digital coupons, something that could hit shares of Quotient Technology (QUOT), the parent of

With consumer debt levels rising and nonsupervisory wages flat year over year in December 2017, we see this as a natural for the intersection of our Cash-strapped Consumer and Connected Society themes.

Online grocery sales are a booming business, with the eCommerce segment expected to make up 20 percent of all grocery sales by 2025.

Traditional brick-and-mortar grocery stores are seeking to adapt to this new market through ominchannel marketing. Kroger, for example, plans to spend $9 billion over the next three years to modernize, according to the Omni Usage Index.

As the online grocery business grows, retailers that sell the products that stock refrigerators and pantries across the country are seeking to expand their marketing efforts across multiple channels — online and in-store. When trying to connect with consumers or offering them a deal on a product, here are five things to keep in mind.

— While a large percentage of large-format grocers already use digital coupons, 40 percent, 33 percent would use them if retailers offered them. Target, for example, has a mobile app called Cartwheel that brings manufacturers’ digital coupons to consumers’ smartphones. From the app, consumers can “clip” coupons that, in some cases, are the same ones found in the local newspaper. As TechCrunch has pointed out, this digital method of coupon clipping increases Target shoppers’ potential savings, as manufacturers’ coupons frequently offer greater discounts than those offered only through the app, like special offers on Target’s private label products.

Source: Grocery Shoppers Want To Use Online Coupons |

Apple playing the long-game with Apple Pay

The current headlines are rumor mongering over iPhone X production cuts for the first half of 2018, but Apple continues to improve the stickiness of iPhone by tapping into the exploding world of mobile payments with Apple Pay. Initially off to a slow start, Apple Pay is now reportedly accepted in 50% of US retail locations… of course, accepted at doesn’t necessarily equate to “used at.” That said, with smartphones and tablets account for 25% of e-commerce transactions in the U.S. it looks like Apple is continuing to play the long game as smartphones and tablets become a greater portion of digital commerce. Now to see more loyalty programs built into Apple Pay and its iOS Wallet…

Addressing conference attendees in a speech entitled “The Modern Shopping Experience,” Bailey presented a few interesting tidbits relating to Apple Pay growth and adoption, as well as insight into Apple’s current and future ambitions for mobile payments services, reports CNET Japan.

Purchases made on smartphones and tablets account for 25 percent of e-commerce transactions in the U.S. The rate of growth for mobile transactions is four times that of desktop, and 10 times that of traditional brick and mortar retail. The same phenomenon is occurring outside the U.S. China, for example, sees 80 percent of its e-commerce transactions performed on mobile devices.

According to Bailey, Apple Pay availability was limited to about 3 percent of stores in the U.S. when it launched in 2014, but is now accepted in 50 percent of stores. Beyond reasonably wide acceptance, the platform plays an integral role in the mobile e-commerce boom. The company provides retailer support in four distinct areas: apps, transaction settlement, loyalty programs and integration between store and mobile.

Source: Apple Pay accepted at 1 out of 2 U.S. stores, says Apple VP Jennifer Bailey

This week’s earnings season game plan

This week’s earnings season game plan


We have quite the bonanza of corporate earnings for holdings on the Tematica Investing Select List. It all kicks off tomorrow with Corning (GLW) and picks up steam on Wednesday with Facebook (FB). The velocity goes into over drive on Thursday with United Parcel Service (UPS) in the morning followed by Amazon (AMZN), Alphabet/Google (GOOGL) and Apple (AAPL). Generally speaking, we expect solid results to be had as each of these companies issues and discuss their respective December quarter financials and operating performances.

Given the recent melt-up in the market that has been fueled in part by favorable fundamentals and 2018 tax rate adjustments, we expect to hear similar commentary from these Tematica Select List companies over the coming days. The is likely to be one of degree, and by that I mean is the degree of tax-related benefits matching what the Wall Street herd has been formulating over the last few weeks? Clearly, companies that skew their geographic presence to the domestic market should see a greater benefit. The more difficult ones to pin down will be Facebook, Apple, Amazon and Google, which makes these upcoming reports all the more crucial in determining the near-term direction of those stocks.

We are long-term investors that can be opportunistic, provided the underlying investment thesis and thematic tailwinds are still intact. Heading into these reports, the thematic signals that we collect here at Tematica tell me those respective thematic tailwinds continue to blow.

As we await those results, we continue to hear more stories over Apple slashing iPhone X production levels as well as bringing a number of new iPhone models to market in 2018. These reports cite comments from key suppliers, and we’ll begin to hear from some of them tomorrow when Corning reports its quarterly results. We’ll get more clarity following Apple’s unusual tight-lipped commentary on Thursday, and even if production levels are indeed moving lower for the iPhone X we have to remember that Apple’s older models have been delivering for the company in the emerging markets. Moreover, the company could unveil a dividend hike or upsized repurchase program or perhaps even both as it shares the impact to be had from tax reform. As I shared last week, there are other reasons that keep us bullish on Apple over the long-term and our strategy will be to use any post-earnings pullback in the shares to improve our cost basis.

In digesting Apple’s guidance as well as that offered by other suppliers this week and next we’ll be keeping tabs on Universal Display (OLED), which is once again trading lower amid iPhone X production rumors. As I pointed out last week, Apple is but one customer amid the growing number of devices that are adopting organic light emitting diode displays. We remain long-term bullish on that adoption and on OLED shares.

We’ve received and shared a number of data points for the accelerating shift toward digital shopping in 2017 and in particular the 2017 holiday shopping season. We see that setting the stage for favorable December quarter results from United Parcel Service and Amazon later this week. We expect both companies to raise expectations due to a combination of upbeat fundamentals as well as tax reform benefits. With Amazon, some key metrics to watch will be margins at Amazon Web Services (AWS) as well as investment spending at the overall company in the coming quarters. As we have shared previously, Amazon can surprise Wall Street with its investment spending, and while we see this as a positive in the long-term there are those that are less than enamored with the company’s lumpy spending.

In Alphabet/Google’s results, we’ll be looking at the desktop/mobile metrics, but also at advertising for both the core Search business as well as YouTube. Sticking with YouTube, we’ll be looking for an update on YouTube TV as well as its own proprietary content initiatives as it goes head to head with Netflix (NFLX), Amazon, Hulu and Apple as well as traditional broadcast content generators.

In terms of consensus expectations for the December quarter, here’s what we’re looking at for these six holdings:


Tuesday, JANUARY 30, 2018

Corning (GLW)

  • Consensus EPS: $0.47
  • Consensus Revenue: $2.65 billion


Wednesday, January 31, 2018

Facebook (FB)

  • Consensus EPS: $1.95
  • Consensus Revenue: $12.54 billion


Thursday, FEBRUARY 1, 2018

United Parcel Service (UPS)

  • Consensus EPS: $1.66
  • Consensus Revenue: $18.19 billion


Alphabet/Google (GOOGL)

  • Consensus EPS: $10.00
  • Consensus Revenue: $31.86 billion


Amazon (AMZN)

  • Consensus EPS: $1.84
  • Consensus Revenue: $59.83 billion


Apple (AAPL)

  • Consensus EPS: $3.81
  • Consensus Revenue: $86.75 billion



Businesses flock to Instagram

The adoption of social media by companies to reach customers, share its wares, drive revenues and build its brands continues. Amid the battle between Facebook and LinkedIn, we are seeing businesses embrace Instagram, in some cases as its only web presence, to reach customers. Even as we peruse Instagram, we are seeing more companies have profiles as well as advertise. The visual nature of the platform, in our view, gives it a hefty leg up over Twitter and because the images “last” we say the same holds compared to Snap. Instagram is also a mobile-first platform, which means its appealing to smartphone users, the fastest growing category for digital commerce so far this holiday season. How long until the Facebook bears begin to wonder if Instagram’s success will eat into demand for Facebook?

Instagram announced this morning that it now has 25 million active business profiles, up from 15 million in July.

Instagram also says that more than 80 percent of Instagram accounts follow a business, with 200 million users visiting a business profile every day.

The growth is impressive since Instagram only launched these business profiles — which allow for more functionality in the profile itself, as well as access to additional analytics — about a year and a half ago.

Vishal Shah, director of product for Instagram Business, said that nearly 50 percent of business profiles don’t link to an outside website, suggesting that they see Instagram as their primary or sole online presence.

Businesses need to be smart about what they post to the feed and in their Instagram Stories, but the distribution strategy goes beyond that, to things like search and hashtags.

In fact, Instagram says that two-thirds of visits to business profiles come from users who don’t follow that profile. And one of the ways that Shah wants to grow the business product is by providing more detail about where visitors come from and what they do “downstream,” during or after that visit.

Source: There are now 25M active business profiles on Instagram | TechCrunch

Today it’s the mobile web, tomorrow the voice-driven web

Today it’s the mobile web, tomorrow the voice-driven web

As we saw in 3Q 2017 earnings results from Asset-lite Business Model company Alphabet (GOOGL) and Connected Society company Facebook (FB), the current platform of chose among consumers is mobile. We are, however, seeing the seeds of the next technology revolution — voice-powered intelligent solutions — with more players entering the fray. The current leader is Amazon (AMZN) with its multitude of Echo devices, but there is also Alphabet’s (GOOGL) Google Home and later this year Apple (AAPL) is expected to unveil its HomePod offering.

As voice interface technology improves and even faster mobile networks come to market, how long will it be before the mobile web is replaced by the voice-driven web? If that’s the case, it would not bode well for companies like Synaptics (SYNA) and Logitech (LOGI) that make peripherals such as mice, keyboards, trackpads and touchpads.

Voice-AI could prove the way along with VR showrooming, that E-commerce accelerates in the 2020s as an improved channel for trusting consumers and younger mobile natives increasingly entering the voice AI economy.

In that world, it will be voice suggestions, instead of mobile Ads that win your heart and subtly influence your shopping habits based upon your Amazon or Google history. Goodbye Facebook.

Amazon as a first mover and with a variety of Alexa devices, holds as dominant if not more so a role in the future of voice activated shopping as Amazon AWS does in the cloud.

With iOS devices changing from Microsoft’s bing back to Google for its web search results we have to assume that the likes of Cortana and even Siri have fallen too far behind Alexa and Google Assistant in the race to be the most useful and ubiquitous personal assistants. Meanwhile for Mandarin speakers the Tmall Genie of Alibaba, retails for around $73.00 (RMB 499).

CONCLUSIONAs the mobile web gives way to the Voice-AI web of IoT and a different kind of smart city such as the rise of food delivery apps, and later autonomous vehicles and drone delivery hubs, the voice interface remains the fastest growing retail technology trend that could impact the future of commerce.

Source: The Future of Voice Activated Shopping – Star Cloud Services

Previewing AT&T (T) Earnings and Watching Capital Spending Levels for Dycom (DY)

Previewing AT&T (T) Earnings and Watching Capital Spending Levels for Dycom (DY)

After today’s market close when Connected Society company AT&T (T) reports its 1Q 2017 results we will get the first of our Tematica Select List earnings for this week. This Thursday we’ll get quarterly results from both Amazon (AMZN) and Alphabet (GOOGL) with several more to follow next week.

Getting back to AT&T, consensus expectations call for the company to deliver EPS of $0.74 on revenue of $40.57 billion for the March quarter. As we have come to appreciate, these days forward guidance is as important as the rear view mirror look at the recently completed quarter; missing either can pressure shares, and mission both only magnifies that pressure. For the current (June 2017) quarter, consensus expectations are looking for AT&T to earn between $0.72—$0.79 on revenue of $40.2-$41.3 billion.

Setting the state for AT&T’s results, last week Verizon (VZ) issued its March quarter results that saw both its revenue and earnings miss expectations. Buried in the results, we found decreased overage revenue, lower postpaid customers and continued promotional activity led to a year on year revenue delicate for Verizon Wireless. The culprits were the shift to unlimited plans and growing emphasis on price plans that likely led to customer switching during the quarter.

If AT&T were still a mobile-centric company, we’d be inclined to re-think our investment in the shares, but it’s not. Rather, as we’ve discussed over the last several months, given the pending merger with Time Warner (TWX), AT&T is a company in transition from being a mobile carrier to a content-led, mobile delivery company. As we’ve seen in the past, consumers will go where the content is (aka Content is King investment theme), and that means AT&T’s content portfolio provides a competitive moat around its mobile business. In many ways, this is what Comcast (CMCSA) established in buying NBC Universal — a content moat around its broadband business… the difference is tied to the rise of smartphones, tablets and other mobile content consumption devices that have consumers chewing content anywhere and everywhere, and not wanting to be tied down to do so.

For that reason, we are not surprised by Comcast launching Xfinity Mobile, nor were we shocked to hear Verizon is “open” to M&A talks with Comcast, Disney (DIS) and CBS (CBS) per CEO Lowell McAdam. In our view, Verizon runs the risk of becoming a delivery pipe only company, and while some may point to the acquisitions of AOL and Yahoo, we’d respond by saying that both companies were in troubled waters and hardly must-have properties.

With AT&T’s earnings, should we see some weakness on the mobile side of the business we’re inclined to let the stock settle and round out the position size as we wait for what is an increasingly likely merger with Time Warner.


We’re Also on the Look Out for Datapoints Confirming Our Position in Dycom (DY)

As we listen to the call and dig through the results, we’ll also keep an eye on AT&T’s capital spending plans for 2017 and outer years, given it is Dycom’s (DY) largest customers (another position in our Tematica Select List). As we digest that forecast and layer it on top of Verizon’s expected total capital spending plan of $16.8-$17.5 billion this year, we’ll look to either boost our price target on Dycom or revise our rating given we now have just over 8 percent upside to our $115 price target.


Tematica Select List Bottomline on AT&T (T) and Dycom (DY)
  • Our price target on AT&T (T) shares remains $45; should the shares remain under $40 following tonight’s earnings, we’ll look to scale into the position and improve our cost basis.
  • Heading into AT&T’s earnings call, our price target on Dycom (DY) shares remains $115, which offers less than 10 percent upside. This earnings season, we’ll review customer capital spending plans to determine addition upside to that target, but for now given the pronounced move in DY shares, up more than 18 percent in the last month, we’d hold off committing fresh capital at current levels.



Adding this Missing Link Connected Society Stock to the Tematica Select List

Adding this Missing Link Connected Society Stock to the Tematica Select List

This morning we are adding shares of delivery and logistics company United Parcel Service (UPS) to the Tematica Select List with a price target of $122. We’ve often referenced UPS and its business as the missing link in the digital shopping aspect of our Connected Society investing theme. Year to date, UPS shares have fallen 6 percent, which we attribute in part to the seasonal slowdown in consumer spending. As we pointed out in our analysis of the January Retail Sales report last week, the shift toward digital commerce continues to accelerate and we see that a positive tailwind for UPS’s business and comments from UPS’s annual investor day held yesterday confirm our view.

As of last night’s market close UPS shares stood near $108, which when compared to our $122 price target offers 14 percent upside before we factor in the 3.1 percent dividend yield. Including the quarterly dividend of $0.83 per share into our thinking, we see 17 percent upside from current levels to our price target. As such we are adding UPS shares to the Tematica Select List with a Buy rating. Should the shares drift toward the $100 level, we are inclined to get more bullish on the shares given the business fundamentals as historical dividend yield valuation metrics.


A Look Ahead to 2018-19 for UPS

Yesterday, at its annual investor day United Parcel Service shared its 2018-2019 financial targets, expanded delivery and pick-up schedule, and continued buybacks. In reviewing those details, we continue to see the accelerating shift toward digital commerce at the expense of brick & mortar retail powering the company’s business. While most tend to focus on Amazon (AMZN) when we think of digital shopping, the reality is we see a far more widespread push toward it from the likes of Wal-Mart (WMT) as well as traditional retailers and consumer product companies. Wal-Mart, in particular, is shared on its earnings call yesterday that it would expand its online efforts to include grocery and called out both mobile and online as part of is efforts to “provide customers with a better offer.”

What all of this tells us is we have reached the tipping point for digital commerce, and like a tanker that is turning, once it hits the tipping point it tends to pick up speed. We see that in the coming quarters as retailers that lagged behind are now forced to invest to stay relevant with consumers.

In response to that accelerating shift, UPS is planning to expand its delivery and pickup schedule to six days for ground shipments, including Saturdays. In tandem, UPS will continue to invest in its logistics network, which signals it is preparing for the continued transformation in how consumers shop. That transformation is leading UPS to forecast revenue growth in the range of 4-6 percent over the 2018-2019 period, which means no slowdown in revenue growth from 2017 is expected. UPS also shared it intends to repurchase between $1-$1.8 billion in share repurchase during 2018-2019, which should allow it o grow EPS faster than revenue. UPS expects EPS during 2018-2019 to grow 5-10 percent, which is at the upper end of current expectations. As such, we expect to see Wall Street boosting price targets today and tomorrow up from the current consensus of $115 to something more inline with our $122 price target.


Embracing Technology of the Future


A drone demonstrates delivery capabilities from the top of a UPS truck during testing in Lithia, Florida, U.S. February 20, 2017. REUTERS/Scott Audette

UPS also shared it continues to test drone deliveries, including launching the drone from the top of a UPS van that is outfitted with a recharging station for the battery-powered drone. Granted this in testing, but in our view, the hub and spoke method of deploying drones from UPS trucks makes sense given that drones, especially those carrying packages, are like to operate for limited time frames due in part to battery power demands. In UPS’s tests, the battery-powered drone recharges while it’s docked. It has a 30-minute flight time and can carry a package weighing up to 10 pounds.

Again, we find this interesting, but odds are we will not see any pronounced impact on UPS’s delivery business for at least several quarters. Longer-term, initiatives such as these could spur further productivity and margin improvements.


The Bottomline on United Parcel Service (UPS)
  • We are adding shares of United Parcel Service (UPS) to the Tematica Select List with a price target of $122.
  • Should the shares drift toward the $100 level, we are inclined to get more bullish on the shares given the business fundamentals as historical dividend yield valuation metrics.


$100 Billion in Online Grocery Sales by 2025 Raises Competitive and Logistics Questions

$100 Billion in Online Grocery Sales by 2025 Raises Competitive and Logistics Questions

Each month it seems we get more data points that confirm the accelerating shift toward digital shopping. As we noted in a recent post,  non-store sales accounted for 19 percent of holiday shopping in 2016 vs. 17% in 2015, but the shift is moving way past holiday shopping. Amazon is moving into fashion, groceries and other verticals as it continues to collapse its time to customer. We’ve seen continued strength in what Nike and Under Armour call Direct to Consumer, and we suspect Kroger and Whole Foods are likely to see the way the tailwinds in grocery are blowing.

One of the lingering questions is how will all of these goods get to those who ordered them? United Parcel Service? FedEx? The US Post Office? Uber? Lyft or proprietary delivery services? Drones? Odds are there will be a partnering strategy as we doubt each retailer will want to develop their own national hub and spoke consumer facing logistics system.

While online sales make up a small fraction of the total market in the U.S., the market share is growing quickly. A new study from the Food Marketing Institute and Nielsen projects online grocery sales in the U.S. could grow tremendously in the next decade.By 2025, the report suggests that American consumers could be spending upwards of $100 billion on online grocery purchases, comprising some 20 percent of the total market share.

Source: Grocery Tracker: $100B By 2025 |