Bloomberg Businessweek Asia Edition 31 08 2020 PDF

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August 31, 2020

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Jeff Hoa Truong CEO Hong Lan Money Transfer Wells Fargo customer since 2014

The Way Ahead

Sending Hope Back Home

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Across the Ocean When Jeff Hoa Truong and his sister immigrated to the United States in 1979, in the first month, they sent $100 back to their parents in Vietnam. “We were so happy to help them,” says Jeff.

Connecting Countries In 2001, Jeff started Hong Lan Money Transfer to serve immigrants like him in Orange County, California’s Little Saigon neighborhood. Now, it transfers $675 million annually in dozens of states.

Full Stop But it was dependent on customers physically handing over the cash or check. When the pandemic hit, “our business went from 100% to zero overnight,” says Jeff.

Going D

Wells Fargo provide enable Hong Lan’s c money using the co

Opportunity “Now, our customers can pay for school, food and healthcare for folks back home without interruption,” Jeff says.

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Connecting Jeff with his

◼ CONTENTS

Bloomberg Businessweek

◼ IN BRIEF ◼ OPINION ◼ AGENDA

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Exxon exits the Dow ● TikTok sues Trump The U.S. needs a coherent strategy to face Putin’s Russia India’s first-quarter GDP ● A new Mercedes S-Class

◼ REMARKS

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Dear Fed, it’s me, the stock market. Thanks!

BUSINESS

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Convenience stores go online to counter the Covid slum Chinese factories wish for a very merry Christmas Blue Apron’s CEO says the home-cooking boom will last

TECHNOLOGY/ VIDEO GAMES

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The video game biz is hot, but issues of fairness remain Lockdown boredom fuels big spending by players All work and no perks for the game industry’s permatemp Microsoft brings the Netflix subscription model to gamin Why Minecraft and Roblox are on your kid’s syllabus ▼ E-sports teams get serious about training

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Sony’s The Last of Us Part II ups gaming’s cinematic gam

FINANCE

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No revenue, no business, and plenty of willing IPO buyers Inflation-wary investors turn to gold, Bitcoin—and whisky Investing in racial diversity is hobbled by a lack of data

ECONOMICS

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Suburban home sales are going through the roof Covid sends India’s migrants home to caste discriminatio

POLITICS

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Federal small-biz aid, $1 billion of it, may have gone astray Once solidly red, Georgia could flip the Senate to blue

SOLUTIONS/ RETIREMENT

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How to replenish Social Security’s dwindling trust fund Low bond yields may put the 60/40 strategy out to past

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Virgil Abloh predicts the clouds over fashion will soon clea This fall, make like a fisherman and stay warm in these kn High-end tailors take measures to keep suitmaking alive Brand-name quality without the brand-name price

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◼ PURSUITS

 IN BRIEF ○ Global Covid-19 cases have now topped

24m and deaths have surpassed 822,000. President Trump said he would expand access to a treatment using blood plasma from people who’ve recovered from the virus, but researchers warned that the therapy’s benefits haven’t been proven.

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○ Delegates at the Republican National Convention renominated President Trump.

MSNBC anchor Chuck Todd described Trump’s opening-night speech as “agrievance-filled informal acceptance speech that was filled with so many made-up problems about mail-in voting that if we were to air just the truthful parts, we probably could only air maybe a sentence, if that much.”

Bloomberg Businessweek

○ Alexei Navalny, a longtime critic of Vladimir Putin, was evacuated to Berlin on Aug. 22 after falling ill from suspected poisoning on a flight to Moscow. Doctors treating the dissident said they found evidence of a toxin in his body and warned that he may suffer longterm damage.  7 ○ A demonstrator in Kenosha, Wis., holds a make Aug.26 arrested a counterprotester who they say night of unrest in the city after officers shot Jacob in the back. Blake, who’s undergone several surge

○ TikTok sued the U.S. government after President Trump issued an executive order blocking the app from operating in the U.S., citing national security concerns. The Chinese social networking service accused his administration of failing to follow due process and providing no evidence or justification for the ban.

○ “With the data that we are presenting today, the case for mRNA-1273 to

○ Exxon Mobil was ejected from the Dow Jones Industrial Average, more evidence of the decline of U.S. commodity companies.

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Pfizer and Raytheon Technologies were also removed, to make way for Amgen, Honeywell, and Salesforce.com.

○ The annual World Economic Forum in Davos will be postponed until the middle of 2021. The gathering of government leaders, executives, and

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◼ BLOOMBERG OPINION

The U.S. Needs A Realistic Russia Strategy The suspected poisoning of Russian opposition leader Alexei Navalny underscores the dangers Russians face for speaking out against President Vladimir Putin. It’s also a warning to those protesting for democratic change in neighboring Belarus. So long as Putin remains at the helm, Russia will continue to pose a serious threat to democratic values, in its periphery and beyond. A coherent strategy to confront this challenge will be essential for the next U.S. administration. It should include responding more directly to Putin’s provocations, raising the costs for Russian misconduct, and strengthening America’s relationships with its NATO allies. The U.S. shouldn’t rule out cooperation with Moscow in areas of mutual interest, but only when doing so demonstrably advances its ownsecurity. Above all, Washington must send clear signals to Putin about the kinds of behavior the U.S. deems unacceptable. The Trump administration’s policies have instead been characterized by inconstancy. Since 2017 the U.S. has imposed sanctions against Russian individuals and some government entities for a range of actions, from conducting cyberattacks to meddling in Ukraine to poisoning a former Russian spy living in the U.K. Yet the impact of these measures has been blunted by Trump’s resistance to tougher penalties, his acceptance of Putin’s denial of interference in the 2016 election, and his push to welcome Russia back into the Group of Seven club of industrial nations. More recently, Trump has refused to respond to intelligence assessments that Russian operatives paid bounties to Taliban fighters to kill U.S. troops. The U.S. should avoid a rush to judgment, but the president’s willingness to side with the Kremlin’s version of events, rather than that of his own intelligence agencies, is disturbing. At a minimum, the White House should suspend high-level communication with Moscow while it conducts a thorough investigation. If the deaths of American troops are traced to Russian operatives,

As during the Cold War, the U.S. sh manage tensions and reduce the risks lation. Russia lacks the economic po the U.S., but it possesses the world’s b and a larger military budget than a try. Extending and strengthening the bilateral arms-control agreement tha February, is critical for the securit Seeking collaboration in areas of share change, say, or space policy—would al Engaging with Putin, however, shou him. Consistent messaging, tougher det resolute support for allies are essential t Continued drift will only embolden Pu to the detriment of America’s securit For฀more commentary, go to bloomberg.

◼ AGENDA

▶ An Economic Tumble India releases its fiscal first-quarter GD Economists predict a contraction of ab central bank has warned of a severe s that will take a long time to recover fro ▶ Daimler unveils its new S-Class in Stuttgart

▶ Delegates from China France Germany

 REMARKS

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ey there! It’s me, the stock market. I kn it’’s weird to write you like this, but I felt lik neeeded to drop a quick thank-you note for eve thin ng you’ve done for me this year. I mean, yo big ol’ balance sheet is almost $3trillion larger sin early Ma rch! You’re backing up the truck and load it with Tre suries and corporate bonds and bond ET all to keep the th competition to stocks from fixed-incom yields as limited as Jim Cramer’s understanding of me. I been a dream come true, honestly. I mean, fess up: Ha you been reading my diary?! Maybe you’ve noticed, but everything else is a royal me Covid-19 is still killing people. Parents are dreading t beginning of “school.” U.S. unemployment is still above 10 higher than it’s been since the 1980s. The country is faci the biggest economic contraction in its history. Corpor profits are plunging. The recession is forecast to contin at least through the first quarter of next year. And me? I soaring! Have you seen these record highs I’ve been settin

◼ REMARKS

Bloomberg Businessweek

until suddenly he’s going viral for using Scrabble tiles to pick stock ticker symbols. The Robinhood set thinks he’s smarter than Warren Buffett! This probably isn’t going to end well I’ll tell you that much. Speaking of Robinhood, that whole Hertz saga was abou as weird as it gets. A rental car company was trying to sel new shares while in bankruptcy court, because its stock price was on a tear? Let me repeat that: Hertz. Sold. Shares While. In. Bankruptcy. I can’t even! You’re sure keeping you pals over at the SEC busy! I mean, it’s so weird out there Bloomberg Businessweek is resorting to cringeworthy satir to make sense of it all. Speaking of cringey, what was up with the minutes from your last meeting? Don’t get me wrong, I didn’t actually read them. If I had the attention span for that type of stuff, you’d call me the bond market. Of course, the bond market did read the minutes, and it thinks you’re being a little rude fo not wanting to keep the party going. Look, I learned thi lesson the hard way—and I sort of thought you did, too—so it bears repeating: Just do whatever the bond market says OK? It’s bigger, better educated, and a sharper dresser than the both of us. So please do me a solid and keep this thank-you note in mind when you host your virtual Jackson Hole summit. No cowboy stuff, OK? If I hear anybody mutter something abou “irrational exuberance,” I swear I’m gonna blow my top and hurt a few of these Robinhood types, you got that? The Lord giveth, and the Lord taketh away. It’s what I do—and I’m good at it! But right now, this is still a lot of fun for me. And when I do end up burning folks, do you really want to be the one who gets thrown under the bus? I mean, you know you’re going to catch all the blame, right? C’ F d W b th k ’ t th th t

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B U S I N E S S

Can Direct-to-Door Slushees Beat Amazo

● Covid pushed convenience stores online. But delivery costs and new rivals could hit profits

Stores have accelerated th thousands of locations v such as DoorDash, Postm “What Covid really d k h f

EK. DATA: CONVENIENCE STORE NEWS

◼ BUSINESS

Bloomberg Businessweek

and beverage offerings—especially coffee—thereby increasing sales and customer visits. Regional chains such as Wawa, Sheetz, and Casey’s elevated the convenience-store menu from being a punchline on The Simpsons into a dining destination for many time-pressed consumers. Selling higher-margin beer and slushees also evens out the volatility of selling gasoline, which accounts for about two-thirds of the industry’s revenue but just 40% of its gross profit, according to Convenience Store News. Even before the pandemic, the volume of gasoline sold at the stores annually had been declining slightly in recent years. Now the reduced demand for fuel, induced by Covid, means boosting sales of on-the-go food and general merchandise is even more important for the industry, which saw annual nonfuel revenue grow 10% over the past four years, to $235 billion in 2019. But the coronavirus has pushed other types of retailers to dive into e-commerce, promising the quick service that had always been the raison d’être of convenience stores. Grocery stores have ramped up Instacart offerings, mom and pop stores signed up with delivery apps, and restaurant chains poured money into online takeout menus. Amazon.com Inc. meanwhile is expanding one-hour delivery, which in some markets includes convenience items like soda and razors. And in August, DoorDash Inc. debuted an online convenience store called DashMart that promises to offer thousands of items for delivery in less than 30 minutes from its own distribution centers. The delivery giant has started the service in eight cities, including Chicago and Phoenix, and plans to add more locales soon. Convenience-store operators are offering a wide range of home-delivery items, everything from milk, eggs, and Ding Dongs to Tylenol and coffee filters. But serving customers online brings its own challenges—especially if it narrows stores’ already thin margins because of the added cost of getting goods to shoppers’ doorsteps. “There is this growing pressure to explore delivery, but delivery is tough,” says Jennifer Bartashus, an analyst for Bloomberg ll h h df

reevaluate their distribution models,” Nelson says There’s also the dilemma that the better a store’ online offerings become, the more customers ma skip the shopping trip to a brick-and-mortar out let. That often causes a hit to sales, because eliminates impulse purchases that in-store mer chandising is still very good at generating. To improve results, e-commerce veterans us data science and algorithms to increase onlin order size. But convenience stores start at a disad vantage, having an average total purchase of jus $9, according to Convenience Store News, and now they have to give a cut to delivery apps. Deliver services charge 15% to 30% of a convenience pur chase’s bill—plus fees paid by the customer, whic can double the price of a small order. But if store are going to remain convenient in the eyes of shop pers, they don’t have much choice. “Consumers ar being trained for instant gratification,” Bartashu says. “It’s hard to see that changing anytime soon Convenience-store chains have tried to eas investor concerns by pointing to early signs tha online customers are spending more per purchase especially after 9 p.m., when few people want t venture out. Some have said delivery expansion hasn’t cannibalized in-store revenue, but is instead generating a net sales boost that, even at a smalle profit margin, will make them more money. In the Midwest, Casey’s had been using it own drivers to mostly deliver pizza, its most pop ular food offering. When the crisis hit, it was tes ing DoorDash in 30 stores to offer longer hours an more items, according to Chris Jones, chief mar keting officer. Within weeks, the pilot expanded t 600 stores. The company said it isn’t worried abou Amazon, because half its locations are in towns o fewer than 5,000 people—parts of the U.S. where th e-commerce giant doesn’t yet offer speedy delivery “We’ve got a real advantage based on our physica locations,” which allow Casey’s to make the vas majority of deliveries within 45 minutes, Jones says 7-Eleven, the largest U.S. chain, which will hav more than 13,000 stores in America after complet f d l

◼ BUSINESS

Bloomberg Businessweek

China’s Factories Need A Little Christmas

● Now that the global re they’re counting on holid

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In January toymaker Dave Cave was feeling good about the year ahead. Orders were coming in for Mighty Megasaur, and he was readying a racing game to coincide with the release of the latest installment in the Fast & Furious franchise. Then the coronavirus shut down the world economy, and Vin Diesel announced the flick would be pushed back a year. Cave saw demand collapse. His Hong Kong-based company, Dragon-I Toys, which makes its goods in China and sells them to 240 retailers in 53countries, including Walmart Inc., was forced to cut costs as it waited for the crisis to pass. Now, as global retailers start to stock up before the crucial yearend holiday-shopping season, a hopeful Cave says Dragon-I Toys’ order book is at its best level in years. “Nobody has canceled any orders in the last six to eight weeks, so everybody is being very optimistic that Christmas will happen,” says Cave, whose company is one of the world’s biggest manufacturers of toy dinosaurs and the maker of the popular Chatimal the Talking Hamster. “The only worry that everybody has now is if this pandemic does get worse, and we get into a situation where the governments in these countries really go back to a phase where everything is closed down.” How the holiday season plays out will reveal a lot about how consumers worldwide are recovering from the pandemic shock. Exports are a declining share of China’s overall economic growth, and not all industries benefit from Christmas demand, but shipments of consumer goods are still a crucial indicator of confidence globally. China’s exports rose 7.2% in dollar terms in July vs. a year earlier, mostly on the back of strong d df l b h l h l d

Justin Yu, a sales manager at Zhejiang-ba Pinghu Mijia Child Product Co., which ma toy scooters and electronic vehicles sold by retailers, has already seen orders rebound to pandemic levels. Since early July the factory been running at capacity, and it’s fully boo until mid-October. Traditionally, July to m October is its busiest period, as the holiday son accounts for 60% to 70% of the compa full-year sales. “Our factory is running overtime,” says adding that even his office workers are going o the factory floor to help. “We are very busy much as we were the past years at this time.” S he estimates that sales in the first half were do 20% to 30% and that second-half sales will be resulting in a full-year drop of 10% to 20%. While China remains the only major econo forecast to grow this year, unemployment is high, and the recovery is patchy. Producer pr fell 2.4% in July from a year earlier, with knock effects for profits, hiring, and investment. Th why many are looking closely at holiday dema “Although the pandemic is very serious, peo still look forward to Christmas,” Yu says. “I kind of revenge spending after a long depress of sentiment. The difference could be fewer ties this year, but those who celebrate Christ

 BUSINESS

BW Talks Linda K will go ahead celebrating it, and those who shopfor Christmas will go ahead shopping for it.” Other Chinese executives caution that the easy gains from an initial reopening phase are over and say further growth will depend on the virus being contained. Large holiday gatherings, for example, may not be on the agenda this year, says Andi Feng, whose company, Bigger Tang, based in Dongyang city in Zhejiang province, makes festive decorations including snowflakes and neon lights. “Even looking ahead to Christmas, many people still don’t feel comfortable enough to attend large events or parties,” she says. “That could be the reason why gifts are selling well, while a company like us that makes decorations is still struggling.” Feng says that before the pandemic, about 70% of her company’s revenue came from exports, with Europe accounting for the biggest share. The crisis has forced her to focus more on dom...