Specialty Retailers Embrace Marketplace Model
Retailers Take a Page From Amazon
Aiming to boost web traffic and increase sales without taking unnecessary risks, Express (EXPR), Urban Outfitters (URBN), J.Crew Group, and more retailers are selling other brands’ products on their websites. The clothing companies get a cut of the sales. This allows them to increase revenue without needing to hold inventory.
Amazon (AMZN) has had success with this business model over the years. For some time, specialty retail chains were reluctant to test this strategy because of fear that it would weaken their brands. But as demand for ecommerce grows, brands are working to emulate Amazon.
A Delicate Balancing Act
Specialty retailers are considering a variety of factors as they test this new business model. Host retailers want to ensure that featuring other brands will not cannibalize their own sales. They also have to prevent outside brands from becoming the main driver of sales growth. Amazon launched its marketplace in 2000 and today sells millions of items from millions of brands. These third-party brands are a key driver of its ecommerce sales. As of April, third-party sellers accounted for close to 60% of Amazon’s retail sales, compared to just 34% in 2010.
Retailers also need to make sure they do not overwhelm their customers by offering too many choices. To address those challenges, so far they have opted to offer a relatively small selection of brands chosen based on specific criteria.
Express Sees Positive Results
Express began testing a marketplace model in 2019, the same year its CEO Timothy Baxter joined the company. The retailer views the initiative as an opportunity to offer items that customers want to buy but that are outside of Express’s main categories.
The retailer hosts items in beauty, activewear, and men’s grooming. With this model, Express has been able to expand its offerings without investing a lot of money. The strategy appears to be paying off. The marketplace is drawing new customers and presents a helpful opportunity for the company as it looks toward a goal of having $1 billion in online sales by 2024. Both investors and customers will be eagerly watching to see if this business model continues to grow.
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Aviation Trade Tensions Between EU and US Ease
Aviation Tariffs Lifted for Five Years
Trade tensions between the US and the European Union are easing, with both sides agreeing to suspend a long-running trade dispute over government subsidies to Boeing (BA) and Airbus (EADSY).
Under the agreement, the tariffs, which have cost US importers more than $1.1 billion since they went into effect in 2019, will be suspended for five years. The truce is part of a broader effort to improve relations between the US and the European Union.
Boeing, Airbus Stand to Win
The transatlantic deal could not come at a better time for Boeing and Airbus. Both aircraft manufacturers were hit hard by the pandemic and are looking toward a somewhat uncertain future. They are also looking for ways to innovate and grow. For example, Boeing is mulling the launch of a new jetliner. Both companies applauded the settlement between the US and the EU, saying it creates a level playing field.
The US and EU are entering a friendlier stage of their relationship in the aviation space. It will be interesting to see if the agreement results in other trade tensions easing in the months to come.
Enhanced Child Tax Credit Payouts to Begin
Families Can Receive as Much as $3,600 per Child
Starting in July, households across the US will receive monthly child tax credit payments as part of the American Rescue Plan enacted in March. Under the expanded benefits, a family can get a maximum of $3,600 for children under the age of six and $3,000 for those aged six to 17.
The credit will be distributed as an advance to 2021 taxes, paid out in monthly installments.
Those getting the maximum will receive $300 per month for each child under six and $250 for children aged six to 17. To receive the full credit, married couples filing jointly must not make more than $150,000. The tax credit phases out for individuals earning $95,000 or married couples earning $170,000 and filing jointly.
Direct Deposit Recipients to Be Paid First
The Internal Revenue Service began sending out letters to families who may be eligible for the tax credit this month. Those who will receive the credit do not have to do anything. The IRS is using 2020 tax returns (or 2019 returns for those who have not yet filed last year’s taxes) to determine eligibility. The IRS started an online portal for nonfilers to sign up for the tax credit. The IRS is also opening a portal for families whose situation may have changed, making them eligible for more of a credit. These changes could be something like a new baby or a decline in income.
Just like with past stimulus checks, the IRS will send direct deposits to those taxpayers with information on file. It will send paper checks to families who do not have their information on file with the IRS.
Timing of Payments
Households eligible to receive the payments should expect them on the 15th of the month unless it lands on a weekend or holiday. In that case, it will be paid on the closest business day to the 15th. The IRS scheduled monthly payments for the remainder of 2021. Tax filers will get the second half of the credit when they file their 2021 taxes next year.
Although the enhanced benefits are expected to expire in 2021, they may last longer if President Biden extends the program through 2025, as he has suggested, or if lawmakers are able to make it permanent. Either way, for now, about 65 million households will benefit from the program.