WEBVTT - BI Weekend: Walmart Earnings, SailPoint IPO 0:00:00.280 --> 0:00:11.440 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence 0:00:11.560 --> 0:00:13.680 with Alex Steel and Paul Sweeney. 0:00:13.760 --> 0:00:17.000 The real app performance has been in US corporate high yield. 0:00:17.160 --> 0:00:19.480 Are the companies lean enough? Have they trimmed all the facts? 0:00:19.600 --> 0:00:23.200 The semiconductor business is a really cyclical business. 0:00:22.880 --> 0:00:26.560 Breaking market headlines and corporate news from across the globe. 0:00:26.600 --> 0:00:29.040 Do investors like the M and A that we've seen? 0:00:29.240 --> 0:00:30.200 These are two. 0:00:30.120 --> 0:00:32.199 Big time blue chip companies. 0:00:32.479 --> 0:00:36.199 Window between the peak and cunt changing super fast. 0:00:36.120 --> 0:00:41.160 Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 0:00:42.080 --> 0:00:44.440 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.440 --> 0:00:46.240 business stories impacting Wall Street. 0:00:45.960 --> 0:00:46.960 And the global markets. 0:00:47.159 --> 0:00:49.159 Each and every week we provide in depth research and 0:00:49.280 --> 0:00:51.000 data on some of the two thousand companies and one 0:00:51.120 --> 0:00:52.400 hundred and thirty industries. 0:00:52.120 --> 0:00:53.800 Our analysts cover worldwide. 0:00:54.080 --> 0:00:56.480 Today, we'll look at how one e commerce company is 0:00:56.520 --> 0:00:59.920 being impacted by a US China trade war, Plus what's 0:01:00.040 --> 0:01:02.800 guess why the retail giant Walmart forecasts a lower than 0:01:02.880 --> 0:01:05.880 expected profit for the full year. But first we begin 0:01:05.959 --> 0:01:08.560 with the auto sector. This week, shares a Rivian Automotive 0:01:08.600 --> 0:01:11.880 tumbled after the company warning it's poised for a first 0:01:11.959 --> 0:01:15.000 ever decline in electric vehicle deliveries in twenty twenty five. 0:01:15.280 --> 0:01:17.480 For more on this and the EV sector, guest host 0:01:17.520 --> 0:01:19.920 Emily Griffey when I were joined by Steven men Bloomberg 0:01:19.959 --> 0:01:23.440 Intelligence Global Autos and Industrials research journalist. We first asked 0:01:23.440 --> 0:01:24.839 Steve how the company is doing. 0:01:25.319 --> 0:01:28.480 I think they execute it very well in the fourth 0:01:28.560 --> 0:01:31.040 quarter and for the most part in twenty twenty four, 0:01:31.280 --> 0:01:35.199 they actually had a gross profit in the fourth quarter, 0:01:35.400 --> 0:01:38.479 first ever if you take out some of the non 0:01:38.560 --> 0:01:42.480 cash items and if you take out credit, they still 0:01:42.720 --> 0:01:46.000 broke even as they promised. But the only thing is 0:01:46.040 --> 0:01:49.480 they've you know, they have huge operating leverage and improved costs, 0:01:49.840 --> 0:01:52.440 but you know, they just can't get enough volume through 0:01:52.480 --> 0:01:56.640 the plants to really benefit from the cost cutting initiatives. 0:01:57.080 --> 0:01:59.760 And what do you attribute to that not being able 0:01:59.800 --> 0:02:00.240 to to. 0:02:00.240 --> 0:02:05.680 Do so, Yeah, you know, their guidance were were lower 0:02:05.720 --> 0:02:09.880 than expected. Uh, there's some concerns about you know, Trump 0:02:10.120 --> 0:02:13.880 Trump administration cutting the seventy five hundred EV tax credit 0:02:14.680 --> 0:02:18.560 denting sales, so you know, and then the other thing 0:02:18.600 --> 0:02:20.600 that you know they're planning to do is shut down 0:02:20.639 --> 0:02:23.880 the plant for part of the fourth quarter to really 0:02:24.200 --> 0:02:26.320 uh you know, bring to bring on the R two, 0:02:26.560 --> 0:02:28.560 a smaller a smaller. 0:02:28.160 --> 0:02:29.600 Mid sized vehicle next year. 0:02:30.000 --> 0:02:33.920 So there's some kind of top line headwind that's impacting. 0:02:34.000 --> 0:02:36.919 But then again, look, you know they've done a really 0:02:36.960 --> 0:02:39.720 good job you step back, They've gonna done a really 0:02:39.760 --> 0:02:45.160 good job in rationalizing their capacity, their costs. I think 0:02:45.280 --> 0:02:47.160 it's just a matter of time that we're going to 0:02:47.240 --> 0:02:51.160 see huge profit windfall for them when they get the 0:02:51.240 --> 0:02:51.800 volume up. 0:02:53.240 --> 0:02:55.320 So, Steve, what's the feeling in the in the EV 0:02:55.520 --> 0:03:00.720 marketplace these days about where demand is is on a 0:03:00.720 --> 0:03:01.720 global scale. 0:03:01.800 --> 0:03:05.720 Here for EV's. 0:03:04.360 --> 0:03:05.160 It's still strong. 0:03:05.280 --> 0:03:09.480 Now we're actually predicting that EV sales will be up 0:03:10.400 --> 0:03:14.440 single digits similar to last year. And then in twenty 0:03:14.520 --> 0:03:17.560 twenty six, twenty twenty seven, I think that's when things 0:03:17.560 --> 0:03:22.160 will improve. Like if the seventy five hundred dollars EV 0:03:22.280 --> 0:03:25.600 tax credit goes away, there are a lot of new 0:03:26.320 --> 0:03:30.680 affordable vehicles coming into the market, so I don't think 0:03:30.680 --> 0:03:34.000 the consumer will need the seventy five hundred dollars. So 0:03:34.320 --> 0:03:38.320 I think the man will improve, and I think we'll 0:03:38.360 --> 0:03:41.440 have to wait until twenty twenty six and specifically Rivian. 0:03:42.280 --> 0:03:43.480 We're very positive. 0:03:43.600 --> 0:03:46.760 I think they are going to launch a new mid 0:03:46.800 --> 0:03:50.280 sized vehicle that's gonna resonate well with the consumers. 0:03:50.760 --> 0:03:53.880 What did you learn in Rivian's report about just how 0:03:53.880 --> 0:03:57.640 the company is reacting to the prospect of terras. 0:03:57.400 --> 0:04:02.440 It's something they can't control, obviously, but you know, I 0:04:02.440 --> 0:04:06.240 think they were anticipating the seventy five hundred dollars going away. 0:04:06.040 --> 0:04:09.880 They they don't expect that to continue forever, and that's 0:04:09.920 --> 0:04:14.320 why they took that cost cutting initiative at the the 0:04:14.320 --> 0:04:18.680 middle of last year and really reduce costs by more 0:04:18.760 --> 0:04:22.120 than thirty percent, and that that will allow them to 0:04:22.240 --> 0:04:26.000 actually have more flexibility on pricing. And the second thing 0:04:26.000 --> 0:04:28.760 they're doing is they're you know, they understand what the 0:04:28.960 --> 0:04:31.360 what the consumer wants, you know, they want a more 0:04:31.360 --> 0:04:33.880 affordable vehicle, and that's why they're going to launch the 0:04:34.040 --> 0:04:37.559 R two in early twenty twenty six or late twenty 0:04:37.600 --> 0:04:38.120 twenty five. 0:04:38.760 --> 0:04:40.160 So they've anticipated that. 0:04:40.720 --> 0:04:43.560 Steve, we can't talk to you without talking about Tesla. 0:04:43.680 --> 0:04:46.160 You know, it's off about the fifteen percent year to date, 0:04:46.160 --> 0:04:47.960 but it's you know, almost seventy five percent, little more 0:04:47.960 --> 0:04:49.960 than seventy five percent or the trilliing twelve months. It's 0:04:50.000 --> 0:04:53.120 kind of the typical volatility that we're I guess used 0:04:53.120 --> 0:04:54.200 to with Tesla. 0:04:54.279 --> 0:04:57.000 Here, what's the feeling out there today? 0:04:57.120 --> 0:05:00.640 Is Elon Musk a net positive or or maybe even 0:05:00.640 --> 0:05:02.880 a little bit of a net negative for this stock 0:05:03.040 --> 0:05:03.440 right now? 0:05:04.560 --> 0:05:08.080 I think I think the concern is really some of 0:05:08.120 --> 0:05:11.840 the sales that's been pretty weak in the US and 0:05:11.920 --> 0:05:15.680 as well as in Europe, and I think the rhetoric 0:05:15.800 --> 0:05:17.960 and there's you know, there's news out there, there's surveys 0:05:17.960 --> 0:05:20.560 out there saying that you know, Elon Musk is having 0:05:20.560 --> 0:05:24.839 an impact, you know, his involvements with with Doge. But 0:05:24.920 --> 0:05:26.839 at the end of the day, you know, if I 0:05:26.880 --> 0:05:29.920 step back and look at you know, the product rollout, 0:05:30.200 --> 0:05:33.320 the product rollouts that they're coming up with this year 0:05:33.400 --> 0:05:36.719 with a new model why, I think that you know, 0:05:36.760 --> 0:05:40.320 the model why rollout is having some impact on current 0:05:40.320 --> 0:05:42.720 sales because customers are actually waiting for. 0:05:42.680 --> 0:05:43.480 The new vehicle. 0:05:44.560 --> 0:05:48.240 And also there's an affordable model also from Tesla coming 0:05:48.279 --> 0:05:52.359 out later this year. I think, you know, it's gonna 0:05:52.360 --> 0:05:54.919 be a you know, a slower year for Tesla in 0:05:55.000 --> 0:05:57.880 terms of sales. But I think in the second half 0:05:58.440 --> 0:06:01.360 and in the fourth quarter it will definitely pick back up. 0:06:01.760 --> 0:06:06.080 There's already signs of, you know, strong demand for the 0:06:06.120 --> 0:06:09.000 Model Y. If you look at China, they start delivering 0:06:09.000 --> 0:06:12.479 the new Model Y and and you know, and consumers 0:06:12.520 --> 0:06:13.800 are really liking that vehicle. 0:06:13.880 --> 0:06:17.600 Right now, I have to ask about the cyber truck. Anecdotally, 0:06:17.880 --> 0:06:20.320 I've seen this vehicle everywhere on the streets of New 0:06:20.400 --> 0:06:22.760 York City. But I'm not sure if like I'm just 0:06:22.960 --> 0:06:25.599 noticing it more, but what are the sales looking like 0:06:25.680 --> 0:06:26.719 for the cyber truck. 0:06:27.160 --> 0:06:29.400 The cyber truck is It's not going to be like 0:06:29.440 --> 0:06:33.359 a high volume vehicle like the Model Wi or three. 0:06:33.960 --> 0:06:38.680 It's still a niche market. I think it helps Tesla 0:06:38.720 --> 0:06:43.080 build the brand as a high tech company. It doesn't 0:06:43.120 --> 0:06:48.920 resonate with everyone, but it does resonate with a large 0:06:48.920 --> 0:06:52.760 group of consumer that I do believe that Tesla has 0:06:53.360 --> 0:06:58.200 the technology, the manufacturing technology and the vehicle technology. Autonomy 0:06:58.240 --> 0:07:01.760 of technology are thanks to Steve Man, Bloomberg Intelligence, Global 0:07:01.800 --> 0:07:04.440 autos and Industrials research analyst. We move next to the 0:07:04.560 --> 0:07:09.239 enterprise security software company sale Point Technologies. Toma Bravo backed 0:07:09.320 --> 0:07:13.000 sale Point recently completed its initial public offering on the 0:07:13.120 --> 0:07:16.120 NASDAQ sale Point Race one point three eight billion dollars 0:07:16.160 --> 0:07:19.960 in its debut, and this marked the first major tech IPO. 0:07:19.720 --> 0:07:20.160 Of the year. 0:07:20.680 --> 0:07:23.320 For More, co host Alex Steele and guest host Norma 0:07:23.360 --> 0:07:26.680 Linda were joined by Mark McLain, CEO of sale Point Technologies. 0:07:27.160 --> 0:07:30.640 Mark's first asked whether sale Points IPO meshes well with 0:07:30.720 --> 0:07:32.600 the company's long term vision. 0:07:32.960 --> 0:07:34.920 Well, I think in general, we've tried to stay focused 0:07:34.960 --> 0:07:38.000 as a business on building great business with our customers 0:07:38.120 --> 0:07:40.440 and winning in the market. In some ways, what happens 0:07:40.480 --> 0:07:42.600 in the financial ownership of the business matters a lot, 0:07:42.640 --> 0:07:44.559 but it doesn't actually affect our day to day lives, 0:07:44.560 --> 0:07:48.040 if you will. In finding and securing customers and making 0:07:48.080 --> 0:07:50.920 them successful, that's certainly always our focus. We do think though, 0:07:50.920 --> 0:07:53.280 that the IPO gets us back out in the public. 0:07:52.920 --> 0:07:53.720 Eye a little more. 0:07:54.080 --> 0:07:56.520 The importance of what we do and what's called identity 0:07:56.600 --> 0:08:00.680 security is raising an awareness and important to the large 0:08:00.720 --> 0:08:03.280 companies all around the world that we typically serve, and 0:08:03.320 --> 0:08:05.680 this will help with our visibility, it'll give us future 0:08:05.760 --> 0:08:08.840 fuel to grow the business. We've had a great run 0:08:08.880 --> 0:08:10.440 as a private company with Tomo Bravo. 0:08:10.760 --> 0:08:11.840 Some folks know this. 0:08:11.960 --> 0:08:14.600 We were public before and before that we were runed 0:08:14.600 --> 0:08:16.520 by Toma Bravo. It's a little bit of an interesting 0:08:16.640 --> 0:08:21.000 story of a PE backed IPO, same PE backed IPO again. 0:08:21.120 --> 0:08:23.680 But all the while, our focus continues to be on 0:08:23.840 --> 0:08:26.280 doing great things for our customers and helping them secure 0:08:26.280 --> 0:08:28.480 their enterprises with identity Well. 0:08:28.520 --> 0:08:31.960 Cyber threats have continued to increase. How does sale Points 0:08:31.960 --> 0:08:34.000 stay ahead in identity security? 0:08:34.920 --> 0:08:37.400 Yeah, what's happened in the world of cybersecurity. There's a 0:08:37.400 --> 0:08:40.360 lot of shifting things in the landscape. A simple metaphor 0:08:40.360 --> 0:08:42.439 that sometimes helps folks is that the. 0:08:42.440 --> 0:08:43.760 Bad actors are the attackers. 0:08:43.800 --> 0:08:45.760 Not so long ago, their metaphor was to break the 0:08:45.800 --> 0:08:48.520 glass and grab the jewels and run. Quite often now, 0:08:48.559 --> 0:08:50.720 and we've seen this in breach reports, they'll try to 0:08:50.760 --> 0:08:53.080 sneak in the back of the jewelry store, poses an 0:08:53.120 --> 0:08:55.760 employee and eventually try to quote clean out the jewelry store. 0:08:56.000 --> 0:08:58.480 And that's because they've been able to impersonate, so to speak, 0:08:58.559 --> 0:09:01.400 an employee, and that's a comp reized identity. What we 0:09:01.480 --> 0:09:05.040 do is help businesses, typically mid to large enterprises around 0:09:05.040 --> 0:09:08.679 the world, focus on understanding all the identities they have, 0:09:08.920 --> 0:09:11.240 both human and non human, all the data they care 0:09:11.280 --> 0:09:13.960 about protecting and making sure that at any point in time, 0:09:14.160 --> 0:09:16.760 all of those connections are secure. It's a pretty complex 0:09:16.800 --> 0:09:18.000 problem at scale. 0:09:18.360 --> 0:09:20.440 Who are your competitors right now and how can you 0:09:20.440 --> 0:09:21.280 help differentiate? 0:09:21.960 --> 0:09:25.040 Yeah, the truth is we've got more I like to 0:09:25.040 --> 0:09:27.280 call them PowerPoint competitors than real competitors. 0:09:27.320 --> 0:09:28.400 I mean, there's folks that are. 0:09:28.240 --> 0:09:30.600 Talking about this space quite a bit, but if you 0:09:30.600 --> 0:09:32.240 look at what happens day to day when we're out 0:09:32.240 --> 0:09:34.480 in the market, there's very few companies that are capable 0:09:34.480 --> 0:09:37.480 of delivering the success at scale that we have. We're 0:09:37.559 --> 0:09:40.600 fortunate to be in almost half of the Fortune five hundred, 0:09:40.679 --> 0:09:43.199 about a quarter of the Fortune two thousand, and they're 0:09:43.240 --> 0:09:47.200 generally throwing out older legacy products like from Oracle and IBM. 0:09:47.280 --> 0:09:49.480 There really hasn't been a strong challenger to us in 0:09:49.520 --> 0:09:52.040 this key space, and that's part of what I think 0:09:52.080 --> 0:09:54.719 has gotten investors excited about our potential for long term, 0:09:54.800 --> 0:09:55.520 durable growth. 0:09:56.320 --> 0:09:59.240 So another thing that's been in conversation, I'm curious, how 0:09:59.320 --> 0:10:01.680 are you all planning to address your debt load? 0:10:02.400 --> 0:10:04.679 Well, you know, one of the key use of proceeds 0:10:04.679 --> 0:10:06.080 will be to pay down a lot of the debt. 0:10:06.160 --> 0:10:08.880 We actually had a little more debt about six months ago. 0:10:09.200 --> 0:10:11.360 Our backers Home of Bravo chose to take some of 0:10:11.360 --> 0:10:13.920 that debt out with equity before the IPO, and we'll 0:10:14.000 --> 0:10:15.880 use the bulk of the proceeds from the IPO to 0:10:15.880 --> 0:10:18.640 pay that debt down significantly, putting ourselves in what they 0:10:18.679 --> 0:10:21.679 call it debt zero, meaning we'll have as as much 0:10:21.760 --> 0:10:23.920 more cash as we have debt, which from a financial 0:10:24.000 --> 0:10:26.080 profile standpoint makes investors really happy. 0:10:26.880 --> 0:10:28.520 Why do you guys decide to do the IPO? 0:10:28.600 --> 0:10:28.800 Now? 0:10:28.880 --> 0:10:30.840 We were just talking about IPOs in general, and I 0:10:30.920 --> 0:10:34.240 was talking about an LNG export that went public at 0:10:34.320 --> 0:10:37.640 seemingly a great time and it didn't go so well. 0:10:37.679 --> 0:10:40.520 So I wonder why strategically you guys chose right now. 0:10:41.040 --> 0:10:43.840 Well, we've been watching markets as everyone has, and I 0:10:43.840 --> 0:10:45.959 think we were really pleased with the progress of the business. 0:10:46.040 --> 0:10:47.640 We went private about two and a half years ago. 0:10:48.320 --> 0:10:50.120 As part of our S one finaling, we talked about 0:10:50.120 --> 0:10:51.920 the fact that as of our third quarter last year, 0:10:51.920 --> 0:10:54.240 we'd grown the business at thirty percent. We've been able 0:10:54.280 --> 0:10:57.680 to deliver non gap margins of about fourteen percent, and 0:10:57.760 --> 0:11:00.440 had a strong sense that durable growth we can, and 0:11:00.440 --> 0:11:02.440 that was at scale. We're over an eight hundred million 0:11:02.440 --> 0:11:05.000 dollars revenue business now and investors don't see a lot 0:11:05.000 --> 0:11:08.240 of profiles of growth at scale with profit. And I 0:11:08.240 --> 0:11:10.760 think our sense was that the markets were kind of hungry, 0:11:10.840 --> 0:11:13.760 so to speak, for new issuances, particularly I think in 0:11:13.800 --> 0:11:16.360 technology security has been considered a. 0:11:16.280 --> 0:11:17.680 Really good market for a long time. 0:11:17.720 --> 0:11:20.040 I think we looked like a company that would fit 0:11:20.400 --> 0:11:23.360 many of their requests, so to speak, for a durable 0:11:23.400 --> 0:11:25.240 growth company in the security space. 0:11:25.720 --> 0:11:29.920 How are regulatory shifts driving demand for identity security solutions 0:11:30.000 --> 0:11:32.920 as enterprises continue shifting to the cloud? How a sale 0:11:32.920 --> 0:11:34.920 point evolving its offerings? 0:11:35.280 --> 0:11:38.320 Well, it's interesting you mentioned that regulatory is indeed part 0:11:38.320 --> 0:11:40.880 of the landscape we're addressing. Sometimes, you know, audits or 0:11:40.920 --> 0:11:42.760 the threat of failed audits or not being able to 0:11:42.840 --> 0:11:46.360 comply with regulations is a driver. But increasingly our space 0:11:46.440 --> 0:11:49.720 is less about that. Not it hasn't moved away from that, 0:11:49.880 --> 0:11:53.320 but it's less about that than truly securing their data. Again, 0:11:53.360 --> 0:11:56.480 what's happened is this concern that data can be compromised 0:11:56.640 --> 0:11:59.360 through this lens of identity, if a bad actor can somehow, 0:11:59.720 --> 0:12:02.599 you know, get in, break in, steal an identity, or 0:12:03.520 --> 0:12:06.359 in some way get access to data through those identities, 0:12:06.679 --> 0:12:08.960 they can do a lot of damage. So that focus 0:12:09.000 --> 0:12:11.240 on truly protecting the data is really more of an 0:12:11.280 --> 0:12:13.120 issue today than just regulatory compliance. 0:12:13.360 --> 0:12:18.200 What's it like attracting talent right now in the market, Well, i'd. 0:12:18.280 --> 0:12:21.800 Attracting talent is never easy in a very competitive technology market. 0:12:21.840 --> 0:12:24.360 I think we're very fortunate at sale Point. One of 0:12:24.400 --> 0:12:26.000 the things that we pay a lot of attention to 0:12:26.160 --> 0:12:28.679 is our culture and our values and how that shows up. 0:12:29.080 --> 0:12:31.440 And as you probably are familiar, a glass Door runs 0:12:31.440 --> 0:12:34.160 around and surveys the world and tries to understand how 0:12:34.200 --> 0:12:37.840 companies are doing. We're super pleased they released those results recently. 0:12:37.880 --> 0:12:40.400 We were number seventeen in the world, and if you 0:12:40.400 --> 0:12:42.800 want to cut it by an interesting factor, we were 0:12:42.880 --> 0:12:46.319 the highest ranked tech company with under five thousand employees 0:12:46.480 --> 0:12:48.840 on glass Door. I think that speaks a lot about 0:12:48.840 --> 0:12:50.760 the kind of culture and the values we live out 0:12:50.800 --> 0:12:53.640 in our company. It attracts and retains very good talent, 0:12:53.720 --> 0:12:55.120 and we're very fortunate. 0:12:55.280 --> 0:12:57.960 Our thanks to Mark McClain, CEO of sale Point Technologies. 0:12:58.280 --> 0:13:00.560 Coming up, we'll look at how banks are nancing for 0:13:00.600 --> 0:13:01.680 the energy transition. 0:13:02.160 --> 0:13:03.599 You're listening to Bloomberg. 0:13:03.240 --> 0:13:06.640 Intelligence on Bloomberg Radio, providing in research and data on 0:13:06.679 --> 0:13:09.199 two thousand companies and one hundred and thirty industries. You 0:13:09.280 --> 0:13:11.880 can access Bloomberg Intelligence via Bigall the Terminal. 0:13:12.160 --> 0:13:14.240 I'm Paul Sweeney. This is Bloomberg. 0:13:18.160 --> 0:13:21.840 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:21.920 --> 0:13:25.040 weekdays at ten am Eastern on Apple Cocklay and Android 0:13:25.040 --> 0:13:28.320 Auto with the Bloomberg Business App. Listen on demand wherever 0:13:28.400 --> 0:13:31.960 you get your podcasts, or watch us live on YouTube. 0:13:32.679 --> 0:13:35.160 This week we focused on a Bloomberg Big Takes story 0:13:35.280 --> 0:13:38.480 entitled tem News Rise was aided by Trump? Now he 0:13:38.520 --> 0:13:41.400 poses a major threat. You can find it on Bloomberg 0:13:41.400 --> 0:13:44.040 dot Com and The Terminal. The story looks at the 0:13:44.080 --> 0:13:47.720 online marketplace Temu, operated by the Chinese e commerce company 0:13:47.800 --> 0:13:50.880 p d D Holdings, and it talks about the obstacles 0:13:50.880 --> 0:13:53.880 TU faces from US China trade war. 0:13:54.120 --> 0:13:55.760 For more, guest hosts Matt Miller and I. 0:13:55.720 --> 0:13:58.880 Were joined by Spencer Soper, Bloomberg News Technology and e 0:13:58.920 --> 0:14:01.720 Commerce reporter First ass Spencer to tell us about Timu 0:14:02.040 --> 0:14:04.959 and how it may be impacted by a China US 0:14:05.160 --> 0:14:05.680 trade war. 0:14:06.080 --> 0:14:10.760 Basically, this is an online marketplace full of discounts. It's 0:14:10.840 --> 0:14:13.440 kind of like a dollar tree in your phone. You 0:14:13.480 --> 0:14:16.480 can find all kinds of products. And the big differentiator 0:14:16.520 --> 0:14:19.840 here is that they're just really really cheap in terms 0:14:19.880 --> 0:14:23.320 of prices, oftentimes like half as much as say like 0:14:23.400 --> 0:14:26.320 Amazon or Walmart, or even even less than that. It's, 0:14:27.680 --> 0:14:30.280 you know, kind of sprang onto the scene in twenty 0:14:30.360 --> 0:14:34.320 twenty two, and it really capitalized on this deminimous loophole, 0:14:35.000 --> 0:14:40.680 which is basically a tariff loophole that originated in the 0:14:40.760 --> 0:14:43.760 nineteen thirties, and it's it's mainly for like travelers coming 0:14:43.800 --> 0:14:47.080 back with gifts and their suitcases and that sort of thing, 0:14:47.160 --> 0:14:48.760 so they don't have to get bogged down and paying 0:14:49.320 --> 0:14:52.600 tariffs and duties. But as e commerce emerged and cross 0:14:52.600 --> 0:14:56.680 border e commerce emerged, it became a way to ship 0:14:56.720 --> 0:15:00.400 products directly from like factories in China to shpe in 0:15:00.440 --> 0:15:04.880 the US without paying tariffs and duties, which has helped 0:15:04.920 --> 0:15:07.600 them beat some prices from US retailers. 0:15:07.800 --> 0:15:10.120 I love the way your story starts out, which is 0:15:11.480 --> 0:15:14.520 in a town that I'm not going to try and pronounce, 0:15:14.600 --> 0:15:17.040 but a Chinese town that's twice the size of Chicago 0:15:17.440 --> 0:15:20.880 with a lot of blade manufacturers. I actually looked on 0:15:20.920 --> 0:15:24.120 the Timu dot com website and the first thing I 0:15:24.160 --> 0:15:28.280 see is a sharp sword, a stainless steel sword for 0:15:28.320 --> 0:15:31.720 four dollars and seventy five cents and a nail cliper. 0:15:31.760 --> 0:15:34.680 Probably says that probably says more about you because of 0:15:34.680 --> 0:15:36.520 their algorithm than it does about FEMO. 0:15:36.880 --> 0:15:39.960 Well, I'm looking to be fair, I'm using the Bloomberg 0:15:40.040 --> 0:15:41.720 Radio Studio computer. 0:15:41.880 --> 0:15:42.840 I haven't logged on myself. 0:15:42.880 --> 0:15:45.360 But if they also have a nail clipper manicure set 0:15:45.400 --> 0:15:49.120 for a dollar eighty six which has twenty three different 0:15:49.160 --> 0:15:52.520 tools in it, so what a price. But you talk 0:15:52.640 --> 0:15:56.640 to a guy in China who has a clipper company, right, 0:15:56.720 --> 0:16:00.240 and he said he saw an opportunity during COVID. He 0:16:00.360 --> 0:16:06.120 used to manufacture and probably still does products for other brands, 0:16:06.160 --> 0:16:08.600 but now he's selling direct to consumer with this. 0:16:10.320 --> 0:16:13.560 Yeah, and that's the big thing is that the Chinese 0:16:13.560 --> 0:16:17.560 factories are really looking to diversify on you know where 0:16:17.560 --> 0:16:21.920 they sell, uh, and so this this factory in particular, Yeah, 0:16:21.920 --> 0:16:24.040 they made a lot of these components that were used 0:16:24.080 --> 0:16:28.240 in name brand raizors like Wall or Remington. Those sorts 0:16:28.240 --> 0:16:30.080 of things, and then they realized, you know what, we 0:16:30.120 --> 0:16:33.520 could actually sell direct to consumer, especially during the pandemic 0:16:33.600 --> 0:16:36.640 when people were giving themselves haircuts at home and getting 0:16:36.720 --> 0:16:38.640 pets and they need to give it, you know, groom 0:16:38.680 --> 0:16:43.320 the pets. So it basically gave life to this uh uh, 0:16:43.480 --> 0:16:46.000 you know, direct to consumer push for this company. And 0:16:46.040 --> 0:16:49.360 they had tried Amazon and they found that team who 0:16:49.440 --> 0:16:51.800 was just a lot a lot simpler for them in 0:16:51.840 --> 0:16:55.120 the sense that they weren't, you know, fighting for every 0:16:55.200 --> 0:16:57.800 sale on Amazon and paying for all the advertising and 0:16:58.920 --> 0:17:02.240 you know, you you really have to run a sophisticated 0:17:02.280 --> 0:17:04.919 business to sell on Amazon. And they found it a 0:17:04.960 --> 0:17:07.119 lot easier on Temu and Sense where they could just 0:17:07.160 --> 0:17:09.560 send the blades to Timu and tim who took care 0:17:09.560 --> 0:17:10.040 of everything. 0:17:10.240 --> 0:17:13.320 So what's the fate or the expected fate of this 0:17:13.600 --> 0:17:16.919 international tax exemption, this loophole, this eight hundred dollars loophole, 0:17:16.920 --> 0:17:21.320 because that seems a central strategy for TEAMU in terms 0:17:21.320 --> 0:17:23.560 of undercutting Amazon and pretty much everybody else. 0:17:25.200 --> 0:17:27.280 That's the million dollar question right now. I mean, it's 0:17:27.320 --> 0:17:30.399 not the only Evantage team who has it's certainly one 0:17:30.440 --> 0:17:33.760 of them, and it certainly helped them be a differentiator, 0:17:33.920 --> 0:17:36.399 and we're still not exactly sure what's going to happen. 0:17:36.720 --> 0:17:39.440 You know, Trump made this mandate to eliminate the loophole, 0:17:39.480 --> 0:17:42.280 but then backpedaled on it. You know, they have to 0:17:42.280 --> 0:17:44.960 figure out exactly how this is going to work. And 0:17:44.960 --> 0:17:46.920 once we know exactly how it's going to work, then 0:17:47.119 --> 0:17:49.320 businesses are going to look for potentially other loopholes or 0:17:49.320 --> 0:17:51.199 that sort of thing. So all of this stuff is 0:17:51.200 --> 0:17:54.359 still shaking out. The bottom line is you could see 0:17:54.400 --> 0:17:58.399 consumers take some price increases, you could see factories taking 0:17:58.400 --> 0:18:00.520 a little bit less to try to share in the pain, 0:18:01.240 --> 0:18:05.080 retailers cutting their profit margin. So generally, when these kind 0:18:05.080 --> 0:18:08.960 of things hit, it's not like a one size fits 0:18:09.000 --> 0:18:12.159 all solution. We'll see this. We'll see the pain of 0:18:12.200 --> 0:18:15.560 any of these tariffs supply differently, you know, throughout throughout 0:18:15.560 --> 0:18:17.560 all the players, depending on the position of strength that 0:18:17.600 --> 0:18:17.919 they're in. 0:18:18.440 --> 0:18:20.879 I mean, in reporting on this story, Spencer, did you 0:18:20.920 --> 0:18:24.280 note that many of Amazon's products are made in China 0:18:24.400 --> 0:18:28.080 as well. In fact, when I look through Amazon for 0:18:28.160 --> 0:18:32.560 any specific goods, I tend to notice a lot of 0:18:32.600 --> 0:18:35.520 brand names that I've never heard of or can't pronounce. 0:18:35.640 --> 0:18:36.919 A lot of times they are just a bunch of 0:18:36.960 --> 0:18:38.600 consonants thrown together. 0:18:38.800 --> 0:18:41.399 And those products are all made in China. 0:18:41.520 --> 0:18:45.760 So Jeff Bezos or you know, the other shareholders he 0:18:45.880 --> 0:18:50.640 only owns nine percent now, are also going to fall 0:18:50.760 --> 0:18:53.760 victim to this tax if if it's enacted. 0:18:55.400 --> 0:19:00.800 Yeah. What the difference here is Misson wants to offer 0:19:00.840 --> 0:19:03.360 you quick delivery. So oftentimes what you buy on Amazon 0:19:03.480 --> 0:19:06.600 is already in a warehouse in the US, meaning it 0:19:06.680 --> 0:19:09.439 was you know, put on a big cargo container shipped 0:19:09.440 --> 0:19:12.320 into to a US port, and the value of that 0:19:12.359 --> 0:19:15.840 cargo container was above this demnimous loophole, so they paid 0:19:15.840 --> 0:19:18.680 the tariff on those goods. The difference here is it's 0:19:18.760 --> 0:19:22.080 being you know, packed in China to be shipped directly 0:19:22.160 --> 0:19:25.720 to you, in which case, uh, you know, that individual 0:19:25.760 --> 0:19:28.480 item is coming in under this eight hundred dollars de 0:19:28.520 --> 0:19:31.800 minimous threshold, in which case no tariff supply. So that's 0:19:31.880 --> 0:19:35.080 the big that's the big differentiator. I mean, so much 0:19:35.080 --> 0:19:36.679 stuff is made in China, whether you buy it in 0:19:36.720 --> 0:19:39.679 a store, on Amazon or whatever. The the you know, 0:19:39.800 --> 0:19:41.600 source of a lot of these goods is still the same. 0:19:41.920 --> 0:19:43.840 It's just a matter of the of the you know 0:19:43.880 --> 0:19:46.520 how how it navigates into the US, all right? 0:19:46.520 --> 0:19:50.440 Thanks to Spenser Sober, Bloomberg News Technology and e Commerce Reporter. 0:19:50.840 --> 0:19:53.960 Each week we look at research from Bloomberg n EF. 0:19:54.280 --> 0:19:54.960