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First Move with Julia Chatterley
China Targets American Non-profits As Trade Talks Apparently Stalled; China Says New Mobile Phone Users Must Submit To Facial Scanning; Black Friday Online Sales Break Records. Aired 9-10a ET
Aired December 02, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:13]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here is your need
to know.
Hong Kong build backlash. China targets American nonprofits as trade talks apparently stalled.
Facing more surveillance. China says new mobile phone users must submit to facial scanning.
And hey, big spenders. Black Friday online sales break records and now it's Cyber Monday.
Let's make a move.
Welcome once again to FIRST MOVE and Happy Cyber Monday, too, if you're somewhere in the world that shopping as we speak. I'll tell you what
though, one thing that the President, President Trump won't be shopping for anytime soon is Argentine and Brazilian steel.
Yes. Tariff Man is back. Take a look at this. He tweeted this morning, quote, "Brazil and Argentina have been presiding over a massive devaluation
of their currencies, which is not good for our farmers. Therefore, effective immediately, I will restore the tariffs on all steel and aluminum
that is shipped into the United States from those countries."
Well, U.S. futures are giving back earlier solid gains on this news. If you remember on Friday, though, we mentioned that many of the Latin
American currencies are trading at around record lows on weaker growth, protests, political concerns. Well, clearly the White House now has taken
note.
The dollar has risen almost 60 percent against the Argentinean peso year- to-date. So that's a 60 percent depreciation of the Argentinian currency. As you can see on the screen in front of you, just to give you some
context, the dollar is up around nine percent this year against the Brazilian real. If you take that on a year, on a one year basis, it's
around nice percent. So some real volatility year-to-date in these crosses.
Elsewhere, let me give you a look at what's going on. The Asian markets did finish in the green. The Nikkei, in fact, was the biggest winner
rising some one percent. Chinese manufacturing data in particular was encouraging. Factories back in growth mode for the first time in seven
months. Is it too soon to say we've seen the lows of the Chinese data? Perhaps it is. What else did we get today?
Well, earlier retaliation from China, as I mentioned, in response to the President signing that Hong Kong Human Rights Bill. I'll call it more bark
perhaps them bite from China at this point with a pretty good reason -- trade.
Let's get to the drivers on this note, because Christine Romans joins me now. Strategic, it feels, Christine, when I look at what the Chinese
announced overnight. We're already seeing them preventing ships coming into Hong Kong ports here from the United States. There's nothing really
new as far as I can see, what do you think?
CHRISTINE ROMANS, CNN BUSINESS CHIEF BUSINESS: And I don't see anything trade focused in those sanctions or in that retaliation and I think that's
important to know here.
But look, I mean, in terms of the trade deal, the mini deal, the super tiny deal that was going to be mostly symbolic, we think and pretty slender --
it is looking harder to see that happening here in the very near term here.
We know that over the weekend, the Chinese -- the Chinese through the state-run media said they would not accept just you know, rolling back
tariffs, December 15th. They're not putting new tariffs in the next deadline, 13 days from now December 15th. They want tariffs rolled back,
current tariffs rolled back for any kind of a Phase 1 deal, and that's something that folks close to the negotiations at the White House have been
wary about, about doing, giving up too much of tariff man's leverage in those tariffs.
So we don't know really how much closer we are today to a trade deal than we were, frankly, last week. And certainly the Hong Kong retaliation and
the Hong Kong bill that the President signed into law, supporting those democracy protesters just complicates the picture.
CHATTERLEY: Yes, incredibly sensitive subject. I just mentioned the Chinese data as well, and sort of throwing it out there whether or not the
Chinese data perhaps is stabilizing here. The jury is out on this, but you have to say, as we start to see perhaps some stabilization in the data in
the United States and China, markets trading at or around record highs. The incentive effect here to reach even a mini Phase 1 deal is reduced.
ROMANS: It's interesting. I did see a survey overnight, though, that showed that, you know, about 40 percent of companies or almost half of
companies, they're not preparing really for long term tariffs to remain on and the pressure that's going to put on American and multinational
companies and there are economists and analysts who have been telling me, Julia that really ending this year with the tariff regime as is, is not
something that many companies had planned for, which could mean pressure next year for them.
[09:05:07]
ROMANS: You've already seen, you know, CapEx decline in a lot of places, even as the American consumer is spending like crazy, companies heading
into next year are still -- you know, haven't really come to grips with the fact that maybe you have a tariff regime that stays into early next year
and that could be trouble for some companies.
CHATTERLEY: Absolutely, and we've got the tariffs potentially going to hit on December 15th. So what does the President do about those?
And to your point, and it's a great one, we've had many conversations on this show, suggesting that deals were done between companies here in the
United States and their suppliers in China just to get them through this period.
ROMANS: That's right.
CHATTERLEY: What on earth happens next year? Because that will then be the real crunch.
ROMANS: Yes, uncertainty is not what corporate managers, beam counters and you know, people are trying to plan to the future. Uncertainty around
tariffs is not something they want to see lasting into 2020.
CHATTERLEY: No, and now we've got potential tariffs on U.S. steel imports from Brazil and Argentina as well, that oh boy they have been struggling,
too. Wowsers. Christine Romans, thank you so much for that.
ROMANS: Nice to see you.
CHATTERLEY: All right, next driver. China, still in focus, forcing mobile users to submit more data. This time, it's a facial scan for anyone
registering a new mobile number. Beijing is saying here it is an anti- fraud measure.
Clare Sebastian joins us on this story. And, you know, I get it. An anti- fraud measure makes sense, particularly when so much of the transactions that are going on are via e-payments, but there's plenty of people that are
looking at this and saying it's more sinister than that.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, absolutely, Julia. This is garnering widespread criticism. It's enforced from this Sunday. It's
not retroactive, I should note. So if you are already a mobile phone user in China, you won't have to go back and have your face scanned. It's only
people who are registering new numbers and the government says this is about fighting fraud.
They say this is about protecting citizens' legitimate rights and interest in cyberspace. But of course, the concern among rights groups is that this
amounts to a significant expansion to an already widespread adoption of facial recognition technology in China. It's already used in everything
from concert venues to parks, schools and universities, which is something the government itself has expressed concern about.
And of course, law enforcement is the big concern here. It is used across China, but in particular, in the Xinjiang region where there's a lot of
evidence that the government is engaged in a crackdown on ethnic Muslims. In some cities in that region, there's a camera every 150 feet.
So the government is of course defending this move with cell phones, but I want to show you a tweet from the Executive Director of Human Rights Watch,
Kenneth Roth. He tweeted, "China further extends its dystopian surveillance state." He calls it " ... by requiring all mobile phone users
to submit to facial scans allowing China's pervasive facial recognition technology to track them even if they leave their phones behind."
That's a critical point. This isn't about using your cell phone as a tracking device. This is about creating a database of people's faces and
he is calling that dystopian -- Julia.
CHATTERLEY: Yes, the counter is if it keeps us all safer, then, hey, perhaps it's the option, but it's how that data is used. I mean, I
recently purchased a smartphone with facial recognition technology, and I paid a fortune for it. So it works in some ways. And then we don't like
the extension that it then creates.
China though is far more advanced in facial recognition data, the collection, the technology. They are fact helping the U.N. to set the
standards here. The question, I think, for everybody here is - are we all going to follow? China is just leading.
SEBASTIAN: Right, and I think this is something that's particularly topical at the moment, Julia. You'll remember, just a couple of months
ago, the U.S. government blacklisted several key Chinese AI startups including SenseTime, which is the biggest AI startup in the world by market
value. They are engaged in, of course, much of this facial recognition technology and at the time, they were criticized for doing that to sort of
curb China's ambitions even though they presented it as a way of preventing human rights abuses in the Xinjiang region that we just spoke about.
So this is a key part of the technology race going on between the U.S. and China, a race that is sort of informing the backdrop of this trade dispute
that we're seeing -- Julia.
CHATTERLEY: Absolutely. Clare Sebastian connecting the dots for us. Thank you so much for that. All right, next driver. We have Black Friday.
Now, it's Cyber Monday, and it's poised to be even bigger than ever. Forecast for total online sales in the United States at $9.4 billion, an e-
commerce record. Alison Kosik continues to track these big buys for us. You're at an Amazon fulfillment center, I believe in New Jersey for us
today.
Alison, I know you've got all the numbers here. So talk us through that and what we can expect and have seen already.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Okay, let me talk you through what's happening at Amazon because that's where I am right now.
I'm at a fulfillment center, one of 175 fulfillment centers for Amazon that are worldwide and this place is massive. It is one million square feet.
That's equivalent to about 28 football fields.
[09:10:01]
KOSIK: There are 14 miles of conveyor belt that move product through this warehouse along with thousands of workers just in this facility, who go
ahead and move that product out.
And just today, Julia, millions of packages -- millions -- are expected to be shipped out just from this facility. And Amazon is expecting it to be
expected to be a record breaking day. You look at what happened last year on Cyber Monday, it had its best shopping day in company history.
Talking about in terms of the number of items that were ordered, and guess what? Amazon expects to beat its own record today. More broadly,
retailers look like they're breaking records as well. You mentioned the expectation from Adobe Analytics expecting $9.4 billion in sales just today
on Cyber Monday.
This is not including the shopping spree, the five-day shopping spree that consumers have been on since Thanksgiving Day when $4.2 billion was brought
in, and then Black Friday, $7.4 billion, Small Business Saturday $3.6 billion. And then of course, as I said $9.4 billion for Cyber Monday.
Adobe Analytics is expecting to see $29 billion in total, just on the five days this giant shopping spree that consumers are on right before the
holidays -- Julia.
CHATTERLEY: Yes, we're a nation of shopaholics it seems. What was interesting for me though, in the details of this as well was the huge
increase in people buying online, but still picking up in store. Bricks and mortar not well and truly finished yet. It's driving sales in-store
too, which is vitally important as well for some of the malls and the retail sector here in the United States, too.
KOSIK: Yes, exactly. And one thing that retailers found with this season, you know, we are six days later for Thanksgiving, meaning Thanksgiving came
six days later than usual. So it's a shorter shopping season for retailers.
So I don't know if you've noticed, but the discounts are much deeper faster. And there's a lot more advertising because of this sort of content
and say this -- this sort of it there's just shorter retail season for retailers and they've got a makeup, you know 20 to 30 percent of their
annual sales just in the final three months of the year -- Julia.
CHATTERLEY: I haven't noticed any of those deep discounts she says blatantly lying, Alison Kosik, thank you so much for that.
All right, let me bring you up to speed with some of the other headlines that have been made around the world.
This hour, U.S. President Donald Trump leaves the White House to begin his trip to London for a Summit marking NATO's 70th Anniversary. The Alliance
is facing increasing challenges from growing Russian influence and President Trump's public disagreements with some key NATO allies.
At the Summit, he'll meet with French President Emmanuel Macron who recently said NATO was suffering brain death.
Mexican authorities have arrested several people in connection with the murder of nine members of a Mormon family last month. Three women and six
children were killed in the ambush. The National Guard and Mexican Security Forces launched a joint operation early Sunday. The President of
Mexico is scheduled to meet relatives of the victims today.
A vigil has been held in London for the victims of Friday's terror attack. Jack Merritt and Saskia Jones were involved with a prisoner rehabilitation
program called Learning Together. They've been attending an event linked to that program when they were stabbed by a man convicted of terrorism
offenses, who was out on early release. Three other people were injured.
A United Nations Climate Change Conference opened in Madrid a day after Secretary General Antonio Guterres said global warming is nearing the point
of no return. Delegates from around 200 countries are participating in COP 25 trying to strengthen the 2015 Paris Agreement on limiting the rise in
global temperatures.
All right, we're going to take a quick break here on FIRST MOVE, but coming up, Cyber Monday gearing up to surpass Black Friday shopping bonanza. We
discuss how smartphones are helping send sales soaring.
And driving disruption. We speak to the CEO shaking up the car rental industry. That's coming up. Stay with CNN.
[09:17:29]
CHATTERLEY: Welcome back to live from the New York Stock Exchange still looking like a mostly flat open for U.S. stocks as we kick off a trading
for December.
President Trump's move to restore steel and aluminum tariffs against Argentina and Brazil dented sentiment earlier this morning, that offsetting
news of better than expected factory data from China and of course, as we've been discussing, robust U.S. holiday sales data.
Certainly, a November to remember though here on Wall Street. Stocks posting their best since June, the NASDAQ, in fact, the best performer up
four and a half percent for the month and up -- wowsers -- 30 percent so far this year.
Now, not everything went up last month. The MSCI Emerging Market Stock Index actually fell last month for its first November drop, in fact, in
three years. It is now less than nine percent year-to-date, but clearly still in positive territory.
All right, let's talk about outlooks now. Joining me is Solita Marcelli. She is the Deputy Chief Investment Officer at UBS Americas. Great to have
you with us.
SOLITA MARCELLI, DEPUTY CHIEF INVESTMENT OFFICER, UBS AMERICAS: Thank you.
CHATTERLEY: Okay. Fascinating article and you say the top questions that investors are asking you right now, what does the U.S. election mean for my
portfolio? How do I invest in a protectionist world? How should I invest at this point in the cycle? Late cycle - low yields? Tough questions.
MARCELLI: Yes, very tough questions. Right. We recently launched our year ahead 2020 publication, and we call it the Year of Choices. It's
actually the year of consequential choices because we think the electorates, policymakers and investors are going to be facing with some
key decisions and it's very hard to predict right now and it's very hard to price them right now in the market.
But they're going to be impacting the market performance quite a bit, which means the uncertainty around our base case is going to be much higher than
usual.
CHATTERLEY: So you have to go about minimizing some of the risk associated with - in certain cases, binary options. Republicans versus the Democrats,
for example.
MARCELLI: Yes.
CHATTERLEY: You focus specifically on corporate tax rates. Talk me through this because they've clearly come down under the Republicans and
the Democrats have already said that's going to change if they get into power.
MARCELLI: Well, as you said, one of the big questions, big decisions that people have in mind is the U.S. elections, right? And we tell our clients
not to position their portfolios with the expectation of a specific political outcome and we told them to think about you know, where they can
find investments and we help them with that that's going to have less sensitivity, you know, to those areas with those political outcomes.
[09:20:08]
MARCELLI: Now, corporate taxes is one that you might not be able to depoliticize your portfolio from, because it's one of those issues that
might affect the entire market, not just a sort of specific.
In the current administration, we have seen corporate taxes come down from 35 percent to 21 percent. And from the current Democratic candidates, or
almost from all of them, we're seeing a different kind of proposal, either reversing it some or a lot from where it is right now.
The decline from 35 to 21 percent boosted S&P earnings by about 10 percent. So the reversal of that will probably have a direct impact on earnings
somewhere between five to 10 percent.
CHATTERLEY: Wow, I mean, this is a huge consideration when you're constructing a portfolio at this stage. The other one is trade and a
significant chunk of people don't expect trades to be resolved before the 2020 election. Many of them are saying look at is going to impact our
portfolio. How are you advising clients on this?
MARCELLI: Yes. So obviously, the second big question is around trade, and our base case scenario is that we are likely to get a Phase 1 deal. But
the main question, what does the U.S.-China trade relations going to look like, right, after the post Phase 1 deal?
Either way, in a protectionist world, how do you invest? And our focus is really on a couple of things. One is, you want to have high quality and
high dividend companies, right? Especially at this late stage in the cycle when you have these kinds of risks in the market, it is important to invest
in those companies that have proven and durable business models, especially those companies that have high dividends, and also increasing dividends
would give you some cushion against a volatility.
But also you want to invest in those companies that are driving most of their revenues domestically.
CHATTERLEY: Right.
MARCELLI: And that by the way is true for both U.S. and Chinese markets, right? You know, you have almost 70 percent of the companies in the U.S.
in this market that are driving their business from here and ironically, actually, you would think trade would impact Chinese consumers and it might
eventually, tariffs might do.
But today, a majority of the companies in the Chinese stock market are actually driving their revenues domestically. And that's two things that
are important.
CHATTERLEY: And that's been one of the key drivers all year is the relative strength in consumer spending even while businesses have pulled
back on their investment spending and their decisions, and we've seen that as one of the dominant themes. And I know you like that, too.
Who benefits if we look globally then? You've got a great chart in the report as well that says, look, these are U.S. companies that operate in
China and they are looking at other regions potentially. So perhaps look at infrastructure in Southeast Asia, for example as a key beneficiary of
the ongoing tension.
MARCELLI: Yes.
CHATTERLEY: And I love this. Talk me through this.
MARCELLI: Actually you touched on a trend that is not only true or not going to be true just for 2020. But we also highlight the next decade to
be a decade of transformation and we mentioned a couple of mega trends. One of the mega trends is the globalization, the momentum around the
globalization and potentially the evolution of a silicon curtain.
So what might happen is the beneficiaries could be those emerging market countries where the manufacturing moves from China to them, so they might
offer opportunities for investors as the companies think about adjusting their supply chains.
CHATTERLEY: In Southeast Asia, well and truly in the --
MARCELLI: Yes. Malaysia, Thailand. Those are the countries.
CHATTERLEY: Philippines.
MARCELLI: Philippines.
CHATTERLEY: Yes, that's amazing. Solita, fantastic to have you on the show. Thank you so much.
MARCELLI: Thank you very much.
CHATTERLEY: Really great. Solita there, Deputy Chief Investment Officer at UBS Americas. All right. Let's move on now to the future of energy.
Beijing and Moscow expand their economic partnership with a landmark pipeline.
Chinese President Xi Jinping and Russian leader Vladimir Putin oversaw the launch of the 3,000 kilometer pipeline that would deliver natural gas from
Siberia to North East China. John Defterios joins us on this story.
All part of the Pivot East here from the Russians in particular, but just talk us through what this pipeline involves and what it will mean for
Chinese energy consumption as well.
JOHN DEFTERIOS, CNN BUSINESS EMERGING MARKETS EDITOR: Clearly, this is a gigantic deal, Julia. I love the symbolism of the pipeline itself, the
Power of Siberia. Let's take a look at the map here.
As you suggested, 3,000 kilometers, not only linking the countries together, but also a strategic alliance between Gazprom of Russia and China
National Petroleum Company, of course of this gigantic importer of natural gas and oil today.
As you suggested the two Presidents watching on as Alexey Miller, the head of Gazprom filled that pipeline here. This is the largest deal ever for
Russia, covering some 40 years at $400 billion initial agreements for 30 years with an extension of 10.
[09:25:08]
DEFTERIOS: But we know it's a $400 billion transaction. And Julia, you talked about this tilt to the East. I remember this extremely well,
because I was in St. Petersburg for the International Economic Forum in May of 2014 when the heat was on Vladimir Putin, because of the sanctions from
the United States and the European Union, because of Ukraine and the annexation of Crimea, he needed the deal then.
So the Chinese negotiated a very hard deal. It worked out for both sides, but it was something that was delivered and something that Vladimir Putin
to go back to his people and suggest I'm not shut out of the world markets, particularly my primary market of Europe. There is still a heavy
dependency.
But there's a big battle to your point over China, whether it's by a pipeline or LNG tanker. They have pipelines coming from Turkmenistan and
Kazakhstan into the south of China and LNG plumbing coming from Qatar. You have it from Australia and the United States with a caveat on that last
member because of the U.S.-China trade dispute, the Chinese have shut off the taps or stopped the tankers going in right now because of that dispute.
CHATTERLEY: Absolutely. And I say -- and the timing actually couldn't be more perfect with the September data showing that the United States now is
a net exporter of crude oil and refined petroleum products. It would be kind of interesting that OPEC meeting this week when we get to it -- John.
DEFTERIOS: Yes, that's for sure. I'll be in Vienna to cover it. But let's cover that seminal move here by the United States becoming a net
exporter. Not by a huge margin, by the way, Julia, 89,000 barrels a day, but still, it's exporting not to the ranks of Saudi Arabia's seven million
barrels a day, but it is the headline number of what the U.S. produced in November that is the real game changer, 12.3 million barrels a day, as you
know, it was just in West Texas in the Permian Basin for the very first time, nine million of that 12 million barrels a day is coming from the
shale fields right now.
So it is extraordinary, and there's a pretty strong conviction that the United States will be at 17 million barrels in five years.
CHATTERLEY: Wow. No one minds how much you won the race by, you just won the race.
DEFTERIOS: Exactly.
CHATTERLEY: John Defterios, thank you so much for that. The market opens next.
(COMMERCIAL BREAK)
[09:30:21]
CHATTERLEY: Welcome back to FIRST MOVE. The opening bell has just rung here at the New York Stock Exchange marking the first trading day of
December of course and the first trading day of the week.
As expected, relatively unchanged start for the markets. We lost a bit of steam earlier on after the President -- the U.S. President just to be
clear, tweeted that he would restore steel and aluminum tariffs against Argentina and Brazil as a result of what he called their depreciation of
their currencies.
The big hope of course as well, the U.S.-China trade progress this month is very much in focus for investors as well, at least the delay in the new
round of tariffs set to take effect against China, December 15th. So all eyes on headlines and information on that as we get it.
Investors simply don't want anything to trigger the kind of December that we had last year when stocks almost plunged to bear market levels.
Take a look at a chart of all three indexes over the past year. The big plunge you see on the left is what happened in December before we then got
the big bounce back in January. We were all a bit traumatized from that. So in December, we're going to watch very carefully.
Have a look at the Global Movers. Bricks and mortar retailers this session. Walmart and Target both higher after reports of strong Black
Friday foot traffic.
Meanwhile, shares of Disney are also higher as "Frozen 2" continues to dominate the box office. It was the number one movie in the United States
for the second straight week beating out the film "Knives Out" which is also a focus.
But Roku stock falling after Morgan Stanley downgraded the company today. It sees revenue and growth profit growth slowing meaningfully in 2020.
All right, let's bring it back to sales. The U.S. consumer is a powerhouse and the smartphone, it seems is transforming the annual American ritual of
Thanksgiving spending; not just Americans, quite frankly. Shoppers spent a record of $7.4 billion online this Black Friday and today's Cyber Monday
poised to be even bigger. $2.9 billion worth of Friday sales have made the smartphones the biggest day ever for mobile sales.
Joining us now Rob Garf, he is Vice President of Industry Strategy at Salesforce, and he's got all the data. Great to have you with us.
ROB GARF, VICE PRESIDENT OF INDUSTRY STRATEGY, SALESFORCE: It's great to be here today.
CHATTERLEY: Some records being broken. Talk us through your highlights and what we should be focusing on in these numbers.
GARF: Yes, absolutely. You know, despite the fact that we're six few days between Thanksgiving and Christmas, we're still seeing really high
performance. You mentioned Black Friday, but also Cyber Monday.
We're projecting $30 billion of global revenue online and about $8 billion for just the U.S., so a lot of that is being driven by the mobile device.
You know, it's the remote control of our daily lives and it's no different this holiday season.
CHATTERLEY: You talked about that compression as being a despite factor. But isn't that a reason for more sales to happen this weekend? Because
you've got one week or approximately one week fewer opportunities to spend basically.
GARF: That's right. Well, you know, retailers have been trying to drum up demand through creative ways around scarcity and exclusivity going all the
way back to November. You probably saw it yourself getting e-mails and all of the gigantic discounts.
CHATTERLEY: Discounts.
GARF: Right. But what's happening is it is being pulled a little further ahead. But we're seeing Black Friday, specifically, huge conversion rate
double the typical day for conversion rates. And again, a lot of that is happening on mobile. We saw 56 percent of all orders happening on the
mobile device on Black Friday.
CHATTERLEY: What do it mean by conversion?
GARF: Sure. So for the amount of people who go to a website, how many of them do actually buy. We saw a lot of traffic the week leading up Cyber
week. But really the consumers click the buy button on Thanksgiving and on Black Friday, and we anticipate it again on Cyber Monday.
CHATTERLEY: What about the click and then collect?
GARF: Yes.
CHATTERLEY: Because we've seen quite a little bit of growth in that, too and for the retailers that have struggled this year, that's important just
to get footfall into some of these department stores and these shops, which is also growing, too, I thought was quite fascinating.
GARF: Yes, you know, this is a big factor this holiday season with the shortened frame we have. There's going to be the shipping cutoff date
around December 14th where consumers can't buy online and get it delivered before the holiday begins.
So what's happening is, the store is not dead. It's playing a significant role this holiday where a consumer can buy well after the shipping cutoff
date with the confidence and then pick it up with the convenience right up until Christmas.
CHATTERLEY: So talk to me again about discounts because I do feel like there's been -- and I don't want to use the word loosely, but excessive
discounting and discount after discount after discount and while that's great as a consumer, it does puzzle for the retailers. You've described it
as a discount chicken.
GARF: Discount chicken.
CHATTERLEY: It's a game of chicken.
[09:35:06]
GARF: That's right. It has been happening for years and years and by the way, the consumer always wins. We're seeing earlier and earlier moments,
higher and higher discounts. But consumers are hanging on. They're getting smarter. They're beating the retailers at their own game.
Today, Cyber Monday, we will see the highest discount rates. So consumers have been browsing. They've been getting inspiration, doing research, but
really, they're going to win the game of discount chicken on Cyber Monday when they're going to see the biggest deal.
CHATTERLEY: You know, I may or may not have bought some Christmas decorations over the weekend, and they were 40 percent off and I only just
decorated and we're still four weeks out from Christmas, they're already discounting and I compare the prices to last year and they're the same
price. It's not even like they've been able to mark up to then mark down.
GARF: That's right.
CHATTERLEY: It's a problem.
GARF: Well, you know, there's always been this idea of margin erosion around the holiday. It's not any different, but what retailers are doing,
they are trying to get a little bit more creative. So they're doing things like social only deals. They're doing things exclusive just for loyalty
members. Flash sales. Collaborations with celebrities.
They're trying to get creative and innovative. They're trying to keep this idea of exclusivity and scarcity to try to break this idea of discount
chicken that you referenced before.
CHATTERLEY: And it's not just about the United States either. I mean, there are global numbers and people around the world are using
Thanksgiving, traditionally a U.S. holiday and this weekend to shop for discounts and retailers in other countries are using the opportunity, too.
GARF: That is true. And you know what? It feels like actually, almost every day is Black Friday. For me, the holiday started with Prime Day over
the summer where you saw more and more retailers trying to take advantage of the halo effect that Amazon was creating around demand.
We actually saw 50 percent of the top digital retailers in the world use a discount and a lot of them actually use the word Prime Day or early Black
Friday to really try to drum up the demand earlier on.
So going back to your point, Thanksgiving, the idea of this higher and heightened demand is proliferating across the entire globe.
CHATTERLEY: So other retailers were using the word Prime and leveraging in some app --
GARF: Seventeen percent -- 17 percent of the retailers use the word Prime in their promotions either on their homepage or in an e-mail over that
time.
CHATTERLEY: Even if they have nothing to do with Amazon in any way.
GARF: That's right. They are just taking advantage of the demand that Amazon has created, and again, there's just been this steady drumbeat
starting from early summer, all the way to here. It is somewhat marginalizing Black Friday and Cyber Monday to a certain degree. There's
still a buzz. But there's this steady drumbeat of demand.
CHATTERLEY: You know what is interesting to me is Alibaba and their Singles Day.
GARF: Their Singles Day.
CHATTERLEY: Not just one day, of course, the sheer level of spending that we saw, I think the total is like $38 billion.
GARF: That's right.
CHATTERLEY: To even when I compared to the numbers that we're talking about here.
GARF: There's a whole lot of consumers over there in China that certainly have taken advantage of this manufactured holiday and created this demand
and it's done very well. Again, the steady drumbeat that is happening throughout the course of November and generally throughout the entire year
at this point.
CHATTERLEY: I know, the beauty of the Chinese consumer though. Let's bring it back to the trade war and the challenges there. Can't forget the
importance of those, guys. Rob, fantastic to have you with us.
GARF: Yes, Happy Holidays, and happy shopping.
CHATTERLEY: Happy. Yes. Allegedly. Rob Garf from Salesforce. Thank you so much for that. All right, what are we doing next?
We're going to take a break. Plenty more to come after this and coming up, we're going to speak to the CEO of a company that's disrupting rental --
the car rental market. Stay with us. That's coming up.
(COMMERCIAL BREAK)
[09:41:43]
CHATTERLEY: Welcome back to FIRST MOVE. Holiday travel is almost upon us and that may well include renting a car. Now, from personal experience, it
is hardly hassle free. There's the waiting around, the unexpected add-on insurance fees and perhaps fears of an unexpected charge when you return
the vehicle.
Enter Turo where you can rent a personal car from someone in a similar way to companies like Airbnb. It says both renters and owners benefit. Turo
says, on average, car owners can make at least $500.00 a month and the owners of at least three cars can make on average $3,000.00 a month.
Turo also claims rents can average 25 percent less than traditional car rental companies, and that has angered the major rental firms saying look,
it is unfair competition because Turo doesn't pay the same taxes and fees as they do.
Plenty to discuss. Joining us in the "Chatt Room" is the CEO of Turo, Andre Haddad. Andre, great to have you with us. Thank you so much for
being on the show.
You know, this appeals to me, because I've always thought the economics of car ownership doesn't really make sense. It loses value. The depreciation
is a problem. So this kind of helps you monetize your vehicle. Was that why you originally launched this company?
ANDRE HADDAD, CEO, TURO: That's precisely why we founded Turo nine years ago. You know, there are more than one and a half billion cars out there
around the world and most of them are sitting idle the majority of the time. So this is a great opportunity with Turo to be able to make some
economic sense of car ownership.
CHATTERLEY: How many cars do you have listed on your platform? And how many users do you have?
HADDAD: So we just crossed 450,000 listed vehicles in four major markets. We are primarily present in the United States and Canada, in the U.K. and
in Germany. And we also just recently crossed 13 million sign ups.
So we're excited about the continuous growth of the business and as you were pointing out in your introduction, what's driving that growth is the
opportunity for people to earn a little bit of money when they're not using their car.
Last year, the average host earned right around $500.00 a month by sharing their car roughly 10 days a month.
CHATTERLEY: And for how much time during that -- is that full day -- the equivalent of full days of rental?
HADDAD: Yes, that's the equivalent of 10 full days of rentals during the month. So roughly a third of the time that they're sharing their car on
the app, they are earning right around $500.00 a month by sharing their car a third of the time.
CHATTERLEY: That's interesting. If you've got a car on finance, you could effectively rent it out and let it pay for itself. How many of your users
or at least what proportion have more than one car? Because I know you yourself, do it and you have six, I believe including a Tesla.
Oh, I think we've lost him. Okay, well try and get Andre back, but for now, I'm just going to throw to break and see whether we can get him back.
Stay with us. We will work it out if we can.
(COMMERCIAL BREAK)
[09:47:05]
CHATTERLEY: Welcome back to FIRST MOVE and the joys of live TV. We can get back to San Francisco with the CEO of Turo, Andre Haddad. Andre,
apologies for that. And it is great to have you back with us.
Just before I was asking you what proportion of those that rent their cars actually rent more than one on the site? Because I know you yourself do it
and you have six, I believe.
HADDAD: Yes, we have a lot of car enthusiasts that share multiple cars, but the overall stat is 95 percent of our hosts are sharing one or two
cars.
So the overwhelming majority of our hosting community is, you know, sharing their private car, and the overwhelming majority of our hosts are not car
enthusiasts.
CHATTERLEY: So now we'll talk about some of the criticisms because some of the car rental competitors out there is saying look, you've got people that
are running small businesses, particularly at airports that compete with them, that you don't pay the same fees that they have to pay.
What's your response to some of the pressures and the criticisms that you're getting from companies like Enterprise that are saying, you're kind
of disrupting their business model and it's not a level playing field?
HADDAD: Yes, we really recognize that they don't like competition. And we just, you know, we just say, hey, we're here. There's an alternative.
There's another option for consumers.
The reality is there is a, you know, pretty well hidden quid pro quo when it comes to rental car taxes, you know, yes, Enterprise and the rental car
industry pay rental car taxes, but they also don't pay any sales tax when they purchase the vehicles in the first place. So that's you know, a
significant tax saving and a tax loophole that they benefit from.
More than $3 billion a year is saved in these sales taxes that they're not paying when they purchase the hundreds of thousands of vehicles that they
purchase every year.
Whereas our hosts obviously pay the sales tax when, you know, they purchased their vehicle or their VAT in Europe when they're purchasing
their vehicle in Europe.
So it's a very different, I would say, situation from a fiscal standpoint. We certainly believe that, you know, consumers deserve to have some choice.
You know, the rental car industry has been consolidating over the last few years, have been limiting selection and increasing prices. And, you know,
I think consumers prefer to have more options at airports or elsewhere.
CHATTERLEY: One of the other things that consumers care about though, is safety. How can you do the due-diligence to make sure that the cars that
have been listed on your site are up to scratch? They have all their details - the car itself is in tip-top condition the same way that perhaps
a traditional car rental company would have to enforce?
[09:50:01]
HADDAD: We do a lot of that screening right at the moment where a host is considering to list their vehicle with us. So we ask all of our hosts to
provide their vehicle identification number, their VIN, which is, you know, a universal identifier of the vehicle that provides us access to a lot of
vehicle information, including very important safety information in the United States around safety recalls.
And so if a vehicle has any kind of safety recall, it's not allowed to be listed on the app.
CHATTERLEY: And that makes sense. I want to finally ask you about raising money and I believe you now have unicorn valuation. So congratulations on
that. How do you feel about that? And in line with that, are you profitable as a company and has that discussion come up when you've raised
money with investors, because there is a greater sensitivity it feels today perhaps than ever before.
HADDAD: There's definitely been a big change I'd say in the last six months in the financial markets, obviously the public ones, as well as the
private ones, and there's a lot more focused on profitability.
We have a great growth story today, we're not yet profitable. We plan to be profitable over the next couple of years and that's been really the
cornerstone of our story for our new investors that have joined us in the summer who helped us fund the next phase of growth and profitability of the
business over the next couple of years.
CHATTERLEY: Fantastic to have you on the show, Andre. Stay in touch with us, please. It is going to be a great to track your progress. Andre
Haddad there, the CEO of Turo.
Alright, so let me bring you up to speed now with today's "Boardroom Brief." Amazon has removed a number of Christmas ornaments that were being
offered on its side, featuring images of the Auschwitz concentration camps in Poland. The images appeared on decorations and mouse pad and a bottle
opener.
The Auschwitz Memorial Museum raised the alarm describing them as disturbing and disrespectful. Wow.
India's Yes Bank says investors including a big U.S. fund have agreed to pump in $2 billion of fresh capital. It isn't yet naming the U.S.
investor, which it sees has committed $120 million dollars. Shares of Yes Bank, India's fourth largest private lender had dropped by nearly two
thirds over the past year.
Nissan's new CEO says this company alliance with Renault is essential for future growth. He was speaking a day after he took the reins at Nissan
sound promising to restore the car giant's profitability.
The Japanese firm has had a year of turbulences since sliding profits since Chairman Carlos Ghosn, who also led Renault was arrested.
Google and Facebook are facing new investigations in Europe. E.U. regulators are investigating the scope of the company's collection of user
data and Britain's competition watchdog is also looking into the possible impact of Google's acquisition of analytics firm, Looker Data Sciences.
Hadas Gold is live in London with more on this. Hadas, wow, Google simply or Alphabet we should call them simply can't catch a break here. Talk us
through the details of these latest investigations?
HADAS GOLD, CNN BUSINESS REPORTER: Yes, Julia, these are likely not the early Christmas presents that Google was hoping for. So we've got pretty
much two investigation launched in the last couple of days.
The first come from the European Commission and it also includes Facebook and what they're looking at is how and why companies like Google and
Facebook are collecting the data it does, particularly when it comes to local search results and online ads.
Now, all we know so far as the Commission says that they have sent out questionnaires as part of a primary investigation. Google has said in a
response that they plan to participate and they will continue to engage with the Commission.
But it goes to show you that the Europeans might not quite be satisfied with the already almost $9 billion worth of fines that they've levied
against Google. They're continuing this very aggressive stance.
We have a new Commission in place. We have another five years from Margrethe Vestager. It seems as though we're continuing on this path, with
even more aggressive action against this.
Now Looker that Google has acquired is this company that allows you to kind of see all of your Cloud data from all these different companies all in one
place. Huge acquisition by Google back in June. Now, it has not completed yet, U.S. authorities have not approved it yet. But what the British
Competitions Authority said is that they are launching investigation to see whether it will affect competition here in the U.K.
They're opening the comments on this until December 20th. But clearly, all of these investigations including all the ones going on in the U.S. -- the
D.O.J., all of the States Attorneys General who have launched investigations, the House Democrats are launching investigations into
Google -- it has not halted Google's spending spree.
We heard recently about this acquisition of Fitbit, and this Looker acquisition is actually its biggest yet at $2.6 billion dollars -- Julia.
These investigations are clearly not stopping Google yet, but what they might do in the future, hard to tell.
[09:55:01]
CHATTERLEY: Yes, I mean, the Europeans have absolutely led the way in terms of tightening up regulation, and this Competition Commissioner who
clearly is going to be staying on and has got the bit between her teeth, she is like a terrier as far as these tech companies are concerned.
My problem here is, is that the fines simply aren't big enough. They're peanuts relative to the sheer earning power of these companies, and until
that changes, I'm not sure what good this does.
GOLD: Yes, exactly. And what we're seeing is we are seeing some of the rules change because initially, for example, here in the U.K. the
Information Commissioner, the max fine, they could put down was about 500,000 pounds. That's literally nothing for a company like Facebook.
Now we're shifting, we're starting to see percentage of revenue that can have a bigger impact. But clearly, what Europe thought was going to be
huge fines on these companies has not had a huge effect. And for Europe, especially what they are particularly concerned about is that there's this
dominance from the U.S. and China tech firms and they're trying to shore up the European tech sovereignty as well.
CHATTERLEY: Yes, absolutely. Hadas Gold, great job. Thank you so much for that.
All right, that's it for the show. I'm Julia Chatterley. You can listen to our podcast at cnn.com/podcast.
For now, you've been watching FIRST MOVE. Time to go make yours. Happy Cyber Monday. I'm reading e-mails, not shopping.
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[10:00:00]
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