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As virus-wary shoppers opt for online purchases, retailers pay the price

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LOS ANGELES(Reuters) – Online sales may be a saving grace for pandemic-battered retailers with fewer shoppers in their stores. But many retailers, from department store chain Macy’s Inc to essential retailer Target Corp, are grappling with higher expenses related to e-commerce.

Retailers often use the more lucrative in-store sales to subsidise hefty e-commerce costs, ranging from marketing to fulfilment and shipping. Companies don’t usually break out those expenses, which of late have been overshadowed by massive write-downs for unsold inventory and lower online profits.

Margins for the hardest-hit nonessential retailers – including mall-based clothing chains – on average are this year likely to be about half what they were in 2019, according to credit ratings agency S&P Global. The shift to e-commerce probably erased a couple of percentage points from company margins, Sarah Wyeth, senior director for retail and restaurants said.

When it comes to online sales, “retailers have always given away too much margin,” said Neil Saunders, managing director at GlobalData Retail. “Now that more stores are closed and online penetration is higher, losses have exploded.”

Historically, sales in stores accounted for more than 80% of all retail sales in the United States, according to eMarketer. E-commerce as a percentage of retail sales, excluding gas and auto, zoomed to 22.9% in the second quarter after the pandemic accelerated the shift to online shopping, said Andrew Lipsman, principal analyst at that research firm.

As of mid-July, the spike of COVID-19 infections around the United States has spurred states such as California to shutter indoor shopping malls – further endangering in-person transactions, which are generally lower cost.

Almost 18% of Macy’s stores are in California.

On July 1, the retail operator, which also owns Bloomingdale’s store, said gross margin tumbled to 17.1%, down more than 21 percentage points from a year earlier.

Macy’s CEO Jeff Gennette said the chain was seeing “a noticeably worse trend in brick-and-mortar” stores in Texas, Florida and Arizona, where infections are setting new records.

“Conversely, in those particular states, the dot-com business is improving,” he said on the heels of posting a staggering $3.58 billion loss for the quarter that ended May 2.

Fast-forward, tighter squeeze

RSR Research co-founder Paula Rosenblum estimated that typical online orders cost retailers roughly 10-15% more than purchases in stores, where shoppers do the work of selecting items and transporting them home. Her calculation does not include returns, which are more common with e-commerce purchases because shoppers don’t see, touch or try on products beforehand.

While Amazon.com Inc, Walmart Inc and other deep-pocketed companies can spend heavily on projects like automation and inventory tracking to reduce e-commerce expenses “a lot of companies are on the ropes and can’t afford to,” said Hilding Anderson, senior director of strategy and consulting at Publicis Sapient.

Target stayed open throughout the early stages of the pandemic, but its gross margin fell 450 basis points in the first quarter, when digital sales surged 141%. The retailer blamed the deterioration on apparel write-downs, a shift to lower profit sales of food and essential items, and rising digital fulfilment and supply chain costs.

“Our first quarter digital volumes weren’t anticipated for another three years … It was an extreme test of our model and our team,” Target Chief Operating Officer John Mulligan said on a May 20 conference call.

Meanwhile, FedEx Corp and United Parcel Service Inc have a lock on e-commerce delivery, but lost a significant amount of high-margin business when offices shuttered. Those carriers are raising their prices to offset the explosion in higher-cost home deliveries of everything from food to furniture and electronics and exercise equipment.

“The margin squeeze might go on for a while,” said Gabriella Santaniello, founder of retail research firm A Line Partners. “It’s going to be really hard to put the genie back in the bottle.”

Reporting and photo: Reuters

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Maldives celebrates arrival of 2024’s 1 millionth tourist

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Maldives on Thursday welcomed the one millionth tourist to visit this year.

The one millionth tourist is a Thai named Sutapa Amonwivat, who arrived from Singapore with her husband and two children. This is her second visit to Maldives.

Maldives Marketing and Public Relations Corporation (MMPRC) and the Ministry of Tourism gave a warm welcome to Sutapa at the Velana International Airport (VIA) Thursday afternoon. She was welcomed at the VIA by tourism minister Ibrahim Faisal, MMPRC Managing Director Ibrahim Shiury and senior officials of various relevant agencies.

After welcoming her with traditional offerings, she was presented with various gifts by the ministry, MMPRC, customs, immigration, Maldives Association of Travel Agents and Tour Operators (MATATO) and Trans Maldivian Airways (TMA).

Maldives reached one million tourists in June, three weeks earlier than last year. The number of tourists reached one million on July 16, 2023.

Maldives expects to reach 2 million tourists this year.

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New air route connects Chongqing to Maldives

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Chongqing Airlines on Monday began its inaugural flights to Maldives.

The Chongqing-Male route, scheduled three times a week, is expected to strengthen the bonds between China and the Maldives, opening up exciting new opportunities for tourism and cultural exchange.

The inaugural flight was welcomed upon its arrival at Velana International Airport (VIA) in Maldives, where local officials and tourism representatives expressed their enthusiasm for this new development.

“We warmly welcome our friends from China to our beautiful islands. This new connection strengthens our bonds and opens up new opportunities for tourism,” the tourism ministry said on X.

Maldives currently welcomes four airlines from China, including China Eastern, Beijing Capital Airlines, Xiamen Airlines.

In January, Maldives government urged tourism stakeholders in both Maldives and China to ramp up efforts to restore China’s position as the primary source market for Maldives tourism, a status held before the onset of Covid-19.

China, being the largest source market for Maldives tourism before the pandemic, saw a resumption of tourist arrivals from January 2023 after a three-year hiatus due to the pandemic. In 2023, the Maldives welcomed 187,118 Chinese tourists, marking a significant recovery in numbers. This year, the Maldives has welcomed the most number of tourists from China, with over 107,940 or 11.5 percent of total arrivals by June 12. 

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CROSSROADS Maldives Introduces Weixin Pay at resorts for seamless guest experience

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CROSSROADS Maldives has introduced WeChat Pay, widely known as Weixin Pay in China, across its world-class resorts, SAii Lagoon Maldives, Curio Collection by Hilton, and Hard Rock Hotel Maldives. This payment option is made available to enhance the convenience and overall experience for guests from China, making their stay in the Maldives more enjoyable and hassle-free.

Understanding the needs of the diverse guests, CROSSROADS Maldives has integrated WeChat Pay into operations, allowing guests from China to easily and securely conduct transactions using a payment method familiar to them. The introduction of WeChat Pay is a testament to CROSSROADS Maldives’ dedication to enhancing guest satisfaction by offering exceptional experiences at every turn. What is also expected through this initiative is that the guests could benefit from better foreign exchange rates, translating to better savings on their expenditures during their stay.

The option is available for guests in-house conveniently at both resorts as well as across the Marina at CROSSROADS Maldives where a wider variety of unparalleled dining and retail experiences are available for all guests. The day visitors from China will also therefore equally benefit from this new introduction at the Maldives’ premier multi-island integrated leisure destination.

SAii Lagoon Maldives, Curio Collection by Hilton, is a vibrant tropical escape that offers unique and locally inspired experiences. The resort features spacious rooms and villas, a variety of dining options, and an array of recreational activities designed to cater to the desires of modern travellers. Guests can escape to the island’s SAiisational natural beauty, enjoy water sports, and indulge in spa treatments, all while relishing the personalised service that defines Hilton’s Curio Collection.

Hard Rock Hotel Maldives brings the iconic Hard Rock spirit to the tranquil shores of the Maldives. This family-friendly resort offers a perfect blend of relaxation and entertainment, featuring music-inspired experiences, live performances, and the brand’s signature amenities. With luxurious accommodations, diverse dining options, and a plethora of activities for all ages, Hard Rock Hotel Maldives ensures an unforgettable holiday experience for every guest.

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