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Chinese online marketplace JD.com has closed its local branch after only 15 months in the market, according to a report by the Australian Financial Review.

The e-commerce giant launched its Australian office in Melbourne in February 2018, after its competitor Alibaba opened an office in Melbourne in 2017.

At the time, the opening was seen as a way for JD.com to work more closely with the Australian and New Zealand brands on its platform, and to pitch its business to new brands looking to expand into China.

Inside FMCG contacted JD.com for comment, but had not received a reply by the time of publication. However, a JD.com spokesperson confirmed to the AFR that the online marketplace is integrating its Australian office into the business in China. The spokesperson said the move didn’t reflect the business’s performance in Australia, nor the region’s importance.

The retailer’s head of Australian operations Patrick Nestrel is no longer with the business, likely in an effort to ensure management in China is able to fully integrate Australian operations.

The online retailer is set to report its first quarter sales results on May 10. It has had a difficult few months recently after founder Richard Liu was arrested in September 2018 in the US for sexual misconduct. He was not charged.

In April, the Chinese university student who accused Liu of misconduct filed a civil lawsuit against him.

Online reseller eBay looks to be wearing the bruises of a brutal battle with Amazon and other online retailers as its net profit for the 2018 calendar year plummeted by 80 per cent and its top-line sales growth hardly budged.

Documents lodged with the Australian Securities & Investments Commission show eBay Australia and New Zealand posted a net profit of $507,147 for 2018, down sharply from the profit of $2.5 million in 2017.

Its revenue, representing services to customers and not the value of merchandise sold online, was $48.19m in 2018, up slightly from $47.955m in the previous year. The accounts also included “travel and entertainment” expenses of $1.482m, up from $1.245m, although it is unclear what this cost relates to.

A spokeswoman for eBay declined to comment on the financial results or the crashing profitability. The result was dented by a sharp rise in income tax expense to $9m, from just $732,000 in 2017.

It comes as the latest financial results from US online retail giant Amazon showed it has taken a $300m bite out of the Australian retail sector as its operations push into new categories and its new warehouses ratchet up the group’s local capacity.

Results for Amazon’s business in Australia, also lodged with ASIC, revealed that Amazon Commercial Services, which operates the company’s retail operations in Australia, posted a smaller loss for the 2018 calendar year. Its losses for the year slimmed down to $4.375m, from a loss of $12.19m in 2017. Local revenue for 2018 rose to $292.33m from $17.38m in 2017.

Apple reported some ugly numbers this week. Revenue in its fiscal second quarter dipped 5 per cent from a year earlier - including a 17 per cent slide in iPhone sales, the company said.

1. Does Apple believe the iPhone sales decline is temporary? Apple's revenue from iPhones - more than half of the company's sales - fell by nearly $US16 billion ($22.8 billion) in the first half of Apple's current fiscal year. Gains from every other Apple product or service rose by a combined $US8.5 billion. That's not a great recipe for growth, and this trend has been brewing for some time.

Growth has stalled  in the number of iPhones sold  - and Apple is not alone. Global smartphone sales have been declining as people hold onto their devices longer, which delays new smartphone purchases. Apple was able to ward off this reality for maybe a year, thanks to the pricier iPhone X models that went on sale in late 2017. But it can't fight gravity anymore.

Apple has never really addressed the most pressing question about its business: Does Apple believe this industrywide smartphone sag will end? If yes, when and what will be the catalysts to ignite sales growth? If not, how is Apple preparing for its most important product to stop growing? Apple's emphasis on its internet-related products such as Apple Music cannot fully replace the revenue decline from sliding iPhone sales (see below). So, what else you got?

2. No, really. What's the strategy behind internet-related services? Given the iPhone sales slide, how is Apple thinking about the financial role of its internet-related revenue and ancillary hardware such as commissions on app sales, the AppleCare warranty program, AirPods, Apple Music and the coming Apple TV+ web video subscription? There's no way these sales can fully fill the crater left by iPhone sales, or so I think. Is that what Apple believes? Is the business strategy to replace some of the lost revenue, and perhaps a larger share of profits, from falling iPhone sales?

But what is the long-term play? Ultimately if people aren't buying more iPhones, Apple won't have a fresh pool of people to persuade to spend more on apps, AirPods and other things that are a supplement to Apple's main hardware products - principally the iPhone. Is the goal to increase Apple's average revenue from each iPhone owner? Or, if Apple is trying to sell products to people who don't already own iPhones and other Apple products, how can it boost what seem to be paltry sales of Apple Music, AirPods, Apple News and more to the billions of people who don't already own its gadgets?

3. What's the plan to reach the next billion users? I think often of this 2016 interview with chief executive officer Tim Cook on Indian television network NDTV. Cook was asked repeatedly how Apple products might be tailored to the unique needs of Indians. Cook seemed out of his depth, and Apple has mostly stuck with its global one-size-fits-all strategy. Since then, Apple has gone nowhere in India. Its revenue flatlined in what is perhaps the world's most important technology growth market.(2)

4. Does Apple have the right expertise at the company to shift direction, if it wants to? This goes for both Apple's strategy with online services and selling outside the developed world. Apple is stocked with expertise in hardware development and supply chains, pedantic designers who come up with one amazing product a year and computer chip nerds. Also, Apple's executive team and board of directors look like this. It's a lot of Americans and Europeans, which is a sign of the company's relative global myopia. Does the company's employee base need different types of skills and experience?

Based on the company's forecast for the the next three months, Apple isn't in a tailspin as it has been for half a year. That's good. But even before the company's revenue warning in January, it was clear Apple had growth trouble ahead, although investors and Apple executives weren't fixated on it.

Now is the time for red-hot focus on Apple's road map for the future - or its lack of a credible one besides waiting out its troubled patch in China.

Flight Centre's shares were pounded in the wake of the announcement, plunging nearly 13 per cent in early trade, and trading at $39.30, a fall of 11 per cent, by late afternoon.

Flight Centre on Wednesday said the subdued trading conditions had coincided with a period of "significant disruption" for the company including introducing a new wage model for its front-end sales staff, an ongoing review of its shop network and putting in new sales systems.

Despite this strength, the sluggish Australian leisure result means Flight Centre now expects its underlying profit before tax for the 12 months to June 30 to fall to between $335 million and $360 million, below the $390 million to $420 million range it initially targeted when it released market guidance in October 2018.

The mid-point in this new range, $347.5 million, represents a 10 per cent decrease on the record
$384.7 million underlying profit before tax it recorded in 2018.

Citi analyst Bryan Raymond said the outlook was far from certain and maintained a price target for the stock at $47.51.

"While offshore and corporate earnings growth remains strong, in order for real value to emerge, a stabilisation of the Australian leisure business is required," he said in a note to clients.

The declines appear to be accelerating in a tough demand environment.

Citi's Bryan Raymond

"That is yet to be seen, as the declines appear to be accelerating in a tough demand environment."

Flight Centre is also facing a challenge from its workforce after trade union Together Queensland and law firm Maurice Blackburn filed Federal Court action against the company also on Friday.

The five suing workers allege the company failed to pay minimum wages for each ordinary hours worked and failed to pay the correct rates for annual leave and annual leave loading. It is also alleged the company failed to provide proper rest and meal breaks.

Maurice Blackburn employment law principal Giri Sivaraman said Flight Centre's pay model, where a commission was paid on top of a base salary as an incentive to drive sales, contributed to the company's alleged breaches of the Fair Work Act.

"However, given the hours actually worked by these employees, they needed to earn enough commission for their pay to rise above the statutory minimum wage," he said.

"As this systemic underpayment of employees was part of the structure of Flight Centre’s business we believe that potentially thousands of current and former workers could have been impacted."

A Flight Centre said it had changed its wage model last year and "categorically denied" paying its staff below the minimum wage.

"These allegations ...are inaccurate and were strongly denied publicly when they first surfaced in 2018," a spokesman said.

"If the combination of retainer and commission fell below the minimum applicable award, the company paid its people an additional top-up to ensure earnings reached the appropriate level."

Google affiliate Wing Aviation has received federal approval allowing it to make commercial deliveries by drone after conducting thousands of flights in Australia in recent years.

It’s the first time a company has gained a federal air carrier certification for drone deliveries. The approval from the Federal Aviation Administration means that Wing can operate commercial drone flights in part of Virginia, which it plans to begin later this year.

The FAA said on Tuesday that the company met the agency’s safety requirements by participating in a pilot program in Virginia with the Mid-Atlantic Aviation Partnership and Virginia Tech, and by conducting flights in Australia. The company said its drones have flown more than 70,000 test flights and made more than 3000 deliveries to customers in Australia.

“This is an important step forward for the safe testing and integration of drones into our economy,” transportation secretary Elaine Chao said in a statement.

Wing said the approval “means that we can begin a commercial service delivering goods from local businesses to homes in the United States.” The company didn’t name any businesses that would take part in commercial deliveries. It said it plans to spend the next several months demonstrating its technology and answering questions from people and businesses in Blacksburg and Christiansburg, Virginia.

Wing said it will “solicit feedback with the goal of launching a delivery trial later this year.” Wing said that to win FAA certification it had to show that one of its drone deliveries would pose less risk to pedestrians than the same trip made in a car.

The company is touting many benefits from deliveries by electric drones. It says medicine and food can be delivered faster, that drones will be especially helpful to consumers who need help getting around, and that they can reduce traffic and emissions.

Drone usage in the US has grown rapidly in some industries such as utilities, pipelines and agriculture. But drones have faced more obstacles in delivering retail packages and food because of federal regulations that bar most flights over crowds of people and beyond sight of the operator without a waiver from the FAA. The federal government recently estimated that about 110,000 commercial drones were operating in the US, and that number is expected to zoom to about 450,000 in 2022.

Chanel's rouge allure luminous intense lipstick costs $72.24 on Amazon.com.au, with only one unit now in stock. It costs $53 in Myer, David Jones and through online retailer Adore Beauty.

Lancome's Hypnose perfume (75ml)  costs $129.05 on Amazon, with four units in stock, but is $189 in Myer and $189 on the official Lancome site.

Beauty companies fear irrational pricing, low stock availability and potential quality issues – particularly if stock is counterfeit, out of date or has been stored incorrectly – could damage consumer perceptions of their brands.

The irrational pricing also threatens to deter Amazon shoppers. According to eBay research, competitive pricing is the most important criteria for online shoppers, ranking ahead of free shipping and wide selection.

Brand integrity

Chanel is particularly aggrieved because Amazon's move undermines global efforts to protect the integrity of its brand and control grey-market product, which represents less than 1 per cent of sales. Chanel declined to comment on Thursday.

A L'Oreal spokeswoman confirmed the company was "not a partner" to Amazon for luxury beauty products and the only luxe product it sold on Amazon was Clarisonic facial cleansing kits.

Asked whether Amazon Australia was selling stock sourced from the grey market,  a spokeswoman said distribution agreements were between a brand and its distributors.

"Amazon’s customers deserve access to the widest selection of authentic goods at competitive prices, and we welcome the opportunity to provide authentic products that are directly or indirectly sourced," the spokeswoman said. "Amazon is always innovating on behalf of customers and we put our energy into ensuring they find low prices every day."

Amazon.com.au appears to be taking advantage of the fact Chanel does not sell products through multi-brand online beauty sites such as Mecca, Sephora and Adore Beauty and does not have its own e-commerce site in Australia. Rather, it relies on stand-alone Chanel boutiques and partners such as Myer and David Jones.

L'Oreal Australia began selling Kiehl's, Giorgio Armani, Lancome and YSL direct to consumers through single-brand online sites last year and is considering launching a multi-brand site. It also sells some brands through Sephora, Mecca and Adore.

Majors reluctant

Online beauty sales are growing 25 per cent a year– more than three times faster than in bricks-and-mortar stores – and account for 21 per cent of the Australian market, up from less than 5 per cent 10 years ago.

In the US, Amazon has tried to convince luxury beauty brands to come to the party by enabling brands to have their products “gated” or protected from being sold by third  parties.

While Amazon is now a popular route to market for independent, start-up and mass-market brands such as Maybelline (owned by L'Oreal), and Covergirl, the major luxury brands are reluctant to take the plunge.

According to a Coresight Research report last month, Amazon is the US' second most-popular beauty product retailer after Walmart. But it remains heavily reliant on third-party sellers, who account for 92.4 per cent of beauty products listed and 94.5 per cent of make-up listings.

Clinique, which is owned by Estee Lauder, is one of the three top-selling brands on Amazon in the US, according to the Coresight report. But, like L'Oreal and Chanel, Clinique does not sell to Amazon.

"Estée Lauder Companies do not have a distribution agreement in place with Amazon," a spokeswoman said.

"These products have not been sourced via authorised channels and we therefore cannot guarantee the authenticity, shelf life or shipping and storage conditions of the products."

Supermarket retailer Walmart has launched a new technology called Intelligent Retail Lab (IRL) that allows it to monitor its physical stores more efficiently and keep costs under control.

The retail giant is testing this new technology, which includes artificial intelligence-enabled cameras, interactive displays and a massive data centre, in its 50,000-square-foot neighborhood market grocery store in Levittown, New York.

According to IRL CEO Mike Hanrahan, the location is one of Walmart’s busiest stores and has more than 30,000 items and this allows them to test out the new technology concept in a real-world environment.

“We’ve got 50,000 square feet of real retail space. The scope of what we can do operationally is so exciting,” Hanrahan said.

IRL is set up to gather information about what’s happening inside the store through an array of sensors, cameras and processors. It has a combination of cameras and real-time analytics that will automatically trigger out-of-stock notifications to internal apps that alert associates when to re-stock, detect the products on the shelf and compare the quantities, among others.

Hanrahan said the first thing this equipment will help the team focus on is product inventory and availability. In short, the team will use real-time information to explore efficiencies that will allow associates to know more precisely when to restock products, so items are available on shelves when they’re needed.

“Customers can be confident about products being there, about the freshness of produce and meat. Those are the types of things that AI can really help with,” Hanrahan said.

Walmart said with its new IRL technology, customers can trust that the products they need will be available during the times they shop.

Woolworths has invested several million dollars developing the app, in conjunction with analytics firm RI, and has been testing it in conjunction with field sales agency Crossmark, which handles merchandising for suppliers such as Twinings, Blackmores and Lion.

Woolworths says the Compass app has the potential to help suppliers recoup millions of dollars in lost sales while also improving availability and product presentation for customers.

Woolworths director of fresh foods and replenishment, Paul Harker, said Woolworths was the first Australian retailer to invest in a free lost sales monitor for suppliers.

“We see it as a genuine win-win because a lost sale for a supplier is a lost sale for Woolworths, and most likely an unsatisfied customer," he said.

“Drawing on smartphone technology and a spirit of collaboration, we’re confident Compass will drive a step-change in availability and merchandising standards for our customers.”

Out of stocks have been higher than usual at Woolworths in recent weeks because of disputes with suppliers such as Nestle, Uncle Tobys and Mars Petcare over price rises.

Crossmark director of operations Luke Johnson said the Compass app was a useful tool for merchandisers and feedback to date had been positive.

“It also provides us with greater insight across our whole field force, which helps ensure we’re focused on addressing the right things in the right stores for the benefit of our clients and their customers.”

The app, which is available on Apple and Android devices, will be free of charge to suppliers.

Last October, Woolworths awarded its data sharing and research services to 50 per cent-owned analytics firm Quantium and market research firm Nielsen.

A new data-sharing model aimed at making it easier for suppliers to understand their sales and market share performance in Woolworths, with more granular detail on sales by store and store clusters and return on space, is due to be rolled out in fiscal 2020.

According to Canaccord Genuity analyst Owen Humphries, consumers can submit a new car they would like to purchase and Eclipx will negotiate with a number of dealer groups to achieve the best price.

Kogan Energy Compare is an energy comparison tool which enables customers to upload existing bills to see if any savings are available. Kogan will take a commission on the savings.

The new products and services will increase the relevance of the Kogan website to its 300,000 daily visitors as competition increases from Amazon, eBay and Catch Group.

The company has also launched a membership subscription service, Kogan First, which gives subscribers unlimited free shipping on certain purchases. This follows the launch of Amazon Prime, eBay Plus and Catch Club subscription services in the last year.

Kogan.com shares, which had been trading around 18-month lows following a disappointing first-half result, jumped as much as 19.5 per cent to $5.39 before closing at $5.34.

Mr Humphries increased his share price target to $6.25 from $5.75 after lifting 2019 and 2020 EBITDA forecasts by 10 per cent and 6 per cent.

"However, if the business momentum continues, particularly in Kogan's exclusive brand and Kogan Marketplace divisions, we see the potential for more material upgrades to our and consensus 2020 and 2021 earnings forecasts," he said.

Deliveroo has appointed Jeremy Brook as head of marketing for Australia.

Brook joins the food delivery service after nearly five years at Google, where he was head of creative partnerships for Northern Europe. Based in the company’s Amsterdam office, Brook founded Google’s in-house creative services team for the region, and developed a trademarked methodology and patent for Google during his time there.

“Jeremy is a fantastic addition to our already talented local team. He brings 18 years’ experience leading digital transformation, design thinking, storytelling and creativity across Australia and Europe with some of the world’s best-known brands,” said country manager Levi Aron.

“This experience will be essential as Deliveroo continues to push the boundaries and transform the way Australians think about food. We are thrilled to have Jeremy on board to lead campaigns that deliver on our mission to become the definitive food company.”

During his tenure at Google, Brook worked with brands including Nike, Lego, H&M and Trivago. Previously, he was global lead in digital and media innovation at Heineken in Amsterdam.

He said now was an exciting time to be joining Deliveroo, which he called “a leading innovator in the food sector”.

“Deliveroo is at the forefront of using technology to completely transform the relationship between Australians and food,” Brook said.

“I look forward to bringing my experience to the team as we continue to grow and expand in Australia and offer new ways for customers to order their favourite foods and for restaurants to reach customers.”

Over the past year, the number of restaurants on the platform has increased by 150% and the number of riders by 50%. Recently, Deliveroo added the 10,000th restaurant to its platform, and earlier this month launched Deliveroo Plus – the first subscription service for a food delivery platform in the market – which had 20,000 Australian subscribers in its first week.

However, despite these wins, Deliveroo and similar platforms operating in Australia’s gig economy have faced criticism over their treatment of workers. Last year, Deliveroo lost employees’ contracts and shifted liability to them, along with extending delivery distances, meaning riders experienced a reduction in pay by 30-40%. Earlier this year, Deliveroo proposed a new classification beyond the current employee versus contractor split, which it argued would reflect new ways of working and give contractors more workplace rights. It was, however, met with concern from unions and experts like economist Jim Stanford, who told The Sydney Morning Herald: “The business model of companies like Deliveroo, Uber and Lyft is completely dependent on their ability to assign workers as contractors not employees. If these companies had to pay minimum wage and other normal conditions of employment they would not be viable.”