Google's new operating system

Google announced on its blog that it is going to launch its own operating system next year based around its web browser, the Google Chrome. The Google Chrome OS will initially be targeted at the netbook market. It will be open source and based on the Linux kernel. Since it’s a Google product, it’s going to be free as well. The blog claims that the new OS will be light weight and more focused on getting the user onto the internet within seconds of booting up rather than waiting minutes for the computer to load.

This step is perhaps the next best logical step for Google since the online world is its home ground. Right now, it depends on other providers providing the user with a platform-the OS and the browser-to get onto the internet and access its services. It solved part of the problem last year by launching its own web browser with the hope that it would come together with all its online applications to provide an integrated experience to the user.

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So, an operating system that is oriented for the internet would be ideal for a netbook since such devices with low processing power are likely to be used for things like accessing the internet. However, totally depending on the internet to provide all the functionality assumes that the netbook would be constantly connected to the internet. The most popular method of accessing the internet through a netbook is by using a dongle that connects to the internet via the mobile 3G network. Although such dongles can be obtained cheaply through deals, which include the dongle and the netbook, such deals have incredibly small download allowances. Since there would be a lot of exchange of data with the internet, the download limit would be quickly reached. So, Google should not only work with manufacturers to get its OS onto their devices, but also with the telecommunications companies and explore new ways of providing cheap internet access with huge download caps where the cost is subsidised by advertising-Google’s main business.

The news media are referring to Google’s announcement as “Google taking on Microsoft”. I think that’s a bit premature to think that Google’s new OS,which depends on cloud computing, will offer all the functionality and applications that Microsoft’s operating system, which largely depends on software hosted locally, can provide the user. Especially since all we have from Google is an announcement, and not an actual product that can be tested, compared and bench marked.

That is not to say that Microsoft shouldn’t be worried about Google’s OS. That’s because currently, users that want Windows on their netbooks are offered Win XP and not Vista. The other alternative is a Linux based OS. Most users prefer XP although its expensive and old because they are familiar with the user interface and have apprehensions about switching to an unfamiliar system. That is why Linux distributions, most which are free and some of which already offer a light weight OS some as small as 50Mb, do not have many users since they are seen as being complicated and “techie”. But with a popular name like Google attached to it, it wouldn’t take long for these apprehensions to go away and for users to start switching to Chrome OS.

It would be interesting to see how Google goes on to monetize its operating system. Microsoft of course gets its revenue by charging a huge price to those who wish to use its operating system and so does Apple to those who wish to use its OSX, although its not so pricey. Linux distributions depend on a community of developers and some organisations get their revenue by providing support to businesses that use Linux operating systems and also by providing customised solutions. Google will obviously fall back on its core competency-its advertising business. That’s how it currently generates most of its revenue, by advertising to those that use its products.

Like in most cases, at the end of the day, it all depends on how Google execute their plan. If they become complacent and start thinking that anything that has the Google brand attached to it will become popular, their OS may not turn out to be a Windows killer. It will be interesting to see what the end product looks like when the beta version is released later this year.

And if any of its previous products are to go by, expect the Google Chrome OS to be in beta till the year 2020.

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Throwaway Fashion

The Department for the Environment, Food and Rural Affairs (Defra) has launched a "Sustainable Clothing Action Plan" co-inciding with the London Fashion Week to highlight the increasing problem of "fast fashion". Apparently, UK consumers buy around two tonnes of clothes every year, and throw away a massive 1.2 million tonnes of them every year.

Rapidly changing fashion trends means that many consumers have to keep on buying new clothes to keep their wardrobe up-to-date and to compete with their friends and peers. This means that new clothes are worn only a few times and as trends change, are then consigned to the bin.

Of the two million tonnes of clothing bought every year, only 300,000 are recycled. If the majority of the clothes are worn only a couple of times, surely more of them can be recycled. Due to the current economic crisis, donations to charities has dropped. Consumers are cutting back on their spending. If more clothes that are in a good condition are donated to the charity shops, they can then sell them on to consumers looking for a bargain which results in a win-win situation. The charity shops get their revenue, consumers can bag a bargain and there are less clothes ending up in the landfill site.

One of the reasons why consumers can afford to keep on buying new clothes and then throw them away is partly due to ready availability of cheap fashionable clothes on the high street. However, many fail to see the real story behind the cheap price tag. An investigation by BBC's Panorama last year revealed how Primark's suppliers used factories with unfair standards and also child labour to provide the consumers on the high street with cheap fashionable clothing.

Jane Milne, who is the business environment director of the British Retail Consortium, said that retailers should be "applauded, not criticised, for providing customers with affordable clothing, particularly during these tough economic times". Sure, if the low prices are due to a better, more efficient production technique. But not if someone less unfortunate than us halfway across the world is subsidising the cost for us by being exploited and made to work in unfair conditions.

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High Street Blues

The trading that occurs in the run up to Christmas is very crucial to retailers even in the "normal" years. It allows them to make up for the losses they might have incurred over the year and helps them prepare financially for the coming year. 2008 has been, by any standards, anything but a normal year. Huge banks have become small banks, some have been swallowed up by bigger banks, some have merged with other banks while some have disappeared altogether.

Little surprise then that the past few weeks have been really tense for the retailers. The number of shoppers visiting the shops have decreased. As a result, retailers have been forced to cut their prices to attract shoppers. According to Experian, the number of shoppers during the weekend, the last weekend before Christmas, was down by 8.7% as compared to last year. However, the number of shoppers yesterday were up 13.6% as compared to the same Monday last year.

It's a bit unfair to compare the two corresponding Mondays because last year the Monday was Christmas Eve. The kind of shoppers who go shopping on Christmas Eve are generally those looking for food items or ingredients for their Christmas dinner, last minute shoppers or those looking for last minute bargains.

Even though the number of shoppers increased, it still remains to be seen how much revenue that translates into. The main reason why more consumers went out to shop perhaps has a lot to do with a last minute heavy discounts by retailers in desperate attempt to attract shoppers. According to the accountants Ernst & Young, the average discounts were 40%, up from 38% last year. It means that even though people had more shopping bags in their hands, the retailers wouldn't have made a lot of money from that.

Although the high street is seeing a decline in the number of shoppers, according to Hitwise, the number of people visiting the websites of high street retailers has increased. Between Dec 18 and Dec 21, traffic to online retailers(including internet-only and high street) increased by 2.2% on average as compared to last year. Websites of high street retailers saw their traffic increase by 2.7% on Saturday and 5.9% on Sunday as compared to last year.

When it comes to prices, mostly the online retailers clearly have an advantage over their high street rivals. But their biggest drawback is that the items have to ordered before a certain date to ensure that they are delivered in time for Christmas. On the other hand, the websites of high retailers allow the shoppers to book their products online and pick them up instore. It may not be cheaper than the internet-only retailers, but it certainly is more convenient. One of the put-offs of shopping on the high street before Christmas is clearly having to navigate through crowded streets and aisles holding your shopping bags. It is also very hard to compare prices across different retailers and browse the items leisurely.

The rise in the number of shoppers will definately be of some relief to retailers. But it will by no means make up for the dismal sales and revenues they have generated over the past few weeks. Woolworths and MFI have gone bankrupt and Whittard of Chelsea is said to be on the brink of administration. And it is clear that more will have the same fate in the new year, what remains to be seen is who they will be.

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Sales rise amidst the credit crunch

According to figures released by the Office of National Statistics (ONS), the volume of sales between September and November rose by 0.5% as compared to the three months before it. This may not sound good, but compared to all the doom and gloom and the difficulty of obtaining credit, it does sound good. Also, the value of weekly sales in November were 2.9% higher than in November last year.

However, the high street retailers beg to differ with the figures. The British Retail Consortium (BRC) said that the figures released by the ONS were optimistic and painted a "rosy picture" of the current difficulties. According to BRC's own findings, the sales value actually fell by 0.4%. Experian reported that the footfall (the amount of traffic generated by shoppers visiting the stores) in stores for the first three days of the week had decreased by 11.5% compared to last year.

It seems hard to believe that the increase in the volume in sales could have lead to a increase in the value of sales. After all, the increase in the volume of sales is largely due to a wave of heavy discounting by the high street retailers, especially after Woolworths slashed its prices to get rid of its stock. It is likely that the spectacular and well-publicised offers by retailers would have made some reluctant consumers go out and spend. It is also equally likely that many who generally would have waited for Boxing Day sales have instead done their shopping before Christmas since they feel that the discounts offer good value for money. After all, there is a limit to the amount of discounts that the retailers can offer before it starts eroding their profits. So many consumers may feel that the discounts are as good as they are going to get. If this is true, what would happen is that the average amount of sales during the Christmas period hasn't really increased, but the shopping has been concentrated to a few weeks before Christmas.

The reason for this difference in figures, according to Reuters, is that the figures of "the ONS figures capture internet shopping more fully". According to the ONS, the value of online sales was £220 million in November and it accounted for 3.8% of the total retail revenues. According to Experian, its company Hitwise which is an online competitive intelligence service, found that the websites of high street retailers had 22% more visits than its internet-only rivals. This could explain why the sales have increased even though the number of shoppers visiting the stores seem to have decreased.

Many shoppers percieve the prices of online retailers to be cheaper than their high street counterparts. And this has been shown to be true in most cases. After all, they do not have to worry about expensive overhead costs like rent and sales staff. However, many shops on the high street nowadays allow their customers to haggle and bag bargains, and this is not available to online shoppers.

It would be interesting to see the figures of the overall retail sales before and after Christmas since that would allow us to see the whole picture.
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Inflation? Worry about Deflation instead.

It was announced today that the Consumer Price Index (CPI) fell by 0.4% from 4.5% in October to 4.1% in November. The CPI is the official measure of inflation used by the Government. The biggest factor for this fall is being attributed to the fall in crude oil prices. The average price of petrol was 95.2p. On the other hand, prices of fresh fruit and vegetables and non-alcoholic beverages is said to have risen compared to last year.

Although the drop is good news, the rate of inflation is still twice the official target of 2%. So, Mervyn King, the governor of the Bank of England put pen to paper and wrote a letter to the Government explaining why the rate of inflation had not hit the target. The governor of the Bank of England is required to write a letter to the Government whenever the rate of inflation is either 1% above or below the target and explain the possible action the BoE might take to solve it. However, Mervyn King feels that the next time he has to write a letter to the Government, it may not be about the reasons for inflation, but deflation instead.

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What are Inflation and Deflation?

Inflation is regarded to be a bad thing since it means a rise in prices, which is a bad thing for shoppers. Then, deflation must be a good thing, right? In the short term, yes it is. In the long term though, its a dreadful thing. To understand why a drop in prices is such a bad thing, one has to understand the meaning of the terms "inflation" and "deflation" and its causes. Inflation is the general increase in prices or, it is the decrease in the purchasing power of money. There are two possible causes; either the cost of production has increased, like the cost of raw materials or labour, or demand is out stripping supply. Take for example a rise in price of a NintendoWii games console. This may be due to a rise in the cost of materials and parts and workers who produce it. Or it could be that the number of units available is less than the number of people wanting to buy it, so the price goes up. Around Christmas, it is likely for the latter to be true. It wouldn't be unusual around this time to find a NintendoWii on eBay at twice its retail price.

Deflation is the persistent decrease in prices. This happens when supply outstrips demand which could happen due to a surge in productivity. Or, like in the current climate, consumers rein in their spending which means that shops have to cut prices to entice customers to spend. If this happens a couple of times, it creates an anticipation of further cuts in the future. So, although consumers may have the purchasing power, they postpone certain purchases since they would be cheaper in the future. Its a self-fulfilling prophecy where consumers postpone their spending thinking that there would be price cuts, and sure enough, shops cut the prices to persuade shoppers to loosen their purse strings. Good news for shoppers, bad news for businesses. Businesses experience cash flow problems and their staff would have to accept a pay cut or even lose their jobs. So, debt becomes expensive because one owes the same amount of money, but has less income to meet it. Signs of deflation can already be seen on the high-street. Retailers are offering massive discounts, the likes of which are usually seen after Christmas, because they are desperate to clear their stock. And the consumers know this and know that further discounts will follow eventually.

It will be interesting to see how Mervyn King and the Government will go about coaxing the shoppers to spend their money.

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Profits at Starbucks go Skinny Latte

Profits for the coffee chain Starbucks fell by 97% in the fourth quarter to $5.4 million, as compared to $158.5 million this time last year. Although the sales revenue were up 3% to $2.52 billion, like for like sales actually decreased by 8%.

This shouldn’t really come as a surprise then since consumers are cutting back on what they deem “luxuries” and are more cautious about their spending and are literally watching their pennies. Starbucks is perhaps well known for its high prices as much as it is for its coffee. Its share price dropped by 3% after the news broke out and was trading at $9.91. Last year, it would have been worth around $20-$30.Starbucks said that it has seen a decrease in customer traffic, in other words the number of customers visiting its branches, and also, crucially, the value of each transaction per customer. So, it is likely that the increase in sales revenue is likely to be due to the increase in prices.

Although drinking coffee is one of life’s little pleasures, its prices in the cafés are anything but little. A cup of coffee for $4 or £2.50 may seem insignificant on its own, but multiply them up for every working day of the month and you are left with a sizeable figure. Starbucks could lower its prices, but it is seen as a premium brand and would as a result devalue its brand value. Think of Marks & Spencer’s food range competing on its prices with Tesco’s Value range or Sainsbury’s Basic range and you get the picture about devaluing the brand value.

It’s likely that other coffee chains like Café Nero and Costa Coffee would now be worried about their own situation while the likes of McDonald’s will be rubbing their hands with glee at the prospect of attracting coffee drinkers with their cheap prices. McCoffee anyone?

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Virgin Media and Sky bury the hatchet

A deal which will see the return of Sky’s basic channels-Sky One, Sky News and Sky Sports News- on Virgin Media television packages has been agreed between the broadcasters Virgin Media and BSkyB.

According to The Guardian, the basic channels will include Sky1, Sky2, Sky3, Sky News, Sky Sports News, Sky Arts and Sky Real Lives. The broadcast on Virgin Media will start on the 13th of November. This deal is contracted to run until June 2011.

Virgin Media was formed by the merger of NTL and Virgin Mobile. As part of the deal, Virgin Media also acquired NTL’s channels-Living, Bravo, Trouble and Challenge. Virgin Media recently also launched its own channel-Virgin 1. Under a second deal, these channels will continue to be broadcasted on Sky.

A row broke out between BSkyB and Virgin Media last year regarding the price Virgin Media had to pay BSkyB in order to broadcast its basic channels. Talks between the two broadcasters broke down and in the end the broadcast of BSkyB’s basic channels on Virgin Media were ceased. Popular shows on Sky One included Lost, 24 and The Simpsons. Sky had hoped that die-hard fans of the American shows would switch to Sky in order to watch them, and at that time, many did. But not enough to make a sizeable impact. Sky lost about 3.5 million audiences (Virgin Media customers) because of the fallout. This means that advertising campaigns carried out on Sky’s channels would have had a lesser impact since the audience would be effectively 3.5 million less and hence the campaign would have failed to reach the wider audience that the advertisers would have hoped it would have. Hence, revenue through advertising would have decreased since advertisers wouldn’t be willing to pay the same amount if it’s reaching less people.