Are Salespeople Built or Born?

In our latest podcast episode, sales expert Lance Tyson discusses the hot topics in sales as the pandemic recedes and artificial intelligence arises: "It's like the Wild West out there!"

Good Morning!

Here are today’s highlights:            

• Advertising is getting much more complicated now that “everything is an ad network.”

• The closing of an NYC restaurant shows the dangers of not being prepared to repay an EIDL.

• McDonald’s is testing a secretive new spinoff chain.

• Welcome to the museum of venture capital failure.

THE 21 HATS PODCAST 

It used to be that best practices in sales were pretty standard across the board: But since the pandemic and with the advent of artificial intelligence, says Lance Tyson, founder of the Tyson Group sales consultancy, “It’s like the Wild West out there.” Suddenly, everyone’s playing by different rules, and the best sales approach can vary, depending on the seller, the target, the industry, the region of the country. The keys, Tyson says in this week’s bonus episode, are to pay attention and stay flexible. Along the way, he addresses a host of hot-button topics: How important is it to see a prospect face-to-face? Is cold-calling dead? Will A.I. replace sales trainers? What’s the right balance between base and commission? How do you handle the salesperson who can’t or won’t be a team player? How do you get salespeople to take maintaining their CRM seriously?

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

MARKETING

Suddenly, there are a lot more places for businesses to advertise: “United Airlines is the latest company to consider expanding its ad business by using passenger information to help brands serve targeted ads to its customers, The Wall Street Journal reported last week. If the airline follows through with its latest venture, it would be joining a growing number of companies working to cram even more ads into every nanosecond of people’s lives—a list that includes retailers, streaming services, hotels, and delivery apps. This new market dynamic even has its own slogan: ‘Everything is an Ad Network,’ a catchphrase coined by mobile-marketing guru Eric Seufert.”

• “Many were also emboldened by the big void left in the wake of  Apple’s changes to its privacy policy in 2021 that required apps to ask users if they want to be tracked. That move dented the ability of some tech platforms such as Facebook to prove the effectiveness of their ads. Companies, especially retailers, seized the moment by leveraging the shopper data they amassed, which is a critical component of online ad targeting and measurement.”

• “Advertising can be more profitable than the main line of business of the companies looking to bulk up their ad offerings. Walmart, for example, gets the majority of its U.S. revenue from its lower-margin grocery business and is leaning into advertising partly because margins are so high. ‘I can’t remember a business with the margin structure of the advertising business here at Walmart,’ CEO Doug McMillon said last year.”

• “[Tim] Armstrong, the Flowcode CEO, added: ‘The big question is: How many ads is a human willing to tolerate every day of their lives?’” READ MORE

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CLOSINGS

Fort Defiance, a well regarded New York City restaurant/general store, is closing for good: “The final straw came in September, when [founder St. John Frizell] found himself facing the reality that he couldn’t pay both his rent and the Economic Injury Disaster Loans he took during the pandemic. ‘I haven’t taken a paycheck from Fort Defiance since the PPP loans, which was 2021,’ he says. ‘This might be the first time you hear this, but it’s not going to be the last. There are people out there in the same boat as us, who are experiencing those EIDL payments for the first time in the last few months. It comes as a shock.”

• “‘This is essentially a pandemic story at the end of the day,’ he tells Grub. The relocation of the restaurant, coupled with a yearlong wait for a liquor license from the State Liquor Authority, meant they took on ‘an exceptional amount of debt’ from the SBA. ‘At that point, everything had to go right in order for us to succeed — and that’s just not what happened.’”

• “During the Covid shutdown, Frizell transformed Fort Defiance into a general store, selling produce, pantry staples, and to-go cocktails. In 2021, he moved it from its longtime corner location to a new space a couple blocks up. The reasoning, he explained then, was that it would’ve cost too much to retrofit the original space for Fort Defiance 2.0 (about $100,000) and turn it into a proper gourmet grocer with a barroom.”

• “This ended up causing new headaches, namely that delay in getting a liquor license transferred to its new location.” READ MORE

COMMERCIAL SPACE

Restaurants and retailers are approaching landlords with creative proposals to restructure their rent payments. The fate of downtown may hinge on the answer: “Two downtown locations of Clover tell two very different stories about the state of storefront retail in the heart of Boston right now. One outpost of the vegetarian fast-casual chain, near South Station, has stayed alive in part because of flexibility from its landlord. Early in the pandemic, Rockhill Management, which owns the building on Federal Street, agreed to switch Clover’s rent to a percentage-based model, in which Clover paid a cut of its revenue each month, rather than a traditional flat rate by square foot. And ‘that restaurant became, even at low volumes, profitable,’ said Ayr Muir, Clover’s founder and former CEO.”

• “Over in the Back Bay, at 565 Boylston Street, the opposite scenario played out. Clover’s landlord there refused to negotiate lower monthly payments or a more accommodating schedule. Instead, Muir said, the Community Church of Boston maintained Clover’s $350,000 annual rent, even when sales fell flat. In August, that Clover closed up shop, and further difficulties with leases were a major factor in Clover filing for bankruptcy earlier this month.”

• “‘Tenants are at the mercy of landlords,’ Muir said. ‘Because if you have a landlord willing to work with you, you can come up with something that is sustainable and survive. Otherwise, we’re in trouble.’” READ MORE

BUSINESS MODELS

This retailer’s business is based on selling lost luggage out of a 50,000 square-foot outlet in Scottsboro, Alabama: “Here's how it works: When a suitcase gets lost (or a pole vaulting shipping container) the airline spends up to three months trying to get it back to its owner. But after three months, the airline gives up and reimburses the owner, up to $3,800. In fact, 99.5 percent of suitcases checked on airlines do NOT get lost. It's just that the 0.5 percent that does, adds up to a LOT of stuff. That's where Unclaimed Baggage CEO Bryan Owens comes in. His father started this business in 1970. Owen's father enjoyed listening to ham radios and one day heard a friend in Washington, D.C., say he worked with Trailways and didn't know what to do with all the unclaimed bags they had. ‘A little light bulb went off in my dad's head and he's like, I think I can help you,’ says Owens. So he borrowed $300 and a pickup truck and drove up to Washington, D.C., to buy the unclaimed luggage.

• “Then he drove it back home and tried to sell it. ‘People were just standing outside the door and in lines and we were open two days a week to begin with, and as the story continues his [dad's] boss told him, You gotta figure out which one of us you love the most, your insurance job or your entrepreneurial venture, and my dad didn't think twice about it."

• “Owens' mom wasn't so sure about it, but 53 years later, Unclaimed Baggage is one of the top tourist destinations in Alabama. A million people visit every year. They've had someone from every state. Many make an annual pilgrimage here.” READ MORE

OPPORTUNITIES

These developers see value in zombie malls: “There are hundreds of zombie malls throughout the U.S. like the Berkshire Mall [in Pennsylvania], more dead than alive. The older, low-end ones have lost at least half and, in some cases, more than 70 percent of their value since the industry’s peak in late 2016, according to real-estate research firm Green Street. As values fall below the balances of their outstanding debt, owners usually stop paying the mortgages and look to either renegotiate with their lenders or hand back the keys. That’s when Namdar Realty and Mason like to swoop in. The New York-based real-estate partners are among the most prolific purchasers of U.S. malls. They make money by buying malls cheap and keeping them going, even as town officials beg them to pull the plug.”

• “The Berkshire Mall used to get so crowded around the holidays that the owners hired police officers to manage the traffic that jammed roads leading to the parking lot. Teenagers in this upscale borough of Berks County flocked to the mall after school, gathering in the food court or around the two bubbling fountains. Pennsylvania native Taylor Swift shopped here in middle school.”

• Today, the Berkshire Mall’s parking lot is dotted with five sinkholes, one so deep you can see the water main beneath. Bon-Ton closed five years ago, followed by Sears, leaving just one department store open. The fire marshal has condemned the former Bon-Ton space due to a partially collapsing roof and other issues. Last week, shortly before the crucial Black Friday shopping day, the mall’s management scrambled to fix sewer backups that were causing raw sewage to seep onto the sidewalk near the main entrance.”

• “Namdar Realty and Mason said they have sold only 10 of the dozens of enclosed malls they have bought together since 2012. They currently own about 80 malls. Their business model exploits a counterintuitive tenet of retail real estate: Dying malls often take a long time to expire, but they can remain valuable assets even as they draw their last breaths.”

• “The partners keep the malls open, but cut costs by appealing their property-tax bills and reducing expenses such as staffing and maintenance. All the while, they continue to collect rent from the mall’s remaining retailers. When national retailers move out, Namdar Realty and Mason try to replace them with nontraditional tenants such as call centers, local small businesses, doctors’ offices and bounce-house venues.” READ MORE

MANUFACTURING

Former coal towns are getting government funding to build factories: “In Weirton, W.Va., in the heart of coal country, a company started by MIT scientists plans to build a plant that will produce a metal and alloy critical for clean energy, fuel cells, and cleaner steel. In Vernon, Texas, also a former coal town, a third-generation wind entrepreneur plans to manufacture turbines suitable for remote, rural locations. And in Vandergrift, Pa., and Louisville, Colo., a window maker plans to retrofit aging factories to produce thin, insulated units that help make buildings more energy efficient. They’re all projects getting federal funding designed to help small- and medium-sized manufacturers bring clean-energy jobs to former coal communities, part of a $1 trillion infrastructure package signed by President Biden in 2021. The Energy Department announced the projects on Monday.”

• “With the grant program, the United States is also trying to reclaim more clean-energy manufacturing, which China and other countries have come to dominate over the past decade.”

• “The goal is to ‘bring new economic opportunities and ensure these communities continue their key role in strengthening America’s national and energy security,’ said Jennifer M. Granholm, the U.S. Secretary of Energy.” READ MORE

TAXES

Are we headed for a digital-tax trade war with Canada? “Canada plans to impose a 3-percent digital services tax on January 1. Americans might not notice the DST as we scroll through apps or click ‘buy’ online, but we would notice the trade war it might prompt. Over the past decade, absent a global agreement on how best to collect tax revenue from multinational tech firms, countries started planning or imposing DSTs, levies on revenue-generating activities conducted online. They often target large American firms like Google, Facebook, Amazon, Uber, and Airbnb. These U.S. corporations often have subsidiaries headquartered in lower-tax jurisdictions but still do a lot of business within higher-tax countries’ borders. Those countries want to maximize their corporate tax revenue with DSTs.”

• “A global treaty brokered by the Organization for Economic Cooperation and Development would seek to replace all of these DSTs in 2025 with a more comprehensive set of corporate tax rules. Participating countries, including Canada, agreed in 2021 to a two-year OECD moratorium on DSTs until the treaty takes effect. This summer, the OECD extended its moratorium by one year.  That’s one year too long for Canada.”

• “The cost of a DST will likely fall on consumers of those services. That could include Canadian sellers using Amazon’s online marketplace or Canadian businesses that advertise online. The Canadian Chamber of Commerce says that Canadians would also feel the DST in the form of higher prices for digital services like renting a movie or booking a vacation cottage.”

• “The U.S. accounts for 73 percent of all of Canada’s exports. Aaron Wudrick, the director of the Macdonald-Laurier Institute’s Domestic Policy Program, notes that the Canadian government ‘seems willing to jeopardize a trade relationship worth around $2 billion per day to implement a ham-fisted tax that would raise less than $1 billion annually.’”

• “On the other hand, Wei Cui, a tax law professor at the University of British Columbia, told The New York Times that ‘Canada has come up with a principled way of levying the tax that should not provoke a trade controversy’ since Canadian online retailers would be taxed just like American companies.” READ MORE

STARTUPS

McDonald’s is preparing to roll out a spinoff chain that is expected to compete with Starbucks: “TikToker Snackloator, who chronicles new snacks, posted a tour of a construction site in Bolingbrook, Illinois, which appears to be the future home of a CosMc's. The TikToker noted the site had four drive-thru lanes. ‘The kind of conventional thinking is that this is going to be something of a competitor to like Starbucks, where it's going to focus on the McCafe stuff and the coffee and the drinks as opposed to serving burgers and fries, which makes even more sense when you realize that this CosMc's is being built directly next to an existing McDonald's,’ Snackloator says.” READ MORE

VENTURE CAPITAL

Welcome to the museum of failure: “Sean Jacobsohn fashions himself as something of a ‘scholar of failure.’ By day, the Bay Area venture capitalist at Norwest Venture Partners helps startup founders realize visions for their companies and weather the everyday stresses of company building, focusing on early-to-growth-stage enterprise SaaS startups. But in his free time, Jacobsohn collects artifacts from times when those visions didn't exactly pan out. A longtime sports fan and collector, he's always gotten a kick out of finding rare items related to his favorite teams. But in November of last year, he attended a Golden State Warriors game where the facilities managers started handing out bobbleheads of player Jordan Poole that were sponsored by the then actively collapsing FTX.”

• “That freebie became the first addition to Jacobsohn's now extensive archive of over 500 items from failed companies, product launches, toy lines, and sports teams, which he keeps in rows of glass display cases in his office. ‘I'm surrounded with my museum — I need to find more space,’ he joked.”

• “One of his most prized items is an unopened, branded-bottle of champagne from early grocery-delivery startup Webvan's 1999 IPO celebration. The startup went on to lose millions and filed for bankruptcy in late 2001. ‘That might have been the only one not opened, and I own it!’ he said.”

• “Highlights include a Theranos lab coat, Elizabeth Holmes' official business card, a Juicero juicer, and a Bird ‘Birdie’ scooter, the company's child-sized, kick-powered scooter. To make it into the museum, the failure has to be a physical item — no NFTs allowed, Jacobsohn said.”

• “He likes to write up other lessons and thoughts on failure on the Norwest blog, where he breaks down exactly why each product or business didn't work, and what lessons a founder could take away from the story. ‘It does inform how I make some of my investments,’ he said.” READ MORE

Thanks for reading, everyone. — Loren