Businesses Built on Amazon Cash Out

Today’s Highlights: The PPP deadline is likely to be extended. Covid has changed the way cars are sold. And the founders behind the rise and fall of the next Ben & Jerry’s are trying again.

PPP LOANS

The House has passed a bill extending the PPP application deadline: “Under the bill, which passed by a vote of 415-3, firms have until May 31 to apply for a loan and the SBA faces a June 30 deadline to process them. Small business advocates had called for an extension of the March 31 deadline to give lenders more time to implement a series of changes the Biden administration made to the program.”

  • “The Senate is expected to take up the legislation extending the deadline. ‘We want it to move as quickly as possible,’ said Senate Majority Leader Chuck Schumer (D., N.Y.).” READ MORE

ECOMMERCE

The value of Fulfillment by Amazon businesses is surging: “Eco-Baby, TrailBuddy, Quility and TapeKing aren’t exactly household names, but they’re working on it. Their products are among the most popular in their categories on Amazon, accounting for millions of dollars in yearly sales. They’re also owned and operated by a single company called Thrasio, which recently raised $750 million in financing. It’s just one among dozens of firms snapping up successful Amazon brands for millions of dollars. Several of the largest firms, including Perch, Branded and SellerX, aspire to become, loosely speaking, the Unilevers and Procter & Gambles of Amazon’s third-party seller economy.”

  • “They’ve given Amazon sellers a way to cash out of their businesses and helped create a new class of listing flippers.”

  • “Through Empire Flippers, a firm that connects Amazon sellers with potential buyers for their businesses, Mr. Green sold the dog seat business for ‘low six figures’ to an individual investor interested in using it as a steady stream of income.”

  • “In the years since his trip to Guangzhou, he has assembled a small team with the goal of building, and then flipping, more Fulfillment by Amazon businesses.” READ MORE

REOPENING

Desperate to bring back customers, movie theaters are considering new strategies—including soap: “One idea could be shaking up the dining options. A studio veteran I spoke to recently suggested that cinemas could make better use of their real estate by bringing gourmet food vendors into their lobbies, in the vein of Smorgasburg and Grand Central Market. Dynamic ticket pricing has long been floated but never fully embraced. Implementing the concept could boost attendance for less popular films and improve weekday attendance. AMC, Cinemark, Regal and other chains already have their own version of a subscription model to encourage customer loyalty. While they’re at it, theaters could cut down the number of annoying pre-roll commercials.”

  • “AMC chief Adam Aron put a fine point on another big issue during the company’s last earnings call.”

  • “‘This is something that our operations department shudders about,’  he said in response to an analyst. ‘But I’m just going to tell everybody here now: The days of dirty movie theaters are over.’” READ MORE

SALES

Covid has changed the way used cars are sold: “Now, for example, instead of going from one lot to the next searching for the make or color of car you want, business is booming for those that easily enable shoppers to cast a wider net on the web, get a 360˚ view of the car, hear the sound of its engine and have it shipped to you -- without ever leaving your home. ... The market for used cars has become red hot because a growing number of people have grown wary of getting on trains, buses or airplanes as a result of the pandemic. Also, supply chain disruptions mean there are fewer new cars on the lots so more shoppers are turning to used cars instead.”

  • “CarMax, the nation's largest used car retailer, has seen its sales shifting online, too, and has, in recent months, taken steps like offering at-home or curbside test drives and delivery to help its customers be more comfortable buying used cars online.”

  • “Kyle Mountsier, marketing and business development director for Nelson Mazda in Franklin, Tennessee, said his dealership now fairly regularly draws in customers from distant cities who found a used car online. ‘Our pricing strategy is a part of that,’ he said, ‘but the Internet has opened us up to the whole nation.’”

  • “New York-based Spincar helps automakers create detailed interactive views of their vehicles for sale online. Among the things some dealers provide are panoramic 360-degree camera views from each of the rows in a three-row SUV and virtual test drives with 360-degree views.” READ MORE

Jason Fried, CEO of Basecamp, takes an unusual approach to selling Hey, the new email platform: “Sometimes I get asked a direct A vs. B sales question. Like... ‘Why should I buy Hey instead of Fastmail?’ My honest answer: ‘I don't know. You should try both and see which one you like best. And once you've made your choice, I'd love to hear which one you picked and why.’ I'm not selling, I'm learning. I can surely point someone to my full video walkthrough, or link up comparison pages focused on a specific angle (like this Gmail vs Hey on privacy page), but when it's why A vs. B on the whole, it's ultimately about a set of feelings and a degree of comfort, it's not a head-to-head comparison chart of features. It's nuance, and nuance has to be experienced to be understood.”

  • “The less energy you put into trying to convince someone of something, the more energy they have to figure things out for themselves.”

  • “And ultimately, when someone comes to their own conclusion, they're more bought-in than if you lead them into it.” READ MORE

COMEBACKS

The founders that turned Ample Hills into the next Ben & Jerry’s—only to see it collapse—are taking another shot: “The ‘grow at all costs’ strategy favored by co-founders Jackie Cuscuna and Brian Smith blew up, forcing the husband-and-wife team to file for bankruptcy in 2020 — just as the COVID-19 pandemic arrived in New York — and to eventually sell the company to an Oregon machining company for next to nothing. ... This week, they signed a lease for a new space on the corner of Washington Ave. and St. John’s Pl. in Prospect Heights [in Brooklyn], and plan to turn it into the Social, a new shop that will offer, yes, ice cream, as well as a strong emphasis on community and gathering. (Plus: There will be doughnuts.)” 

  • “The couple says they’re taking the hard-learned lessons of their first company and combining them with the sensibilities that made Ample Hills such a hit when it opened.”

  • “But, she admits, the excitement is tempered with caution and experience: “I’m also insanely anxious — don’t get me wrong. We went into Ample Hills and we didn’t know all the things that could go wrong. Now we know, and our eyes are much wider.” READ MORE

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HUMAN RESOURCES

Uber has granted employee status to its drivers in the U.K.: “The changes may presage legal wrangling, however, because the ride-hailing company says it will guarantee its drivers the U.K.’s minimum wage only after they have accepted a trip—not from the moment they sign into the app and are ready to work, as labor activists have demanded. Uber announced the changes, effective Wednesday, after losing its final appeal last month of lower-court decisions that had granted a group of former Uber drivers a type of U.K. employment status that falls between employee and self-employed.The company’s move, which reclassifies Uber drivers in the country as ‘workers’ rather than independent contractors, will make the U.K. the first place where Uber is paying directly for its drivers’ vacations and pensions.”

  • “In November, Uber won a major ballot battle in California—its home state—that exempted it from having to reclassify its drivers as employees eligible for broad employment benefits.”

  • “As part of that win, Uber offered some new benefits including health insurance for some drivers. The company passed on some of its costs to riders in the form of higher prices.” READ MORE

PAYMENTS

Visa and Mastercard say they will hold off on increasing the fees they charge merchants until next year: “Visa and Mastercard plans included raising interchange fees for many online purchases by around 0.05 to 0.10 of a percentage point, according to a document reviewed by the Wall Street Journal. Those changes would have resulted in hundreds of millions of dollars in additional interchange fee charges for merchants within the span of a year, according to estimates from CMSPI, a merchants’ payments consulting firm.”

  • “Last year, Visa and Mastercard postponed planned fee increases that were supposed to take effect shortly after the pandemic began.”

  • “Mastercard is ‘mindful that some merchants are still facing unprecedented circumstances,’ a spokeswoman said.” READ MORE

THE ECONOMY

Consumers stopped spending last month: “Retail sales fell 3 percent in February, according to the Commerce Department. That's the sharpest decline since the early months of the pandemic, and a much steeper drop than economists had expected. A winter storm that blanketed much of the country's midsection last month was partly to blame, depressing demand for sporting goods, home improvement supplies and general merchandise. Online sales, which are typically more weather resistant, also dropped by 5.4 percent. ‘Let's not mince words. This was bad,’ Wells Fargo economists Tim Quinlan and Shannon Seery wrote in a research note. The storm also chilled industrial production in February. Manufacturing output declined by 3.1 percent.” READ MORE

LOGISTICS

That Texas freeze has triggered a plastics shortage: “The February freeze that triggered mass blackouts in Texas led to chemical plant shutdowns that are disrupting global supply chains, causing a shortage of the raw materials needed for everything from medical face shields to smartphones. The power outages brought the world’s largest petrochemical complex to a standstill, forcing more plants in the Gulf of Mexico region to shut down than during Hurricane Harvey in 2017. A month later, many remain offline, and analysts said it could be months more before all are fully back. Prices for polyethylene, polypropylene and other chemical compounds used to make auto parts, computers and a vast array of plastic products have reached their highest levels in years in the U.S. as supplies tighten.”

  • “John Schiegg, vice president of supply-chain services for David Weekley Homes, a Houston-based home builder, said he was being told by suppliers to expect shortages of everything from siding to adhesives to insulation.”

  • “That will mean delays for home starts and further increases in costs for home buyers, which have been climbing in the midst of a housing shortage, he said.”

  • “‘We had no idea how much came from the Gulf Coast area,’ Mr. Schiegg said. ‘I tell people it’s going to get ugly. There’s going to be a big fight for materials.’” READ MORE

READER FEEDBACK

Yesterday we highlighted a story that suggested the pandemic-induced housing boom is more stable than the 2006 boom. David Russell, CEO of Manage 2 Win, a leadership consulting firm, disagrees: “Here in Roseville, California the market is insane.  Not logical and it cannot continue indefinitely. One home was underpriced on the market last week for $400K. It got 121 offers and sold for cash at a price over $500K. Another was on the market for $650K. Within days it got over 50 offers, selling for cash at over $700K. Sellers are demanding no loan or inspection contingencies, rent backs for up to one year, and more ridiculous demands. Even junk houses are being bought for over asking price with multiple offers. It is not sustainable.”

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THE 21 HATS PODCAST

Episode 53: I Hope You’re Not Torturing Yourself: Should Stephanie Stuckey sell pecans on Amazon? Should Laura Zander wholesale yarn to discounters? Should Jay Goltz’s businesses be active on Pinterest (assuming Jay knows what Pinterest is)? This week, we cover those issues, plus whether the owners are ready for an economic boom and how Laura made the painful decision to fire several employees she inherited when she bought her wholesale yarn business in Texas. “You have to do it,” says Jay. “And it doesn't make you a bad person. It makes you a bad boss if you don't do it.”