Buy the Building
Family Video, a video rental chain, no longer rents videos but it still exists for one big reason. It bought the real estate.
Here are today’s highlights:
More than 300 independent bookstores have opened in recent years.
It doesn’t cost less to manufacture in China if you can’t get the products over here.
Shipping rates and gas prices have fallen dramatically.
On this week’s Dashboard, Gene Marks talks about text-message marketing.
Family Video, which outlasted Blockbuster—and proved the value of owning your real estate— is still alive as Highland Ventures and moving to Nashville: “Founded in 1978, Family Video went from renting Betamax tapes to VHS to DVDs over the years, and grew to an 800-store chain at its zenith. As video rentals gave way to online streaming, the company evolved its business model, partnering with Marco’s Pizza in 2015 to help lure customers during the inexorable decline. Industry giant Blockbuster closed its corporate-owned stores in 2013 as the video rental industry wound down, but Family Video somehow survived by catering to a dwindling small-town customer base scattered across 17 mostly Midwestern states. Ultimately, the Covid-19 pandemic sounded the death knell for the Family Video business, which closed its remaining 250 stores in January 2021.”
“Highland Ventures has since been ‘transitioning’ its business model, converting its 700-plus retail locations into small strip malls, leasing out space to the likes of Jersey Mike’s Subs, Subway, and 90 Little Caesars pizza shops, among other businesses, [Keith] Hoogland said.”
“While its primary focus is retail real estate, the company has also expanded into office space, buying about 20 buildings — none of which are located in Illinois, Hoogland said.”
“The entire commercial real estate portfolio covers 22 states and is valued at over $800 million, according to the company’s website.” READ MORE
More than 300 bookstores have opened in the past few years: “People told Lucy Yu it was a crazy time to open a bookstore in Chinatown. It was early 2021, and the pandemic had devastated the neighborhood, forcing dozens of stores and restaurants to close. The rise of anti-Asian hate crimes had shaken residents and local business owners. But Ms. Yu believed that a bookstore was just what the neighborhood needed. She raised around $20,000 on GoFundMe, enough to rent a narrow storefront — a former funeral supply store — on Mulberry Street in downtown Manhattan. A neighborhood grant gave her $2,000 for shelves and books. And in December, she opened Yu and Me Books, which specializes in titles by and about immigrants and people of color. The store was profitable within four months, Ms. Yu said.”
“Yu and Me Books is one of more than 300 new independent bookstores that have sprouted across the United States in the past couple of years, in a surprising and welcome revival after an early pandemic slump.”
“And as the number of stores has grown, the book-selling business — traditionally overwhelmingly white — has also become much more diverse.”
“In a survey of booksellers earlier this year, the association found that some 80 percent of respondents said they saw higher sales in 2021 than in 2020, and nearly 70 percent said their sales last year were higher than 2019, Ms. Hill said.” READ MORE
Direct-to-consumer brands are moving from Facebook to Amazon: “Apple's App Tracking Transparency feature, which allows iPhone users to opt out of data-tracking while using apps such as Facebook, makes it harder for brands to target customers via social-media ads. Price hikes on shipping rates by FedEx and UPS have also made it much more expensive to operate a DTC brand in 2022. Meanwhile, persisting supply-chain issues have made Amazon's new Buy With Prime feature, which lets merchants sell on Amazon through their own websites while taking advantage of Amazon's fulfillment services, a tempting way for DTC brands to test the platform.”
“‘Within the last 12 to 18 months, these headwinds have caused folks to look for new streams of profitable revenue growth,’ said Kyle Widrick, the founder and CEO of Win Brands Group, a DTC holding company. ‘And whether they find it or not on Amazon, it's only natural for them to test it out.’”
“‘We consider Amazon to be the largest shopping mall in the world,’ Widrick said. ‘So whether you want to be on it or not, you have to be.’
“‘Amazon is incredibly efficient — you have access to every human being alive,’ said Katharine McKee, the founder of Morphology, a digital commerce consultancy. ‘But it's not a retailer. It's a tool, and you have to be ready to use the tool correctly.’” READ MORE
More manufacturers say they are pulling out of China. But will it stick? “For two months, millions of dollars worth of designer perfume and cologne sat untouched in a Shanghai warehouse as Covid-related lockdowns rendered the building inaccessible. For Jean Madar, founder and chairman of Inter Parfums, the lost sales validated his decision to break up with China. ‘We’re doing this even though China is way cheaper,’ Mr. Madar said. ‘How good is it to have cheaper components when you cannot get them? For a consumer-products company like us, you need to have super stability in supply.’”
“The pandemic and ensuing global supply-chain meltdown have made businesses—from beauty companies and auto manufacturers to global retailers and small businesses—rethink low-cost importing.”
“Betting against China carries risk and remains out of reach for industries with narrow profit margins, executives say. Companies such as Peloton Interactive that set out in the pandemic to uproot their China-based factories and supply chains found doing so was harder in practice.”
“‘No one can do what they do,’ said [Helga Arminak, APackaging Group’s founder and CEO], referring to China’s bigger factory workforce and available infrastructure. ‘All they do is work, and the government has been very supportive. Sadly, we are very dependent.’” READ MORE
Digital tools are making supply chains more flexible even for smaller businesses: “Consider on-demand warehousing from providers such as Flexe. These services identify unused industrial storage space and make it available to companies on a short-term basis. Sharing the space in this way enables the owner of the space to defray the cost of its unproductive asset and better align its warehousing needs with other’s demands. It allows the service buyer to meet its changing storage requirements without having to add an expensive asset to its portfolio.”
“The owner might have to accept that companies interested in sharing its warehouse facility may be arch-rivals — an accommodation that was difficult to justify before digital transformation opened the door to this type of service.”
“Then there is the Walmart GoLocal platform, which allows other retailers, restaurants, or online services, small and large, to use Walmart’s own delivery platform to complete last-mile deliveries to other merchants’ customers.”
“Platform users gain access to the retailer’s transportation network as well as external gig drivers.” READ MORE
Shipping rates have fallen dramatically, a sign that goods could get much cheaper very soon: “The good news is that shipping rates are indeed falling globally, and the supply chain is righting itself. Flexport, a tech-enabled freight forwarder, has seen rates drop from highs of around $20,000 per container to $10,000. And Dave Lissman, a sales manager at importer Port Royal Sales, said he was finally seeing some easing after a long period of pain. ‘As of recently,’ he said, ‘there has been some slight room for negotiation.’ Also encouraging is that Flexport has seen a 35-percent reduction in shipping transit times, according to Anders Schulze, its global head of ocean and trucking. So those long waits for living room furniture might start abating. And now that congested ports are loosening up, prices might fall further as idle ships come back into service.”
“‘It’s still much higher than historical averages,’ Schulze said. ‘But it’s pointing down, which is exciting.’” READ MORE
Gas prices took their biggest drop in more than a decade: “Not since 2008 have U.S. gasoline prices fallen so much in one day, a welcome relief to drivers following months of dizzying fuel prices that surpassed $6 a gallon in some places. The national average for a regular gallon of gasoline fell to $4.72, according to auto association AAA, with 13 states ringing in less than $4.50. A recent selloff in crude oil futures, which have given back much of their surge in the wake of Russia’s invasion of Ukraine, helped bring down prices. Summer driving demand is also below average with consumers reeling from inflation.”
“The lowest gas prices in the U.S. are currently in South Carolina and Georgia at $4.23 a gallon.”
“California persists as the outlier as the only state over $6 a gallon, currently at $6.15.” READ MORE
Restaurants are being extorted with one-star reviews: “Internet scammers are targeting numerous Chicago restaurants, leaving one-star reviews on their Google profiles, and then asking for money to make them go away. Suspicious one-star reviews have popped up on the profiles of a number of the city’s acclaimed restaurants, both new and old, including Adalina, EL Ideas, Elske, Ever, Galit, Next Restaurant, Nomi Kitchen, North Pond, Oriole, Parachute, Porto, Sochi Saigonese Kitchen and Topolobampo. Many are recipients of Michelin stars or Bib Gourmand designations, highly prestigious accolades in the restaurant industry.”
“Sochi co-owner Chinh Pham noticed the problem 10 days ago, as first reported by Eater Chicago. She asked her staff if any customers had complained in person, but they hadn’t noticed anything substantial, Pham told the Tribune on Thursday.”
“Each day, a few more one-star reviews would show up, though none of the people who left them included a comment or explanation. Eventually, Pham checked OpenTable to see if any of the names matched with the reservations, but none did.”
“Then the restaurant got an email from someone asking for a $75 Google Play gift card to make the negative reviews stop. Pham tried to contact Google, but hasn’t been able to get in touch with anyone at the company.” READ MORE
Businesses could be hit with increased unemployment fees: “California, Connecticut, Illinois and New York have directed surplus funds to social programs and taxpayer rebates, among other causes, leaving unpaid debts to the federal government ranging from tens of millions of dollars to more than $15 billion. If the debts aren’t fully repaid by Nov. 10, as officials in the four states envision, the federal government will start charging $21 per employee annually on all businesses in the states next year. In addition, state taxes on businesses to fund their unemployment programs will go up by varying amounts.”
“Business groups say the increased charges are unfair, particularly for companies that haven’t laid off employees recently, and unwise as the economy is potentially headed toward a recession.”
“Many states are now flush with cash due to the quick economic resurgence and $350 billion in aid included in the 2021 coronavirus relief bill. Sixteen have fully repaid their loans, though New Jersey and Pennsylvania expect to borrow more later this year. Massachusetts and Colorado have made arrangements to pay their debt by November.”
“The loans accumulate interest, though it was waived for the first months of the pandemic. If a state has an outstanding debt on Jan. 1 for two consecutive years, the federal government withholds an additional $21 per employee annually to pay down the balance, a levy that escalates by the same amount each year.” READ MORE
THE 21 HATS PODCAST
Dashboard: Email or Text? This week, Gene Marks talks about the continued rise of text-message marketing and how it can be integrated with your CRM system. Gene also warns businesses off of Twitter—even though he’s a power user. Plus: How do you plan for a recession and a labor shortage at the same time? And is that $10 billion in SSBCI money flowing yet?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren