How Often Do You Review Your Prices?
It used to be mostly airlines, gas stations, and big retailers, but more small companies are changing their prices on a daily or even hourly basis.
Here are today’s highlights:
The U.S. added more jobs than expected in January.
A record number of small businesses raised wages in January.
The move toward privacy is upending digital marketing.
THE COVID ECONOMY
Since bottoming early in the pandemic, the U.S. economy has outperformed most advanced economies: “Between the fourth quarters of 2019 and 2021, the labor-force participation rate—the share of the population ages 15 to 64 either working or looking for work—dropped 0.7 percentage points in the U.S., while rising in Japan and Canada, according to the Organization for Economic Cooperation and Development, an association of advanced economies. The eurozone’s participation rate was also well above its pre-pandemic level in the third quarter, the latest for which data is available. While much of the decline in the U.S. labor force is because of retirement, its participation rate for people ages 25 to 54 has also fallen more than in other countries.”
“The sources of this discrepancy could help answer another question: Why is U.S. inflation higher than in other countries? It appears to be a combination of stronger demand and more constricted supply, including of labor.”
“Cumulative infections and deaths from the virus are about three times higher, per capita, in the U.S. than in Canada—almost certainly affecting the willingness and ability to work.” READ MORE
The U.S. added more jobs than expected in January, defying omicron: “Nonfarm payrolls increased 467,000 in January after an upwardly revised 510,000 gain in December, a Labor Department report showed Friday. The unemployment rate ticked up to 4 percent, and average hourly earnings jumped. The median estimate in a Bloomberg survey of economists called for a 125,000 advance in payrolls, though forecasts ranged widely.”
“The job gains were broad based, led by a 151,000 advance in leisure and hospitality. Transportation and warehousing, retail trade and professional and business services also posted solid increases.
The solid employment growth in several categories may reflect businesses choosing to retain more holiday workers than normal in the face of a tight labor market.” READ MORE
Smaller businesses are adopting dynamic pricing strategies: “Retailers say the price moves are in response to rising production, labor and shipping costs, and continuing product shortages associated with the Covid-19 pandemic. The price changes are happening online as well as offline, especially among smaller retailers that have been wary of spending on pricey technology or frustrating customers, according to executives and analysts. ‘There have been more times than not where we’re almost just breaking even on products because of failure to be able to update the pricing,’ said Jeff Wachenfeld, who manages two True Value hardware stores on New York’s Long Island.”
“Quicklizard Ltd., a company that sells software to help retailers automate their pricing strategies, said 75 percent of the roughly 100 retailers on its platform have increased how frequently they update prices in the past year, with nearly a third changing prices several times a day, up from 15 percent a year ago.”
“Adjusting prices is tedious work and can interrupt store operations, Mr. Griffin said, adding that some employees are working overtime to put in new tags. To save time, B&R is trying electronic shelf labels at a store.”
“Other companies, including Weis Markets, are holding off on changing prices frequently. Jonathan Weis, chief executive of the Pennsylvania-based chain of around 200 stores, said too much change can erode consumers’ trust in the business.”
“‘It raises a red flag for me when contractors are buying me out of something in particular,’ such as PVC pipe, said Mr. Wachenfeld of True Value. ‘Why is everyone buying this all of a sudden? It’s because I’m way too cheap.’” READ MORE
Apple’s decision to let users decide if they wish to be tracked has had a big impact on digital advertising: “‘People can’t really be targeted the way they were before,’ said Eric Seufert, a media strategist and author of Mobile Dev Memo, a blog about mobile advertising. ‘That breaks the model. It’s not just an inconvenience that can be fixed with a couple of tweaks. It requires rebuilding the foundation of the business.’”
“While Meta and other big media companies have developed new methods to target people with ads, some smaller brands, whose ads can no longer reach new customers, have found a different solution to the problem: raise prices.” READ MORE
Here’s what you need to know about Topics, Google’s latest attempt to replace cookies: “Topics will collect data on users' interests over a rolling three-week period, assigning each user's interests to one of 300 Topics. When advertisers want to reach users, Topics will randomly assign them three possible topics — one high-interest topic for each week of browsing data — that advertisers can use to target consumers.”
“Advertisers and publishers should question whether Topics will be effective enough to replace cookie-based targeting.”
“Consumers pay for most content by consenting to see ads. In the absence of user data, advertisers will have to adopt spray-and-pray messaging, a change that will hurt the user experience and will be more expensive for advertisers.”
“Ultimately, advertisers will pass those increased costs onto customers.” READ MORE
Amazon’s advertising revenue continued to grow in 2021, rising to $31 billion from $21 billion in 2020: “Amazon has become the third-biggest digital advertising company behind Google and Facebook and dominates how brands spend ecommerce ad dollars. This growth has led Walmart, Instacart, Walgreens and other retailers to build their own paid media platforms to grab a slice of the ad pie. But under new CEO Andy Jassy, Amazon is shaking up its ad business to attract new advertisers that typically buy television.”
“The tech giant continues to cut into advertisers' search budgets that mostly go to Google. It's also ramping up its audio and video sales pitch.”
“Marketers have complained that Amazon is tough to navigate. Amazon said its complex approach is by design, but has rolled out tools to make it easier for marketers to buy and measure ads.”
“Nonetheless, its structure has spawned a cottage industry of firms that specialize in helping marketers navigate the site.” READ MORE
Small businesses are raising wages: “A record 50 percent of U.S. small-business owners said they raised compensation in January amid still-elevated job openings, the National Federation of Independent Business said Thursday. With some 47 percent of small businesses reporting job openings last month that they could not fill, employers have been raising wages to attract skilled candidates—a trend that doesn’t appear to be reversing any time soon.” READ MORE
State-run retirement programs offer an alternative for private companies: “Those with no access to a 401(k) plan or similar workplace option have collectively saved more than $400 million in individual retirement accounts through such programs. To date, there are three states that have them up and running, although others are on deck. ... While large employers are more likely to offer a retirement option, cost and administrative burdens can stand in the way of small business owners’ pursuit of setting one up. Thus, these state-run programs can increase access to a workplace plan for those workers.”
“Through state-run programs in California, Illinois and Oregon, nearly 430,000 accounts have been funded since the first (OregonSaves) began in 2017.”
“This year, Maryland and Colorado are expected to roll out their own versions, while Connecticut will shift to a full launch from its pilot phase. A handful of other states — including Massachusetts, Vermont and Washington — have programs that operate differently, with participation voluntary.” READ MORE
Concerned about rising prices, two friends, Erik Rico and Oscar Llarena, started a youth sports equipment business with a subscription model: “In 2016, Rico and Llarena co-founded Miami-based baseball equipment retailer Bat Club. The company offers an online subscription service starting at $20 per month through which customers can rent baseball bats, gloves, and other equipment, with the option to switch gear if their children outgrow it—or simply don't like it. The company, which also lets customers purchase equipment outright, generated $3.1 million in annual revenue in 2020.”
“The startup is growing through word of mouth and partnership programs, according to Rico. It offers brand ambassadors and batting facilities affiliate fees for getting people to sign up through unique QR codes and links.”
“Recent studies have found that American families spend from $100 to $500 per child per month on sports, with one Utah State University survey determining that some families spend as much as 10 percent of their income on their children's sports.”
“And kids from low-income families are six times more likely to quit sports because of costs than kids from high-income families, according to the Aspen Institute's Project Play initiative.” READ MORE
THE 21 HATS PODCAST
The Game Has to End at Some Point: This week, Shawn Busse, Paul Downs, and Jay Goltz talk about their evolving succession plans. There are lots of options—selling the business, turning it over to a family member, selling it to an employee stock ownership plan, holding a going-out-of-business sale, just walking away—and they all come with advantages and disadvantages. Plus: Would any of them consider instituting a four-day work week? And we can report that this podcast now has its first B Corp. Who knows what a B Corp is?
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