Is It Ever Okay to Deceive Customers?

How about when the owner pretends to be a lower level employee to make the company seem bigger?

Good morning!

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Here are today’s highlights:

  • Ami Kassar suggests a different way to look at your P&L.

  • Gene Marks asks how you’ve been treating your suppliers. Are you their best customer?

  • Should you be advertising on Pinterest?

  • How David’s Bridal is recovering from bankruptcy and preparing for a surge in weddings.

MANAGEMENT

Is it okay for the owner of a business to pretend to be a lower level employee on the phone in order to project a larger image? “Is it worse than when Rahul at your bank’s Bengaluru call center identifies himself to you as Randy? In my view, it is. Rahul has been instructed to do so in order to make American callers more comfortable and maybe disguise the fact that the call center has been off-shored to somewhere far, far away. ... Your boss, by contrast, is concealing things that might be of legitimate interest to callers — namely, that they’re talking to the boss and that she’s not running a very big operation.”

  • “Here’s a test: How much would it matter to the people on the other end of the line if they found out what was happening? With Rahul a.k.a. Randy, they’re mostly not going to mind.”

  • “With your company, on the other hand, they might feel some unease. Can you rely on someone who tries to mislead you about who she is?”

  • “The deception she’s perpetrating on some of her customers, though minor in the scheme of things, is still wrong.” READ MORE

FINANCE

Ami Kassar suggests businesses take a different approach to their P&L statements: “The money we have to spend is rent, insurance, etc.; these are basic expenses to keep our lights on and keep the business running on time. The money we don’t need to spend, which I believe should now be tagged as investment expenses, are new items that we are testing or trying to use to grow and expand our businesses. These are investments we are making to get bigger, better, or different in the future. So whatever your investments might be, we need to track, monitor, and understand them. If you took $100,000 and invested it in the stock market, you could log onto your account and see how your investments are doing.”

  • “When it comes to investments we make in our companies, the information might not be as precise, but we still should have a similar understanding. How are we doing?  Where should we double down, and what programs should we kill?”

  • “You need to be asking yourself those questions.” READ MORE

PROFILE

Here’s what David’s Bridal is doing to prepare for a year that may have the most weddings in four decades: “The surge is coming at a delicate time for David’s Bridal. The retailer, which has more than 300 stores, declared bankruptcy in November 2018. The company emerged a short time later and brought on Jim Marcum as chief executive officer in June 2019 from private-equity firm Apollo Management and following a long career in retail management. Then Covid-19 hit. Under Marcum, the chain, which is privately held, has tried to modernize by launching a loyalty program and expanding its presence on YouTube and TikTok.”

  • “The leadership team every day at 6 a.m. gets all the one- and two-star comments anywhere in the country or world from the previous day and — trust me — we're responding to them.”

  • “We launched a virtual stylist program. We developed augmented reality, where we could take dresses and bring them right up on her phone.”

  • “We launched, in the midst of Covid, quinceañera dresses. What you found in these young women who are growing up in the Latina community is that the 15-year-old celebration is huge. It’s like a wedding.” READ MORE

MARKETING

Pinterest is an acquisition target because more retailers are selling through the social media site. Should you? “Social-commerce spending is expected to rise close to 36 percent in the U.S. this year to $36.62 billion, according to research firm Insider Intelligence, counting purchases made on a social platform or by clicking directly on an advertisement or other content in social media. Pinterest is primed to benefit from that growth. Some 80 percent of its users have discovered a new brand or product on Pinterest, and 45 percent of people in the U.S. with an annual household income greater than $100,000 are on the platform, the company has said.”

  • “About 400 million people visit Pinterest’s website or app every month in search of inspiration for all sorts of projects, from decorating cakes and planning weddings to designing costumes and creative landscaping.”

  • “More than half of the platform’s so-called Pinners are women between the ages of 24 and 49, according to the company, a group that analysts say marketers prize because they typically make most of a family’s spending decisions.”

  • “‘Pinterest is where you start that shopping journey,’ said AB Bernstein analyst Mark Shmulik. ‘It’s not where you complete that shopping journey, which is where I imagine potential acquirers think they can deliver.’” READ MORE

THE COVID ECONOMY

It’s getting more expensive to insure a home: “The nationwide average annual premium for homeowners insurance is $1,398 today, as estimated by trade group Insurance Information Institute. The group says that from 2017 to 2020, premium rates were up 11.4 percent on average. That is higher than the nation’s 7.9 percent inflation rate during those years. Premiums have further increased this year with an average rate increase in the third quarter of 6.6 percent, up from 4.8 percent in the second quarter, according to MarketScout, a firm that monitors insurance rates. The cost was up as much as 25 percent in parts of California and Florida, MarketScout says, and $20-million-plus homes with high wildfire exposure faced even higher increases.”

  • “The increase in home-insurance premiums is largely driven by many of the same factors that are putting other parts of Americans’ budgets under stress.”

  • “Higher prices of building materials and other supply-chain disruptions, for example, have driven up repair and rebuilding costs for insurers.”

  • Insurers are filing rate increases reflecting the increased volume of disaster claims they have been paying.” READ MORE

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LOGISTICS

Gene Marks says many of those struggling with supply-chain issues could learn from the way his dad managed to get gas during the ‘70s oil embargo—by being nice to Burt, the owner of a local gas station: “When the '73 oil crisis hit, Burt's business was impacted like any other gas station, but he always kept reserves of that precious gasoline for his favorite customers. And my dad was on top of that list. … Burt was no different than any other business owner since the beginning of time. Business owners always look out for their best customers. They give them priority.”

  • “Are you that best customer? How do you treat your suppliers? Do you pay them on time? Do you make excessive demands? Are you distant and unsociable?”

  • “​​We're in a supply chain crisis right now, but that doesn't mean there's no supplies. They’re just more limited.”

  • “I'm seeing businesses go out of their way to get products to their best customers, even when products are in very short supply.” READ MORE

Here’s why Costco and Levi’s are coping with the supply-chain chaos better than others: “It's all about ‘preparation and paying attention,’ said John Esborn, former supply chain leader at Wayfair and current head of international transportation for Amazon seller roll-up firm Perch. The prep started last year, when smart buyers secured ship and truck contracts months earlier than usual. The ‘paying attention’ part is about monitoring market swings and the situation on the ground, and staying ready to react. A backup plan for sourcing and moving goods is a must-have.”

  • “Levi's, for one, doesn't allow more than 20 percent of its product to come from a single country, CEO Charles Bergh said on an earnings call earlier this month. It produces some items in two countries simultaneously as insurance.”

  • “Bed Bath & Beyond, for example, planned for 100 percent higher shipping rates than last year in the third quarter, CFO Gustavo Arnal said on an earnings call last month. Rates ended up 150 percent higher.”

  • “Experts say small and mid-sized retailers will have the most trouble this holiday season.” READ MORE

STARTUPS

Flora wants to help you stop killing your houseplants: “The company started as a passion project for [Aabesh] De at the height of the Covid-19 pandemic, as he and many other Americans turned to houseplants during lockdown, but two months ago he left his job at Microsoft to jump into Flora full time. The idea is simple: to create a hardware device that tells you exactly what your plant needs, from temperature, humidity, moisture and lighting conditions, and an app that gives you alerts and other information to stay on top of it all. ‘I was looking for a tech solution that would tell me exactly what I needed to do,’ said De, who's now the owner of more than 60 houseplants. ‘There really wasn’t anything that was like a Fitbit for plants.’”

  • “Flora's first batch of 1,000 sensors, which the startup makes from scratch, will arrive in March. Its iOS app is already live and lets you add your plants, determine optimal water and fertilizer schedules, and set your lighting conditions.”

  • “The Flora app currently has 10,000 active users, De said.” READ MORE

THE 21 HATS PODCAST

Holy Crap! This Is All My Dreams Come True: This week, in episode 81, we have a celebration. As many of you will recall, when we started this podcast, Karen Clark Cole was coming off months of failed negotiations with a potential investor in Blink, the business she co-founded. Those months she spent trying to land the investor took a toll on both Blink and on Karen, who subsequently took a mental health sabbatical. But, as she tells Jay Goltz and William Vanderbloemen, she came back, refocused, and has just sold Blink for $94 million in cash. As you might imagine, we had some questions for Karen, including: Will she stay? How many employees knew what was going on? Was there a bidding war? Is there an earn out? What was it like to wake up one morning knowing that she had taken all of her financial risk off the table? And is she ready to report to a boss?

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