‘It’s Important to Not Catastrophize’
As you may have heard, there’s a new Covid variant. We should know more soon.
Good morning! And welcome back. Here’s hoping you had a wonderful Thanksgiving.
Here are today’s highlights:
The SBA has $100 billion in Covid funding that’s about to expire.
Digital customer acquisition costs, including Google and Facebook ads, paid search, and content creation, are up nearly 50 percent over five years.
Food brands that used to fight for shelf space are now targeting the ultra-fast delivery services.
THE COVID ECONOMY
U.S. companies are responding to the new variant with a mix of concern and confusion: “Some executives scheduled calls with internal teams to assess the threat or peppered health advisers with questions, while many cautioned that they would hold off in making changes to operations until more is known. The fast-spreading Omicron variant pushed companies in a range of industries to consider how safety measures and new workflows created during the peak of the pandemic could be reinstated. It also served as a reminder, executives say, that navigating through the unknowns of Covid-19 is a new reality of corporate management.”
“‘It’s important to not catastrophize and not to kind of just jump to the worst, but you’ve got to take it as a real threat,’ said Brian Fielkow, chief executive of Jetco Delivery, a Houston trucking and logistics company.”
“Over the weekend, Roslyn Stone, CEO of Zero Hour Health, a health-advisory firm, watched as her email lit up with inquiries about the new variant from restaurant and hospitality industry CEOs and other corporate leaders.”
“Some executives asked: ‘Is this real? What do you think? Are you panicked?’ Ms. Stone said.” READ MORE
Gene Marks says $100 billion in SBA funding is about to expire: “The Economic Injury Disaster Loan program, or EIDL, was created as an offshoot of the agency’s existing disaster loan programs. It is specifically targeted at businesses in disaster areas caused by the Covid-19 pandemic. Since its introduction, billions have been distributed in the form of loans and grants to millions of small businesses. As of last week, almost $300 billion in loans and grants has been approved by the SBA. ... But there’s more money available. About $100 billion more. So why not apply? ‘I don’t think we’re eligible,’ one client told me recently. ‘I just don’t have the time to go through the process,’ another said. To me, that’s unacceptable.”
“If you’re a small business with fewer than 500 employees, you can likely be approved for an EIDL. The loan amounts — thanks to recent changes to the program — can be as much as $2 million (collateral and personal guarantees may be required). The interest rate is 3.75 percent for for-profit companies ...”
“The maturity period for these loans is 30 years. If you do the math, this all adds up to a fixed monthly payment of less than $500 for a $100,000 loan. Not bad, right?”
“I’ve been advising my clients to re-visit these programs now while there’s still time. Many don’t realize that they’re eligible and that the cost of capital — particularly in this inflationary environment — is attractive.” READ MORE
The flood of Covid relief funding has transformed countless businesses: “When the pandemic brought the supply chain to a standstill and jolted product demand, small American manufacturers scrambled. ‘As a young company, not having large cash reserves was the really scary part — not knowing if we’re going to be able to make payroll, not knowing if we’re going to be able to get raw material,’ says Terry Hill, the owner of Rapid Application Group in Broken Arrow, Okla. Before the pandemic, Hill and his 10 employees, mostly fellow veterans, 3-D printed specialty aircraft parts. ‘All of that came to a screeching halt,’ Hill says.”
“‘Overnight, we went from printing for private space-travel companies to designing our own masks,’ he says. ‘If it wasn’t for the pandemic, and having those PPP funds, we would have never dove into health care.’”
“The investments permanently changed RAG’s business model. Today the company receives as many orders from health care as from aerospace, building on relationships established during the pandemic, as with a hospital in Tulsa.”
“Originally, RAG supplied masks to the hospital; now the company is designing parts for robots to sanitize its infectious-disease wards.” READ MORE
Furniture manufacturers in North Carolina are winning business back from globalization: “The furniture companies that dot Hickory, N.C., in the foothills of the Blue Ridge Mountains, have been presented with an unforeseen opportunity: The pandemic and its ensuing supply chain disruptions have dealt a setback to the factories in China and Southeast Asia that decimated American manufacturing in the 1980s and 1990s with cheaper imports. At the same time, demand for furniture is very strong. In theory, that means they have a shot at building back some of the business that they lost to globalization. Local furniture companies had shed jobs and reinvented themselves in the wake of offshoring, shifting to custom upholstery and handcrafted wood furniture to survive. Now, firms like Hancock & Moore have a backlog of orders. The company is scrambling to hire workers.”
“Yet the same forces that are making it difficult for overseas manufacturers to sell their goods in the United States — and giving American workers a chance to command higher wages — are also throwing up obstacles.”
“Many of the companies are dependent on parts from overseas, which have been harder — and more expensive — to obtain. Too few skilled workers are seeking jobs in the industry to fill open positions ...”
“Prices for couches, beds, kitchen tables and bedding have shot up this year, climbing by 12 percent nationally through October.” READ MORE
Food brands that used to fight for shelf space are targeting startup delivery services like Gopuff: “These startups have created an opportunity for up-and-coming food brands to get exposure to new customers as they join the platforms. Rather than sitting on the shelf at a grocery store along with about 40,000 items, these products are competing with about 2,000 items on startups' apps. And many of the delivery startups highlight small and local businesses.”
“Farmer's Fridge has used Gopuff to break into new markets, selling its products on the platform in Detroit and Cincinnati before establishing relationships at local Target locations or setting up its vending machines, its founder and CEO Luke Saunders told Insider.”
“Pure Green, a smoothie brand that started out operating its own stores but has expanded into selling at retailers, has struggled to make shipping directly to consumers through UPS and FedEx financially viable, CEO and founder Ross Franklin said.”
“Selling through Gopuff, by contrast, gets the product to customers in less than an hour. ‘That's a game changer for CPG companies,’ Franklin said.”
“Gopuff's advertising options have a better return than more established options, such as Google and Facebook, Pure Green's Franklin said. ‘Our ad guy's like, Wow, don't put your money into Facebook ads,’ he said.” READ MORE
Ecommerce companies are concluding they need more brick-and-mortar stores: “Retailers this year are expected to open more stores than they close for the first time since 2017, according to an analysis of more than 900 chains by IHL Group, a research and advisory company. Most of the growth is coming from mass merchants, food, drugs and convenience chains. Department stores and specialty retailers, which experienced the biggest shakeout over the past five years, are still closing more stores than they are opening. But the pace of closures has slowed from record levels.”
“Stores have become integral in fulfilling e-commerce orders. They serve as distribution hubs and convenient places for shoppers to pick up and return online purchases—services that will be key this holiday season as orders once again threaten to overwhelm shipping carriers.”
“As the cost of acquiring customers online has skyrocketed, stores also are a less expensive way to attract new shoppers.”
“Digital customer acquisition costs—which include Google and Facebook ads, paid search and content creation—are up nearly 50 percent over the past five years, according to ProfitWell, a software maker that helps subscription companies with customer retention and pricing.” READ MORE
Over Thanksgiving weekend, shoppers returned to stores: “The rebound marks a reversal from 2020 when the pandemic accelerated a yearslong shift of holiday spending occurring online at the expense of in-store shopping. It also shows retailers were able to secure spending on the key Black Friday selling day, analysts say, even though discounts weren’t as prevalent this year and they spent weeks nudging customers to shop earlier in the season. RetailNext, a firm that tracks shopper counts in thousands of stores with cameras and sensors, said store traffic rose 61 percent this Black Friday compared with last year but was down 27 percent from 2019.”
“The Thanksgiving holiday weekend was also the first time in years that online retail sales didn’t increase from the prior year, according to some industry estimates.” READ MORE
Amazon has nearly doubled its fulfillment capacity since the start of the pandemic: “Amazon blanketed the country with more than 450 new facilities used to store, sort and ship items, according to logistics consultant MWPVL International, doubling down on a logistics empire that aims to deliver items in one day or less, and increasingly to do so without the help of third-party shippers. Many of the new buildings are concentrated near big cities, putting more items for sale on the website closer to large population centers. The facilities also include more than two dozen smaller outposts stocked mostly with bestselling items, allowing the company to prepare for supply disruptions while also expanding fast-shipping capabilities, according to MWPVL.” READ MORE
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Concerned about turnover, more companies are trying four-day workweeks: “In May 2020, as the pandemic sent stress levels through the roof, an online children’s clothes retailer called Primary started an experiment that it hoped would prevent its staff from burning out: It gave everyone Fridays off. By December, the new schedule was working so well that Primary decided to extend it indefinitely. Primary’s staff of 60 hasn’t taken pay cuts and workers aren’t expected to extend their hours during the four days when they work. They occasionally do some work on Fridays, but are not expected to, and the day is meeting-free company-wide. Thursdays have become known as ‘Friday junior’ and ‘Thri-day.’”
“One big advantage, said Primary’s chief experience officer, Cap Watkins, is ‘people feel recharged on Monday.’ The company’s voluntary attrition rate has fallen slightly to 7 percent this year, even as workers in the United States are quitting jobs at record levels.”
“Kickstarter, Shake Shack and Unilever’s New Zealand unit are among those that have experimented with the four-day workweek, or have announced plans to.”
“Proponents of four-day weeks say the key is to rein in meetings.” READ MORE
Some wealthy nations are competing to attract immigrants: “In Germany, where officials recently warned that the country needs 400,000 new immigrants a year to fill jobs in fields ranging from academia to air-conditioning, a new Immigration Act offers accelerated work visas and six months to visit and find a job. Canada plans to give residency to 1.2 million new immigrants by 2023. Israel recently finalized a deal to bring health care workers from Nepal. And in Australia, where mines, hospitals and pubs are all short-handed after nearly two years with a closed border, the government intends to roughly double the number of immigrants it allows into the country over the next year.”
“In the United States, immigration policy remains mostly stuck in place, with a focus on the Mexican border, where migrant detentions have reached a record high.”
“The [Biden] administration’s $2.2 trillion social policy bill, if it passes a divided Senate, would free up hundreds of thousands of green cards dating back to 1992, making them available for immigrants currently caught up in a bureaucratic backlog.” READ MORE
Teenagers are filling the gaps in this year’s holiday workforce: “The age group of 16- to 19-year-olds enter and leave the workforce in numbers that mirror recessions and expansions nationally, said Stephen Herzenberg, executive director of the Keystone Research Center in Harrisburg. ‘We haven’t seen teen employment this high since the fall of 2008, right before the Great Recession,’ Herzenberg said, when 32 percent of 16- to 19-year-olds were employed.”
“The prior high for teen workers was 46 percent of the 16- to 19-year-old population in the year 2000, right before the dotcom bubble burst.” READ MORE
Apple priced its new polishing cloth at $19 for a reason: “Unveiled in October after Apple showed off its new line of gadgets, the soft, light gray square is made of ‘nonabrasive material’ and embossed with Apple’s logo. During tests, the rag worked like other microfiber cloths that list for less than half that price. So…why $19? As it happens, Apple’s pricing strategy rarely allows accessories to fall below that threshold. The 6.3-inch swatch of fabric sits beside 17 other Apple-branded items on the company’s website—a mélange of charging cables, dongles and adapters—each priced at $19. Some, such as the wired earbuds and charging adapter, were once included with new iPhones.”
“The price of almost every Apple product ends in one number: 9. This is a widespread retail tactic, known as ‘charm pricing,’ designed to generate a feeling of good value and is rooted in decades of behavioral research.”
“Analysts say $19 is also a sweet spot for well-to-do consumers willing to pay extra for basic tech products and services. ‘When you go below $20, those people don’t think twice about it, even if [the item] could be competitively priced at $1,’ said Gene Munster, managing partner at venture-capital firm Loup Ventures.”
“In the case of Apple’s polishing cloth, selling it at $19 creates more demand than pricing it at $9, experts say.” READ MORE
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