Maybe It Is a Recession?
The U.S. economy shrinks for a second consecutive quarter.
Good morning!
Here are today’s highlights:
More than 60 percent of customers check Google reviews online before they visit a business.
Best Buy is testing a digital-first, brick-and-mortar store in North Carolina.
Some thoughts on how entrepreneurs spot opportunities for new businesses.
The revenue drop following the sale of a business can range from 20 percent to 50 percent, says a business broker.
THE ECONOMY
GDP fell in the second quarter: “The U.S. economy shrank for a second quarter in a row—a common definition of recession—as businesses trimmed their inventories, the housing market buckled under rising interest rates, and high inflation took steam out of consumer spending. Gross domestic product, a broad measure of the goods and services produced across the economy, fell at an inflation and seasonally adjusted annual rate of 0.9 percent in the second quarter, the Commerce Department said Thursday. That marked a deterioration from the 1.6 percent rate of contraction recorded in the first three months of 2022.”
“The GDP report offered some discouraging signs, and underscored the challenges facing U.S. businesses, consumers, and policy makers—including high inflation, weakening consumer sentiment and supply-chain volatility.”
“Consumer spending accounts for roughly two-thirds of total economic output, and Thursday’s report showed Americans spent at a cooler clip in the second quarter. Business investment worsened slightly.” READ MORE
MARKETING
Google is delaying its plan to kill third-party cookies: “The latest delay is intended to allow more time for advertisers, publishers, and other members of the online ad industry to begin formal testing of the new cookieless technologies proposed in Google's ‘Privacy Sandbox’ initiative, sources familiar with the matter told Insider. ... Google said it planned to expand the testing windows for its Privacy Sandbox technologies for developers and begin trialing them with Chrome users from early August into 2023. ‘We now intend to begin phasing out third-party cookies in Chrome in the second half of 2024,’ the blog post continued.”
“Chrome is by far the most-popular global web browser, cornering two-thirds of the market, while Google is also the world's biggest seller of advertising.”
“News of the delay will likely be welcomed by some corners of the ad community, which are still heavily reliant on cookies to precision-target and measure ads.” READ MORE
Here’s how to manage your Google reviews: “More than 60 percent of customers check Google reviews online before they visit a business. Understandably, they want to check out the experience others have had with your company before they commit to you. This is why Google reviews are important, and why you should put effort into acquiring them. The first thing that appears when you search for a business on Google is that business' reviews and average rating, and if these are not good, chances are potential customers will go elsewhere.”
“If Google sees that you have good reviews, your website will be ranked higher in search engine results because Google can see you are popular and offer customers a good experience.”
“Customers are usually only driven to write a review if they have had a negative experience; this means obtaining lots of great reviews isn't something you can leave to chance.”
“It’s a good idea to respond to reviews. Thanking a customer for a good review shows that you care what customers think about you and are grateful for their business.”
“If there are any negative reviews, responding in an open manner that is not defensive will demonstrate that you are willing to make things right and own up to your mistakes.” READ MORE
RETAIL
Best Buy is opening a 5,000-square-foot, digital-first store in North Carolina: “This is a departure from the company’s big box stores that are typical of 35,000-40,000 square feet in size. The company says while shoppers won’t be able to buy major appliances from this store, they can still place an order on the site and pick them up from the Monroe store. What’s more, for regular-sized items, the company is placing pick-up lockers outside the store, so shoppers can grab online orders anytime. Blue shirt employees and Geek Squad techs will staff the store for purchasing advice. Plus, shoppers can virtually contact experts through its virtual store through voice calls, video calls or chat.”
“Demos are a critical part of this format, and the firm said shoppers can try most of the products before buying them.”
“Like Apple Stores, shoppers can purchase items from the show floor. Just scan a QR code next to the item, and Best Buy staff will bring the item from the backroom.”
“Or if it’s a small item, like a charging cable, scan the QR code using the Best Buy app and grab the item from the shelf.” READ MORE
BUYING A BUSINESS
Taking over a successful business can be surprisingly challenging: “When Jonathan and Jamie Steckler bought Kelloggs & Lawrence a 135-year-old hardware store in Katonah, N.Y., they did their best to maintain the shop’s attractions, including the selection of hand tools, the quirky gift selection and Kelsey, the squawking cockatiel behind the counter. But there was one draw they couldn’t keep on the shop floor—the store’s previous owners, Bart and Diana Tyler. Customers say they miss Mr. and Mrs. Tyler, who sold the store and retired after a 24-year run.”
“The revenue drop following the sale of a business can range from an expected 20 percent to 30 percent in the case of an IT-services provider to 50 percent in the case of a hair salon, says Sam Curcio, a business broker with Transworld Business Advisors of New York, who arranged the deal between the Tylers and the Stecklers.”
“Mr. Steckler had managed a large food-distribution business. Mrs. Steckler had been a buyer in the building-materials industry before becoming a full-time parent to their now-teenage daughter. But they had enjoyed renovating five homes together over the course of their 20-year marriage and decided they wanted to try running a business together.”
“The Stecklers say that sales hit $2.6 million last year, up 24 percent compared with pre-pandemic levels, while profits doubled thanks to cost-cutting measures and consolidating inventory purchases to get better wholesale deals.” READ MORE
PAYMENT
A Senate bill takes aim at credit-card fees: “The bill, which could be introduced as soon as this week, aims to create more competition among U.S. credit-card networks, a sector where Visa and Mastercard have long dominated. Sen. Dick Durbin, an Illinois Democrat, and Sen. Roger Marshall, a Kansas Republican, are expected to introduce the bill. Mr. Marshall said banks and major card networks lobbied his office to not sign onto the bill. He decided to move forward after hearing from a growing number of merchants, including small businesses, restaurants, gas stations and convenience stores, about the toll of the rising credit-card fees set by Visa and Mastercard that are often pocketed by large banks.”
“Mr. Durbin spearheaded a similar rule for debit cards over a decade ago. The Durbin amendment, part of the 2010 Dodd-Frank law, requires that merchants have the ability to choose from at least two unaffiliated debit-card networks when routing transactions.”
“When a consumer pays with a credit card that has Visa or Mastercard listed on it, merchants generally have to route the payment through that network. The bill would mandate that merchants in many cases have the right to route payments through an unaffiliated network.” READ MORE
REAL ESTATE
An early “Zoomtown,” Boise’s housing market is now seeing dramatic price cuts: “Now, the housing boom around Idaho’s capital city has ground to a halt. Buyers are balking at record prices and mortgage rates that last month hit a 13-year high. Sixty-one percent of listings in the Boise metro area had a price cut in June, the highest rate out of 97 metro areas surveyed, according to brokerage Redfin Corp. Home builders who couldn’t keep up with demand last year are cutting back on construction. The factors that made the Boise area so alluring, such as its relative affordability and its fewer pandemic restrictions, are less appealing now that prices have climbed and companies are calling workers back to their offices.”
“‘When average mortgage rates surged above 5 percent in April, ‘it was like somebody just turned the lights off,’ said Shauna Pendleton, a Boise real-estate agent for Redfin. ‘The buyers just disappeared off the face of the earth.’”
“The slowdown in Boise mirrors what’s happening in housing markets around the U.S. After two years of unrelenting demand that unleashed the biggest housing boom in 15 years, sales activity is cooling and more homes are sitting on the market.” READ MORE
ENERGY
Is fracking nothing more than a boondoggle? “Today, with profits aided by the energy price spikes of the last year, the fracking industry is finally, at least for the time being, profitable. But from 2010 to 2020, U.S. shale lost $300 billion. Previously, from 2002 to 2012, Chesapeake, the industry leader, didn’t report positive cash flow once, ending that period with total losses of some $30 billion, as Bethany McLean documents in her 2018 book, ‘Saudi America,’ the single best and most thorough account of the fracking boom up to that point. Between mid-2012 and mid-2017, the 60 biggest fracking companies were losing an average of $9 billion each quarter. From 2006 to 2014, fracking companies lost $80 billion; in 2014, with oil at $100 a barrel, a level that seemed to promise a great cash-out, they lost $20 billion.”
“These losses were mammoth and consistent, adding up to a total that ‘dwarfs anything in tech/V.C. in that time frame,’ as the Bloomberg writer Joe Weisenthal pointed out recently.”
“‘There were all these stories written about how V.C.s were subsidizing millennial lifestyles,’ he noted on Twitter. ‘The real story to be written is about the massive subsidy to consumers from everyone who financed Chesapeake and all the companies that lost money fracking last decade.’” READ MORE
HUMAN RESOURCES
New websites let college students and recent grads rate their internships: “The tools are turning the table on employers, who have long held sway on whether to hire or recommend interns, and influencing other people’s decisions about where to work. Paige Searles, a 20-year-old junior at the University of Georgia, read online reviews as part of her internship search. The double-major in advertising and business management looked up companies on Handshake, an app where employers post internships and entry-level jobs, and interns and recent graduates share unfiltered accounts of how they perceive office culture and work-life balance.”
“Some sites, including Symplicity, which posts jobs and career events for students, don’t allow employers to read or respond to reviews. Others require a campus email address to read or post, or might be accessible only to the reviewer’s own classmates.”
“Online reviews left on multiple sites about consulting internships and big tech companies reviewed by The Wall Street Journal show interns’ concerns about overworked managers, long hours and diversity on staff.”
“One former Amazon.com intern shared anonymously on Handshake that there were no people of color on their 10-person team, but the manager was relaxed and the office was nice. (No snacks, though.)” READ MORE
STARTUPS
Some thoughts on how entrepreneurs come up with ideas for new businesses: “Through 200 interviews with leading entrepreneurs, I identified three ‘ways of seeing’ that help people spot promising opportunities. Here is what I found: Some entrepreneurs capture opportunity by repurposing something that already exists. They transport ideas across geographies or domains, seeing solutions in one arena that can be reapplied in another context. They lift and shift working models, identifying why an idea succeeded in the first place and what will make it work again.”
“For example, in recent years education-tech entrepreneurs have rapidly built businesses that transport in-person learning to a digital format. One such startup, Hellosaurus brought skill-building exercises for young kids into the home by developing collaborative, interactive video stories in a mobile app.”
“A second way entrepreneurs come up with business ideas is by identifying problems that have yet to be addressed. They pay attention to bottlenecks, friction points, irritations and pain points—all of which were in ample supply during the pandemic.”
“A third way entrepreneurs capture opportunity is by integrating existing products or services together in a way that hasn’t been done before to address a new market need or shape a novel outcome.”
“Stoggles combined fashion eyewear with safety eyewear to create prescription-friendly, lightweight and durable lenses with anti-fog coating for anyone wearing glasses with an N95 mask.” READ MORE
THE 21 HATS PODCAST
Are there enough hours in your day? This week, Paul Downs, Sarah Segal, and Laura Zander discuss their daily routines, how those routines have been affected by the pandemic, whether they think they’re working too much or too little, and whether they would join a peer group where they would be exposed to owners who are working harder and, perhaps, having greater success. Plus: Laura places her bet on influencer marketing, Paul says his new marketing campaign has already paid off, and Sarah explains why none of her employees have ever asked her for a raise.
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