Stay DTC? Or Try to Go Costco?

The founder of Citibin is rethinking her decision to eschew big box retailers.

Good morning!

Here are today’s highlights: Tech startups offer employee-bonding trips. Why is Amazon so bad at HR? And have you considered not applying to have your PPP loan forgiven?

RETAIL

In her latest post for 21 Hats, Liz Reisch Picarazzi ponders Citibin’s growth strategy: “In fact, my business exists because as a consumer I couldn’t find a trash enclosure that I liked in the mass market, so I created my own. It’s a niche product for a customer who is willing to pay for quality and design. It’s not the type of mass market product that does well on Shark Tank. And yet, as I look to scale my business, I’ve become curious again about selling in Costco. It does carry premium products online that aren’t available in their warehouses. But the potential move raises some questions: Should I knock off my own product with a lower-priced version before someone else does? What exactly would I have to do to get into Costco? And how would this help or hurt my brand?”

  • “We’ve also tried selling on Amazon. I was okay with the 15-percent referral fee because of the platform’s massive reach. But it came with a lot of  strings attached.”

  • “We tried to sell package delivery lockers on Amazon for a few months and didn’t make a single sale. I think that was largely because we hadn’t been credentialed yet as Amazon Prime, which most buyers expect.” READ MORE

FINANCE

Is your business applying for PPP loan forgiveness? Gene Marks suggests another option: “Instead of designating its payroll costs to get forgiveness on its loan, a small-business owner can instead use those same funds to apply for another stimulus benefit: the Employee Retention Tax Credit — or ERTC. Doing so may result in even more cash back from the government and a greater overall savings.”

  • “But you can’t use the same payroll dollars to apply for PPP forgiveness and to apply for the ERTC. This presents an interesting decision for small-business owners that received a PPP loan.”

  • “If you don’t apply for forgiveness on your PPP loan, you’ll owe the money back to the government. It’s a five-year term but the interest rate is only 1 percent.”

  • “PPP forgiveness is nontaxable for federal, Pennsylvania, and New Jersey state tax purposes. But tax credits like the ERTC will reduce employer payroll expenses, which will effectively increase net income and therefore the income taxes a company owes.”

  • “In the end, experts are strongly advising small businesses to consult with their financial advisers or payroll services and crank through the numbers.” READ MORE

HUMAN RESOURCES

Tech startups with remote workers are planning employee-bonding trips: “It’s a spin on the old ‘off-site,’ when offices gathered somewhere outside the corporate campus to hear about company goals and make plans to improve sales performance, capped off by some wining and dining. In the new model, PowerPoint presentations in hotel conference rooms are replaced by more enjoyable endeavors: mountain biking in Colorado, swimming with dolphins in Mexico and dancing the tango in Argentina.”

  • “Offering the flexibility of remote work and the perk of frequent, company-sponsored travel, CEOs say, also will allow them to better compete for talent with the big tech companies ...”

  • “All Turtles Corp., a startup incubator that launches new tech products, is bringing its full staff and employees of some of the startups it has backed—close to 150 people—to Memphis in October for bourbon, BBQ and Graceland.”

  • “Some CEOs also worry these trips would cater to young, single employees and put parents in a bind. Mr. Rogynskyy of People.ai said he is reviewing a child-care stipend that would support spouses and kids when employees are away and in some cases pay for families to travel along.” READ MORE

One of the authors of the New York Times report on Amazon that we highlighted yesterday talks about why the company is so bad at HR: “Amazon hires so many people, often with no in-person interview and little vetting, and it loses a significant number of workers within the first couple of weeks after they’re hired. We’ve heard of people walking out on their lunch break on their first day of orientation. That creates a tremendous amount of turnover and some chaos in the workplace. We also wrote about an employee named Dayana Santos, who had been praised by managers and then was fired for one bad day when for various reasons she wasn’t consistently producing. She’s someone the company should have wanted to keep. Amazon has since changed the policy that led to her firing, but the example shows that the company has built systems that cannot always effectively assess who is a capable worker.”

  • “David Niekerk, a former Amazon vice president who built the warehouse human resources operations, said that Jeff Bezos didn’t want lengthy tenure for hourly employees. Company data showed that employees became less engaged over time, and Amazon wanted people who would push to go above and beyond.”

  • “Maybe Amazon doesn’t want to have so many people leave every year, but changing that is not the No. 1 priority, either. Amazon churns through so many employees that I’ve heard numerous Amazon leaders in Seattle describe a nagging fear that the company will run out of Americans to hire.”

  • “Walmart is often criticized for its labor practices and it generally pays less than Amazon, but it says that more than 75 percent of managers at its U.S. stores started as hourly employees. It’s extremely challenging to make that jump at Amazon.”

  • “Sam’s Club, which is part of Walmart, trains workers to do multiple jobs in a store. That’s partly to keep people feeling fresh in their jobs and learning new skills. Amazon warehouse employees might do the same type of work for 10-hour shifts every day.” READ MORE

VENTURE CAPITAL

Amazon is starting an accelerator for Black-owned businesses: “The company says it's committing $150 million over the next four years to give Black business owners access to ‘financial support, business education and mentorship, and marketing and promotion of their brands and products as third-party sellers in our store.’ This new initiative was created in partnership with Amazon's Black Employee Network, the U.S. Minority Business Development Agency, and the U.S Black Chamber. The company says it's aiming to ‘help build sustainable equity and growth’ for Black businesses.”

  • “Only 1 percent of Black founders seeking venture capital actually receive funding, according to the Harvard Business Review. The publication says the low numbers are due to venture capital investors being largely white and not "good at recognizing and developing Black entrepreneurs." READ MORE

REOPENING

Royal Caribbean postponed a cruise after eight crew members tested positive: “The crew members’ cases come after two passengers sharing a room on the Celebrity Millennium, another Royal Caribbean ship, tested positive last week for Covid-19, though the cruise sailed on. Cruise operators are hoping to show they have protocols in place to handle Covid cases, in contrast to some high-profile outbreaks that brought sailings to a halt last year.”

  • “Six of the Odyssey crew members are asymptomatic, while the other two have mild symptoms, Mr. Bayley said. All crew members are quarantining for 14 days with routine testing, he said.”

  • “All 1,400 crew members on the ship were vaccinated on June 4 and will be considered fully vaccinated on June 18, Mr. Bayley said. The cases were detected after the vaccination was given and before they were fully effective, he added.” READ MORE

LOGISTICS

Reibus International is building a B2B marketplace for industrial metals: “Consumer marketplaces get all the love. But B2B marketplaces are often attacking gigantic markets. Case in point: Reibus International. The Atlanta-based firm runs a marketplace for the industrial metals market. Boring? Sure. But industrial metals is a $300 billion market in North America, and supply chain constraints and price volatility have made it ripe for disruption.”

  • “‘Reibus’s business is booming because steel has been so volatile the past couple of years. It’s not just the pandemic, though the pandemic has created some volatility. With climate-induced trade disruptions, volatility is going to keep going up.’”

  • “The technology underlying Reibus’s marketplace is a relational database similar to that used by dating site Match.com, Armstrong explains.”

  • “It currently has around 4,900 listings, representing more than 49,000 tons of metal in 107 locations. ‘Everybody has too much or too little material all the time.’” READ MORE

THE 21 HATS PODCAST

Episode 64: Adventures in Candyland: This week, Stephanie Stuckey tells Jay Goltz and Dana White about moving closer to the candy factory she recently bought to get a better feel for the people, the operation, and the challenges. Right now, those challenges include recruiting enough employees, absorbing increased supplier prices, and figuring out how much she should raise her own prices: “We can only give up so much of our margin, right?” she tells us. To which Jay responds, “Why give up any?” Plus: we talk about competing for labor with Amazon, whether to require employees to get vaccinated, how to manage legal fees, and whether Dana’s feelings of FUD have eased.

THE MORNING REPORT WEEKLY WRAP-UP

Every Friday, Gregg Stebben of the Small Business & Entrepreneurship Council and I offer our takes on the week’s most important stories for business owners and entrepreneurs. We post a new episode Fridays at noon. You can subscribe wherever you get podcasts or you can LISTEN HERE

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