Stephanie Stuckey's Pricing Dilemma

Today’s Highlights: A store opening offers a 'much-needed injection of confidence.' What we can learn from a legendary Facebook video. And yes, you should know what an NFT is.

THE 21 HATS PODCAST

Episode 57: Here is Stephanie Stuckey’s dilemma: Over the years, she tells us, Stuckey’s signature pecan log rolls were cheapened and offered for sale in too many convenience stores. But since Stephanie bought the company in 2019, she has stopped outsourcing production and is now making better log rolls in her own factory. The next step is to sell the candy in more upscale stores with higher prices and better margins. But how do you transition from a C-store price to an upscale price? How big a problem would it be if the C-stores stopped buying before the upscale stores started buying? “It’d be a problem,” Stephanie tells us. So what should she do?

  • PLUS: Dana White decides to franchise.

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REOPENING

A newsstand opens, demonstrating that life will return to cities: “Big Little News opened its doors on East Pike Street in Seattle in early March. The postcard-size space is outfitted with wood shelves displaying more than 250 magazine titles. There’s also a case for cold drinks and a carefully curated selection of puzzles, coffee table books, snacks, and alcohol. ‘We wanted to be a place where you could walk in and have the high and the low,’ says co-owner Joey Burgess. Customers might buy ‘an import fashion magazine,’ he imagines, ‘and also grab a can of Yoo-hoo.’ The real novelty of the place, though, is that it opened in the middle of a pandemic. After a year in which retailers, restaurants, and bars in this ever-changing corner of Seattle struggled to survive, any new business can feel like a much-needed injection of confidence.”

  • “Owners of new restaurants, cafes, and Amazon.com-proof concepts such as the one Burgess is testing have also been able to capitalize on the uptick in retail vacancies by snapping up locations that would have been unavailable or unaffordable a year ago.”

  • “‘I have been pleasantly surprised—and in some cases awed—by the resilience’ of neighborhood businesses districts, says Michael Berne, president of MJB Consulting, a retail planning and real estate consultancy. ‘In a year’s time, I would expect urban Main Streets to have regained a footing, if not yet their swagger.’” READ MORE

Women may not go back to heels: “Sales of high-heeled shoes fell 45 percent in 2020, according to market researcher NPD Group, as women had nowhere to wear them. Beth Goldstein, the firm’s industry analyst for accessories and footwear, predicts sales will rise this year, but only modestly, as more women, feeling liberated from the tyranny of heels, stick with more comfortable footwear. Many women had already been moving away from heels pre-Covid with the growing casual-fashion trend. The pandemic accelerated that shift. Brands famous for stilettos and pumps, such as Christian Louboutin and Stuart Weitzman, have been promoting more flats, loafers, sandals and sneakers on their Instagram accounts.” READ MORE

BUSINESS MODELS

Mark Cuban thinks NFTs could provide small businesses with an important new revenue stream: “Small businesses looking to get involved in NFTs may find they have a practical purpose beyond investing or selling. NFT owners can offer up their assets as collateral for a loan, or offer loans to other users on marketplaces such as NFTfi. The digital tokens also could be tied to real-life benefits or membership clubs. A group of 10 music venues, including the Troubadour in Los Angeles and Washington, D.C.'s 9:30 Club, are participating in an auction of crypto art. Each NFT is tied to a participating venue and entitles the owner to VIP passes or other real-life perks. NFTs could replace tickets to concerts or other events. Mark Cuban is exploring using NFTs for tickets to Dallas Mavericks games, which could allow the Mavericks to earn royalties on ticket resales.”

  • “Pringles recently unveiled its latest flavor, ‘CryptoCrisp,’ as a one-of-a-kind digital collectible known as an NFT—and the bids to get one went up to more than $2,000. Taco Bell's NFT taco GIFs sold out in a mere 30 minutes.”

  • “The original function of NFTs was to verify digital art, because they can function as certificates of authenticity. Now luxury fashion labels, real estate companies, pro sports leagues, and even legacy art auction houses such as Christie's, Sotheby's, and Phillips are selling NFTs.”

  • “You should also know that NFT marketplaces like OpenSea, Rarible, and Nifty Gateway all charge high transaction and auction fees, typically ranging from 2.5 to 5 percent of each sale, which could take away a substantial cut of your profit. Still, this is comparable to other e-commerce platforms like Etsy and Shopify.” READ MORE

One other thing about NFTs? They’re terrible for the environment: “The system is intentionally designed to be onerous, ostensibly to make it transparent and competitive, and to prevent cheating. Bitcoin, the largest cryptocurrency, also uses the energy intensive proof-of-work model. According to an estimate backed up by independent researchers, the creation of an average NFT has a stunning environmental footprint of over 200 kilograms of planet-warming carbon, equivalent to driving 500 miles in a typical American gasoline-powered car.” READ MORE

RETAIL

Is L.A.’s Platform the future of retail? “In Culver City on the west side of Los Angeles, a shopping development is experimenting with retail, mixing traditional strategies with new. Called Platform, the new quarter defies many of the terms by which we define retail. It’s neither mall nor department store, neither traditional Main Street nor high street plumbed with independent owners. It’s an appealing array of these elements, with unusual merchandise partnerships and online connectivity thrown in. Platform’s business model is the brainstorm of two aspiring real estate investors, Joey Miller and David Fishbein, who, tellingly, lacked retail experience when they bought two acres of land in Culver City a decade ago when they were in their twenties. Several of the two dozen stores at Platform are pop-ups with short-term leases. Others are owned, branded and merchandised by the developers, using unconventional partnership contracts with brands.”

  • “‘We felt the entire wholesale market was broken,’ says Fishbein. ‘The brand really needs to share the risk with the store.’ But rather than claw at risk-sharing with charge-backs, fees and other contractual clauses that can leave fashion labels eating their own profits late in the season, Platform’s approach splits sales 50-50.” 

  • “Signs pointed to Platform’s drive-through lane, where it’s possible to pick up a $525 Maison Kitsuné oversized cardigan or a Thakoon ribbed turtleneck 35 minutes after ordering it along with wood-fired pizza from Roberta’s.” READ MORE

HUMAN RESOURCES

Here’s the case for ending NDAs for victims of harassment and abuse: “Last March, I sat in a lawyer’s conference room and watched as my corporate account at Pinterest was suddenly shut off. For almost two years, I had worked at the company as a public policy manager engaging with elected officials, civil rights groups and public health organizations. In an instant, I lost access to emails, documents and all internal systems. Months earlier, I filed complaints about wage discrimination and retaliation. Now the company was presenting me with no choice but to leave. I thought about how I would explain to my colleagues, friends, family and prospective employers why I no longer had the high-profile job I loved. Worse, I had to find a way to have those conversations without violating the terms of a highly restrictive nondisclosure agreement, drawn up by Pinterest’s legal team, which was designed to keep me quiet.” READ MORE

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THE COVID ECONOMY

OPINION: Small business owners should become vaccine evangelists: “A good vaccine plan aligns with state or local vaccine policies, is clearly communicated to employees, and includes incentives, such as paid time off for employees to get the shot(s) and recover from side effects if they occur. It should also follow the CDC's guidance on wearing masks and social distancing, even after all employees are vaccinated. Small business owners who want to do more can encourage local community members to receive the vaccine. There are a number of ways to do this, ranging from helping reduce vaccine hesitancy among friends, family, and peers to spreading awareness or providing logistical support. This is not only good for the health of the community, but it will restore the confidence of people who will be comfortable going back to normal with a fully reopened Main Street.”

  • “Small business is the most trusted institution in the United States, according to Gallup, and represents more than 90 percent of all businesses in the country.”

  • “The survey also found that 80 percent of small business owners plan to get a vaccine, which is 10 percent higher than the overall public.” READ MORE

Inflation is about to look worse than it really is: “The issue itself is pretty simple. Normally, economists track inflation by looking at the change over a 12-month period. But last spring, consumer prices began to fall thanks to the onset of the coronavirus crisis. Since then, they’ve rebounded without quite returning to their pre-COVID trend. But year-over-year comparisons back to the moment when prices were in a ditch will make it look as if inflation is suddenly galloping out of control.”

  • “If prices don’t rise at all in the coming months (unlikely, but bear with me), the government’s inflation gauge will go up by 2 percent in March, 2.7 percent in April, and 2.8 percent in May, on a year-over-year basis.”

  • “So, if the headline inflation figure that people usually rely on is useless for the next three months, what number should people track? [Economist Jay] Shambaugh told me that he’s primarily going to watch the annualized rate of inflation over the last 24 months, which should smooth out the impact of COVID.” READ MORE

COMMERCIAL PROPERTY

The pandemic has reordered commercial property winners and losers: “Medical office buildings emptied out during the pandemic when many patients opted for video appointments and telemedicine rather than in-person visits. That didn’t stop investors from pouring money into these properties. Investors say there are a number of reasons to favor medical offices even as property owners turn more bearish on conventional office buildings, which have been upended by the new popularity of remote work. For one, doctors and medical firms paid their rent during the pandemic.”

  • “Landlords have collected more than 95 percent of what they are owed, according to data firm Revista LLC. Some office landlords with mediocre property, by comparison, had rent collections lower than 85 percent, according to market participants.”

  • “Patients are returning to the doctor’s office after in-person visits fell 60 percent early on in the pandemic, according to a study published by the Commonwealth Fund, a healthcare-research foundation.”

  • “In December, telemedicine accounted for just over 8 percent of visits, the study said.” READ MORE

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LOGISTICS

And the latest supply-chain-induced shortage? Bubble tea: “The nation is facing a boba crisis, as the massive shipping backlog on the West Coast is creating a shortage of both boba balls, imported from Taiwan, and tapioca starch, which is used to make the boba and largely comes from Thailand. Those in the booming bubble-tea business are warning customers that boba supplies will likely be depleted in the coming weeks, and it could take months for the supply to get back to normal. ‘This is an industry-wide shortage,’ the owners of Hayward, Calif.,-based U.S. Boba Co. — who also run the popular Boba Guys shops in San Francisco, Los Angeles and New York — said in an Instagram video last week. ‘Some boba shops are already out. Others will run out in the next few weeks.’”

  • “A national survey after the pandemic lockdown last May found bubble tea was the most popular delivery item in California, Hawaii and Michigan, and the drink has been trendy in New York City for years.”

  • “A shipment that typically takes about a month to cross the Pacific, clear customs and leave the docks is now taking four to five months, the Boba Guys said in their video.” READ MORE

MARKETING

What can we learn from the legendary Squatty Potty Facebook campaign? “It started with a shrewd and sophisticated marketing strategy that culminated in late 2015 with a video that broke the internet. As you may remember, ‘This Unicorn Changed the Way I Poop’ features a unicorn that poops rainbow-colored ice cream cones for small children as a prince explains the mechanics of proper pooping in a fairy-tale English accent. The video was produced by Provo, Utah-based Harmon Brothers, which has experience turning quirky products into viral videos, including for the bathroom deodorizer Poo-Pouri. In 2016, the company sold $38 million worth of Squatty Potties, says Bobby Edwards, mostly because of the video, which Edwards says has been seen more than a half a billion times. What are they doing for an encore? READ MORE