Tastes Worse! Costs More!
Global warming is having a negative impact on hop yields and beer production.
Good Morning!
Here are today’s highlights:
Both online and in stores, AI is changing how people shop.
On social media, brands are struggling to resist the race to the bottom.
Companies are trying to take advantage of the creative ways consumers justify their spending.
PayPal is cutting the price of payments.
MARKETING
Brands are trying too hard on social media: “In the comments on a recent TikTok post by RyanAir, an exuberant traveler posted about flying the airline for the first time. In the past, the typical corporate response to this might have been something like, ‘We’re glad to have you!’ or ‘Thanks for joining us!’ Ryan Air went with: ‘Do you want a medal?’ It was quirky, except not. Being weird on social media has become standard practice for corporate brands. This has long caused some older people to recoil. And there are signs it is no longer working with millennials or Gen Z customers — people like Priya Saxena, 25, who works in digital marketing in Atlanta. ‘I roll my eyes,’ Ms. Saxena said. ‘A lot of them are trying too hard. I think sometimes they’re trying to fit in and reach out to my generation. So it’s not very natural.’”
“It wasn’t long ago that brands were simpler online: Sale here, happy holiday wishes there. But the reach of influencers on social media and the increasing purchasing power of people in their 20s have pushed companies to change their voice.”
“Online influencers on TikTok have more sway over Gen Z than traditional advertising, said Donna Hoffman, a marketing professor at George Washington University. To reach this group, Ms. Hoffman said companies are copying the influencers and their pithy posts. But they sometimes come off as try-hard, or fake.”
“Ron Cacace, a 33-year-old former social media manager for Archie Comics, said the brands are now in a race to the bottom. ‘When you see that everyone is kind of doing this lowercase funny, sarcastic posting or outlandish slang-based advertisements, what happens is you have to continue to one-up it,’ Mr. Cacace said. ‘The quality is kind of dropping across the board.’” READ MORE
FOOD & BEVERAGE
The climate crisis is making beer taste worse and cost more: “The quantity and quality of hops, a key ingredient in most beers, is being affected by global heating, according to a study. As a result, beer may become more expensive and manufacturers will have to adapt their brewing methods. Researchers forecast that hop yields in European growing regions will fall by 4-18 percent by 2050 if farmers do not adapt to hotter and drier weather, while the content of alpha acids in the hops, which gives beers their distinctive taste and smell, will fall by 20-31 percent.”
“Beer, the third-most popular drink in the world after water and tea, is made by fermenting malted grains like barley with yeast. It is usually flavored with aromatic hops grown mostly in the middle latitudes that are sensitive to changes in light, heat and water.”
“In recent years, demand for high-quality hops has been pushed up by a boom in craft beers with stronger flavors. But emissions of planet-heating gasses are putting the plant at risk, the study found.” READ MORE
RETAIL
Consumers are finding creative ways to justify discretionary spending: “The rules are simple: Using cash doesn’t really count as spending. Prices should always be rounded down. Savings are earnings. And anything under $5 is free. ‘A refund is free money,’ explains Nniffer Guldner, a 39-year-old social worker in Royersford, Pa. She’s returning a bunch of Halloween purchases soon and is excited to feel like she’s making money—so she can spend that dough all over again. Guldner is one of many Americans embracing the latest personal-finance pastime: justifying discretionary purchases with artful arithmetic and then sharing that handiwork with friends, family, and even strangers.”
“Millions of consumers are gleefully touting their twisty spending logic on social media, often under tongue-in-cheek hashtags—and the tabulations are now jumping into real-life.”
“A few days ago, for instance, Sparrows Tattoo Company, of Mansfield, Texas, publicly cited the funky arithmetic to demonstrate how getting inked makes financial sense. ‘Tattoos are basically free because you pay for it once and have it till you die,’ says the company’s Facebook post. ‘Which means it only costs cents a day when you divide total cost over how long you’ll have it.’”
“This wisdom rings true to Josh Benevides, 47, the co-owner of a used-sporting-goods store in Juneau, Alaska. He says he bought an exercise bike for physical therapy after he tore his ACL, and felt hesitant about the bike’s $400 price tag until he soothed his mind with an equation.”
“‘If I ride the bike 400 times, it only costs me a dollar a ride!’ Benevides recalls realizing. He’s since used it about 4,000 times, so thus, he says, he is now ‘riding for a dime! Boom.’” READ MORE
ARTIFICIAL INTELLIGENCE
AI is already changing retail jobs at Walmart: “At the Walmart Supercenter in Secaucus, New Jersey, some 750 employees have been interacting with artificial intelligence on a daily basis for the past few years. Retail workers use an AI and augmented-reality app to quickly and remotely gauge what needs restocking, reducing trips between the store aisles and the backroom. It helps cut the time it takes workers to manage the backroom inventory by a third, according to the company. AI also suggests optimal product placements on shelves, while a new feature under development will soon prioritize workers’ tasks according to urgency.”
“If a customer asks where the orange juice is located, workers, using voice or text, can query an app that is powered by natural language processing, a subfield of AI that enables the app to understand questions like humans. Walmart says its employees ask the app a total of more than 600,000 questions each week, on average.”
“At a press tour of the tech features and gadgets used throughout the Secaucus Walmart, Ivy Barney, the company’s senior vice president of operations, was quick to say that the store’s 750-employee workforce hasn’t been reduced.”
“Instead, retail workers’ jobs have evolved into new roles including ‘digital shoppers’ and ‘hosts’ for the cashier-less registers, with additional new roles in receiving and other operations at the back of the store, she said.” READ MORE
EBay is building AI tools it thinks will change the way people shop online: “The company is bringing AI to both sides of the e-commerce equation, innovating for both buyers and sellers on its platform. Its initiatives have included generative-AI tools to make it easier to list products, a 3D-imaging tool, natural-language search to improve search results for buyers, and AI-powered expert content for product categories such as electronics and motor parts. Internally, eBay is also developing AI tools that are aimed at improving productivity and creativity for its engineers, analysts, and content creators. [Nitzan] Mekel-Bobrov told Insider he viewed the arrival of AI as a ‘paradigm shift’ that ‘will completely transform ecommerce’ and outlined how he saw that transformation taking place over the next three to five years.”
“In the first phase, he said, natural-language search capabilities will become available on more platforms, and shopping assistants will become more common.”
“‘In the second phase, as LLM-powered agents become increasingly popular and their operating cost continues to go down, I expect the trend towards distributed commerce will only accelerate, as e-commerce platforms expand from being a destination consumers go to, i.e., a site or an app, to an experience that shows up wherever the customer is,’ he said.”
“The third phase would be marked by AI agents being able to plan and complete a series of tasks to achieve a specific outcome. ‘This could mean acting on behalf of sellers to reach their financial goals, or on behalf of buyers to complete certain shopping missions, like purchasing everything they need for a trip within a certain time frame and budget,’ Mekel-Bobrov said.” READ MORE
AI may soon require as much electricity as some countries: “A peer-reviewed analysis published Tuesday lays out some early estimates. In a middle-ground scenario, by 2027 AI servers could use between 85 to 134 terawatt hours annually. That’s similar to what Argentina, the Netherlands and Sweden each use in a year, and is about 0.5 percent of the world's current electricity use. ‘We don’t have to completely blow this out of proportion,’ said Alex de Vries, the data scientist who did the analysis. ‘But at the same time, the numbers that I write down—they are not small.’” READ MORE
ECOMMERCE
Amazon has a new feature designed to drive more revenue from existing customers: “The company has tested a ‘Buy Again’ feed and featured it in a tab on the most prized real estate on the home page of its app. The tab uses a customer’s order history to make recommendations, including in categories such as groceries or electronics. Buy Again has been used in recent weeks on a variety of accounts tracked by market-intelligence firm Watchful Technologies. Amazon, which has seen less growth in its Prime memberships in recent years and less spending from its users, is seeking to drive customers toward more regular purchases or steer them toward subscription-based ordering through a feature called ‘Subscribe & Save.’”
“Amazon has tried different ways to get customers to reorder items they have purchased in the past. Its Alexa assistant, for example, notifies some customers of potential order options based on order history.”
“A buy-again and subscription option is available on Amazon’s website but doesn’t often appear to have top billing. Most customers can access similar information on the app but have to pass through multiple steps to reach the section.”
“The tests Amazon has conducted move the ‘Buy Again’ option to a prominent place in the app with a dedicated feed of products customers have previously purchased.” READ MORE
PAYMENT
PayPal is risking a price war over payment fees: “Last year, the San Jose company began cutting the cost of payment services it offers under its Braintree brand, a white-label service that lets companies small and large accept debit cards, credit cards and other payment methods from consumers. PayPal is making a land-grab play in North America to gain market share over close competitors including Dutch processor Adyen and fintech darling Stripe, analysts say. It’s trying to reel in merchants by offering lower prices on Braintree services and then bundle them with more profitable features like branded checkout, its credit products or PayPal Payouts, which helps merchants like Uber pay their drivers.”
“The payments processing business is one that thrives on tiny percentages. In 2022, PayPal had net revenue of $27.5 billion, or 2 percent of the $1.36 trillion total transaction volume that it processed. Competitor Adyen, more of a pure play in transaction processing, had revenues of $1.4 billion from $815 billion in processed volume, or just 0.17 percent of its volume. Stripe’s revenues were $3.2 billion from $817 billion in volume, or 0.39 percent.”
“The risk PayPal runs by cutting processing fees is triggering a race to the bottom. If all three companies chose to cut prices, they would all take hits to their bottom line, though that may be less risky for Paypal given its higher margins and the fact that it has the wider suite of products available for cross-selling.” READ MORE
GOVERNMENT CONTRACTING
New SBA rules have changed what it takes to be 8(a)-certified: “Aperio Global CEO Earl Stafford Jr. knows the exact moments during his school years when incidents of discrimination shook his confidence and changed his life trajectory. ‘There are some things I'm doing today that I'm certain I would have been doing 15, 20 years ago with a fervor, and I didn't,’ Stafford said, ‘because I did not think that I had what it took to be in business.’ They’re old wounds the government contracting chief wouldn’t dredge up with an old friend at a bar or a reporter he’s chatted with a few times, but still experiences he was required to pen in painstaking detail to the Small Business Administration to remain eligible for its 8(a) set-aside program for smaller, disadvantaged contractors.”
“All new applicants that want to be a part of the program must now bare their souls in much the same way that Stafford did to prove they had faced a social disadvantage to earn their 8(a) certification as part of a recent change in the application process.”
“The changes to the SBA's 8(a) regulations — released in August — stem from an injunction issued by the U.S. District Court for the Eastern District of Tennessee that had deemed the program unconstitutional after it was challenged in a lawsuit.”
“The changes now require all prospective and current 8(a)-certified businesses to write a social narrative to provide that evidence, except for firms owned by Indian tribes, Alaska Native Corporations, Native Hawaiian Organizations or Community Development Corporations.” READ MORE
THE 21 HATS PODCAST
The Employee Engagement Industry Has Failed: In this week’s bonus episode, Bill Fotsch, a business consultant, explains why he thinks much of the effort that he and many others have put into creating employee engagement over the past three decades has been wasted effort—well intentioned, but wasted. The fact is, Fotsch says, employees today are no more engaged than they were some 30 years ago when the concept of employee engagement first gained currency. So what’s the answer? Fotsch has come to the conclusion that it’s something he calls “economic engagement,” which happens to be the name of his consulting business. What exactly is economic engagement? He says it’s getting employees to focus on serving customers, and doing so profitably. He says it’s not so much about sharing financials with employees but about getting employees to understand the strategies and actions that really drive a business’s profitability.
Fotsch is so convinced that he’s cracked the code that he’s gone beyond mere consulting and has been buying stakes in businesses so he can implement his ideas and prove his concept. So far, he says, it’s working.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren