‘That Bet Didn’t Pay Off’
The CEO of Shopify thought the pandemic’s ecommerce boom would keep on building. Now he’s laying off staff and turning to supporting merchants.
Here are today’s highlights:
TikTok is replacing Instagram as the go-to platform for restaurants.
Many big brands are continuing to raise prices with impunity.
A staffing service wants to be TaskRabbit for high paid executives.
Bacon soap and Cowcohol: Inflation is driving businesses to create funky new products.
The example of Red Chickz, a Nashville-style hot-chicken restaurant in L.A., shows the impact TikTok can have: “The restaurant runs promotions through the platform and once received so many orders that [founder Shawn] Lalehzarian and his partner had to delay a flight to help with the rush. At the beginning of the year, they explored franchising, and Lalehzarian argues that the TikTok popularity helped them sign deals on 18 new locations, with at least a dozen more on the way across Texas and California. It’s an investment for the restaurant. The Red Chickz’s marketing team of four devotes 15 to 20 hours each week to TikTok—mostly brainstorming compelling content ideas and sizing up trends. They check in with senior leadership once or twice each month.”
“It’s also an investment that Lalehzarian thinks is worth the cost. A growing slice of users are getting on the platform ‘not necessarily to create content but to be entertained,’ he says. Because they’re not expecting to see marketing or promotional content on TikTok, they’re less likely to skip, say, a short video showing a chef’s knife crunching through reddish fried chicken and dousing it with sauce, he argues.”
“The age of TikTok users is creeping up too, despite its reputation as a platform for young people to perform silly dances. In the first quarter of 2021, 36 percent were between 35 and 54 years old, compared to 26 percent a year earlier.”
“‘It requires your own unique creativity and a different kind of communication,’ Lalehzarian says of TikTok. ‘But there’s a real opportunity to get in front of people, not just with a dead picture, but a short video that they can connect and communicate with. I don’t think we’ve had such a marketing opportunity or tool before.’” READ MORE
Big consumer brands continue to raise prices with little blowback: “The makers of Coca-Cola beverages, Dove shampoo, Huggies diapers and Big Macs have been raising prices as their costs increase on everything from wood pulp to wages. The executives behind these global brands on Tuesday said they would keep passing along those costs to shoppers, for now. Consumers are continuing to buy even as inflation takes a toll on households, these executives said.”
“‘We continue to see resilience and a lot of demand not just in the U.S. but across the world, John Murphy, Coca-Cola’s finance chief, said in an interview. Some consumers are willing, Coca-Cola said, to spend now after missing out on restaurant dining and entertainment during the pandemic.”
“‘We are pricing ahead of the market, and we’re prepared to tolerate low-single-digit volume declines and some compromise on competitiveness for a limited period of time in order to land that price,’ said Unilever Chief Executive Alan Jope.” READ MORE
Shopify is laying off 10 percent of its workers: “Tobi Lütke, the company’s founder and chief executive, told staff in a memo sent Tuesday that the layoffs are necessary as consumers resume old shopping habits and pull back on the online orders that fueled the company’s recent growth. Shopify, which helps businesses set up e-commerce websites, has warned that it expects revenue growth to slow this year. ... Mr. Lütke said he had expected that surging e-commerce sales growth would last past the Covid-19 pandemic’s ebb. ‘It’s now clear that bet didn’t pay off,’ said Mr. Lütke in the letter, which was reviewed by the Journal. ‘Ultimately, placing this bet was my call to make and I got this wrong.’”
“Shopify’s workforce has increased from 1,900 in 2016 to roughly 10,000 in 2021, according to the company’s filings. The hiring spree was made to help keep up with booming business. E-commerce shopping surged during the pandemic, and many small-business owners created online stores to sell goods and services.”
“Shopify has been expanding its business in recent years to provide more services for merchants. It has developed point-of-sale hardware for retailers, launched a shopping app for its merchants to list products and created a network of fulfillment centers to ship orders for its business partners.” READ MORE
TriNet will offer abortion travel coverage to small businesses: “Within an hour after the Supreme Court overturned Roe v. Wade, TriNet, an HR and payroll services company working with small and midsize businesses, found itself bombarded with calls from worried employees and employers wondering how they would be affected. So TriNet created a benefits product that will allow its customers to offer tax-free reimbursement for out-of-state medical travel, including for abortion. The product will be available to some 610,000 employees of TriNet clients and their dependents. Employees will be able to access it regardless of whether they are enrolled in their employer’s health plan.”
“The anonymity element is critical as companies helping employees seek abortion care out-of-state could be at risk of criminal liability in Texas, Missouri and several other states seeking to target those who ‘aid and abet’ abortion.”
“‘Part of getting the best talent is about being a leading employer in terms of the benefits we offer, but it’s increasingly becoming about being an employer that is willing to take a stand on key issues that people care about,’ said [Derek Steer, co-founder and chief strategy officer at Mode, a data analysis software company].”
“‘This is one such instance where we can do right by our team and in doing so, be an attractive place for those folks to work, especially when their alternatives are some of these big companies with a lot of resources.’” READ MORE
Continuum is helping companies institute layoffs: “There’s at least one startup that is thriving in the market turmoil. And it’s sort of the perfect metaphor for the current state of tech. The company is called Continuum, and it’s cashing in at layoffpalooza. ‘We were not thinking about creating a layoff product when we were founding the company,’ says Nolan Church, Continuum’s CEO. But now, if you’re a startup that wants to lay off workers, this new startup can help you with that.”
“Church describes Continuum as a ‘labor marketplace for fractional executives.’ What are ‘fractional executives,’ you ask? That’s techspeak for part-time consultants. The company, which Church co-founded in August 2020, aims to connect startups with seasoned executives who work a few hours here and there providing advice.”
“His pitch: why spend millions recruiting and employing executives full time when you can spend only thousands employing them part time? Continuum is basically TaskRabbit, but for high-paid executives.” READ MORE
In search of new revenue and greener ways to deal with waste, businesses are introducing funky new products: “Todd Koch, a dairy farmer in Canby, Ore., started making Cowcohol—vodka made by distilling lactose from whey, a byproduct of milk production. He learned about the process from scientists at Oregon State University. ‘It was a no-brainer for us,’ he said. ‘It makes whey more environmentally friendly, and we get a new retail product from our raw product.’ When his distillery gets up and running this summer, he expects his farm, TMK Creamery, to produce 500 bottles a week. He hopes to sell them for $39.95 apiece. The extra revenue, he said, would help in an environment of higher ‘fuel costs, feed costs, supply costs, all of it.’”
“Ocean City’s Sunrise Diner ends up with about 3 pounds of grease a day from cooking 15 pounds of bacon. “I thought, why don’t I start doing this and maybe help me with my margins a little bit?” said Mr. Delauter.
“He filters, boils and skims the bacon grease into an odorless lard, then combines it with lye, lavender oil, and wildflowers to make bars of soap.”
“This spring, he began putting the soap in a display box by the cash register with a sign explaining the story. A QR code on the tables directs diners to a video on how the bars are made. He plans to sell bars at farmers markets during the winter when the diner is closed.”
“‘People are like, Eww, we don’t want that,’ he said. ‘Others say, ‘Oh, that’s really cool.’” READ MORE
Major League Baseball is still trying to break its dependency on one mud supplier: “Tubs of the substance are found at every major league ballpark. It is rubbed into every one of the 144 to 180 balls used in every one of the 2,430 major league games played in a season, as well as those played in the postseason. The mudding of a ‘pearl’ — a pristine ball right out of the box — has been baseball custom for most of the last century, ever since a journeyman named Lena Blackburne presented the mud as an alternative to tobacco spit and infield dirt, which tended to turn the ball into an overripe plum.”
“Consider what this means: That Major League Baseball — a multi-billion-dollar enterprise applying science and analytics to nearly every aspect of the game — ultimately depends on some geographically specific muck collected by a retiree with a gray ponytail, blurry arm tattoos and a flat-edged shovel.”
“But M.L.B. executives do not exactly get all misty-eyed over the whimsical tradition of what is called Lena Blackburne Baseball Rubbing Mud, which they say is too often inconsistently applied. In their quest to make balls more consistent — and the game more equitable — they have tried to come up with a substitute, even assigning chemists and engineers to develop a ball with the desired feel.”
“The score so far: Lena Blackburne: 1. Major League Baseball: 0.” 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, including 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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