The Business Lunch Is Over
The Business Lunch Is Over
Blame remote work and Zoom deals. “It's nothing like it was before Covid,’ says Ashok Bajaj, a restaurateur in Washington, D.C. ‘The energy has been sucked out of downtown.’”
Good morning!
Here are today’s highlights:
Advertisers continue to abandon Facebook—although some believe that may be creating an opportunity.
Inflation hit a four-decade high in June but may have peaked.
The biggest challenge with remote work is onboarding new employees.
Would you pay a monthly fee to heat your car seats? BMW thinks so.
FOOD & BEVERAGE
Are business lunches a thing of the past? “Few people understand the power lunch better than Ashok Bajaj. The restaurateur began his career here in the waning days of Ronald Reagan’s presidency, when he opened the Bombay Club a short walk from the White House. Eight of the 10 restaurants he operates today are, like his first, located downtown. They’re conveniently clustered near one another, making it easier for Mr. Bajaj to preside over multiple dining rooms, and near customers who work on Capitol Hill, at the State Department and in the Eisenhower Executive Office Building — crucial sources of what Mr. Bajaj calls his ‘lunch crowd.’ Prominent members of that crowd gravitated to the Oval Room, the power-lunch magnet he ran for 26 years — and closed in November 2020.”
“Lunch reservations in the first four months of this year at restaurants with an average check of more than $50 were sharply lower than during the same period in 2019, according to data from the online reservation service OpenTable.”
“They fell in Washington (by 38 percent), New York City (38 percent), San Diego (42 percent), Philadelphia (54 percent) and Chicago (58 percent).”
“It afflicts a specific, influential cohort of restaurateurs who, like Mr. Bajaj, own prestigious restaurants in the hearts of large cities that office workers have fled, along with their corporate expense accounts.”
“Longtime regulars have resumed eating lunch at [Mr. Bajaj’s] places that are open for it, like Rasika and the Bombay Club. But ‘it’s nothing like it was before Covid,’ he said. ‘The energy has been sucked out of downtown.’” READ MORE
MARKETING
Advertisers continue to abandon Facebook: “Already, analysts expect the social giant to record zero growth in the second quarter, in a first for the company. Mark Zuckerberg himself called the situation ‘one of the worst downturns that we've seen in recent history,’ according to Reuters. The rest of the digital ad sector, made up of Google, Twitter, Snap and others, is also facing a slowdown in growth. What's different is that Meta is in a perfect storm. As a result, more advertisers are not just increasingly willing to diversify away from Meta, but doing so for the first time. It's a big shift for a company that historically could always count on their dollars, scandal after scandal, as long as their ads performed.”
“Facebook has been harder hit than other apps by Apple's privacy update last year that dented advertisers' ability to target and measure the effectiveness of their ads.”
“Google, with its core search business, has been more immune to Apple's privacy update. Google has said it also intends to introduce a similar privacy update for Android apps in the coming years.”
“[Facebook is] still the second-biggest ad business after Google, and the vast majority of its advertisers are small- to medium-sized companies that rely on it for promotion — even if the performance of their ads is more difficult to measure post-Apple's privacy changes.”
“Indeed, some ecommerce companies are pouncing on dips in Meta's ad prices and accelerating their ad spending when they see the opportunity, said Luke Jonas, chief commercial officer at ad agency Nest Commerce.” READ MORE
Here’s how a cosmetics company, Lush, found alternative channels: “Last year, when a Facebook whistleblower's Senate testimony revealed concerns about social-media apps' influence on mental health, Lush — which generated $943 million in revenue from July 2020 to June 2021 — announced it would no longer be active on Instagram, Facebook, Snapchat, and TikTok. ‘If we found out that an ingredient was harmful for you, we wouldn't put that in our products,’ Lush's head of global public relations, Karen Huxley, told Insider. ‘To know that those particular platforms were potentially dangerous to young people, it's not something we could ignore.’”
“Though Lush estimated it would lose $13 million from the decision, its six co-founders said they were willing to take the hit if it meant staying true to their values.”
“The company reinvented its marketing strategy with a greater focus on wellness — encouraging customers to log off and take a bath.”
“Lush is still active on YouTube, Twitter, LinkedIn, and Pinterest and works with influencers to promote its products.”
“Lush created an app in 2015 but is putting more emphasis on it now that it's doing less on social media. ‘Wherever possible, we are in full control of everything that we do,’ Bird said. ‘We didn't want to be beholden to another business to communicate with our customers.’” READ MORE
THE ECONOMY
Inflation may have peaked in June with a four-decade high: “U.S. inflation reached 9.1 percent in June, its highest rate in nearly 41 years, the Labor Department said Wednesday. Investor expectations of slowing economic growth world-wide have led to a decline in commodity prices in recent weeks, including for oil, copper, wheat and corn, after those prices rose sharply following the Russian invasion of Ukraine. Retailers have warned of the need to discount goods, especially apparel and home goods, that are out of sync with customer preferences as spending shifts to services and away from goods, and consumers spend down elevated savings. Economists expect those developments to subdue price pressures in the coming months.”
“‘There’s a pretty serious recession fear affecting a broad range of asset prices,’ said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives.” READ MORE
Mark Zandi expects consumer prices to moderate:
A dollar is worth as much as a Euro for the first time in 20 years: “The war in Ukraine, restricted energy supplies from Russia, high inflation and the rising risk of recession in the eurozone have dragged the euro down to within a whisker of parity, or a one-to-one exchange rate with the dollar. This week, fears that a crucial natural gas pipeline from Russia to Germany, which went offline on Monday for 10 days of scheduled maintenance, but could remain shut down for longer, have hit the euro hard.” READ MORE
The yield curve inversion is deepening: “The 10-year Treasury yield on Tuesday was 2.91 percent compared to the 2-year yield of 3.03, a spread of 12 basis points. The inverted yield curve — when short-term rates exceed longer-term rates — has long been a reliable recession warning, and reflects investors' waning confidence in the economy thanks to heightened expectations of risk.”
“An inverted yield curve preceded the 1990, 2001, and 2008 recessions, according to DataTrek.”
“However, an inversion only predicts a downturn if it lasts for several months, as brief flashes in the 2-year Treasury yield typically don't determine much.” READ MORE
HUMAN RESOURCES
The biggest problem with remote work is onboarding new employees: “Many inexperienced employees joining a virtual company realize that they haven’t joined much of a company at all. They’ve logged into a virtual room that calls itself a company but is basically a group chat. It’s hard to promote a wholesome company culture in normal times, and harder still to do so one misunderstood group Slack message and problematic fire emoji at a time. ‘Small talk, passing conversations, even just observing your manager’s pathways through the office may seem trivial, but in the aggregate they’re far more valuable than any form of company handbook,’ write Anne Helen Petersen and Charlie Warzel, the authors of the book Out of Office.”
“Many of the perks of flexible work—like owning your own schedule and getting away from office gossip—can ‘work against younger employees’ in companies that don't have intentional structured mentorship programs, they argued.”
“The work-from-anywhere revolution has something of a kick-starter problem: It’s harder for new workers, new groups, and new ideas to get revved up.”
“The remote-work debate has become deeply polarized between people who consider it a moral necessity that is beyond criticism and those who consider it a culture-killer that is beyond fixing.”
“Like the office, remote work will never go away, and like the office, it has important problems that deserve our attention. Solving remote work’s problems is a job worth doing.” READ MORE
AUTOMOTIVE
Bloomberg says the U.S. has crossed the tipping point for mass EV adoption: “The U.S. is the latest country to pass what’s become a critical EV tipping point: 5 percent of new car sales powered only by electricity. This threshold signals the start of mass EV adoption, the period when technological preferences rapidly flip, according to the analysis. For the past six months, the U.S. joined Europe and China — collectively the three largest car markets — in moving beyond the 5 percent tipping point. If the U.S. follows the trend established by 18 countries that came before it, a quarter of new car sales could be electric by the end of 2025. That would be a year or two ahead of most major forecasts.”
“Continued growth also depends on the ability of automakers and their suppliers to increase production fast enough. Volkswagen, Ford, and BMW are each targeting 50 percent or more of their global sales to be fully electric by the end of the decade.”
“It turns out, automakers have tipping points, too. Factories must be retooled and supply chains reconfigured. To achieve the most cost savings, the entire vehicle must be redesigned with electrification in mind. In Europe, once 10 percent of an automaker’s quarterly sales go electric, the share triples in less than two years.” READ MORE
PRICING
BMW has started selling heated seats on a subscription basis: “A monthly subscription to heat your BMW’s front seats costs roughly $18, with options to subscribe for a year ($180), three years ($300), or pay for ‘unlimited’ access for $415. It’s not clear exactly when BMW started offering this feature as a subscription, or in which countries, but a number of outlets this week reported spotted its launch in South Korea. BMW has slowly been putting features behind subscriptions since 2020, and heated seats subs are now available in BMW’s digital stores in countries including the U.K., Germany, New Zealand, and South Africa. It doesn’t, however, seem to be an option in the U.S. — yet.”
“Other features that BMW is locking behind subscriptions (as per the company’s digital U.K. store) include heated steering wheels, from $12 a month; the option to record footage from your car’s cameras, priced at $235 for ‘unlimited’ use; and the ‘IconicSounds Sport package,’ which lets you play engine sounds in your car for a one-time fee of $117.” READ MORE
THE 21 HATS PODCAST
How Would You Spend $10,000 a Month on Marketing? Shawn Busse, Hans Schrei, and Sarah Segal explain what they would do with an extra $10,000 a month to spend on marketing. As we all know, there’s a lot going on right now. No one’s entirely certain where the economy is headed, and no one’s entirely certain where digital marketing is headed. So it seemed like a good time to ask our regulars where they would place their bets if we offered them each an imaginary pot of money to promote their brands. Spoiler alert: Their responses gave us a good sense of what these business owners think is working right now—and it’s definitely not billboards.
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