The Great Resignation Isn’t Over Yet
Despite fewer job openings and growing concern about the economy, nearly 4 percent of retail workers quit their jobs in June.
Here are today’s highlights:
A lot of corporate employees could soon be looking for jobs.
As the “bullwhip effect” swamps warehouses, retailers face difficult choices.
VC firms invested billions in scooter businesses. What went wrong?
Startups are promoting ways to buy a house without a mortgage.
Even with job openings falling, people are still quitting their jobs: “The number of open jobs fell sharply in June, signaling a slowdown in the booming U.S. labor market. That hasn’t stopped the Great Resignation, though. While the number of U.S. job openings fell by 5.3 percent to 10.7 million from May to June, the biggest drop since the covid recession, workers are still quitting, according to data from the U.S. Bureau of Labor Statistics released Tuesday. The quits rate, or share of employed Americans leaving their jobs voluntarily, was 2.8 percent in June.”
“Meanwhile, layoffs are at historic lows as employers try to hold onto the employers they fought to attract when the U.S. economy emerged from the pandemic.”
“Nearly 4 percent of retail workers quit in June. ‘While employers may have pulled back on their intention to hire, they continue to refrain from laying off workers at higher rates,’ Bunker said.”
“The current job situation is a reversal of what happened after the Great Recession. Back then, the labor market remained weak even as the economy recovered. Now, the job market is staying strong, despite clear signs of a downturn.” READ MORE
As the economy worsens, corporate CEOs are returning to their old ways—which could present an opportunity for owner-operated businesses: “Corporate chiefs who spent much of the pandemic patiently answering questions in town halls, sending reassuring notes to staff members and projecting a softer image are shifting their tone as signs emerge that the economy is worsening. The CEO of Google’s parent company told staff last month to work with ‘greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days.’ Meta Platforms’. CEO Mark Zuckerberg said in late July that the Facebook owner must operate with greater intensity ‘and I expect us to get more done with fewer resources’; an engineering leader at the company also recently told managers to identify and push out low performers.”
“Beyond tech, CEOs are warning of tougher times, while others are telling employees to reconsider spending on trips, business meals, or even corporate swag such as T-shirts and coffee mugs.”
“Many CEOs disliked remote work from the beginning and are tired of hiding it, advisers and executives say. Privately, some CEOs have said the prospect of an economic downturn will give them greater license to order their employees back into offices.”
“Bosses can also take a harder line only so far, executives and coaches say, in an environment in which unemployment remains low and the most talented employees still have plenty of options.”
“‘Some organizations are kind of trying to take advantage of the macro fear environment and kind of scare people back into the office,’ said Rich Barton, CEO of Zillow Group, which has embraced flexible work for its employees. ‘I’m not a big fan of that.’” READ MORE
Gas prices have fallen for 49 straight days: “The average cost of a gallon of regular unleaded gasoline sank to $4.19 Tuesday, the 49th straight day that prices have declined, according to OPIS, an energy-data and analytics provider. That is a 17 percent decline from the previous high of $5.02 a gallon set back on June 14, according to OPIS. Global demand for oil has fallen in recent weeks as economic growth has slowed around the world, including in China, analysts said. Demand data and consumer surveys also suggest Americans are driving less.”
“Patrick De Haan, head of petroleum analysis at GasBuddy, said he thinks the U.S. hit peak gas prices in June. The average price of gas could fall under $4 a gallon over the next week or two if there are no major disruptions to supplies, Mr. De Haan said.” READ MORE
Warehouses are about to get swamped with more goods than they can handle: “America's largest warehouse market is full as major U.S. retailers warn of slowing sales of the clothing, electronics, furniture and other goods that have packed the distribution centers east of Los Angeles. The merchandise keeps flooding in from across the Pacific, and for one of the busiest U.S. warehouse complexes, things are about to get worse. Experts have warned the U.S. supply chain would get hit by the ‘bullwhip effect’ if companies panic-ordered goods to keep shelves full and got caught out by a downturn in demand while shipments were still arriving from Asia.”
“In the largest U.S. warehouse and distribution market—stretching east from Los Angeles to the area known as the ‘Inland Empire’—that moment appears to have arrived.”
“‘We're feeling the sting of the bullwhip,’ said Alan Amling, a supply-chain professor at the University of Tennessee.”
“Retailers left holding unwanted goods are faced with the choice of paying more money to store them or denting profits by selling them at discount.” READ MORE
Scooter companies don’t have a lot to show for their billions in venture funding. What happened? “Scooters networks simply did what virtually all California unicorns of the era did: They grew rapidly while losing gobs of money. And of course, the problem with being popular while losing money is that the more popular you become, the more money you lose. Venture backers who bankrolled these losses, however, failed to see a market shift in which public investors would no longer want to support high valuations for high-growth, high-loss companies. That leaves scooter networks and scores of other once heavily subsidized business models eschewing growth-first to focus on stemming losses and pushing toward profitability.”
“In total, well over $5 billion in venture funding went into assorted startups engaged in the renting, charging and making of scooters in roughly the past five years.”
“Today, a scooter rental ride hardly seems like a bargain. At typical rates, which include an upfront and per-minute fee, a 20-minute ride would cost about $6. That’s more than a quick bus or subway ride in places that offer those options.”
“Still, last-mile transportation remains a tricky niche to fill in urban networks, and scooters do have a place in the mix. We’re not done with them yet.” READ MORE
With a $1.5 million venture capital investment, Bandit, a Philadelphia maker of vegan cheese, shifts from organic growth to fast growth: “Company founder and CEO Bo Babaki said he hopes to expand production of his cashew-based cheeses, formerly sold under the Conscious Cultures Creamery brand, from 1,000 pounds a week now to 5,000 pounds a week within a year while expanding distribution to more stores in Northern California, Texas, and Illinois in the coming months. ‘We’re trying to grow as quickly as possible and do it the right way,’ Babaki said in an interview last week. ‘I’ve experienced a lot of organic growth since the beginning of this, so now it’s going to be cool to see what’s going to happen [ when we] have money to brand things and to do some marketing, pay for some ads.’”
“A new machine, from Sweden, will be used to break down cashews before they are soaked and fermented to make the cheese. ‘In one day with the new machinery ... we’ll actually be able to do what we were doing in a week.’ Babaki said.”
“Bandit received the $1.5 million investment from Prime Movers Lab, which is based in Jackson Hole, Wyo., and describes itself as investing “in start-ups reinventing energy, transportation, infrastructure, manufacturing, human augmentation, and agriculture.”
“We have been looking for a dairy-alternative investment, and at the end of the day, Bandit just tasted better than anything else we tried,” Prime Movers Lab partner and Bandit board member Gaetano Crupi said in a news release.” READ MORE
Paul English, co-founder of Kayak, has sold another business, podcast discovery app Moonbeam: “English declined to say how much money Audacy (formerly Entercom) paid for the Moonbeam app, although he said it will be enough to fund Boston Venture Studio’s operations for two years. The Moonbeam technology, English said, will probably be the centerpiece of Audacy’s podcast tech (though the Moonbeam name will probably go away). To English, the sale of Moonbeam, roughly one year after its launch, marks the sixth such deal that he has completed of a startup that he’s led, or helped lead. He made most of his millions selling Kayak to what was then Priceline.com, in 2013 for nearly $2 billion.”
“English helped lead Boston Light (sold to Intuit), InterMute (bought by Trend Micro), and GetHuman (sold to two of its executives).”
“He co-founded Lola.com, a travel-tech company, in 2015 and eventually sold that technology to Capital One last year, before embarking on his venture studio project.” READ MORE
A shared-equity startup in Houston is offering a way to buy a house without a mortgage: “Mirabilis allows clients to start out purchasing as little as 1 percent of a home’s value, Zambrano explained. Then, every month, Mirabilis charges a fee, which is set every year at no more than market rent. The monthly ‘rent’ cannot increase by more than 4 percent a year, which Zambrano called ‘very important’: ‘We don’t want people getting priced out of their own homes.’ Because Mirabilis is a partner with the family, the monthly cash flow is split between the two according to the amount they own. Say, [a client starts] out purchasing 5 percent of the home.”
“If the monthly fee charged is $1,300 and the monthly costs, including taxes and homeowner association fees, are $300, [the client] would own 5 percent of the resulting $1,000 in cash flow: $50. That money goes toward increasing the share of the home she owns.”
“[The client] could also buy additional equity from Mirabilis at any point of her choosing (the value of the home, used to determine the cost of buying equity, is also set once a year, and cannot increase by more than 8.5 percent a year.)”
“Whenever a family decides to sell their home, the profits are split according to the percentage shares Mirabilis and the family each own. So if the joint company owning the home makes $500,000, (after selling costs) and the family owns 20 percent, they would pocket $100,000.” READ MORE
BUSINESS FOR SALE
Anyone want to buy Forbes? “The chronicler of the wealthy and powerful, announced on Tuesday that it was exploring a sale of its business after a previous deal to go public fell through. In recent weeks, an offering document describing Forbes’s financials compiled by Citigroup has been circulated to media companies, including Yahoo, said three people with knowledge of the decision, who would speak only anonymously because the outreach was private. According to the document, Forbes generated more than $200 million in revenue and more than $40 million in profit in 2021, two of the people said.”
“The people said Forbes was exploring selling for at least $630 million. That is the valuation that the company declared when it moved to go public through a special-purpose acquisition company, or SPAC.”
“Forbes scrapped that plan this year, and it is unclear whether it can get that price now. Integrated Whale Media Investments owns a majority of the company.” READ MORE
THE 21 HATS PODCAST
This week, Jay Goltz tells Shawn Busse and Karen Clark Cole about a dream he had recently. It was a dream, of all things, about this very podcast, and on it, someone—it was a guy—was talking about how his business was faring: “I think I’m screwed,” he says in Jay’s dream. But who was it? And why was he screwed? Jay woke up before those answers were revealed. So we did some interpreting on this week’s real podcast. Spoiler alert: It wasn’t that hard to interpret! Plus: Shawn explains why he thinks his website is no longer performing. Karen explains why she thinks it’s actually easier to onboard an employee who will work remotely. And Jay and Karen discuss whether it’s time to give up on things going back to the way they were.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
If you see a story that business owners should know about, hit reply and send me the link. If you got something out of this email, you can click the heart symbol, you can click the comment icon below, and you can share it with a friend. Thanks for reading, everyone. — Loren