The Next Big Thing in Retail

Today’s Highlights: States expect a surge in vaccine supply. Companies have been reluctant to fire underperformers. And will business travel recover?

RETAIL

Shopify’s president says we’re in a retail revolution and the next big thing is augmented reality: “Consumers still want to be surprised and impressed when shopping online, [Harley] Finkelstein said, and augmented reality is the best technology for doing that. He used Chip and Joanna Gaines's Magnolia brand as an example. Even if you're unable to visit the company's store in Waco, Texas, you can go on its app to peruse products and use your phone to virtually place those products around your home to test them out. Not only does using AR in this way reduce cart abandonment and increase conversion rates, Finkelstein said, it also gives consumers the peace of mind that's typically reserved for in-person shopping.”

• “‘At Shopify, we've been working on AR and VR for six or seven years. We're trying to create a product that is future-proofed,’ he said. ‘AR, in particular, will play a much larger role in the future of online shopping, but it has not been widely adopted yet. It's something that I think we'll see in the next year or two.’” READ MORE

REOPENING

States are preparing for a surge in vaccine supply: “State and local health officials who have spent months rationing shots are now racing to be ready for a surge in supply — enough for every adult by the end of May, as President Biden promised last week. They’ve been advised to plan for between 22 and 24 million doses a week by early April, an increase of as much as 50 percent from current allocations, according to two people familiar with the estimates who spoke on the condition of anonymity because they were not authorized to discuss them.”

• “In New York City, where multiple sites are already operating 24 hours a day, officials on Tuesday said they were seeking 2,000 additional staff to administer vaccine doses and provide other support, with recruitment kicking off in some of the hardest-hit communities, including Staten Island and the Bronx.”

• “From big cities to small towns, pharmacies have been on hiring sprees. CVS alone set a target late last year of hiring 15,000 employees ...” READ MORE

Companies that thrived during the pandemic may struggle as the economy improves: “Tech companies in particular prospered over the past year as people and companies diverted spending to online tools and pursuits. Gene Munster, managing partner at investment and research firm Loup Ventures, said that the biggest players will remain in strong shape, but that for some smaller businesses that had breakout years, ‘there’s going to be some readjusting for these companies when things go back to normal.’ Online marketplace Etsy doubled its revenue in 2020, as shoppers purchased everything from face masks to home décor. But executives have said those purchases could wane.”

• “‘We also know, we hope, that as the world opens up later this year, consumers will soon be able to spend more of their money on travel, dining and entertainment, and this will create some headwinds to Etsy’s growth relative to 2020,’ financial chief Rachel Glasser said on a recent earnings call.”

• “The company still thinks that it can outgrow the broader e-commerce sector.” READ MORE

THE MORNING REPORT PODCAST

Would you prefer an audio version of the Morning Report? Subscribe by searching for The Morning Report Podcast wherever you get podcasts. Or:

CLOSING A BUSINESS

It can take longer and cost more to close a business than to open one: “Whenever a restaurant closes, real estate is the first concern, because it’s the most expensive and can lead to the most significant losses. Without due notice to the landlord, an owner risks being sued for the remaining value of their contract, unless they can strike a deal. David Helbraun, a founding partner of Helbraun Levey, said his firm has worked on hundreds of lease-exit negotiations in the past year — a huge increase from the handful of cases they handled pre-pandemic. ‘It always costs the restaurant owner more than they want to pay, but it’s always less than they actually owe,’ Helbraun says. ‘That’s where the negotiation comes in.’”

• “But rent isn’t the only factor in real estate. As Helbraun explains, ‘the very minimum you’re going to lose is your security deposit. And then you’re taking the loss of all the money you invested into the restaurant. People put hundreds of thousands to a million dollars into building out a space.’”

• “For the thousands of small-business owners who are in similar circumstances, it will take years to recover from the injuries — both financial and personal. Owners could still face the stigma of failure, even when so much was beyond their control, and, on top of that, reconciling the loss now, as industry watchers begin to forecast recovery and growth, can feel like a cruel joke.” READ MORE

BUSINESS TRAVEL

How many business trips will survive the pandemic? “We are a year into a pandemic that has kept much of the world grounded. Yet in many sectors that once relied on in-person sessions, big deals are still getting done, sales are still being closed and networkers can’t quit networking. Face-to-face interactions were said to justify the $1.4 trillion spent globally on business travel in 2019. In 2020, business travel was slashed in half, our faces were stuck in screens, and yet many of the companies used to spending boatloads on travel are doing just fine.”

• “‘I grew up in a sales culture that said, You want to close a deal, you go get in front of the client,’ said Darren Marble, an entrepreneur based in Los Angeles who used to travel to New York every other week. When the pandemic hit, he didn’t know how he’d do business.”

• “But in the Zoom era, everything worked out. In fact, Marble told me, 2020 was a ‘breakout year’; his firm, Crush Capital, recently raised more than $3 million from over 30 investors, all through Zoom. ‘Rapport is overrated,’ Marble said.” READ MORE

GOVERNMENT SUPPORT

The PPP window needs to stay open: “The Biden administration’s recent program revisions were aimed at boosting uptake of the funds, especially by the smallest businesses and those owned by women, minorities and rural residents. The tweaks included a 14-day window during which the SBA approved loans only for firms with fewer than 20 employees. The SBA also revamped the loan calculation formula for sole proprietors, independent contractors and self-employed business owners, potentially allowing them to receive larger loans. But lenders weren’t able to submit borrower applications to the SBA using the revised method until March 5, leaving less than a month for applicants to take advantage.”

• “Chris Hurn, chief executive at Fountainhead Commercial Capital, said Congress should extend the program “to really make sure it’s going to have the impact you want it to. You can’t bake an amazing cake, if you don’t give it enough time to cook.”

• “Rep. Nydia Velázquez (D., N.Y.), chairwoman of the House Small Business Committee, said she is ‘working diligently with leaders in the Senate and administration to come to an agreement on extending PPP in a way that meets the needs of small-business owners.’” READ MORE

HUMAN RESOURCES

Companies have been reluctant to fire for performance during the pandemic: “Companies had underperforming workers when virus-related lockdowns began, and they still do now. Yet as their workers contend with a year of pandemic stresses—from school closures to child-care crises to burnout from long homebound workdays—many businesses are reluctant to fire or even raise issues of underperformance for now, executives and corporate advisers say.”

• “Rebecca Weaver, a former HR chief and founder of the coaching practice HRuprise, said firing an employee during a health crisis weighs more heavily on a manager than during the normal course of business.”

• “Brian Kropp, chief of human-resources research at Gartner, a research firm, said some workers who might have been considered underperformers were cut in large-scale layoffs during the first and second quarters of 2020, as the pandemic set in.” READ MORE

Seventy percent of employees believe vaccinations should be required: “Glassdoor found that age and gender play a role in people's opinions on the vaccine. According to survey results, those aged 18-34 are less likely (58 percent) than those aged 35-44 (84 percent) to agree that employees should be required to get a Covid-19 vaccine to return to the office. Men (74 percent) are more likely than women (64 percent) to agree that employees should be required to get a Covid-19 vaccine to return to the office. Overall most surveyed plan to get vaccinated against Covid-19. Over 3 in 4 (76 percent) intend to get inoculated when a shot becomes available to them.” READ MORE

LOCATION, LOCATION, LOCATION

Not everyone who left Manhattan for Miami is glad they did: “‘The main problem with moving to Florida is that you have to live in Florida,’ said Jason Mudrick, who oversees $3 billion at Mudrick Capital Management and has resided in Manhattan for more than two decades. ‘New York has the smartest, most driven people, the best culture, the best restaurants and the best theaters,’ he said. ‘Anyone moving to Florida to save a little money loses out on all of that.’” READ MORE

THE 21 HATS PODCAST

Episode 52: I Need a Vacation: It was this week a year ago that the W.H.O. declared a pandemic, the NBA suspended its season, and toilet paper started to disappear. It has all taken a toll. “This is where it gets tricky,” Jay Goltz tells us. “Just because everybody shows up every day and looks like they're happy-go-lucky, they're not. People have stresses in their life, whether it's their kids, whether it's their aging parents, whether it's their financial situation, whether it's their physical well-being—any of the above. This is just layered on top of whatever was going on in their life before.” Plus: Karen Clark Cole’s company goes to Mars, Dana White gets a smart question about expansion from a retailer in Canada, and Jay discovers that ESOP companies don’t have to pay federal income tax.

• You can subscribe to The 21 Hats Podcast wherever you get podcasts.