Discover more from The 21 Hats Morning Report
TikTok Is No Longer Just for Kids
Which is why businesses are suddenly hiring senior influencers to reach older customers.
Here are today’s highlights:
Ami Kassar has advice for business owners struggling to take the next step.
People really don’t like those iPad tip screens (because they work).
With mental illness skyrocketing, there aren’t enough therapists to provide the care employees need.
Immigrants and women are returning to the workforce.
Trying to reach older customers? You just might find them on TikTok: “TikTok is gaining traction with older users, so brands are following them there, said Mae Karwowski, founder of Obviously, an influencer marketing agency that connects companies with content creators. Her agency works with Amazon and others to find TikTok influencers over 55. These creators have been finding success by sharing life lessons and fashion tips, cooking, interacting with grandchildren or just being funny — while also promoting products. ‘Older influencers have popped in popularity recently,’ Ms. Karwowski said. Over the past year to 18 months, she added, ‘it’s really been accelerating.’”
“Brands often look for creators with as few as 5,000 followers because those so-called nano-influencers are more likely to engage with people in their comment sections, giving the account an authentic feel, Mr. Creusy said.”
“Those accounts can also be an inexpensive marketing vehicle as creators sometimes feature a product just because they received a free sample. About half of partnerships formed on Upfluence offer free products as compensation, but no pay.” READ MORE
THE 21 HATS PODCAST: DASHBOARD
Getting Past the Fear: This week, Ami Kassar says that in running MultiFunding, which helps businesses figure out their finance needs, he frequently meets business owners who know what they need to do but are reluctant to take that next step. One way to build your confidence, Ami says, is to make sure you really understand what drives your business model, which may require bringing in a fresh set of eyes, perhaps from a fractional CFO. Ami also talks about the current state of lending, his concerns about where the SBA is headed, and why business owner peer groups are so valuable.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Those iPad tip screens no one likes are working: “Business owners—helped by more versatile software—are resetting our social norms and habits around tipping. Tip screens, popping up at a wider range of businesses from cafes to fast-food chains, have turned gratuities into a multiple-choice test. In addition to letting business owners choose which tip suggestions to present to customers, point-of-sale devices offer businesses many options. Owners can show tips in dollar amounts versus percentages, choose whether suggested tip amounts are calculated before or after tax, or decide whether the tips are based off the full or discounted value of a transaction.”
“By tinkering with the default options and settings in point-of-sale screens, businesses can nudge their customers to give bigger tips, software designers and behavioral economists say.”
“The range of options has also short-circuited the normal decision-making process. Not leaving a tip used to be a passive decision. Now prompts on screens have turned it into an active choice.”
“So far, it seems to be a successful strategy for business owners. A 2017 Cornell University study found that larger suggested tip sizes increased how much customers tipped while having little impact on customer satisfaction, spending or retention.”
“Setting suggestions meaningfully above the social norm, or higher than 25 percent, caused fewer people to tip, but increased overall tip revenue since customers who decided to tip gave more.” READ MORE
There aren’t enough therapists to provide the care that employees need: “Mental illness is skyrocketing. Last year alone, 76 percent of U.S. workers reported at least one symptom of mental illness. The situation looks nothing like it did even three years ago. Every employee engagement survey you see reports mental health as the number one issue in organizations. And yet, utilization of mental health benefits is extremely low, with the average utilization rate by employees hovering around 2 percent. This is impacting the bottom line: absenteeism, productivity, turnover rates, and even customer net promoter score. Today, mental illness drives 200 million lost workdays each year at a cost of $17 to $44 billion to employers annually, according to the Centers for Disease Control and Prevention.”
“Relative to previous generations, Gen Zers are about twice as likely to battle depression. In fact, 42 percent of the Gen Z population already live with a diagnosed mental health condition. What’s more, 81 percent of Gen Z adults and 68 percent of Millennials report leaving their jobs for mental health-related reasons.”
“From truck drivers and manufacturing employees, to store associates and hospitality workers, deskless workers make up 80 percent of our global workforce and face high rates of mental illness with remarkably poor access to care.”
“Across our entire country, the total number of therapists would only be enough to provide weekly therapy to 7 percent of the population.” READ MORE
The return to the workforce of immigrants and women helps explain the continuing boom in jobs: “In May, once again, the U.S. economy trounced Wall Street forecasts. The nation’s employers added 339,000 jobs, much higher than predicted. This marks 13 out of the past 14 months that the U.S. job market has beaten expectations. In fact, many economists have been warning of not just a slowdown, but an imminent recession, for about a year now. Yet nothing about this job market suggests recession. Why has the economy overperformed? Or, to put it another way, why has the economy been so consistently underestimated?”
“To be clear, immigrants remain a small share of the labor market. They account for less than one-fifth of employment overall. But they are more than punching above their weight in this recovery, particularly as (disproportionately older) native-born Americans retire. Increased immigration may be helping resolve some other economic challenges, too. It’s unclear how many forecasters have been incorporating these improvements in the functioning of the immigration system into their models.”
“Consider what has happened among women considered ‘prime working age’ (ages 25 to 54 — i.e., after traditional college-going years and before most retirements). The share of these women in the labor force, as well as the share actively employed in a job, is at an all-time high. Many women have endured grief, loss, burnout; but, as a group, rather than being economically scarred by covid, female workers seemed to have emerged stronger than ever.” READ MORE
What went wrong at Sherry-Lehmann? “New York City has spawned many iconic retailers: Tiffany & Company in jewelry; Bergdorf Goodman and Saks Fifth Avenue in fashion; F.A.O. Schwarz in toys. In fine wine, that retailer was Sherry-Lehmann Wine & Spirits. The Zagat guide once said of Sherry-Lehmann, ‘If Bacchus owned a wine store, this would be it.’ One of the world’s most prolific sellers of high-end wines, Sherry-Lehmann introduced Americans to Dom Pérignon Champagne in 1947 and the famed Bordeaux Petrus in the 1960s. Its clientele ranged from celebrities (like Greta Garbo and Mick Jagger) to billionaires (like the Bass brothers of Texas) to run-of-the-mill wine lovers (like me). Thanks to online sales, it served customers all over the country.”
“Earlier this year, Sherry-Lehmann’s liquor license expired and the store closed. It owes the state $2.8 million in unpaid sales taxes. Dozens of wholesalers have told the state liquor authority that Sherry-Lehmann is delinquent on payments. Many have stopped delivering.”
“Peter Ambrosino worked at Sherry-Lehmann for 15 years before quitting as director of operations in 2018. He said customers complained to him about not receiving wine that they had paid for. ‘I was tired of seeing good people being ripped off,’ he said. ‘A great institution has been flushed down the toilet.’”
“Sherry-Lehmann’s former co-owner Michael Aaron agreed. Mr. Aaron, whose father started the company in 1934, worked there for decades until he severed ties in 2014. At that point, Mr. Aaron said, ‘the adult was gone, and it was time to party.’” READ MORE
Anyone looking to buy a mall? “It isn’t the best time to be the largest mall owner in Pennsylvania, especially with a debt load of almost $1 billion coming due at the end of 2023. That’s why the Pennsylvania Real Estate Investment Trust has spent the last few years shedding weaker properties and adding medical, residential, and experiential entertainment in locations where retail sales have softened. ... A major bet on the Fashion District, a high-end renovation of Center City’s Gallery mall in collaboration with Macerich, soured rapidly after the pandemic struck mere months after it opened. It is currently 79 percent occupied, the second weakest performer in PREIT’s portfolio after the half-vacant Exton Square Mall — which the company is struggling to sell.”
“PREIT’s share price, meanwhile, fell dramatically from over $166 five years ago to $2.60 last December when it was delisted from the New York Stock Exchange. As of late May, the price had fallen further still to a mere 55 cents.”
“The [Moorestown] mall had long been overshadowed by PREIT’s superstar, the sprawling Cherry Hill Mall, just four miles away on Route 38. In recent years, as the mall market bifurcated, Moorestown lost three of its four anchor tenants. But PREIT was able to replace them with smaller retailers such as Michael’s and Five Below and a 165,000-square-foot Cooper University Health Care specialty-care facility. Almost 400 apartments and a hotel are on the way, too.
“‘It’s a complete transformation from something that could have gotten scrapped to a vibrant, viable, successful project,’ Coradino said. ‘Our objective is to continue operating successful properties, increase their value over time, and maximize the value in whatever direction we choose.’”READ MORE
What do you do with an abandoned college campus? “College graduation season is drawing to a close, and for some schools — like Cazenovia College in upstate New York and Holy Names University in Oakland — this year’s commencement was the last ever. Those schools have joined more than 100 private, nonprofit colleges that have permanently shut their doors since 2015, according to the Department of Education. They’re closing as the population of traditional college-age Americans declines, and will likely keep shrinking, a trend the higher ed world is calling the ‘demographic cliff.’ That means more schools are likely to close in the coming years. For small college towns, a closed school leaves a hole in the local economy, and often, a large vacant property.”
“On a recent sunny morning, Alan Weissman stood in the ballroom of a vacant mansion in Bennington, Vermont. The room has high ceilings and windows that look out over the rolling peaks of the southern Green Mountains. Weissman has a vision for this space.”
“‘This is going to be the dining room,’ he explained. ‘So there’s an area that used to be the kitchen. We’re going to reconstitute it as a kitchen because this was actually used as a college’—specifically, Southern Vermont College, a small, liberal arts school that called this former estate on a hill home for about 40 years until it closed in 2019. Now, Weissman and his firm want to turn the entire campus into a luxury resort.”
“‘There’s a sense in the real estate community that there is a huge market opportunity,’ said Brad Noyes, a vice president at Brailsford and Dunlavey, a consultant group that works with higher ed institutions that downsize. Noyes said in reality, former campuses are — at best — complex real estate opportunities.” READ MORE
The tech downturn is rippling through smaller businesses on the West Coast: “Janitors and teachers, and restaurants and dry cleaners in California, Oregon, and Washington are feeling the cooling effects of tens of thousands of tech layoffs and other cost-cutting measures since the middle of last year. The results include higher unemployment, falling wages, pinched state budgets and slower job growth. California had the nation’s second-highest state unemployment rate in April at 4.5 percent, Washington tied for third at 4.3 percent, and Oregon was close behind at 4 percent, according to the Labor Department. While low by historical standards, the readings were higher than the national rate of 3.4 percent in April. The U.S. rate rose to 3.7 percent in May.”
“Teresa Rodriguez, who owns a shoe-repair shop in downtown San Francisco, commutes more than an hour from Castro Valley. Her family struggles with the cost of public transportation and housing, and keeps her slumping business open only because the landlord reduced the rent.”
“In more flush times, dozens of customers would arrive early to drop off their heels and boots, seeking same-day service. Now, she says, she’s lucky to get six or seven, and there is no rush.”
“‘I can see that it’s not the same,’ Rodriguez said before pausing to ring up a client for a pair of boots she had dropped off two weeks before.” READ MORE
Allstate will no longer write new home and business policies in all states: “Allstate’s decision in California follows a pattern seen across the United States in which insurance companies are raising rates, restricting coverage or ending business altogether in areas vulnerable to climate change and natural disasters. In Florida, most large insurance companies have pulled out of the state, with homeowners relying on smaller private companies, whose resources are being stretched, to protect their homes in the face of severe storms that have become typical.”
“Allstate cited other factors in pausing new policies in California, including state regulations and inflation, which has led to higher costs for rebuilding.”
“The combined moves by Allstate and State Farm in California may lead more property owners in the state to lean on the FAIR Plan, a state-offered ‘insurer of last resort’ in high-risk fire areas.” READ MORE
THE 21 HATS PODCAST
Best Of: What It Takes to Build a Business: So, I decided to give the 21 Hats Podcast crew this past week off. Between the Memorial Day holiday and our first 21 Hats in-person event in Chicago—attended by five of the podcast regulars—it seemed the right thing to do. It also seemed like a great opportunity to reprise one of our favorite all-time episodes. We first published it in December of 2021, and it features highlights taken from the podcasts we’d published up until that point that cover many of the risks and rewards of business ownership, including what it’s like to sell your business, to fire an employee, to risk your own home in order to get financing, and even to deal with serious mental health issues.
If you’re new to the podcast, I think you’ll find that these conversations bring real context to the journeys of the entrepreneurs you’ve been following here. But even if you’ve heard some of these discussions before, I think you’ll find them a refreshing reminder that choosing to build a business can be a noble mission, but it generally doesn’t come with an owner’s manual. We’re all figuring it out as we go.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren