Why Car Dealer Profits Are Up

A New and Improved Morning Report. An Opportunity to Hire Tech Workers. And a Look at What We Lose When We Lose a Business

EDITOR’S NOTE:

Today’s a big day here at 21 Hats: This is the first Morning Report published on the newsletter platform Substack. The new platform will make it easier for us to offer a host of new features we have planned. In the coming weeks, you can expect to see more interviews with entrepreneurs, more original stories, and more reports from the front lines about what it takes to run a business. Toward that end, it would be helpful if you would fill out an eight-question, multiple-choice survey. We want to know more about who’s reading the Morning Report, what your needs are, and how we can help. The survey is anonymous, takes one minute (literally!) to complete, and comes with an absolute guarantee that you will feel great about helping out a fellow entrepreneur. (If you have questions about our new platform or our new direction, you can always reach me at lfeldman@21hats.com.) Many, many thanks! TAKE SURVEY HERE

OPPORTUNITIES

Car dealers are rediscovering that leaner inventories mean bigger profits: “For months, dealer stocks have been running about 25 percent thinner than normal, a hangover effect from two months of pandemic-related factory closures last spring. The shortfall is requiring many buyers to order their cars and wait a few weeks, running counter to the American car shopper’s desire for instant gratification and dealers’ impulse to send the customer home in a new car that day. That change may outlast the pandemic as industry executives find that stocking fewer cars, amid high demand, has lifted profits for car companies and dealers alike. Now both are talking about carrying fewer vehicles on the dealership lot permanently, in what would mark a monumental shift in the way cars are sold in the U.S.”

  • “The result has been a seller’s market, with car companies able to hold the line on discounts, driving prices to record highs.”

  • “And, because of the inventory crunch, car companies have been giving priority to their most popular models and feature combinations, which has reduced complexity and cut supply-chain costs, the companies say.” READ MORE

Shopify’s president says the pandemic has sped up the shift to ecommerce by 10 years: “Founded in 2006 to help physical retailers establish a web presence, Shopify offers easy-to-deploy cloud software so small businesses don’t have to do the heavy lifting of going digital. When Covid-19 forced stores to shudder, Shopify’s technology suddenly became essential. ... Because so many brick-and-mortar stores remain closed, with coronavirus cases spiking across wide swaths of the U.S., Shopify is expecting the 2020 shopping rush to be like none before it. According to eMarketer, retail sales on Black Friday are expected to surge 39 percent from last year to over $10 billion, while Cyber Monday is projected to see a 38 percent increase to almost $13 billion.” READ MORE

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TRAVEL

A traveler tests negative pre-flight and then infects at least four passengers: “Health officials in New Zealand, a country that has a strict 14-day quarantine in place for arriving travelers, released a case study on Friday that details the risks of traveling on long-haul flights during the coronavirus pandemic — even if negative coronavirus tests are required before the flight. The report details a coronavirus outbreak linked through DNA analysis to one passenger on an 18-hour flight from Dubai to New Zealand in September. The traveler, who tested negative for the coronavirus with a polymerase chain reaction (PCR) test within 48 hours of the flight, was contagious but pre-symptomatic onboard the plane, and infected at least four other passengers.”

  • “In total there were seven cases linked to the flight, which had 86 passengers onboard.”

  • “‘This case speaks to how hard it is to keep infected people off a flight ...’” READ MORE

HUMAN RESOURCES

As they leave Silicon Valley, tech workers are open to new opportunities: “Deepinder Singh, founder of a Bloomington, Minn.-based startup, had never bothered trying to recruit Silicon Valley tech workers. They were too expensive and didn’t want to move. In seven years, he had never gotten an applicant from a large tech company. But since May, more than a dozen people on both coasts have applied for jobs with his company, 75F Inc., which makes internet-connected, energy-saving HVAC control systems. One résumé came from Facebook; another came from Twitter. The 130-employee firm just hired an engineer from Sonos.”

  • “He has seen the reverse—employees leaving for Google and Tesla—but, he said, ‘We’ve never actually seen this.’”

  • “‘These companies are on a hiring spree,’ said Guy Berger, principal economist at LinkedIn. Covid-19 ‘has really given entrepreneurship and these small enterprises a kick in the butt to really ramp up.” READ MORE 

MARKETING

Here’s how social media entrepreneurs make money from influencers on TikTok: “West of Hudson Group, for one, operates a network of content houses where many prominent young influencers live. Houses like these function as management companies, taking a percentage of revenue from the creators living in them. The influencers often don’t pay rent, but produce content for brands and promote products as a form of in-kind rent. Dozens of influencer houses have arrived in the Los Angeles area over the last year, and the companies that run them have been searching for sustainable business models. Going public, though, is a new strategy.” READ MORE

THE COVID ECONOMY

Struggling retailers owe $52 billion in missed rent: “That’s the total amount of retail rent that’s been missed since April, according to CoStar Group. While some of the overhang has since been paid back, the remainder will be a drag on merchants as they try to rebuild and landlords demand their money. In some cases, the unpaid balances could drive them into bankruptcy.”

  • “So far, the amount of rent collected from retailers climbed from 54 percent at the end of April to 86 percent this month, according to CoStar. Malls have fared worse, with only 79 percent of rent due this month received. That makes the situation critical for landlords, too.”

  • “‘It’s going to take a period of years, not months, to get through this,’ said Michael Hirschfeld, vice chairman at JLL, a real-estate services firm.” READ MORE

Guitar Center has filed for bankruptcy: “The 61-year-old company -- the biggest musical instrument retailer in the United States -- had tried to stay afloat during the coronavirus pandemic by offering virtual music lessons. But Guitar Center was forced to close many of its stores in March during nationwide lockdowns, and it struggled to get customers to buy instruments as the economy headed south. Guitar Center has 269 locations, many of which are in malls that had been struggling long before Covid-19. Foot traffic in malls has plummeted, and stores like Guitar Center that are dependent on people making discretionary purchases have been among the worst-hit this year.” READ MORE

THE ENTREPRENEURIAL LIFE

As her father’s retail store fades, a daughter writes about what the business has meant: “For 45 years, that store, Harmony Audio Video, has been my dad’s life: the reason he left home early every day, the reason he was chronically late to pick me up from school, the reason he didn’t take a single vacation for 25 years. Growing up, the store was my life too: From the time my mom’s breast cancer metastasized when I was in second grade (she died when I was 10), I hung out in the back after school until 7 or 8, before we drove 40 minutes home on coastal Highway 1 to slightly more affordable El Granada. Keeping me with him at work meant he didn’t have to pay for child care.”

  • “The internet wasn’t all bad for my dad. It enabled him to get outdated parts on eBay and to search audiophile forums for tips on tricky repairs. With a few clicks, he could also see the big-box stores’ prices and endeavor to beat them.”

  • “It’s easy to compare prices. It’s harder to put a value on the cranky independence of small-business owners, or their collective importance to community spirit and even the American idea.”

  • “‘What astonishes me in the United States is not so much the marvelous grandeur of some undertakings as the innumerable multitude of small ones,’ Alexis de Tocqueville wrote in 1835.” READ MORE

THE 21 HATS PODCAST

Episode 40: We’ll Find Something for Them to Do: Dana White and Laura Zander explore some of the great unresolved debates of entrepreneurship this week. For example, which comes first when hiring: filling specific needs or finding places for good people? With sales people, do you motivate by paying commission or build a team by paying salary? And in finance, do you bootstrap to maintain control or raise capital to grow faster? Dana and Laura tell us what’s been working for them.