Why Give Up Any Margin?

In the latest 21 Hats Podcast episode, Stephanie Stuckey talks about coping with increased labor and supplier costs.

Good morning!

Today’s highlights: Where are all of the office workers? Rush hour may never be the same. And an early warning signal from England. 

THE 21 HATS PODCAST

Episode 64: Adventures in Candyland: This week, Stephanie Stuckey tells Jay Goltz and Dana White about moving closer to the candy factory she recently bought to get a better feel for the people, the operation, and the challenges. Right now, those challenges include recruiting enough employees, absorbing increased supplier prices, and figuring out how much she should raise her own prices: “We can only give up so much of our margin, right?” she tells us. To which Jay responds, “Why give up any?” Plus: we talk about competing for labor with Amazon, whether to require employees to get vaccinated, how to manage legal fees, and whether Dana’s feelings of FUD have eased.

THE ECONOMY

Car prices continue to soar: “The average new car price hit a record $38,255 in May, according to JD Power, up 12 percent from the same period a year ago. About two-thirds of car buyers paid within 5 percent of the sticker price in May, with some even paying above sticker. Wholesale prices for used cars sold at auction are up 39 percent since the start of this year, according to other data from JD Power. Retail used car prices are up a more modest 20 percent in the same period. That's also a significant jump for this time of year, and the higher wholesale prices are pointing to bigger increases on the way.” READ MORE

But lumber prices are falling fast: “Economists and investors have wondered if sky-high prices for wood products would doom the booming housing market. Builders raised home prices and many stopped selling houses before the studs were installed, lest they misjudge costs and sell too cheaply. Lumber became central to the inflation debate: whether a period of runaway inflation was afoot or high prices were temporary shocks that would ease as the economy moved further from lockdown.”

  • “The rapid decline suggests a bubble that has burst and the question now is how low lumber prices will fall.”

  • “Even after tumbling, lumber futures remain nearly three times what is typical for this time of year.”

  • “Lumber producers and traders expect that prices will remain relatively high due to the strong housing market but that the supply bottlenecks and frenzied buying that characterized the economy’s reopening and sent prices to multiples of the old all-time highs are winding down.” READ MORE

Retail sales fell 1.3 percent in May: “The 1.3 percent decline in May follows months of ups and downs in consumer spending, driven by the persistence of the coronavirus that had kept many people away from airports and restaurants. The data from April was revised to show an increase of 0.9 percent. But with a growing portion of the country’s population vaccinated and infection rates falling, Americans are venturing out and spending more on lodging and entertainment, rather than on the home improvement projects and grocery hoarding that characterized the earlier, more homebound months of the pandemic.”

  • “‘Consumer spending growth is shifting from goods to services as the economy reopens,’ said Gus Faucher, chief economist at PNC Financial Services Group.” READ MORE

REOPENING

The most vaccinated state in America is dropping all of its Covid restrictions: “Hospitals are closing their Covid wards, and cases of new infections are plummeting. But it’s the little things that are making the biggest impacts, Vermont residents say: Schools are hosting in-person graduations. High-fives and hugs are common. Self-serve coffee is back. Grocery shopping no longer requires a mask.”

  • “Vermont said that 80 percent of the state’s eligible population has received at least one shot of the vaccine.”

  • “The state leaves it up to businesses now to decide if they still prefer mask wearing and some shops haven’t completely gotten on board with letting go of all rules.” READ MORE

White collar workers still aren’t returning to central business districts: “Fewer than three out of 10 white-collar employees were working at the office on average in 10 major U.S. cities, including New York, Los Angeles, San Francisco and Washington, D.C., according to Kastle Systems. The nationwide security company monitors access-card swipes in more than 2,500 office buildings in cities across the country. As of Monday, an average of 31 percent of office workers had returned to the workspaces they occupied before the Covid-19 pandemic, according to Kastle.”

  • “Largely empty office buildings stand in contrast to crowded restaurants, full airline flights and bustling sports arenas. Some are now operating around full capacity.”

  • “The shops and restaurants that rely on office workers as their main customers are left wondering ‘where are all the office workers …’” READ MORE

Rush hour may never be the same: “Traffic has begun to return as the economy has revived. But planners, transit agencies and researchers are now considering the remarkable possibility that in many places it won’t revert to its old shape amid newfound work flexibility. About a third of workers in the U.S. hold jobs that economists say could be done remotely. Suppose many of them worked from home one day a week, or opted occasionally to read email in their bathrobes before heading in. Overall, we’d be talking on a given day about a decline of a few percentage points in peak commuting trips — a small number, but a big deal during the most painful parts of the day.”

  • “If peak demand does ease in a lasting way, that could affect how we build infrastructure and how transit agencies spend money ...”

  • “Lower peaks could mean more space on city streets for bike lanes and more equitable bus service, with more off-hours resources available for essential workers.” READ MORE

When reopening an underutilized office, Covid isn’t the only concern: “Scientists have learned a lot about the virus over the past year, and there are some clear, evidence-based steps that employers can take to protect their workers — and that workers can take to protect themselves. Some of these strategies are likely to pay dividends that outlast the current crisis.”

  • “Plumbing systems that sit unused, for instance, can be colonized by Legionella pneumophila, bacteria that can cause a type of pneumonia known as Legionnaires’ disease.” READ MORE

As America reopens, businesses confront more bad behavior: “Retail workers have been subjected to horrifying attacks based on their race, gender identity or disability. Flight attendants have been verbally — and occasionally physically — assaulted. Aggressive driving has led to road rage, with deadly consequences. Shoppers are brawling in the aisles. Experts are pointing to soaring stress levels as the trigger for the rise in these types of incidents.”

  • “The FAA tracks incidents with problem passengers and says issues surrounding face masks have been a contributing factor.”

  • “According to Emily May, co-founder and executive director of the nonprofit Hollaback!, retailers are seeing an alarming rise in discrimination where floor staff are being targeted for who they are when enforcing safety measures.” READ MORE

INTERNATIONAL

England is postponing its Freedom Day by a month—and sending a warning signal:“Restaurants and pubs in England, while open, will still have to observe social distancing rules indoors, limiting capacity, and nightclubs and theaters will remain firmly closed. The decision, which will be reviewed in two weeks, sent a warning to the world that even well-vaccinated nations remain at risk and angered a noisy caucus of libertarian lawmakers within Mr. Johnson’s own party. At present, overall new cases in Britain are averaging around 8,000 per day and are doubling every week in the worst affected areas. Hospital admissions have begun rising. And the impact of the Delta variant across the country has already incited alarm in other European countries including Germany, which has introduced a travel ban.”

  • “And the variant now appears to be outpacing other versions of the virus in parts of the United States and Canada, too, with some scientists saying that they expected that trend to continue.” READ MORE

HUMAN RESOURCES

Here are the states eliminating supplemental unemployment benefits: “Twenty-five states will halt some or all emergency unemployment benefits, with many Republican governors blaming the programs for a shortage of workers in many industries as businesses reopen.” READ MORE

With labor in short supply, visa backlogs and travel curbs are blocking U.S. companies from hiring from abroad: “Although federal officials have eased Covid-19 restriction guidelines, the U.S. still has kept travel bans on 33 countries, including the U.K., much of Europe, China and India. Citizens of those countries for the most part aren’t being granted work visas even if they are vaccinated or test negative for Covid-19. In countries that aren’t banned, months long backlogs at consulates make it difficult for foreign workers to get visas.”

  • “Cedar Point, an amusement park in northern Ohio with some of the country’s tallest roller coasters, has been closing two days a week because of the worker shortage, said Richard Zimmerman, chief executive of the park’s parent, Cedar Fair Entertainment Co.”

  • “The park usually sponsors about 1,500 foreign college students to staff its rides and concession stands each summer, but it has gotten only a few hundred foreigners this year, he said.” READ MORE

VENTURE CAPITAL

Last year, the VC industry pledged to do better on diversity. “Venture capital firms have historically been slow to diversify their workforces. According to the latest VC Human Capital Survey, a biannual report compiled by the National Venture Capital Association, Venture Forward, and Deloitte, only 4 percent of VCs are Black, up from just 3 percent in 2018. Latinos represent 4 percent of investment professionals, down from 5 percent in 2018. (Asian and Pacific Islander employees, meanwhile, held 19 percent of investment positions in the survey—a higher percentage compared to the overall US working-age population.) What's changed, though, is the number of firms with diversity, equity, and inclusion plans ...”

  • “‘The industry remains in the ‘planning phase,’ according to Frederik Groce, a partner at Storm Ventures and cofounder of BLCK VC, a nonprofit that supports Black investors.” READ MORE

STARTUPS

Would you pay $6 for one strawberry? “The Omakase Berry, a Japanese variety grown by the New Jersey-based company called Oishii, bills itself as an entirely different strawberry experience. The website even offers advice when it comes to eating them: Allow berries to sit at room temperature for 10 to 15 minutes; let the berries’ aromatics ‘fill the room’; inhale the ‘bouquet’; eat. Oishii grows its berries indoors vertically, leveraging technology that its co-founder and CEO, Hiroki Koga, 34, explored in Japan.”

  • “‘I got my first start in the vertical farming industry as a consultant in Japan, where it took off before anywhere else in the world,’ he said.”

  • “The first run of berries (the Omakase cultivar) has been geared toward the luxury market and is available only in the New York City area.” READ MORE

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