Harley-Davidson’s Free Advertising. Do Banks Need Branches? And the Biggest Mistakes Business Owners Make

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MARKETING 

Harley-Davidson has probably gotten at least $40 million in free advertising from Katy Perry: “Last month, Ms. Perry released ‘Harleys in Hawaii,’ a song inspired by a tropical idyll with her fiancé, the actor Orlando Bloom. Within two weeks, it had been streamed 20 million times on Spotify, and the accompanying music video—which features the pop star as both a rider and a passenger on Harley bikes—had been watched over 12 million times. … But all Harley-Davidson did in exchange for the enormous exposure to her fan base was provide motorcycles for the video. … Harley-Davidson didn’t know anything about Ms. Perry’s newfound motorcycle affinity until after the song had been recorded. … 

“‘They’re extremely lucky,’ said Mae Karwowski, the founder and chief executive of Obviously. … ‘If you just look at how much Katy would make for paid placements on her social channels,’ she said, ‘I think it would be upwards of $40 million, and that doesn’t even factor in the value of all the streams on Spotify, or the 11,000 fan posts tagged #HarleysinHawaii.’”

STARTUPS

Lordstown Motors is buying GM’s shuttered Lordstown plant with plans to hire some 400 workers next year and start production of an electric pickup designed for commercial fleets: “Steve Burns, the founder of Lordstown Motors, said the company would give preference in hiring to the plant’s former GM workers. … The pickup that Lordstown Motors says it will build was developed by Mr. Burns’s previous company, Workhorse Group, based in Cincinnati. He left that business to start a venture to produce the electric pickup while Workhorse focused on an electric delivery truck. …

“Lordstown Motors has orders for 6,000 trucks from 19 companies that operate large fleets, including Duke Energy, Mr. Burns said. Financing for the factory purchase was provided by Brown Gibbons Lang & Company, an investment bank in Cleveland. Lordstown Motors said that with the bank’s help, it hoped to recruit strategic investors as it built a new assembly line at the plant. Mr. Burns said earlier that he would need to raise about $300 million to acquire the Lordstown factory and get it running again.”

Travis Kalanick’s post-Uber startup has secretly been backed by Saudis: “Saudi Arabia’s sovereign-wealth fund has pumped $400 million into Travis Kalanick’s new company CloudKitchens, according to people familiar with the situation, in a deal that could value the operator of so-called ghost kitchens at about $5 billion and reunites the former Uber Technologies chief with one of his biggest backers. The Saudi fund’s agreement with CloudKitchens was completed in January, the people said. It was the fund’s first known deal in Silicon Valley since the murder of journalist Jamal Khashoggi last year, the people said, a killing that sparked global outrage and nixed several would-be investments. CloudKitchens is a bet on the food-delivery boomlet. It buys cheap or rundown real estate, often near city centers, where it builds commissary kitchens—also known as ghost kitchens—that it rents to restaurants wanting to prepare food exclusively for delivery services like Grubhub. and DoorDash.”

At University of California, Berkeley, you can get your burrito delivered by robot: “Kiwi Campus, a startup that operates in the square mile surrounding the university, has made more than 60,000 robotic food deliveries in the past two years. ‘There’s nowhere in the world that robots are a more integral part of its sidewalks than Berkeley,’ said Sasha Iatsenia, Kiwi’s head of product. ‘It’s ultimately a social experiment to see how robots get accepted by a community.’ The company takes a trial-and-error approach. The path followed by each robot at first was guided entirely by remote control by Kiwi employees 3,800 miles away in Medellín, Colombia. So-called pilots, still in Colombia, where the founders are from, now set and adjust a series of way points along a path. The delivery bot is about the size of a proverbial breadbasket, and it carries a single cubic foot of cargo. The devices, which have an onboard computer and six cameras, cost about $3,500 each to produce in China. …

“Kiwi is a work in progress. Its bots frequently lurch in front of pedestrians. The GPS is imprecise, so couriers and customers need to hunt down the robot’s locations, sometimes behind bushes. There are regular reports of minor bot abuse by those protesting high-tech invasiveness. Mr. Ammons said nearly half his orders were entirely delivered on foot or Segway. Mr. Iatsenia, Kiwi’s product chief, is undaunted. Kiwi plans to eclipse a million robotic deliveries on college campuses before the end of next year, and Mr. Iatsenia is guided by a grand vision of displacing car delivery. ‘DoorDash and Uber Eats use two-ton Hondas to deliver a small container of hummus,’ he said. ‘That’s very inefficient.’”

FOOD AND BEVERAGE

Chobani’s latest food incubator helps veterans start businesses: “[Incubator director Zoe] Feldman chose a total of three companies, which came from a smaller pool of about 60 applicants. Each company has a founder from a different branch of  the armed services. James Lee perfected his family recipe for J. Lee’s Gourmet BBQ Sauce while serving in the Army. His company is based in Biloxi, Mississippi, and includes a sauce variation that uses agave to be diabetic friendly. Lee has won numerous national sauce competitions and sells primarily in Southern grocery stores and at military commissaries. 

“The two other companies include Amore Congelato, a gelato and sorbet outfit whose products are sweetened with agave nectar, and which offers facts about injustice on its packaging. It was founded by Thereasa Black, a member of the Naval Reserve, and is based in Chantilly, Virginia. Savor the Flavor, a grits and rice mix company, is cofounded by Air Force veteran Carolyn Brunson Hodge. It’s based in Sumter, South Carolina, and, like Lee’s, its offerings are based on a family recipe. … Chobani’s incubator will include a one-week immersion at the company’s New York headquarters in December. It plans to offer hands-on tutorials in everything from branding to website building to sales techniques for building larger distribution.”

MANAGEMENT

Gene Marks has a list of 20 mistakes that too many business owners make, for example: “Don’t ignore the math. Quick: you’re selling something for $125, so what’s your margin? How many of these things do you have to sell in a month to break even? How often does your inventory turn? What happens to your debt maintenance if interest rates go up a point? What would be the impact of a five percent rise in your supplier’s costs? What percentage of your sales is overhead? What percentage of your labor represents health and retirement benefits? These are the things that my most successful clients know off the top of their heads. They’re boring, mathematical, numerical facts that drive the success (or failure) of every business and not knowing your profit margin is one of the top 10 mistakes new business owners make. Not interested? Then hire someone who is or go work for someone who is.”

ENERGY 

While the intentional California power outages have affected small businesses, generator companies have seen a boost: “Small business clients make up about 20 percent of his company’s overall business, said Aaron Jagdfeld, CEO of Generac, a generator company that has benefited from increased demand in California. Another 50 percent of the business is serving homeowners. ‘For the homeowner, [buying a generator] is an easier decision,’ Jagdfeld said. A modest home of 1,500 square feet could be looking at less than $10,000 for the purchase and installation of a standby generator, which is hardwired into the building and comes on to keep the essentials electrified when the power grid goes out. For small businesses, however, the cost of purchasing and installing a standby generator ranges from $27,000 for something that could support a small convenience store or gas station to $81,000 for a generator capable of powering a supermarket.”

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RETAIL

American banks don’t know what to do with their branches: “US banks have closed thousands of branches in recent years and poured billions of dollars into the smartphone apps that customers increasingly use for many of their daily banking needs. But customers still want the option of a physical branch, especially when they have problems that are tough to solve over a web chat. In 2017, some 52 percent of people primarily used their bank’s websites or mobile apps to access their accounts, according to a Federal Deposit Insurance Corp. survey, up from about 39 percent in 2013. But nearly one-quarter of bank customers visited a teller more often than a bank’s website, the survey found. ‘Customers want the physical and the digital,’ said Tom Brown, founder and chief executive of Second Curve Capital, a hedge fund that focuses on the banking industry. ‘And you have to deliver both.’

“How to best do that remains an open question. Banks are still trying to figure out exactly how to balance spending on branch upgrades and digital offerings to maximize deposit growth. … Capital One Financial Corp. has about 480 branches and around three dozen cafes. It has been opening around 10 annually for the past few years, said Lia Dean, the bank’s head of bank retail and marketing. Customers can expect the full suite of banking services at both the company’s cafes and its traditional branches. In modeling the cafes, Capital One responded to what it heard from consumers: Bank branches were intimidating and stressful. At the cafes and branches, the employee dress code is relaxed, and customers can open accounts on iPads. The cafes also host community groups and hold workshops such as ‘Talking Money With Your Honey,’ which focuses on finances in relationships. Ms. Dean said the customer response to the cafes has been positive, but she declined to provide details about how they are performing compared with the bank’s traditional branches.”

SILICON VALLEY

The latest thing in Silicon Valley? Dopamine fasting: “They tried to tamp the pleasure. They would not eat for days (intermittent fasting). They would eschew screens (digital detox). It was not enough. Life was still so good and pleasurable. And so they came to the root of it: dopamine, a neurotransmitter that is involved in how we feel pleasure. The three of them—all in their mid-20s and founders of SleepWell, a sleep analysis startup—needed to go on a dopamine fast. …

 “On a recent cool morning, [James] Sinka and his startup co-founder Andrew Fleischer, both 24 years old, were beginning their fast while Alberto Scicali, 26, another founder, managed the startup from his bedroom. Mr. Sinka, who has a mop of curly hair, was wearing water shoes and a cable-knit sweater as he did light morning stretching. Mr. Fleischer was reading a book. A dopamine fast is simple because it is basically a fast of everything. They would not be eating. They would not look at any screens. They would not listen to music. They would not exercise. They would not touch other bodies for any reason, especially not for sex. No work. No eye contact. No talking more than absolutely necessary. A photographer could take their picture, but there could be no flash. The number of things to not do is potentially endless. The ultimate dopamine fast is complete sensory deprivation …”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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