Trade Falls, Regulation Rises, and Mark Zuckerberg Takes On Elizabeth Warren

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THE ECONOMY

Global trade is declining fast, slowing the world economy: “World trade in merchandise is now expected to expand by only 1.2 percent during 2019, in what would be the weakest year since 2009, when it plunged by nearly 13 percent in the midst of the worst global financial crisis since the Great Depression. Only six months ago, the organization was forecasting more than double that pace of growth, a 2.6 percent expansion in merchandise trade. The WTO warned that intensifying trade conflicts posed a direct threat to jobs and livelihoods, while discouraging companies from expanding and innovating.

“Both the United States and China—the world’s two largest economies—have seen a pronounced cooling in commercial activity in recent months, a trend exacerbated by the tariffs they have imposed on each other’s exports, raising costs for businesses and consumers, and discouraging investment. In Europe, trade is being stymied by fear that Britain may be on the verge of a tumultuous exit from the European Union …”

With the trade war, the economic slowdown, and a credit squeeze, China is buying stakes in private companies at a record rate: “The investments mark a reversal after decades in which state-owned enterprises have shrunk in importance, as reflected in measures such as their share of the workforce or asset ownership. Since China’s public-sector companies are typically less efficient or innovative than their private rivals, the shopping spree could lead to a fresh drag on growth.

Private enterprises are in a weaker position because they have comparatively poorer access to cheap bank loans and other types of financing, and have also been squeezed by Beijing’s moves to reduce pollution and overproduction. However, while President Xi Jinping has centralized control more than his predecessors, the purchases appear to be driven by the desire to maintain stability rather than a deliberate strategy to weaken the private sector.”

RETAIL

Starbucks is building its first mobile-order-only store in New York: “Inside New York’s Penn Station, the beverage company is constructing Starbucks Pickup. Starbucks describes it as “a streamlined store experience for Starbucks Rewards members who order and pay with our app.” … Starbucks hasn’t announced an opening date yet for Starbucks Pickup. But it describes the ordering process on its web page. First, customers will download the Starbucks mobile app, if they don’t already have it. Then, they will select Pickup-Penn Station as the location, and place their order. Once they arrive at the store, Starbucks says they will find their order via an order status board. Baristas will be there to help if needed, but they are primarily there to make drinks as orders come in on the app.”

REGULATION

Mark Zuckerberg is preparing to go to battle with Elizabeth Warren: “Ms. Warren rolled out a proposal to break up Facebook, Amazon and other tech giants in March. … In leaked audio recordings of open meetings with employees this summer, Mr. Zuckerberg can be heard saying that the company would sue if Ms. Warren were to enact the plan as president. ‘If she gets elected president, then I would bet that we will have a legal challenge, and I would bet that we will win the legal challenge,’ he said. ‘Does that still suck for us? Yeah. I mean, I don’t want to have a major lawsuit against our own government. That’s not like the position you want to be in. We care about our country and want to work with our government to do good things,’ he added. ‘But look, at the end of the day, if someone’s going to try to threaten something that existential, you go to the mat and you fight.’”

Congress is inviting Apple, Google and Facebook to face questions about their treatment of small businesses: “In the hearing, [House Small Business Committee Chairwoman Nydia] Velazquez plans to home in on issues small businesses face when trying to compete with or promote themselves on the companies’ platforms. … The inquiry could give ammunition to critics who complain that big internet platforms are abusing their dominance to harm competition.

“It’s unclear whether any legislation or further investigations may stem from the hearing, but lawmakers’ past critiques of the companies offer some clues about what they may focus on. … Amazon sometimes changes the way product-search results are displayed or even decides to sell or manufacture the product itself, which can have a dramatic impact on the bottom lines of small businesses. … On Google, some small businesses have complained that the company displays advertisements next to their search listings, directing potential customers to competitors or to delivery apps that charge hefty fees. Facebook has also sometimes faced criticism for changes to the algorithm governing its News Feed that can dramatically reduce the web traffic some businesses receive.”

MARKETING

Some digital advertising companies, not including Facebook or Google want to clean up their offerings: “A group of 16 companies—including leading ad tech firms, ad agencies and publishers—is trying to help clean up the murky world of digital advertising. On Wednesday, the companies called for more visibility into where each dollar is spent in the online advertising supply chain. They committed to standards and practices for sharing data on fees and authenticating content, and urged others to move in the same direction. The move, industry executives and analysts say, is an effort to bolster digital advertising outside the domains of Google and Facebook, whose ad businesses are being scrutinized by federal and state investigators for anticompetitive behavior. …

 

“The companies are all looking for a path to prosperity in an industry criticized for a lack of transparency, for hidden fees and for rampant ad fraud. The companies in the initiative, called Source, are trying to demonstrate that a more efficient, more open marketplace can exist. They want to be a viable alternative to Google and Facebook, which supply tools for ad buyers and sellers and run the auctions within their digital walls. The tech giants, which are able to offer advertisers huge audiences, increasingly hold sway.”

HUMAN RESOURCES

A new Illinois law prohibits employers from considering a job applicant’s pay history: “Illinois companies can no longer ask job applicants or their previous employers about their pay history under a law that took effect Sunday. Supporters say the measure will help close the pay gap between women and men. … If an employer violates the law, a person can seek up to $10,000 in damages. If an applicant suspects he or she is being discriminated against, they should document the conversation. Job applicants should write down which interviewer asked the question about salary history, but they should not record an interview because it is illegal …”

 

Employer-based health insurance is becoming increasingly unaffordable: “The average premium paid by the employer and the employee for a family plan now tops $20,000 a year, with the worker contributing about $6,000, according to the survey. More than a quarter of all covered workers and nearly half of those working for small businesses face an annual deductible of $2,000 or more.”

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STARTUPS

Flockjay is an online academy that trains people from underrepresented demographics for jobs in the tech world: “[The 12-week program’s tuition does not consist of] upfront payments but 10 percent of alumni’s first-year salaries, meaning trainees can participate in the program for free and not have to pay up until they actually start earning a living. … [Founder Shaan Hathiramani’s] idea seems to be working. Since Flockjay’s launch in January (it was in the Y Combinator winter 2019 batch), 100 people have completed the program, according to Hathiramani. Of those, 50 percent are women and 70 percent are people of color. Plus, 40 percent don’t have four-year degrees. He added that about 20 percent of students drop out in the first two weeks of the course. Alumni include a broad cross-section of people traditionally excluded from the insular tech world, such as retail salespeople, bartenders, and aging vets.”

AGRICULTURE

America is laying too many eggs: “The US flock of laying hens rose to 331.4 million in early September, according to the US Department of Agriculture, up 800,000 birds from a year earlier. Chickens in the US produced more than 65 billion table eggs through August this year, up three percent from that period last year. Iowa, Indiana and Pennsylvania are among the states that produce the most of those types of eggs. The egg glut is adding to pressure on a US agricultural economy in turmoil. Record-wet weather this year delayed many farmers from planting their fields at the best times. …

“That has led to a bounty of stockpiled grain that is contributing to the expansion of US livestock herds and flocks. US hog inventories reached 77.7 million head as of Sept. 1, according to the USDA, a high point since the agency began issuing that report in 1988. … Retailers have been quick to pass the drop in egg prices on to customers, eager to make more sales of a consumer staple.”

Apple orchards outside Chicago might have to cut apple-picking season short due to extreme weather: “At Homestead Orchard in Woodstook, 65 miles northwest of Chicago, co-owner Don Burda expects to run out of apples by the end of September, a month earlier than usual. The trees that usually produce apples that ripen in October never blossomed, he said, likely because of the severe winter cold. ‘We have no Jonagolds, Braeburns, Jonathans, Empires,’ said Burda, a retired teacher who founded the five-acre farm in 2000. ‘This is my 20th year and this is the first we won’t have (October) apples to sell.’ … At apple orchards that rely heavily on the pick-your-own fruit business of late summer and early fall, when the crisp air draws families to get lost in their corn mazes, farmers are advising customers to check availability before venturing out.”

FASHION

How did fashion brand Sonia Rykiel tumble into liquidation? “It was, after all, a brand founded by a woman half a century ago. A brand practically synonymous with female liberation and empowerment through clothes. A brand so embedded in the history of French women that a year ago Mayor Anne Hidalgo inaugurated the Allée Sonia Rykiel—the city’s first street named for any fashion designer. A brand, in other words, practically made for a time when women everywhere are demanding their due and seizing the lead. … 

“In 2015, just as Rykiel’s new management team was implementing a major restructuring plan, France was hit by a series of terrorism attacks that leveled its economy, and domestic retail sales collapsed; the Russian financial crisis wiped out the brand’s second-largest market outside of France … And when it became clear in late 2018 that Rykiel needed to bring in a financial partner and relaunch, the Yellow Vests protests decrying economic and social inequities erupted throughout France. But taken together, these facts add up to a tale of just how easy it is to miss the cultural cues that create fashion relevance.”

OXFORD STRATEGIC ADVISORY DEAL OF THE DAY  

CoStar Group, a commercial real estate data and marketplace listing platform, has agreed to acquire STR, a hotel data aggregator. “The acquisition will give CoStar, which specializes in collecting information on office and industrial properties, access to a major source of hotel data. Although CoStar collects basic information about hotel properties, STR offers data on occupancy rates, room rates and revenue per room. STR also expects that CoStar’s large platform and sales team will help expand STR’s reach outside of the US.”

And that’s what’s ahead.

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

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