Morning Report

What you need to know one minute before daylight

Uber’s Losses, Amazon’s Taxes, and How to Fire

Get the Oxford Morning Report every day. Click here for a free subscription.

DAYLIGHT  

Wait! Fridays may not be the best day to fire an underperforming worker. In fact, traditional the thinking on how to fire has been evolving: “Much is up for debate, including the proper day to let an employee go, whether to have security escorts present and how long to maintain a fired worker’s benefits as a way to help smooth rattled nerves, companies and consultants say.

“Conventional wisdom long held that Fridays were the best time to lay off staffers since the day frequently coincided with the end of a pay period and gave workers a weekend to gather their thoughts. Now, some say end-of-week firings should be avoided. When Bubba Fatula, a former law-enforcement official who is director of threat preparedness at Gittings Protective Security, conducts active-shooter training for HR staffers, he advises them to conduct terminations midweek. Letting a person go on a Wednesday gives them time to contact other employers and look for work during business hours the following days, he said.”

TAXES

On Thursday, Amazon challenged its competitors to raise their wage minimum to $15 or even $16 an hour. On Friday, “Walmart’s executive vice president of corporate affairs, Dan Bartlett, responded to Bezos by tweeting, ‘Hey retail competitors out there (you know who you are) how about paying your taxes?’” Last year, Amazon paid no taxes on $11 billion in profit, even pocketing a $129 million rebate. (Which is part of the reason Elizabeth Warren is pitching a “Real Corporate Tax” that would have no loopholes or exemptions, apply to both domestic and foreign profits, and levy a 7 percent tax on profits over $100 million).

STARTUP

Zooey Deschanel’s startup offers city dwellers a smart vegetable garden that could fit in a phone booth: “Looking like a cross between a fancy bong designed by Jony Ives and one of those new-school security robots that patrols the mall, the Farmstand is a vertical garden that takes up no more floor space than a coat rack and makes growing family-sized quantities of edible greens absurdly simple.

“All this happens thanks to a curvilinear white pillar, its surface is studded with holes, into which you insert pre-potted seedlings of kale, swiss chard, eggplant, tomatoes and other veggies. Every two weeks, more seedling cups arrive in the mail to replace the ones you’ve harvested. The Farmstand is scalable: If you want to grow more food, you just buy more units and stack them on the ones you already have. (The entry-level version costs $399, plus $49 per month for the seedlings.)”

Some cultures see women’s menstrual cycles as taboo and as a result, thousands view their periods as a source of shame. But startups like Blume see an opportunity: “Blume’s website advertises a $10.99 subscription box which includes a ‘wide range of life products such as organic tampons and pads, fun treats, and comforting remedies for everything PMS.’ (For context, a 50 count box of Target-brand tampons costs $4.99.) Currently, Blume is available in Urban Outfitters, Riley Rose and Nordstrom, among other retailers. …” The biggest challenge so far: to get investors (mostly male) to inform themselves on a women-centric issue.

E-COMMERCE

Third-party sellers are selling more on Amazon than Amazon is: “‘Something strange and remarkable has happened over the last 20 years,’ Amazon’s Jeff Bezos said in his annual letter to shareholders. ‘Third-party sales have grown from 3 percent of the total to 58 percent. To put it bluntly: Third-party sellers are kicking our first-party butt.’ …

“As Bezos pointed out, both types of sales have grown substantially in the past 20 years. In 1999, Amazon did $1.6 billion in physical gross merchandise sales itself, compared to $100 million by its third-party sellers. Last year, Amazon’s direct sales were $117 billion and third-party sales, mostly from small and medium-sized businesses, came in at $160 billion. Independent sellers moving everything from diapers to diamonds now collectively sell more stuff on Amazon than Amazon does.”

RETAIL

Despite the number of online brands turning to brick-and-mortar stores, the retail apocalypse marches on: “An estimated 75,000 stores that sell clothing, electronics and furniture will close by 2026, when online shopping is expected to make up 25 percent of retail sales, according to UBS. Roughly 16 percent of overall sales are made online.

“Even so, some Internet-only companies such as furniture retailer Wayfair and mattress brand Casper are beginning to open physical stores. But analysts said these outposts—often smaller and more sparse than traditional stores—function more as showrooms for items customers can order online than a one-stop shop with swaths of inventory.‘The trend is toward more streamlined stores: Less chaos, less inventory, less choice,’ [John D.] Morris said. ‘If a customer wants something in a different color or size, they can find that online.’”

If you were forwarded this newsletter, click here for a free subscription.

GOING PUBLIC

Uber, which expects to be valued at $100 billion, revealed that it lost $1.8 billion last year on revenue of $11.3 billion: “One potentially major concern for Uber is that it does not appear set to turn a profit in the near future. In the United States, the company is burning cash as it battles Lyft, cutting prices for passengers and spending to recruit drivers. In other parts of the world, Uber also provides discounts to riders and incentives to drivers as competitors like Ola fight for market share. And the company is investing heavily in businesses like food delivery and scooters.

“‘We will not shy away from making short-term financial sacrifices where we see clear long-term benefits,’ Dara Khosrowshahi, Uber’s chief executive, wrote in a letter accompanying the prospectus.”

ZACK ELLER’S DEALS OF THE DAY

Amazon has acquired autonomous warehouse company, Canvas Technology. “Canvas should make a nice addition to Amazon Robots’ offerings. The division was created after the company’s 2012 acquisition of Kiva Systems, whose shelving robotics now serve as a kind of robotic epicenter to Amazon’s many fulfillment centers…Canvas, on the other hand, brings its own built-in safety with its autonomous vision system.”

Walmart has acquired Polymorph, an ad-tech company. “The San Francisco-based startup’s technology and assets will allow Walmart to deliver more relevant ads to online shoppers, the retailer says. Meanwhile, Polymorph’s team will join Walmart’s in-house advertising business, the Walmart Media Group.”

REGULATION

American auto manufacturers are preparing for a regulatory nightmare: “As the Trump administration prepares to drastically weaken Obama-era rules restricting vehicle pollution, nervous automakers are devising a strategy to handle their worst-case scenario: a divided American auto market, with some states following President Trump’s weakened rules while others stick with the tougher ones.

“The effort is increasingly urgent because the Trump administration has now settled on the key details of its rollback plan, according to two people familiar with the matter. The new rules would all but eliminate the Obama-era restrictions, essentially freezing standards at about 37 miles per gallon, compared to 54.5 miles per gallon required by the current rules. The policy makes it a near-certainty that California and 13 other states, collectively representing roughly one-third of the United States auto market, will keep enforcing the stricter rules, splitting the national auto market in two.”

MANAGEMENT

Stacy Spikes, co-founder of MoviePass, is finally ready to talk about his firing:  “Then on January 9, I get an email that said, ‘Thank you, but your services are no longer needed.’ And my feeling is we just disagreed on the approach. After that, I’ve never spoken to Mitch or Ted. And I’ve been watching it all unfold like everyone else. Listen, you go through a whole string of emotions like any kind of breakup—‘Great, I’m glad to be out of there’ to ‘I wish I was still there to help from the inside’—but there’s a saying investors always like to ask entrepreneurs, ‘Would you rather be rich or would you rather be the king?’” Of course, sometimes the end result is neither.

SCIENCE

Scientists have discovered the remains of a distantly related human species in a cave in the Philippines: “At least 50,000 years ago, an extinct human species lived on what is now the island of Luzon, researchers reported on Wednesday. It’s possible that Homo luzonensis, as they’re calling the species, stood less than three feet tall. The discovery adds growing complexity to the story of human evolution. It was not a simple march forward, as it once seemed. Instead, our lineage assumed an exuberant burst of strange forms along the way.”

OBITUARY

The New York Times has published a belated obituary for Rose Morgan, who built what Ebony magazine called in 1946 “the biggest Negro beauty parlor in the world.”: “Rose Meta House of Beauty, which grossed more than $3 million in sales in its first few years, became a fixture in Harlem. It went beyond hair care, offering skin care, massages and other services that were rarely available to black women at the time, and women traveled from all over the country to go to the salon. …

“Rose Meta (pronounced MEE-tah) was an oasis that signaled elegance and calm for black women in a world that was, for the most part, accustomed to being pampered by black women … Formality and respect for clients was paramount. Morgan forbade her employees from talking with clients outside of questions and answers about their service for the day. …

“Morgan also had a strict policy on addressing clients. ‘You never called anybody Lucy, Sarah or Rose,’ she said. ‘Whatever your last name, they had to call you by your last name.’ These policies went a lot deeper than mere formality at a time when black people were purposefully not addressed with respect.”

And that’s what’s ahead.

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

BECOME AN OXFORD MEMBER