Morning Report

What you need to know one minute before daylight

How to Use Instagram, How Not to Open a Restaurant

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DAYLIGHT  

There is a report out that Uber may never achieve profitability, and the author of that report is Uber:In its S-1 filing, Uber acknowledges that it may never turn a profit. ‘We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability,’ the company says. ‘We will need to generate and sustain increased revenue levels and decrease proportionate expenses in future periods to achieve profitability in many of our largest markets, including in the United States, and even if we do, we may not be able to maintain or increase profitability.’”

CHINA

White House officials believe technology theft and other unfair business practices from China are costing the American economy more than $57 billion a year. And yet, the victimized businesses have been reluctant to fight back: “Government and business leaders interviewed by NPR and Frontline said individual companies were making millions of dollars in China over the past decade and a half and didn’t want to hurt short-term profits by coming forward. They demanded secrecy, even in the face of outright theft.

“But now the impact of that secrecy is coming to light, they say. Companies are facing hundreds of millions of dollars in future losses from the theft, and US officials say they are years behind trying to tackle the problem.”

MARKETING

Running her plant business on Instagram, Jarema Osofsky gets her customers to spread the word: “Self-styled as DirtQueenNYC, Osofsky got her start selling plants on a Brooklyn street. But like many Instagram users finding new ways to use the platform—whether it’s creating safe havens through secret finsta accounts, garage sale-style selling, photo fan-fic, or repurposing memes—she’s past posting flashy photos to the main grid.

“DirtQueenNYC is something else: a modern take on word-of-mouth marketing. ‘People post a picture of a plant that they got from me and tag me,’ she says. From there, her service spreads among their friends. ‘Instagram in general has made the whole shopping experience with me be more of an experience and less of a transaction,’ she says.”

STARTUPS

When Arielle Haspel, a non-Asian health, coach opened a “clean” Chinese restaurant in Manhattan, the blowback came quick: “Within a day of Lucky Lee’s opening in the Union Square area, Asian-Americans castigated her on social media. Yelp temporarily disabled its listing because of an ‘unusual activity alert.’ And a stream of food writers posted about how Ms. Haspel’s decision to brand her Chinese food as ‘clean’ was dredging up stereotypes that were hurtful to Chinese-Americans, not to mention tone-deaf. …

“This week, Ms. Haspel, 36, deleted Instagram posts that could be seen as culturally insensitive, such as the one about feeling icky after eating lo mein. She decided against using a decal that said, ‘Wok in, Take Out’ that she planned to put on the window. ‘We have been listening and learning, and we have been making changes and we will continue,’ she said. ‘Shame on us for not being smarter about cultural sensitivities.’”

RETAIL

Ikea is opening a radically different kind of store today in New York City, the first of 30 similar stores planned for big US cities. Among the changes: “Far fewer products on display. Lots more space devoted to living space mock-ups. … Lots of on-site consultants whose job is to help guide customers to design their apartments and pick the right stuff. … Encouragement to hire folks from TaskRabbit (now owned by Ikea) to come and assemble whatever needs assembling. No meatballs. No cafeteria at all, actually.”

By 2026, an analysis from UBS finds, online retail sales will rise from 16 percent to 25 percent of all sales. And with each 1 percent increase in online penetration, some 8,000 to 8,500 stores will close: “That means some 75,000 stores will be forced out of business by 2026, or about 7 percent of the 1,044,754 retail establishments in the US today, according to data from the Bureau of Labor Statistics.

“The sword will fall unevenly depending upon the retail sector and the rate of penetration online sales are expected to have. Clothing stores will take the biggest hit, losing an excess of some 21,000 stores out of the current 82,200, or some 25 percent. Consumer electronics stores will drop by 10,000 stores, or 25 percent of the 39,000 currently standing. Home furnishings will lose 8,000 stores (32 percent of its current 25,300) and home improvement stores will drop by 1,000 (about 7 percent of the nation’s 14,500 hardware stores). And the number of grocery stores will fall by 7,000, or 8 percent, from current 89,500 levels, if online penetration rises to 10 percent from its current 2 percent level.”

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LITIGATION

Google has been sued by a German price-comparison portal for abusing its dominant position in the search-engine market: “If it succeeds, the litigation could spark similar actions in Europe by other tech firms that have hesitated to take on the Silicon Valley company. In the suit filed in a Berlin court Friday, Idealo internet GmbH, a leading price-comparison service that is majority-owned by publisher Axel Springer SE, alleged that Google made it harder for users of its search engine to find links to Idealo after the U.S. company started promoting its own price-comparison offering, now called Google Shopping.”

TECHNOLOGY

Last week, we talked about a startup that used drones to replant forests. This week we’re highlighting another startup out of Santa Monica that uses drones to prevent power outages: “Santa Monica’s DroneBase is about to take that evolution one step further, with thermal-equipped drones that can analyze heat patterns in power grids, buildings and solar panels, unveiling damage that would otherwise be invisible. According to DroneBase, one of the main advantages of the technology is the ability to address damage to buildings and equipment before it’s too late to fix it.”

REAL ESTATE

Rents in the US are rising, spurred in part by Millennials and their desire to leave the nest: “While apartment construction surged in the years after the housing bust, it hasn’t kept up with demand, giving landlords the upper hand. Years of rising home prices, meanwhile, have made it more difficult for many would-be homebuyers to save up for a down payment. ‘Even though mortgage rates are sliding a little bit and are lower than the historical average, you still have a huge amount of people who are not able to afford homes right now,’ said Joshua Clark, an economist at HotPads. ‘That’s keeping people renting and that’s going to keep people competing against each other for the same units.’”

ZACK ELLER’S DEAL OF THE DAY

Wibmo, a provider of premium payment security and digital payment solutions, has been acquired by PayU, a provider of payment processing services for $70 million. “‘The acquisition will bring together PayU’s strong merchant network and Wibmo’s digital transaction security solutions expertise for merchants and financial institutions in India and other high growth markets,’ PayU said in a press statement.”

CANNABUSINESS

Being CFO at a cannabis company can be different: “This chief financial officer and former Ernst & Young accountant leans into an unmarked armored van where there’s a metal cage to protect the revenues for his company, Canndescent, from would-be thieves. ‘Over the course of a month, we probably have $2 million in cash that’s in some state of transit,’ he says. By the end of the year, that’s expected to top $4 million, which will mean more armored vans and heavily armed guards. …

“DiGiovanni looks like he could be Ray Liotta’s brother, with a nightclub bouncer’s build. He says he likes living on the edge—at least businesswise. That’s good, since aspects of his job feel more akin to gangster than pencil pusher. Marijuana is legal medically or recreationally in 34 states, but it’s still illegal under federal law. And though many businesses have entered that new gray market, the financial services industry has not. No major US banks will open accounts for a company like Canndescent or its retail clients.”

E-COMMERCE

Dream Market, one of the world’s most popular dark web marketplaces, closed down over the weekend. The site, which was “founded in 2013 and only accessible with anonymity software, has been among the busiest drug sites in operation today, specializing in sales of narcotics as well as stolen data. But administrators announced Tuesday the site is going down on April 30, and moving its files to a ‘partner service,’ according to a screenshot provided by the dark web intelligence company IntSights.

“The announcement coincides with announcements from the FBI and Europol that they have arrested 61 people and shut down 50 dark web accounts as part of an international police operation. Perhaps because of the raids or because of similar sting operations in the past, dark web watchers have warned each other to assume police are lurking on Dream Market. ‘The dark web is not as dark as you think,’ Catherine De Bolle, Europol’s executive director, said in a statement.”

And that’s what’s ahead.

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

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