Category Archives: Business and Economy

Briefly considering the factors behind less successful social media platforms

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Social media may seem all powerful and present at this particular moment but it may be helpful to remember that numerous social media platforms did not succeed and for a variety of reasons:

By the New York Times’s and Abrams’s own account, though, hubris killed Friendster. A group of venture capitalists persuaded Abrams to turn down a $30 million offer from Google and then ran it into the ground with novel features rather than keeping the creaky site functioning smoothly. Pages just didn’t load…

In 2008, two years after reportedly surpassing Google as the most-visited website in the United States, Facebook eclipsed Myspace’s monthly user count. In 2011, when Myspace announced it was laying off half its staff, the New York Times attributed its decline to “fickle consumers and changing tastes”; a corporate “culture clash”; litter of celebrity promotion and pop-up ads; and Facebook’s standardized utilitarian interface–meaning that prefab profiles with names stylings like John Doe versus jdoe1234 were appealing to people. Forbes attributes Facebook’s generic design and its slow expansion through universities (with school email address verifications) and 13+ age policy to a perception that Facebook was a “safe space,” which would have incidentally coincided with a technopanic created by news reports of pedophilia. Social media scholar danah boyd performed an extensive study finding that racism also played a part, with upper-middle class white users deciding to wall off into exclusive groups…

The app for college students that quickly turned into a Black Mirror episode. Yik Yak, the anonymous messaging app designed by frat brothers Tyler Droll and Brooks Buffington with campuses in mind, allowed users to broadcast posts within a five-mile radius without creating a username. It soon became a scourge on 1,600 schools, terrorized by Yik Yak-borne threats: bomb threats which led to multiple lockdowns and evacuations, a threat of a “Virginia Tech 2.0,” threats by white students to kill black students, threats to rape and “euthanize” feminist students, and general cruelty and mockery encouraging suicide. Several schools banned it, subpoenas and court orders were issued, federal complaints were filed against schools, and Yik Yak had to disable the app near high schools and middle schools altogether…

Over the next decade, Orkut never took off in the US but was huge in Brazil and India, at one point, claiming 27 million members to Facebook’s 4.2 million. Orkut ostensibly fulfilled the same basic needs, but observers/analysts/users attributed Facebook’s dominance to a number of factors: Facebook had more games, the feed, the like button or notifications, a more “professional” look, mutual friends , and cultivated a following of international students and “professionals” who brought Facebook back to India.

These explanations have a tinge of post-hoc analysis made easier by comparisons to which platforms did succeed. But, a full explanation of what leads to success for some platforms and not others likely gets complicated by a variety of factors:

  1. Timing. When is the platform introduced, how much of a user base does it attract and at what speed, and how does it compare at the time to other options?
  2. Particular features offered.
  3. The user experience/interface.
  4. Organizational skills. Could the company effectively move forward or did it keep making problems for itself?
  5. Financial backing.
  6. Appeal to a narrower or broader audience.

That Facebook is viewed as a success does not necessarily mean that it had all the appealing features or a certain genius at its helm or simply arrived at the right time and in the right place. How fields develop like this is complex and littered with winners and losers, some more responsible for their own fate and others more influenced by the social forces around them. And developing the full story will likely take time as we assess how today’s winners fare and how social media itself as a form of technology evolves.

Bringing medical clinics to vacant shopping mall space

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Filling emptying shopping malls can be a hard task. Add medical services to the list of possible replacement uses:

Mall of America in Minneapolis, America’s largest mall, announced plans last week to open a 2,300-square-foot walk-in clinic in November with medical exam rooms, a radiology room, lab space and a pharmacy dispensary service. Mall of America is teaming up with University of Minnesota physicians and a Minnesota-based health care system to operate the clinic…

While mall leases for clothing retailers declined by more than 10% since 2017, medical clinics at malls have risen by almost 60% during the same period, according to Drew Myers, real estate analyst at CoStar Group. The growth of medical clinic leases at malls has been the “strongest among all major retail sectors over the past five years,” he said.

Mall landlords are betting that when patients visit for a flu shot or eye exam, they’ll shop around for clothes or electronics. Adding medical clinics also makes sense for mall owners because they draw in doctors, nurses and technicians every day who may shop and eat at restaurants, according to a May research report by real estate firm JLL. Health care providers are also attractive tenants for mall landlords because they tend to have high credit ratings and sign longer leases compared with other retailers, JLL analysts noted.

On the provider and health insurer side, shopping malls give companies convenient locations to set up outpatient care posts and preventative care locations for patients. Providers are increasingly looking to these lower-cost clinics to help patients avoid expensive trips to the emergency room.

The medical offices can serve the new residents and commercial uses that are also now occupying shopping mall space in addition to blending shopping and medical trips (dubbed “medtail” in the article). Just wait until the new hospital takes over the mall and patients and visitors can walk out one door and into a clothing store down the hall.

More broadly, this hints at a blending of activity within single structures that suburbs are not used to. Suburbs are known for separating land uses, often with the goal of protecting single-family homes. Suburban downtowns, places where multiple uses might be found, are limited and now often seem geared more toward entertainment and cultural use. Could the shopping mall truly be a community center in the coming decades with more residential units, medical offices, and community spaces?

Mantra of the gig economy: “Experiences driving with Uber may vary”

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A radio ad from Uber for drivers ends with this disclaimer: “Experiences driving with Uber may vary.”

Is this here for legal purposes? To accurately describe the variability in the position?

Jobs like these are often billed as easy ways for someone to earn some extra money: the drivers gets to pick when they want to work, they get to use their own vehicle, and the position could appeal who those who like to drive and/or meet people. This reminds me of Dave Ramsay’s common advice that those with debt should pick up a second job delivering pizzas to help bring in extra money. The flip side is that they may not be able to make that much money. They might have some unruly customers. The job puts wear and tear on their vehicle. The position may not last for very long or someone could be an Uber driver for years. Can someone make a decent living driving for Uber? Or, do they also need to deliver some Amazon packages, do freelance writing or web editing, complete some TaskRabbit jobs, and be a cashier somewhere to make ends meet?

Overall, the disclaimer strikes me as a pretty succinct way to summarize what supposedly is the wave of the future: workers taking on a variety of jobs as they so choose. I would guess Uber is not trying to engage in such metacommentary yet it can be hard to pin down many corporations on exactly how they view their employees or contractors.

Beware of buying a 1×100 plot of land between villas at a real estate auction

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One man was surprised to find out what he actually purchased in a Florida real estate auction:

Kerville Holness thought he’d done a great job snapping up a $177,000 Tamarac villa for only $9,100.

He got a 1-foot-wide, 100-foot-long strip of land on Northwest 100th Way — valued at $50.

It starts at the curb where two mailboxes have been installed, goes under the wall separating the garages of two adjoining Spring Lake villas, then extends out to the back of the lot…

The message from county officials and real estate experts is that auction participants need to do their homework and make sure they’ve checked for all possible problems a property might have…

Real estate is a hot investment option these days. Add the interest people across the United and world may have in property in southern Florida plus the ability to purchase online and you could get more situations like this. How many people would be willing to purchase a property without ever seeing it?

Perhaps the answer going forward is that a lot of people would be willing to do this. If you can buy a car without driving it first, then more and more properties and units could go this way. In hot markets where properties go fast and the competition is fierce, it probably already happens at higher rates.

I wonder if at some point there could be a local backlash about Internet property sales. Just the idea that someone from anywhere could purchase land or buildings might make some nervous. Takes places like Vancouver or southern California where outsiders are making a lot of purchases. Or, perhaps the backlash from angry buyers who did not get what they thought they would (such as in the story above) could change Internet property sales. What format or what details are needed to truly make physical property a salable commodity to Internet buyers all over?

Strategies for renovating old downtown office buildings to compete with new towers

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Pressure on office and residential space in Chicago’s Loop is coming from multiple angles, including the need for older buildings to adapt to modern office requirements:

Kamin said he expects more office buildings to find a second life as hotels or residential towers. “I don’t think there’s a successful path for some of these functionally obsolete buildings as offices,” Kamin said…

The high cost just to acquire a property presents relatively few opportunities for major overhauls, said developer Craig Golden of Blue Star Properties…

The venture took out a nearly $100 million construction loan in 2016, and converted the 20-story building into modern offices, branded as The National — a reference to the property’s 1907 opening as the home of Commercial National Bank.

The developers added the type of distinguishing feature that has helped properties thrive in recent years, creating the sprawling Revival Food Hall on the ground floor. The food hall brings in lunch crowds from throughout downtown, adding to the building’s vibrancy. Office tenants include co-working firm WeWork and the headquarters of Paper Source.

I have heard that it is often cheaper for companies to build a new big box store than to reuse and/or renovate one built by another company. Thus, problems with vacancies when companies close locations. Could the same be true for downtown office buildings – the cost of renovation is too high? I find this a little hard to believe given the difficult process that can ensue in order to construct a sizable building in a major city.

Similarly, the strategy of adding enticing dining options echoes what is happening with shopping malls expanding beyond retail to dining, residences, hotels, and a variety of entertainment establishments. The goal is to both promote multiple uses but also cross-traffic between organizations and business as people need to work, eat, enjoy life, and sleep.

Perhaps we will know there is really a problem when multiple older structures are torn down to make way for new buildings.

Trying to create a bust-proof oil city

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Midland, Texas is looking for ways to utilize the benefits of the current oil boom to prevent a future bust:

In the Permian, “we don’t say boom anymore,” according to Morales, who serves as mayor of the nation’s fastest growing city. “We’re very sustainable. The boom-and-bust era is over.”…

The Permian rose from the dead with the advent of fracking a decade ago to become a market beast, producing about a third of U.S. oil as it grew to become one of the world’s most prolific oilfields.

In the process, though, local resources were stretched beyond their limits. Now, Morales and others say the region may be settling into adulthood. Employers still struggle to fill jobs in competition with the oilfields, roads are jammed, schools overflow and home prices are sky-high. But local leaders say they have plans and resources set to secure a long-term future…

The partnership being forged between the oil companies and the local communities is unlike anything achieved elsewhere, Bentley said.

Growth is good in any American community. When the population is increasing, businesses arrive in town, and money is being made, a lot of problems can be overlooked (including the issues of adjusting to sudden or rapid growth).

But, growth does not always continue or move at the same pace. This seems especially true for places reliant on limited natural resources like oil. At some point, the oil runs out or prices change and the boom is over. Reliance on any single industry or produced good – think Detroit and cars – can lead to problems.

I would guess that few communities could quickly replace or recover from the loss of a business sector that seems to be as important as oil is in Midland. At the same time, resiliency is a buzz word in many circles as cities, regions, and states consider how they might set themselves up to be more adaptable to the sudden changes that could come. Imagine New York City without the finance industry, Silicon Valley without tech, Miami without tourism and beaches, and so on. Building infrastructure now and sowing the seeds for other industries and sectors to grow in the future could be a good hedge for a time when oil is not booming.

The late 2000s “global economic meltdown” and values of McMansions

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One columnist connects the economic crisis of the late 2000s and McMansion values:

Perhaps you thought the last decade’s global economic meltdown, which crushed stock prices and McMansion values, would most hurt the wealthy. Nope. The gap between rich and poor in the U.S. expanded in the aftermath of the Great Recession. The (sarcastic) good news: America’s wealth gap expanded less than Bulgaria’s between 2010 and 2017.

Three quick thoughts:

  1. McMansions are often cited as a symptom of the problems that led to the economic crisis and housing bubble of the late 2000s. The spirit of consumption in the United States with lenders providing more and more risky loans (and not recognizing the problematic loans and then selling and buying them as if they were good investments) plus decisions by consumers to purchase more and acquire debt all contributed to the larger issues. If you needed one symbol of excessive consumption from the early 2000s, commentators often go for the McMansion or the SUV.
  2. While the McMansion became an important symbol, housing prices almost across the board declined precipitously. Not just McMansions were affected. And since most American single-family homes are not McMansions, it seems a bit odd to single them out here. Many Americans who would not or could not purchase McMansions felt the effect of declining property values.
  3. Housing construction declined during and stayed depressed for a number of years after the economic crisis. Even during this down time, builders continued to construct McMansions. And once the economy started to pick up, more McMansions appeared. While the economic trends certainly affect how many McMansions go up, the style of home has some staying power. Even if such homes helped contribute to the economic crisis, some Americans still want to build and buy them. The value of such homes may not be the only reason people build and buy them.

Beleaguered shopping malls face more closing stores

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Shopping malls face multiple challenges, including more and more store closings:

It’s only April, but already this year more store closures — nearly 6,000 — have been announced than in all of 2018…

U.S. retailers so far have announced they will shut 5,994 stores, while opening 2,641, according to real estate tracking done by Coresight Research. That’s more locations slated to go dark than during last year. In 2018, there were 5,864 closures announced and 3,239 openings, Coresight said.

The planned closures include more than 2,000 from Payless ShoeSource, which filed for bankruptcy, hundreds from clothing retailers like Gymboree, Charlotte Russe, Victoria’s Secret and Gap, and discount chain Fred’s. Meantime, chains like Aldi, Dollar Tree, Ollie’s Bargain Outlet, Five Below and Levi’s are planning to open more stores…

With more store closures likely on the horizon, consumers can expect to start seeing hotels, gyms, apartment complexes, more food halls and grocery stores at traditional malls, turning them into more like city centers. The new Hudson Yards mall, which opened in New York last month, is the perfect example of this mixed-use model.

Before long, shopping malls may morph more into entertainment and public spaces than shopping spaces. In today’s world, it is not enough to cluster a bunch of national retailers together in an indoor or outdoor setting surrounded by plenty of free parking. The era of teenagers hanging out at the mall (and efforts to counter those gatherings) may be over. And it may not be only shopping malls that are in trouble; this may not be an issue of too much suburban sprawl. Rather, shopping districts all over the place, even in Manhattan, may be threatened. Some of these shopping areas will continue, particularly those surrounded by wealth or those that offer unique “cosmopolitan canopies.” Others will be transformed to the point that it will be very difficult to discern they were once shopping malls.

Furthermore, it will be interesting to see how these retailer brands disappear into the night or return in new forms or with new emphases or new money. Will Payless come back? Is Gap in its death throes and will its lessons be absorbed by companies taking up that same business space? Can Sears hang on another decade or even make a comeback?

 

Uniqlo, don’t lose your edge by appealing to the suburban market like Gap did

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An overview of Uniqlo suggests it would do well to avoid becoming the wear of suburban families:

Uniqlo isn’t in the business of chasing trends. Its staples—versatile black pants, reliable oxfords, crisp cotton socks—are available month after month, year after year. A more apt analogue would be the Gap. In its 1990s heyday, the Gap revolutionized American retailing by making basics cool. But the company eventually became a victim of its own success. “When [the Gap] tried to go from having a certain cachet to being in every single mall in every single town in America, the brand lost its edge,” Steve Rowen, a managing partner at Retail Systems Research, told me. Gap clothing became the uniform of suburban moms and dads. Despite the company’s efforts to make its khakis less baggy and its shirts slimmer, no one wants to fall into the Gap anymore—especially when you can get cheaper basics with cleaner lines at Uniqlo…

That could be an opportunity to make a good first impression. But as Uniqlo learned when it arrived on American shores, first impressions can be hard to manage. The three original U.S. stores were in New Jersey malls, where the company soon encountered several hurdles, including fit. (American customers, on average, are taller and fleshier than Japanese shoppers.) It closed the stores within a year.

Uniqlo has continued to struggle in suburban markets. Rowen, of Retail Systems Research, said he thinks the company should hew closely to cities, where it has found its greatest success, because that’s where its core customers are. This would also help it avoid the fate of the Gap, which traded its sense of self for growth.

This could be a simply story of a company being cautioned to avoid the mass market because doing so would lessen is cool factor. But, it is interesting that this is cast primarily in suburban/urban terms. The dilemma appears to be choosing between these two points:

  1. The majority of Americans live in suburbs. If a company wants to hit it big, the American people are in the suburbs. Furthermore, there is a lot of money to tap in the suburbs as well as future generations of loyal brand adherents in the form of suburban children.
  2. Being associated with the suburbs – shopping malls, parents, the mass market – will change the brand and eventually render it obsolete.

It is also worth considering numerous other brands that have appealed to suburbanites and survived. Is the clothing market that different than the smartphone and tech industry? In other words, does Apple suffer because so many suburbanites have an iPhone or are they the rare example of a company that has kept its cool factor even while becoming ubiquitous?

If this were an American company, I might guess that they would eventually go for the suburbs with all its money and potential buyers.

Advertising your business as five miles east of a wealthy suburb

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Suburban businesses can use odd geographic markers to describe their own location. One building material company in the Chicago area regularly runs radio ads with this description of their location: five miles east of Oak Brook in Broadview. Why might they do it this way?

  1. Compared to Broadview, Oak Brook is a more known location.
  2. Oak Brook has a large shopping area with a mall and all sorts of restaurants and other businesses nearby. People already out shopping may be willing to drive a bit further.
  3. Oak Brook is a higher status community with more wealth. Also, Broadview is majority black and Oak Brook is majority white.
  4. They are trying to reach wealthier suburban customers. This is why they do not say they are roughly 14-15 miles from the center of the Loop.

All in all, the Broadview location is about 10 minutes east of Oak Brook. That is not a long drive for suburbanites who may be willing to drive all over the place for good deals. And the advertising strategy may have some effectiveness as the business keeps using it. Still, it strikes me as a bit odd to downplay their own location in favor of a suburb five miles away…