Economy

A mobile society? Maybe not so much.

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The United States has long been known as one of the most mobile societies on earth. Throughout the history of our nation, Americans have seemingly always had a major collective case of wanderlust.

This was especially true during World War II when hundreds of thousands of servicemen and women found themselves posted to places far away from home. Getting a taste of unfamiliar and interesting locations — so different from what they knew growing up — many people elected not to return home from the war.

My father, who was stationed in Alaska during World War II and was mustered out of the Army Air Corps in San Francisco/Oakland, tells of acquaintences who opted to take a small cash payout and stayed in California, rather than accept free transport back to their homes in New York, Pittsburgh, rural Alabama or wherever.

In the 1950s and 1960s, the population growth of the Mountain and Pacific States plus plentiful manufacturing jobs throughout the Midwest sparked dramatic population migrations from South to North and from East to West. Families took annual vacation road trips of 1,000 miles or more, fueled by cheap gasoline and the brand-new Interstate highway system.

Today, things look much different. According to a just-released Rasmussen poll, 90% of respondents report that they have lived in the same state for at least the past five years. And nearly three-fourths report that they’ve lived in the same state for more than 20 years.

This news comes hard on the heels of the U.S. Census Department reporting that only ~35 million people changed where they lived from March 2007 to March 2008. The Census Bureau noted that this was the lowest number recorded since 1962 — when the United States had 120 million fewer people.

More recent stats for the comparable 2008-09 period aren’t yet available, but I suspect the numbers have declined even further. If so, it will represent a big change in one of America’s most unique and defining aspects — its mobility. I wonder … is another one of America’s trademark characteristics now becoming more a myth than reality?

What?! A Reduction in Postal Rates?

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The first class postage rate is going up again this month. But not so fast! The USPS is actually having a sale on postage as well.
The new first class postage rate is going up again this month. But not so fast! The USPS is actually having a sale on postage as well.
Death … taxes … rising U.S. postal rates. It seems all three of these things are just a given. And the USPS is getting ready to up the price mailing a first-class envelope another 2 cents, effective next week.

But hold on! Because it’s suffering from a significant decline in mail volume approaching 15%, the USPS is concurrently rolling out a special program heretofore never seen from this most politically tin-eared of government agencies. The impressively named Saturation Mail Incentive Program gives large standard mail direct marketers who increase their mailing volumes the opportunity to earn per-piece credits — discounts essentially — on their mailing activity.

The discounts themselves are rather small — ranging from 2.2 cents per nonprofit letter mailer to 4.0 cents per flat piece (catalog).

… And the “fine print” conditions as to who actually qualifies for the discounts are almost byzantine in their description.

… And the savings are for a limited time only (~1 year) beginning this month.

… And program participants must formally apply to the USPS for approval.

… And they must do so by June 11 or lose their opportunity to participate at all.

… And, and, and … Well, you get the idea.

But the fact that the postal service is actually throwing a “sale” on rates is big news in and of itself. When has this ever happened before?

Quoting the eloquent words of USPS spokesperson Michael Woods, “The Postal Service is always looking for ways to use our pricing flexibility to improve business, and the current economic climate makes that more important than ever.”

Translation: “We’ve lost a pile of business in the economic downturn, and maybe if we lower our prices, we’ll get some of it back.”

Good luck.

We’ll check back after a few months to see how things are going. Judging from the most recent financial results published this week — a quarterly loss of nearly $2 billion — we may not see much improvement. After all, the USPS has managed to make money in only one quarter out of the past eleven!

UPDATE (5/18/09) — The USPS has now finalized the program, which will now launch July 1. Details are here.

Yet Another Headache for the U.S. Auto Industry

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Several Mexican drug cartels are very active along the U.S. border.
Several Mexican drug cartels are very active along the border -- and U.S. auto parts plants are getting caught in the crossfire.
Now here’s an interesting confluence of events that at first blush seem totally unrelated to each other: the U.S. automotive industry and the Mexican drug wars. As if the auto industry didn’t have enough problems on its hands, now it’s finding itself in the crosshairs of the Mexican drug cartels’ shootout with the government in towns along the U.S. border.

Ciudad Juarez, Mexico is a factory town that happens to have its share of U.S.-owned auto supply factories, drawn to the region by cheap labor rates averaging less than $1.50 per hour. Always a tough city, Juarez has gotten a lot more dangerous in recent months. The raging violence peaked several months back with drug gangs killing six police officers in one single week before the Mexican government sent military troops in.

Civilians and foreign nationals are also at risk, it turns out. In January, a plant manager for Detroit-based auto parts manufacturer Lear Corporation was kidnapped on his way to work in Juarez, and a $1 million ransom was demanded for his release. Shortly before this drama unfolded, the firm’s local facilities were attacked by a band of gunmen armed with assault weapons; reportedly, they were after employees’ Christmas bonuses plus proceeds from the plant’s ATM machine.

Auto parts maker Delphi has also reported a number of disturbing incidents, including the attempted kidnapping of one of its female executives.

So, in addition to being faced with a blizzard of bad news on the domestic front stemming from the collapse of automotive sales, the auto parts manufacturers are encountering an entirely different set of bad conditions on the border. In response, they’re taking special precautions, including adding more security (and vetting security personnel more carefully), removing ATMs from plants, restricting local personnel travel to daylight hours only, and even going so far as to keep their CEOs away from the region entirely.

But you can only wonder how much longer things can go on like this if the Mexican government doesn’t gain the upper hand in quelling the danger and the violence — and soon. After all, there are nearly 1,000 auto parts makers in the country, ~70% of which are subsidiaries of U.S. companies. That makes it very hard for the military to patrol so many locations against the seemingly random attacks, kidnappings, and other acts of violence.

At some point, the prospects of cheap labor and low costs will run smack up against basic safety, security and peace of mind. Other Latin American countries face similar issues … so might this mean a shift of some of these operations back to the United States? Now, that would be an interesting twist!

We shall see.

Now that April 15th is behind us …

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While we’re all catching our collective breath after filing our 2008 federal and state tax returns … it’s a good time to consider the most recent findings on Americans’ tax preparation behaviors.

You might expect that a significant portion of tax filers are now using “cheap ‘n easy” computer software programs like TurboTax to complete and file their tax forms.

Well … not so fast. A just-released survey conducted by Mediamark Research & Intelligence finds that only about 20% of U.S. tax filers used software programs. Another ~13% prepared their own returns the traditional way — by hand.

But fully half of respondents relied on outside professional help from a CPA, tax preparer or national chain resource like H&R Block — despite the fact that such services cost much, much more.

Why would half of all adults who file personal federal taxes feel the need to pay a lot more for professional assistance rather than take advantage of affordable software programs? There are a number of reasons: the complexity of the federal tax code … intimidating tax forms and instructions … concern about the safety and security of computerized software programs and electronic filing … and, not least, fear of retribution from the IRS for making an error.

The fact that many of the tax returns completed by professional preparers still contain errors doesn’t seem to make much difference. Many taxpayers would rather shift the responsibility of “filling out and filing” to somebody — anybody — else.

The Newest Wrinkle in Social Marketing: Getting Paid to Praise

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It had to happen. With the dramatic rise in the popularity and number of blogs and other social marketing sites on the web, sooner or later merchandisers would get wise to the fact that they can use them to pitch their products and services. And for just pennies on the promotional dollar.

How? By offering free merchandise or cash payments to bloggers who will then be favorably disposed to write positive reviews about new products. And with blog postings being indexed by search engines in just a few days or even a few hours, it’s an incredibly cheap way to gain positive exposure for their products and brands in cyberspace.

… Not to mention that many readers will not be wise to the authors’ tidy mercantile relationships with the companies whose products they are reviewing. This despite the efforts the Federal Trade Commission is making to update its nearly 30-year-old advertising guidelines to cover the new new-fangled techniques brought forth by the cyber revolution — tactics few could even have dreamed of just a few years ago.

How long will it be before the FTC has these new guidelines in place? Who knows? For the moment, there are no hard-and-fast rules regarding paid reviews. But there are some moves being made within the industry to provide “full disclosure” to readers. Blog entrepreneur Ted Murphy of IZEA Social Media Marketing requires his “for-hire” bloggers to insert an icon next to each product review that states: “Sponsored Post. 100% Real Opinion.”

“One hundred percent real opinion?” Does anyone seriously believe any sponsored post will be completely free of bias?

Of course, sponsored bloggers could write a negative review … and then watch as it’s the last time they ever have the opportunity to write for that supplier. Practically speaking, that’s not going to happen — and everyone knows it.

A more fundamental concern is what paid pitching is doing to the credibility of the blogosphere in general. If people find out that even one or two product reviews they read turn out to be nothing more than disguised advertising for the merchandiser, it could cripple the credibility of bloggers overall in the minds of those readers.

This whole phenomenon has the risk of turning a highly powerful consumer information resource into a caricature of itself. Those who read product reviews tend to be the more cautious – or the more suspicious – consumers among us. And so, despite providing every assurance that bloggers who are paid cash compensation or receive merchandise freebies for their posts will remain honest in their opinion … that’s not how it’s going to be received by the audience.

Advice to bloggers: If you value your credibility and your reputation, don’t accept quid pro quo compensation from companies whose products you are reviewing. Advice to consumers: As always … be careful of what you read online.

UPDATE: Two years later … and not much has changed. Here’s Honda’s latest shenanigans.

Another Win for the Tax Man?

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The threat of collecting sales taxes for Internet-based commerce has been rumbling in the background for years. But the latest news out of Washington may mean it’s finally coming to pass. And it’s generating its share of controversy.

A bill is expected to be introduced soon in Congress that would force Amazon, Overstock and other Internet retailers to collect sales taxes from their customers who shop online or through mail order. Co-sponsored by a Republican senator and a Democratic congressperson – which means almost certain passage – the bill would require states to inform retailers whenever there is a change in their tax code. This will have the effect of simplifying the tax collection and data reconciliation process.

State officials are understandably excited over the prospects of gaining additional sales tax revenue. And why wouldn’t they be? After all, sales tax receipts have dropped off in recent months due to a general decrease in retail activity. To them, this seems like a quick and easy way to replenish their coffers.

Plus, some brick-and-mortar retailers are surely happy about having a more level playing field. No longer will they have to compete at a disadvantage against online retailers that are saving their customers 6% or 7% sales tax on every purchase.

Of course, sales tax regulations have long been a thicket of complexity. In fact, a tidy number of sales tax collection software/service companies have sprung up over the years to help retailers make sense of it all. Not only are a myriad of different sales taxes set by individual states, but cities and other municipal entities within states can also set their own sales taxes as well.

To add even more to the potential confusion, each state has its own individual laws regarding what type of merchandise is taxable, or whether things like shipping expenses are taxable. So collecting the correct figure is often a tricky business, even for large online retailers.

As for sellers having multiple physical locations in addition to their online presence, depending on where those business locations are in relation to the online consumer’s place of residence can make for an even more complicated picture.

Are we having fun yet?

It’s no wonder online retailers intensely dislike playing the role of tax collector for the states. On the other hand, government officials absolutely love the idea that they can collect new funds without actually having to raise taxes.

And that’s what’s so interesting about this latest maneuver. No one is talking about an official change in tax law. Technically, online shoppers have always been required to keep their receipts and pay tax funds to their home state when filing the yearly state tax return. But be honest … do you know anyone who’s actually ever done that?

UPDATE (4/28/09): BusinessWeek is reporting that the particulars of the legislative bill are still being drafted. Of course, this isn’t the first time movement on a bill has been delayed in Congress. The magazine is also reporting that the bill’s passage is not a foregone conclusion … although opposition in this Congress appears to be lower than in previous ones. We shall see.

No froth in the beer industry …

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Can it be possible? The Beer Institute trade association is reporting that U.S. beer sales are actually declining.

Chalk up one more piece of evidence showing that this economic downturn is a vastly different animal. In previous periods of recession, beer sales did not really suffer. Perhaps that’s because it’s been a relatively inexpensive discretionary item. If you’re feeling down about the economy or your personal finances, why not drown your sorrows in a nice cold one?

Not so this time around. The Beer Institute reports that domestic brew sales have declined 4% in the first two months of 2009 compared to the same period last year, while import beer sales are off a whopping 19%. Not only that, foreign beer sales registered a decline for the entire year of 2008 as well.

Shipments from Mexico have fallen nearly 14% so far this year compared to last, led by Corona. But Corona is still America’s top-selling foreign brew, beating Heineken by a long shot. Speaking of which … beer sales from Holland have declined by an even bigger percentage (more than 25%).

What should we make of these statistics? Are Americans now tightening their belts on absolutely everything?

Or maybe we’re doing for our health what we’re also doing for our personal savings rate. Perhaps switching to something better than brewskies – like heart-healthy red wine? We’ll have to wait for the latest statistics from the National Association of American Wineries to find out.

Conference Centers to the Fore

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What a difference a few months make. “Way back” in 2008, high-end resort properties in exotic locations were doing a healthy business hosting corporate events. Large corporations have long been a core resort customer segment that has delivered volume business year after year – major contributors to the bottom line even as resorts have also attracted their share of weddings and other smaller events.

The economic meltdown has now brought hugely negative publicity to corporate events held at resorts, the result of news reports that federal government bailout money has gone to pay for them. These events have been described by politicians and the press as “outrageous,” “excessive,” “junkets” and “boondoggles” – places where well-heeled business types get to wine and dine and cavort in the sun on the taxpayer’s dollar.

Even the AFL-CIO union hasn’t been immune to the criticism, coming under fire for holding its annual convention at the exclusive Fontainbleau Hilton resort property in Miami Beach.

While one can certainly fault these companies and organizations for being politically tone-deaf, the fact is that business does get carried out at these events. Even in today’s electronic age, it is still important to organize face-to-face get-togethers on a regular basis.

Enter the Conference Center. This corner of the hospitality industry, long relegated to backwater status, has consistently labored under the image of being far less impressive and exciting than the resort segment. Now, sensing an opening, conference centers are making their move. They’re promoting themselves as a preferred location for serious business events – far away from tourist attractions or white sand beaches, extreme recreation or other distractions (the ubiquitous golf being the exception).

Properties like the Marriott Aspen Wye Conference Center in Maryland and the Wyndham Princeton Forrestal Conference Center in New Jersey are stepping up promotion, as is the International Association of Conference Centers. The basic message is that conference center properties are the places where productive meetings take place, free of distractions. “Serious-minded meetings are in … posh or over-the-top venues are out” is the order of the day.

Plus, right now it just sounds a lot better from a PR standpoint if you can report that your corporate event is being held in a location five miles from Trenton, New Jersey.

Skyscraper Graveyard

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apartment-buildingBook TowerOn a trip to Detroit a few days ago, my family and I stayed downtown in one of the city’s newly renovated grande dame hotels. The 1920s-era Fort Shelby Hotel, now part of the Doubletree chain, reopened last December after being closed for more than 25 years. It’s a jewel of a property stuck in the middle of one of the most depressed cities in America. Reportedly, a whopping $80 million was spent on its renovation.

The timing couldn’t have been worse. Just up the street is the even more palatial Westin Book-Cadillac, which was the world’s largest hotel when it first opened in 1924. It, too, stood vacant starting in the early 1980s, miraculously avoiding the wrecking ball before being rescued in a $200 million+ renovation and reopening this past October.

So what will help fill the rooms of these showcase hotel properties? If a flood of reservations actually materializes, it will be for the myriad lawyers, accountants and government officials descending on the city to pick apart General Motors and Chrysler Corporation.

The city of Detroit can’t seem to catch a break. First, there’s the real estate crisis that has seen property values plunge even faster than the national average. Today, the city’s median home sales price is below $10,000, which has to be the record low for a major U.S. city.

Next up, the spectacle of dilapidated infrastructure, a dysfunctional school system plus governmental corruption, nepotism and favoritism run amok – all culminating in Detroit’s mayor being sent to prison.

Now comes the implosion of Detroit’s auto industry that has sparked the nation’s renewed attention on the crumbling city, including human-interest television reporting and lurid photo essays like the one just published in Time magazine.

Sadly, this is Detroit. Riding the People Mover, the 2.5-mile monorail system that loops the perimeter of downtown, one can peer into the second-story levels of building after vacant building. It’s truly a metaphor for the entire city … and a peepshow for the rest of the nation.

Is there a natural bottom? The investors in Detroit’s old hotels seem to think so. But you have to wonder, would those investors have moved forward with these initiatives knowing what they know today?

It was photographer and social commentator Camilo Jose Vergara who suggested more than ten years ago that the empty skyscrapers of downtown Detroit be preserved in their current state as a memorial and monument to a vanishing industrial age. Of course, the city government leaders were horrified at the idea and objected loudly. But really, what other use could they possibly come up with for these relics – silent and stark reminders that a city once the nation’s fifth largest has shrunk in under 50 years to less than half its former size.

The Titanic Tribune

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The news about newspapers has been unremittingly bleak in recent days. The Rocky Mountain News.  Chicago Tribune.  Minneapolis Star/Tribune.  Going bankrupt or shutting down altogether.

And now we read that the Chicago Sun-Times has announced that it, too, is filing for bankruptcy.

Even more depressing than these reports is reading about the tactics some news organizations are adopting in order to roll out a new business model that’ll supposedly keep their brand “on the beat.” So now we discover that the Seattle Post-Intelligencer is going all-digital. The Hartford Courant is sharing its staff with two local TV stations and combining newsgathering duties. And the Detroit Free Press is cutting home delivery to three days a week.

This is like rearranging the deck chairs on the Titanic.

Strip away the flurry of activity and it all boils down to this: How many consumers really need newspapers anymore? Sure, there may be a smidgen of news in the paper that can’t be found (easily) on the Internet. But the issue is really one of preference and behavior.

Ask yourself: Who do you personally know who subscribes to your daily city paper? How old are they? I’d be surprised if they were born after 1950. And while the over-60 set may still prefer the ritual of reading the paper over a morning cup of coffee (a paper they paid for, no less), that’s a scenario one encounters less and less in the rest of the population.

The fact is, people want quick access to the news when and where they need it. Usually in short information bursts. On the go or at their desk … but far less often in an easy chair at home. The online sites of newspapers can provide this, of course, but so can so many other sources. No longer the big kids on the block with little competition and huge barriers to entry preventing others from encroaching on their turf, today’s newspaper publishers must clamor for attention among a gaggle of other online outlets – most of whom know how to play the game a whole lot better.

Darwin … or dinosaurs? The final verdict may not yet be in. But we already know how this is going to turn out.