Counterfeit Power Tools
CBS reported that consumers are being scammed by fake web retailers advertising DeWalt and Milwaukee brand tools and storage chests for well below retail. A 10-piece set of tools from DeWalt that should retail for about $1,000 was advertised at $95. The problem has become so severe DeWalt posted a warning about the scams on their website. Storage chests and other tools are similarly priced far below retail. Reportedly, consumers who order these tools receive cheap Chinese imitations. CBS recommended purchasing tools from legitimate retailers such as The Home Depot and Lowe’s.
Persistent Inflation Blamed on Supply Chain Problems
Fed Chairman Jerome Powell believes the current bout of higher-than-normal inflation could last into early next year, because supply chain bottlenecks are getting worse rather than clearing up as he had hoped. Shortages of parts and materials are affecting availability and prices throughout the supply chain. Retailers are warning that holiday gifts, especially electronics and toys, may be hard to come by. Shipping and delivery services from the US Post Office to FedEx and UPS are all raising prices and extending delivery times. While Powell said it is very difficult to gauge how long this current bout of inflation will last, he continues to believe that inflation will cool off in 2022 as shortages ease.
Suburbs and Exurbs Growing Fastest
Home construction is continuing to shift from high-density metro areas to more affordable regions, according to the latest Home Building Geography Index (HBGI) from the National Association of Home Builders (NAHB). Lower land and labor costs and fewer regulatory hoops to jump through are making these markets more appealing to builders. More affordable housing is making them more appealing to prospective homeowners. In addition, the migration out of densely packed cities and expanded teleworking are providing an influx of badly needed labor. The growth is most pronounced in the multifamily residential market, but single-family home construction is also creeping up in these more affordable areas and slipping in the most expensive counties. Exurbs and outer suburbs of medium-sized cities accounted for 18.1% of single-family construction in the second quarter, a market share gain of 0.8% since the fourth quarter of 2019. Over the same time single-family construction in core areas of large and medium-sized metros dropped 1.2%.
Associations Dominate New Homes
According to data from the Census Bureau’s Survey of Construction (SOC), 67.1% of single-family homes started in 2020 were built within a community or homeowner’s association. This is a record high for the association percentage since the redesign of the SOC in 2009. The share of all new homes built within a community or homeowner’s association declined slightly in 2019, but otherwise has been trending up consistently from 47.6% in 2009 and reaching at least 50% by 2011. The percentage of homes being built within HOAs varies greatly by region, accounting for 80%+ of new construction in the Mountain and South Atlantic regions to a low of just 26.8% in the Mid-Atlantic.
Contractors Struggle with Shortages of Skilled Craft Workers and Materials
Contractors are struggling to find enough skilled craft workers as well as deal with pandemic-induced project delays and supply chain disruptions, according to a workforce survey from the Associated General Contractors of America and Autodesk. Almost nine out of ten surveyed contractors reported they are having difficulty finding craft workers this year, compared to 52% last year. In addition, 88% of the more than 2,100 participating decision-makers from a range of several contractor types said they are experiencing project delays and nearly all, 93%, said their businesses have been affected by rising materials prices. The survey went on to note that contractors believe the industry needs to take a more active role in showing young workers and workers who want to change careers that the skilled trades have a lot to offer. The overall construction industry lost 587,000 jobs in 2020 when the COVID-19 pandemic hit the economy. Recovery has been fairly steady since, but the industry is still far short of full employment as home building and related construction activities play an increasingly important role in the broader economy.
Combatting the Worker Shortage
Job openings are at a record high, and companies in many industries are facing worker shortages. Recruiting and retaining employees has been particularly tough for frontline jobs in manufacturing and distribution and for businesses that interface with the public where working remotely is not an option. Flexible schedules, hybrid jobs, on-the-job training, opportunities for continuing education and retraining for the jobs of tomorrow are all becoming the norm.
Amazon offered to pay the cost of a four-year college education for 750,000 of their frontline workers as part of an extensive array of benefits and programs designed to attract and retain staff during the current labor shortage. They’ll cover tuition fees and textbooks after someone has been employed at least 90 days as long as they remain on the payroll. Amazon will pay when the expenses are due rather than requiring employees to foot the bill and then submit for reimbursement. Amazon will also begin covering the cost of other types of education, including high school diplomas and English-language courses, as well as extending on-the-job career training to 300,000 people.
Many companies in transportation and logistics are offering signing bonuses, raising their pay scale and getting more creative about recruiting. Trade organizations and unions are promoting the skilled trades in high schools. While 18-year-olds can get a commercial driver’s license in many states, they can’t drive on the interstate until they’re 21. Now there is a move underway to lower that age requirement to 19.
Companies of all types and sizes are using social networking sites like Facebook and Twitter to advertise job openings and recruit potential employees. LinkedIn, Facebook and Twitter were all rated as highly effective by more than 50% of HR managers responding to a recent survey by the Society for Human Resource Management, with LinkedIn getting a thumbs-up from 67% of respondents. In addition, companies post company info, job openings, tips and advice for applying, plus information about what it's like to work for the company on their Facebook pages and social media sites.
Technology adoption is on the rise, with 57% of respondents to a survey by Associated General Contractors reporting their use of technology has increased over the past twelve months. Nearly 60% of respondents expect it to continue to increase as they look for ways to streamline bidding, document management, workforce management, site inspections and site and worker safety.
National Shipper Advisory Committee
Some of the largest and most powerful companies in the US will now have a say in shaping transportation policy, thanks to a new committee formed by the Federal Maritime Commission (FMC). FMC Chairman Daniel Maffei said that the commissioners need rapid access to the perspectives of importers and exporters on the ground who are dealing with the realities of ocean shipping every day. Among the members of the new committee are representatives from Amazon and Walmart. The committee will consider many factors, including commodities shipped, ports used, geographic areas served, origins of cargo and other relevant factors. The current members will serve until the end of 2024. The advisory panel was formed as companies deal with persistent bottlenecks at ports and extended shipping delays. Many shippers have complained that carriers are taking advantage of the unprecedented pandemic-driven demand for carriers’ services by raising prices to a level that goes well beyond increased costs.
Beating the Pandemic
A tough program to encourage America to get vaccinated to protect themselves from CV19 was rolled out in early September by President Biden. The plan mandates vaccinations for all Federal employees, all hospital personnel at hospitals that receive any funding from Medicare and requested that OSHA use its power to require companies with more than 100 employees to require vaccinations. There are some exceptions as well as an option for weekly testing in lieu of being vaccinated in some circumstances.
The measures apply to about two-thirds of all US employees who work for businesses with more than 100 employees. Some companies immediately applauded the measure, including Amazon. Microsoft and Facebook noted that they already required employees to be vaccinated. The National Association of Manufacturers, the largest US industry group, said that getting eligible Americans vaccinated is an economic imperative and they will work with the administration to ensure that the mandate does not interrupt operations. President Biden’s plan requires companies to give employees paid time off to get vaccinated or provide an opportunity on-site. A Gallup poll in late August showed that 55% of Americans supported vaccine mandates; an AP poll showed about 50% support from the public.
Over half of the employers (52%) expect to have vaccine mandate requirements in the workplace by the fourth quarter of 2021, according to a nationwide poll by ABC News. At the time of the poll in mid-August 21% of firms had some type of vaccine mandate in place for employees.
The polls done post-mandate also show the majority of Americans support a mandate, but there are deep divisions along party lines. Many companies and local governments are offering incentives for employees to get vaccinated. The plan also includes making discounted over-the-counter rapid tests available at Amazon, Walmart and Kroger.
Many large retailers are also reinstating mandatory mask policies for employees and customers regardless of vaccination status in CV19 hot spots, including Walmart, Sam’s Club and Target.
Amazon Dethrones Walmart
Amazon became the world’s largest retailer outside of China according to corporate and industry data, as Amazon customers spent more than $610 billion over the 12 months that ended in June 2021. Walmart reported global sales of $566 billion for the same period. Numbers were analyzed by financial research firm FactSet. The largest retail seller in the world remains China’s Alibaba; neither Walmart nor Amazon are dominant forces in the Chinese market. Wall Street analysts also noted that as the new leading player, Amazon will inherit Walmart’s unwelcome characterization as “the Big Bad Wolf” that puts other retailers out of business.
Amazon Takes on PayPal and Shopify
Top Spender on Artificial Intelligence
The retail industry will soon take over the top spot for spending on artificial intelligence (AI). Companies including The Home Depot and Walmart are turning to AI for a wider variety of operations, from inventory management to more personalized online search and shopping, according to market research firm International Data Corp. The global retail sector is expected to spend $11.8 billion on AI this year, up from $9.36 billion in 2020. Spending in the sector is expected to grow at a compound annual growth rate of 25.5% between now and 2025. Retailers who want to take advantage of the growth in ecommerce that was jump-started by the pandemic are increasing their AI spending. They’re hoping that better understanding their customers and improving the customer experience will help them boost sales.
Retail Customer Loyalty Scores
Walmart has the most loyal customers in the US, with a loyalty score of 3.22, according to a report from InMarket that identified the top ten retailers in the second quarter of 2021. Rankings were based on customer loyalty, which was defined as average return visits per customer. Also in the top ten were Lowe’s, Target, The Home Depot, Dollar General and Sam’s Club. The report went on to note that many of the investments retailers made to serve customers during the pandemic greatly increased loyalty, including curbside pickup, speedier deliveries and expanded online and brand offerings.
Holiday Retail Sales Forecasts
US holiday retail sales are expected to increase between 7% and 9% in 2021, according to Deloitte’s annual holiday forecast. Deloitte projects that holiday sales will total $1.28 to $1.3 trillion between November and January. They also forecast that ecommerce sales will grow by 11% to 15% year over year, which would result in online sales of $210 to $218 billion. Last year’s holiday sales were stronger than expected, growing by 5.8%. Deloitte believes that spending will be strong across all channels, both in stores and online. However, they do believe that some spending on services and experiences will return and that gift cards will continue to rise in popularity.
Retailers are working hard to bulk up inventory ahead of the holidays so they don’t miss sales. The media is already warning consumers about holiday shortages and shipping delays and urging people to start their shopping immediately. Retailers’ efforts to push more goods to stores and warehouses follows a drop in inventories over the past year. Many retailers pulled back orders in the early months of the pandemic and have been dealing with shortages and supply chain backups as they try to restock. According to several surveys, about 40% of consumers have already started their holiday shopping.
The ratio of US retailers' inventories to sales fell this spring to the lowest level in US Census Bureau records dating to 1992, and the measure has ticked up only slightly even as record volumes of container imports have flowed into the U.S. Jason Miller, an associate professor of logistics at Michigan State University's Broad College of Business, said the declining inventory measure has been driven by strong sales in consumer goods and shortfalls in specific categories
The Post Office, UPS and FedEx are all telling people to ship early and expect holiday surcharges and shipping delays. The Post Office will add a surcharge to most packages sent between October 3rd and December 26th.
Inmar Intelligence reports that 60% of respondents to their latest holiday survey plan to spend at least $400 on gifts this holiday season. About half say they'll take advantage of Black Friday and Cyber Monday deals to make their holiday dollars go farther. A majority of respondents plan to host holiday gatherings. About one-third do not plan to travel but will celebrate at home.
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