Isegoria

Luxury sneaker markets are a preview of Capitalist Dystopia:

Buyers now use bots to automate sneaker purchasing to ensure they’ll get as many pairs as possible to resell on online sneaker marketplaces like StockX and GOAT. Retailers, meanwhile, have sought to guard against such bots through raffles, leading to a proliferation of raffle bots. Raffle bots will automate hundreds, if not thousands of entries. Bots themselves are sold and resold for thousands and created in limited supply to ensure they remain effective in an ever-more competitive purchasing arms race.

Consignment and resale stores are the result of side hustles becoming a primary business — one that’s now profitable enough to exist in retail space. Successful buyers market their own guides on sneaker investing. News articles hold forth on the value of kicks in investment portfolios. Enthusiastic YouTubers giddily sound off on whether or not you should “sit or sell,” claiming to possess insight on the potential long-term value of sneakers.

If you can master the tricks of the trade, it’s highly lucrative. Effective resellers can pocket hundreds of thousands of dollars. The terminology of sneaker resale markets offers a more urban version of the language used by Wall Street banks and investment firms.

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Consumers of rare sneakers range from collectors who will display their trophies and keep them as “deadstock” — industry lingo for shoes that are never worn — all the way to simple enthusiasts and those disparagingly referred to as “hypebeasts” — people who covet, wear, and obsess over every new release as a display of wealth.

The global sneaker resale market is valued at $2 billion and expected to triple in the next few years, reaching $30 billion by the end of the decade. This fall, StockX opened its first Canadian warehouse, another expansionary step for a global corporation already valued at $1 billion.

Frequent flyer miles are worth big money — to the airlines:

The Financial Times pegs the value of Delta’s loyalty program at a whopping $26 billion, American Airlines at $24 billion, and United at $20 billion. All of these valuations are comfortably above the market capitalization of the airlines themselves — Delta is worth $19 billion, American $6 billion, and United $10 billion. In other words, if you take away the loyalty program, Delta’s real-world airline operation — with hundreds of planes, a world-beating maintenance operation, landing rights, brand recognition, and experienced executives — is worth roughly negative $7 billion. But economics of the loyalty program don’t work without a robust airline operation.

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Spending money on a Delta-branded American Express card to earn points feels like getting free money, and redeeming it feels like getting a free flight. Since consumers mentally double count their points, they’re willing to accumulate them, which means banks and other counterparties have found it valuable to offer those points to consumers.

Typically, the airline will sell points to banks, who then offer those points to cardholders in exchange for spending. Once someone has picked out a loyalty program, they’re incentivized to be loyal and rack up points, so the bank knows they’ve acquired a credit card customer for the long haul. Exclusive partnerships between airlines and credit card issuers can be quite lucrative: Delta’s deal for American Express to be the sole issuer of its SkyMiles credit card was worth $3.4 billion in 2018, and the contract has since been extended to 2029. It’s a classic fintech play: provide a novel way to help exchange money now for money later at favorable rates. Since the loyalty rewards business is asset-light, grows fast, and is not as sensitive to economic cycles as the core airline business — United revealed that loyalty revenues dropped just 2% in 2009 — it raises the question: Why not just spin them off? That’s harder than it looks, and it gets to the crux of the airline industry’s problems.

Loyalty programs acquire customers because those customers want to earn and spend points with a particular airline that has flight routes optimized for their needs. That means they’re ultimately dependent on an airline’s route network. For example, if you do a lot of business in Atlanta, Delta’s your go-to airline; if work takes you up and down the West Coast, you’ll probably choose Alaska. When airlines decide which routes to expand and which to cut, they’re not just thinking about ticket prices — they’re also thinking about their loyalty members. Abandoning a major city, or even reducing routes to it, is a good way to permanently lose those lucrative customers.

That problem is especially hard because people like to earn miles on business trips and spend them on vacation. So an airline that cuts a route to the Bahamas or Vail might lose business in New York and Chicago.

Wired reports that the coronavirus pandemic is changing how people buy books:

When Andy Hunter launched his ecommerce startup Bookshop in January, he hoped it might carve out a small, cheerful corner of a market dominated by Amazon. Hunter’s pitch was appealing. He offered an easy way to buy books online without further enriching Jeff Bezos, after all. But Bookshop’s success was not guaranteed. In fact, it looked unlikely. Hunter was running Bookshop on a shoestring, working with four staffers out of leftist magazine The Baffler’s Manhattan office, hustling to convince publishers to join its affiliate program and independent bookshops to become partners and receive a portion of the proceeds. It was an optimistic operation. Too optimistic, if anything.

Then the coronavirus pandemic hit. Bookshop’s business boomed.

“It has been a wild ride,” Hunter says. Bookshop went from a well-intentioned startup facing an uphill battle to one of the most popular ways to buy books online in a matter of weeks. The New York Times, BuzzFeed, Vox, and The New Republic are all affiliate partners now. Its headcount has doubled in size. Hunter expects to hit $6 million in sales by May, eons ahead of its loftiest projections from January. If the company’s performance holds steady, it could do $60 million in sales a year, although Hunter is assuming post-quarantine life will be different. “I’m sure that when things open back up, our sales will drop, maybe even cut in half,” he says. “But even then, we’re still one of the top 10 bookstores in the US.”

It sounds like Bookshop’s major selling point is that it’s not Amazon?

The online retailer is the most dominant force in American bookselling today, accounting for over 90 percent of ebooks and audiobooks, and around 42 to 45 percent of print sales, according to BookStat. Into this fray jumps a new online retailer, Bookshop, which is betting that people will see the value in choosing to buy somewhere else—at a business meant to give independent booksellers a chance to grab back some of the market share. “It’s not really about disrupting an industry,” CEO Andy Hunter says. “It’s about reinforcing an industry. Bookshop is about pulling back from the disruptive influence of Amazon.”

Anti-disrupting (reverse-disrupting?) will prove challenging. For starters, there’s Amazon’s grip on consumer habits. Despite recent movements advocating pushback against Amazon, most people in the United States maintain a favorable view of Jeff Bezos’ “everything store.” Peter Hildick-Smith, president of book audience research firm Codex, says that this includes most people who frequent independent shops; just over three-quarters of that cohort also use Amazon, at an average of five times a month, according to a 2019 survey. Even among bibliophiles, Hildick-Smith says, “It’s not as if everybody’s saying, ‘Gosh, I really don’t like Amazon. I don’t shop there.’” The result? “A very skewed market.”

There’s a bit more to it:

These sellers can also sign up for the company’s affiliate program, which offers a 25 percent commission to stores. If, say, a bookseller doesn’t want to deal with ecommerce, they can sign up for this program and essentially outsource their online sales to Bookshop, which uses the major book wholesaler Ingram to fulfill orders.

The affiliate program is also available to media large and small, from major magazines to micro-famous book bloggers, with a 10 percent commission. When it’s time to publish seasonal roundups, gift guides, reviews, or other books coverage, these media companies will be able to hyperlink to Bookshop and get paid if readers buy something they click on.

Anyway, back to how the coronavirus pandemic is changing how people buy books:

Books about travel, foreign languages, and business are on a downward trend—it’s a terrible time to release a guidebook, for instance. But some speciality publishers have been particularly well-positioned to succeed right now. “Sales are up 15 percent over last year today,” says Margo Baldwin, founder of Vermont-based independent publisher Chelsea Green. “Direct-to-consumer web sales have skyrocketed.” With a focus on nonfiction covering sustainability, increased general interest in gardening and eco-friendly domestic activities has been a boon for the indie. “Our gardening books are doing extremely well, including one that hit a regional best-seller list out West, Gaia’s Garden. That was published over 25 years ago,” she says. “People are really turning towards how to make themselves more self-sufficient.”

The NPD Group highlighted this trend too. “We’re watching a solid increase in the cooking category,” McLean wrote. “It’s clear that everyone really is making bread.”

In addition to homemaking books, children’s educational books are in high demand, as parents have moved en masse to homeschooling. NPD found that “juvenile” book sales have been up 80 percent since the beginning of March. Barnes & Noble has seen this large increase in educational and children’s books. CEO James Daunt says that people are also gravitating toward well-regarded novels, both contemporary favorites and canonical books. “Fat ones are selling more than thin ones,” Daunt says. “Those books that everybody is supposed to have read but perhaps hasn’t.”

“Ebooks are up, audiobooks are up, hardcover was up through the Easter holidays, books for children, books for gifts. The sense is that it might just have been a holiday blip,” Hildrick-Smith says; he says he expects the data for after Easter to become available soon, but until then it’s hard to make a strong assertion about the state of the marketplace.

It’s not all rosy—in fact, it’s a dire time for a large portion of treasured indie shops, as these book sales are not getting equally distributed. While the pandemic caused a spike in interest in Bookshop, buyers have also been flocking to Amazon, which was already the dominant force in bookselling. While Amazon designated books as “non-essential” items, thus elongating shipping times, its vast selection and reputation for consistency have kept its position strong.

“Amazon’s market share by default, we estimate, will grow to at least 70 percent of the market on the basis of the month of April, up from just over 50 percent in the pre-Covid period,” Hildick-Smith says.

The U.S. Commerce Department reported that retail spending in March collapsed by the largest number on record:

Travel spending — including on airlines, hotels, and cruises — is down more than 100 percent, if you include refunds. Department stores and clothing stores are facing an extinction-level event after having experienced years of decline. Pockets of resiliency and even strength include grocery stores and liquor stores, which in March had their best month of growth on record. Home-improvement spending is up as well.

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Over the past 50 years, the number of American malls grew almost twice as fast as the U.S. population, to the point that in 2015, the U.S. had 10 times more shopping space per capita than Germany. Such abundance makes no sense in the age of Amazon. Overleveraged, overbuilt, and oversprawled, American retailers had a long way to fall as the country moved toward online shopping. In 2017, and again in 2019, physical-store closures reached an all-time high, led by the decay of suburban totems like Sports Authority and Payless.

The year 2020 may bring the death of the department store, marking the end of that 200-year-old retail innovation after decades of decline. Macy’s has furloughed more than 100,000 workers. Neiman Marcus has filed for Chapter 11. More legacy department stores and apparel retailers will almost certainly follow them to bankruptcy court or the corporate graveyard. As these anchor stores shutter, hundreds of malls that were already wobbling in 2019 will be knocked out in 2020.

The pandemic will also likely accelerate the big-business takeover of the economy. In the early innings of this crisis, the most resilient companies include blue-chip retailers like Amazon, Walmart, Dollar General, Costco, and Home Depot, all of whose stock prices are at or near record highs. Meanwhile, most small retailers — like hair salons, cafés, flower shops, and gyms — have less than one month’s cash on hand. One survey of several thousand small businesses, including hotels, theaters, and bars, found that just 30 percent of them expect to survive a lockdown that lasts four months.

Big companies have several advantages over smaller independents in a crisis. They have more cash reserves, better access to capital, and a general counsel’s office to furlough employees in an orderly fashion. Most important, their relationships with government and banks put them at the front of the line for bailouts.

The past two weeks have seen widespread reports of small businesses struggling to secure funds from the federal government. Larger companies do not seem to be experiencing the same delays. In one particularly controversial case, Ruth’s Chris Steak House — a public company with 159 locations and $87 million of cash on hand — announced that it had secured $20 million from a small-business rescue program that ran out of money before it could help countless independents. (Ruth’s Chris later pledged to return the money, and the federal government replenished the pot, though it will likely run out again quickly.)