Marketplace - Walmart, Wayfair and . . . wool?

Episode Date: May 16, 2024

Staying ahead is tough if you run a business — especially in this odd economic moment, where even affluent shoppers are picking low-cost alternatives. Whether you’re selling furniture, home goods or sheep’s wool, sometimes you have to adapt by targeting new markets. In this episode, three businesses doing just that. Plus, what a dip in weekly jobless claims might signal, why currency carry trades are risky, and how the bees made a comeback. Marketplace is behind target for this budget year — that means listeners like you can make a critical difference by investing in our journalism today.

Traditional revenue sources for public media and media at large are declining this year, and we at Marketplace are not immune to those trends. We're currently tracking behind target for this budget year. We're tightening up our expenses, yes, but the need for trusted, grounded, fact-based reporting is as pressing as ever, and we simply cannot cut back on our mission. So we're turning to the listeners like you. Please step up now and invest in Marketplace. If you haven't given yet,

now's the time, go to marketplace.org slash donate. The labor market, honeybees, and sheep in that order. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdal. It is Thursday today. This one is the 16th of May.

Good as always to have you along, everybody. Let us review the data available to us so far this week, shall we? The consumer price index yesterday, also retail sales. Got some corporate earnings too, both of them very consumer adjacent. The prices we're paying, how much we're buying, retail sales, right? Also how the companies that sell stuff to us are doing. Today there was a very labor market proximate report. We get it every Thursday morning, first-time filings for unemployment insurance, reported

state by state, and then aggregated nationally. The number has been, until the last couple of weeks, pretty low, 210,000 layoffs a week, give or take. But it has been inching up. That number has. Marketplace's Mitchell Hartman volunteered to read the labor market tea leaves for us today. Here's why we pay attention to weekly state administrative data on unemployment insurance, says Thanh Nguyen at consulting firm RSM.

Initial jobless claim data is one of the closest things to real-time and high-frequency data that we have on the job market. Nguyen says some of the recent spike in claims is seasonal noise, but Zoom out claims have been on a small upward trend since January. We don't believe it is a cause for concern at the moment. It's more like the labor market is cooling gradually rather than getting into trouble. But there does appear to be growing agitation among the working public. The conference board reports more Americans anticipate jobs will be hard to find and employment

and income will get worse in coming months. Here's Quincy Crosby at LPL Financial. It's the consumer hearing just from where they live, their neighbors, their relatives, that perhaps the labor market is poised to soften more. We know that is when the consumer really starts to hold back spending. And there may be more job loss than we're seeing. Michelle Evermore is an expert on unemployment insurance at the Century Foundation. The caveat I always have about initial claims is that it doesn't necessarily measure the number of layoffs. It just measures the number of people who are laid off and then decide to apply for unemployment.

Why wouldn't laid-off workers go for their benefits? They're relatively certain they're going to get a new job because unemployment is low. Or they could be discouraged. Some states have made it harder to apply. I think inflation has really eroded the value of benefits. Only about half of states automatically adjust for inflation. You've still got a maximum benefit in Mississippi of $235 a week and in Florida and Tennessee, $275. Evermore says some people may feel it's just not worth going through the bureaucratic hassle

to file. I'm Mitchell Hartman for Marketplace. Wall Street on this Thursday. You know, some days you got it, some days you don't. We'll have the details when we do the numbers. What would it take for you to start shopping at Walmart? Or if you already shop there, why? What is it that gets you in the door? I ask because public radio listeners tend to be higher income. And when Walmart reported quarterly earnings this morning, $5.1 billion for the three months,

January through March, in case you were wondering. The retailer said it got there in part because it is making inroads with high-income shoppers. Marketplace and Nancy Marshall-Gensler has that one. Some high-end shoppers turned to Walmart during the pandemic. Paula Rosenblum was one of them. The first place I got toilet paper during the great toilet paper shortage was Walmart. Rosenblum is also a retail analyst, managing partner at RSR Research. She thinks Walmart beat expectations this quarter because it won over more people like her. I'm not embarrassed to say that I bought something from Walmart anymore.

Rosinblum has a Walmart Plus membership, which gives her free delivery on some orders, and Walmart says it's cut its delivery time. The growth in e-commerce is potentially another way for Walmart to unlock this higher income consumer. Blake Drosh is a senior analyst at eMarketer. He says according to his data, about 70% of Americans already have access to Amazon Prime. So Walmart has a giant mountain to climb. So what they're going to have to do is convince people who are already Prime members to switch

from Prime to Walmart Plus. It's a little bit easier if you're already shopping in the Walmart store. But Drosch says there aren't that many Walmart stores in affluent areas. There is one in Sucharita Kedali's neighborhood in Charlotte, North Carolina. She's a retail analyst at Forrester and a Walmart shopper. She says the retailer has tailored some stores to appeal to higher-end consumers. You'll see things like more organic products in the food aisles or you may see more books for instance. Codali says we don't know yet how successful Walmart has been. It won't say what percentage of its customers are high income.

I'm Nancy Marshall-Genser for Marketplace. Keeping with the shopping theme here, one of the biggest destinations for home furnishings online is going IRL next week. The first Wayfair brick and mortar store opens next Thursday in a suburb of Chicago. The company brought in about $12 billion last year. Sales, though, have slowed since the e-commerce frenzy of the early pandemic, which we all remember. So Wayfarer is following the lead of digital brands like Warby Parker, Allbirds, and Glossier and turning to old school physical retail to give its businesses

a boost, as Marketplace's Megan McCarty-Corino reports. Brick and mortar. Just the term sounds old-timey, but it's still how consumers make more than 80% of their purchases in the U.S., according to census data. I have never bought anything in the furniture space online. Jonathan Zhang is a marketing professor at Colorado State University. I need to feel the texture, I need to sit on it, I need to see the fabric. It's not so easy to just send back that couch

that turned out to be a little more fuchsia than you expected. These are expensive, considered purchases. It takes some time to get comfortable with it. Adam Katz is head of physical retail for Wayfair. He says the new store will help address the friction points with buying home furnishings online, though the 150,000 square foot space will only carry a fraction of what's online. As big as our store is, you cannot fit millions of products in there.

Instead, it will have a curated selection of about 10,000 items. Now, a single store might not itself add a huge volume of sales, says associate dean Anastasia Goche at the University of Arizona. But kind of treat it as another way to build brand loyalty, right? Allow customers to have an experience with your brand. She says online consumers aren't usually very loyal. They're often motivated by convenience and price. And online

advertising has gotten less effective, says James Cook, director of retail research at real estate consulting firm JLL. If they open up stores, especially in high traffic areas, they really increase their visibility. And, he says, research has documented a halo effect. Digital brands that opened a physical store then saw a nearly 14% bump in online sales in the surrounding area. I'm Megan McCarty Carrino for Marketplace. Remember a decade or so ago all the stories about how honey bees were dying out, colony collapse disorder it was called, and the agricultural Armageddon that would surely follow? Today?

Still got bees. Still got ag. In point of fact, the Department of Agriculture tells us the United States might have more honey bees now than it ever did. Brian Walsh is the editorial director at Vox, and he wrote about how we got it so wrong and also about the bee reality today. Brian, welcome to the program.

Great to be here. So you wrote in Time Magazine like 10, 11-ish years ago, the headline was, A World Without Bees, and yet we still have bees. What happened? We clearly do, yes. I mean, sometimes that happens. I mean, like when you've done this as long as I have,

like 20, 25 years, sometimes you were right, and sometimes you'll be wrong. As it turns out, the bees were a lot more resilient than perhaps some of us expected, but also I think the reason why they are is because they turn out to be really valuable to us. I think a lot of it came down to the fact that we just looked at honey bees in the wrong way We saw them as kind of a wild species at risk of extinction. They're actually more like a messicated species

And and there is an economic imperative to keep them around right to keep you know supplying that system Oh, absolutely I mean they are incredibly important to the farming system especially to things like the almond almond crop. I mean, out in the West Coast in the spring, you will have something like 42 billion bees who are moved to California to help with the pollination of almond trees. And without them, that really wouldn't be possible. No almond milk, no almond products. So just that itself is incredibly valuable. And that really creates an economic imperative to keep these bees going, even though they are subject to all kinds of environmental and disease threats as well, and just the sheer stress that comes with playing that role in the egg-cruel rule system.

Right. Well, lay that out a little bit, right? Because you describe bee colonies that are weakened by travel and stress and all of this. Yeah, absolutely. I mean, the big concern is something called the varroa mite, really scary thing if you see it up front. Can really destroy whole colonies. There are viruses that go with this.

And then there's just simply like the fact that bees are not meant to be moved, you know, hundreds, thousands of miles to help pollinate almond trees. That's not something they can really withstand. So in the most recent survey, I believe beekeepers support losing something like almost 50% of their managed honeybee colonies. I mean, that's just the numbers who are being, who are dying essentially and then they need to replace and that's what we have now. We just, they die, we get more, we keep using them over and over again. This is a really stupid question. If all these bees are dying, where do we get more bees?

They just keep breeding them really. You know, I mean that is one positive thing about bees is that they can breed very quickly and if you put enough money into it, you will do that. And so we have something like, actually we know exactly how many honeybee colonies we have in America as of 2022. That's 3,800,015 according to the extremely detailed census of agriculture. I love the 15. Someone's out there counting those. No, totally.

You make a comparison in this piece between that bee scare of the early 2000s and peak oil lay that out for us Would you yeah, it's interesting things both happened around the same time If you remember like in the mid-auts you start hearing about colony collapse disorder at the same time That was kind of like when we saw oil prices getting into the triple digits for the first time There was a real concern that we're gonna max out on oil, which would be Catastrophic for the global economy. There was a real concern that we are going to max out on oil, which would be catastrophic for the global economy, among other things. Fast forward to now, the world is producing more oil than ever has before. The US is producing more oil than any country has ever.

And that's simply a response to that economic need. When the need is great, capitalism is pretty good at actually finding a solution to it. This is going to sound more flip than I mean it to, but what I hear here is we should monetize like the snowy plover or take your pick endangered species to really preserve them somehow, right? Put an economic imperative behind them. I mean, there's a theory behind that. There's something called ecosystem services where,

all right, what if we put a price on the value of forests, on clean water, things like that, maybe that's what will get us to protect it. It's an idea that works in some ways, it's harder to put in practice than something here where that's putting almost like, I'm not going to say imaginary price, but something that's more theoretical, whereas the very fact that a farmer can make a lot of money by producing a lot of bees, taking them to California, participating in the almond crop, or obviously an oil company can make a lot of money, finding a new supply of oil.

That's a clear connection. I think that's why you see that happening as opposed to like, let's put these prices on nature and that'll solve everything. Right. Just to put a punctuation mark on this, we're going to keep overworking these bees and we're going to keep having them because we need them and they are money, right? That's exactly right. They will remain as busy as bees, I suppose,

in the service of us. Brian Walsh at Vox. Brian, thanks a bunch. Appreciate your time. Thank you. Coming up. Sheep should have wool on them, period. I mean, I guess. First though, let's do the numbers. Dow Industrial is off 38 points today,

about a tenth percent, 39,869. The Dow did cross 40,000 for the first time at one point today, and now it's below it. The Nasdaq dropped 44 points, about three tenths percent 16,000 698 the s&p 500 off 11 that's two tenths percent 52 and 97 Megan McCarty Corino is telling us about Wayfair opening its first physical store Wayfair shed three and four tenths percent today some of the other retailers we mentioned that made that same leap from digital first to IRL Warby Parker added two and seven tenths percent today reminds me I need a new pair of glasses rent the runway where customers can pay to borrow designer clothes. Jumped 18 and a tenth percent today.

Allbirds rang up 5 and 8 tenths percent today. Pop quiz ticker symbol for that one. Allbirds. You can't not get this. B-I-R-D. Right? Bird. Walmart gained 7 percent today after those better than expected earnings and Nancy Marshall Genza was telling us about bonds down

Yield on the tenure T. Note rose to four point three eight percent You're listening to marketplace My name is Lee Hawkins My name is Lee Hawkins. I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and

my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now. Hey everyone, it's Rima Chavez, host of This Is Uncomfortable. If you're looking for some good recommendations on books to read, well you should join This Is Uncomfortable's Summer Book Club. Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class, and work, while also featuring an interview with the author or an expert on the topic.

Plus, when you join, you'll be entered in a giveaway where you could win some This Is Uncomfortable merch. Be sure to check it out. Sign up today at marketplace.org slash book club. This is Marketplace. I'm Kai Rizdall. Trillions of dollars and yen and euro and assorted lesser-known currencies burble around the global economy every day. And not just because of international trade. The currencies themselves move, too. Electronically, to be sure, but you get the point.

Investors and traders park their money in different places for lots of different reasons, one of which is something called the carry trade, a bet really that those investors and traders can make more money in one country, that is to say currency, than in another. Marketplace's Sabri Benishor has our explainer. Different countries have different economies and different problems. Brazil's polarizing former president. explainer. Different countries have different economies and different problems. Brazil's polarizing former president. A powerful earthquake has hit the East Coast of Taiwan.

Japan has lost its place as the world's third largest economy. And as a result, different countries have different interest rates. Japan has had zero rates really since the 90s. Wynn Thin is global head of market strategy at Brown Brothers Harriman. They have hike rates recently, but they remain incredibly low compared to the rest of the world. US rates are over 5%. Mexico's are over 11%.

Turkey's are over 45%. A certain type of investor looks at all that and sees a way to make money. Boils down to barring in a low interest rate currency and putting it into a high interest rate currency. Borrow some Japanese yen where you pay a super low interest rate on your loan. Invest that somewhere else on the planet where you earn a high interest rate. You keep the difference.

That is what is called the currency carry trade. I can actually share my screen, right? Paresh Upadhyaya is director of fixed income and currency strategy at Amundi US. He does a version of the currency carry trade. He opens up a spreadsheet full of economic data on different countries, regions, and looks at where interest rates are high. We like the Kazakh Tengi, the Uzbek Summa. These are all very high yielding.

Some of these are super high yielding. Some investments in Turkey are offering 51% interest. But there is, of course, a catch. You don't jump into a country just because their interest rates are high. Those interest rates are high for a reason. That reason could be a country's fighting a lot of inflation. Okay, understandable. It could also be the whole country, its politics, and its economy are super unstable and you

don't trust you're going to get your money back. And there's another catch. You can have very high yields, but those yields could be more than wiped out by the volatility in the country's exchange rate. It is all fine and good if you borrow yen and make a million Australian dollars, but if one day the exchange rate changes and those Aussie dollars are suddenly not worth the yen you owe back over in Japan, you're in very big trouble. This exact thing actually happened during the 2008 financial crisis.

People lost so much, so much money. The Australian dollar started to lose value and investors ran for the exits, pulling as much of their money out of Australia as fast as they possibly could. Violently selling their Australian dollars. And trading them back into yen to pay off their yen loans. That only made things worse by making the Australian dollar even weaker and the yen even stronger. This is how much it moved. 46.7 percent. Massive. Massive. This is how the currency carry trade and investors trying to execute it can cause entire nations'

currencies to make big moves, sometimes very quickly. That can actually destabilize the whole exchange rate market. Marcus Brunner-Meier directs the Bentheim Center for Finance at Princeton. Sudden moves in currency can cost exporters money or create inflation for consumers. At the same time, many countries depend on this money to flow into or out of them, but preferably slowly. Overall, some form of carry trade is also healthy. It can help a struggling economy grow, he says, or help an overheating economy cool down.

But it is just one type of trade that illustrates something much bigger. Different countries' interest rates are like magnets, pulling money around the world and moving currencies with it. That is interest rates less talked about power. In New York, I'm Sabri Beneshor for Marketplace. You know what else is like a magnet? Our podcast. If you miss something on the air, you're just kind of drawn right to that podcast.

You can check it out at marketplace.org or on the platform of your choice, of course. We did honey bees in the agriculture economy up in the first half of the program. We are going to go back to ag here at the end. Sheep, most of them, most sheep breeds that is, have to be sheared regularly lest their wool overwhelm them. It used to be that selling that wool could offset some costs and bring in some extra cash even if the sheep were intended for meat, not material. Now though, wool prices are weighed down less than a nickel a pound, especially in the Midwest, where sheep wool tends to be coarser and shorter and just not as good as some of the competition.

Innovation and adaptation are the business model responses as Rachel Kammerer reports now from Harvest Public Media. At a family farm in central Iowa, a sheep shearer leans over a ram making smooth, clean strokes through several inches of shaggy wool. By the end of the day here, more than 100 sheep will be about 8 pounds lighter. But farmer Mary Corey says the wool won't bring in much cash. We'll get just a few cents a pound, really. Her husband Tom started raising sheep in the early 1960s.

He says wool was an asset back then. I was able to get enough money from that wool that I could pay for their winter feed. Today I can't even pay for half the shearing. The quarries, like most producers in the Midwest, raise sheep for lamb meat, not so much for wool, which in this part of the country tends to be coarse. Still, farmers used to be able to get something for their wool. But as wool prices have fallen in recent years, it often costs more to shear the wool than it brings in. Jalen Whaley is a sheep field specialist with South Dakota State University

Extension. She says this is one more thing that makes it hard to turn a profit raising sheep these days. We're having a hard time keeping people in the industry. She says wool prices are connected to global demand. China buys the most American wool, but imports fell sharply in 2019 because of the trade war with the U.S. And then with the pandemic, you know, we saw worldwide labor shortages. COVID shut down wool processors, disrupted supply chains, and increased shipping costs. But here's the thing, sheep can't just stop growing wool. So there was a global surplus and that

pulled down wool prices even more. That's why Whaley says sheep producers have to get innovative and make those changes that are profitable. Changes like finding new uses for wool. In Northern Iowa, Wendy Johnson runs a farm and a business called Counting Sheep Sleep Company. She shows me some of the processed wool from her flock. It's creamy white and lightly speckled batting. This is what fills the pillows. And it's just such a nice fiber. Johnson sends her wool to a mill in Minnesota where it's cleaned and turned into filler for pillows, comforters, and eye masks

that she then sells online. It's an amazing fiber, I think, because it's so completely renewable and it just grows back. Wool is also biodegradable and can act as a natural fertilizer. That's what Megan Landis Murphy does with wool from her ranch and others in south central Nebraska. She turns coarse wool into garden pellets. I think wool pellets are a great outlet

for this underutilized wool. And then it's also beneficial for plant enthusiasts and gardeners alike. The pellets add nitrogen to the soil and slowly absorb and release excess moisture. Still, some producers are holding out for wool prices to go back up. Back at the farm in central Iowa, sheep shearer Ron Kilstrom takes a break before more ewes and

rams are brought into the barn. These sheep are shearing really sticky today. He's seen some producers move towards specially bred sheep that don't produce much wool. They're called hare sheep, and they naturally shed in the spring. No shearing is necessary. It disturbs me a little bit. Sheep should have wool on them, period. Ha ha ha! He says otherwise, they're like dogs that don't bark. In Polk County, Iowa, I'm Rachel Kramer for Marketplace. This final note on the way out today, a hint of good news for Detroit.

New data from the Census Bureau shows that that city's population actually grew last year after decades and decades of falling. Not a whole lot, mind you, an extra 1800 people in 2023 from a year earlier on a base of 630-ish thousand, but still, good news. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Sieck are the Marketplace editing staff, Amir Bibawe is the managing editor. I'm Kai Rizdal, we will see you tomorrow everybody. This is APF. My name is Lee Hawkins.

I've been a journalist for over 25 years. On my new podcast, What Happened in Alabama, I get answers to some of the hardest questions about how things came to be for many black Americans and the truth that must come before any reconciliation can happen. I investigate my family history, my upbringing in Minnesota, and my father's painful nightmares about growing up in Alabama. What Happened in Alabama is a new series confronting the cycles of trauma for myself, my family, and for many black Americans. Listen now.