The Best One Yet - Walmart gets its M.D., WeWork’s acquires Spacious, and Dollar Tree & Dollar General’s Matrix-like tariff creativity

Episode Date: September 3, 2019

WeWork just acquired Spacious before its IPO, and the startup’s business model fascinated us. Walmart is stealthily testing out a new health center it could take nationwide. And Dollar Tree and Dollar General were about to be hit hard by tariffs — then they discovered 4 creative ways not to pay for tariffs.Learn more about your ad choices. Visit podcastchoices.com/adchoices Hosted on Acast. See acast.com/privacy for more information.

This is Nick. This is Jack. And this is Snacks Daily. Welcome to September. It is Tuesday, September 3rd. Snackers, I'm not an earth major in college, but I can tell you, we actually have 18 more days of summer, so don't get too sad yet. And that's perfect timing because this was the best Snacks Daily. Jack and I have ever done it. We worked all three-day weekend on it. Jack, what have we got? Markets rose by 2% last week, but we're focused on Walmart, which wants to become your neighborhood doctor's office. A big new project was revealed on Walmart.com. This is a great situation if you want to shop while you annoyingly wait for the dentist to see you, which tends to take three hours.

Yeah, instead of looking at a 1998 issue of Time magazine. Second story, Dollar General and Dollar Tree announced their earnings reports. And earlier this year, we talked about these dollar stores being successful because of American income inequality. Now we've got to talk about their success with dodging tariffs in the most acrobatic way we have ever seen. Third and final story is the kind of unicorn of the day. WeWork just acquired a company called Spacious. Now, WeWork is about to IPO, possibly this month, probably for billions of dollars. We want to talk about spacious, though, because it's not a unicorn. It's not going to IPO,

and we think it's pretty fascinating. But Snackers, last week we talked about Fitbit, which just rolled out a premium health service to pay like $10 for month to get coached up on your health. The question was, when are we going to hit subscription saturation? Now, we thought about that term a lot, subscription saturation. It doesn't quite roll off the tongue. But then we got a tweet from our buddy, down in Oakland, Maryland, who said, you may want to merge the words, and we like what you were thinking, Anthony. I think Anthony's marketing skill here is going to make this word live forever in business textbooks for decades. We're talking subscription. That point when you hit peak subscription,

you've subscribed to so many things. Your body can't go on subscribing to more. You basically freak out because you've subscribed to so much. Now, the end of the summer is approaching. It's time for reflection. Look at your wallet. Look at your checking account. Look at the credit card. When are you going to hit subscription? More specifically, what is your subscription score? How many things are you ridiculously subscribed to that are direct-to-consumer showing up on your doorstep? I think for a snacks article, we did some research, and now I have like a chewy.com subscription. It's not good. Jack, I got HBO Harry's Spotify, and I'm kind of using someone else's Netflix's so that one doesn't count. But my score is a nine on subscription. My score is about to climb by one because I'm definitely signing up for Disney Plus when it comes out in November. Seven bucks a month? Are you kidding?

Anthony, we love the term. We're running with subscription. Tweet us your subscription. score. We want to hear this at Robin Hood Snacks. You're tuned in to snacks daily. We spoke to the lawyers and we got to get something legal out the way. The snacks about to hear ain't food. It's air candy. They don't reflect the views of the Robberhood family. It's all informational just

so. You know, we're not recommending any securities. Nope. It's not a research report or investment advice. Not an offer or sale of a security. Snacks is digestible. Business news for you. Robahood Financial, LLC, member FINRA, slash SIPC.

For our first story, Walmart is officially launching its first health clinic, but it's doing it in like a totally stealthy way. All right, so you go to Walmart and you're going there with the intention of buying some socks and ironing board and two 12 packs of LaCroy. Jack, you'll walk out with a hearing test, a vision test, a dentist appointment, and three mental health exams. Walmart is getting medical. So here's what actually happened, and the way it rolled out was like kind of sneaky but kind of cool. So Walmart updated its website link for Walmart health. That's it. Boom.

subtle, but big move. And they're showing that they have these $59 to $99 appointments for like all those services that we just mouthed off before. And I got to give Walmart credit. Its website looks pretty digitally savvy. Jack and I spent a good like 15 minutes looking at this thing. We couldn't tell if this was like some new Silicon Valley direct to consumer erectile dysfunction startup. We were shocked it was Walmart. Walmart's got good web game. Except for the stock photo of a child with a purple bandaid just looking unhappy. It's like we get it. You're going to make, you know, sick kids happy. It just didn't really land. But there was a highlight we thought was fascinating, which was the quote-unquote behavioral sessions.

You can actually sign up for a 60-minute mental health counseling, and that's just something we were impressed by. It's a huge plus for society in general that behavioral health is losing its stigma. Now, Snackers, this is a classic Walmart move. It tests a big idea in a small setting. It rolls it out with no announcement, and then it won't even comment when it comes out. They're doing the same thing on Long Island with like a store with robots and artificial intelligence that sounds like, like some freaky thing from the 43rd century. So if you want to double your Walmart shopping with going to the doctor, you can only do that in Georgia. So that's the one location that's taking appointments

starting September 13th. And kind of like interestingly, again, impressed by this, they're having a physically separate location for the doctor section so you have a little more privacy, even though you're strolling within the Walmart grounds. Yeah, you don't necessarily want all your neighbors seeing you at the doctor's appointment while they're Walmart shopping. Now, we know when you hear Walmart, you're thinking big numbers. Let these numbers sink in. A hundred and forty million Americans, visit Walmart stores every week, and they've got 1.5 million employees. We also got to give plus points to Walmart because its scale is so huge, it can impact society. And this move could democratize basic health access since so many Walmarts are in rural places

where getting health care is tough. Jack, so can you look from a distance and tell me what letter you see and then tell me the takeaway for our buddies over at Walmart? All right. So this is a place you drive to. You park, you walk around, you shop, you can eat, you can buy clothes, you can even get a checkup at a doctor's appointment. Jack, this sounds like a mall. Okay, Snackers, a theme of our lives right now is this. It's millennials killed malls with online shopping and malls will

never recover. The concept is dead. But the physical stores that are surviving are borrowing tricks for malls, specifically the benefit of one-stop shopping. We got a list of examples here. Coles, it's adding planet fitness locations on its real estate. CVS is also a UPS access point so you can drop off packages, and it has its own health centers as well. Right Aid has Amazon lockers. And now Walmart, you can also get your teeth whitened by a dentist when you're shopping. Walmart's new move shows that chains are becoming mini malls. For our second story, this is our kind of unicorn of the day. WeWork just acquired Spacious, and there are big implications here, but this is no WeWork story. Snackers, we broke down the

WeWorks S1 document a couple weeks ago because WeWork is getting ready to IPO probably this month. But they just acquired this company spacious. Jack and I were curious. We jumped in and we were fascinated by the spacious business model. Jack, favorite dinner spot in New York City off top of your head. What we got? Very, very tough question. But I'm going on Han Dynasty on 3rd Avenue and like 11th Street.

Jack, I like what you're thinking. I was thinking like quality eats. That's where I'd go with you and our buddies and like Tim and stuff. But with Molly, I'm more loring place. Great, great choice right there. Now I've got a follow up question for you. Do you think the Han Dynasty team is serving brunch Monday through Friday? Those noodles are way too oily to eat before 5 o'clock.

They're not. And at 5 p.m., that's when it becomes a restaurant. But before then, they've got a lot of empty space. And that's when spacious kind of enters the room. Spacious signs up restaurants that don't do lunch, don't do breakfast, and don't really do brunch. And it gets them to take all those tables and all that beautiful space and the coffee machines and the outlets and open it up for co-working. Exactly. And if you're an entrepreneur, you're looking at your options out here.

You can either splurge to get office space, spend a good amount of money on a we work, or you can buy one. of their $20 day passes or $129 a month to sit in one of these restaurants. Exactly. I don't think Han Dynasty has signed up for Spacious, but if they were, 20 bucks a day or $129 a month, I think the lowest cost we work is like $450 for a hot desk. And if you're a founder, like, think of your alternative here. Otherwise, you go into like the local coffee shop and you got to do that whole song and dance of like, yeah, excuse me, can I just use, I just need to get to the outlet over here?

Can I, can you just move your laptop? some kid chewed on my laptop the other day. Hotel lobbies is a good choice too, but they always have the option to kick you out and you kind of feel like you're cheating. Now, what made Jack and I so fascinated about Spacious in this case was that it freakishly combined the co-working elements of WeWork with the sharing business models of like an Airbnb.

Yeah, a restaurant can basically Airbnb their tables during lunch because they don't do lunch. The only downside we've got to highlight about Spacious, if you got a business call and it flows from like a half hour longer than you expected and it's 5 o'clock, they're going to kick you out Because it's a restaurant and they need you to leave. Yeah, the team has got to learn the specials that evening. So Spacious is actually a three-year-old New York City-based startup, and there are a few others

in this space, too. Like, you got Kettle Space as well, which is a good rival. So, Jack, what is the takeaway for our buddies over at Spacious and WeWork? Sometimes the best way to defeat the competition is to acquire it. We went in there and we counted WeWorks acquisitions. Jack and I found 18. In fact, last year, they made six acquisitions in an eight-month sprint. Some of its acquisitions are complementary, like team, T-E-E-E-E-E,

EM, which has a little iPad that you basically sign in when you come in and you like sign in NDA, and you can also book conference rooms. So that's charming. They've also got some direct competition like Spacious that they just acquired, which is basically direct competition. Yeah. Think about it. Like Spacious was fighting for clients with WeWork and now they don't have to compete anymore.

In case you're wondering, we've seen this movie before. And the most important one you got to keep in mind, it's Facebook. Yes. Facebook acquired Instagram for $1 billion in 2012. At the time, I don't think we realized that Instagram. was the only company that had a real shot of rivaling Facebook for social media dominance. Now, Instagram is the only social media company that would have been the closest direct competitor to Facebook and kept them in check. In fact, it's estimated that today, Instagram would have been

worth $100 billion and Facebook's worth $500 billion. Those are rivals. But now Facebook owns it. For our third and final story, Dollar General and Dollar Tree are both dodging tariffs in like a ridiculously acrobatic way. These guys are going neo on these tariffs. Matrix style, bending back. Bullets are flying by. They're wheezing out of the way. Jack, red pill or blue pill? Kianu. Kiyanu. Kiyanu, what's the rest of the story? So, Snackers, context here. Dollar General and Dollar Tree. They're huge dollar store chains in America. Their stocks have done incredibly well the past few years, catering to budget-strapped Americans. Jack, it is a golden era right now for plastic anything. Yes, and a golden era for these dollar stores because

income inequality have created lots of customers for dollar stores. Get this. These stores have 15,000 stores each, which, wait for it, that means they've got 30,000 stores together. That's a lot of stores. On Friday, we mentioned Panera Bread. They only have 2,000 stores, and there's 30,000 of these dollar stores. And all the stuff that they're pumping out there, all those cheaper plastic items, those are made in China. And that means they're probably going to be victim numero uno in this trade war because new tariffs are going to make the supplies they get from China go up in price. So while you were sitting in traffic on Sunday, like kind of trying to get back from Labor Day early, a new round of tariffs just hit. September 1st, 15% tax

America is charging for low-income consumer stuff that comes from China. Now, if your dollar general or your dollar tree, you're getting into like the strategy room here, you're bringing in, you're wheeling in that whiteboard. You're going to open the, Linda, get in here. We got to work on this. You're going to open up the marker. The marker doesn't work because markers never work whenever you first try one with a white part. But that second marker is going to work, and here's what you kind of strategize out. You got two options. as the dollar store to handle these tariffs. Option number one, you can increase prices on the things that come from China in your store by 15%.

And that would probably hurt your sales. Option number two, you cannot increase prices and you can just pay for the tax yourself, not pass it on to customers. So that would probably hurt profits. Turns out, there are actually some other options here that ended up getting thrown on the Dollar General Whiteboard, and we wanted to get into them because they're creative. And those two companies were bragging about their ability to hit these other creative options to avoid tariffs. Jack, can you tell our snackers a little bit about substitution? All right, let's say Dollar General buys plastic solo cups that are made in China.

Basically, just stop offering those cups. Give paper cups instead that aren't made in China. What about option number two, negotiate? Okay, let's say that solo cup maker in China, you go to them and you say, hey, I'm not paying for those tariffs. You got to keep me the same prices as before. I'm not paying anymore despite the tariffs. But try to keep a professional tone and don't just yell hey at them. The third idea is product reengineering, which sounds highly technical. Yeah, I don't know how that would apply to the solar cup example. Maybe like change the ingredients of the solo cup.

I do not. Well, the fourth creative option here is country of origin diversification. This one's great. You're currently buying solo cups from a company in China. Just find a company in Poland that makes the same thing and doesn't have to pay tariffs. So if you're Dollar General and Dollar Tree, these creative options have helped to upgrade your earnings because you can now creatively get around the tariffs that are about to hit you. Linda and Bob were seriously packed.

adding themselves on the back last week during calls with analysts. They're going to hold an office party and they're going to have that whiteboard there. So, Jack, what's the takeaway for our buddies over at Dollar General and Dollar Tree? Those companies were able to dodge tariffs, but not all American companies can dodge them as easily. Abercrombie, Best Buy, Calvin Klein. They all announced earnings recently and they're all expecting to be hurt by tariffs already. Look, dollar stores like business is pretty flexible. The stuff just has to be less than a dollar and customers will be okay with that.

Abercrombie's, not so much. You can't just go to American Eagle and buy their clothes because they're not made in China. Your factories in China, you got to deal with it. Jack, the shirt collars don't pop themselves. Now, get this stat. 92% of Chinese made apparel is now 15% more expensive to import. And that all started on Sunday. And those tariffs will be unavoidable for some companies.

It's going to hurt profits and increase prices. Jack, it is good to be back. Can you whip up the takeaways for us over there? Walmart is adding dental and basic health clinics to take one-stop shopping to the next level. We've noticed that chains are now becoming mini malls. WeWork just acquired Spacious, a place that turns restaurant into low-cost WeWorks before dinner. We don't know the Sticking notes policy. We assume it's B.I.O.

But we'll let Spacious let us know. Dollar General and Dollar Tree are showing some nifty business skills to avoid tariffs. But not all companies can have like a matrix-like bending abilities when it comes to supply chains. Now, Jack, time for a snack fact of the day. A little belated one for the long weekend. All right. If you are in New York City anytime soon, check out Union. Square. That is where the first Labor Day celebration ever happened in the United States in 1882. Jack,

I guarantee you there's at least a dozen hundred snackers who are getting out of the Union Square four or five subway right now. They're confused because it's like a labyrinth down there and some people get lost for days. Also, fun fact, Han Dynasty is three blocks down Third Avenue. Fun fact, great farmers market there on weekends. Also, I got to thank all the snackers, Zach, Hydeum, Justin, Lisa, Christian, Kevin, Butterfly Beach and Santa Bar. Barbara, gorgeous. Also, Chase McElroy. If you need to use the bathroom, don't use the public ones. Just pretend you're staying at the five-star four-season's hotel. Good advice. Excuse me, sir. Excuse me. What's the problem with me being here?

Rule number one, act like you belong there. We love that. And by the way, live every weekend like it's your mini move. Talk to you tomorrow. This is Jack, and I own stock of Amazon. The Robin Hood Snacks podcast you just heard reflects the opinions of only the hosts who are associated persons of Robin Hood Financial, LLC and does not reflect the views of Robin Hood Markets, Inc. or any of its subsidiaries or affiliates. The podcast is for informational purposes only, is not intended to serve as a recommendation to buy or sell any security, and is not an offer or sale of a security. The podcast is also not a research report and is not intended to serve as the basis of any investment decision. Robin Hood Financial LLC, member FINRA, SIPC.