The Economy Is Improving in Three Major Ways
The bad news you probably already know. Mortgage costs are brutal at the moment, putting homeownership out of reach for millions of Americans. The pace of inflation is coming down but remains high, meaning consumer goods keep getting more expensive. Businesses are bracing for a recession. The economy is just weird right now, suffused with uncertainty and crossed with mixed signals.
Nevertheless, Americans have some positive short-term trends to celebrate, among them falling gas prices. Better still are three long-term trends that, despite their economy-transforming magnitude, have gone largely uncelebrated or even unnoticed. These trends promise a more dynamic economy not only in 2023 but also in the coming decades.
A decade ago, President Barack Obama called economic inequality “the defining challenge of our time,” arguing that “the next few years will determine whether or not our children will grow up in an America where opportunity is real.” At the time, data showed the middle class shrinking, average wages stagnating, and the wealthy eating up all the gains from economic growth. Rising inequality was paralyzing Washington and fraying the country’s politics. Yet around the time of Obama’s speech, inequality stopped rising. In the past three years, the country has become more equal, at least by some measures.
I don’t want to overstate things: Income and wealth are still distributed very unequally in the United States, much as they were in the Gilded Age. The haves are still trouncing the have-nots. The country’s level of inequality remains a threat to its political stability and long-term growth trajectory. Still, wage growth of late has been fastest for the poorest workers, David Autor of MIT and Arindrajit Dube and Annie McGrew of the University of Massachusetts at Amherst recently found—so much so that, the pandemic notwithstanding, the past few years have erased one-third of the growth in the wage gap between the highest- and lowest-paid workers over the past four decades.
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The country’s wealth inequality has eased a little too, although the explanation isn’t entirely salutary. The value of assets held by the top 0.1 percent of the wealth distribution has dropped from $18.4 trillion to $16.9 trillion in the past three quarters; the holdings of the top 10 percent have fallen from $98.6 trillion to $92 trillion. (The bottom 50 percent, by the way, accounts for less than $5 trillion.) Rich people still own the bulk of the assets; those assets are just trading for less, thanks to the downturn in the stock market and in high-end real estate. A more encouraging sign in 2023 would be if wealth inequality declines because more middle-class and low-income families also get to own homes, stocks, and businesses.
Fourteen years ago, analysts at the Centers for Medicare and Medicaid Services thought that health spending would be roughly 22 percent of GDP in 2022. The real share was 18.3 percent. Government actuaries spent years overestimating the number of dollars Americans would spend in hospitals and doctor’s offices—a decade-plus ago, they thought we would be spending about $700 billion more on an annual basis than we are today—and the share of the economy devoted to health care. That is because the “cost curve” bent.
Nothing scared the green-eyeshade set like the cost curve projected in the aughts—a swoop showing Medicare spending, national health expenditures, or both growing faster than the economy itself did. Their projections, and thus their worries, were rooted in reality: The country’s health expenditures were swelling by tens of billions of dollars a year, and the country’s population was aging, meaning demand for health care would go up.
Read: What does a good health-care system look like?
But for the past 15 years, health-care spending growth has been subdued, leaving aside the catastrophic early years of the pandemic. As a result, CMS anticipates that health spending as a share of GDP should be stable over the next decade at roughly 20 percent. And the CBO sees Medicare spending rising from 5.8 percent of GDP to just 6.8 percent of GDP 10 years from now—a reasonable amount, given the rising share of older Americans.
What happened? Any number of things. The Great Recession and slow recovery that followed dampened health spending for years. More employers started offering and more people signed up for high-deductible health plans, which come with significant out-of-pocket costs and discourage people from seeking care. The Affordable Care Act implemented a series of cost controls in Medicare. And pharmaceutical companies have conjured up fewer new, expensive drugs.
Of course, the country still spends an extraordinary amount on health care while having significantly lower life expectancies and worse health outcomes than its peers. And families are still struggling with crushing out-of-pocket costs. But in the long term, the bending of the cost curve promises higher wages for families and more room in the federal budget for other priorities.
It took 76 months for the economy to recover every single job it shed in the Great Recession. It took 30 months for it to recover every job it lost during the pandemic. And in this most recent recession, the labor market gained back the majority of jobs it lost in less than a year—far faster than after the housing crash.
This is an extraordinary policy triumph. An unprecedented downturn hit, and the government—with loose monetary policy and trillions of dollars of stimulus spending—buoyed millions of families through it, unlike during the Great Recession. The economy has not lost any potential output due to the COVID recession, economists think. Long-term unemployment has barely grown. The government’s income supports made low-income families more than whole.
Earnings among the poorest workers actually increased by 66 percent in 2020 because of boosted unemployment-insurance payments and stimulus checks; during each of the prior two recessions, the same group of Americans lost a quarter of its earnings.
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Prior recessions left grievous scars. Many laid-off workers experienced worse health and permanently lower earnings trajectories; in some cases, their children’s educational and employment prospects were diminished too. Economists are now hopeful that the COVID downturn might not cause such permanent damage.
Each of these overlooked but hugely consequential trends means a more vibrant, productive economy today and in the future. The COVID stimulus program saved jobs, lives, and livelihoods while protecting the economy’s productive capacity. The moderation in inequality means less food insecurity and healthier kids growing up in low-income households. The bending of the cost curve frees up money for wage increases and gives the government space in the budget for investments in child care, social insurance, infrastructure, and everything else.
Yet each feels like just a beginning. An efficient and effective health system, the end of poverty, and lower inequality—these are things worth fighting for in the new year.
Justice Department Investigation TikTok Owner for Spying on U.S. Journalists: Reports
The company admitted in December that some of its employees improperly accessed the data of U.S. journalists in a bid to uncover the source of leaks.
The Justice Department and the FBI are investigating the parent company of the popular social media app TikTok for surveilling American citizens, including journalists.
According to reports, federal authorities began their investigation late last year, after TikTok owner ByteDance Ltd. acknowledged that some of its employees improperly accessed journalists’ location data and other private data. Forbes was the first to report the investigations.
The investigation comes amid scrutiny of the app and a hardening policy stance by a bipartisan group of lawmakers and the White House over concerns that China is using the app to gather data on American citizens and influence elections.
ByteDance is based in China and has ties to the Chinese government. The app is banned from federal government devices, government devices in more than two dozen states and those in several European countries.
The FBI and the Justice Department are part of an agency called the Committee on Foreign Investment in the United States, which has asked ByteDance to divest from the U.S. arm of the app – or face a potential nationwide ban, which the White House has signaled it might support.
Former President Donald Trump in 2020 issued an executive order that effectively forced the company to divest of its U.S.-held assets, drawing on emergency economic powers. Despite several reports that a sale was imminent, no agreement was reached. The order did not survive legal challenges in federal court and was ultimately revoked by President Joe Biden.
The latest request has come amid ongoing negotiations between the company and the government over its ownership and the storage of data belonging to Americans. ByteDance has previously proposed another plan whereby the data from U.S. users would be stored in the U.S. and managed by a U.S.-based team.
ByteDance said in December that the employees who accessed the journalist’s data did so in a bid to uncover the source of leaks. Those employees have been fired, it said.
Federal prosecutors in Virginia are also investigating ByteDance, according to reports. TikTok Chief Executive Shou Zi Chew is scheduled to testify in front of the House Energy and Commerce Committee next week.
Dating back to the first vending machine developed in London in the early 1880s to sell postage stamps, autonomous shopping has had a long history.
In 2018, there were an estimated 350 stores in the world offering a fully autonomous checkout process — and this is expected to grow further with 10k autonomous stores anticipated by 2024.
But since then, consumer preferences have shifted: There’s an increased demand for personalisation, on-demand delivery, sustainable consumer choices and the growth of AI.
So how have autonomous stores been affected by these new market trends — and is the sector still on track to hit 10k stores in 2024? Sifted sat down with the experts to find out.
An increased demand for personalisation
Scaling personalisation has been shown to be one of the key retail trends of 2023. Consumers respond well to personalisation throughout the shopping process — from sales and marketing to upselling and after-sales support.
Brands are increasingly relying on consumer data, algorithms and online surveys to fulfil this growing demand for customised products.
For Natasha Thakkar, head of marketing at AiFi, an AI-powered platform that helps retailers scale autonomous shopping solutions, the boom in AI presents the perfect opportunity for it to be used more widely in enabling personalisation in autonomous shopping.
“AI analyses consumer purchase patterns, previous transactions, interests, demographics and other relevant data to help suggest personalised recommendations to the consumer,” she says. “This increases the likelihood of them making a purchase and interacting with the brand more frequently.
Paweł Grabowski, head of unmanned solutions at Żabka Future, a unit of Żabka Group that fosters innovation and finds businesses increasing the value of the convenience store chain, says that autonomous stores (Żabka Nano) allow them to deliver a personalised experience in the offline world. It now operates over 50 stores, making Żabka Nano the largest chain of autonomous stores in Europe.
“It’s like ecommerce shopping, but within brick and mortar — we can collect customer data and track the customer journey at all the stages, which allows us to build advanced analytics, including sales funnel or advanced shopping history based on events.
“The data, combined with our mobile app, enable us to personalise communication, offer and even discount coupons to the customers,” he says.
On-demand delivery and flexible lifestyles
The pandemic drove up the demand for quick online shopping — also known as quick commerce or qcommerce. But now, there’s a shift back to offline shopping and consumers are increasingly opting for a hybrid approach — a mix of online and offline shopping.
40% of consumers who intend to increase in-store shopping and decrease online shopping say it’s because delivery costs are too high.
The experts say that a hybrid approach is the way to go for all brands.
“Both autonomous stores and quick online shopping educate people on how to do grocery shopping differently. We believe in the synergy between those business models,” Grabowski says. “Customers are expecting a complete ecosystem of convenience solutions. Qcommerce is based on dark stores located in good city spots. What if autonomous technology can extend their role to them? Dark stores can then serve both as warehouses and come-and-grab stores for the local community.”
Emanuel de Bellis, associate professor and director of the Institute of Behavioral Science and Technology at the University in St. Gallen, Switzerland, says that he sees autonomous technology working better for quick shopping in local stores. De Bellis’s research focuses on how consumers perceive and use new technologies.
“I don’t see a future with larger stores that are fully autonomous because I don’t really see the incremental benefit — the technology works better for smaller local stores where you can just grab a couple of things,” he says.
Additionally, autonomous stores also give brands the flexibility to operate within settings which were traditionally considered unusual for stores. The ATX Market at Q2 Stadium in Austin, Texas, recently became the first soccer stadium in the world to introduce a checkout-free store.
“Our stores are located in the middle of the offices, dormitories, gyms and inside other stores,” Grabowski adds. “Autonomous stores can provide convenience services in locations where traditional retailers are unable to operate.”
Sustainable consumer choices
Given inflation and the downturn, this may be the right time for brands to leverage technology to improve their offerings and come up with innovative ways for consumers to shop and save.
“Since there’s no checkout staff operating autonomous stores, retailers can operate them 24/7,” says Thakkar. “This not only provides more convenience to the customers, but also helps in increasing the revenue and significantly decreasing operating costs, thereby increasing overall store efficiency.”
Consumers are also increasingly shifting towards conscious shopping habits — buying decisions revolving around ethics, environmentalism and sustainability, regardless of macroeconomic conditions. A 2023 survey shows that 78% of consumers prioritise sustainability.
Grabowski says that at Żabka Group, the business and ESG strategies are interlinked. For example, the stores use only energy from renewable sources.
“Since there’s no checkout staff operating autonomous stores, retailers can operate them 24/7″
“Another crucial element is reducing food wastage: our store is data-driven, so for example, we can accurately predict the demand for fresh products,” he says.
De Bellis says that this also points towards a possible future where human intervention for grocery shopping can be completely eliminated — homes and retailers would be interconnected to predict the items and quantities that need to be purchased and replaced.
“With large amounts of data, it could check what’s in your fridge, for instance, or it could also be connected to many more things such as your blood glucose level and order specific things depending on how healthy you are,” he adds.
“It’s something that we can expect only in the distant future, but are slowly moving towards.”
Why Do Your Customers Really Buy from You?
The following is a simple question for business owners. Why do your customers buy from you?
I told you the question was simple, but an accurate answer, on the other hand, can be far more complex and perhaps even elusive. To achieve long-term, sustainable success, your understanding of why your customers choose to do business with your company needs to be both correct and substantial.
Many business owners develop a customer value proposition (CVP) alongside their company mission and vision statements. The brief declaration is supposed to document why a customer would opt to buy your product or service over the competition.
While developing a CVP is commendable in its customer-centric approach, it often falls short of its intended purpose due to ambiguity, a lack of self-reflection and sometimes even outright insincerity. Dollars to doughnuts, there is not a single CVP out there that reads, “Our customers turn to us because we deliver lackluster service and a marginally good product.”
Related: Who Is More Important — Your Customers or Your Employees?.
I would also assume that there are many businesses whose CVPs portray an exaggerated sense of the company’s true customer value. CVPs should never be created based on hype or manufactured mantras; instead built from sincere, astute insight.
Bravado and disingenuousness are not the only ways business owners are misguided in their understanding of customer engagement and loyalty. The following are common misconceptions related to the question of why customers buy from you.
“We are the cheapest”
Sure, this value statement might be dressed up as “We deliver the best value,” “We are the low-price leaders,” or some other cost-based differentiator. But when I hear any form of “My customers buy from us because we are the cheapest,” I cringe. Competing on price alone is simply not a good model and is often unsustainable. There is always some other business owner who is willing to run out of cash faster than you are.
Most customers – both B2B and B2C – understand the balance between cost and value. They walk that tightrope in every purchase they make. Contending that cheapest is the key attribute that keeps them coming back shortchanges both your business and your customers.
“We have the best employees”
Forgive me for being a bit skeptical about this assertion as well. Sure, your business may have good employees; but are they really the best? You may provide excellent service, but your competitors probably do as well. Is it truly your employees that keep your customers coming back? With the rare exception of that ultra-charismatic salesperson who charms the socks of buyers, the answer in all likeliness is a resounding no.
That is not to say that hiring for personality and alignment with company values is unimportant. It most definitely is. But to put the onus of success and customer loyalty squarely on the shoulders of your employees is shortsighted.
Related: 3 Reasons Why I Gladly Welcome Competition
“We’ve got the best product on the market”
While possessing a corner on the market is a great position to be in, it does not account for innovations in the marketplace and often fickle changes in consumer preferences. Evolving customer motivations and expectations, coupled with aging business models, have been the downfall of even some of the most successful industry titans.
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