Ready or Not, Class is (Almost) in Session

The following is included in PMG’s Summer Briefing Series, exclusive content and commentary provided to PMG clients 2/week on the marketing and business news that’s making headlines.

Wednesday afternoon, dozens of prominent Twitter accounts, including those of President Obama, Bill Gates, Kanye West, and Elon Musk, were hacked in an apparent coordinated social engineering hack turned Bitcoin scam. Unable to put a stop to the attack, Twitter disabled the ability for people and brands with verified accounts to Tweet for several hours. President Trump’s account was one of the most prominent unaffected, likely because his account operates under a “special lock-and-key.”

Given the wide range of the attack, security experts theorize it was a result of a security flaw in Twitter’s system, not poor security measures by those affected. 

It was an unbelievable show of force from both the scammers and Twitter with its countermeasure capability to pause service for a large swath of users at-will. Surprisingly, ads still ran unencumbered during this time. Twitter has launched an investigation (latest updates available in this Twitter Support thread) and has “taken significant steps to limit access to internal systems and tools” while the investigation is ongoing. 

I could talk about the what-ifs and what-nows of this kind of attack for the entire briefing, so let’s switch gears while we’re ahead. 

Commerce

Mask mandates

Back to school

Retail recovery

Services

Dining and food

Travel and hospitality

Finance

B2B

Tech

Marketing and media

The process of reopening brick-and-mortar retail is like one giant game of Tetris, one move, and every other block inevitably follows suit — and by block, I mean retailer. Yesterday, Walmart announced it would require customers to wear face coverings in all Walmart and Sam’s Club locations starting on July 20th. Best Buy and Kroger have since announced or enacted similar measures, with the National Retail Federation now recommending that all retailers put face mask requirements in place. 

Despite the US government not enacting a federal face mask mandate, nationwide companies are now developing these policies for themselves. Given how political mask-wearing in the States has become, this will be a really fascinating policy-shift to see play out. Already, search results are exhibiting signs of opposition.

Source: Google Predictive Search Results

But like in most competitor sets, peer pressure works. We’re likely to see more nationwide retailers enact mask policies in the days to come. 

Schools are busy planning their return — virtual or in-person — while mounting concerns for the quality of education and personal health remains top of mind for millions of American families. Many school districts are grappling with the decision to forgo a normal return to in-person instruction amid the recent spikes in coronavirus cases.

In Deloitte’s Back to School Survey, nationally, 66 percent of parents are reportedly anxious about “sending their children back to school because of COVID-19.” California’s two largest school districts, Los Angeles Unified School District and San Diego Unified School District, made the call two days ago, announcing schools in either district would not open for in-person classes, and instead, students will continue to learn remotely. 

Source: Axios x The COVID-19 Tracking Project

Schools in Atlanta, Houston, Nashville, San Francisco, and others will begin the school year remote-only then transition to in-person later if deemed safe, with others like schools in New York waiting for phased reopening plans to determine their exact approach. 

On the surface, universities face the same decision, though the decision-makers are juggling financial needs and personal safety, with administrators, faculty, parents, and students weighing in on the decision to return to campus and how to best do so in the fall. For some, tuition has been lowered as universities go all-remote while other colleges plan to bring the student body back on campus but only offer online classes or require masks in classrooms. Similar to state reopenings in early summer, school reopenings are a mixed bag of hybrid models and in-person mask-wearing and contact tracing stipulations. 

College students have fewer options than K-12 students do, and attending school regardless of risk seems to be the growing consensus. Traditional gap year options, such as traveling or working, are no longer an option as millions remain unemployed and international borders still closed. Millions of students depend on work-study and student loans to pay not only for class but living expenses as well.

Related: The Trump Administration rescinded its controversial policy that would prohibit students with F-1 and M-1 visas from enrollment or immigration if their US universities’ classes were exclusively online. 

Despite the uncertainty, the timing of back to school shopping is predicted to remain the same as years past, kicking off in late July and lasting throughout early August. In a new report from Deloitte, this year’s back-to-school spending is expected to be flat YOY at $28.1 billion, or $529 per US household. Category purchases are anticipated to shift as families opt to invest in more digital resources than traditional back-to-school supplies. On average, American households are projected to spend $1,345 on back-to-college shopping.

Source: 2020 Deloitte back-to-school survey

Notable insights from the Deloitte study:

Seventy-nine percent of students received digital learning content provided by their school this spring.

Fifty-one percent of parents are spending more on internet-based learning resources YOY, such as virtual tutors, subscriptions to eLearning platforms, and online classes.

Other studies, such as one by NRF, are reporting higher than usual back-to-school spending. This figure is mostly dominated by the need to supplement at-home learning with laptop and tablet purchases, driving the average spend per household higher than in recent years to $1,059.20, topping last year’s record $976.78.

Interestingly enough, parents and students are said to be adjusting where they shop this year. Most (81 percent) are planning to shop mass merchants, though that’s down from 88 percent last year. In their place, warehouse clubs, drugstores, grocery stores, and catalogs are to have a larger piece of the pie.

Deloitte found that department and electronic stores will experience the same level of shopping as usual, but specialty retailers, fast-fashion, and consignment shops are predicted to see fewer back to school shoppers than normal, likely as a result of well-below foot traffic across the nation. Forty-seven percent of parents prefer to purchase from retailers that offer an option to buy online and return to store.

Layoffs and bankruptcies continue to disturb the retail industry’s recovery. REI announced it’s laying off five percent of retail staff, and RTW Retailwinds, the owner of New York & Company, filed for Chapter 11 with plans to close most, if not all, stores. And by facing unpredictable demand heading into the fall season, retailers are reportedly remaining conservative in their merchandising decisions as they still face the challenge of selling merchandise and in-store stock that was tucked behind closed doors and never sold during the lockdown.

In new data from eMarketer, COVID-19’s impact on worldwide retail is expected to be worse than in the Great Recession. According to a new forecast from the Global Port Tracker published by the NRF, estimated import levels into the US are expected to remain lower than last year, as the peak season is forecast at its lowest since 2014.

Related: Retail sales were up 7.5% in June, though new shutdowns are anticipated to stall a months-long resurgence in spending. 

As takeout and delivery remain the go-to amid in-person dining closures, ghost kitchens are gaining traction across the States, and that’s not the only thing changing. This week, Blackstone, the world’s largest private equity firm, led a $200 million funding round in oat milk brand Oatly.

Similar to other business verticals, the pandemic is accelerating changes first anticipated to take years, with consumers, especially Gen Z and millennials, rejecting conventional animal products over environmentally conscious ones. Beyond Meat and Oatly are claiming market share while PepsiCo says its beverage segment largely drove the decline in sales as consumers reach for the oat milk rather than heading out to grab a soda. 

Related: Amazon announced its latest shopping shake-up, a new smart shopping cart that tracks your groceries as you add them. They’ll be first used in Amazon’s soon-to-be-open LA grocery store. 

For many, summer is typically a time spent galavanting from vacation to vacation but with a surge in coronavirus cases across the States, and the European border still closed to Americans, people seem to be up to one of two things: road-tripping or investing in their outdoor living space. Interest in road trips and RVs is skyrocketing while travelers figure out the best, most scenic routes from Point A to Point B. According to data prepared by the Maryland Transportation Institute for the federal government, the July 4th holiday brought on 32.2 million trips of more than 50 miles away from home, slightly more than the 31.9 million trips made during that same period in 2019.  A signal of the decline in long-range travel: Airbnb this week asked if guests would like to donate to hosts, an ask poorly received by many. 

Meanwhile, some 46 percent of consumers say they’ve invested and dedicated time to a home improvement project sometime in the last three months. I can attest my new indoor garden is quite Insta-worthy, and that’s nothing compared to all the new DIY projects popping up around my neighborhood. 

The situation at hand: Coronavirus cases continue to surge across the US, with more states quickly rolling back reopening plans, extending emergency funding, and enacting new restrictions on indoor and outdoor gatherings. Travelers who decide to make the trip somewhere new face quarantine requirements in some states with limited restrictions in others.

Consumers have continued to spend on big-ticket items such as homes and cars, bolstering the economy at a time when renewed business shutdowns have slowed down dining and consumer shopping sectors. With these historically low interest rates, many of the new auto and home buyers have higher incomes and firmer job security than service-sector workers that have been disproportionately affected by the lockdown and economic recession. 

Related: The Consumer Price Index rose 0.6% in June.

Congress is debating whether to extend the extra $600 a week in unemployment benefits provided by the federal stimulus set to expire at the end of July. Meanwhile, the US budget deficit is expecting to hit $3 trillion with big banks warning of the long economic recovery ahead. From the big banks’ top executives, on the $28 billion set aside for anticipated loan defaults: 

JPMorgan CEO Jamie Dimon: “This is not a normal recession. The recessionary part of this you’re going to see down the road.” 

Citigroup CEO Michael Corbat: “The pandemic has a grip on the economy, and it doesn’t seem likely to loosen until vaccines are widely available.” 

Wells Fargo CEO Charlie Sharf: “Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter.” 

As the pandemic lasts longer than initially anticipated, the prolonged effects on businesses are starting to take shape, predominantly impacting small businesses much greater than larger ones. A survey of US CFOs found that depending on the size of the business, the outlook on the next 12 months is drastically different. 

One global equity strategist equated that expectations at small firms “have essentially collapsed.” 

Over 60 percent of large businesses with sales over $2 billion expect sales growth “to accelerate,” with 49 percent expecting a “significant pickup.” 

The forced, rapid revolution of work caused by the pandemic’s lockdown has ushered in a new wave of consolidation and development similar to the dot-com bubble that accelerated globalization and second-generation internet companies. Now, US businesses are making steeping investments in supply chain relocations and digital transformation via tools to improve WFH capabilities and IT security, ecommerce, artificial intelligence, and more. 

Related: Failure to offer delivery was the top reason US B2B buyers switched suppliers mid-pandemic, according to a new report by eMarketer. 

Investments in India-based technology companies are on the rise, with Google negotiating to invest $4 billion in Jio Platforms, joining Facebook with its $5.7 billion investment. Jio is the fastest growing cellular carrier that has essentially transformed mobile broadband in India. The company has, so far, raised $16 billion from a wide range of investors. In a separate effort, Google said it would be investing $10 billion in India over the next several years. 

Following in the US’s footsteps, Britain is barring UK telecom companies from using Huawei’s new equipment for the country’s 5G mobile networks. The UK government gave firms seven years to remove any Huawei gear that’s currently in use. 

In the first case of the week, Apple won against the European Union over $14.9 billion in alleged unpaid taxes. The EU’s top court ruled that “Apple’s tax arrangement with Ireland wasn’t illegal,” which overruled the European Commission on the matter. Today, thousands of companies will reportedly face newfound restrictions about storing information about EU residents on US servers, “after the EU bloc’s top court rules that those data transfers exposed Europeans to US government surveillance without “actionable rights” to challenge it.

This will bring new legal challenges and is said to potentially disrupt the operations of thousands of multinational firms that do business both in the US and Europe. Many were surprised by the European Court of Justice’s ruling on the case. 

The Senate is closing in on a bill that will ban federal employees from using TikTok on government devices as the US Administration is planning to take action against Chinese-owned TikTok and WeChat within “a matter of weeks,” according to statements made by White House Chief of Staff Mark Meadows to Reuters. Coincidentally along that same timeline, Facebook is expected to take Instagram Reels global, launching in the US and more than 50 other countries in a matter of weeks as well.

Although over 1,000 brands halting Facebook advertising, notably absent from the ad boycott is Hollywood. Major entertainment companies are now facing criticism for continuing to advertise on the platform. In other news, NBCUniversal launched its Peacock streaming service this week, Hulu released a self-service tool for ad-buying, and a judge denied an injunction that would have required Quibi to disable its “Turnstyle” feature.

In a new report by the IAB and PwC, US podcast ad revenues will approach $1 billion in 2020, and new audio features have been announced for Apple News and Apple News+, including a daily briefing and a new feature that enables users to listen to long-form stories — aka podcasts. Downloads of the Vine reboot, Byte, surge after the US Administration warned TikTok could be banned, SiriusXM is buying podcast company, Stitcher, for $325 million, the largest podcast deal in history, and YouTube continues to test immersive ad experiences.

And that’s all I have for you this time around. Don’t miss PMG’s POV on the recent TikTok tensions and more insights on the PMG blog. We’ll be back on Monday with the next briefing.