Not Feeling the Snap-Back

One of the reputable theories about the economic recovery from the coronavirus pandemic is that activity will rush back to previous patterns as soon as people are free to do so.

In this argument, the pandemic is like a hurricane or earthquake. Eventually power, roads, and traffic lights are restored. When that happens, people in most households can forget that the disruption ever occurred. They can go right back to their previous plans.

Never mind that the pandemic never did close roads or take out power. The response at the end is theorized to be the same.

People’s theorized haste and eagerness to return to their previous patterns is described in several metaphors. One of these is “snap back,” which in physical terms describes the behavior of an extended rubber band when pressure on the center is released.

For me, today ought to be the snap-back day. I was fully vaccinated on Friday afternoon, so three days later, I am supposed to have a good working approximation of the full protection of the vaccine. At the same time, I have recovered well from the 24-hour fever that the vaccine gave me. Today for me is the closest thing to an all-clear signal that an individual consumer can have in a pandemic. According to the snap-back theory, I should be going shopping.

But I am not feeling it.

Food would be my top priority, but I still have some of the food I bought last month. I have fallen into a rhythm of grocery shopping 3 or 4 times a quarter. It is impossible to drum up any urgency in me on that topic anymore.

A year ago my friends and I were talking about the restaurants we would want to go back to when we could. Now there seems no urgency about that — and in the meantime, most of those restaurants have closed permanently.

It would make a certain kind of sense that I would want to buy clothing after having gone more than a year with virtually no clothing purchases. The last clothing item I bought was the race T-shirt from the virtual race I entered in October.

But as I have explained elsewhere, I have consumed virtually no clothing during the lockdown. Given the perfect chance to wear my stained and torn but otherwise comfortable clothing, I have worn it almost every day. I wore a pair of walking shoes until they fell apart, then I taped them up and wore them a little longer. These are things you can do when you know you’re not leaving the house on a given day. Adding 100 days of wear to my badly stained jeans has hardly changed them, and meanwhile, my better clothing is as fresh is it was in February 2020. The extended time I spent at home has given me the chance to organize my clothing. It is all in one room now, and that helps me understand how truly excessive it is in almost every category. So I am reluctant to go buy more of the same.

I have a shopping list and some wish lists, but the urgency I felt about shopping before the lockdown is no longer there.

And if I am having this reaction after a relatively benign lockdown experience, it can hardly be much better in the households where household members or close relatives died or have spent months in the hospital.

That is not a small number of households. At this point, it seems statistically safe to say that everyone in most countries in the world has lost at least one distant relative to illness in the last six months. If one death can dampen a person’s shopping impulses for a year or two, what will be the effect of the largest wave of deaths in the history of humanity?

Okay, I’ll calm down. No one really knows how these patterns will generalize in the current circumstance because this is a circumstance that has never been seen before.

The point here, though, is that I should be the perfect example of the snap-back consumer, the person who, after a year of being prevented from shopping, is free to go shopping again today without any undue worries. I am the perfect case, today specifically, for the theory of pent-up demand being released — and today I spent nothing.

There is another issue around the idea of pent-up demand, and that is how much the world has changed in a physical sense. The vaccine clinic I attended three days agao was in a mall. I walked halfway around the mall only to find that the clinic could be reached only through an outside entrance. While in the mall, though, I passed some 50 closed stores compared to only one that remained open. A person in my position today who had rushed out to the mall or to their favorite restaurant would, at least, meet with frustration. Shopping habits are constructed on the idea of going to a specific place to buy a specific kind of thing. When that is no longer passible, the habit is broken, regardless of how eager the shopper is.

I don’t see why I would not eventually go back to shopping and spending as much as I did before, but it will not be a quick or easy process. I wlll have to start from scratch — to figure out what I want to buy, then to figure out where I can buy it. My shopping experience of the past decade will not help me very much over the next couple of years as I sort out my new shopping patterns. I will be acting more like someone who is only now learning how to shop.

This is not the stuff that a snap-back effect is made of.

The Secret Sears Store Closings

Yes, the Sears store in Exton is closing. I went to the store and took a picture.

The posters in the windows read “Store closing sale! Nothing held back!” At half a meter square, these are a far cry from the signs and banners you expect, but the wording could not be more clear. If the message is muted from the parking lot, it is more obvious after you step inside the store. The sale message is repeated on larger laser-printed paper banners hanging overhead.

But if you don’t go into the store, you might never know that the store is closing.

The store finder on the Sears web site does not mention that the store is closing. I have not seen a closing date. As I understand it, legally the date would have to be within six months, but that doesn’t narrow it down much. I don’t think there have been any print advertisements or news stories about this store. The Internet banner ads appear to be narrowly targeted — no one else seems to have seen them.

When I saw the ads myself I initially thought they were either fake or a mistakenly approved ad campaign. This is the era of Internet misinformation, after all, and it would cost a rogue actor only a few dollars to run display ads that reach only bloggers who have mentioned Sears and its recent bankruptcy, in order to plant a false idea and create a rumor. An online ad campaign might be prepared for the future and then launched by mistake with hardly anyone knowing about it even within the company. It seemed strange that there I could not find mentions of the store closing on the Sears web site, in a news outlet, or anywhere. There were news stories about other locations closing, but not the one in Exton. I went to the store and verified that the store closing sale is real.

So some Sears stores are having a “secret” store closing sale. That is a concept I have never run across before. Traditionally the whole point of a sale is to draw attention and bring shoppers into the store. Sears is taking the opposite approach. It is closing stores and and hoping the world does not notice.

Sears is surely planning on having millions of dollars in unsold merchandise, as I saw in the nearest Kmart store when it closed a year ago. The merchandise can be shipped out to another store in an adjoining county. There isn’t the same pressure to sell everything when a retail chain is closing only a dozen or so isolated stores.

The real story here, though, I believe, is embarrassment. The recent Sears bankruptcy was supposed to cut losses and put the retailer back on an even keel. Instead it is already back into its downward spiral. For context, the Exton store, though surely too large for the Sears of today, is one of the chain’s best stores and its only remaining store in one of the fastest-growing counties in the country. If it can’t keep going here then there is not much hope for Sears stores anywhere. But Sears needs to give a good appearance for investors and lenders if it is to keep operating even one more year.

Perhaps Sears has reached the point where giving the impression of holding its own is more important than actually making a profit. That would explain why it could decide that getting shoppers to buy the merchandise in the stores that are closing is not so important as its public image, so that a store closing is something the retailer would rather not talk about.

Bayer Fades After Monsanto Acquisition

Could Bayer face bankruptcy because of its acquisition of Monsanto? There is reason to consider that as a possibility. The stock has suffered this year, so that the entire company is now worth less than the $60 billion it paid for Monsanto last year. The most obvious risks relate to corrupt practices in Europe and illnesses caused by the herbicide Roundup in the United States, but problems run much deeper than that.

It was a $2 billion verdict in favor of two people who got cancer after exposure to Roundup that made the biggest headlines, but there are thousands of lawsuits on behalf of people sickened or killed by Roundup. Facing a likely liability of millions of dollars per case, the lawsuits already in the courts might be enough to bankrupt the company. And virtually every person and animal in the world has some degree of Roundup exposure, so the civil liability could be thousands of times larger, and one has to wonder how long it will be legal to sell Roundup over-the-counter. The desperation in Bayer’s position is easily seen in its public statements, in which it says its plan is that all of the Roundup cases will be overturned on appeal, an outcome that legal observers say is unlikely.

In Europe, the company collected files on p.r. targets with detailed information that appear to go beyond what European law allows. An investigation is underway in multiple countries. That is, it looks like the company was preparing to bribe and blackmail journalists, scientists, and others and may indeed have done so already. Though Bayer so far has been able to distance itself from what it says was a Monsanto initiative, Bayer’s own history is dodgy enough and there is no telling what an investigation might turn up.

Roundup and blackmail are not two isolated problems at Bayer. Roundup is certainly not the only toxic product Bayer sells. Toxicity is inherent in the fields it works in. So too, apparently, is deceptive marketing. The agribusiness sector that Bayer tries to dominate uses, to cite just one example, pictures of cows in fields to sell milk from cows kept in concrete cells. When examined, this will likely be found to be illegal in countries like the U.K. that have truth in marketing laws.

Even in the absence of scandal, Bayer may have accumulated so much market clout that it works against the company's fortunes. Bayer depends on national laws to protect its exclusive rights to product categories at the same time that it wields its clout against those countries’ national economies. Countries are likely to respond defensively with technical legal changes to reduce the risks. Technical changes in the legal status of seeds would be too obscure to explain to the broader public but could pull the rug out from under Bayer’s dominant market position in one country after another.

No one disputes that Bayer blundered badly in its acquisition of Monsanto. Is it too late for the company to recover? Maybe not, but I don't think anyone can say with confidence.

When Cars Are Mostly Electric

What will it look like when most of the cars are electric? That’s a threshold that seemed unimaginable to most of the auto industry — until it happened.

It happened last month in Norway. Car buyers bought more electric vehicles than fuel-burning vehicles. From NPR:

Electric Cars Hit Record In Norway, Making Up Nearly 60 Percent Of Sales In March

The 58 percent share for electric vehicles in March was a bit of a fluke, with a flurry of car sales after a period of limited supply that kept buyers waiting. Don’t expect electric cars to take a 50 percent share again in April or May — but it will happen again, and within a year or two, it will be the norm. Electric vehicles had a 30 percent share in 2018, and that number will grow in 2019.

That’s a far higher level of adoption than in the United States, where electric cars are likely to reach a 5 percent share for the first time in 2018. The U.S. market is almost 100 times the size of Norway’s, so that means more electric cars are sold to U.S. drivers. Still, the experience in Norway is important in making the idea of having mostly electric cars look attainable and familiar.

Replacing with the Same Model

I think it has become a trend: consumers replacing broken appliances and computing devices with the same model they had.

This is hardly the behavior that manufacturers and retailers expect. They expect shoppers to be looking for the latest, most advanced designs. But this isn’t always what shoppers want. The same way that you might postpone the purchase of a replacement for a device until the device actually fails, you might choose to replace the device with the design that you are already used to.

The purpose is to minimize the disruption. You don’t have to learn something new when you replace a device with another one that is exactly the same. There are no new processes to learn, no working habits to change.

There can be emotional reasons to keep things the same. In a world of constant change there is some relief when even one small change can be postponed. On two occasions I remember making a dumb mistake that destroyed a kitchen device. I bought a replacement that was not just the same model but the same color so that I could pretend that the error and damage had never happened.

It is the resistance to learning that seems to be the deciding factor, though. Since last year, iPhone sales have been sluggish because potential buyers were put off by the large number of new features. When combined with an ultra-high price and a high degree of uncertainty about the usefulness of the new features, people decided to hold on to their old phones for a few more years.

The same effect can be seen with devices as prosaic as coffee makers. I just today sold a coffee maker online, and I got a higher price than I would have guessed, comparable to the prices shoppers paid for them when first released five years ago. It surely helped that I am not a coffee drinker and had never used the machine I was selling. The most likely reason for the purchase is that the buyer wanted to replace a broken machine with a new one that was just like it.

I can relate to that kind of thinking when I look at my desktop computer, a Mac Pro made around 2010. That makes it nine years old as I write this. A more efficient Mac Pro was introduced just three years later, but the difficulty in configuring it, along with a new higher price, dissuaded me and most of the computing world from buying it. Instead, millions of computer users are waiting for the new-generation Mac Pro to be introduced next, probably this year.

When the 2013 Mac Pro came out, I was working on one of the original 2006 Mac Pro designs. Those became obsolete around 2015, and I have upgraded by buying old machines on the used market. It was an easy adjustment for me to make. I could literally slide the hard disk drive out of the old Mac Pro and into the new one, then carry on almost as if I were working on the same computer as before.

This approach has its limits. Eventually, Apple’s macOS will no longer support the 2010 Mac Pro I currently use, and it has the other problems you would expect in a nine-year-old computer. Last week I had to replace the optical drive after it failed. One of the chips, a memory chip I think, has become unreliable when the computer is cold, and I am working around that problem by never turning the computer off or allowing it to sleep. That is hardly an efficient strategy, but the energy costs are lower than those of buying another computer, even another 9-year-old computer on the used market.

Similar problems arise with the old coffee makers. A coffee maker is not so sturdy that it is likely to keep running for another five years, but if it does, it will eventually become hard to find the supplies for it. But even a few years of postponing an inevitable change may be worth it if it allows the user to skip an entire generation of technology, so that a whole set of skills never has to be learned.

Manufacturers gain more sales by introducing new models and new features every year than they lose by turning away potential buyers who would rather have the same thing as before, so the regularly scheduled design upgrades are not about to go away. Buyers who want to replace a broken device with something identical will mostly have to navigate the used market. In the bigger picture, this is a good thing. Fewer raw materials are needed for factories and old equipment is delayed in getting to the landfill.

In some cases there are market opportunities to provide devices that mimic popular designs that are no longer available. The most popular iPhone form factor ever was that of the iPhone 5, 5c, and SE. Now that the iPhone SE has been discontinued, there is an opportunity for a manufacturer to provide a product that resembles the discontinued phone as closely as possible. Consumers might choose that product if they believe they can avoid the learning curve that goes with finding their way around a new design.

Or maybe not. Maybe phone users who break their iPhone SEs will buy used iPhone SEs as replacements. Maybe Apple will fill this niche itself with a new model that copies much of the look and feel of the iPhone SE.

Products are more diverse and complicated than ever, and the complexity is a burden on consumers. It is no surprise if they are responding by looking for ways to reduce the complexity.