Sustainable Business Models and Entrepreneurial Resilience

prorogram today. Honestly It's all about you From American public media. This is Market plans In Los Angeles, I'm Kyl Risal. It is Wednesday today, the twenty fourth day of June. Good as always, Debie along everybody. We've got some data coming this week. May inflation in the form of the personersal consonsumption expenditures price index that is tomorrow And then on Friday, the University of Michigan's indndex of Consumer Sentiment And that which is to say consumers, which is to say us is where we are going to start with Heather Long. She's the chief economist at Navy Federal Credit Union, also one of Friday regulars. Hi Heather Hi Kyi, gllad to be back So look, somebody wakes you up at two o'clock in the morning from a dead sleep and says, Heather What is the mood of the American consumer? And without having a chance to check any of your data, what would you say Well, I think after I maybe sack them, I would probably say the mood is still really gloomy And I think the big thing that's going on that people are missing is while a lot of the consumption data still looks pretty darn robust There's this massive psychological tax on the middle class right now, where they feel and they have to financially make every dollar stretch to the furthest possible And that's why the sentiment is so low. It's this I got to find the cheapest gas station in town. I need to reset my thermostat so my electric bill isn't soaring again. I need to shift my spending from the nice grocery store to the warehouse or the discount store. It's that pressure people feel to be able to even do what they were doing without much thought a few years ago Okay, so now I'm going to let you dig into your knowledge of the data that you guys have at maybe federal. and And what are we seeing consumers doing and starting doing. You went over some of them, but clearly consumers are still spending, but I guess The point is they're changing the way they're spending what they're spending on Exactly. It's a big shift that's going on under the surface. I want to be clear this is for the middle class The top twenty percent earning one hundred seventy thousand above. They're fine. They are spnd, spnd spnd whatever, this is really folks in the middle. And what's really apparent is two big trends. Number one, this value and discount hunting. So this massive shift to spending at places like Costco and Sam's Club U and the second trend that's going on a lot less spending on the home. so whether it's home furnishings or gardening. and because people are still want to prioritize entertainment spending and they want to do go to that concert or go to that World Cup. mayaybe that was a little bit too much of a stretch, but they want to be part of those one time splurge experiences still All right, so what happens then when the changing spending patterns of that middle class and the lower end of the income spectrum are so separated from those at the top end, right? The top end is buying and spending whatever they want. but what are the What's going to happen in a year and a half if it keeps going like this, I guess is my question Yeah, it's a great question. I mean, in a lot of ways, the economy has been like this for a while with the top twenty percent driving a lot of consumption But I think what's different now is the reality of the affordability crisis, particularly with cost of housing, cost of car ownership, those aren't coming back down. And now we got the electricity pressures that are rising for a lot of people U and so I think what's my crystal ball, always tricky, but the crystal ball is it's inevitable that there will be belt tightening. The question is really how much know the reality as you always report is that wages are not keeping up with inflation right now. There's very little I mean, that picture may get a little better by the end of the year. There's no Um there's no great income for the middle class that's going to show up. that's really going to improve a lot of people's Buds in late twenty twenty six. Right. Right. scale of one to ten then, and this is a little unfair because it's a nuanced question, but scale of one to ten, how macroeconomically worried are you? You got like fifteen seconds? You can hear my deep sigh. Macroeconomically This is the frustration, right? And this is why I think the middle class is so gloomy. Is this going to tank the economy? No, probably not. It's probably more like a four or five on your ten point worry scale Is this a long term problem? Is this the economy that most Americans want u to feel that psychological tax of Gee, I can't do everything notot only can I not do everything I want to be doing right now, but I can't even do everything I could felt I could do even a few years ago. And that's that doesn't feel sustainable long term. Sure doesn. Heather Long at the Navy Feral Credit union. She's aiefconom there. Thanks, Heather Hey, thanks guysy Wall Street today, oil wayigh down, stocks mostly down too. we will have the details when we do the numbers Let's keep going on that theme that Heather and I were talking about. Things that are affecting the consumer mood out We're going to do it though with an eye on the Wall Street narrative Ever since the war started, conventional wisdom has been that high oil prices are driving inflation higher Check ue. Over the past couple of days though, The vibe has been that lower oil prices are going to drive more consumption, which is also going to mean higher inflation. bles Justin Hoe takes it from there Earlier in the war, when a barrel of oil cost twenty five bucks more than it does today, markets were worried about inflation caused by a tight supply of oil. But now we're moving what appears to be more of a concern towards the demand side. That's Nathan Tuft with Many Life Investment Management He says falling oil prices solve the supply side inflation problem cause more demand. So people start thinking about Inflation driven by the fact that the economy might actually improve because we're no longer having to worry about higher energy prices consumer has those dollars then to spend on other things. And that can lead to inflation too. Tuff says that's a concern for stock markets because in that case, the Federal Reserve might raise interest rates, which raises costs for businesses. Gil Labot with Jenny Montgomery Scott says bond markets have been expecting higher interest rates. That's been pushing up bond yields and the value of the dollar Much of that follows from Kevin Warsh's Federal Reserve press conference last week in which he struck a tone that was hinting at higher interest rates. Of course, things might not end up playing out this way. Consumers might not have extra money to spend, says David Kelly with JP Morgan Asset Management. The key thing to recognize here is wage growth is still very low. In fact, the main number in wage growth was the second lowest we've seen in five years on a year over year basis. Kelly says population growth is another factor. It's slowed down, thanks in part to the Trump administration's crackdown on immigration. And if you've got shrinking demographics, that means less demand for housing, less demand for consumer basics And of course there fewer workers. And I think all of that is really acting as a constraint in overall economic growth and a constraint on inflation Kelly says that means the Fed will probably keep rates steady I'm Justin How for Marketplace We talked about the million dollar starter home yesterday. Kristen Schwab did that story for us Today, the flip side homes under one hundred thousand dollars. First of all, they do still exist, but it's actually really hard to get a mortgage for them. somethingomething that the housing bill Congress passed last night addresses, President Trump's refusal to sign it Notwithstanding, Marketplace' Caitlin Tan has our story. The house you might be able to afford Get a loan for Craig Richardson is perusing Zillow for homes under one hundred thousand dollars near where he lives in North Carolina 'm looking in a two bedroom one bath seven hundred and twenty nine square feet. It's a nice little cottage Another one's fifty five thousand. It's a multifamily home, another condo is eighty nine thousand. Richardson is an economist at Winston Salem State University, and he actually bought a similarly priced condo as an investment We had to refinance and wrap this condo into a larger loan that included both our house and the condo couldouldn't get a small mortgage for just the condo. And that's pretty common. People typically pay cash or go with riskier financing such as land contracts, rent to own agreements, or lease purchase Tara Roach oversees Pgh's housing policy. She says it's hard to get a small mortgage because lenders don't likeem They have fixed costs no matter the loan size. It can make those small mortgages difficult to pencil for lenders To make it worth their while will likely take regulatory change. Roberto Carcia with University of North Carolina at Chapel Hills says Congress's housing bill calls for that They create policy and regulatory framework to eventually implement change Carcia still doesn't think one hundred thousand dollars mortgages will be easy to find anytime soon Caitlin Tan for Marketplace If your getaway plans this summer involve internal combustion engines in any form, plane, train, automobile, or other It's going to be expensive. So a lot of people already fed up with inflation and sluggish wage growth have been opting for vacations that don't involve burning quite as much crude as usual Pice is Kelly Wells report Travelers facing tighter budgets have always been a good thing for tourism in relatively affordable, Astabula County, in the very northeast corner of Ohio. Stephanie Siegel is executive director of its Visitors's Bureau This isn't the first time that we've seen a little bit of a downturn in the economy. And whenever we've seen this historically, our area does incredibly well. Tourists from Detroit, Columbus, Cleveland, and Pittsburgh can get there in three and a half hours or less. They come because it is the home of Ohio's wine country, seventh largest in the nation. It's got lakefront beaches and beach towns, and the county boasts a whopping nineteen covered bridges. So, when times get tough, People start to be a little bit more creative and don't just naturally jump on a plane and leave the state or leave the country, they start to look a little inward what's around them, what can they drive to, or what can they affordably get to Because in Ashabula County, you can get a lakeside cottage that sleeps a family of four for two hundredars per night. Then take the family on a self guided tour of those covered bridges and finish a beach day at the local farm's market all for free And that's what people seem to be doing. Typically, April is Ashtabula County's quietest month This year A lot of our businesses reported having some excellent numbers in March and April Siegel says the county's tourism revenue is already up thirteen percent compared to last year, with the busiest summer months still ahead That lines up with another trend that lead economist Haley Berg with the Travel app Hopper has been seeing Deal seeking behavior trying to find ways to use their points to extend that budget a little bit more shopping around, trying to find the best price looking for offers She says more travelers are blending work trips with vacation trips to cut down expenses. They're waiting for price cuts. They have their eye out for credit cards with good travel rewards Travel is always the category that's being protected most when you compare it to entertainment, online shopping, eating out, that's the category that No matter how strafted budgets get Travelers are really trying to protect their vacation budget With higher vacation costs, people are traveling differently, not less. The US. Travel Association says domestic travel is going to increase again this year Clint Henderson at the Points Guy says that if travelers surveyed by his company are changing their plans, they're driving instead of flying, they're going somewhere different and they're going on shorter trips. If you're planning a trip with your family for the summer Maybe you're not going to try to take them to Europe, mayaybe you're going to go somewhere local instead And there are still plenty of people who are forging ahead as usual. Flight prices are up twentycent to thirty percent in some cases The numbers of people who say they're going to cut back on travel are very small. I keep thinking we're at the limits of what consumers will bear and they continue to shock me But between years of inflation and higher fuel prices because of the war in the Middle East, Henderson thinks that travelers in the U S. will finally start cutting back next year. But he also thought that last year and the year before I'm Kaylee Wells for Marketplace Coming up, I never paid so much attention to the ten year and the five year treasury note. Welcome to the club, man. First though, let's do the numbers Now Industrialals up one hundred and eighty two points today, one third of one percent, fifty one thousand eight hundred forty eight and NASdaq down one hundred ten, that's points percentage is four tenths of one. Closed to twenty five thousand four seventy six S and P five hundred dipped seven points, tenth percent, seventy three and fifty eight. Caitlin was just telling us about the pursuit of one hundred thousand dollars mortgages How about some lenders rocket companies? startarted with mortgages and expanded into Fintech, as you know, fired up nine point four percent on the day. Loan Depot. That's a non bank holding company that sells mortgage and lending products Finances interesteresting. shhot up five and three tenth percent. bonds up yield now on the ten year teame at four point four zero percent Youre listening to Metpl This is Marketplace. I'm Kai Risdol. There was a time, not all that long ago, twenty ten's ish When a very particular kind of direct to consumer retail was the hot hot thing, specifically, brands that targeted the sustainability minded among us That wave though, seems to have crested of late. Everlane, which built its brand on clean manufacturing, was sold to Sheian, the fast fashioned but not so clean manufacturing giant. All birds the shoe company It does AI now But some of the companies that caught the wave back then are still hanging on. Three years ago, I talked to Lindsey McCormick. She's the founder and CEO of a company called Bte. which makes plastic free toothpaste tablets and deodor Well I have so many questions. I have so many questions Their office inside a we workout in Culver City. California was indeed a bit of a circus. There were samples of packaging laid out on a table, boxes of products stacked all over desks. Fast forward to today though, Lindsey has moved herself to Miami and that office is no more We are now a fully remote team. We have people all over the US and the world. So we didn't need that space anymore. Okay. Now let's start any space. Any space, right? Let's talk about the actual business. you know, you were along with a bunch of others that I mentioned in the introduction. You were one of those, you know, twenty tenens, late twenty tenens isish companies. that went direct to consumer for sort of sustainable product and it was working really well. and I guess I want to know what happened Yeah. So you know we I feel very lucky that we're still one of the ones hanging on. We're still D to see, we're still sustainable. But you know seeing like Everlane and Alberirds and just these epic companies that had such amazing messages just kind of goingo the way that they did, I think that there's like a number of reasons. So one thing I think is that it's harder and more expensive to run a business, right? So I think we'll probably be talking a little bit about tariffs as well as even the fact that we're still made here in the US. And also consumer sentiment. I think it's changed a lot over the past few years And we're actually seeing some really positive things in our space right now, but it's a very, very recent thing. There was a few years that were a very treous treacherous time for sustainable brands, especially. Well So let's dig into that a little bit because you say consumer sentiment and I hear that thing that I talk about all the time which is consumers are cranky, But that's not what you're talking about, right? There was there was indefinite sort of change in the way consumers look at sustainability. Yeah. So you know, I kind of said like I joke about this now. know, I started my company because I wanted to save the sea turtles. And back in twenty eighteen and twenty sixteen, that resonated with people. They wanted to know what their products were doing for the planet, like what know what they could do to help. And what we're now kind of finding, especially with this new understanding of microplastics and the impact that it has on the human body More people are gravitating towards that. so', you know it's no longer about the sea turtles and now it's about ourselves. And same product, same same goals, same mission. It's just a different type of messaging that is resonating with consumers right now How do you know? It's not about the sea turtles anymore, and it's more about people thinking about themselves and microplastics or whatate have you So because we're a direct to consumer, we have a really interesting first eye look into this. So we put hundreds of thousands of dollars through meta every month. And so we're able to see what messaging is resonating with people and what's not when you put an ad up against, you, toothpastes trashing the planet and then another ad up with how microplastics are you impacting your body and one of them just clearly wins every audience, no matter what. That's one of the reasons that we've kind of pivoted not our ethos, not our mission, but our messaging until we kind of get back to that holistic view. Right. Sorry, just to be simple about this, literally what people are clicking on, you can see that. That's it You mentioned tariffs, which I appreciate so that I didn't have to introduce it into this conversation. How have they been for you So we were made in the U.S or we are made in the US. And I think that a lot of people, yeah, still are. But no matter where your product is made, you have ingredients and components coming from all over the world. And so what had happened was that basically all of our manufacturers here in the US ended up having to their prices in some ways, whether it was directly tariff related, whether it's because they were getting hit, we ended across our entire product line having to pay more. And now now that tariffs are getting paid back. We have not had that. We have not been made whole. Did you just take those tariff costs out of your margin and you ate them Yeah. We didn't raise prices. We just took it. So that was one of other the reasons too, right? You start looking at being like, do we need this office space? Do we need, like what can we do here to kind of make up for it? We still want to be able to provide for our customer. And so you kind of look at ways you can save that doesn't impact your company in a negative way. Right This is sort of a tough question to ask an entrepreneur who has poured, you know, I don't even know. It's just got to be like ten years of your life, probablyro more into this. and who knows how much capital, but are you going to make it Yeah, we are. are We're going to be able to weather the storm. We're seeing like after a few tough years, we're seeing some really real traction with microplastics. And I think here's the thing K I think this is cyclical. I think people will start caring again about the planet. I think that will be able to be a part of our messaging. It's always been a part of our DNA as a company It's going to be a good twenty twenty six, twenty twenty seven Lindsy McCormick, CEO, founder also space pits and who knows what else she's going to wind up sell Lindseay, thanks a lot. I appreciate your time. Thanks so much, Ky We were talking a couple of weeks ago about how we're not making enough honey in this country to meet demand Maybe though a way to get your hands on some if you can't find it at your local piggly wiggly. is to harvest it yourself That's the setup for today's installment of our series My econom I'm Adam Hickman from Foxound B Company in Ironale, Alabama Our business is a beekeeping supply company where we supply equipment to beekeepers, provide them the bees they need, the queens they need, and we also do a lot of education about bees as well So it started seeing some of my great grandfather's equipment when I was a kid. I got some interest in how it works and decided let me just try this out. So I started as a beekeeper myself and then I became my own customer. I saw that there was a pain point for a lot of people who wanted to get into bees and built a little website, made a little money on the side, and then it just grew organically every year from there until the point I couldn't keep my full time job. and in twenty twenty, a month before the pandemic started, I just had to do this full time I moved into an old warehouse that was rickety and leaky, but it was much better than a storage unit in my garage and operated in that space until it was the fall of last year. was when we had our grand opening at our brand new five thousand square foot building that is purpose built just for beekeeping Moving into a new space and taking on an SBA loan and buying multiple warehouses was a huge leap. I felt like this was like when I quit my job I never paid so much attention to the ten year and the five year treasury note as I did in that last year We ended up closing on the loan a few weeks after that war started. And this isn't, I mean, a house is a huge purchase, but this SBA loan is huge. And a quarter percent is several hundred dollars every single month for the next ten years, at least. But it's hard. I wish we closed thirty days before Foxound is a seasonal business. so we do a lot in the spring and the early summer. And then as the flowers stop blooming across the country, business kind of slows down a little bit I look at year over year numbers and Foxound Be Company is doing great. I'm really proud of our team and the business that we're still pulling in on double than we were last year It is a beautiful place to come to work I spend more time pulling out a keyboard than I do pulling frames out of the hive, but I absolutely love going to talk to customers and opening hives. It's a very rewarding place to be guysys, that's why we talk about the bond market so much. Adam Hickman, beekeeper, Pprieter, Foxown Bee Company, Ironale, Alabama. Send your stories w to marketplace. org slash my economy. All right, too much of me talking, N not enough time. We gotta go. Our media production team includes Brian Allison, John Folki, Montana Johnson, Drew Johnstad Gary O'Keee and Charlon Thorb. Alex Simpson is the manager of Media productrouction And I'm Kai Rizal. We willil. See you tomorrow, everybody This is APM