For many Americans, this time of year is filled with family memories, food, and celebrating holidays.  But for over 74.5 million, this time is also associated with intense shopping for Christmas presents and overcrowded malls.

The day after Christmas, otherwise known as Black Friday, is typically a time where many Americans head to their local malls in search of door buster deals and savings.

Studies estimate that over 30% of an average retailer’s sales comes from the six-week time period from Thanksgiving to Christmas.

Although almost 100 million Americans are still choosing to shop on Black Friday, and now over Black Friday weekend, the number of Americans has been declining over the past few years.  In 2015, 102 million shopped over Black Friday weekend but when compared to the 2014 numbers (133.7 million), many people are choosing to not partake in the Black Friday festivities.

Black Friday, although still very popular, is no longer becoming the buzzy, attractive thing to do the day after Thanksgiving, as the popularity and willingness of Americans to brave the crowds for a deal declines.

So, why are sales and the number of Americans choosing to shop declining?  As many currently believe, the economy is doing much better than in previous years, so sales should be increasing.

Experts believe that one of the factors leading to the decline in Black Friday shoppers is the lack of credit card debt.  Many shoppers currently are using their own money, or cash, to spend on Black Friday consumption, rather than credit cards.

Also, many people throughout the country are still very concerned about the economic state of the United States, as people are still recovering from the recession and economic crisis of 2013.

Many also attribute the decline of shoppers to the increase in online shopping.  Many of the big-box consumers, like Target and Walmart, offer the same low price deals online.  This encourages many to stay home and avoid the crowds while still being able to save and get the deals that they are looking for.

In 2015, the National Retail Federation (NRF) reported that more Americans shopped online the three days after Thanksgiving than in stores.

While many large retailers look to Black Friday for a substantial portion of their sales, some stores, like REI have chosen to close down on Black Friday completely.  REI now encourages their customers to #OptOutside and pays all their employees time off for the day.

In an interview with Business Insider, REI CEO Jerry Strizke said that he wanted to make a statement against the trend of opening around a national holiday. “I was looking at the chaos of Black Friday and how more and more stores were opening on Thanksgiving and it just didn’t feel right.”

Although Stritzke might feel this way and take a stand against Black Friday shopping, no other retailers have made this move to shut down so far.  As shopping numbers decline, will other retailers decide this is a change to make as well?

http://www.businessinsider.com/rei-closed-on-black-friday-2016-11

http://www.economist.com/blogs/economist-explains/2015/12/economist-explains

https://www.thebalance.com/what-is-black-friday-3305710

 

 

Tuesday, November 8, 2016 was a significant day for the United States of America. Some man was elected president of our country, and the NFL passed its first post-election ratings test. This year, we have seen a nation where the National Football League and American politics have been intertwined like never before.

With Colin Kaepernick making his mark on national headlines each Monday morning due to his silent protests during the national anthem, the focus has shifted towards players protesting our newest President-elect. Many areas of the country seem to be unhappy with the results of the 2016 Presidential Election; however, people have decided to revert back to watching football on Sunday.

Week 10 marked the first set of games played after the election had been wrapped up. The overnight ratings were up after Sunday’s games. To put things into perspective, Game 5 of the 2016 World Series between the Cubs and the Indians amassed an overnight rating of 15.3 compared to 11.6 for the Sunday night matchup between the Cowboys and Saints. With the election over and baseball in the offseason, the Patriots versus the Seahawks drew a 14.3 rating, the best rating on S
unday Night Football since 2011. Of all the games this season, the afternoon game between the Cowboys and the Steelers drew a 17.8 rating setting the bar for the remainder of the season.
The NFL is all about ratings. As long as people are watching the games and stadiums are filling up, the NFL is making money. For example, it was announced earlier last week that the Patriots versus Jets game on November 27, 2016 has been flexed out of Sunday night and will be played during the late afternoon scheduling. The Kansas City Chiefs versus Denver Broncos game will be replacing the woeful Jets’ game with hopes of boosting ratings.

Although Week 10 looked great for viewers with a staple Seattle-New England matchup to finish the day, it is time to focus on what the following week will bring. If ratings continue to grow in this fashion, which is expected, you can assume these matchups will only get better. With playoffs around the corner, teams are fighting for their lives and the opportunity to hoist the Lombardi Trophy. This stiff competition drives fans to watch their favorite teams battle it out.

We still do not know the actual answer behind the spike in ratings for the most recent week of football, but we can assume that it had to do with the political debates and other championship games. Although the country is split between who they supported, people will look towards football Sunday as an escape and a way bring people of all races, genders, and ethnicities together under one roof. As a result, fans will continue to spend money and the NFL will continue to make money no matter who is President.

As November comes to a close, people are getting excited about what they have to look forward to in the coming month. Thanksgiving is quickly approaching, which means that Hanukkah and Christmas are right around the corner. Although the holidays are an exciting time for most, businesses are even more excited about the influx of cash they are going to make. Black Friday, the Friday after Thanksgiving, is one of the most important retail days of the year for most businesses, with around 30% of annual retail sales occurring between Black Friday and Christmas. Therefore, it is important for businesses to strategically plan how they are going to approach the Black Friday holiday in order to maximize sales and further stimulate the economy.

In the U.S., Black Friday has been regarded as the beginning of the Christmas shopping season since 1932. It is referred to as Black Friday because many retailers usually make enough sales on that day to put them in the black for the year, meaning that they will begin to turn a profit. In 2015, 74.2 million people shopped on Black Friday alone, which is lower than the number in past years ranging anywhere from 85 million in 2011 to 92 million in 2013. Although the number of consumers have decreased in recent years, 74.2 million shoppers still means large profits for these corporations.

Black Friday is known for kicking off holiday spending, however, the three-day Black Friday weekend is where businesses truly make their money. In 2014, 133.7 million people shopped over the weekend. Each one of these 133 million spent, on average, $380.95, which totals out to be around $51 billion dollars of consumer money that was poured into the economy. Investors examine Black Friday sales in order to examine the health of the retail industry. Since many economists believe that spending drives economic growth and activity, they will imply that if Black Friday spending is low the health of the economy is too.

As investors analyze the signals that Black Friday has on the direction of the market for the rest of the year, they tend to tailor their trades to reflect what they believe will be the future of Black Friday sales for that year. Whether the retail performance on Black Friday is good or bad, the results signal consumer confidence in the economy. According to research conducted by the National Retail Federation, 2016 holiday sales have the potential to increase by 3.6% and shoppers plan to spend approximately $655.8 billion.

To prepare for the three busiest retail days of the year, businesses are rearranging their stores, stocking up on merchandise, and hiring between 640,000 and 690,000 workers nationwide. This planning is necessary in order to compete with big-box retailers, like Wal-Mart, who brings in around $8.4 billion on Black Friday. Not only do this week’s upcoming sales have a powerful effect on the future of many businesses but more importantly, the sales should be thoroughly analyzed because the results are an accurate indicator of the health of our nation’s economy.

Sources:

http://www.investopedia.com/ask/answers/102714/how-stock-market-affected-thanksgiving-and-black-friday.asp

https://www.thebalance.com/what-is-black-friday-3305710

http://www.tradingacademy.com/lessons/article/does-black-friday-have-an-impact-on-the-stock-market/

The rise and fall of GoPro is a story other technology companies should be looking at when thinking about going public on the stock market. With an innovative company like GoPro, it seemed like a great next move and expand their business model, however, they might be regretting it now. Companies like GoPro and Twitter are having a hard time diversifying their products and gaining a consumer base, making it hard on investors to stay confident in their products. In its IPO filing in 2014, GoPro admitted that they depend on the sales of their products to capture profits for their company. Let this be a cautionary tale for those who want to become a publicly traded company or for those investing in a stock they may believe in.

Surfline.com

GoPro is an American company that produces versatile, portable high-definition cameras used for action videos and photography. In 2002, Nick Woodman founded the company after going on a surf trip to Australia and failing to capture quality action photos while surfing. As the company developed, so did the camera software and eventually, digital and video cameras were installed. GoPro made the decision to go public in order to become a larger media company and generate additional revenue from their camera products. On June 25, 2014, GoPro became a publicly traded company on the NASDAQ where their price per share was sold at $24. That day, they sold over 17.8 million shares of GoPro stock.

GoPro Official Website

Since their IPO, their share price quadrupled in the course of three months and things were on-track for success. On September 24, 2014 GoPro released their camera, Hero 4 causing their stocks and investor confidence to rise in the brand and their price per share jumped from 72.88 to 78.46. At its highest, GoPro was trading for $98.

However, some investors were soured when CEO Nick Woodman sold shares of GoPro stocks for his new charity, the Jill +Nicholas Woodman Foundation, and gave 5.8 million shares to their charity, causing the share price to decrease by seven percent. Although the shares were taken came directly from Woodman’s holdings, which was comprised of 52.4 million shares at the time of GoPro’s IPO, the company created more shares for the charity as well. This was especially alarming because GoPro’s lockup period expired in late November 2014. After the lockup ended, GoPro managers and directors can start selling shares, but not before then. This caused investor confidence to lower because they thought Woodman was signaling the stock’s high price was too extreme by selling off his shares in October.

Jump to two years later after a tumultuous year after becoming a publicly traded company, where their share price is around $10—quite a different company than two years prior. This fall from grace has happened because investors simply don’t like the stock and that’s because slumming sales. In 2015, their price fluctuated but had a sharp decline in July, where they plummeted to $60 per share. Because GoPro technically sells hardware, they cannot have a high operating margin, especially when their growth is expected to slow. GoPro is projected to generate $2.1 billion in 2017, when its actual revenue of 2015 was around $1.93 million—not a big increase year-over-year. 

Yahoo Finance

However, today with a share price of around $10, maybe some investors are too hard on GoPro and their sales, they may be able to turn it around. Although the company faces competition and is having a hard time expanding its consumer base, but people who have the product love it. GoPro now has a Karma drone in the works, which could life the company up. Everybody loves a comeback story and this is an opportunity for GoPro to reinvigorate stockholder confidence and gain a new segment of customers.

GoPro

 

 

The past Single’s Day (11/11/2016), the world’s biggest online shopping day of the year, has just finished with Chinese shoppers spending $17.8bn in 24 hours. That’s a bit short of the $20 billion some analysts had expected sales to reach but easily surpasses the previous record, last year’s $14.3 billion. But still, a lot.

Let’s look at another number. Shanghai Daily reports that the sales total blew past $1.5 billion, an 8% of the total volume in the first seven minutes of the event.

Singles Day laughs in the face of Black Friday. Last year on Thanksgiving Day and Black Friday, according to Adobe, American shoppers spent about $4.45 billion online (and $12 billion at brick and mortar shops). And that’s over the span of two days and counting all retailers, not just one site. Cyber Monday online sales, meanwhile, were just over $3 billion, according to CNBS.

(Source: Forbes)

Singles Day started as “anti-Valentine’s” celebration for single people in China back in the 1990s. Alibaba, the online retail giant, spotted the commercial opportunity in Singles Day back in 2009 and has encouraged single people to celebrate and buy presents for themselves since then. It takes place in China on November 11 every year.

 

This resulted in 467 million parcels being delivered after 710 million payments were made, according to Chinese news agency Xinhua.

（Source: Routers）

Ma Yun, the CEO of Alibaba is even more ambitious to promote Singles’ Day globally. Huge international companies are offering big discounts: Apple is offering certain models of its Beats earphone at 50% off, while Nike promotes 60% off on a wide range of shoes and clothes. Even Costco, the local brand of the States is joining this year.

In addition to steep discounts on the site, Alibaba has made an early start to promote the event to build the anticipation for the big day, already generating plenty of buzz from its celebrity line-up at the countdown gala in Shenzhen and an eight-hour fashion show in Shanghai which shoppers can pre-order items and pay later. To push for more sales, the Alibaba has introduced a virtual reality shopping experience and a stream of web broadcasts.

This year, the countdown gala featured appearances from retired NBA star Kobe Bryant, footballer David Beckham and his fashion designer wife Victoria, and U.S. pop band OneRepublic. Jack Ma, the founder of the Alibaba Group, showed up to perform a magic trick, and the new Alibaba Pictures’ film production was also promoted during the gala.

(Source: NPR)

“It’s not thinking about ourselves as an ordinary company. It’s about thinking of ourselves as an economy,” said Ma Yun. “You can use your device, your mobile phone, to connect to this economy to do global business.”

Undoubtedly, Singles’ Day is China’s largest shopping and advertising event, which is a barometer of China’s strong consumer sector. Singles Day reflects the changing shopping habits of China’s consumers. The mobile market is playing a major role. Mobile purchases accounted for 72% of purchases in 2015, up from 43% in 2014, according to the Atlantic.

 

 

Coachella Valley Music Festival is the largest music festival in the U.S., and its home, the Empire Polo Fields in Indio, California has become the host to festivals several weekends of the year. These few weekends a year have a huge impact on the area due to the mass amounts of people it draws.

Here’s a breakdown of the economic effects from the two Coachella weekends and Stagecoach in 2016:

• $704 million – estimated overall economic activity, made up of consumer spending and business spending that was generated by the three festival weekends.
• $403 million – spent in the Coachella Valley area
• $106 million – that went into the city of Indio’s economy- benefitting their businesses
• $3.18 million – in tax revenue for Indio that was made from ticket sales
• Estimated 10,000 people stayed in Airbnbs
• Estimated 100,000 people there during each day of Coachella
• Estimated 70,000 people there during each day of Stagecoach

Now that there has been Desert Trip, a new festival this year at the Polo Field’s, it is estimated that there has been an economic impact of $805 million in 2016 from the three festivals combined. It will be interesting to see the outcomes and information on the Desert Trip festival’s impact. So far, it has been estimated that Desert Trip brought $250 million into the Coachella Valley economy. This all has been a huge move forward since 2012 when the Polo Field’s contract with Golden Voice begun.

Some of the economic outcomes from Coachella and Stagecoach in 2012 were-

• $254 million – spent in the Coachella Valley area
• $90 million – that went into the city of Indio’s economy- benefitting their businesses
• $1.4 million – in tax revenue for Indio that was made from ticket sales

This can partly be attributed to ticket prices increasing and many more people attending each day now.

These effects on Indio’s economy and the Coachella Valley area’s economy have allowed for renovations to business and infrastructure. It has also brought new businesses, hotels and other tourists due to the city’s new “City of Festivals” reputation and mystique. This effects will most likely grow as the festivals continue to grow. The city of Indio recently approved Golden Voice’s proposal to increase Coachella’s attendance by 26,000 people and Stagecoach’s attendance by 10,000 people. The proposal also included expanding the festival site by 42-acres and adding more parking and camping sites. It allows sound checks to start at 8 a.m. instead of at 10 a.m. as well. It is predicted that the growth in attendance would give Indio $1 million more in ticket taxes.

Moving forward, the city of Indio is making efforts to bring more people to their city year-round rather than just during those few weeks during the year.

Sources:
http://www.kmir.com/story/31553258/goldenvoice-proposes-attendance-increase-to-coachella-and-stagecoach
http://www.cvindependent.com/index.php/en-US/news/politics/item/3385-to-lead-the-city-of-festivals-seven-candidates-compete-for-two-seats-on-the-indio-city-council
http://www.latimes.com/business/la-fi-coachella-impact-20160723-snap-story.html
http://www.desertsun.com/story/news/local/indio/2016/03/22/goldenvoice-concerts-coachella-economic-impact/82141410/

Gold Mine in the Desert

http://www.cnbc.com/2016/10/07/oldchella-set-to-be-a-boon-of-at-least-250-million-to-coachella-valley.html

The Automobile Industry

The automobile industry today: an industry that is exhausted with a plethora of options for the consumer to choose from. This is a market that is innovative, changing, and advancing on a daily basis to meet increasing consumer and environmental needs.

General Motors (GM) is an American multinational corporation that designs, manufactures, markets and distributes motor vehicles and parts. GM was founded in 1908 and has played pivotal role in the automobile industry since its inauguration. With that being said, I am going to take a deeper dive into the mission and ideas behind Tesla Motors for the remainder of this post. Tesla was founded in 2003 in the city of technologic innovation, Silicon Valley. Elon Musk and the other cofounders believed from the start that it could become a standalone leader in a market that was already extremely saturated and highly competitive. Tesla sought to create an electronic vehicle that would be an integral part of a company that is now referred to as a hybrid between an American automaker and “energy storage company”.

“Tesla’s mission is to accelerate the world’s transition to sustainable energy.”

We look at two companies, on opposite ends of the spectrum; Tesla – a company looking to quickly gain market share, compared to General Motors who has been in business for over 100 years. Both share a common purpose of serving consumers with the power of a motor vehicle.

Small Fish in a Big Sea

This is where the story begins. The thing is, Tesla Motor’s valuation is ¾ of General Motors. However, its production makes up only a tenth of GM. Currently, Tesla’s market cap is at $29.2 billion in comparison to GM’s $48.5 billion. Looking closer into this situation, it is important to understand that the automobile industry is all about scale.

Car companies are competing with similar products. A standard vehicle is no longer appealing to the millennial car buyer. It is companies like Tesla who are being rewarded for its innovation, which has allowed them to capture market share in a competitive space. Tesla has taken risks, risks that have surely paid off and will allow Tesla Motors to grow as it continues to roll out new vehicles in the future.

Tesla is breaking every rule of what a car company should be and investors are rewarding it for doing so. All, telling by the market valuation and how investors are reacting to its stock (TSLA).

Cars or Energy? Pick One…or Both.

As mentioned earlier, Tesla has also been referred to as an “energy storage company”. Co-Founder and CEO, and Product Architect, Elon Musk, truly believes that there will be a future when all vehicles will depend 100% on electricity or alternatives to gasoline and oil. Tesla will stand by this motto and become a supplier of electric parts to gain the cooperation and ability to work alongside other car makers. By doing so, Tesla has the capability to continue to dominate the electric vehicle industry by becoming a supplier that other makers will soon rely on, in order to grow and flourish.

Knowing Tesla’s Executive is a Musk

It’s imperative to get back to Tesla’s roots and the man behind the magic. Elon Musk is running the show of this technologic
al craze. In 1998, he co-founded PayPal, an online payment service company that was entering a market, which was moving quickly and attracting the
introduction of new, innovative products/services each day. Tesla, similar in a way, is a cutting-edge, innovative, brand new product.

Musk is an innovator, always thinking of new ways to better his projects. He is trying to “disrupt an established and technology-adverse industry” by the power of the Tesla. Due to his many controversial and outlandish ideas, questions have risen regarding his leadership and direction with the company.

After reporting its first profitable quarter on October 26, 2016, there are still many consumers who are hesitant to pull the trigger. Many people are satisfied with the car companies they already trust and are scared to take the leap of faith. However, those who have started making the switch have been seen in increasing numbers as time passes. Tesla’s newest Model 3 sedan has over 375,000 preorders.

Investing in Tesla

Being that Tesla’s concept is completely new to the consumer, it is frightening, yet, exciting. This is the future and investors are seeing this through Tesla’s growing stock price. So great that,
“automobile manufacturers have entered a race towards the development of sustainable cars, and shifts in customer demand will drive production in the future.”

Investors are trusting this company by looking at its growing numbers in sales. Its projection rates are growing astronomically and the car maker is being faced with manufacturing inventory challenges today. Although seen as a challenge, this is an issue that most companies want to be facing. It is incredible that investors have wanted to trust this company from the beginning all because of its concept and the man behind the madness. Tesla Motors just recently became a profitable corporation; however, that did not stop investors from trusting this technologically-savvy vehicle from its inception.

Musk has provided our world with the future; a vehicle capable of technological, energy-saving power that one could have never dreamt of actually operating on the roads today. This is a vehicle of its own.

It’s ALL good, or is it?

We must take a step back as it is crucial to analyze Tesla Motors’s values and initiative as an automobile and energy storage company. Is Tesla moving too fast all at once? Yes, I firmly believe it is great that they have been able to single-handedly dominate the electric vehicle space, but more distinguished and respected automakers are headed directly for them because they see this being the future.

More recently, Tesla has announced that is not only is going to continue to just dominate the space of electrical vehicles, but also solar energy. Let’s evaluate this company as a whole. It has been able to grow its production from 50,000 vehicles to over 500,000 in just three years. The numbers are incredible, making leaders of this company only want to try new things and continue to be a relevant name in the technological, energy-saving industry.

The Path to Success is Up in the Air

It might be a good idea for Tesla to focus on one specific thing. Should they be focusing on the idea this company was created on in the first place, electric vehicles? Or, should Tesla focus more on research and development in the alternative energy space? When we look at Musk from an outsider’s perspective, it seems like focusing on one product at a time will not be the case.

Though it does not appear that Tesla is taking any initiative to slow down, it is imperative to look at all aspects of the empire in regards to this automobile maker. There are a lot of obstacles that Tesla is willing to face head-on and by thinking together critically, we too can discuss the future of Tesla Motors for the betterment of the investor, the company, and its stakeholders.

 

 

Sources:

http://themarketmogul.com/teslas-road-to-success-is-not-car-manufacturing/

Castellanza, Luca. “Tesla’s Road To Success Is Not Car Manufacturing.” The Market Mogul. N.p., 15 Aug. 2016. Web. 10 Nov. 2016.

http://www.usatoday.com/story/money/business/2016/08/20/tesla-gigafactory-lithium-ion-batteries/87684228/

McDonald, Michael. “The Key Challenge to Tesla’s Growth.” USA Today. Gannett, 20 Aug. 2016. Web. 10 Nov. 2016.

http://money.cnn.com/2016/11/02/technology/tesla-solar-city-solar-roof/index.html

McFarland, Matt. “Tesla Is Killing off the Ugly Solar Panel. But There’s One Problem.” CNN Money. N.p., 2 Nov. 2016. Web. 10 Nov. 2016.

 

Armed conflict has been responsible for more than 231 million deaths in the last century. The nature of the arms trade has intensified this conflict (A.B., The Economist).

The line between the formal arms trade and the black market is entirely ambiguous. Lax enforcement has contributed to unfathomable human suffering and violence throughout the globe. Often there is a relationship between a country’s department of defense and major arms producers as well as a relationship between their intelligence community and illegal dealers.

The last figures on the arms trade, recorded in 2003, show that it is liable for 40% of all corruption in world trade. Corruption that is systematic and perpetuated by leading nations. In 2006, former UK Prime Minister Tony Blair halted an investigation into the largest-ever arms deal, the al-Yamamah deal, which began under Prime Minister Margret Thatcher’s government in the late-1980s. The deal between the UK and Saudi Arabia was estimated around $7.4 billion in commissions paid on the deal alone. Mark Thatcher, the Prime Minister’s son, allegedly made 14.8 million as a broker on the deal (Castle, Independent).

Similar controversies and questions over corruption have been raised in the United States. For instance, former Vice President Dick Cheney, was the CEO of Halliburton before taking office. Halliburton [and its subsidiary KBR, Inc.], is a name practically synonymous with war profiteering, acquiring billions of dollars in new business thanks to non-existent weapons of mass destruction and U.S. noncompetitive government contracting-practices. Due in part to a consolidation trend during the 1990s, the company is one of the 5 largest firms in the US, which account for 44% of the industry’s market share. Not to mention that campaign contributions on behalf of private defense contractors are large enough to keep many lawmakers in complacent support of costly militaristic projects (A.B., The Economist).

After 9/11, private military contracts in the US rose from $145 billion in 2001 to $390 billion by 2008 under the Bush administration (Lawson).

Political will and greater transparency are viable conduits in reducing the corruption that lie within the arms trade market. The UN has attempted to do something about it putting forth a global Arms Trade Treaty [ATT] approved by over 150 countries in April of 2013. The treaty went into action in December of 2014 and prohibits arms trade that would facilitate genocide, crimes against humanity and war crimes. It continues to grapple with the regulation of international trade of conventional weapons and countries like the US and UK, which both spend considerably large amounts on defense budgets, have failed to ratify the treaty.

The United States military spending, at $598.5 billion, accounted for 54% of the nation’s spending in 2015. That’s approximately $2000 for every US citizen, in one year alone. The US is also a top supplier of major conventional weapons trading 31% share of the global arms exports to ally nations. Arms exporters commonly only consider the impact of exporting on their own welfare and fail to consider the impact and possible negative externalities that may arise from trading with another nation. Other abstainers include China and Russia, major arms exporters and importers like Saudi Arabia and Egypt (A Killer Deal, The Economist).

“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. The world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children… This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.” – Former U.S. President, Dwight D. Eisenhower

 

Wars have a dirty habit of making companies and private interest groups billions of dollars. Maintaining a highly militarized defense industry will continue to remain vogue as long as there are profits to be made.

 

Sources:

http://www.economist.com/news/international/21575751-vote-un-week-arms-trade-treaty-could-save-many-lives-killer-deal

http://www.economist.com/blogs/prospero/2011/11/quick-study-global-arms-trade

http://www.independent.co.uk/news/mark-thatcher-accused-sources-say-he-got-12m-pounds-from-arms-deal-signed-by-his-mother-1441851.html

The economics of arms trade and arms control – University of Kent

http://www.rollingstone.com/politics/news/the-stoner-arms-dealers-20110316

Paying a little extra for avocados is an affordable luxury for most Americans. Many are willing to pay an extra dollar to incorporate avocados in their favorite tacos, soups, salads, wraps, and burrito bowls. Following the avocado’s newfound status as a staple food, increased consumption and difficulty harvesting in the United States has led avocado trade to become a lucrative crop for Mexico. Most Americans currently enjoy the nutty fruit blind to how the avocado’s gang-stricken trade impacts could continue to raise prices.

In the United States, avocados are obtained from three main sources: Mexico, California, and Florida (The Plate). High worker wages, lack of rainfall, and an avocado-tree pathogen have greatly impacted production and profitability of avocado trees in the United States. Thus, the United States has increasingly relied on Mexico to satisfy its avocado needs, importing over 40 percent of its avocados from its neighbor (The Plate).

Avocado imports from Mexico began in 1997, after Congress lifted an eighty year ban on trading the fruit (NPR). The ban was lifted shortly after the introduction of the North American Free Trade Agreement (NAFTA), which ended most tariffs between Canada, Mexico, and the United States. American avocado producers were initially fearful of the risk of oversupply and exposure to pathogens that the influx of Mexican avocados could supply. Since 1997, a large number of American avocado producers have turned to facilitating avocado trade between the United States and Mexico as a profitable source of income.  In 2014 alone, Avocados from Mexico, a not-for-profit marketing association, reported that the United States imported over 1,763,593,888 pounds of avocados (Avocados from Mexico).

Today, Mexico is the leading global producer of avocados, producing three times the number of avocados as California and Florida combined. State Michoacan is Mexico’s avocado hub, accounting for 92 percent of the country’s production of the crop. More than 80 percent of Michoan avocados are exported to the United States (Daily Kos). With Mexican grown avocados generating $1 trillion in revenue for the country in 2014 alone, It’s no wonder that in Mexico, avocados have been dubbed the “green gold” (Vanguardia). Avocados produce more profit in Mexico than any other crop, including marijuana, making it a target for Mexican gangs who view it as a source of political and financial influence over areas like Michoacan.

The Caballeros Templarios (Knights Templar) are an example of a Mexican gang targeting the avocado industry. The Knights Templar are primarily known as a drug cartel trafficking cocaine and meth throughout the country. The knights view themselves as protectors of the Michoacan area, using a Robin Hood complex to take money from the rich to help sustain the poor. Now, the gang controls a significant portion of the Mexican avocado industry, from production to distribution (Daily Kos).

According to one Avocado trader, who changed his name to Jesus to maintain privacy from gang members, the cartel is already taking over land and avocado plants. The gang affects farmers, packers, and shopkeepers, taking a huge portion of profits under taxes and fees that they forcibly inflict. Workers are required to report the number of pounds produced per acre of land. The gang receives most of its revenue through administering taxes ranging from ten cents per pound produced to $100 per hectacre of land (Daily Kos). Lying or failing to abide by the gang’s policies often results in violent punishments, including rape, death, and destruction of homes of farmers or their loved ones.  Three weeks ago, one notary in Uruapán who refused to sign the deeds to his plantations over to the cartel was severely punished: his son was kidnapped and killed a few days later.

The result of increased crime has led to instability and fears for those in the avocado industry. It has impacted the numbers of those involved in the industry, thereby decreasing supply and raising prices. Though American avocado traders have not revealed the specific financial impact the gangs have had on the prices of avocados, Jesus says that the gang inevitably racks up prices for those in the avocado business trying to stay afloat amidst their high taxes. Ultimately, these price increases make their way all the way up past the Mexican-American border and into grocery shelves across America.

Prices of avocados in the United States have been on the rise for years, but began taking a sharper turn starting in 2013. In 2014, the average price of a Hass avocado was $1.29. In 2015, it went up to $1.38 (Hass Avocado Board). However, avocado demand has remained high as ever. Avocados are continue to fly off the shelf, even if rising prices leaves Americans saying, “holy guacamole!”

 

Sources:

http://www.vanguardia.com.mx/lostemplariostomancontroldelnegociodelaguacate-1888691.html

http://www.12news.com/news/nation-now/holy-guacamole-avocado-shortage-causing-prices-to-soar/346400878

http://www.producenews.com/the-produce-news-today-s-headlines/19948-avocado-picking-resumes-volume-to-ramp-up-quickly

http://www.theatlantic.com/health/archive/2015/01/the-selling-of-the-avocado/385047/

https://www.washingtonpost.com/news/wonk/wp/2015/01/22/the-sudden-rise-of-the-avocado-americas-new-favorite-fruit/

http://theplate.nationalgeographic.com/2015/05/05/thanks-to-america-weve-reached-peak-avocado/

https://thinkprogress.org/chipotle-warns-it-might-stop-serving-guacamole-if-climate-change-gets-worse-d797f64a932c#.9pird9xu1

http://www.dailykos.com/story/2016/7/12/1546610/-Avocados-and-the-Mexican-Drug-Cartels

http://www.hassavocadoboard.com/retail/volume-and-price-data

http://www.npr.org/sections/thesalt/2015/02/13/385754265/how-nafta-changed-american-and-mexican-food-forever

About AFM

When most people hear the terms, “China” and “trade,” they think of the billions of dollars in merchandise moving back and forth between multi national conglomerates, or more recently some may think of Donald Trump. While China and trade are intimately connected to both of these notions, there is another fascinating arena in which China and trade are opening up incredible opportunities for savvy entrepreneurs at a micro-level. Due to tariffs, pricing laws, and other multi national rules, certain items in China cost significantly more than they do in America and other countries. While many think of luxury goods like Louis Vuitton and Apple, the wide schism in pricing creates arbitrage opportunities in healthcare, mid level clothing apparel, and custom goods.

In the early 2000’s, this trend was diametrically opposed. Smart Americans with the use of the internet could navigate early iterations of websites like Dhgate and Alibaba, two major Chinese online retailers, and buy items in bulk. They would then resell these items, like headphones, batteries, knockoff jerseys and toys, on American websites and capture profit in the difference in pricing. While these opportunities are still there, the more profitable move is now for individuals, usually Chinese nationals, to buy items in America and sell them back to China.

One of the reasons that there is a market for smaller entrepreneurs is that many of these items that are sent are considered gray market or even black market, meaning there is a legal risk to partaking in a venture. Since larger, more established companies don’t want to assume this risk and potentially clash with the Chinese government, brave and risk-seeking businessmen seek to exploit this opportunity. The market dynamics are such that no one can truly scale, as size would be a deterrent to profit. Eventually, if a person or company gets too large they will attract the scrutiny of retailers or the Chinese government.

One of the most notorious areas where this exists is the luxury car market. Cars like the “Jaguar F-type S convertible parked in front of a Pasadena, California, dealership sells for $89,000—but it can go for quadruple the price in China thanks to high demand for everything luxury, especially cars,” according to the Daily Beast. In order to  derive a profit, individuals in America and abroad will recruit straw men and women to go into dealerships and buy cars, or lease them and immediately sell the lease to a third party. After this, they will collect a commission for purchasing the car ranging from low four figures to low five figures, and put it onto a shipping container. There, the true business mastermind figures out a way to navigate the murky shipping laws and somehow get the car into China. This will either be sold to a dealer or an individual at an incredible markup, but still well below the market price that the same Jaguar or Range Rover would sell for in China.

This practice was especially popular in the early 2010’s, but as of late car dealers have caught on to this and put safeguards in place to prevent such actions. Now, depending on the dealer, especially those in states with no sales tax, some individuals who purchase cars will have to sign agreements not to ship their cars overseas. This is just one area where business people have figured out a way to derive profit from mismatches in pricing.

Since cars represent such a large dollar amount in one transaction they were a favored product to bring over as the payout on the effort per individual item sold was so high. Other cottage industries like vitamins, powdered milk, and athletic gear have all given rise to individuals setting up as middlemen between America and China. The problem with this strategy’s viability as a long term business is that the inefficiencies are either solved by better government relations or China cracks down on such sales by regulating transactions more intensely.

Currently, another booming trade area between individuals in America and end users in China is personal shopping for luxury goods. This is also taking place in England, due to the fall of the pound, but China is predominantly trying to crack down in the United States first. These shoppers are called, “haiwai daigou,” which can be translated to personal shopper. Since there is a major price discrepancy between America and China in terms of luxury brands, the members of the wealthy Chinese class will pay Chinese Americans to purchase items and ship them back.

This is another area that the Chinese government is trying to slow down as it hurts native sales within the country. According to CNN,  China’s “General Administration of Customs has stipulated that all individuals engaged in ‘cross-border e-commerce’ must provide a list of imported and exported items to customs.”

As the government and brands figure out new ways to stop the import, savvy entrepreneurs will continue to find new areas to exploit on a micro level of trade. The question is how long will this game of cat and mouse last, and whether or not any one individual will figure out a way to consolidate market share.