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Banks Don’t Like Poor Communities and Economics of Food Delivery

Just earlier this week, unfortunately an Ethiopian Airlines plane crashed and killed every person onb
Banks Don’t Like Poor Communities and Economics of Food Delivery
By Hipsternomics  • Issue #64 • View online
Just earlier this week, unfortunately an Ethiopian Airlines plane crashed and killed every person onboard, just minutes after takeoff. This tragic incident has caused about 30 countries and 30+ airlines to temporarily stop the use of the Boeing 737 Max 8 planes until the planes have been thoroughly investigated. While the US and Canada have not yet issued a grounding, it is important for all US travelers to know that Southwest Airlines, American Airlines and United airlines operate a combined 64 of these Boeing 737 Max planes. Travel safely and condolences to the loved ones of all of the crash victims.

Southwest, United and American Airlines frequently fly the Boeing Max planes
Southwest, United and American Airlines frequently fly the Boeing Max planes
Top Stories
The rich gets richer through better banking options, while the poor gets, we’ll stick to mobile banking for now. JPMorgan has plans to open 185 new branches, 71% of which will be in rich areas. While the bank also plans to shut 187 branches and half of those are located in areas where household income is below the national median of $60,336, according to a Bloomberg analysis of regulatory and U.S. Census data. Nationwide, banks have shut 1,915 more branches in lower-income neighborhoods than they’ve opened in the four years through 2018, according to S&P Global Inc., with JPMorgan, Wells Fargo and Bank of America leading the pack.
Bank closures could impact communities and potentially make the wealth gap among the big and small businesses even bigger, as local businesses can’t get loans to open or grow their businesses. The number of new small-business loans already have decreased by 13 percent in poor and minority areas, in the years after a branch closing, according to a recent paper.
Food delivery has become a very important part of the customer satisfaction strategy for restaurants and grocery owners, as customers now expect that anything they order can show up at their doors, quickly and inexpensively. But with the fear of losing customers, most restaurants and grocers charge much less fee for their delivery, which means that businesses have to sell a lot more per order so they can absorb these delivery costs. Increasing customers’ expectation has made it difficult for most restaurants and grocers to make revenues.
What are the economics of food delivery? It costs businesses an average of $10 an order to deliver food, but businesses only charge around $8 from customers. In addition, many grocers had to invest money to reconfigure their stores, installing coolers for delivery orders, creating checkout lanes for online shoppers and redesigning backrooms and parking lots. Also, groceries must be packaged carefully and sent in refrigerated trucks. Restaurants must pack meals in special containers and deliver in a short amount of time. To help fulfill orders, many restaurants have turned to delivery services, such as Grubhub, DoorDash, and Uber Eats. These third-party services currently handle 52% of online restaurant orders. While offering delivery is essential to keep convenience-seeking customers, food sellers pay services like Instacart an average fee of 10% to 25% on each order, which means the actual deliveries often lose money. Wall Street expects that online grocery sales will grow to around $86 billion in 2022 from $17 billion in 2017 and the sales of online restaurant delivery will grow to $62 billion in 2022 from about $25 billion today.
Chart of the week
How the value of various luxury items have appreciated in value
How the value of various luxury items have appreciated in value
In Case You Missed It
Facebook coin – the new digital currency? Facebook, with 2.32 billion monthly active users, wants to create a global currency and allow users to transact among themselves across all of its platforms, which is similar to what AliPay and WeChat have accomplished with mobile payments in China. According to the People’s Bank of China, mobile payments in China reached $32 trillion in 2017. For comparison, in 2017 PayPal processed only $451 billion in transactions. With all of its recent shady privacy and trust issues, if this idea becomes implemented, Facebook would have literally all the information about its users.
How much is your social data worth? Senators are drafting a new bill “that would require web platforms of a certain size, including Facebook and Google, to regularly tell users the value of their data.” The proposal would also force these platforms to tell users what data had been gathered from them and how it’s used for commercial gain, but also to report to the SEC how it obtained those users data and the total monetary value of their data holdings. California’s new governor is also looking to introduce a “Data Dividend” so that companies would pay its users for access to their information so they too can “share in the wealth that is created from their data.”
Companies Mentioned (52-week performance)
JP Morgan (-12%), Bank of America (-12%), Wells Fargo (-14%), Walmart (+12%), Target (+8%), Facebook (-7%), PayPal (+21%), Boeing (+9%).
Resources of the Week
Resource: Axdraft - A free legal-document generator to help you draft some of the most commonly used contracts for startups, freelancers and businesses.
Book: Never Split the Difference by Chris Voss. This is the best book I’ve ever read on the psychology of huma behavior as it applies to negotiations. Chris Voss was the most successful FBI hostage negotiator of all time.
Podcast: Luck, risk, and avoiding losers. An interview with Howard Marks, the Oaktree Capital Founder. This is a brilliant interview on not only about finance and investments, but the principles and thought-processes discussed in this interview applies to all areas of life, risk assessment, how to think different than the crowd, and decision-making.
Thank you for taking the time to read through today’s news brief! This brief was written while listening to “Always Something” a rap album by ADE. Enjoy!
Have a great week ahead!
Valentine (@vtineike)
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