Plus, Restaurants Are Trying to Increase Your Bills…Without You Noticing
Welcome to your Sunday digest…my breakdown of the things we’re thinking about and talking about in the Global Intelligence world.
First up this week…NFTs.
NFTs, or non-fungible tokens, are those one-off, one-of-a-kind cryptos that first emerged as a way to own digital art, but which have since spread across a range of sectors including metaverses, play-to-earn gaming, and venture-capital investing.
The huge popularity of NFTs has attracted many of the world’s leading consumer brands.
One of the latest to dive into this space is Prada.
On Thursday, the Italian luxury fashion house—ranked the ninth most valuable brand in the world—launched a new line of T-shirts in conjunction with artist Cassius Hirst.
Shoppers who buy items from this Cass x Prada range will get “airdropped”—given for free—NFTs to match their physical goods. These NFTs will be hosted on the Ethereum blockchain.
Prada plans to release the limited-edition merchandise in stages, on the first Thursday of the month, until all 100 items have been sold.
Shoppers who receive the Prada NFTs will be able to list them for sale on secondary markets. It remains to be seen what they will be worth.
Still, the fact that a company as prominent as Prada is giving out NFTs shows how far these crypto tokens have infiltrated the cultural zeitgeist. And Prada is far from the only major fashion house to move into this space, with Balenciaga and Gucci having also used NFTs to market their apparel.
Next, the recent dip in the U.S. savings rates is worrying…
In April, the savings rate in the U.S. fell to its lowest level in 14 years.
The rate dropped to 4.4%, down from 5% the previous month, as households dipped into their savings to offset rising costs. Commerce Department data show that consumer spending rose 0.9% in April.
Now, lots of experts like to praise rising spending figures as a sign of a healthy economy.
But here’s what they don’t tell you: Spending figures aren’t adjusted for inflation, meaning higher prices are just folded in.
So, this isn’t a healthy economy driven by strong consumer spending. It’s a case of people tapping into savings to pay for their basic needs.
Indeed, much of the increase in spending was driven by autos and services. Basically, people are being forced back into offices, which means they have to spend on all the services that come with that, like auto-repair and childcare.
And they are having to dip into their savings to pay for them.
U.S. households managed to save a lot during the pandemic, and currently have about $4 trillion in excess savings.
The question now becomes whether those savings will be enough to ride out this inflation wave.
My guess is that high inflation will be with us for many years yet, which unfortunately means many households will be tapped out long before this wave ends.
Finally this week, more about inflation and a sneaky new move by restaurants to tackle it…
With inflation hovering near 40-year highs, businesses all across the economy are getting squeezed.
Now some restaurants are responding…not by raising their prices or shrinking the size of their portions, but by adding new fees to the fine print at the bottom of bills.
These new surcharges have bizarre names like “wellness fee,” “noncash adjustment,” or “kitchen appreciation fees.”
Seemingly, paying for the meal and tipping the staff is no longer enough to show your appreciation…now you have to pay another 3% on top as well.
Use of these surcharges is widespread and growing.
According to point-of-sale software company Lightspeed, restaurant fee revenue nearly doubled from April 2021 to April 2022. That was based on a sample of 6,000 U.S. restaurants that use its platform.
Moreover, the number of restaurants adding service fees grew by more than 36% during the same period.
Now, I’m sympathetic of restaurants and other service businesses. They operate with thin profit margins, which means they are especially sensitive to inflation pressures.
Indeed, according to one study, the average price of supplies for restaurant operators has increased by a massive 17.5% since last year.
Few businesses could take that kind of hit without raising prices.
Still, that’s no excuse for this kind of underhanded surcharge culture. It’s like the shrinkflation trend that’s invaded supermarket aisles. It’s inherently dishonest. Restaurants are hoping that a lot of customers simply won’t notice.
Is it too much to ask that, instead of charging me for your “wellness,” you simply tell me that your costs have gone by 17.5% in a year and that you need to bump up prices?
That I can understand and get behind.
That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.
Enjoy the rest of your Sunday.