Monday, December 28, 2015

Online Shopping's Increased Popularity Causes Extended Shipping Delays

Just in December alone, it is expected that United Parcel Service will deliver a total of about 420 million packages in the United States while its competitor Federal Express will deliver about 228 million. The U.S. Parcel Service is also in the game, expected to ship about 545 million packages this month. All together, they will be shipping a huge amount, almost 8% more than they did at this time last year. According to Samantha Masunaga, in her L.A. Times article, this dramatic increase in the number of people and retailers needing to ship packages is due mainly to a recent increase in e-commerce.

This year, many retailers offered Black Friday deals on their websites, essentially giving their customers a choice. They could come into the store on Black Friday and shop, finding deals and purchasing items to take home with them immediately. Or, they could shop online, earning the same deals and reduced prices as in the store, and have the item shipped. Sensibly, many customers chose the second route, choosing to wait a little bit longer for their item rather than braving the hectic battle in the store on Black Friday. While this online integration by the retailers helped to keep Black Friday running more smoothly in stores, it came as an unexpected hit among shipping companies, whose predictions were far surpassed, which led to many delays on deliveries.

With the holidays approaching, shipping companies were getting even more overwhelmed with many more orders than in previous years. Because of that, they began telling customers that there would be no assurances that their package would arrive before Christmas unless they used the higher-cost options, like two-day or overnight shipping. Even those options were not perfect. UPS's on-time delivery rates for two-day and overnight delivery have varied throughout the month, ranging around 97%. Basically, when it comes down to it, even the more expensive options are not a guarantee, so consumers should plan ahead and order far in advance if they want to make sure their item arrives in a timely fashion.

Cyber Monday sales exceeded expectations, reaching $3.07 billion, which was 16% more than last year's sales. During Black Friday, about 103 million people got their deals online while 102 million preferred to do their shopping in brick-and-mortar establishments. Online purchases this year, especially during its final months, soared higher than ever expected, which is why shipping delays occurred. While shipping services were prepared for higher demand than in previous years, they could hardly know exactly how much the demand would increase, so the explosion of e-commerce's popularity caught them off-guard. Even for many online merchants, this year's demand was surprising. For several retailers, popular items ran out very quickly, and some even experienced crashes on their websites due to the increased traffic.

Most people in this day and age have a smartphone or some other way to get online while on the go. Because of this, online shopping may be easier and more appealing than having to go to stores and hope that they have the item you want in the correct size or color or style. It is simpler to just go to a website, type in exactly what it is you want, and order it. Over the holiday season, about 25% of e-commerce shopping was done via a mobile device. Our society's increasing dependence on new technology could be a reason why retailers have integrated more of that same technology into the shopping experience, making it easier and faster for potential customers to shop with them.

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Friday, December 18, 2015

Federal Reserve Hikes Interest Rates - First Time Since Great Recession Began

For the first time in seven years, since the Great Recession began in 2008, the Federal Reserve has decided to start raising its interest rate. When the recession began, pushing the interest rates as close to zero as possible was necessary to help the nearly crippled economy. The Fed raising their rates could be seen in a positive light, as a sign of confidence that the economy is getting back on track. To others, it could be a preventative measure in preparation for a future economic downturn. Jim Puzzanghera and Don Lee discuss the implications of the rate hike in their recent article in the L.A. Times.

What was seen by some as a vote of confidence in the recovering economy helped investors to feel more confident, which in turn led the Dow Jones average to rally and close up about 224 points, a substantial increase. When the Fed decides that the economy can handle an interest rate increase, this helps the average person to believe that they can more easily trust the economy to keep their money safe. This leads to more investment, which can help the economy even more on its path to recovery. When people believe in the power of the economy, it is more able to grow and meet their expectations.

On the other hand, the increase of the interest rates might be an indication of future trouble for the economy. When the economy is struggling, when the market crashes or a recession hits, the Federal Reserve is able to lower interest rates, which can lessen the impact of the economic downturn. However, if the rates are already near zero and a recession begins anew, lowering the interest rates will have no effect because they are already too low. So, if the Fed raises the interest rates now, the government can start building up revenue so that if and when the economy slows again, they can lower interest rates and pump money back into the economy to give it a jumpstart.

This decision by the Fed, although seen as "historic" by economists, will likely have little effect, at least for the time being. The benchmark federal funds rate, which affects consumer and business loans, has only increased by 0.25%, and the Fed has promised that increases in the future will come slowly. Loans on automobiles and the interests rates on credit cards will probably begin to rise slowly in the coming months, and mortgage rates have already risen slightly. Small businesses, which have been more affected by the Great Recession than their larger competitors, have shown support for the raising of the interest rate, seeing it as a step on the way to a more stable economy. After all, at this point, a quarter of a percentage point does very little to harm business growth and could do much for the future of the economy.

The rate hike has been viewed by many as the turning point for the economy. It may signal an end to the worst of the recession and a new beginning for the economy. The rates, which will grow slowly, at first, are expected to reach 1.375% by the end of 2016, which is pretty low in the grand scheme of things. In fact, the interest rate was over 5% before the Fed started lowering it due to the Great Recession. By some measurements, unemployment is down to 5%, which means that the rate hike could be necessary in order to reduce inflation. Out of fear for issues in the global economy, the Fed decided not to raise rates in September, but since then has decided that the rate hike is exactly what the US economy needs right now.

Some economists believe that the increase is a ploy by the Fed to simply fulfill a promise that was made to raise the rates by the end of the year. Whether this was the Fed's intention or not, it doesn't matter because the rates have gone up and will continue to increase. All agree that the interest rates, when increased again, should go up slowly, so as to not stifle any economic growth that they may cause. While some still fear that the rate hike is a way for the Fed to handle "negative shocks" in the economy, the Federal Reserve Chairwoman, Janet Yellen, assures the American people that the economy appears to be stable for now. She believes that the economy will continue its growth in the future and that the American people should see the rate hike in a positive light.

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Friday, December 11, 2015

Faraday Future to Break Ground on Billion Dollar Nevada Plant in 2016

Like its competitor, Tesla Motors, electric car start-up Faraday Future has decided to open up shop in Nevada. Faraday Future, a new, relatively small rival to the other electric car producers, was debating among California, Nevada, Louisiana, and Georgia for their billion dollar production facility, but eventually made their decision and will start construction in the beginning of 2016. a main factor influencing Faraday's decision was an offered package of over $300 million in tax incentives by Nevada legislators, According to company executives, this wasn't the only reason, though, and a more detailed analysis of the choice is made in Chris Kirkham's and Ivan Penn's L.A. Times article.

Faraday Future, which is branded as an electric car company, has not yet produced an electric car. One of the company's founders and primary backers is Chinese media mogul, Jia Yueting, who has a net worth of several billion dollars and is ranked as China's 17th-richest person. Many of Faraday Future's top executives previously worked for Tesla and luxury car companies like BMW and Porsche. As such, they have quite a bit of experience with electric vehicles and the selling points behind them. The market for electric vehicles, while it is still undetermined based on Tesla's sales over the past decade, has the potential to grow larger, especially as people become more environmentally conscious and try to find ways to be more energy efficient.

Nevada legislature offered similar perks to Tesla Motors a year ago. With the help of $1.3 billion in tax abatements, Tesla began work on a $5 billion factory outside of Reno. While Faraday only received a $335 million deal, that is still nothing to scoff at, and will go a long way toward creating more jobs in Nevada and producing vehicles that rely more on renewable energy sources rather than fossil fuels. These deals, which might look to some like a waste of money on the part of legislators, can actually be quite beneficial to the state as a whole due to the production of jobs and the increase in goods for export to other states and other countries. The money in tax incentives that Nevada is providing to these companies can be earned back many times over by increased productivity over the long-term future.

Faraday's business model must be pretty sound for the state to take a risk and invest in them and in the hope of domestic growth in the future. Faraday doesn't just get the $335 million immediately; they have to prove that their company is moving forward. According to legislators, Faraday will not receive all of the tax abatements and other promised perks until it has invested at least $1 billion toward construction of the plant. Even without help from the tax incentives, Faraday's investment could pay off very well in the long run. As gas prices stay low, more individuals are going back to larger SUVs, since they can better afford to fill up the tanks of such automobiles. However, if and when gas prices rise again, people will be more interested in the fuel efficiency of electric vehicles and hybrids. So, as companies like Faraday and Tesla start getting ready now, they may be able to have their production running smoothly by the time demand for electric vehicles increases again.

While the tax incentives helped Faraday to make their final decision of Nevada, there were aspects of the other potential states that could have made them better choices. California, Louisiana, and Georgia all have direct ocean access, which means that they have ports and, therefore, make shipping and receiving of products and parts much simpler. Between California and Nevada, the latter has more wide-open spaces in which to build large factories. All in all, Nevada, which lacked direct access to seaports, still provided close enough access to make shipping of parts not too much of a nightmare in transportation. Highway 15 provides Nevada an almost direct route to the West Coast's ports, which, when combined with the tax incentives, made Nevada a better choice for Faraday's base of production. While we don't know whether California's legislature offered similar tax incentives to convince Faraday to choose the Golden State, in the end, Faraday made its choice, taking the best deal for itself while also benefiting the state of Nevada.

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Friday, December 4, 2015

New Credit Card Chip Technology Makes Debut as Holidays Approach

Have you recently noticed having a longer wait when checking out at various stores? Part of the reason is that there were more people out shopping, in preparation for Thanksgiving and Christmas. Another reason is that checkers are having some difficulty getting used to new systems designed to deal with the new "chip" credit cards. In Samantha Masunaga's L.A. Times article, she describes the new type of credit card, the reasons why it was created, and how its creation has affected shoppers.

While everyone expects longer lines around holiday times, analysts expect that the new credit cards may make lines extra long this year. Starting October 1st of this year, many new credit cards began to come equipped with a small metallic chip. This chip, which makes purchases safer and fraud harder to commit, has also caused something of a headache in that it has forced merchants to install new terminals that are able to accept the new cards. Since it is expected that 70% of cards will have the new chip technology by the end of the year, most merchants and card issuers have found that they should jump on the bandwagon.

While shoppers and checkers are all still trying to get used to the new card chips, leading to confusion and a longer wait time, eventually, as the chips become more common, it is expected that the lines will go back to normal. In all, though, customers seem to be taking the longer lines in stride, understanding that the increased security is worth a little bit more of a wait. Because it makes it harder to create a fake credit card or steal another person's information, the chip in the credit card helps to reduce identity theft and fraud.

Major retailers like WalMart, Target, and Home Depot have already transitioned to new technology that can accept chip cards, but some smaller companies are yet to complete the transition. However, by 2017, all merchants, including gas stations, will be forced to adopt new terminals that can accept the chip cards. Some shoppers have admitted to avoiding using their new chip cards, at least for the time being. While the difference between a chip card and a standard magnetic strip card can be as little as a few seconds, a delay of a minute or two can be caused by someone trying to swipe a chip card. If the mistake occurs several times throughout the day, the seemingly insignificant delays can add up. Because of this, many people not accustomed to the new technology try not to use it, so as to avoid causing a hold-up in the checkout line.

Some merchants claim that they argued with credit card companies about releasing the new cards right before the holidays, out of fear for potential back-ups. They would have preferred to start the new cards in January or February when customer traffic is less and slightly longer lines would be not as noticeable. Unfortunately, credit card companies chose to issue the new cards late this year. On the positive side, customers will be able to get plenty of practice over the holiday season and learn to use the cards properly. Some stores claim that delays are unnoticeable, others state that lines are only slightly longer, and customers have reported some even longer delays. Either way, even if the issue is minimal, use during the next month or so will provide shoppers with the chance to master the new technology and keep even minimal delays reduced in the future.

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