Feeling Lucky or Unlucky, HSBC and Retail Auto in the Metaverse, Consumers Pushing Back on Pricing

March 17, 2022
On this St. Patrick’s Day there are plenty of folks feeling both lucky and unlucky. Today we talk about the big ASOTU announcement at NADA, the first Retail Auto transaction in the Metaverse, big banking enters the sandbox, and ask the question “Are consumers reaching their limits with inflation?”.
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ASOTU is now the only Dealer Owned Media Publisher in Automotive

ASOTU Investor Brian Kramer is about to execute the first Metaverse Auto transaction in Naples Florida

HSBC enters “the sandbox”

  • Bought a plot and will be focused on sports, and gaming
  • SAND token jumped 11% on the news
  • JP Morgan entered last month also in Decentraland
  • Expect $8T metaverse value in China alone

Toyota cuts April’s production schedule by 150,000 to be more realistic with expectations

  • “By doing this, we will establish healthy workplace environments that place the highest priority on safety and quality, rather than exceeding the capacities of facilities, pushing people to their limits, and making do through overtime work,” Toyota, the world’s largest automaker, said.

Fed Raised rates .25, stocks surged and retreated a bit in this morning’s futures

Inflation price hikes reaching the limits of shopper willingness to keep spending

  • Macy’s tried to raise prices on mattresses and shoppers pushed back
  • Bella Dahl, clothing brand raised prices on t-shirts and then rolled it back as sales fell. Chief brand officer, Steven Millman said there was a revolt. If we go any higher, we’ll do half the sales.
  • Retail sales are up 17.7% but mostly due to inflation pricing
  • 43% of consumers surveyed say they will be delaying purchasing if prices go up any more

SPEAKERS

Kyle Mountsier,Paul Daly

 

Paul Daly 00:34

It isThursday, March 17th. Yes Is Happy St. Patrick's Day to you Kyle? We're awake.We're awake, baby sleeping Kyles awake, and we're ready for a show this morninglet's go. They stopped. It's funny, it feels like all week, even though it'snot the baby's fault. I feel like we're like, we have like the baby delay passon everywhere. And it's really not even tied to that.

 

Kyle Mountsier 01:04

No, notat all. Yeah, we just Yeah, well, I guess it is a little bit because I'm stillat the house and I get the kids wrangled up while Amanda is kind of getting thebaby going. And so yeah, it's a little bit baby fault. But it's also just thinkwe've got that like post NADA, drag. We've got a lot things going on. Everymorning. Every morning is full of so much in the world, or I feel like youknow, you know how that one time back at the end of the year, the last week ofthe year, we're like, hey, anyone got any news out there that we were things wecan talk about in the world? And it was like top 10 nouns? Right?

 

Paul Daly 01:43

It wasdesert, like the

 

Kyle Mountsier 01:45

10 the10 best ways to spend, you know, new years or whatever. And it's like, oh, no,no, no. Now now we've got inflation and and Ukraine, and we've got fed rates.And we've got cool things about Starbucks. Yes. It's just everywhere. So it'sfun to rain, all that in right. The

 

Paul Daly 02:03

coolthings about Starbucks aren't even in. Oh, what are the cool things aboutStarbucks? Yeah, that was yesterday. I was just, Oh, yes. cool things aboutStarbucks. Good

 

Kyle Mountsier 02:12

morning.I forgot that I slept since then. It was so cool.

 

Paul Daly 02:16

It wasso cool. I just didn't pass. Right. But hey, we I just realized we didn't talkabout on the show at all. We did the big announcements that we made at nadaSaturday morning, we have a live stream, we'll try to link it up in the shownotes in the podcast platforms when we when we launch it. But we made a massiveannouncement for us on Saturday morning. And that is so you, you may have knownautomotive save the Union, depending on how when you came into the communitymaybe as far back as two years ago, we had the very first live stream, but itkind of plotted on for a year and a half ish, right Kyle and I got together, Istarted doing some stuff. And then you know, Kyle pulled right up next to me inthe automotive stay, the union road really started picking up more velocity atthat point. And we made a decision a few months ago, actually, I think thedecision was probably made it and they are at Digital dealer Vegas, when werealize this has to be a primary trajectory, you know, can no longer be thething that's on the side, this has to be a primary trajectory. So what we didwas actually formed it into a corporation. And we raised an initial round offunding from only dealers. So we are very first and we just announced this lastSaturday, we announced to the investors were the same again. But we are theonly dealer owned media company in automotive, because it's important to usthat we stay close to the needs of the dealers. And who better to do that, howbetter to do that than actually have owners who are dealers. And then also onthe flip side, right? On the flip side, it's how do you maintain and encouragehealthy dealer vendor relationships, but by having actual dealers on in thismedia organization that's able to give quick feedback. And really, I think alot of accountability. Right? Like we're not going to be promoting promotingtrash.

 

Kyle Mountsier 04:08

Right,exactly. Yeah. No, I mean, here's the thing. And and we've already been, I lovethat. What I feel right now and maybe it's because we're still in like thatgrassroots area is just that people are willing to go hmm, you know, is our Doyou really want to be about that is this is this exactly how we should becommunicating as dealers as as that's our primary focus that the dealer the notjust the owner, operator, but everybody in the dealership is the primary focusof gathering everyone around whether it be our investors, or the community,like if you're part of the community and you're listening to something on thepodcast or watching or reading the email, and there's a red flag that goes upwe want to hear about that we want to this is a conversation. It's not it's nota it's not a speech,

 

Paul Daly 04:54

right?Yeah, no doubt. I mean, we talked about troublemaking, right. Buttroublemaking, the spirit of troublemaking isn't just a break thing. It'sactually move things forward. So like when there's feedback, or maybe a littlecriticism, or maybe you know, some tough stuff really the the spirit behind itall is that we can all agree and move forward and make it better make itfaster, make it more beneficial for the consumer. So, a list we're going totell you six of the seven investors one is yet to be revealed will be soon. Sowe're talking about a couple people you may know who are pioneers in their ownright in each and they're very different right all the dealers have atroublemaking cultural focus, incredible success in common. But they're allvery, very different in the way they execute, which I think he's indicative ofthe industry. So we have Liza Porsches Damon Lester Brian benstock, ScottSimon's Brian Kramer, who we're going to talk about in just a second. We got wegot Brian graver to talk about the one and only David Long that I always get to

 

Kyle Mountsier 05:55

know yougot it. And then we got to seventh we'll announce that person soon. We just gotto get a couple of things clear on that one. But yeah, so those are so thoseare the six and like you said, what I really love about it is there's somediversity in thought the way they the way they do business, the type ofcapacity that their dealerships have whether they're managing multiple storesor single rooftops, right. There's there's kind of a an in different areas ofthe country, right east, all the way west, kind of across West

 

Paul Daly 06:25

Coasttree all the way down to Florida. Right. Virginia in the middle of the country.A couple of Virginia. Yeah, it really is like talk about a foot like covers thewhole thing.

 

Kyle Mountsier 06:34

Yeah.And so I think that that there's no one way to peel an onion, right. And towork this out as as as an industry, there's going to be people that are thatare having negotiation, there's going to be large dealerships. Smalldealerships are going to be single point of contact dealerships, there's goingto be people that are working to be in the metaverse, and there's those thatare going to be hard into Dr. Or, or, or credit challenge financing. And all ofthe anything that works within those arenas, whether it be vendor dealerpartnerships, or ways of doing business or marketing strategies, or new ideason the horizon, we want to we want to be bringing everybody along and not justgoing, Hey, this is the only way to do business. We believe that there are bestways and there are there are things that every single dealership or everysingle business should be doing. But we want to grab from all those arenas.

 

Paul Daly 07:25

That'sright. Well, speaking of the metaverse, he just mentioned.

 

Kyle Mountsier 07:29

Segway.Yeah.

 

Paul Daly 07:33

Allright, go ahead and kind of launch this one because I just saw that theLinkedIn posts, we tag up the link in the comments or in the stream commentsand podcast comments, but one of our investors making big, big trouble.

 

Kyle Mountsier 07:44

So Iwake up this morning and I actually so as as it goes, it's 440 in the morning,and I grab, grab my laptop to get started this morning after baby is gone backdown. And literally, I see Brian Kramer Well, no, actually, yesterday, I see apost of him and he's got his finance manager with an Oculus on right in thefinance office, kind of like this number. Right. And and he's, you can tellhe's trying to do something, right, because he's got one arm over this way.Jumping, looking up Brian Kramer's in selfie mode, right in the finance office.And I'm like, oh, things are about to get real. Well, today. He drops a postwhere actually is that in the metaverse stuff? And he's like, by the end of 24hours, a vehicle will be delivered in the metal

 

Paul Daly 08:40

won't bedelivered. Yeah, that would be a $40,000. Yes, we can deliver in the metaverse,right.

 

Kyle Mountsier 08:48

Yeah.No, yeah. But to complete a transaction in the metaverse, which,

 

Paul Daly 08:53

youknow, I think world right. So I have Brian Kramer saying it. It's probablytrue.

 

Kyle Mountsier 08:59

I thinkso. And and, hey, look, it's kind of like we created the first automotiveautomotive POAP if no one else is saying it. Right. Yeah. So I think that, youknow, there's so much that had to go into that there's a lot of r&d, histeam had to get around that, you know, he even he said, and I've heard him kindof talk about, it's not, it's not him doing the metaverse transaction orworking into that right now, that changed. He's been doing a series of changesfor the last three to four years that have led up being the lead up to himbeing able to execute something like this right. Most dealerships are not goingto go from like, writing pencils on paper to the metaverse, right you had there'sa trajectory, there's a plan. But what I love about this is he's not sayingthat everybody has to adapt this tomorrow. He's just saying he's, he and histeam are willing to do the work to lead the way to show the way to create theinroads to here steps you can take to get to there. But it looks really cooltoo.

 

Paul Daly 10:04

Well,you got you got to you got to break the mold. You have to start doing right.And then we were talking about this a little bit of NADA right there are peoplelike Brian Kramer who are like, first in the pool, right? The first one thepool, they're figuring out about to transact on it. And then you have you know,I've heard Brian benstock say like, I have so much opportunity in that thephysical tangible world, right, that dedicating focus to it, like I have somuch more to grab in the physical world. So again, back to your last, you know,point in the last segment about, you know, there is no one way to win anautomotive but it's exciting to see one of our very own being the first in thepool, and Nathan comments and says, So when are you going to be able to testdrive in the metaverse, you already can? It's called Need for Speed.

 

Kyle Mountsier 10:48

Yeah,it's Need for Speed or Great Grand Theft Auto, right? I mean,

 

Paul Daly 10:55

thatsemi through a public park. It'd be awesome. Speaking of the metaverse andsandbox segway so hsbc.com Do you know what HSBC stands for?

 

Kyle Mountsier 11:09

I donot, but I know it has to do with banking.

 

Paul Daly 11:11

HongKong, Shanghai, Bank of China.

 

Kyle Mountsier 11:15

There itis. Did you know I didn't. I didn't know. I didn't know what I did. I just knowI had to do with banking,

 

Paul Daly 11:22

megaChina. So HSBC just bought a plot of land. They've entered the sandbox. And ifyou're not familiar, the Sandbox is kind of a Metaverse world, right. Andpeople are buying real estate brands are buying real estate celebrities arebuying real estate in this world. And then they're setting up shop, rightsetting up sports venues, setting up retail shops, where people can buy stuff.So HSBC is the most recent one to jump in and a partnership with sandbox, theybought a plot of land, you know, and they say their their banking or financialtransactions there are going to be based on sports eSports and gaming. Soobviously, they all make sense, right? Probably going to be reading in and thecurrency in Sandbox is cryptocurrency token called sand sa nd and on the newsof HSBC entering jumped 11% I didn't realize it, but JP Morgan is also alreadythere. Right? So this is just kind of the latest and entering JP Morgan isalready there. And in kind of the OG Metaverse world called decentraland. And,you know, JP Morgan executive says in this, I think is I don't remember aForbes article. It's linked up in notes. They expect HSBC saying actually thatthey expect the metaverse, you know, market size to be 8 trillion with the T $8trillion in China.

 

Kyle Mountsier 12:40

Wow. Sohere's what's interesting to me two things. One is that I do think that there'sa unique opportunity in the sports genre because eSports and gaming has been sopopular, and it already has that like Metaverse, so for feel, right. It's justit's gonna be the first and easiest thing to transition into a more realisticMetaverse type type version of stuff. I mean, you even think back, think backto like the 90s, when everyone was kind of doing, you know, the, like, all themovies were saying, like, this is what it's gonna be like, and they hadholograms and stuff was all around boxing or sports or that right, that that'salready tuned up in our brain. So I think that's my first comment. The secondcomment, and everyone keeps saying this, they, you know, they're buying realestate, or they're buying plots in these lands. And I'm wondering if placeslike decentraland, or sandbox are going to start limiting the availableresearch real estate, right? Because in the world, I think it's alreadylimited. Okay, because in the world, there's a limited amount of real estate,right? And so you can't just build on the world until you get to Mars, right?And that's what drives value up in certain areas. And in certain, you know,like pockets on this is closer to this or this is closer to here,

 

Paul Daly 13:56

right?That's true. I mean, it does. It rings true in the metaverse like location isstill the primary value proposition of any piece of land because like say,there's a sports complex, right? A gaming, you have to go there to go in toparticipate in events. So if there's a Nike store in the corner, right, you'rejust already in that proximity, even though you could fly to the Nike store,wherever that is, however, that works. Proximity still matters. Let's talk alittle auto for a second. So Toyota, you know, just a month or two ago, theywere like we're gonna have the biggest production, you know, the biggestinventory dropped in the history of in the history of the company. And theyjust announced Wait, wait, wait, everyone's

 

Kyle Mountsier 14:36

readyfor the biggest surprise. Where, where, where?

 

Paul Daly 14:43

It's notgonna happen. They cut their production schedule by about 150,000 vehicles tobe more realistic with expectations. It was interesting in the article welinked up, it says that the big one of the big reasons for it, you know, well,this is the leading reason, the leading reason it says because of the healthand safety of our workers. So they said, you know, the production a shortageled by like a big push to get as many out parts coming in at times they reallysaid it's stressing out the workforce. Right. And it's conditions that are thatare maybe putting quality in jeopardy and if you know Toyota Lexus right bestin quality, very typically right high. Yep. You know, initial quality, they'realways up there at the top of the rankings. So they put that as the second I'mlike, Man, that can't be the only and then as you keep reading down thearticles like and supply shortage and Chip shortage and and and

 

Kyle Mountsier 15:30

someonefrom PR wrote that article for sure.

 

Paul Daly 15:36

So butbut either way, it's just another indication, you know, what we talked aboutyesterday about the Honda make meetings, and then talking about, hey, we'reprobably not going to be back to normal till 2024. This is just anotherindicator of that, you know, from Toyota. And, you know, this is kind of newswhere it is news, but it's not news anymore.

 

Kyle Mountsier 15:52

Yeah,this is just what what dealers have come to expect. And I think there's athere's a hopeful anticipation, but also a resilience to deal with this type ofstuff and understand like, hey, we can, we can continue to do business underthese conditions. And whether we have inventory or not, we we've learned to howto communicate that stuff to to our customers, I think there are some dealersthat are getting really, really ahead of that communication, both online andadvertising. And then once customers engage with them. So I would, I wouldargue that if you haven't put a plan in place on how to communicate thatwritten it down, create, created, you know, the guidelines for the dealershipon what that looks like, write it down, make it plain, communicate over,communicate it to your employees, because don't ever expect that someone knowshow to communicate that, especially as their start, because everybody's hearingthis stuff, right? They're on there. They're on their phone, they're listeningto this stuff. And if you don't create the expectation on how to communicatethat they're going to communicate it from their lens, right, so don't ask to befed down from leadership. Without a doubt this question came in are all theseshortages are unrelated to Ukraine? Conflict, right? Yeah.

 

Paul Daly 16:58

It'shard to tell what isn't. Without a doubt, without a doubt. It's puttingpressure on just about everything. We got one more I know we're running alittle long. Everybody knows the Fed raised rates quarter point yesterday, ifyou didn't, you know now, you know, stocks went up on the news. And then theyretreated a little bit. But the last thing I think it's important for us totalk about is this Wall Street Journal article that talks about, are wereaching the limits of consumer willingness to spend money or pay more money?And inflation? Like, are we about to hit hit the ceiling of that? And someindicators are saying yes, Macy's was the lead in the article saying they triedto raise some prices on some mattresses. And there was they call that I think,a revolt, a customer revolt. clothing brand, Bella doll raised the prices ontheir T shirts, and sales fell pretty sharply. And they said, you know, if wekept the prices there, so they rolled the pricing back and they said if we keptthe pricing there, we would have sold half as much. And as you read through thearticle, it's a great article that goes through a number of things thatretailers are trying to do. Some brands are are starting to skimp on thequality, right? Using thinner leather, thinner cotton, right on materials. Andbindings are starting to cut back a little bit while some brands are actuallyadding premium material to justify the higher prices.

 

Kyle Mountsier 18:10

Interesting.Yeah. No, I think I think that that's a big deal. And so not just thinkingabout your pricing, whatever, whatever business you're in, especially if in theautomotive industry, thinking about your pricing on new cars, used cars, butalso thinking about the value that you're adding to that pricing. Because Idon't think as Jonathan smoke, and Steve Greenfield and some of the leadingeconomists in the industry have said, I don't think that demand has gone away,or the capacity to purchase has gone away, there's still a ton of money insavings accounts, there's a lot of money coming in from tax rebates. So it'snot like the money isn't there to purchase, it's the consumer perception of thepricing that's driving down whether or not they're going to hold on purchase,or move forward. So your perception is based on the value that you provide. Sojust thinking about that is I think really key is those those people that haveled in with a different material or adding more value to their already, theircurrent pricing structure is is a way to push consumer demand into purchase nowinstead of later.

 

Paul Daly 19:11

Youknow, it'll be interesting to see how this plays out. Because I think peopleare used to dipping into savings, or using a tax rebate on a vehicle. Right?It's a purchase, right? You should have to take a little extra a lot extra insome cases. But you know, in the article, they're talking about basic basicitems like clothing, like what one woman said, you know, hey, I went outbecause it's like refresh wardrobe time. And this is like the first springbreak. Everyone's such a spring but it's the first spring where everyone's likereally going back to life. You know, so it's like I've been sitting on thisstuff for two years, maybe three years and now it's time to refresh and onewoman and there's like Hey, I went out to buy like four pairs of pants and Iactually only ended up buying one I you know, because as these things so retailpricing is actually up almost eight tene percent retail sales. So it's like,oh, we're doing great. It's like, actually not because the moat, the majorityof that is just because prices are higher. It's not because more products beingsold. So, you know, thinking about and this is a question maybe we can talkabout tomorrow because we're out of time. But I was talking with Darren Doaneon the phone, and we were just talking about the fact that inflation is superhigh gas prices are super high. But until really up, even up to this point,it's like everybody seems just fine. Right? Companies seem just fine.Everybody's making a lot of money. People don't seem to be panicked. And Darrensays he's like, he got to ask the question, like, who's losing in this rightout to be losing? And my thought that I'll submit here is that I think we'reall losing because the value of our actual money is going away. And we owe muchmoney into the economy to stimulate it. There's like a lot of cash around. ButI think there's a carpet to be pulled, because it's so weird, that prices aresuper high. And companies are super profitable. And everybody's like, everyafter what we just went through, everybody's fine. It just doesn't add up.Whoa, what a way to lead people on a Thursday, man, he's gonna leave youhanging like that. It's brutal. To try to make you think let us know what youthink. Sign up for the email. So do calm and hit the reply. But when it comesin, let us know. We'd love the comments. We'll talk to you next week ortomorrow.