Tuesday, March 21, 2017

Amazon Bought This Man's Company. Now He's Coming for Them, from 2015

$215 Billion Wal Mart en-route to bankruptcy?

Wal Mart is recently being lauded for it's digital shopping spree. Since it's 2016 acquisition of online retailer Jet.com, the bricks and mortar retailer has more recently brought into their fold, e-commerce brands Shoebuy, Moosejaw, and ModCloth. Marc Lore, president and CEO of Wal Mart eCommerce and founder of Jet.com, says the world's largest retailer will continue seeking out new brands that bring new, unique products to its assortment of products. The executive made his comments from the Code Commerce event in Las Vegas. He said, "we're being pretty active, " "We're behind." The latter statement was an obvious reference to e-commerce leader Amazon.

Keywords and the philosophy behind Wal Mart's digital approach are "new and unique". The logic goes that there is no cannibalization of the existing multi-billion dollar superstore format that Wal Mart has constructed across the globe. Unique products and new shoppers would ideally take nothing away from existing sales, or would they?

Only time will tell, but I personally have to wonder. If I'm running Wal Mart and see same store sales declining steadily, as a result of a mega-trend toward internet shopping, I'm obviously motivated to stop the bleeding, but how? Prior to 2016, it seemed the Wal Mart strategy was two-fold: 1) Close your eyes and hope the trend would go away. 2) Hope that brick and mortar customers would turn to Wal Mart.com, which again has a distinct tint of cannibalization.  The migration to Wal Mart.com, cannibalization or not, has not occurred, thus the desire for Jet. 

In Wal Mart's case, you are damned if you do and damned if you don't. The way I see it, every box of Tide or package of socks sold online, are one less box and package that will be sold from their mega-store format. Retail certainly is cutthroat, and in it, you live by the sword and die by it. Wal Mart thought nothing of the thousands of retailers it destroyed on the way to it's $200 billion capitalization, the biggest killing of which has been Sears/K-Mart. Once dominant K-Mart of Michigan, was thrown a lifeline from Sears, but together the two are hanging on by a thread which is weakening by the day. 

The future of retail is E-Commerce and specialty bricks and mortar stores filling niches that are difficult to fill via online shopping, such as perishable and prepared foods. The Wal Mart superstore format looks like the victim of this mega-trend and I wonder how you can afford to heat and cool these colossal size buildings with increasingly declining sales. Assuming you can't, how can your income statement survive the change, much less your balance sheet? Is the key to transform yourself into an e-commerce enterprise? Maybe someone will buy your bricks and mortar locations? If they do, certainly it will be at a loss, and you will have lost the goose that laid the golden egg in he process, or has it already been lost?

With a $215 billion dollar market cap, Wal Mart has a long way to fall, and could be the short of the century. I'm astounded that only recently has Warren Buffett sold his Wal Mart holdings and admitted the error of his ways. Seems Warren has lost his touch, or should we allow him the occasional blunder? I've heard no one else predict it, so you heard it here first, I think Wal Mart goes the way of Blockbuster and K-Mart. If I'm right, this is a much larger story than the demise of Blockbuster or K-Mart because neither of the aforementioned ever achieved the gargantuan status of Wal Mart. A Wal Mart bankruptcy would really be something to see, and we'll see if it happens and I'm proven right. 

Sunday, March 19, 2017

Perception is reality and reality drives sales

Amazon: Earth's Most Customer-Centric Company!
Jeff Bezos, “We’re not competitor obsessed, we’re customer obsessed. We start with what the customer needs and we work backwards.”

Above you'll find Amazon's corporate credo and philosophy as articulated by founder Jeff Bezos. Upon reading them, I really got to thinking about a typical American's life in dealing with business, both small and large, day in and day out, all of his or her life. I am myself a typical American and have been experiencing business transactions for some five decades now. Some good, some bad, some ambivalent. These transactions have created in my mind, a perception,a perception that has created a reality, that was either positive or negative, and whether the former or the latter, this would would determine where my discretionary dollars would be spent going forward. 

I wondered, how many people such as myself had a negative perception of companies like Geico, State Farm, or Progressive, and why? Was it because I and others like me were forced to purchase their product by law and had no choice but to pay what they charged, no matter how extortion-like the premiums seemed? Did I and others feel used to pay for billions of dollars worth of advertising in order that the deep voice guy from Allstate, with his good hands, or Flo from Progressive, or Jake from State Farm, or the guy saving a bunch of money switching to Geico, would become the omnipresent, nuisance that they are? Does anyone believe that they can really save a bunch of money by switching to Geico? Did this feel like truth in advertising, or propaganda by a powerful insurance cartel, guilty of monopolistic collusion?

I asked myself how many other consumers like me would leave these profit driven enterprises if a company like Tesla began offering insurance with customer-centric rates and service? My conclusion was obvious, that there would in fact be a overwhelming, sea-change in where car owners would in fact seek insurance. Not unlike the tens of millions of Americans that have cut the cord and canceled cable now that there are finally alternatives to profit driven enterprises such as Comcast. How many people do you know that love Comcast? Would you buy your Apples from Comcast Apples? Would you buy them from Geico Apples? Would you buy your apples from Used Car Salesman Apples?

Perception is reality, and reality drives sales, and whether others contemplate these things consciously as I do, all consumers accumulate perceptions of every business enterprise they encounter. I have many other examples of profit-driven business enterprises, such as the for-profit heath insurance industry that has destroyed the American healthcare system (we need single payer now), but I think I've made my point sufficiently to get you to thinking about the vast differences among business enterprises in a capitalistic system. Generally speaking, a business will not survive and thrive if it's not customer-centric, unless customers have little or no alternative. Once given the alternative of a customer-centric business, the profit-centric business will inevitably perish and the customer- centric will thrive.

In the early 2000's, I was an early admirer of Netflix. Virtually no one I knew had heard of them, much less were yet subscribers, but I had no doubt in my mind, bricks and mortar dvd rental enterprises such as Blockbuster, had their days numbered. Netflix offered an immensely better customer experience. Rather than having to battle traffic, burn gas, and stand in line at a physical store, you could receive your dvds with a few clicks of the mouse. Oh, and did I mention Netflix was far cheaper than it's prehistoric, predecessor? In those early days of e-commerce, Blockbuster had all the name recognition and Netflix had none. So, many Netflix detractors surmised that offering DVD's online was easy, that anyone could do it, and that Blockbuster, synonymous with DVD rentals, would simply come to dominate the online sphere as they had done with bricks and mortar. This narrative ignored the perception factor. DVD renters did not perceive Blockbuster as the more customer-centric alternative. This distinction was earned and owned by Netflix, and the rest is history. 

One of the many wonderful aspects of e-commerce is the ease in obtaining and assessing customer reviews of a product. As I read these on Amazon.com, I read customers referring to Amazon with reverence. I read descriptions such as, my "beloved Amazon". A couple of thoughts immediately jumped out at me. First was the tremendous contrast these sentiments and feelings drew from say those for Comcast, or Progressive, or Wal Mart. Second thought was, I felt exactly the same way as these reviewers did, I loved Amazon and the customer experience they provided. 

Amazon is not profit driven, nor is their focus on competition, it's on customer satisfaction. No greater testaments to this fact can be made than by the love people like me and others feel for Amazon, and by the fact that Amazon didn't turn a profit for over a decade. Even now, with $200 billion in annual sales, analysts know that the bottom line might be paltry, that little net income might result from all these sales. Amazon is customer-centric, not profit-centric. 

Wal Mart, Kroger and other bricks and mortar retailers are now competition-centric, they are obsessed with Amazon. These companies are now trying everything and anything Amazon is doing. Problem for them is, they've established a negative perception among the client base they are seeking desperately to maintain. I think of how customer unfriendly Kroger's self-checkout lines are. These were created not to make things easier for the shopper, but to increase profits by way of fewer cashiers and baggers. Oops! Now Kroger wants to become customer-centric and deliver groceries to your door, ala amazon, but the damage is already done in shopper's minds, perception is reality and reality drives sales. 
As Amazon begins opening bricks and mortar stores of various formats, customers will flock to them. Amazon can invade bricks and mortar successfully because customers believe they will receive the best experience from Amazon. Wal Mart bought Jet.com, an e-retailer, rather than to try and survive on WalMart.com alone. I assure you, you will find no reference to Wal Mart on Jet.com. Wal Mart wants zero association with Jet, other than a monetary one. Need I say more about the public perception of Wal Mart?
One of those business's I'm not especially fond of are casinos. How customer-centric is it that in order to turn a profit, you spend millions of dollars researching how to addict people to your games of chance? How customer-centric is it that you as an individual gambler have the odds systematically stacked against you? Imagine that you are born into wealth as Donald Trump was. You can make anything of yourself with the silver spoon you are given. What do you choose to do with these advantages? You become a real estate swindler where those with money thrive, and those that don't have it, are foreclosed and pay exorbitant rents of 25% or more of their income. This is why people like Dan Gilbert remain billionaires despite the real estate bubble bursting.

Trump, who could have done anything in life he sought to do with his advantages, also chose to get into casinos. Even with the rule that the house always wins, he twice field for corporate bankruptcy leaving his creditors high and dry. Trump hates Amazon's Jeff Bezos. Bezos is not a conservative hater as Trump is. Bezos actually created something of value, as Trump has never accomplished, Bezos's wealth dwarfs Trump's. Trump is seething with jealousy and warped philosophical differences with Bezos. Mr. T (Trump) has threatened Bezos with antitrust action and criticized amazon's profit margins as minuscule. Mr. T, reality tv star, just doesn't get it, does he, on anything? Mr. T's show shouldn't have been Apprentice, it should have been Biggest Loser!

There are good guys and bad guys in business and it is our job as both voters and consumers to make these distinctions. 

Interesting comparison

Saturday, March 18, 2017

One of the best tweets ever Nancy!

  1. I think he's going to have 2b shot with a tranquilizer gun, silence of the lamb restricted, & dragged from the White House into a White Van