Stores Closing Faster Than They Opened

The wonderful, exciting news keeps coming in, the ex-nihilo credit-fueled dinosaurs continue to die off:

Macy's has already said that it's planning to close 100 stores, or about 15% of its fleet, in 2017. Sears is shuttering at least 30 Sears and Kmart stores by April, and additional closures are expected to be announced soon. CVS also said this month that it's planning to shut down 70 locations.Mall stores like Aeropostale, which filed for bankruptcy in May, American Eagle, Chicos, Finish Line, Men's Wearhouse, and The Children's Place are also in the midst of multi-year plans to close stores. Many more announcements like these are expected in the coming months.The start of the year is a popular time to announce store closures. Nearly half of annual store closings announced since 2010 have occurred in the first quarter, CNBC reports.In addition to closing stores, retailers are also looking to shrink their existing locations. "As leases come up, you're going to see a gradual rotation into smaller-footprint stores," Hottovy said.Despite recent closures, the US is still oversaturated with stores.The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia — the next two countries with the highest retail space per capita, according to a Morningstar report from October."Across retail overall the US has too much space and too many shops," said Neil Saunders, CEO of the retail consulting firm Conlumino. "As shopping patterns have changed, some of those shops are also in the wrong place and are of the wrong size or configuration."

The story makes a delusional point hat these stores are dying due to web competition.  Absolute nonsense.  They are dying in part because they wasted so much resource on web marketing.  And am I ever glad they did, the sooner these stores die off the better for a small business renaissance.  Into the vacuum comes enough demand for specialty that the renaissance will be partly effected.

All of these stores used ex nihilo credit to destroy small businesses, which once provided a livlihood for familes, but then provided exceptional wealt for one family, like thr Walons of WalMart, while turning those small business people in to underpaid workers partially on welfare to subsisence.

The odious ex nihilo credit regime is finally dying put. But you must do your part, and that is start a business.

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Self-Employment Wisdom Affirmation

An SME is a small or medium sized enterprise, to be distinguished from large business, aka, dinosaurs. I, along with about six million other people, own a Seattle-based co-op called REI.  It is a medium sized business by all definitions, started by sport mountain climbers just before WWII.  So far it has been largely West Coast, but comes a story now they are moving onto the East Coast, filling in the real estate where dinosaurs have died.

The Sears store and Auto Center was recently sold to Seritage Growth Properties as part of the agreement in which Sears Holdings leases the store from Seritage, Reifs said. Under the agreement, Seritage has the right to recapture the space occupied by the store, he said.
After Sears' departure, the space will be developed for REI, along with additional junior box and small shop retailers, including restaurants, according to the Seritage third quarter operating results.
Saks Off 5th, the outlet version of the luxury department store, has signed a lease and will also occupy some of the space, West Hartford Community Services Director Mark McGovern said in an email Thursday.

Saks 5th Avenue is also by all definitions a medium-sized enterprise as well.  Both REI and Sak's compete on design, not price.  (And competing on design, not price, you'll have about 80% of your customers the one-off upscale stores and about 20% those well-known medium sized enterprises.  And of course you want exactly zero of the dinosaurs, the large businesses, as customers.)

Naturally, well-run companies that survived the bust will be the first to take advantage of the dying dinosaurs' demise.  Note what the real estate developer is doing: repurposing from dinosaur to delightful.

As an aside, while stores like Sports Authority drop dead from ex nihilo credit heart attack, a coop like REI thrives like crazy.

Your savings and pension and even social security depends on the dinosaurs thriving.  They will not, they cannot.  To keep from being taxed to death, you were persuaded to invest all in the limited range of securities allowed by law.  The law of course was designed by those who benefit from money pouring in every month to that limited range of securities.  Either way, the thieves end up with your surplus.  That is your future, because it the reality right now.

What is the best investment hedge given the reality?  Self employment, which is a misnoner. The real term would be customer employment.  We are all customer-employed, the hedge is to cut out the middle-man and be customer employed directly.

See yesterday's post for some options.

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All 463 Sports Authority Stores to Shut

Sports Authority is going down, as all the dinosaurs will.  The writer makes the nonsense assertion that the internet did the company in.  Nonsense.  REI continues to do well in this economy, but then REI is a co-op, not a capitalists' scam.

The Sports Authority closings come on the heels of another athletic goods retailer,Sport Chalet, taking similar action. The chain stopped online transactions and began closing sales at its nearly 50 stores in April.

Sports Authority, which was owned by the Los Angeles-based private equity firm Leonard Green & Partners, has said that it was hampered by $1.1 billion in debt, and was late in picking up on shifting consumer trends.

Well, who cares if the debt is 1.1 billion if interest rates are zero, in effect, that debt costs you nothing?  The reason is that there is no way they can buy anything upon which they can make a profit and work their way out.  They played the game of borrow-the-most mal-credit and steamroll over anyone who did not borrow enough.  The online micro-component of sales of sporting goods has nothing to do with it.

Sports Authority was $35 a share in 2002, hundreds of millions in mal-tallies.  its ownership resided in pensions, investors, etc.  Now it is all gone.  This is one way to balance the books.  A billion in losses on the liability side, nothing gone on the asset side, for the hegemon.  At teh same time, for about 75 years REI (Recreational Equipment, Inc) has had a "stock price" of about 5 cents a share, as a co-op.  It continues to be rock solid.

Who is going to fire up a production line to serve Sports Authority when it is clear that it cannot pay for what they buy. No one.

For the small entrepreneur, there are two vacuums hear, the customers this big business will no longer serve, plus the widening excess product capacity of manufacturers.

Step in with your own sporting goods, and sell to stores like REI, or open a retail store and sell new and used products side by side.

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Advice For Dinosaur Retailers

Stop breeding, and try to put on some weight, it's going to get colder soon:

 The combination of slower in-store sales growth, an increase in less-profitable online sales, and steady spending on stores has made it harder for many retailers to maintain healthy profit margins. Stock prices are responding accordingly.  

But but but...  I thought online sales were riskless, easy, fantastic profits.. a no brainer.

E-commerce sales, not physical stores, are driving a bigger portion of retailers' year-over-year sales growth at established stores

Here we go again... measuring from a truly insignificant amount to a merely insignificant amount, using words like "bigger" and "growth." 

America has more retail square footage than Australia, the U.K., Germany and Mexico combined

Because USA is a consumeristic society, and those are materialistic societies.  We buy junk and throw it away, they buy quality and keep it.  That our poor are fat is an example of the difference.  It takes far more retail infrastructure to serve a consumeristic society than a materialistic one.

Ungh... ROIC?  A rent-seekers metric if ever there was one.

One way for investors to figure out which companies are following Home Depot's example and keeping a lid on unproductive store growth is by watching a company's return on invested capital (ROIC), a metric Gutman figures has a 90 percent correlation with stock performance at the retailers he follows. The idea is that the better a retailer deploys its capital, the higher its stock price tends to go. 

This assumes the point of retail is to make money for investors, not serve customers.  Any surprise they are dying?

Dick's Sporting Goods, ... 7 percent increase in square footage from 2013 to 2015 and 1.5 percent decline in sales per square foot (when excluding e-commerce sales) during that time. With Sport's Authority's bankruptcy and impending store closures, Dick's is eager to pick up some of its competitor's locations. That could help boost short-term sales, but comes with diminishing returns, as mounting competition squeezes specialty athletic gear retailers.
A better plan for Dick's and other struggling retailers might be to focus on how to make their existing stores better. 

Dinosaurs had plenty to eat toward the end, with so many dinosaur carcasses to cannibalize. A better plan for you is to open a sporting goods store near where a Dick's or Sports Authority closes and offer the materialistic customers what they want.  There will be enough business to discover in that vacuum to support a lifestyle.  For the next 40 years accumulation will be confiscated, necessarily so. 

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Stupidly Blaming Amazon

Mish brings some common sense to big retail analysts idea that somehow Amazon is to blame for the sales funk in USA retail.  But even Mish misses the core reason.  First read the article and see the graph.

Yes, Nordstrom is in a funk too, but it does not belong in that list with Kohl's, Macy's and Walmart.  Walmart is dying because malcredit, the oxygen of the dinosaurs of the last forty years, cannot be invested in anything dinosaur-grade that can make a payback.  It does not matter if we are in deflation and the banks will in effect pay you to borrow malcredit, the revenue stream from the investment with the borrowed malcredit will not cover the amount you borrowed.  Income drops but the debt remains on the books, in effect growing relative to all other assets as it cannot be reduced.

One reason Walmart grew so amazingly is its customers were not as foolish as Macy's cardholders.    This is how the real world works.  Macy's and Walmart goes to the exact same factories and buy the exact same jeans for essentially they same price, but with their own respective labels.   Walmart buys for $7, sells for $19 in a cash transaction.  Advantage Walmart shopper.

Macy's buys for $7, lists at $45, on sale for $29.  People whip out their Macy's cards and after paying 50% more (29 instead of 19) pay 20+% interest on top of the overprice.  Macy's benefits from a slight boost in sales as their competitors who played the same game died.  No there is no one else left to die, so Macy's is the last man standing.  No one from which to gain a boost in sales.

And by the way, I am a cast iron cooking gear freak, and I check out Goodwill for pots and pans fairly regularly.  I cannot imagine ever buying kitchenware from anywhere else...  Goodwill's supply is massive and very good quality dirt cheap.  Macy's managed to be the last man standing based on their amazing kitchenware departments in the 1980s and 1990s.  I was there. That's over.

Take any Macy's department.  For those who love people, open a retail store to compete directly with that Macy's department.  Buy fashion forward new and for the time being sell used whatever alongside.  The secondhand goods will compete with what is on Macy's shelves, and your testing out the new items will make you a destination shop.

There have always been upscale second hand stores.   You can merge new and used together.  Get month to month rent, refuse a lease.  In fact, cut a deal where the landlord gets only 6% of the top line as rent. so he makes money only if you do.  Refuse triple net lease as ludicrous, insulting.

And work closely with Goodwill or your local version.  You'd be surprised what they are up to.  With maybe 80% used, to start, and 20% really cool new new,  bury Macy's and have Nordstrom VPs visiting your store to figure out how you are taking their customers.

The dinosaurs are dying, because their system is over. Those into lifestyle over personal accumulation will very much enjoy the next 40 years.

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Self- Incriminating Pension Shortfall

It was way back in 1982 while negotiating the longshoreman master contract in San Francisco on the management side of the table (I am sooooooo mercenary!) that I first heard the term "unfunded pension liability".  It was the strike issue.

Well, can't squeeze blood out of a turnip, and there was just no way promises made could be kept.  Slowly but surely, and I believe Hoffa was murdered to make the point labor was not to push this, one labor group after another folded.

Anyone who entered into pension agreements of any sort should have noticed they were not being honored.  For the last 35 years.

To the degree to which anyone believed that a pension would await them is guilty of self-delusion and willful ignorance.  One would have to assume the economy of the last 40 years was rational, just, fair, and equitable.  The the degree one is so self-deluded is the degree to which they will engage the fight for scant resources and massive unfunded liabilities.  It is gaining momentum...  quarter million truckers will see pension cut 23%..

More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money.
Within the next few weeks, the Treasury Department is expected to announce a crucial decision on whether it will approve reductions to one of the country’s largest multi-employer pension plans.

We all believe we will be exempt, we all have special pleading ready.  And this ignores the fact that at zero and negative interest rates, there are countless pensioners right now suffering want.  They all expected promises to be kept. Now to whom can they turn?  They no longer produce anything, who will champion their cause?  Whatever you do, make sure you are paying taxes until the day you die, or you'll be a liability, not an asset.

The great default is already underway, and the suffering is real, but just beginning.  People will vote for one of the above, simply because they believe they have a case.    But to vote for any of the above is to admit you believe you have no other option but to fight over the diminishing asset base.

O well, you'll just work at Starbucks?  Good luck.  You'll be far better off starting your own hole in the wall coffee stand.  Don't let the hegemon hear he is your only hope.  Abandon your pension claims and pick another battle.

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Oct 1 EMV Credit Card Switch - More Deflation Evidence

For the last 40 years, the banks could book the profits and socialize the losses of credit card fraud for the simple reason the credit was mal-credit, that is it cost them nothing.  Since they made the credit out of thin air, they actually lost nothing to fraud.  The banks simply kept creating more credit to cover their losses, and prices went up to pass the losses onto the consumer.  How much fraud occurred meant nothing to the banks, we consumers would ultimately cover it with higher prices when next we shopped.

We now have hyperinflation in mal-credit where those who qualify for credit either don't want it or use bene-credit, and those who do not qualify, overrated borrowers like students, home and car buyers and corporations are snapping it up for those purposes.  (Home buyers are a special case, they are secondary, with real incomes but based on the false economy, in any case paying waaaay to much.)

So knowing full well a bust is coming, and no longer able to pass on the losses through mal-credit inflation, the banks have come up with a change that suits them in a delflationary economy;

Credit card fraud is the merchants problem, not the banks, unless you upgrade to new technology:

Right now, if you process a fraudulent card, the card issuer absorbs the cost, whether it be Bank of America, Chase, Capital One, etc. After the “liability shift” hits, if someone pays with a fraudulent chip card and you haven’t upgraded to an EMV reader yet, the liability falls on you. The card issuer is off the hook.

Of course the switch is voluntary, so who cares?  Well, voluntary for now, as always (but recall the new risk).  But wait, 

Moreover, U.S. banks and card companies will not issue personal identification numbers (PINs) with the new credit cards, an additional security measure that would render stolen or lost cards virtually useless when making in-person purchases at a retail outlet. Instead, they will stick with the present system of requiring signatures.

So we are going to a system, and putting in that real cost to retailers, and mal-credit funded to bankers for a system that does not work?  Sounds about right...

The liability issue has engendered anger on the part of some retailers, but it has also provided an incentive for compliance with the new standards.
"When banks and card companies are only concerned about shifting the liability to the retailer, you have to comply first," Brooks Brothers Chief Executive Officer Claudio Del Vecchio said. "And then think of solutions that will fix your problems."

As to small business,

Anne Manion, owner of the women's clothing and accessories boutique Girl Hour said she doesn't think small businesses are as exposed to data breaches as large retailers are, but she is still thinking about reaching out to her bank about upgrading terminals at two of her stores.
"The cost implications are important and I'm going to wait and see if by the end of the year there is a way to rent these terminals instead of buying them," she said. Manion already pays a $500 fee every month for the two card terminals she now has.

I've had a merchant account with Wells Fargo for over a decade associated with my online business, feeding the beast.  Today I stop accepting credit cards, you can create a PO, have me bill you, or mail me a check.  In a year I'll report the resulting differences

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Closing Stores

A previous post on retail sales in USA prompted the observation that if so many stores are closing, why are sales dropping?

As of 2005 annual store sales in the range of $300 per square foot ($3,000/m²) is considered a respectable result in the United States as the national average for regional malls is $341 per square foot,^[1] but the target number depends on the location, the type of store and other factors. For example, the Forum Shops at Caesars Palace in Las Vegas sets a precedent for Las Vegas stores. The location has the highest sales per square foot of any mall in the nation at approximately $1,300 per square foot.^[1] The average for specialty apparel retailers, for instance, is $400 per square foot ($3,000/m²), and according to Baseline Magazine the retailer Hot Topic achieves an annual $619 per square foot ($6,660/m²).
According to industry research firm RetailSails, Apple has the highest sales per square foot, with average in all their stores of $6,050 per square foot annually.^[2]

So,  if an average is $300, an Apple store at $6000 can equal 20 other similar sized stores closing.  The first Apple store opened in 2001, and now there are 408 total, with over 250 in USA.  So 20 time 250 means Apple would make up for 5000 other stores closing.

This is just a shift in consumer preference.  Whereas once people enjoyed nice clothes, housewares, paper, rugs, and other soft goods, they now prefer to stare into an iPhone screen.

If the internet goes down, on some sort of Target/Heartbleed thing, whole lotta bored people will start looking around their drab surroundings and see they need a tailor.

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Bookstore Survivability

John,

Regarding the issue that most retail sales are happening offline in real stores (supposedly internet sales are only like 5 % or so), I cannot avoid thinking that book sales (both printed books and ebooks) are different. There seem to be constant reports about commerce taking over in the media. Maybe the retail market is still adjusting to the advent of the internet (even though it's been about 20 years). Could the sales of other products be affected by the internet? Maybe it's just taking longer for the internet to change retail commerce?

see this article:

http://www.nytimes.com/2014/02/20/business/media/james-patterson-giving-cash-to-bookstores.html?hpw&rref=books&_r=0


Hey Anonymous...

Thanks for being the #1 poster on my blog.

There is something different about the brick & mortar book business, and that is it has a model that needs to die.  Amazon killed off the fake bookstores, Barnes & Noble, Crown Books, Borders, which were really just financial services companies, not booksellers (they made their money off usury, not books sales.)

The model that needs to die is that of all USA industries, booksellers can return products (books) they do not sell.  This started in the great depression, where most of what is bad in USA was instituted.

Once booksellers could send back books they did not sell, then the business model changed to where a bookseller did not care what was on the shelves, just stack up the bestseller junk which is 20% of the business, and maintain the classics (MacBeth, the Iliad, etc) which is 80% of the business, and then sit back and manage mistakes by shipping them back.  Interesting or new authors need no apply.

Powells in Portland discovered (and I happen to think inspired Bezos at Amazon) the tactic of selling used copies and new copies side by side.  They are thriving.

And incidentally, neither of my books would ever be carried in a brick and mortar store without some direct association with me (a college bookstore carrying my book when I also teach at the college).  On the other hand, I've had a book on Amazon for over a decade.  See the Long Tail for what is going on there.

Michael Pietsch, the chief executive of Hachette Book Group, said that while some have prospered, there has been “a cataclysmic loss in the number of independent bookstores” over the last two to three decades. “The stores that have weathered the significant downturn have had very good years recently,” Mr. Pietsch said. “But there are many stores that have not had that success.”

Publishers went after the "blockbuster" books.  The printed massive amounts of each to stack in all stores and then take back what did not sell.  Fully 50% of the bestseller books are returned to be shredded.  Yes, that million copy best seller is ultimate only a half million copies, and actual printed copies come back to be shredded by recyclers.  Why would anyone lament the end of this terrible system?

Those bookstores still standing have a staff that cares about books, and an ambience catering to people who love to read.  That staff in effect curates books.  if booksellers could no longer return books they did not sell, not only would it help the ecology, it would widen access to audiences from bookstores.  If there were 10,000 bookstores in USA, then maybe there would be 200 in which a clerk who was expert on business might be recommending my book, and then it would sell in stores.  If each sold a copy a month, I'd have a stream of $2000 net a month from that alone.

And though many communities remain loyal to their shops, and the American Booksellers Association says its membership has recently grown, the online discounters have wreaked havoc on the independent bookseller’s business model.

If your model is the execrable 50% return model. The destruction of the old model is not over.  Some publishers (like me) have no return policies.  Right now it kills any sales.   Eventually those businesses that depend on the "no-effort" model of bookselling will die out due to competition from Amazon.  Amazon has well and truly killed off Crown, B&N and Borders, and hooray for that.  Good riddance!  I am happy to see the small independents who are organized around the "we can always send it back" die out.  More business for real book lovers.

The article you cited is a distress call from someone who made his money in the old system, Patterson.  We all love a system that works for us.  And what was his first plan?  A government bailout of book stores?!  Wow.  But then people who make money off degenerate systems do not want the gravy train to end.

Last year, Mr. Patterson placed full-page ads in The New York Times Book Review and Publishers Weekly arguing that the federal government’s financial support of troubled industries like Wall Street and the automobile sector should extend to the bookstore business. Since that appears to be a pipe dream, Mr. Patterson decided to create his own bailout fund as part of his mission to promote literature, especially for children.

Now, to Patterson's credit, when the government did not step in, he stepped in and put his money where is mouth is.  Bravo!

He began his project last year by getting the word to store owners that he was willing to begin writing them checks, which will range from $2,000 to $15,000, according to a spokeswoman for Mr. Patterson.

But wait...

The current health of independent bookstores is mixed. While some have benefited from the disappearance of the Borders chain in 2011 and a shrinking Barnes & Noble, the stores have been hit especially hard with consumers switching from paper copies to e-books.

Two things, probably 10% of my net comes from ebooks sales, but I believe very few of the people buying the ebooks are reading the ebooks.  In any event, in time the independent bookstores will come up with a open-source kindle that allows customers to buy any ebook with a cut going to their favorite bookshop.  An affinity kindle.

It has never occurred to me until now to pitch another book I wrote and sells on amazon, Perish Your Publisher.  It is a study on how to develop a teaching and writing and publishing combination as a sideline or full time occupation.  i brought what I learned from small biz int'l trade to publishing and figured out how to get paid for my time spent thinking.   (I wish what I thought brought in more money, but the bible says you have to be happy with your portion.)  Here is that book:

Perish Your Publisher

(Odd... the server image code no longer works with googleblogs... hmmm...)

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Distressed Merchandise

A student writes to me regarding a company, we'll call Xcorp, that offers to find buyers for distressed merchandise you might find.  It is a club.  You pay to join.  There is no selling on your part, you just call around, even from a list they give, and find distressed merchandise.

The person inquiring said she found some items, but the XCorp keeps telling her they have not found a buyer.  Why would they?  The game is the club fee, not the service.  After they got your money, they can safely ignore you.  It is a great scam.

First off, there is no such thing as distressed merchandise, only distressed importers. Second, there is already a very efficient system for getting distressed merchandise sold. 

I have in the last 40 years had to liquidate mistakes from time to time.  It happens.  And I know what to do.  I go straight to BigLots. (40 years ago it was AAA liquidating, then it was Macfrugals 20 years ago, now it is BigLots, bless their hearts.)  They will buy every piece of my mistakes, whether I have 100 pieces or one million pieces.  At what price?  Well, say I paid $10 each for my item.  And I have 5000 pieces.  So they cost me $50,000.

BIgLots will look at those 5000 pieces and say at what price can we sell all of them in 30 days?

hmmmmm... say 50 cents each, the can move the 5000 pieces out their door in 30 days at a retail price of $2500 for all 5000 pieces.  $2500 is what they will gross on selling my dead stuff.

Then BigLots will offer me 10 cents each for those, because they need to make 5 times on everything they buy in 30 days.

So they will pay me $500 for what I paid $50,000 for, and they will get $2500 for it.  If BigLots could get more, you know they would, because they want as much as possible.  This is one company I never hear anyone complain about.  Straight as an arrow.

BigLots, as you might imagine, always pays their bills,  first rate company to work with.

Can I get a better price elsewhere?  Never.

You mean I am taking a $49,500 loss?  Yes.

Is there an alternative?  No.

Why don't I offer it on sale to my regular customers?  I said 'No!"  My customers want to buy new, not dead on sale.

Can't I sell these at flea markets or craigslist or ebay and get more?  No.  first you are not in that business of selling on eBay.  Second the time and effort to sell the $50,000 will be more than the "more money" you might ever get.  You job is to rip the band-aid off fast.

I bless my lucky stars there is a BigLots to buy my mistakes.  When I have a dead item, they move it at a very fair price.  They take it all, I no longer pay rent and insurance on a dead merchandise.  The $49,500 comes straight off the bottom line, so my taxes are lower, but I learn from my mistakes or fire who needs to be fired.

Never hope the market changes its mind, and hope a dead product will sell.  Better to rid yourself of it instantly.  Then put that $500 back to work.

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Good News For Apparel Importers

Mish Shedlock has a graph that seems to show massive inflation and dropping demand for apparel in the USA, starting about Oct 2010.  If so, this is great news for anyone starting an apparel business, because those importers with fixed overhead and debt to service will find they cannot stay afloat under these circumstances.  Otherwise perfectly viable businesses will fail, creating a vacuum for new businesses, with lower overhead (your business) to come in and fill the void.  This will help prices drop, and we cannot have an economic recovery without massive falling in prices, wages, costs, taxes, etc.  Don't feel bad, plenty of people knew what was going on, so anyone failing had it coming.  They can start up from scratch, just like you are.

But there may be another interpretation of the graph, and that is, clothing importers are going up market.  The graph shows the price per M3 of fabric garments...  it does not show the quality of the fabric or the complexity of the construction.  I do not know the answer to this question, but one could find out by studying the HTS and NTDB trade data.

Either way, it is a good time to start up.

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Increase Sales, Go Out of Business

Long ago I heard that phrase from an accountant, who noted most businesses increase sales just before they close down.  What with liquidation sales, this makes sense, but he was talking about the people who cut prices or run gimmicks to bring in more customers, not realizing what it does to the profit margin and profitability.

Online retail sales are still only about 6% of all retail activity, but boom-time big businesses, price cutters, are trying to get a jump on each other by opening early and earlier on the day after Thanksgiving, BlacK Friday.  How being open more hours with more overhead to sell products at lower prices helps a business, I do not know.  If I was in charge in these times, I would be closed Sundays, and no doubt have the same amount of sales at 1/7th reduction in cost.  If you have what people want, they will arrange to be there when you are open.

At a Halloween party I listened as two 40+year employees of a major department store chain talk about how the entire loss prevention team was laid off.  They estimated it was about a million a year in savings for the one store they worked in, and guess that any increase in theft was less than that.  Now this may be temporary, as many companies lay off well paid crews and then rehire replacements at minimum wage.  In any event, according to the salesperson, stuff is disappearing fast, and it is provoking since their commissions are based on sales and if the good stuff is gone they cannot do better than minimum wage.  Obviously the thieves have figured it out.  I wonder if the loss prevention crew laid off contacted past arrestees to notify them the store is wide open, with a view if the losses are too dear they will get rehired?  Who knows, but perhaps eBay will have the best selection of new garments this Christmas season.

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Health Care Crushes Small Business

Mish is on the mnoney again with a report on how the health cares costs, skyrocketing because of govt involvment, are crushing exosting small businesses. We'll never know what businesses did not start because of the USA health care system costs.

And I should be careful here, there is a big difference between what we pay and what health care costs. Health care does not cost anywhere near as much as we pay. Single payer will not solve the problem, because the problem is the govt which is involved in health care. And with single payer, the whole thing is turned over to the entity that is wrecking it.

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Bail Out Small Business?

Obama is pressuring banks to lend money to failing businesses. This is of course a waste of taxpayers money. A failing business does not need a loan, it needs customers. If it gets customers, it does not need a loan. If it cannot get customers, it does not need a loan. This may soound simplistic, but the people going out of business modeled their biz on a false complexity. Probably every failing failing small business could be saved if the owner were just to get back to basics.

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Tiffany's Profits Down 76%

Good news: Tiffany is clearing out their boom time baubles and so their profits are naturally way down. In USA their sales are down 20%. A 20% drop in sales with a 76% drop in profits means deep price cutting. Tiffanys is making the right moves.

Their overseas operations sales dropped only a few percents, suggesting the economies overseas are much stronger right now than in the USA.

The travel industry is helping retailers out with their deep discounts. Luxury Hotels are giving rooms away to foreigners to get some revenue. My daughter spent last weekend in New York's Waldorf Astoria stowed away with her Italian family who were guests. With little travel costs and Tiffany's at deep discounts, foreignors shop here. Retailers need to have the ability to ship goods back home for travellers to increase sales.

Tiffany's is still profitable, because they can handle their debt load with lower sales and narrower margins. The missing elements, the desperate question is, what is new?

Anyone with a passion for jewelry can be part of the solution to our economic troubles right now by starting a business that sells to Tiffany's and other such stores. If a person gifted with such a passion is working in another field or worse yet, unemployed, then they are part of the problem.

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ISM Reports Growing Inventories

Mish is reporting a problem in Biz right now, inventories are growing at both the wholesale and retail levels.

Here are the problems: these inventories must be financed from revenue, but revenue is dropping. People who think the economy will turn in a few months are borrowing to make it through, but since this downturn will last 25 years or so, they will be gone before Christmas. Some wholesalers and manufacturers will be caught unable to carry the cost of the excess inventory. Down they go, like the stock market.

The only chance a retailer has is to sell what the new customer will by, and that is discovered thru the system I learned from others and teach in my course and book. You can read the book for free on line at google books.

Sales are dropping. Supply is dropping faster. Thus demand is increasing, if you can discover what these post-boom customers will buy. Apple knows, their stores are packed. Tesla Motors knows, they have a order backlog. I am working on what I know. What is the field you love, what is the problem you experience/ What problem that working upon gives you joy? That's where it works. That's where your work is.

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If It were a Mac, It Could Be $20K

Saks 5th Ave has a decrease in sales, but is handling the depression in a most excellent manner. Here is a new offering, a new business competing on design, also getting into the computer business. The heart of this offering is a msdos pc, so it can only command $10K. Make mine a mac, and it will go for $20K.

Now another point, what if your life was a mess, your fiannces in turmoil, and your product offering the above? REgardless of your circumstances, the world would view you generally by what you offer. For those concerned about image, as I am so very much, then having the world admire such a product is to be admired yourself.

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What New Products?

Saks is doing it right.... during Christmas sales season they slashed prices 70%, driving plenty of people who tried to match them out of business... Sak's boss knows to clear out the old stuff while customers are in the stores...

As I mentioned before, the goods on the shelves and in the pipelines is not what people are buying. Stores are desperate for what will sell, what will loosen up the wallets of those who are in their stores.

Of course take feedback directly from your customers, but also note what others are doing. Coke and Pepsi are supposed to be recession proof, but they have learned people are eating out less often. So, what are they coking with? Is there an opening?

Apple is finding sales of iPhone to poor people, as I mentioned earlier in this blog. So, economy commands a higher price.

Starbucks is going down market, but here is a case of big mistake. Mickey D will slaughter them, as I've pointed out before.

Wonderbread is launching a natural, organic line. The mind boggles!

Neiman Marcus is advertising Old World Chain, a company offering heavy gold chains. It is only a matter of time until this govt seizes citizens gold, as they did in 1933, so gold jewelry is a good idea. The heavier, more pure, the better. Branding here is important.

Best Buy is still selling boom economy products with boom economy sensibilities. "Be the one who gives the presentation of a lifetime, every time." What? Expecting to testify before congress? Who is making presentations anymore? I'd short Best Buy if I was in stocks right now.

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Businesses That Must Fail

Here is a critique of a kind of company that comes only in a boom and necessarily busts with the economy. Study the patterns and see if it applies to any other customers...

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Leading Store Buyers Pay Bounty For New Products

I told you the fact that you are a new business with anew product is the ticket into the best stores, one of the best, Hammacher Schlemmer is paying $2500 bounty on new products...

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