Village Solutions

Pedestrian Thoughts

Starbucks Experience

In order to differentiate itself from McDonalds and Dunkin Donuts, “The Starbucks experience will now include the whir of the grinder and the smell of the aroma all day”, according to new written procedures for the 7000 units  of the U.S. chain.  According to the Wall Street Journal,   Starbucks Coffee, “will now grind beans each time a new pot is brewed”.  Seems like telling the baker to vent his fresh baked goods into the shop than out the back. But, something does not smell right when the most basic of assumptions must be converted into a manual.  Sounds more like a statement in a failure of a corporate culture than a lesson in process management?

Best Buy

Facing a number of challenges including new competition, Best Buy reported a 15% drop in earnings for the first fiscal quarter of 2009.  While the company is projecting cautious numbers for the balance of the year, officials are upbeat with recent increases in market share and increases in margins.  After the closure of Circuit City, the firm’ overall market share increased to 21% of all consumer electronics, about 2% higher than 2008, reflecting gains in a computer notebooks, flat panel televisions and mobile phones.  Likewise, the company’s gross margins improved from 23.7% a year ago to 25.3% in 2009.  However, new competition from Wal-Mart, Amazon and regional players such as HHGregg have also taken market share away from Best Buy.  One other challenge is the lack of consumer stimulus checks for 2009 to match those given out in 2008 unless Congress caves into to fund another rounds of consumer confidence for 2009.

Holy Cow

In 2009, McDonald’s plans to open another 40 restaurants to bring its total close to 200 in the Indian sub continent.  But not a burger can be found on the menu in a country where the cow is considered sacred.  To tap a new billion plus market, McDonald’s is selling chicken burgers and vegetables patties.

City Centers Growing Again? Not so fast!

Much has been written about how one can lie with statistics, and it seems that may very well be the case when looking at the change in center city demographics.  While, being a major proponent of center city neighborhoods, I am not so sure that the recent headlines proclaiming population growth in the urban core presents an accurate picture.  New reports are suggesting that people are returning to the center city and giving up the suburban mansion for urban condos.  One headlined stated, “Old big cities doing better than new hot spots”.  Another article quoted an urban advocate who stated the research proves that people want to be in pedestrian locations and would prefer not to have to drive to all of their services.  Now really guys?

Let’s take a closer look.  Population growth in center cities may be occurring for reasons other than quality of life issues.  Clearly, growth in suburban homes construction, new shopping centers and office buildings have all stopped dead in their tracks, along with the jobs they created.  But this is hardly a promotion of urban living over suburban choices.  This is more about the migration of the unskilled and new immigrants to urban environments that offer economies, limited jobs, and better services.  Yes, service jobs ranging from landscaping to restaurant service staff have all made dramatic cutbacks leaving a lower working class stranded with no jobs and expensive commutes.  The only reasonable alternative is to relocate to center cities to be closer to governmental services such as free medical care, unemployment offices, job training centers and other similar services centers. Additionally, the government stimulus package is largely assisting far more urban projects than suburban projects, hence another reason to move back into the urban core to be closer to the jobs.  But one man’s loss is not necessarily one man’s gain.

Back to School Sales: Early Results

Early back to school sales are a barometer of consumer confidence, especially in the all important junior apparel category.  With schools in some states opening in mid August they become an indicator of sales for other states such as New York and California with late school openings.  If sales are not going as planned in the early states, especially the smaller ones, retailers can cut back on their orders for the larger states.  And if a family will not buy for back to school they are likely not going to be making big purchases at Christmas.  I suspect sales will be marginal to poor and that it will continue with certainty through the holiday season with cries for more economic stimulus in early 2010.

Frugal Grocery Shoppers

Grocery stores in our austere economy are aggressively tweaking their formulas in response to changes at Wal-Mart and the overall economy.   In recent years grocery stores went upscale on the perimeter with flower shops, coffee shops, sushi bars, bakeries and prepared food sections.  But the focus is now back in the interior of the stores where as much as 70% of the profits  are generated, yet down from 85% just 10 years ago before the arrival of the discounters.  The biggest gains in profits are coming from the aggressive marketing of private labels.  Partly, fueled by private label sales, Kroger posted a 13% rise in quarter profits releases last month.  Conversely, Whole Foods reported a 4% decline in sales in the most recent quarter.

Luxury Entertainment

Triple Five announced two new anchor concepts for its Mall of America development located just outside of Minneapolis.  The first new anchor, a large Mayo clinic facility is slated to target a non core market of the clinic and the second one is being billed as a luxury entertainment concept.  So we wonder what color is a “luxury entertainment concept?” Scenarios include the next version of a solid gold strip club, maybe an upscale arts cinema or a revamped version of an upscale bowling center or a redeveloped Dave & Buster concept.  Hopefully, something dynamic and new will evolve but don’t “bet on it”.

Reduced Square Footage

Retailers are more than ever studying the sales of their stores with the goal to increase profits by reducing their square footage, inventory levels and the mix of goods to higher margin products.  In general retailers are taking less square footage to display fewer products with higher margins.  If successful look for retailers to give back space to the landlord. Could this be a move back to some less than the huge warehouse stores we have plagued our landscape in recent years.

Tags: Retail, Retail Changes, shifting retail trends

This entry was posted on Tuesday, July 7th, 2009 at 9:47 am and is filed under Retail. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.