Amazon changes the world-Again

 Well, today, July 16th is Prime Day. Until tomorrow midnight, Amazon is offering special deals, which creates a major sales opportunity in an otherwise quiet retail season. While Amazon does not divulge exact results, they did tell that results in 2017 increased 60% from the year before, and Jeff Bezos expected even better results this year. Actually, never mind that. As of this morning, Amazon's stock is up $17/share. X the 485million shares outstanding, that is an increase in market cap of $8.25billion. As a point of reference, Macy's market cap is $11 billion, Bed Bath & Beyond is $2.7billion, and Target's is $21billion. So, without the sales results, Amazon has gained 3 Bed Bath and Beyond, 3/4 of a Macy's, and 40% of a Target.

Holy Crap! The rest of the retail world is rushing to defend itself by creating their own events:
1. Target.com- 25-40% off online Tuesday 7/17 only (wait-that is like trying to start Black Friday sales on Saturday, right?)
2. Macys.com- "Black Friday in July." Extra 25% off Extra 15% off blah blah Macy's usual discount doublespeak.
3. Bed Bath & Beyond- "Beyond Week A.K.A. Summer's Black Friday." Various deals.
4. Gap and Gap.com- The only one to mention in store although I am sure this will be the case for all-"The Great Gap Sale" up to 70% off.
5. JC Penney- "Cyber in July" online only extra 30% off.
6. Rite Aid- 30% off online
7. Best Buy- Big Deals Days 2 day sale online only although I believe if you walked in to the store to buy a 50" TV rather than have them ship it they would give you the price..

Naysayers:
1. Walmart.com- No special deals mentioned. Prideful and stupid, just because you didn't think of it first? Wonder what their sales will be YOY for the 2 days..
2. Ebay.com- This is interesting. "1 day of deals?! We're here all year. NO memberships. Just Kick Ass. Oh yeah, that will make me shop on Ebay today rather than Amazon and most everywhere else!
Again, pride goeth before a fall, right? Which is what will happen to their sales for the next two days.

So what's the bottom line of all this?

1. I think retailers have no choice but to follow
2. I don't believe the positive impact for the followers will be anywhere near that of Amazon.
3. Amazon owns this event. So it will be the first and maybe last place to visit.
4. IF you are an Amazon shopper, your visit to the others may be parenthetical.

I wonder what the cost of the markdowns will be for the others, and what will be the impact on their bottom line and sales/sq. foot in their stores because a. nobody is buying anything at regular price today or tomorrow so unit price will be lower; and b. since they are pushing online as the source of discounts, they are cannibalizing their own in-store business.

What this really shows is the cowish herd nature of American retailers, the lack of aggressive marketing, and basically the fear and trembling of anything Amazon does. So why didn't they come up with the idea-actually, Amazon shamelessly stole it from the Singles Day Event in China (11/11) which has been going on for years.

So Amazon changes the world-again. Further cements its dominance of online retail. BUT WAIT- this year Whole Foods joins the party. Sometime in the future the other retailers may just need to close for these two days and save the money.

Actually, Amazon has some practical reasons for a Prime Day in July, according to one Seeking Alpha analyst:
1. Increase the perceived value of the Prime membership fee;
2. Reduce seasonality and thus logistical surges;
3. Add Whole Foods and thus, brick & mortar, to their influence;
4. Mess with the heads and cause panic, maybe stampede, amongst the rest of the retail herd.
https://seekingalpha.com/article/4187494-amazon-prime-day-2018-will-huge?app=1&dr=1

So what are we going to do, retailers? Keep following, or come up with some bold ideas that will establish you as a leader, not a bovine herd, and raise your market cap by 1% or more in one morning?

I truly am embarrassed for you, because Amazon didn't reinvent the wheel. They just made it spin faster. IF I were CEO or CMO of one of the other guys, I would not sleep until I came up with something to make my store stand out from the crowd- and from Amazon.

My Fifth Horseman-Inditex-And Why You Will Never Catch Them

In Professor Scott Galloway’s groundbreaking book, “The Four”, he describes why and how “The Four Horsemen” are dominating global business. They are Apple, Amazon, Facebook and Google. How did all this happen? Did we all fall asleep and wake up in a Brave New World? For some of us, maybe..

After explaining why they are so dominant, Galloway explains the factors they have in common, and the elements that a potential Fifth Horseman would need to have to sit alongside the Four in global business. He calls these elements The T Algorithm, which contains eight characteristics:

– Product Differentiation
– Visionary Capital
– Global Reach
– Likability
– Vertical Integration
– AI
– Accelerant
– Geography

In case you didn’t read the book, here is a brief explanation of each:

1. Product Differentiation
The product is king- marketing a mediocre product doesn’t work anymore; Map out the entire value chain of the product.
2. Visionary Capital-
Attract cheap capital by articulating a bold vision; Cash builds your MOAT.
I should elaborate on this one. Cash is king, right? And debt kills the mighty, even the (former) Category Killers like Toys R Us. Below is a chart I compiled for my Global Marketing class:

Company	Market Cap ($B)	Sales ($B)	Cash ($B)	Debt ($B)	Debt/Cash %	Debt/Market Cap %
Amazon	692.56	177.86	90.98	44.14	48.5	6.37
Apple	886.58	238.79	77.15	122.4	158.6	13.8
Google	720.36	111.02	101.87	3.69	3.62	.5
Facebook	477.91	40.65	41.71	0.00	0.00	0.00
Macy’s	8.64	24.83	1.49	5.88	394.6	68.1
Inditex	94.53	29.30	7.99	.02	.2	.02
Nike	108.78	35.26	4.75	3.48	73	3.2
L Brands	10.08	12.63	1.53	5.79	378.4	57.5
Walmart	253.81	500.34	6.75	46.48	688.6	18.3
The Four	2777.41	568.32	311.71	170.23	54.6	6.1
United Kingdom (GBP)	2629.41 (GDP)		152.88 (National Reserve)	2271.1 (National Debt)

Company

Company

A little bit shocking when you look at it this way, right?
1. The Four combined cash position is more than the UK National Reserve;
2. The Four combined are the worlds 5th largest economy;
3. The Four combined debt (colored a bit by Apple) is 54.6% of their cash position and only 6.1% of their market cap compared to, say, Macy’s at 394.6 and 68.1%, respectively, and the UK whose debt is (gulp!) times the national reserve.

3. Global Reach-
Product appeals to people on a GLOBAL scale; Product transcends cultural boundaries; Product needs a passport at a young age.

4. Likability-
Customers want to date the Prom Queen? Company image and product strikes and keeps a positive chord; negativity is fast and destructive.

5. Vertical Integration-
Control as much of your product supply chain and the user experience as possible.

6. AI-Behavioral Targeting-
Knowing what you want based on what you do or say; much more effective than demographic targeting, social targeting, focus groups etc.; Not only know your behavior, but control it. This is the new marketing.

7. Accelerant-
Attract top talent- be a career accelerant; Drains the pool for the rest- consequences?

8. Geography-
Need to be near a technology/business center with knowledge base and knowledgeable talent; major cities will see great growth.

The candidates for the Fifth Horseman Galloway gives are (for the most part, Uber and Airbnb possibly excepted now):

1. Alibaba
2. Tesla
3. Uber
4. Walmart
5. Microsoft
6. Airbnb
7. IBM
8. Verizon/AT&T/Comcast/Time Warner

Galloway points out that none of the above are a slam dunk for the position.

For me, the best candidate was missing and what I want to propose here- Inditex. Here’s how Inditex ticks the eight boxes of the T Algorithm:

– Product Differentiation- All units have shown a great knack for moving product at just the price, just the style, just the color, just the time to have gathered a very loyal following
– Visionary Capital- Take a look again at the chart above. Inditex debt is $.02 billion, a miniscule fraction of their cash position and market cap. Virtually debt free.
– Global Reach- “The clothing retailer has more than 2,200 stores in 96 countries and is the flagship brand of the Inditex Group. Zara is renowned for its ability to develop a new product and get it to stores within two weeks, while other retailers take six months. Zara added a net of 51 stores in 2017, plus 38 Zara Home locations. Spain is the biggest market with 563 stores (including Zara Kids and Zara Home), followed by China (223 stores), France (150), Russia (144) and Italy.” https://www.forbes.com/companies/zara/
– Likability-passionate customer following,;  Amancio Ortega just an ordinary good guy
– Vertical Integration- Factory and logistics ownership setup in Spain will never be matched.
– AI- Unknown, but must be very sophisticated to monitor product and customer; I believe Inditex has digitized their supply chain to a level people are only dreaming about today.
– Accelerant- Who wouldn’t want to work for them?
– Geography-Maybe the only question mark.
– Plus-SCALE nobody will ever match- They can be imitated, but, unless somebody commits a lot of money and resources (most important human), they will not be caught.

So what is the point for the rest of us? For the companies who are not- and will never be-Inditex?

My advice would be;
1. Stop whining;
2. You have seen a formula that works. But you can’t copy it, if not only because it is too far ahead of you. So find your own formula to delight-yes, delight- the customer and dramatically collapse your supply chain.
3. Understand that the world of fashion and consumer goods is changing from a stable mass-market model to an SKU-rich, quickly changing environment.
4. If you are successful, it will chiefly be accomplished by improvements in technology-such as Blockchain for supply chains which I wrote about before in this blog. Today, there is an article per day about Blockchain or other digital technology, but mainly about the last mile-payment and logistics. In order to really collapse your supply chain, you must control the first mile- design to manufacturing- as Inditex does.

Warning- this may be a case of Creative Destruction- you probably will have to chuck out most of what you do and replace it with something better. Do you have the courage to kill the old man so the baby can grow?

Great thanks and acknowledgement of all materials quoted from (unless otherwise indicated):

The Four: The Hidden DNA of Apple, Amazon, Facebook and Google, by Scott Galloway

• Publisher: Portfolio; First Edition edition (October 3, 2017)
• Language: English
• ISBN-10: 0735213658
• ISBN-13: 978-0735213654
Available on Amazon (of course!)

Nike: Mea Culpa Youa Culpa; Whose gaffe are my shorts?

Description: Activewear shorts, zippered pockets, comfortable cotton fabric, button fly.

Wait- Button Fly? The only other place I have experienced button fly is on Levi’s 501 and some Diesel jeans. In both of those cases, I accept the button fly as an iconic jeans style feature. But on activewear shorts? How does it even make a bit of sense to have this style feature on Nike shorts which are supposed to be functional and comfortable-button fly is neither.

Not to mention, when you desperately need, you know, Number 1, it is nothing short of stupid. And, more than once I have closed the waist button as is the normal procedure and failed to close the others…

OK, I admit, this is my fault for buying the shorts in the first place. But that is what makes the story even worse-they are nice shorts.

It is pretty easy to see from the pictures that these shorts are not new, so why bring this up now?

What made me focus on this are two things: 1. The weather in New York is finally getting warmer and 2. The dysfunctional gaffe that Gap made with the China Map Tee.

I am just wondering when-or IF- these companies will recognize that they are all working in windowless silos. In this case, as in the Gap situation, when the designer offered these shorts for adoption, which manager or managers were responsible for these being adopted and manufactured and should have said, “Wait-these are great shorts and you are ruining the functionality with a feature that has no place on active shorts and which will never increase but more than probably decrease, sales of the item.”

Clearly that didn’t happen. Clearly large companies like Nike are struggling to define their future in today’s market; hence Nike’s agreement to sell their product on Amazon (bad, bad move-most especially because price and the origin of the product, from Nike or third party sellers, are both out of their control).

Clearly it doesn’t have to be this way.  Nike and these other companies are suffering from LCSS (Large Company Silo Syndrome). Good news- it can be cured!  Companies like Nike need to make structural changes in their organizations and their mentality to effect the cure. There is no doubt that major improvements can be made in the efficiency of even the largest company by doing so, and gaffes like the Gap’s China Map Tee and my shorts can be avoided.

Oh. You thought I was going to tell you what changes and how to effect them. Sorry, I stopped giving free information a while ago. Nike, Gap, other large company that wants to take down your silos, you will just have to hire me to find out.

Cross-Pollination in Healthcare; Could this work for Apparel? Let’s play The Match Game

Have you noticed all the cross-pollination in the healthcare industry? You don’t need to be an industry analyst to do so; just being a customer is enough.

Recently I went into my local Rite-Aid which proudly announced that there was a Walgreen’s pharmacy now inside (this Rite-Aid is owned by Walgreens). Rite-Aid has split the baby further in an alliance with Albertson’s, which owns multiple large supermarket chains: Safeway, Vons, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs and the New York-based meal kit company Plated (oh, I can’t resist: deliver your drugs with your dinner?). So, soon you may see Rite-Aid pharmacies or clinics or shops in your local food market.

There is more: CVS pharmacies in Target; CVS is also buying Aetna, so soon you can get your drugs and your health insurance in Target. Crazy? Walmart is teaming with Humana and has kiosks in their stores-wonder if WM can Roll Back the price of healthcare?

Above-mentioned giant Walgreens is teaming with United Health Care to open urgent care centers. Here’s an exciting possibility (really!). Once you get treated and a prescription, you get your drugs right there (in Hong Kong, China etc. dispensaries are commonly in hospitals and doctors’ offices).

I am sure the story will continue in the healthcare industry; so, wait, how crazy is it to imagine some of the same pairings in apparel?

I will offer just a few here- the point is, let’s see how crazy this is and what crazy pairings (or threesomes if that works for you) that you can come up with.

Ok, here we go:

1. Nike and Levi’s- Two icons who need help with their identity. Git yer shoes with y’alls jeans.
2. Tommy John and 7 For All Mankind- feel good about yourself.
3. American Giant and Hanes- Feel REAALLY good about yourself.
4. Everlane and Speedo- Life in the fast lane?
5. Victoria’s Secret and Buck Naked Underwear- What happens in Duluth, stays in Duluth.
6. Zara and Burberry- In case the fast fashion makes you dizzy or disoriented.
7. Old Navy and Ralph Lauren- I can’t figure this out either, but there must be something if they can have the same CEO.
8. Sears and Best Made- the hat guy with the earflaps looks like the Sears customer.
9. Macy’s and Uniqlo- In case you can’t find the style you want or that you should be wearing, and that you feel good about the value- console yourself with the discounts piled upon discounts.
10- Levi’s and Buitrago Jeans- Looking for adventure, and whatever comes our way. Jeans as establishment icon, or what they were intended to be since Woodstock?
11- Bloomingdale’s and Bergdorf-Goodman- We built this city on fashion, and now we wonder what is left of our message? Can the two old ladies of NY retail revive fashion r-e-s-p-e-c-t?
12- Macy’s and Chicxulub Crater Yucatan (where the asteroid hit)- Which is more destructive to civilization as we know it? The asteroid 66 million years ago, or Macy’s, who sanitized and neutered the American retail industry?…

Let’s have some fun with this. We need a team effort to make this really funny and provocative. GO for it! I am sure there are so many more ideas!


Thanks to source: https://www.forbes.com/sites/brucejapsen/2018/05/15/rite-aid-albertsons-well-be-top-5-health-food-and-wellness-player/2/#5ff7a30260d9

REPOST: Blockchain for Supply Chains-A single, immutable truth for our future.

(This article was originally published in April of 2018. While Blockchain is still a potential solution for supply chains, it is still far from being a viable system for some industries, such as the fashion industry and other lower-priced items. I believe my proposed solution below is still the best one, but even so, Blockchain is still at the starting line)

Today “Blockchain” is one of those words that everybody uses but few understand (until recently, count me in that group).

A paper by the Amber Road group entitled, “ Blockchain for Supply Chains: Ghost in the Machine or Breakthrough Technology?” (link below) allowed me to understand what Blockchain is (at some level) and to visualize the potential for applying the technology to supply chain management. IF I understood the author correctly, the possibilities are dazzling.

So first, what in the world is Blockchain, anyway? On a very simple level, Blockchain is the technology that empowers Bitcoin transactions. It substitutes Digital for Analog (being: paper and anything non-digital) steps in the transaction, each of which is verified by M2M (Machine to Machine) transactions.

The aggregate of these transactions is a Digital Ledger, which can be explain as:

a digital ledger is a decentralized database that is shared by network participants across any number of peer-to-peer computer connections. Somewhat analogous to a traditional accounting ledger, a user-certified, distributed ledger is where cryptographic signatures are verified, transactions are authenticated, assets are exchanged and, in the end, where blockchains are built.

So, all the individual pieces of a financial transaction can be digitized, reducing paper, hands, mistakes and time, producing a quality transaction in less time with more accuracy. Did I get that right?

IF so, let’s just imagine the impact it could have on supply chains? I will focus here on the apparel industry, as it is always the most embarrassingly arcane, slow and prone to stupid mistakes. The author talks about “Smart Contracts” as the solution-we are far from that.

The author of the essay uses an example of footwear from Vietnam. Vietnam, as recent as it is on the scene of textile powerhouses, is very progressive in its mentality and its willingness to adopt and adapt. China has distinguished itself lately in its adaptations of technology to daily life, such as the quick transition from a cash to cashless society and the millions of rented bikes running around major cities. Now let’s imagine the aggravation of trying to complete an analog transaction from Bangladesh or Myanmar…

The author also focuses on the financial and logistics element of an international supply chain transaction. Maybe this is because they are the most obvious and easily converted from analog to digital. That said, LCs and shipping paperwork such as BOL, transportation/clearance documents are not traceable and trackable until they appear, after someone’s lunch or afternoon rest or a poor soul working overtime. OMG.

Now let’s expand the view slowly until we can’t stand the anticipation anymore. How about production PO? Let’s just start with payment terms and actualizing. I remember a maddening number of spreadsheets and contradictory numbers because nobody could agree on the deposits/amount shipped/amount paid vs. balance owed. Not to mention how much time it took to resolve on the part of the factory/Shanghai office/NY office. IF this alone could be part of a digital ledger, we could all eat dinner on time.

Next step-all transactions in the supply chain that contribute to the successful completion of an order connected by a digital ledger- BOM (fabric, accessories, packaging, including verified inspection and acceptance of supplier materials), WIP (labor value added, production stages completed, quality reports), quality control inspections and results. Connect all this with logistics and financial ledger blocks and you have a transaction which requires a fraction of the effort and aggravation that exists today, even in large firms that sport the BS online as to how progressive they are (PVH comes to mind)-ask their employees- but even more in the millions of small and medium sized companies that still exist in the hope that their star will shine in the new marketplace.

One more tease- the most popular word in the apparel industry today is “sustainability.” Who can prove or confirm the chitchat that passes for proactive activity? With all due respect, I am sure a lot of  (or most) of it is BS that has been passed by someone-it is the nature of the beast in this industry.  With Blockchain technology, we get the opportunity to execute Smart Contracts that will keep feet to the fire (if you want to cheat, you can, but this will tamp down the simplicity of cheating and give much greater accountability).

What I love the most about this: A single, immutable version of the truth. Those of us who have been in industry over the past half century would salivate for this concept.

The article puts a downer on the prospects for the advancement of digital technology in a digital age to an industry that seems hopelessly analog because of various caution points, correctly assessed:

The truth is that there are a lot of smart people out there that don’t understand what blockchain really is, or what it can be used for (the author certainly had this problem, and some people may argue that he still does). Worse yet, when one adds to these misunderstandings the somewhat dubious connection blockchains have to bitcoin, a certain percentage of people will automatically write it off as pure quackery.

So what percent of the CEO’s and boards composed of ancient yahoos who have no clue about the digital age and its possibilities can we write off as clueless?

The author also worries about the lingering perception and association of Blockchain and Bitcoin. Again pandering to the uninformed and those who time has passed by and should be playing golf, not making decisions:

those blockchain professionals committed to moving beyond bitcoin have to mount a public relations campaign that dispels misconceptions while positioning the technology as a true creator of supply chain value.

Again, realistic of the decision maker’s understanding and perspective.

Are we doomed to talk about this technology until it becomes boring to do so, and accept the way things are? How can this game-changing, cost-saving, and future-insuring technology be adopted, adapted and supported in a global industry? The author contributes his suggestion:

Closely related to the above points is that of marshalling the human capital necessary to create blockchain solutions that address real-world supply chain challenges. This might sound like a pedestrian task, but experience has shown that the bane of any supply chain software project is the disconnect between the “techies” and the “operators,” and how the inability to translate needs into code produces solutions that just don’t work very well. Due to blockchain’s complexities and relative newness, finding people that know how to write the code and that understand supply chain won’t be so easy.

Bottom line: We need a company that is committed to bringing together the best minds in supply chain and in blockchain technology, who can create the processes and protocols and then sell it to some suppliers around the world. Techies and groundies together changing the world.

We don’t need consortiums and conferences to adopt protocols and standardize technology-at least not now. What we need is someone who has the guts and money to set an example.

THAT I want to be part of. Jack Ma, Jeff Bezos, are you listening? OR anyone else who wants to start this next Big Bang. Call me if you have the courage to face the future.

LINK TO PAPER: ( https://info.amberroad.com/rs/665-BWT-776/images/Amber%20Road%20-%20Blockchain%20Supply%20Chain%20-%20Ghost%20in%20the%20Machine%20or%20Breakthrough%20Technology%20White%20Paper.pdf?mkt_tok=eyJpIjoiTUdNMU56Y3pNMkpsTURkbSIsInQiOiJYYjRiVFdsRCszcjd2Z2E5RXdxYnlBcSszaDNsXC8yS0lXY3F6eUZUZlVEcjhtaEtTTVZVZVJiMUtJK2llRUJxdWtNQ1F4eDVudmNzUXVGQWV5d1k3SVwvWU90TnVSZWRmNm5odW1neHNTXC9SdmxHdkEwUzZlWjVXbWVLam5qdEtZSCJ9)