Competition is GOOD!

Competition

I just saw an American Express ad on TV urging its members to do business with small, local businesses and not just the mega corporations.  Awww....it's that nice of them, looking after the little guy like that?  How sweet.  What's that....ulterior motive?  Why yes, yes they do.

This reminded me of a conversation I had with a high-up-the-ladder marketing guy with Lowe's a few years ago.  He told me that consumers had the impression that, because of their volume, Lowe's (and Home Depot) received better pricing from appliance manufacturers than the smaller local retailers.  He said that was not true, and that they in fact paid a bit more.  I asked why that was?

He told me that the two large box stores combined already accounted for something like 50% of all appliance sales.  The appliance manufacturers understood that if they allowed the small retailers to disappear, and Lowe's and HD had it all to themselves, the two big boxes would effectively OWN the appliance makers.  They would bark "jump", and the manufacturers would have to reply, "how high, sir?"  Therefore they gave the small retailers a slightly better price to keep them competitive and in business. 

Until recently American Express was the only credit card the giant members-only store Costco accepted.  Ten percent of all Am Ex cards were issued thru Costco, and 20% of Am Ex total loan portfolio was with Costco.  Feeling like they had the power to pull American Express's strings, Costco demanded that Am Ex cut their processing fee and raise their rewards program, both benefitting Costco and hurting Am Ex.  

American Express realized the folly of having too many of their eggs in one basket and bid Costco adieu.  Now they're trying to boost their business with thousands of small retailers so as to never be held hostage like that again.  And that's, as Paul Harvey would say, "The rest of the story."

So with this in mind, please tell me why we let the Big Six banks (JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley) control roughly half of all American banking, with the other half divided up among roughly 6,000 "others"?  Tell me again why we shouldn't break up the Big Six?

Who do YOU bank with?

S

Not sure what to think of this one....

Sacre bleu!

I read in ze news that the French Senate has unanimously passed a bill that says online booksellers (read: Amazon) can offer consumers either a 5% discount or free shipping, but not both.

My first reaction was, "Why would the French government not want their constituents to get the best deal they could?"  Why, that's just downright un-American!  Umm....wait....

But then I realized they're just trying to keep the smaller booksellers from going out of business.  They're just trying to save jobs.  Hmmm...

But....but....free enterprise....the market....   

It's a real conundrum for sure.  Of course entrepreneurs should be encouraged to bring their new ideas to market.  What if the old school had tried to stifle Thomas Edison or Henry Ford or Steve Jobs?  But at some point you have to wonder how far this should go.  

It's one thing to keep the competition on their toes, but if pricing becomes so predatory (prices so low, sometimes at or even below cost....at least until they get a near-monopoly) they force the smaller competitors out of business entirely, is this really in the consumers best interest?

I think we're now seeing that airline consolidation in America is going to work against the consumer.  (Check fares on the "low cost" carriers.  They're not so low any more.)  It will be great for the airlines and their stockholders, but consumers will pay more.

And now that just 5 big banks control the majority of the banking biz, do you see yourself getting better service or lower fees?  When is the last time you got a free toaster from a hungry bank wanting to gain market share?  Their attitudes sure changed, didn't they?

Major appliance manufacturers are worried, too. That's why, contrary to popular opinion, the big box retailers (Home Depot, Lowe's) do NOT get better wholesale pricing than the mid-sized retailers.  They know that if the big boxes get better pricing and put the smaller guys out of business, then the 2 boxes will in effect "own" the manufacturers.  The manufacturers don't want to lose control.

So more competition is good.  The government should just butt out and let the market do it's thing.  And less competition is bad.  The government should step in and make sure the big don't get too big.  (Don't kid yourself.  Our anti-monopoly regulators are not at all pro-active.)

DOH!  See, conundrum.  We don't live in a black or white world anymore.  Think about it.

S

I think I would make a fine King

Here is the new King of the Netherlands, King Willem-Alexander, shown with his mother, Queen Beatrix, who officially abdicated her throne yesterday so her son could have a go at it.  The papers said for years there had been some quiet concerns that Willem-Alexander, who was seen as a bit lazy, wouldn't be up to the rigors of being a reigning monarch. 

Come to think of it I do sorta see the resemblance.

Somebody help me out here....what exactly does a Dutch King do?  I'm thinking maybe attend a few ribbon cuttings, dedicate the reclamation of another few acres from the North Sea now and then, officially declare the opening of Tulip Week, make a trip to the airport every once in a while when a VIP comes through....what else? 

If it turns out Willem can't hack it, I'm available.  ;)

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When the temperature starts creeping up, and when I see Home Depot ads like this ^ , I remember why I'm a home builder living in an apartment.  And that's just page one.

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Some days I think it's probably a curse to have a logical mind. Every day I see and hear things and I wonder, "What were they thinking?"  I spend so much time shaking my head in disbelief I'm afraid I'll someday give myself a whiplash.

S

What goes around comes around

I heard just yesterday that a store in Australia will soon institute a $5 "cover charge" to come in and look around.  They say they are trying to discourage people from coming in and trying out whatever it is they sell, then going home and ordering it online.  (If you do buy from them the retailer credits back to you your $5 cover charge.)

Interesting.  I can imagine their frustration with people like ME who look locally, but often buy online.  Not always though....I'll buy locally if the difference is just a few bucks, but for 30% or 40% difference, it's Amazon here I come!

But here's why I don't feel guilty about doing that: The big stores that I shun to order online are generally the same big national stores that blew into town 10-20 years ago and put all the local mom-and-pop stores out of business.  Seems to me they're now getting a taste of their own medicine.  To me this is just retail evolution.

Home Depot didn't shed any tears when they put Plaza Hardware out of business.  Nor did Best Buy show any remorse when they pretty much destroyed Hollingshed's Appliance.  Same with Walgreen's and CVS as they shuttered Payne's Drug Store.  And who killed Larry's Shoes, and do I have to say anything at all about all those little guys Walmart squashed?

Some things I won't buy online or from a catalogue.  Pottery Barn and Restoration Hardware both send me a very nice catalogue several times a year full of their new offerings.  I've found their furniture to be of commendable quality, but how do you buy a chair, for example, without sitting on it first?  I don't care what it looks like if it doesn't pass my butt test.

Shoes....I've found that even within the same brand line, shoes can feel different.  I want to try them on in a store and see if a particular style is all-day comfortable.  If so, then it's time to check Zappos, may the best cut-throat mega-retailer win.

And now a plug (unfortunately uncompensated) for my all-time favorite online retailer, LL Bean.  I've just replenished through them my summer wardrobe....3 pair of chino shorts, 3 very nice polo shirts, and 5 (various colored) t-shirts.  And if something is wrong, they make it right, no arguments.  Can't beat that!

If I was a big brick-and-mortar retailer, I'd be scared.  VERY scared.

S

It's "Small Business Saturday"

I don't know where the idea came from, but I like it.  

Today we're encouraged to make a special effort to do business with the mom-and-pop small merchants instead of the giant national big-box retailers in our area.  The trick is to find one.  I don't know how things are in smaller towns or rural areas, but here in the Big City they're becoming as rare as hen's teeth.

Back in the late 1950's-early '60's when I was in my "yout" that's pretty much all we had.  Mom bought her dresses at Stern's, while I was outfitted by Ken's Mans Shop and The Varsity Shop.  Dad shopped at Jas K. Wilson.

The toy store was M. E. Moses.  Hardware was available from Plaza Hardware.  (I worked there as a kid assembling and repairing Schwinn bikes and Lawn Boy and Toro lawnmowers.  I learned about tools there, too.)  The pharmacy was Payne's Drug Store.  If you wanted a casual meal out you went to Harris Restaurant or to the Plaza Cafeteria and saw Mr. & Mrs. Padgett.  Want a hamburger?  Try Lindy's drive-in.  Need a new car?  Go see Ken Pruitt (Buick) or Mr. Jackson (Chevy).

Mr. Tedford owned the Enco station (now Exxon) and would always wash your windshield and check your oil while filling your tank.  We got our furniture and appliances from Hollingshead's, and our tires from Shugart's.  That's just the way things were back then.  You bought from your neighbors.  They knew you and went out of their way to make you happy. It was called "customer service".

Today we have Walmart and Target, Macy's and Toys R Us, Home Depot and Walgreen's, Chili's and the Sonic Auto Group.  Need gas?  Just swipe your card at the pump.  (A complete stop is still required.)  The "owner" is usually in a far-away city somewhere looking at a spreadsheet, and the "manager" was a senior in high school last month.  Neither knows your name.  Or cares.

I understand "economies of scale".  I know we have many, many more choices at much lower prices today than we had back in those days, but something deep inside me says we've lost a whole lot, too.  If you can still find a small local business where you live, go buy something from them today. (Maybe again tomorrrow, too?)  Spend an extra buck or two.  It won't hurt you, and it will mean a lot to them.

S