Category: Retailing

Mighty Falling

Management, Retailing

Back when I were a young (!) data analyst and retail specialist at The Great Big Research Company, one of my minor clients was Walgreens Drug Stores.  (I say “minor” only because I was reporting only on the grocery section of the stores, and not the Rx or even the over-the-counter (OTC) drug or general merchandise products.)

Anyway, I became very friendly with one of the execs, and in one of our conversations she let slip that at that point in time, Walgreens had never — not ever in the history of the company — failed to make a quarterly dividend payment to shareholders.  I checked on that, and she was correct.  So a couple of years later, once I’d left Nielsen and was managing my own 401k account, I purchased a bunch of Walgreens shares and watched the dividend payments roll in, reinvesting them back into the business for several years.

Then one day I was driving to the local mall, and something stuck in my brain on the way there.  I couldn’t figure it out because that’s the nature of such things;  but on the way home I figured out what it was.

On the short five-mile trip between the mall and home, I had passed six Walgreens outlets.  And all my old retailer instincts came to the fore:  Walgreens was, in the industry parlance, over-stored.  Granted, this was in Greater Chicago (Chicagoland), where Walgreens’ head office was located, but still…

A short time later I sold all my WAG shares (at a very handsome profit).

Of course, all that was back when dinosaurs roamed the Earth, but I note this recent development (as shared by Reader Mike L.) with interest:

Walgreens is set to close a substantial number of its roughly 8,600 locations across the United States as the company looks to reset the struggling pharmaceutical chain’s business.

CEO Tim Wentworth said on a call with analysts Thursday that “changes are imminent” for the roughly 25% of stores that aren’t profitable and Walgreens’ strategic review will “include the closure of a significant portion of these underperforming stores.”

“We are at a point where the current pharmacy model is not sustainable and the challenges in our operating environment require we approach the market differently,” he said.

Okay, fine,  This can and does happen to many a business.  But there’s a wrinkle:

Wentworth said the closures would focus on locations that aren’t profitable, too close to each other or stores struggling with theft.

The first two phenomena are common, while the third… well, let’s just say that unless I miss my guess (but I doubt that I do) a whole bunch of inner-city Walgreens outlets are going to be boarded up because of undocumented product movement.  And those areas are going to become not only “food” deserts, but “medication” deserts as well.  (The other kind of “medications” are firmly established there, of course.)

And by the way, Wentworth is a seriously smart cookie — unlike so many other corporate CEOs of recent vintage — so if he can’t get the existing show to work, it’s a safe bet that nobody in the industry can.

Ripoff?

Business, Economics, Retailing

Let’s say you went into a little seaside diner feeling peckish, and saw that they had a menu item that read:  “2 slices of buttered toast”.

Sounds okay, yes?  (I’m going with “normal-person peckish” and not “American peckish” which would apparently require the entire loaf to satisfy that hunger pang.)

Then you see the price:  $5.00 for the two slices of buttered toast.

Ripoff?  Let’s analyze the thing.

I’m going to give the diner the benefit of the doubt here, and allow their claim that this isn’t Wonderbread and store-label butter, but a “premium” offering.  I’m also, for the purpose of the analysis, going to allow that they purchased the ingredients thereof at retail prices (they didn’t).

Our diner, by the way, would be located in the equivalent of coastal Florida, up in the Redneck Riviera.

So using my local gourmet store (Central Market) as a price guide, let’s look at the thing:

Let’s see what the unit cost is.  Assuming you’re doing thick-ish (e.g. “not-quite-Texan”) slice size, you’re going to get about 16 slices out of that loaf, assuming that we discard the ends, of course.  So: $5 / 16 = 31.25 cents ($0.3125) per slice; or 62.5 cents in total for the two.

Now the butter:  even assuming you slather the butter on like I typically do, you’re still going to use about 1/32oz per slice, ergo ending up with (8x 32 = 256;  398 / 256 = about 1.5 cents per slice or 3 cents for the menu item.

Total “cost”:  (31.25 + 1.5) x 2 = 65.5 cents ($0.655) for the two slices of buttered toast.

Now for the tricky bit.

Restaurants, from back when I still managed one, typically have had to mark up “cost” by 600% just to break even.  (Don’t even get me started on whether that’s the case in NYfC or Califuckingfornia:  it isn’t.)  This takes into account fixed overhead like salaries, supplies & equipment, utilities, real estate and so on (i.e. what it costs your diner each day before you get a single customer in the door).

So the extended cost of that 2-slice item works out to (errr carry the six) $3.93, before adding a single penny for gross profit. (And just so we’re clear:  $5 from $3.93 represents about 27% gross profit — I know, don’t make me laugh.)

Is $5, therefore, a total ripoff?

Not from where I stand, and this kind of analysis explains why you have to take your bank manager along to 5 Guys every time you visit them to get you and your wife a burger.

Here’s the article that prompted this post.

And Fuck Joe Biden, because about three years ago that $5 loaf of bread at Central Market used to cost $2.85, and the $4 butter about $2.75 (because I keep track of this kind of thing, even though the Gummint would prefer that I forget that the chocolate ration used to be 5 grams and not three).

[/Orwell]

Small Wonder

Morons & Idiots, Retailing

The last time I was in an office supply retail store (Staples, Office Depot etc.) was shortly before I took down my consultant’s shingle and beat a client to death with it.

A frequent customer of such establishments, therefore, I am not.

So when New Wife asked me to swing by one and buy a half-dozen plastic clipboards while she was doing the laundry, I obliged with pleasure.  Here’s the item under discussion:

I know, we could just have bought the things from Satan’s Warehouse Amazon, but they were needed urgently, i.e. the next day, so we would have to buy at full retail.  But the price stuck in my mind, because that meant that the clipboards would price out at just over a couple of bucks each.

So I went over to Staples, who had the product not at all, nay even unto other colors.  “Maybe next week?” was the helpful response from the stock clerk of whom I made the request.

No big deal:  this is America, land of choices sufficient to make you puke.  So pausing only to knee the surly peasant in the groin, I went over to Office Depot, literally across the road.

Okay, they didn’t have any blue ones in stock (school uniform color, in case you’re interested).  But they did have clear ones which, when I checked with Herself, were judged “satisfactory” albeit grudgingly.

But no price in the shelf, so I grabbed a passing flunky by the ear and told him to scan the UPC code with his little scanner thingy, which he did after only a little moaning.

Then he told me the price of the piece of plastic with tin clip up top:

Thirteen (13) U.S. dollars… EACH

…and then it was my turn to do the moaning.

Fucking hell.  If a piece of mass-produced-made-in-China shit can cost in-store what can be purchased online at one-sixth of the price, something is wrong somewhere.  It could be the office supply store’s pricing policy, it could be the cost of shipping, it could be that the price was entered into the store’s price file at 10x the intended (that added decimal place matters, you know), it could be any number of things.

Anyway, New Wife was as appalled as I was, the teachers will just have to settle for something other than a blue plastic clipboard, and I’m sure that Office Depot’s fire insurance policy can replace the store… or not, I don’t care.

Because it will be another decade before I bother to set foot inside one of them again.

Search String

Entertainment, Retailing

Here’s an interesting thing.  The other day I was asked by an old friend from Seffrica where she could find one of my novels on Amazon, so I just told her to do a search for “Kim du Toit Prime Target” on their website.  Here was the search result:

Errrr what?

Puzzled, I tried one of the other novels:

No problem there… and likewise for all the other works I’ve published at Amazon.

Then I tried again, using just “Kim du Toit” as the search string, and lo and behold, they all showed up, including Prime Target:

Of course, trying to reach anyone at Amazon who could look at the problem is like trying to decipher the U.S. tax code at IRS.gov: opaque,  impossible and misleading.  Amazon must be the least-friendly organization on the planet when it comes to this kind of thing.

Anyway, here’s the link to Prime Target, in case anyone is still interested in a story about a government agency spying on U.S. citizens’ private data.

Working Towards Extinction

Business, Retailing

In this post at Insty’s  which discusses how San Francisco retailing is going down the rat-infested tubes, Stephen Green opines:

The future of shopping in America’s Democrat-run cities will eventually evolve into the Soviet model of paying a clerk first at one counter, then waiting for your goods to be delivered at the next counter. Shoppers won’t be allowed near any of the merchandise. But that’s what happens when you elect Soviet-minded politicians.

Our remaining advantage over the Soviet model is that enough of America still works that there are goods behind the counter.

So far.  But the Communists in the Democratic Socialist party are working hard to create the other reality — you know, the one where the State ends up owning the means of production and pretends to pay people while people pretend to work. [/Stalinism]