ETD: 864 Dell Lessons; American Paper Optics - Holiday Specs;
Federated Buys May
E-Tailer's Digest
etd_post at gapent.com
Tue Mar 1 12:20:36 GMT 2005
E-Tailer's Digest --- Everything for the Retailer
Issue #0864 March 1, 2005
George Matyjewicz, Moderator mailto:georgem at gapent.com
Published by: GAP Enterprises, Ltd. http://www.etailersdigest.com
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CONTENTS
[1] Greetings
[2] Dell Lessons
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[3] American Paper Optics - Holiday Specs
[4] Federated Buys May
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[1] Greetings.
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Hi All:
I read a very interesting article about the success of Dell in Fortune
Magazine, which got me to thinking about the lessons we should all learn
from Dell and other successful companies. While Dell's gross margin is
lower than the competition, their net is higher. Time to rethink your
processes to see where you can eke out profits.
The Federated/May deal has been approved by both boards and now awaits
Justice Department approval. IMHO, the merger merely brings together two
struggling companies that will become one larger struggling company. Sure,
they will gain some efficiencies with better buying power, consolidations,
and product lines. However, they still lack the one thing that will make
them successful - differentiation! Why buy at one of their stores? What
makes them different? They are neither low-prices big box stores nor are
they premiere, full-service stores. What will drive success? What do you
think?
In another similar note, Toys R Us has narrowed the field down to four
candidates who are offering to buy them out. Now here's an example of how
a speciality store blew it and let the competition run away with their market.
List member Tom Hockaday tells us about American Paper Optics - Holiday
Specs, a great retailing opportunity, which will remain for posterity at
our "Members: Who Are You?" site. This is a courtesy to our members who
contribute to our forum, and not merely a way to advertise for
free. Anything to do with the retail world, i.e., supplier, retailer,
consulting, etc. http://etailersdigest.com/resources/members/index.htm And
we have a form there for you to tell us about you. As I said when I first
proposed this idea, we have "known" each other for a long time, yet we
often don't know anything about each other. So, tell us who you are and
what you do.
Now, let's get to everything for the retailer.
Sincerely
George Matyjewicz, PhD
Chief Global Strategist, GAP Enterprises, Ltd.
mailto:georgem at gapent.com
http://www.etailersdigest.com
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[2] Dell Lessons
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Fortune Magazine has an interesting article about Dell Computer - the #1
computer company. When Dell started 21 years ago, IBM was #1 and H.P. was
#3. The leader in the PC market was a $1.1 billion company called Commodore.
Dell's gross margin of 18% is actually lower than IBM's and HP's, because
Dell is generally selling lower-margin machines. However, Dell's net
margin is 6%, while the others are close to 1%. This is due to Dell's
operating expenses—e.g., selling, general and administrative—are so low, a
direct result of the cost-effectiveness of selling directly to customers
rather than through a middleman.
A fundamental difference between Dell and the competition is that at Dell,
every single machine is made for a specific order. The others are producing
machines to match a sales forecast. The advantages that Dell derives from
this model on the factory floor are tangible and enormous. For instance,
Dell now carries only four days of inventory, while IBM has 20 days and HP
has 28. Obviously, low inventory frees up mountains of cash for Dell that
is otherwise tied up at IBM and HP. Dell urges its suppliers—everyone from
drive makers to Intel—to warehouse inventory as close to its factories as
possible. Any cost that can be "shared with" (read "transferred to") those
suppliers, is. (Does that remind anyone of a certain large retailer
headquartered in Bentonville, Ark.?) Pay a visit to a Dell plant and you
can watch workers unload a supplier's components almost right onto the
assembly line.
All this is reflected in one eye-catching statistic: In 1998, Dell produced
$745,000 of revenue per employee. Now, seven years later, the company does
$900,000 of sales per employee (HP comes in at $540,000).
How can you benefit from this? Like Dell, you should keep your inventory
as low as possible. The more you turn inventory, the more profitable you
are. And watch the expenses. Figure out better ways to do the job, and
cut expenses. Invest in technology to improve operations. The bottom line
is most important.
George
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[3] American Paper Optics - Holiday Specs
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American Paper Optics - Holiday Specs is the worlds largest manufacturer of
3D glasses. If you have seen Shrek 1/2 or Santa -vs- the Snowman you have
seen our product.
Our retail lines consists of Holiday Specs, Happy Eyes, X-Ray Spex and 3D
Fireworks glasses. Holiday Specs are used for viewing Christmas lights,
they transform every light into a holographic image. Images are Santa,
Snowman, Christmas Star, Fluttering Angels, Jingle Bells and Snowflake.
Happy Eyes are our everyday line and contain Hearts, Stars, USA, Happy
Birthday, Good Luck and Smiley Face. The X-Ray Spex are those glasses you
remember from the back of comics in the 70's - and yes they do work and are
a great gag gift.
The benefit of selling Holiday Specs, Happy Eyes, X-Ray Spex and 3D
Fireworks glasses is the profit margin you will achieve.
Because they are so popular that a store will usually sell out of their
display and reorder and sell out of those too.
The benefit to someone who wears a pair of the glasses is the "Awe and
wonder" the give you as you experience the holographic images they produce.
Our products are patented and we are the exclusive licensee of the technology.
Call Tom at 800-767-8427 to place an order and to get your pricing
questions answered. Or visit www.holidayspecs.com or
www.3dglassesonline.com or retail at 3dglassesonline.com
Tom Hockaday
Director of Retail Marketing
American Paper Optics - Holiday Specs
3080 Bartlett Corporate Drive
Bartlett, TN 38133
800-767-8427
901-381-1517
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[4] Federated Buys May
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In a landmark deal that may well be the last stand for department-store
retailing, No. 1 chain Federated Department Stores Inc. has agreed to buy
longtime rival and No. 2 May Department Stores Co. for $11 billion, the two
companies said Monday.
Federated, the parent of Macy's and Bloomingdale's, will pay $35.50 a share
in cash and stock to buy May, whose stores include Marshall Field's, Lord &
Taylor and Filene's. Under the terms of the deal, each share of May will be
converted into the right to receive $17.75 a share of cash and 0.3115
shares of Federated stock. Both boards have approved the deal, which will
create a national colossus of nearly 1,000 department stores. Federated
will also assume $6 billion in May debt.
While the Federated-May deal combines the two biggest players in the
business, it also underscores the dire condition of department-store
retailing, a way of doing business that dates from the 19th century.
Squeezed by big-box retailers like Wal-Mart Stores Inc. on the low end and
upscale stores like Neiman Marcus Group Inc. on the high end, the sector
has been losing market share consistently since the early 1980s.
In the short term, analysts expect the combination to bring big
efficiencies to both companies. May fills important gaps in Federated's
national presence, particularly in the Midwest, through the Marshall
Field's chain, and in Texas, with the Foley's chain. Marshall Field's famed
Chicago store adds to Federated's already impressive collection of retail
flagships, including the Macy's location in New York, the world's largest
department store. Divestitures are expected, however, particularly in the
94 malls where the two retailers both maintain locations.
The deal, meanwhile, will put pricing pressure on the apparel companies
that supply both chains, while giving the new parent more clout with the
landlords who control and develop the nation's shopping malls.
In the longer term, the combination places a bold bet on the survival of
department-store retailing in the U.S., which harks back to an age when
every American city of any size had a family-owned regional department
store downtown, with revolving doors and fancy December window displays.
During the past two decades, department stores have steadily lost market
share in nearly every category. Market share of men's apparel sold through
department stores fell to 38% last year from 70% in 1982, according to
market researcher Service Industry Research Systems Inc. In the same
period, women's casual apparel dropped to 35% from 75% and children's
apparel to 36% from 64%.
The shrinking might of department stores has been partly self-inflicted.
Once purveyors of many goods, they began focusing on clothes in the 1980s,
hoping to capitalize on women's need for new wardrobes as they entered the
work force. But many shoppers found department stores time-consuming and
tiresome, making their higher prices even harder to swallow. Ambience and
service have been consistently reduced to boost bottom lines. And their
status as fashion leaders has been steadily eroded by mass marketers like
Target Corp. and Kohl's as they get better at offering the latest styles at
low prices.
Whether a combined Federated and May can overcome these challenges and
revive the whole sector remains to be seen. While a bigger entity is
certain to enjoy significant cost efficiencies in buying, real estate and
advertising in the near future, longer-term growth could be more elusive,
as the broader retailing landscape will still inflict the same competitive
pressures.
Details at...
http://online.wsj.com/article/0,,SB110954537749165299,00.html
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