Tag Archives: retailing

Ambition Or Greed Dotcom

When I soak in articles like this one on Amazon’s (the dotcom) vast and ever-growing empire I wonder about the difference between ambition and greed. I used to admire this company tremendously, founded by the singularly focused Jeff Bezos. But, for some reason, when Amazon expanded into retailing groceries my allegiance began to wane. Now that they’re also producing their own entertainment programming, and have their sticky fingers in hundreds of diverse pies, I think I’m starting to dislike and distrust this corporate behemoth. Amazon gave up being a pure retailer a while ago — now they produce original shows and movies; they host e-commerce and manage business services for many other corporations; they run all manner of marketplaces; they compete with distributors. The company does all of this very well.

And, yet.

When did Jeff Bezo’s ambition and that of his 150,000-plus employees — to deliver all manner of stuff so effortlessly and conveniently — morph into what increasingly seems like greed? Because, somewhere along this spectrum of acquisitiveness a noble ambition seems to have become a selfish one.

Oh, and as for the demanding, competitive, brutish workplace — the company seems to be doing nothing more than applying the same principles to its employees as it does from its data-driven retailing and distribution operation. Unfortunately, it seems to have lost sight — as do many companies — that employees remain stubbornly human.

From NYT:

On Monday mornings, fresh recruits line up for an orientation intended to catapult them into Amazon’s singular way of working.

They are told to forget the “poor habits” they learned at previous jobs, one employee recalled. When they “hit the wall” from the unrelenting pace, there is only one solution: “Climb the wall,” others reported. To be the best Amazonians they can be, they should be guided by the leadership principles, 14 rules inscribed on handy laminated cards. When quizzed days later, those with perfect scores earn a virtual award proclaiming, “I’m Peculiar” — the company’s proud phrase for overturning workplace conventions.

At Amazon, workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)

Many of the newcomers filing in on Mondays may not be there in a few years. The company’s winners dream up innovations that they roll out to a quarter-billion customers and accrue small fortunes in soaring stock. Losers leave or are fired in annual cullings of the staff — “purposeful Darwinism,” one former Amazon human resources director said. Some workers who suffered from cancer, miscarriages and other personal crises said they had been evaluated unfairly or edged out rather than given time to recover.

Even as the company tests delivery by drone and ways to restock toilet paper at the push of a bathroom button, it is conducting a little-known experiment in how far it can push white-collar workers, redrawing the boundaries of what is acceptable. The company, founded and still run by Jeff Bezos, rejects many of the popular management bromides that other corporations at least pay lip service to and has instead designed what many workers call an intricate machine propelling them to achieve Mr. Bezos’ ever-expanding ambitions.

“This is a company that strives to do really big, innovative, groundbreaking things, and those things aren’t easy,” said Susan Harker, Amazon’s top recruiter. “When you’re shooting for the moon, the nature of the work is really challenging. For some people it doesn’t work.”

Bo Olson was one of them. He lasted less than two years in a book marketing role and said that his enduring image was watching people weep in the office, a sight other workers described as well. “You walk out of a conference room and you’ll see a grown man covering his face,” he said. “Nearly every person I worked with, I saw cry at their desk.”

Thanks in part to its ability to extract the most from employees, Amazon is stronger than ever. Its swelling campus is transforming a swath of this city, a 10-million-square-foot bet that tens of thousands of new workers will be able to sell everything to everyone everywhere. Last month, it eclipsed Walmart as the most valuable retailer in the country, with a market valuation of $250 billion, and Forbes deemed Mr. Bezos the fifth-wealthiest person on earth.

Tens of millions of Americans know Amazon as customers, but life inside its corporate offices is largely a mystery. Secrecy is required; even low-level employees sign a lengthy confidentiality agreement. The company authorized only a handful of senior managers to talk to reporters for this article, declining requests for interviews with Mr. Bezos and his top leaders.

However, more than 100 current and former Amazonians — members of the leadership team, human resources executives, marketers, retail specialists and engineers who worked on projects from the Kindle to grocery delivery to the recent mobile phone launch — described how they tried to reconcile the sometimes-punishing aspects of their workplace with what many called its thrilling power to create.

In interviews, some said they thrived at Amazon precisely because it pushed them past what they thought were their limits. Many employees are motivated by “thinking big and knowing that we haven’t scratched the surface on what’s out there to invent,” said Elisabeth Rommel, a retail executive who was one of those permitted to speak.

Others who cycled in and out of the company said that what they learned in their brief stints helped their careers take off. And more than a few who fled said they later realized they had become addicted to Amazon’s way of working.

“A lot of people who work there feel this tension: It’s the greatest place I hate to work,” said John Rossman, a former executive there who published a book, “The Amazon Way.

Amazon may be singular but perhaps not quite as peculiar as it claims. It has just been quicker in responding to changes that the rest of the work world is now experiencing: data that allows individual performance to be measured continuously, come-and-go relationships between employers and employees, and global competition in which empires rise and fall overnight. Amazon is in the vanguard of where technology wants to take the modern office: more nimble and more productive, but harsher and less forgiving.

“Organizations are turning up the dial, pushing their teams to do more for less money, either to keep up with the competition or just stay ahead of the executioner’s blade,” said Clay Parker Jones, a consultant who helps old-line businesses become more responsive to change.

On a recent morning, as Amazon’s new hires waited to begin orientation, few of them seemed to appreciate the experiment in which they had enrolled. Only one, Keith Ketzle, a freckled Texan triathlete with an M.B.A., lit up with recognition, explaining how he left his old, lumbering company for a faster, grittier one.

“Conflict brings about innovation,” he said.

Read the entire article here.

Fast Fashion and Smartphones

google-search-teen-fashion

Teen retail isn’t what it used to be. Once dominated by the likes of Aeropostale, Abercrombie and Fitch, and American Eagle, the sector is in a downward spiral. Many retail analysts place the blame on the internet. While discretionary income is down and unemployment is up among teens, there are two other key factors driving the change: first, smartphones loaded with apps seem to be more important to a teen’s self identity than an emblazoned tee-shirt; second, fast-fashion houses, such as H&M, can churn out fresh designs at a fraction thanks to fully integrated, on-demand supply chains. Perhaps, the silver lining in all of this, if you could call it such, is that malls may soon become the hang-out for old-timers.

From the NYT:

Luring young shoppers into traditional teenage clothing stores has become a tough sell.

When 19-year-old Tsarina Merrin thinks of a typical shopper at some of the national chains, she doesn’t think of herself, her friends or even contemporaries.

“When I think of who is shopping at Abercrombie,” she said, “I think it’s more of people’s parents shopping for them.”

Sales are down across the shelves of many traditional teenage apparel retailers, and some analysts and others suggest that it’s not just a tired fashion sense causing the slump. The competition for teenage dollars, at a time of high unemployment within that age group, spans from more stores to shop in to more tempting technology.

And sometimes phones loaded with apps or a game box trump the latest in jeans.

Mainstays in the industry like Abercrombie & Fitch, American Eagle Outfitters and Aéropostale, which dominated teenage closets for years, have been among those hit hard.

The grim reports of the last holiday season have already proved punishing for senior executives at the helm of a few retailers. In a move that caught many analysts by surprise, the chief executive of American Eagle, Robert L. Hanson, announced he was leaving the company last week. And on Tuesday, Abercrombie announced they were making several changes to the company’s board and leadership, including separating the role of chief executive and chairman.

Aside from those shake-ups, analysts are saying they do not expect much improvement in this retail sector any time soon.

According to a survey of analysts conducted by Thomson Reuters, sales at teenage apparel retailers open for more than a year, like Wet Seal, Zumiez, Abercrombie and American Eagle, are expected to be 6.4 percent lower in the fourth quarter over the previous period. That is worse than any other retail category.

“It’s enough to make you think the teen is going to be walking around naked,” said John D. Morris, an analyst at BMO Capital Markets. “What happened to them?”

Paul Lejuez, an analyst at Wells Fargo, said he and his team put out a note in May on the health of the teenage sector and department stores called “Watch Out for the Kid With the Cough.” (Aéropostale was the coughing teenager.) Nonetheless, he said, “We ended up being surprised just how bad things got so quickly. There’s really no sign of life anywhere among the traditional players.”

Causes are ticked off easily. Mentioned often is the high teenage unemployment rate, reaching 20.2 percent among 16- to 19-year-olds, far above the national rate of 6.7 percent.

Cheap fashion has also driven a more competitive market. So-called fast-fashion companies, like Forever 21 and H&M, which sell trendy clothes at low prices, have muscled into the space, while some department stores and discount retailers like T. J. Maxx now cater to teenagers, as well.

“You can buy a plaid shirt at Abercrombie that’s like $70,” said Daniela Donayre, 17, standing in a Topshop in Manhattan. “Or I can go to Forever 21 and buy the same shirt for $20.”

Online shopping, which has been roiling the industry for years, may play an especially pronounced role in the teenage sector, analysts say. A study of a group of teenagers released in the fall by Piper Jaffray found that more than three-fourths of young men and women said they shopped online.

Not only did teenagers grow up on the Internet, but it has shaped and accelerated fashion cycles. Things take off quickly and fade even faster, watched by teenagers who are especially sensitive to the slightest shift in the winds of a trend.

Matthew McClintock, an analyst at Barclays, pointed to Justin Bieber as an example.

“Today, if you saw that Justin Bieber got arrested drag-racing,” Mr. McClintock said, “and you saw in the picture that he had on a cool red shirt, then you can go online and find that cool red shirt and have it delivered to you in two days from some boutique in Los Angeles.

“Ten years ago, teens were dependent on going to Abercrombie & Fitch and buying from the select items that Mike Jeffries, the C.E.O., thought would be popular nine months ago.”

Read the entire story here.

Image courtesy of Google Search.

Retailing: An Engineering Problem

Traditional retailers look at retailing primarily as a marketing and customer acquisition and relationship problem. For Amazon, it’s more of an engineering and IT problem with solutions to be found in innovation and optimization.

From Technology Review:

Why do some stores succeed while others fail? Retailers constantly struggle with this question, battling one another in ways that change with each generation. In the late 1800s, architects ruled. Successful merchants like Marshall Field created palaces of commerce that were so gorgeous shoppers rushed to come inside. In the early 1900s, mail order became the “killer app,” with Sears Roebuck leading the way. Toward the end of the 20th century, ultra-efficient suburban discounters like Target and Walmart conquered all.

Now the tussles are fiercest in online retailing, where it’s hard to tell if anyone is winning. Retailers as big as Walmart and as small as Tweezerman.com all maintain their own websites, catering to an explosion of customer demand. Retail e-commerce sales expanded 15 percent in the U.S in 2012—seven times as fast as traditional retail. But price competition is relentless, and profit margins are thin to nonexistent. It’s easy to regard this $186 billion market as a poisoned prize: too big to ignore, too treacherous to pursue.

Even the most successful online retailer, Amazon.com, has a business model that leaves many people scratching their heads. Amazon is on track to ring up $75 billion in worldwide sales this year. Yet it often operates in the red; last quarter, Amazon posted a $41 million loss. Amazon’s founder and chief executive officer, Jeff Bezos, is indifferent to short-term earnings, having once quipped that when the company achieved profitability for a brief stretch in 1995, “it was probably a mistake.”

Look more closely at Bezos’s company, though, and its strategy becomes clear. Amazon is constantly plowing cash back into its business. Its secretive advanced-research division, Lab 126, works on next-generation Kindles and other mobile devices. More broadly, Amazon spends heavily to create the most advanced warehouses, the smoothest customer-service channels, and other features that help it grab an ever-larger share of the market. As former Amazon manager Eugene Wei wrote in a recent blog post, “Amazon’s core business model does generate a profit with most every transaction … The reason it isn’t showing a profit is because it’s undertaken a massive investment to support an even larger sales base.”

Much of that investment goes straight into technology. To Amazon, retailing looks like a giant engineering problem. Algorithms define everything from the best way to arrange a digital storefront to the optimal way of shipping a package. Other big retailers spend heavily on advertising and hire a few hundred engineers to keep systems running. Amazon prefers a puny ad budget and a payroll packed with thousands of engineering graduates from the likes of MIT, Carnegie Mellon, and Caltech.

Other big merchants are getting the message. Walmart, the world’s largest retailer, two years ago opened an R&D center in Silicon Valley where it develops its own search engines and looks for startups to buy. But competing on Amazon’s terms doesn’t stop with putting up a digital storefront or creating a mobile app. Walmart has gone as far as admitting that it may have to rethink what its stores are for. To equal Amazon’s flawless delivery, this year it even floated the idea of recruiting shoppers out of its aisles to play deliveryman, whisking goods to customers who’ve ordered online.

Amazon is a tech innovator by necessity, too. The company lacks three of conventional retailing’s most basic elements: a showroom where customers can touch the wares; on-the-spot salespeople who can woo shoppers; and the means for customers to take possession of their goods the instant a sale is complete. In one sense, everything that Amazon’s engineers create is meant to make these fundamental deficits vanish from sight.

Amazon’s cunning can be seen in the company’s growing patent portfolio. Since 1994, Amazon.com and a subsidiary, Amazon Technologies, have won 1,263 patents. (By contrast, Walmart has just 53.) Each Amazon invention is meant to make shopping on the site a little easier, a little more seductive, or to trim away costs. Consider U.S. Patent No. 8,261,983, on “generating customized packaging” which came into being in late 2012.

“We constantly try to drive down the percentage of air that goes into a shipment,” explains Dave Clark, the Amazon vice president who oversees the company’s nearly 100 warehouses, known as fulfillment centers. The idea of shipping goods in a needlessly bulky box (and paying a few extra cents to United Parcel Service or other carriers) makes him shudder. Ship nearly a billion packages a year, and those pennies add up. Amazon over the years has created more than 40 sizes of boxes– but even that isn’t enough. That’s the glory of Amazon’s packaging patent: when a customer’s odd pairing of items creates a one-of-a-kind shipment, Amazon now has systems that will compute the best way to pack that order and create a perfect box for it within 30 minutes.

For thousands of online merchants, it’s easier to live within Amazon’s ecosystem than to compete. So small retailers such as EasyLunchboxes.com have moved their inventory into Amazon’s warehouses, where they pay a commission on each sale for shipping and other services. That is becoming a highly lucrative business for Amazon, says Goldman Sachs analyst Heath Terry. He predicts Amazon will reap $3.5 billion in cash flow from third-party shipping in 2014, creating a very profitable side business that he values at $38 billion—about 20 percent of the company’s overall stock market value.

Jousting directly with Amazon is tougher. Researchers at Internet Retailer calculate that Amazon’s revenue exceeds that of its next 12 competitors combined. In a regulatory filing earlier this year, Target—the third-largest retailer in the U.S.—conceded that its “digital sales represented an immaterial amount of total sales.” For other online entrants, the most prudent strategies generally involve focusing on areas that the big guy hasn’t conquered yet, such as selling services, online “flash sales” that snare impulse buyers who can’t pass up a deal, or particularly challenging categories such as groceries. Yet many, if not most, of these upstarts are losing money.

Read the entire article here.

Image: Amazon fullfillment center, Scotland. Courtesy of Amazon / Wired.