« October 2006 | Main | December 2006 »

November 26, 2006

A store fit for a Count?

OUTSIDE DALLAS, TX -- I find myself in Dallas this evening to have dinner with Gu, a high-school friend down here. Meanwhile, as I sit in a Hertz-rented Taurus outside a suburban restaurant, my mind turns to the Wal-Mart test store, some 18 miles north of here in Plano. I'm nearly giddy with excitement for this super high-end Wal-Mart that promises, among other things, some good wine. As the Washington Post relates:

And in the long, long aisle that is the wine department, there are four bottles of La Mondotte 1999 Comtes de Neipperg selling for $557.47 each. They are on a short, kiosk-type wooden shelf near an aisle-long cooler of beer. (The good beers, but also the bad.) On the other side there's a '98 Dom Perignon ($145.37), and several other wines in the $100 to $300 range.

You could just stand and watch the La Mondotte all day, as people discover it, and give it a brief gaw. Many of them are actually looking for it, having seen it on TV during a flurry of opening-day coverage. ( Y'all hear about that $500 bottle of wine they got at that new Wal-Mart in Plaaano?) Mothers forbid the picking up or fondling of it -- "Don't you put your hand on it," one scolds her kid. Friends giggle over it. A teenage girl reads the label intently and informs her mother that it's French.

But nobody is a hick about it. Nobody in the high-end Wal-Mart passes judgment on it, or haughtily proclaims that no wine is worth $557. They admire it and continue their shopping as if it had always been there.

I wonder if Count Stephan von Neipperg, the dapper nobleman of St Emilion, would be proud that his wine is in a Wal-Mart?

(Here is a picture of Count Stephan in his cellar, and scroll down here for notes from our visit to his main winery, Ch Canon La Gaffeliere.)

And what about all these people thinking a 1999 La Mondotte is actually worth $557.47? Wal-mart may have the lowest prices for Franco-American Spaghetti O's, but 1999 La Mondotte can be just as easily had for $270 at Sherry-Lehmann in New York City.

I'm still looking forward to the visit, even if the wine is insanely overpriced.

UPDATE (a few hours later): All the hype about this special Wal-Mart is really over-done. Basically Wal-Mart has sprinkled a few high-end items into their usual assortments, decluttered the store, added some wood floors, and changed the fixturing/signage. (The fixturing is now about 7' high and not as wide/deep.) It's like Wal-Mart's attempt to turn their usual 200,000-square-foot box into a Target. That's a ringing endorsement of Target's strategy, but I'm not sure that it'll work for Wal-Mart.

The biggest problem with the new Wal-Mart is actually the decluttering. The typical Wal-Mart is only slightly less cluttered than a flea market, with product stacked in the aisles, dropped on warehouse pallets in the middle of the racetrack, hanging on dozens of clip-strips hanging from the Lozier (shelving), and in just about every spare inch of usable real estate. That's how Wal-Mart drives both high margin impulse purchases as well as off-loads billions of dollars in excess inventory every year. Here's how it works: a manufacturer (let's say Franco-American) is falling short of their quarterly sales goal and needs to off-load a few million cans of Spaghetti-O's. Only Wal-Mart is big enough to take all this inventory, so they buy it at a fire-sale price, since Franco-American needs to unload the inventory this quarter and "make the numbers." (This irrational inventory management then puts the manufacturer into a sales hole at the start of the next quarter, but this is a topic for another day.) Each Wal-Mart then gets a pallet or two of Spaghetti-O's, far more than they could stock on the shelves or sell in a short time. Thus the pallet gets dropped wherever there's room on the racetrack with a big "$1 rollback" sign. Meanwhile, people who never go down the processed spaghetti aisle notice the great price and pick-up a few cans as impulse buys at a very good price.

In a way, everyone benefits from the cluttered store, most especially Wal-Mart. The consumer gets a great price and the manufacturer quickly gets rid of excess inventory. Wal-Mart drives average check higher, gets additional margin, and burnishes its image as the price leader. Meanwhile, store operating costs are low because it's cheap to drop a pallet in the middle of the store rather than stock shelves.

The grocery section of the new Wal-Mart has not a single pallet in the racetrack. (Other sections, notably electronics, resemble the old Wal-Mart more closely.) Aisles are wider, about 8' wide. The racetrack is over 16' wide. Merchandise is not inventoried above the Lozier, which means a larger back-room. Apparel racks are spaced wider and loaded with less merchandise. Big sections of the store, such as in electronics, are completely empty at a time when inventory should be at its peak. The net result is that the store's productivity (margin per square-foot) is probably well-below what other Wal-Marts run.

This new Wal-Mart makes sense if one believes a few things. First, one could believe that margin on selling higher-end products is enough to make-up for the less-intense use of floor space. That's hard to believe because the vast majority of the assortment is the same and because high-end items tend to have slower turnover. How many bottles of La Mondotte are really selling, and would the space be better utilized by a warehouse pallet of $1 Spaghetti O's?

Second, one could believe that new customers will be attracted with a decluttered store. But is going head-to-head with Target, and potentially abandoing the free-for-all bargain-basement experience really the way to draw in new customers? Can Wal-Mart out-Target Target?

Third, one could believe that current customers will shop more often or have higher checks if the store is less cluttered. But if existing customers have put-up with Wal-Mart's clutter for decades and continue to drive the chain to record sales, why change the formula?

It seems to me that Wal-Mart's best strategy is to stick to the core and continue to do what they've done all along: drive down operating costs and deliver a "good' assortment to the consumer at a better price than competitors. Selective decluttering might be beneficial, but if Wal-Mart is to be a mere copycat of Target, is Wal-Mart abandoning its lowest-price niche and leaving the hard-discount sector open to attack by the likes of Aldi, a resurgent K-Mart, or the ever-popular dollar stores?

Oh, by the way, the $557 bottles of La Mondotte are no longer carried.

Posted by adrianjo at 06:05 PM

November 25, 2006

A Sark contrast

The tiny island of Sark, an independently-governed island off the coast of France, last month voted to abolish its feudal government that had existed since the 1500s. These strange governments like Sark's fascinate me, for reasons not fully clear.

Sark has been ruled by a Seigneur, or a feudal lord, since the first Seigneur moved with 40 families under a British royal charter in 1533. In exchange for a few pounds annual rent given to the Queen, the Seigneur runs the island. He owns all the land and has a few other strange rights, such as being the only person allowed to own piegons and unspayed bitches. He also owns whatever washes up on shore.

Reports the London Times:

In future, the island will no longer be governed by an hereditary seigneur deriving authority directly from the Queen and a group of unelected landholders, but by an elected council.

Islanders voted by 234 to 184 to abolish Sark’s 450-year-old system of government.

Since the reign of Elizabeth I, Sark, which is six miles from Guernsey but entirely selfgoverning, was run by the descendants of 40 “tenants” given the right to settle there in 1533. In a concession to modernity, the island’s parliament Government, the Chief Pleas, was recently expanded to include 12 “people’s deputies” elected by islanders. They were given the choice of an entirely elected body or one that included eight representatives of the 40 tenants.

The biggest change for Sark’s 610 residents is likely to be the abolition of the feudal position of the Seigneur, who was the Sovereign’s sole representative on the island.

It's still unclear whether this will allow islanders to own piegons and unspayed bitches.

Posted by adrianjo at 07:35 PM

November 19, 2006

Powerline: Grin and Barack It

It wasn't popular to say that the emporer had no clothes, and it's not popular to say that Barack Obama has no substance. I remember when I first encountered some campaign lit for Barack Obama and thought, "geez this guy is a crazy rabid liberal." I didn't expect him to go anywhere. He barely survived the Illinois Democrat primary and then got lucky when his opponent self-destructed after admitting he took his wife (Seven of Nine from Star Trek) to a kinky Paris sex club. Millions of men fantasize about taking Seven of Nine to a sex club, and I've never understood why that revelation compelled a smart former i-banker to withdraw from a Senate race he was winning. Anyway, this self-destruction provided the perfect opportunity for Obama to conceal those earlier unpalatable liberal tendencies and cruise to an easy win.

Powerline is also willing to say the star child has no substance:

I suppose there have been political figures more overrated than Barack Obama, but it's hard to think of one offhand. Here is a typically fawning media portrait, this one from the Associated Press, headlined Riding High, Obama Ponders His Future.

Obama is surely riding high, in some sense, but if you ask the question: what exactly has he done? the answer is elusive. Previously unknown, he won a Senate race against an opponent who withdrew from the race. That was less than two years ago. Since then, in his time in the Senate, what has he done? Nothing noteworthy, certainly.

The AP spins Obama's lack of any accomplishments as an advantage:

Obama, 45, clearly benefits from his rapid rise. He is not burdened by a lengthy Senate voting record.

Or any other record, as far as that goes. The AP professes itself mystified as to the origins of Obama's current notoriety:

It is hard to fathom Obama's meteoric rise in politics.

Not really. I think it has something to do with the fact that every news article that has ever appeared about Obama has described him in glowing terms as a "rising star." What he has done to deserve such a description, however, remains unclear.

Posted by adrianjo at 10:01 PM

Chain-store gang

Thursday night we found ourselves flying back from Texas. We had left at 11.30AM. It was now 11.30PM. You can imagine what happened in the meantime, what with the bad weather and all. The Capitan came on and said, “Ladies and gentlemen, as you can tell, we’ve been circling over LaGuardia for a while now. We have been told we can land in an hour, but we don’t have an hour’s worth of fuel. So we’re about to land in Philadelphia instead.”

That made for a nice evening in Philly—we tried to drown-out the travel troubles with Champagne at the Ritz Carlton—but it inevitably turned into a working night till 2AM. The next morning I paid a visit to Vikram and my old friends at Wharton the next morning. On the downside, I missed Chain Lunch Fridays at the office. Basically, every Friday, the consultants in the office choose a different Times Square chain restaurant for lunch, usually some tourist-trap restaurant that no New Yorker would be caught dead in like Bubba Gump’s or ESPN Zone. Times Square has degenerated into a giant Disneyfied suburb stacked vertically, a sea of crappy chain stores and Marriott hotels like what usually sprawls down suburban highways. Blinking lights + second-rate chain hotels, restaurants, and stores = tourist magnet.

Times Square’s decline is a recent phenomenon. Local lore holds that Times Square used to be a seedy land of 25-cent spank booths and strip clubs, much of which got wiped-out by the combined forces of the zoning board and the VCR. I don’t have much use for spank booths and tittie bars, but I suspect that in those times, there were far better food options in Times Square.

That’s not to say that Times Square is a miserable place today; indeed it has its share of gems. There’s the W Hotel, of course, and the Japanese restaurant Haru. Nearby, Ninth Ave has some excellent restaurants, while 44th St between Fifth and Sixth Avenues (Clubhouse Row) seems to have a giant no-tourist force field protecting the local clubhouses and places like Daniel Bouloud’s DB Bistro Moderne (home of the $30 foie-gras-stuffed sirloin burger) and the Royalton Hotel (one of Philippe Stark’s earliest hotel commissions).

The latest addition to the New York cheap fashion scene is Uniqlo, a Japanese retailer that somehow opened in the Menlo Park Mall well-before last weekend’s grand opening in SoHo, which doesn’t make much sense. Marketers have recently been puzzling over how young New Yorkers will take the $2 A-Train to JFK to meet a first-class flight to Europe, as well as wearing $20 shirts under $400 Barney’s jackets. Uniqlo seems to get it: their magalog features a section called “The Girl from Gramercy,” subtitled “Not quite uptown, not quite downtown, the girls from Gramercy Park have a unique take on elegance and cool.” The photos show a Continental-looking young woman of perhaps 20 years of age peering from the back of a black Towncar wearing a $30 sweater and $10 mittens. Somehow the subtle juxtaposition of the aspirational luxury of a limo and cheap sweaters works for Uniqlo in a way that wouldn’t for Old Navy.

The Uniqlo magalog also features interviews with Sonic Youth’s Kim Gordon and the designers behind the brand. There’s also a piece called “I Love New York” by Glen O’Brien complete with a list of 10 reasons. Among his reasons:

1. Beauty. I’ve been everywhere and there is absolutely nowhere where you see as many beauties as you do on the streets of New York. Beauties from all over the world converge here, hoping to be a famous model or actress or billionaire spouse. When the weather gets warm and there is less clothing on the streets it’s a spectacle out there and several times a day one is absolutely wowed.

Hmm… a hot early-20s woman hoping to be a famous model or actress? I’ve never met anyone like that in New York.

5. Liberty. No matter how much the world has changed, New Yorkers still welcome you with open arms. We believe in the Statue of Liberty. You Can Still Give Us Your Huddled Masses. This town was created by people who had to leave where they lived before. You want to worship toads or tattoo your entire body or drive a cab wearing a veil? You’ve come to the right place. You two guys want to get married? It’s OK with us. You two gals? You two… whatever you are? Our diversity is our strength. You can do whatever you want here. Just don’t walk down Broadway three abreast. This ain’t the mall, honey.

6. No Malls. Yes, we have no stores ending in “–mart,” but if you want to buy limited-edition sneakers or fennel pollen or mounted dung beetles or old bebop 78s or a Jeff Koons painting or solid gold handcuffs or a magic wand…”

Hmm, no malls, huh? So why did Uniqlo open their first US store in a New Jersey mall? When does the store in Times Square open? Unfortunately, like many companies that have great marketing (think H&M) and questionable authenticity, the clothes at Uniqlo fall flat, but I might be suckered in by the $80 cord jacket.

Posted by adrianjo at 07:40 PM

November 12, 2006

Rumors of my disappearance have not been exaggerated

NEW YORK - I sort of went into hiding after the election. I’ve been hiding down in Texas, returning to New York for weekends and on Fridays to submit expenses, go out, and pick-up the dry cleaning.

I know that I’m probably traveling too much and haven't much of a life when I start obsessing about frequent flier miles and loyalty programs. That’s exactly what I’ve been doing far too much lately, being a point & mile whore. My biggest accomplishment over the past month has been to get Platinum status on American Airlines. I’m not sure if that’s an accomplishment or a sad mark of having a typical consultant lifestyle (it requires 50,000 miles of annual travel), and I’m still not sure if being Platinum really gets me anything. They don’t even serve that bag of six pretzels anymore.

Other accomplishments include Silver status at Marriott (for having 37 nights at a Marriott this year), and possibly Gold status by the end of the year if I stay another 13 nights at a Marriott through next month. It’s possible and also a bit sad.

Oh yeah, and I’ll soon have Five Star membership at Hertz. Last week they offered me a choice of a Crossfire, a Taurus, or a mini-van. I wasn’t exactly sure what a Crossfire was, but I figured it would drive a bit better than a minivan. After a 20 mile drive, I wasn’t too impressed, so I remarked to my colleague, “I don’t think that the sticker more than $15,000.” She figured it carried a $30,000 sticker. Turns out that the sticker is $30,070. New Yorkers can usually calculate the expected cost of a taxi ride to the nearest dollar, but sticker prices on autos are usually a bit more troublesome.

What else?

Hmm… The laundromat at Sixth Ave & 130th St raised their prices 25 cents a load and lost a lot of business, which is great because machines are now available. I hate mail-in rebates. I’m going to miss Ed Bradley, probably the best product of West Philadelphia and much more of a heavyweight than today's flaky newsreaders like Katie Couric. Republicans deserved it for spending too wildy, not reforming Washington, and forgetting why they’re Republicans. Pomegranates are fabulous this week; buy them by the half-dozen. The Uniqlo grand opening was fun. We had a Harlem reunion last night where it was decided that I'm still the only non-foreign straight white boy living in Harlem. My calendar is booked for December 10 from 8am onwards.

Posted by adrianjo at 07:37 PM

November 05, 2006

Vote out the Republicans!

My thoughts on the upcoming election are boiled down nicely in cartoon format:

Posted by adrianjo at 06:32 PM