Most layoffs not due to offshoring

While I'm no fan of sending jobs overseas just because it's supposedly cheaper, this news story really puts all the current hype in perspective. Only 2.5% of the jobs lost in Q1 were from layoffs due to offshoring.

Leave it to the media to blow things way out of proportion. I understand that it's news and ought to be covered, but it's equally newsworthy when we learn that the trend isn't as prevalent as the quantity of coverage led us to believe.

As with so many things, offshoring your customer service department or your IT staff is the latest fad. Most companies will recognize it for what it is and will avoid it suspiciously. Many of those that try it will find that they dramatically overestimated the savings or underestimated the difficulty of managing customer relationships across two languages, a dozen time zones and other red tape.

The 7th P

For decades our CEO has expressed a list of guiding principles for our company that he refers to as the "Six P's." They are:

• Purpose
• People
• Products
• Process
• Patience/Perseverance
• Profit
  

Though it requires some elaboration to explain how they are applied at our company, they are pretty fundamental. It's easy to remember them once you hear the speech, but I won't go into that right now. That's not the point of this post.

What's new and interesting (and cool) is that recently Tom talked about the "Seventh P" -- Prayer. In over twelve years working with him, I've never heard Tom talk openly about this.

In Tom's words, "No major decision is made at this company without prayer." Like the other six P's, that's not exactly a revolutionary concept. But the fact he said it to the whole office staff is remarkable. Why the coming out? Why did he suddenly decide to add it to the list publicly, assuming that it has been on the unspoken list for some time?

Here's my theory (and it's just a theory at this point)... Tom added it to the list because what was an assumed principle to many in his generation -- a given -- is something that needs to be taught to younger managers raised in post-modern America. It's part of an untold legacy, one that now needs to be communicated more overtly.

Faith is personal for everyone, but for many of the people I've known in Tom's generation, my parents included, it is intensely private as well. While they'll probably stop short of outright evangelism, I think we're going to start learning more about this part of the lives of many business leaders who are closing in on retirement. If my theory is right and this develops into a trend, then I welcome it.

Walmart.com

Interesting story in this morning's Internet Retailer newsletter. Walmart.com is going to become a much stronger online player, but their business may look different than many of the other majors. With their store count and foot traffic so high, they are in a unique position to use their web site to generate in-store purchases (and vice versa).

The fact that you can return Walmart.com purchases to Wal-Mart stores also increases store visits and online consumer confidence. They are well ahead of the pack on this. They also run their own site and thus control their own destiny more readily than many other retailers. Target and Toys R Us, for instance, depend on their partnerships with Amazon.com.

Wal-Mart suppliers would do well to pursue programs that 1) convert online success with Walmart.com into store listings, and 2) encourage in-store programs that promote products that are only available at Walmart.com. Multi-channel marketing at its best!

Key Life

I just received my first CD from Key Life. I signed up to receive them a few weeks ago. Steve Brown is a wonderful teacher. Down to earth. Real. Biblical. Personal. From the CD, it sounds like he's a fellow pipe smoker too! Steve's messages are one of the few things connecting with me lately.

D-Mac's Comments on Wal-Mart Credit Card Figures

Wow, a comment on one of my posts! That's really something. (OK, I confess -- it's from a family member. Don't burst my bubble.)

At 6/2/2004 09:24:01 PM, D-Mac said...
Hey Rob. Sam's club only takes debit cards. WalMart had that anti-trust suit against MC/Visa a while back. Pretty viscious, which is why Sam's only take debit. Cuts out the merchant Fee. That probably explains part of the quirk. Also, the average American has 4 credit cards. So the statistics are probably off. It may only be 50 million people that actually have cards, it is just multiple cards.

Actually, Sam's does accept one credit card: Discover. Costco only accepts Amex. BJ's accepts all four major cards. The figures I was given were for Wal-Mart stores only; Sam's was not included in the calculation. (Incidentally, the average Sam's Club customer is _much_ more affluent than the typical Wal-Mart customer. I don't remember the difference in income level, but I was really surprised when I heard it.)

I did some more poking around for credit card ownership rates. The most recent data I could find indicated that the average American holds seven credit cards, which includes department store and oil company cards. I also found a slightly older reference to the total number of people carrying cards that put the number just over 200 million. That's in the ballpark with the 190 million I quoted earlier. (Sorry I don't have any supporting links. I was on the job and didn't have time to copy them. I think I found most of the info on Cardweb.com.)

Wal-Mart does not accept MasterCard debit cards. They do take Visa debit cards, though. I witnessed an "associate" explaining this to a customer last week. I am not sure about Sam's and debit cards. (I've never used a debit card in my life -- I wonder what the debit card demographics look like.)

Regardless of the figures, I am still amazed that half of Wal-Mart's customer's don't have credit cards.

Great Resource for Economics Info

Being the information junkie that I am, I felt like a kid in a candy store when I re-discovered Ed Yardeni's research site. (The link is in the upper right corner of the page.) The Consumer Handbook (With Baby Boom Charts) is particularly interesting from a marketing standpoint, and it is updated monthly.

Wal-Mart Stores RV Parking

I just found an FAQ buried on Wal-Mart's web site that talks about RV parking. This is great marketing. Here's an activity -- parking one's motor home -- that would drive most retailers and other business crazy. Wal-Mart, instead of patently prohibiting the activity, embraces it, knowing full well that they will pick up tremendous sales (and goodwill) by having people temporarily "live" at their doorstep. For all the annoying things that wal-Mart has become, they didn't become the largest company in the world by saying "no" to their customers.

Singing the Same Tune

Last night's edition of Frontline was about the music industry and all of its troubles. While this could have degenerated into another gagging regurgitation of the internet file sharing controversy, the program instead focused on the overall business and how it works.

Throughout the program, there was discussion of the retail distribution channels for music and how much the big retailers dominate the business. One record company exec said that Best Buy, Target and Wal-Mart together account for 50% of music sales. As is the case with so many other products, CD's now have to please the few dominant retailers before they are readily available to the consumer.

This is yet another illustration of my longstanding belief that merchandising has become less about carrying the products that consumers want to buy and more about retailers offering what they want to sell. More and more product offerings are retailer-driven, not consumer driven.

Although the retailing giants do not operate in a vacuum -- they cannot succeed if consumers are not willing to buy what is being offered, things are very different than they used to be. Oligopoly, which is basically what we have in much of retailing today, reduces the risk of failure for the dominant players. They have the foot traffic, so as long as they meet the minimum requirements, they'll sell whatever they offer. Remember the bread lines in the Soviet Union? Do you think quality was much of an issue? (Extreme example, I know, but it's still a relevant point.)

Maybe a more realistic example is the U.S. auto industry in the 1970's. They went for years offering an inferior product -- and people accepted it because that's what was available! It took many years of pressure from the Japanese before GM, Ford and Chrysler woke up and realized that consumers will, when given the choice, respond to better products when they are readily available.

Ultimately, I think many categories of retailing are on the same path. Sure, there are new factors like internet shopping, but I still believe that history will repeat itself. They only question is when.

Five years from now...

Interesting predictions from Seth Godin. They made me think...

Hard drive space is free

It's easy to see this happening already. Google's new gMail and Yahoo Briefcase are good examples. It's also remarkable how many places will host your images and other files for free.

Wifi like connections are everywhere

Yes, but with more and more Blade Runner/Minority Report-like advertising messages.

Connections speeds are 10 to 100 times faster

That would change everything. I wonder how much of today's hardware will be able to keep up with that. My hunch is that people are keeping their computer hardware longer. Are there any infrastructure barriers to this as well?

Everyone has a digital camera

No brainer. The camera is morphing into a device that is integrated into all kinds of other device platforms -- phones, PDA's, computers and camcorders.

Everyone carries a device that is sort of like a laptop, but cheap and tiny

I never would have believed that PDA sales would start tanking the way they have. Mine is indispensable. I guess they just don't improve productivity enough for many people. Whatever the replacement is, it will have to do a better job if it's going to take root.

The number of new products introduced every day is five times greater than now

At the rate things are coming out of China, it wouldn't surprise me. The growth in skilled product development and implementation there is mind boggling.

Wal-Mart's sales are three times as big

That's about 25% growth per year. They should easily get almost half that from their growth in the US. Factor in their international opportunities, and this is very doable.

Any manufactured product that's more than five years old in design sells at commodity pricing

This is almost true already. The Bose Wave Radio is the only exception I can think of off hand! Seriously, though, the product life cycle keeps getting shorter and shorter.

The retirement age will be five years higher than it is now

Will it really add a year each year? That seems a bit aggressive. Regardless of how fast it changes, people will certainly be retiring later and later in life.

Your current profession will either be gone or totally different

It's amazing how much it has changed in the past five years. Being in the CPG business, the rate of change is palpable. Our company figures that in five years, half of our current sales channel will be completely gone. We have five years to replace half our sales volume, or we're gone too.

State Tax Receipts are Rising Again

I just read a report that state income tax receipts have steadily improved over the past few months. Yet another encouraging sign that the economy is growing at a healthy pace. I've seen amazingly little coverage of this in the media. A search on Google News turns up a handful of articles including this one. As the coffers are refilled, I have to wonder how many states will rescind or reduce the tax increases they've enacted over the past couple years. With few exceptions, I bet they won't. Spending will rise to fill the gap long before any tax reductions pass through the legislatures.