Retail or E-tail?

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As of this writing, the boom times that followed the Great Recession are still in full swing, with unemployment below 5 percent. Yet we see shuttered stores on Main Street. It’s as if our town never got the news. What gives?

E-commerce has transformed shopping habits, shifting attention from street-side retail and toward website e-tail. You can order nearly anything online — food, clothing, books and music, appliances and equipment — and have it delivered to your doorstep, no store visits needed, often for less than you’d pay at the mall. As a result, businesses have cut back on brick-and-mortar locations while Web retail surges.

Still, while it’s easy to order a dress online from JCPenney or Macy’s, it’s gotten harder to try it on first, as chains cut back on the number of outlets. The chief reason to visit a street store is to touch the merchandise; website images don’t quite get it. But lately some customers will visit stores, try stuff on, then go home and order the items cheaper from another company’s website.

As retail square footage shrinks and bandwidth expands, the tension between mail-order and in-store shopping opens up a window for e-tailers who can give patrons a real-world sense of product lines from a home screen. Brick-and-mortar retailers, too, are looking for ways to shift their stance in the new ballgame.

Online businesses have been innovating:

• Many clothing websites will send you items to try on at home.

• You can customize your order by size, color, features, etc., and thus access the entire product line — much more than a brick-and-mortar outlet can stock.

• Many e-tailers provide multiple views of products, and you can zoom in on the images for a more detailed examination.

• Online prescription eyeglass stores let you upload a photo of your face (or you can select an image of a face that resembles yours), click on prospective frames, and view them on the facial image to get a sense of how they’ll look on you in real life.

If you’re an online store owner or web developer, be sure to keep an eye on the technology as it evolves:

• 3-D computer and TV screens will become common, allowing you to replace flat product images with more lifelike ones.

• Some Virtual Reality headsets already allow customers to “walk through” online stores and examine merchandise in much more detail.

• Haptic (touch-sense) gloves will augment V-R headsets so your patrons can “feel” cloth, “heft” items to gauge their weight, and “touch” product surfaces.

• And who knows? Perhaps someday we’ll have “Smell-o-Vision”, along with humidity and temperature simulators, so we can enjoy the often-pleasing atmospheres of retail locations.

These technologies are burgeoning almost faster than we can write about them, so stay up with developments.

Meanwhile, if you’re a committed brick-and-mortar retailer, don’t despair. Advancing tech creates new opportunities for you as well:

• Empty stores mean lower rental costs, which reduces the price advantage of your e-commerce competitors. A shuttered store next to you is a chance to expand your retail operations simply by renting the spare footage and opening up a passageway between.

• Your retail store can promote your e-tail store. Some chains (Bed, Bath & Beyond, for example) encourage patrons to use store computers to order out-of-stock or specialty items directly from the chain’s warehouse. This protects the sale while getting customers into the habit of ordering from the retailer’s own website.

• Driverless vehicles will ease traffic, so getting to your store will be less of a hassle. These cars will need fewer parking spaces, reducing congestion while opening up acreage that downtown business groups can repurpose into, for example, parklike pedestrian avenues for shoppers.

• People like to meet and interact with other people in person, and your store can become a social locale when you add, say, a coffee bar or entertainment corner, or you can host designers, authors, and artists who conduct seminars, demos, and readings.

• Visiting your store becomes something of an event with a Virtual Reality system that teaches patrons how it’ll look and feel to use your products.

The world is transforming in ways we can barely foresee. Retail sales, too, will shift unpredictably. Shop owners and online vendors who keep their fingers on the pulse of that change — and who resist the temptation to sit back and rest on their laurels — will find ways to thrive. It won’t be easy, but it will be interesting … and, if you play it right, it’ll be profitable.

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UPDATE: Retail scene changing quickly

UPDATE: Retail outlet as shipping center (and shipping center as retail outlet?)

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Women Who Put Out Fires

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Recently there’s been chatter on how women often become leaders during crises. A number of examples come to mind: Carly Fiorina (Hewlett-Packard); Mary Barra (GM); Marissa Mayer (Google, Yahoo); Margaret Thatcher (UK Prime Minister) and Theresa May (UK Prime Minister). All these women attained high leadership positions during major upheavals in companies or countries.

Why do crises and women leaders go together? Two reasons stick out: (1) the men screwed things up and don’t want to touch the problem with a ten-foot pole; (2) groups cast about for a fresh perspective, saying, “Let’s see what a woman can do with this situation.”

Of course, sometimes men on the outside are simply waiting for the problem to overwhelm the woman so they can claim, “See? She can’t do it! But we can!” and winch themselves back into power.

Thus women candidates for leadership may want to think twice before gambling on a position that could turn out to be a sucker bet.

It brings to mind an old joke: “Why do ducks have webbed feet?” … “To stamp out forest fires.” … “And why do elephants have flat feet?” … “To stamp out flaming ducks.” You don’t want to become a pile of ignited feathers squished by an elephant of a crisis.

Two approaches to this dilemma are likely to be popular:

1. Complain that “men are no damn good” and they only use women in blazing emergencies and then toss them under the fire truck when the going gets smoky.

2. Learn how to put out fires.

Number 1, above, may be partly true and therefore useful to know. But complaining does not a leader make.

Number 2 is where the money is. A crisis is a woman’s chance to demonstrate calm capability. To that end, prepare for the opportunity:

• Learn how to handle budget emergencies

• Learn how to cut red tape

• Learn how to lay off employees, especially men who will try to intimidate you when you hand them a pink slip

• Learn how to cut spending, especially pet projects that are squirting money like severed arteries

• Learn how to meditate (or anything else that keeps you calm and unflappable)

With hard work, smarts, and a bit of luck, a woman can save the day, convert a trap into a triumph, and rise from patsy to hero. At that point, she should make sure her future compensation reflects her excellent performance — and/or be ready to field offers from other companies desperate for a turn-around artist.

So, ladies: prepare for the job as if it’ll be a series of emergencies … assemble your fire equipment … and go put out some fires.

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A Survey of Startups

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Nearly all startups fail to scale up.

There — we got the bad news out of the way. The good news: it’s possible to greatly shorten the odds by following a few simple rules.

A report on recent MIT research lays out some pointers:

“Compared to average startups, which have a one in 3,500 chance of experiencing growth, the top one percent of firms with these characteristics have a much better chance (one in 100) of taking off. New startups are four times more likely than the average startup to grow if they are a corporation, two and a half times more likely if they have a short name, and five times more likely if they have trademarks. Furthermore, firms that apply for patents are 35 times more likely to grow. And, curiously, eponymously named firms are a whopping 70 percent less likely to grow.”

There’s more, but in a nutshell:

  • Incorporate
  • Use a short name (not the founder’s name!)
  • Nail down your trademarks
  • Apply for patents
  • Locate in a high-tech region:
    • Silicon Valley
    • Southern California
    • Washington state
    • New York / Boston
    • Texas

Oh, and let’s add the standard principles for business success:

  • Provide a product or service people need and love
  • Make what you sell vastly better in some important way
  • Hire excellent people you can get along with
  • Stay focused on results (instead of signs of your own importance)
  • Work your butt off for 4 years or more

What could be simpler? Now get to it.

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Your Livelihood and the American President

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Running a brilliant campaign does not translate into running a brilliant White House. — Gail Collins

Does it matter to your bottom line what the government does? Absolutely. Legislatures and bureaucrats and presidents and prime ministers can screw up an economy with the stroke of a pen. Witness, for example, the run-up to the Great Recession of 2008: the U.S. set low interest rates, encouraged home buying (and strong-armed banks to provide loans to incompetent borrowers), spent nearly $2 trillion on a useless military venture in Iraq, then blamed Wall Street when the bottom fell out … and then bailed out the Street’s investment bankers while workers and small firms on Main Street had to suck it up.

Okay, but does it matter to your bottom line who is the U.S. president? Yes and no. Great power does flow through the White House, but it’s like water through a firehose that’s hard to point at problems without backsplash or getting knocked over. Over the past century, a few Chief Executives have managed to wield enormous influence (for better or worse): Wilson, FDR, Johnson, Reagan, Bush. But most have come and gone without leaving much of a mark.

A finer-grained question is: does it matter to your income stream which party a president belongs to? Campaign contributors tend either to be labor groups or corporations, neither of which are keen on draconian measures that might cause job losses or declines in revenue. So there’s a political limit, despite all the rhetoric, to what either party can do to the economy once it controls the White House.

In fact, it may not much matter which party holds the office. Sometimes a Democrat can be good for business (as with Clinton’s budget surplus), and sometimes a Republican can be bad for it (witness Bush with Iraq and the Recession). What’s more, it’s hard to tell what kind of administrator a candidate will turn out to be, and it’s often just as hard to foresee what policies they’ll instigate once in office. Meanwhile, situations can change suddenly — Pearl Harbor in December 1941 … 9/11 … the recent upheavals in technology — with unpredictable results for White House policy.

On top of that, the Constitution was written deliberately to throw sand in the gears of political change, impeding the government from rushing headlong into wild-eyed projects that might do more harm than good. This applies to the Executive as much as to the Legislature. Sometimes the American government breaks through and hurtles toward disaster, but usually progress is glacial. Thus one change of government probably won’t result in enormous shifts in society or the economy.

In recent years, though, the purview of the White House has widened. Under George W. “I Am the Decider” Bush, overly broad use of signing statements — which are meant merely to outline a Chief Executive’s plans for implementing legislation — enabled him to get away with backdoor line-item vetoes. Then the administration pushed through Congress laws that vastly increased federal power to spy on, arrest and/or kill U.S. citizens, often without warrants.

In 2009, Barack Obama — a constitutional scholar who as a candidate railed against Bush’s assault on civil liberties — became president and added to Bush’s power grab, especially in the overuse of Executive Actions.

Every president feels beleaguered by ongoing assaults from political opponents and will cast about for any influence that may win the day. No sitting president willingly lets go of arbitrary clout inherited from previous administrations; worse, there’ll be an enormous temptation to expand on it. Basically, if a Chief Executive exceeds the limits to his authority and nobody calls him on it, the next president will do the same … and then some.

The overall result is an ongoing expansion of Executive power, with no sign that it will slow down. In that respect, it doesn’t matter which party occupies the Oval Office; presidential prerogatives will likely continue to grow. More and more edicts will be handed down arbitrarily, rulings that could cause your company, or your career prospects, to lurch crazily.

What’s a business owner or employee to do?

  • Don’t waste a lot of time worrying about who will be the next president. Their behavior and influence is hard to predict and often vastly different from what they promise. Besides, fretting about events you have virtually no influence over is a waste of resources. Instead, put your energies where they can do some good — work on your career. Hold a steady course despite the changing winds.
  • Assume taxes and regulation will continue slowly to increase, no matter who’s in office. They have done so for decades, and there’s no sign they’ll halt or reverse course. Any compliance process you can computerize will simplify the burden and save some of the time and money you’d otherwise lose.
  • Assume recessions will recur under Democrats and Republicans alike. The Fed tends to tweak interest rates to stretch out economic booms, and the resulting busts become that much deeper, regardless of who’s in office. Resist the temptation to invest or make expensive purchases at the end of a boom simply because you’ve been doing well and there’s no sign of trouble. You’ll find yourself over-extended just as your income drops.
  • Assume 5% unemployment is the best we’re going to get. Rarely does the rate fall much lower, and soon enough it begins to swing upward, often doubling within a year or so. At 5% get ready to batten down the hatches.
  • Never assume a strong economy, or a good job or business, will continue indefinitely, unmolested by national turmoil or bad governance. As they say in poker, “Take some chips south” — squirrel away cash from the win streaks, and you’ll still have resources after a loss.
  • Never assume Washington will save you! They’re much more likely to cause problems than fix them; at best, their help is a mixed blessing. It’s better to have yourself on your side: you’ll retain the best ally you can get … for both bad times and good.

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Three Ways to Bid

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If you work for an employer — like 93 to 97 percent of American workers — you get your pay from a salary or wage. If you work for yourself — free-lancer, contractor — your pay depends on the deal you strike with the client. That deal can take three forms:

HOURLY: You get paid for how much time you put into the work.

Advantages: You know in advance what your hourly income will be. If the job is bigger than expected, you’ll get paid more. Your rate is secure.

Drawbacks: You don’t now how much money you’ll make on the entire job, since the total number of hours is uncertain. And your rate is the upper limit on how much you can make per hour of effort. Also, your client doesn’t know how much the job will cost until it’s over, which can cause said client to balk at your bill.

When to use: Take your pay by the hour if the work is open-ended.

BY THE JOB: You get paid for results.

Advantages: You know ahead of time how much revenue you’ll receive. If the job takes less effort than expected, you’ll still receive the same amount. Your total payout is secure. Also, your client knows how much the project will cost ahead of time.

Drawbacks: You don’t know for sure what your pay rate will be, as the job could take much longer than you hoped. Worse, after expenses, you could lose money.

When to use: Take your pay by the job if you have a good idea of what your total hours and expenses are likely to be.

BY PERCENTAGE: You get paid a portion of your client’s revenue or equity.

Advantages: There’s no fixed limit on how much you can earn. If revenues — or stock value — go through the roof, so will your take-home. A lot of billionaires get started this way.

Drawbacks: You could earn nothing if the client’s business fails. Also, your equity participation can get seriously diluted, especially if you’re working for a start-up that goes for a second round of funding and renegotiates the cap table. And most start-ups don’t get very far, so don’t hold your breath.

When to use: Take your pay as a percentage of revenues and/or equity if the client’s company looks to blast off like a rocket and/or if the client is having serious cashflow problems right now but should get nicely into the black in the near future. (Bear in mind that most established businesses won’t do this kind of deal.)

…Of course, you can mix and match these pay methods to suit, taking a portion in up-front money and the rest as stock options or a piece of the company or a slice of revenues, then adding hourly consulting fees if the client has a last-minute need for extra help. 

In any case, your final bill can be hell to collect. Not every person you do business with — no matter how charming — is honest. The last bill is the easiest to welch on, as they often don’t expect to need your services anymore, and they know that most small contractors will give up the chase. Also, a client may sail into tight straits, and your bill gets tossed overboard.

That said, most people on salary never get rich, and the biggest opportunities find their way to independent contractors. So go ahead, make a bid.

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Victory or Profits?

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Popular business theories often rely on the notion that success is binary: that you either defeat other businesses or you are defeated. This idea enables sports coaches to consult with Fortune 500 companies, but does it really cover all the bases? 

“Do or die” has an elemental, romantic appeal to corporate CEOs, most of whom are highly competitive and love a good battle. And it’s true that the marketplace can be ruthless. But that’s not all there is, and out-and-out market victory certainly isn’t the only source of profitability. Let’s look at some of the popular shibboleths and see if we can improve on them:

  • Grow or Die: This idea comes mainly from the 1973 book Grow or Die by George Land. The author described how all living systems, including businesses, go through growth spurts when they discover and exploit new resources, then stall out when those resources run dry, at which point new approaches to resource discovery and management must be developed. It helped publicize the S-curve, which shows how growth starts slow, speeds up, then slows down again. These concepts have proven popular and useful to business strategists. But still we’re left with that catchy binary book title, which seems to imply that all companies, and life forms in general, must constantly enlarge or they will be destroyed. By that reckoning, the oldest and most successful creatures would be the size of Massachusetts, generating their own Zip Codes and a sizeable gravitational field.
    • Better: Adapt or Fade. The point is profits, not constant growth. It’s not how big you are but how much you return to your stakeholders. To that end, especially in today’s innovative marketplace, the adaptive and creative firms will do best. That S-curve will show the growth of your margin, not merely your bulk.
  • Go Big or Go Home: This is a metaphor from sports, where outcomes are always binary (except in hockey). But it’s not a solid match for what companies face in the marketplace. Competition is only one aspect of commerce, and second- and third-place firms often earn more profit than the leader. But “Go big” appeals to men, who are fueled by testosterone and thrive on competition. For many leaders, the only thing that matters is total victory, as if they were in a war where the loser submits to unconditional surrender. Markets don’t usually work that way.
    • Better: Own Your Niche. Find the spot in the market where your company has a natural monopoly because of its uniquely useful products. The focus is on serving the clients and making a profit, instead of trying for some arbitrary notion of “victory”. (But you can still feel dominant in your particular corner of the market, if you need that buzz.)
  • Take or Give: Givers, says Adam Grant in his book Give and Take, prefer to give more than they get, and their team thrives. Takers, on the other hand, believe it’s a dog-eat-dog world, and they must grab as much as they can and give as little as possible, which disrupts group efforts. Clearly, you want a Giver on your team. But Grant’s thesis suggests a binary takeaway, namely, that the energy of your labor is exactly counterbalanced by the energy stored in the money you make. This is a zero-sum game, and it represents an attitude that goes all the way back to 17th-century Mercantilists, who believed that trade only worked if they “got more than they gave”, as if cash and product were worth exactly the same to both sides of an exchange that was more competition than cooperation. It’s also an attitude popular among fiscal liberals, who tend to think the rich got that way by cheating. In fact, Grant suggests that the only real flaw in a Giver is the tendency to give too much, as if he or she should pull back, now and then, and be a Taker — at least, long enough to pay for some nifty stuff. It makes the Giver look like the Nicest Loser.
    • Better: Create Value (rather than hijack it). Grant’s main point is that we work best when we’re not constantly calculating what we’re getting from our labors. If, instead, we focus on producing for the team, our pay will tend to reward us naturally over time. This seems a wise and fruitful attitude. And Grant — a Wharton Business School professor — no doubt understands exchange theory quite well. He’ll likely agree that when you make value generation your goal, you’ll do much better in the long run than when you act like a leech.
  • Dominate the Market: If you control the market, you ought to be able to dictate price and guarantee huge profits. Or so they say. The binary implication is that you own your market or it owns you. In fact, giant companies with overwhelming market share often get trapped paying for their enormous infrastructure by cranking out low-margin items. Meanwhile, small competitors can adapt and innovate quickly, so their goods and services are more likely to be uniquely valuable and command higher margins.
    • Better: KIP (Keep It Profitable). Yes, a huge corporation with a low margin may take more total profit than a small company with a big margin. And, yes, a big margin on big revenue is better than a big margin on small revenue. But as a general matter, it’s more important to be profitable than large. Size, as scientists would say, is an “emergent property” of success. But it’s not required.

In short: stay adaptive, develop your own niche, focus your team on creating value, and point your firm toward profit rather than size, and you’ll sidestep most of the grinding headaches that come from trying to steamroll your competitors in a “do or die” fight to the finish. 

Let someone else take home the laurels, and you bring home the bacon.

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The Four Career Strengths

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What we have to decide — once we’re okay, once we’re not living on three dollars a day, once we have a roof, once we have health care — is we have to decide, “How much more money, and what am I going to trade for it?” Because we always trade something for it, unless we’re fortunate enough that the very thing we want to do is the thing that also gives us our maximum income. — Seth Godin

A popular career goal is to find work you love and make a killing at it. And there are a zillion ideas on how best to balance enjoyment and moneymaking. Generally, though, the more of one you get, the less of the other. Fun jobs usually don’t pay as well. It’s a binary choice: pleasure or cash. 

Joseph Campbell famously suggested, “Follow your bliss.” But Stephen Pollan replies, “To search for work that’s fulfilling emotionally is noble but quixotic, especially today.” Pollan suggests you labor for the money and then fulfill your emotional needs elsewhere with friends and hobbies.

Each has a point. On the one hand, at the end of your life you probably won’t wish you’d spent more time at the office. On the other, it’s hard to watch your kids’ faces redden with shame every time you drive them to school in your rusty beater.

Most people take the cash and put up with the boredom.

We perform our work duties repetitively — over and over, forty hours a week, month after month — for decades. Even the most stimulating hobbies grow tedious at that rate of effort. If we search for pleasure on the job, we’re sorely disappointed. (As the saying goes, “That’s why they call it work.”) No wonder we’re exhausted at day’s end and can barely keep our eyes open in front of the TV set.

Even if we labor at something we love — an art or science, a sport, an outdoor activity — we can get caught up in endless paperwork and the constant hustle for funding or clients. The calling we once loved becomes encrusted with an overgrowth of dull chores.

Maybe we’re looking for the solution in the wrong place. Perhaps there’s more to the issue than “fun versus money”.

One of the joys of life is to create value for others. And some of the sweetest words in English are “Thank you!” and “Good work!” We’ll gladly toil all day just to hear them. Besides, nearly every business produces things people want to have, so there can be at least some sense of mission, no matter where you work.

Another of the great joys is is to attain mastery in a craft or skill. The auto mechanic tunes an engine the way a woodworker turns a table leg or a stylist trims a head of hair. When we do it right, we get a type of “high” that’s hard to imitate — the well-thought-out brief; the artfully managed negotiation; the report that solves the production problem.

Most jobs have moments of social fun. I sometimes visit a fast-food restaurant where the workers enjoy each other’s company, joking and kidding, and are warm and cheerful to the customers. At most offices, you can get a similar experience during lunch breaks and around the water-cooler. 

Of course, the money we earn is fundamental. It’s a great pleasure (and often a relief) to deposit those paychecks into our accounts.

Since it’s hard to get too much positive feedback from others, and because we can never sustain ultimate perfection in the things we do, the creation of value and the pursuit of craft are two stimulating goals that can help meet our need for career satisfaction. The fun we find at work, and the paychecks we receive, begin to seem almost like extras.

It appears, then, that we have four ways, not merely two, to fill out a satisfying work experience:

  1. Create value: The goods or services we provide — whether to a client, boss, or co-worker — add benefit to people and give meaning to the tasks we perform. Any way we can improve value will add to our experience in the workplace.
  2. Master the craft: To do great work, we must test ourselves and rise to the occasion every day. A good job well done is like a badge we pin on our souls.
  3. Have fun: We can look for and share positive social moments at work. Beyond the enjoyment, they help bond us to our cohorts and improve teamwork. 
  4. Get paid: The more we emphasize 1, 2, and 3, above, the more our earnings can improve, either here or at the next job.

Notice that “fun” has dropped a couple of ranks, and “value” and “craft” now provide most of the focus.

When you stress value creation and high quality, your work morphs from “boring routine” to “meaningful calling” and your experience changes from “punching a clock” to “answering a challenge”. The job no longer feels like drudgery and, instead, takes on a sense of purpose. Both Joseph Campbell and Stephen Pollan would be proud of you.

The fun and money? They’re just icing on the cake.

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