Avery Dennison is an office services and supplies company that makes a wide variety of products. While the labels and binders used in offices across the nation are certainly not the sexiest products ever sold, they are surprisingly profitable. The company has been a leader in advancing RFID technology through its retail information services segment. RFID tags, which use radio frequency technology to tell computers where they are, represent the next big change for the retail industry.
Wal-Mart is using its tremendous market strength to mandate RFID tracking throughout the supply chain. As a consequence, most of America's retailers will soon be following suit. Bar coding was a revolution in the way business is conducted that also made Avery Dennison a lot of money. RFID technology is the next wave.
Showing posts with label Wal-Mart. Show all posts
Showing posts with label Wal-Mart. Show all posts
Friday, June 29, 2007
Monday, June 25, 2007
The Kroger Co.
Kroger is the United States number one standalone grocery retailer. While the company is smaller than Wal-Mart's grocery division, more than $60 billion in annual sales is nothing to laugh at. The company's location in the South and Midwest occurred by no accident. The company has repeatedly tried to compete in western Pennsylvania but has been unsuccessful due to a series of management missteps, local competition, and labor difficulties.
Kroger runs a series of grocery stores that don't particularly attempt to compete on price. Rather, the company has succeeded in convincing numerous consumers to pay significantly more for cleaner stores with more employees.
Ironically, Kroger's strength in the Midwest is actually more of a liability than an asset in the near term due to continuing economic weakness there. Kroger's southern stores have been repeated out-competed by H-E-B, most notably in San Antonio, and Wal-Mart.
Kroger is not a particularly good value for its customers and investors should look elsewhere for profits in this sector. Wal-Mart is certainly more than a grocery store, but the rest of the company is a better bet for future growth than Kroger's stale, over-priced brands. If you're looking for a pure play on the grocery market, consider Whole Foods Markets. Impending strikes throughout California will give Whole Foods' labor-unfriendly business model a competitive advantage.
Kroger runs a series of grocery stores that don't particularly attempt to compete on price. Rather, the company has succeeded in convincing numerous consumers to pay significantly more for cleaner stores with more employees.
Ironically, Kroger's strength in the Midwest is actually more of a liability than an asset in the near term due to continuing economic weakness there. Kroger's southern stores have been repeated out-competed by H-E-B, most notably in San Antonio, and Wal-Mart.
Kroger is not a particularly good value for its customers and investors should look elsewhere for profits in this sector. Wal-Mart is certainly more than a grocery store, but the rest of the company is a better bet for future growth than Kroger's stale, over-priced brands. If you're looking for a pure play on the grocery market, consider Whole Foods Markets. Impending strikes throughout California will give Whole Foods' labor-unfriendly business model a competitive advantage.
Family Dollar
Family Dollar's market location at the very bottom of the retail food chain puts the company in what would seem to be an unenviable position. But in spite of spending the entirety of its existence in more or less direct competition with Wal-Mart, Family Dollar has found the means to not only survive but thrive.
Operating more than 6300 stores all across the United States, Family Dollar has more than doubled in size in just the last seven years. Since taking over in 2003, the son of the company's father has more than demonstrated his business acumen. This smooth transition indicates that the current management is going to be quite stable for the foreseeable future.
Family Dollar has demonstrated an ability to grow its core business no matter the prevailing business environment. If the economy booms, more people will shop in its stores. If the economy falters, many consumers will shift from more expensive retailers and continue to drive the company's bottom line.
Family Dollar is an excellent long-term investment, but the stock should not be purchased at any price. Pay close attention to the company's ability to drive same-store sales. The company has put many new stores in business very recently and will need to demonstrate an ability to continue to grow sales at these locations.
Operating more than 6300 stores all across the United States, Family Dollar has more than doubled in size in just the last seven years. Since taking over in 2003, the son of the company's father has more than demonstrated his business acumen. This smooth transition indicates that the current management is going to be quite stable for the foreseeable future.
Family Dollar has demonstrated an ability to grow its core business no matter the prevailing business environment. If the economy booms, more people will shop in its stores. If the economy falters, many consumers will shift from more expensive retailers and continue to drive the company's bottom line.
Family Dollar is an excellent long-term investment, but the stock should not be purchased at any price. Pay close attention to the company's ability to drive same-store sales. The company has put many new stores in business very recently and will need to demonstrate an ability to continue to grow sales at these locations.
Costco
The membership warehouse club business has high volume and low profit margins. Costco's five hundred plus warehouses have a combined annual revenue of over $60 billion, but only a little over $1 billion in profits. Now $1 billion is nothing to sneeze at, but 132,000 employees could be expected to create many multiples of that in almost any other business.
For a company founded in 1983, the business has demonstrated a history of phenomenal growth. Yet after an industry shakeout that bolstered Costco at the expense of its primary competitor Sam's Club, the current environment doesn't appear to offer Costco another reprieve.
Costco's business model is built on fewer warehouses operated by much more highly paid employees moving truly prodigious amounts of product in order to beat back Sam's Club and its major trump - Wal-Mart's accumulated relationships and business acumen. Costco is much more labor friendly than Wal-Mart and that actually translates into a significant competitive advantage in Blue America. Unfortunately, Wal-Mart's size and unprecedented competitive drive ensure razor-thin margins.
Costco has created tremendous wealth in the relatively short time it has been in business, and no particular trend aside from a wholesale economic downturn is likely to drag the company under. Unfortunately, Wal-Mart is better positioned to use its greater size to extract greater profits and squeeze its smaller competitors. Costco is a fine business on its own, but stock symbol COST is only worth holding on to. Any new capital should be invested in either industry leader Wal-Mart or an industry with greater profit margins.
For a company founded in 1983, the business has demonstrated a history of phenomenal growth. Yet after an industry shakeout that bolstered Costco at the expense of its primary competitor Sam's Club, the current environment doesn't appear to offer Costco another reprieve.
Costco's business model is built on fewer warehouses operated by much more highly paid employees moving truly prodigious amounts of product in order to beat back Sam's Club and its major trump - Wal-Mart's accumulated relationships and business acumen. Costco is much more labor friendly than Wal-Mart and that actually translates into a significant competitive advantage in Blue America. Unfortunately, Wal-Mart's size and unprecedented competitive drive ensure razor-thin margins.
Costco has created tremendous wealth in the relatively short time it has been in business, and no particular trend aside from a wholesale economic downturn is likely to drag the company under. Unfortunately, Wal-Mart is better positioned to use its greater size to extract greater profits and squeeze its smaller competitors. Costco is a fine business on its own, but stock symbol COST is only worth holding on to. Any new capital should be invested in either industry leader Wal-Mart or an industry with greater profit margins.
Wednesday, June 20, 2007
Best Buy
The mass-market electronics business is a notoriously difficult nut to crack. Aggressive competition from players like Circuit City is only half the battle. Discounters like Wal-Mart and slightly more upscale venues like Target are eager to gain a piece of the market. And when traditional powerhouses like Radio Shack enter the mix, consumers have enormous options and retailers have significant competition.
The entire business model has changed significantly due to all this competition. What once would have been blockbuster models are transformed into loss leaders. Best Buy can't undercut competition from Wal-Mart when Wal-Mart cuts prices on game systems so low that droves of customers literally crush each other in a mad stampede to get the hottest new product.
Yet the rewards for winning the competition for this sector of retail are especially rich. Best Buy can afford to heavily saturate its stores with sales personnel. While Wal-Mart's customers are left to their own devices, customers at Best Buy need to fight past waves of employees just to reach the merchandise. And in a complicated field like electronics, many customers really appreciate this approach.
While competitors like Circuit City have repeatedly disrespected and underpaid their employees, Best Buy has created an employment paradise. And consumers ultimately benefit.
The entire business model has changed significantly due to all this competition. What once would have been blockbuster models are transformed into loss leaders. Best Buy can't undercut competition from Wal-Mart when Wal-Mart cuts prices on game systems so low that droves of customers literally crush each other in a mad stampede to get the hottest new product.
Yet the rewards for winning the competition for this sector of retail are especially rich. Best Buy can afford to heavily saturate its stores with sales personnel. While Wal-Mart's customers are left to their own devices, customers at Best Buy need to fight past waves of employees just to reach the merchandise. And in a complicated field like electronics, many customers really appreciate this approach.
While competitors like Circuit City have repeatedly disrespected and underpaid their employees, Best Buy has created an employment paradise. And consumers ultimately benefit.
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