Tag Archives: Retail

Bloomingdale’s Warehouse Fur Sale – Proof That Even Luxury Goods Retailers Are Hurting ?

You are more likely to find us at a PETA meeting than in the fur salon at Bloomingdale’s, and we usually don’t pay much attention to advertising for fur coats. Besides, who needs fur, when you already have, well… fur! (see our picktur). But with everyone’s preoccupation these days with the economy, and the fears of a prolonged economic recession, I guess we have fine tuned our radar to keep an eye on advertising and retail trends.

We just heard a radio commercial advertising Bloomingdale’s warehouse fur sale. Now perhaps they have this sale every year, but I can’t recall hearing or seeing this in the past. If this is a new marketing gimmick by retailers of high-end products, we think it is confirmation that the economic slump has finally reached the luxury goods market.

RoutingByRumor’s economic rule of thumb # 1: You know it’s really a recession when the luxury goods market is hurting, or when you can’t unload your mansion at any price. What’s next? Buy-one-get-one-free deals from Rolls Royce? A De Beers warehouse sale? Buy one Learjet, get the second one for half-price?

Now don’t go running out to your nearest Bloomingdale’s store. The advertisement indicated that the sale is taking place at their fur warehouse, which is actually the Danish furrier Birger Christensen’s warehouse. Birger Christensen / BC International Group (BCIG) appears to be the largest fur retailer in the United States. (As an aside, I stumbled across some interesting info about an action that BCIG brought against another retailer to gain control of the Internet domain “maximilian.com”.)

We’ve read that Bloomingdales is not Birger’s customer, but rather it’s landlord. Birger Christensen leases space in Bloomingdale’s stores and operates the fur departments with their own employees. This, coupled with the fact that the “warehouse sale” is taking place at BC’s warehouse, tells us that it is not Bloomingdale’s holding the warehouse sale, but Birger. It would be our guess that the inventory is owned by Birger, and not by Bloomingdales (or by any of the other retailers where they operate their fur salons).

With BC’s purchase of Evan’s, Inc. almost ten years ago (see this article about Evans’ history), they operate the fur salons in Bloomingdale’s, Carson Pirie Scott, Dayton’s, Filene’s Basement, Goldsmith’s, Hudson’s, Lazarus, Macy’s, Marshall Field’s, Rich’s, and Saks Fifth Avenue stores (see related article, circa 1999, so this list may have changed somewhat). We don’t know if any other retailers use warehouse sales to move luxury product inventory. Our guess is that even if they haven’t in the past, you might start seeing them doing so now, as the economy continues it’s downward spiral. See this New York Times article about a disappointing holiday season for the nation’s retailers.

As the downturn of the U.S. economy continues, we think you’ll see indications that more and more retailers are in trouble, across the board. As we wrote yesterday, we doubt the U.S. economic stimulus plan that was announced yesterday will do much to stem the tide.

If the IRS hurries up with those tax rebate checks, perhaps you’ll get yours in time to run down to the “Bloomingdale’s” warehouse fur sale and do your part to stimulate the U.S. economy. You’ll look stunning in that new chinchilla.

– RoutingByRumor

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Chinchilla

Aw, he’s sooooooooooo cute. Maybe we’ll get a faux fur coat instead.

 

2/26/2008 Update – Here’s more proof that high-end retailers are feeling the squeeze… This article from CNN indicates that Nordstrom’s sales were down almost 9% in the last quarter.

 

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Shrinking Products – Pay More, Get Less !

This is the first installment of what will be a continuing category of articles from RoutingByRumor. We will be documenting the most egregious examples of popular consumer products that are shrinking, being downsized or otherwise reduced in quantity or quality by manufacturers often employing “deception engineering” in an attempt to hide the changes from consumers.

Shrinking Product # 1 – Scott Toilet Tissue

Perhaps the most visible and distressing shrinking product category is paper products. Paper manufacturing requires large amounts of energy and water, and transportation costs represent a larger portion of the finished product’s price than most products. Because of their weight and bulk, paper products are particularly vulnerable to increased energy, transportation and raw materials costs.

The result has been ever decreasing quality and quantity of tissues, toilet paper and paper towels, to name just a few paper products. One of the largest manufacturers, Scott / Kimberly-Clark of Neenah, Wisconsin, has responded by a series of price increases and successive product downsizing.

Focusing on one Scott product, toilet tissue, we will examine some of the tactics Scott has employed in am attempt to camouflage the fact that you are paying much more for much less. One of Scott’s flagship products is the 1000-sheet roll of tiolet tissue. In the last few years, the retail price of a 1000 sheet roll of Scott toilet paper has roughly doubled, from about 45 cents (US) to about 90 cents. But the price increase only tells part of the story.

While Scott still advertises (in my opinion, deceptively) that it still contains 1000 sheets per roll, a roll of Scott tissue is substantially narrower and shorter than it was a few years ago. Since I started keeping track, the size of each individual sheet has gone from 4.5 x 4.4 inches (19.8 square inches), to 4.5 x 3.7 inches (16.65 square inches). Each time Kimberly-Clark has downsized the roll of ScottTissue, it has shrunk by almost ten percent. While I am not absolutely certain about this, I believe that if you go even further back in time, the standard toilet paper roll was 5 inches wide. I believe the tissue is substantially thinner, and in my opinion, much lower quality than it was previously. Another attempt to hide the reduction in quantity is to wind the roll on a much larger diameter paper tube, and to emboss the tissue, adding bulk without adding paper, so the outside circumference of the roll appears larger. Another indication of the decreasing amount of tissue on each roll is weight. Pick up a 6-pack or 12-pack of toilet paper these days, and it feels like it weighs perhaps half as much as it did a few years ago (some other brands are even worse).

In my opinion, the most insidious part of this is not that you are paying more per roll. It’s that because you are getting less in each roll, they are forcing you to buy more and more rolls (assuming that your consumption remains constant). It’s like the oil companies figuring out how to produce gasoline that provides lower and lower miles-per-gallon, forcing you to fill up more often, on top of the fact that the price-per-gallon keeps going up! Reducing a product’s size or yield masks the true extent of a price increase.

You are paying about double, but qetting 15-20% less than you did a few years ago, of a product I believe is substantially lower in quality. While Scott does not disclose the percentage of recycled fibers in their toilet tissue (or in any of their other products, to my knowledge), I have to believe their toilet paper is either made from 100% recycled paper, or it is made from predominately recycled fibers. I base this conclusion partly on the fact that when it comes in contact with water, it disintegrates instantly. I believe that is an indication that the length of the cellulose fibers is extremely short, and indicative of recycled fibers.

Of course, the proof is in the pudding, as the saying goes. Without getting too graphic, I believe the efficacy of Scott toilet tissue has decreased substantially as a result of Scott’s tinkering with the recipe, if you will. Certainly, there is a lower limit, at which a product’s size, quality and value will drive consumers to choose a competing product. My guess is that for some consumers, that limit has already been reached by Scott / Kimberly-Clark. I guess manufacturers try to find out what that limit is, without exceeding it.

Here’s some photos of the “Incredible Shrinking Roll” of ScottTissue.

(Note that the most recent wrapper below no longer unequivocally says “Made In USA”, but rather states “Made in USA of domestic and imported materials”, and fails to provide further details as to what percentage of the product is domestically sourced.)

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1000 sheets @ 4.5″ x 4.4″ = 137.5 square feet scott-45x40.jpg
1000 sheets @ 4.5″ x 4.0″ = 125 square feet

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1000 sheets @ 4.5″ x 3.7″ = 115.2 square feet

LATE BREAKING NEWS…

Dateline: June 8, 2008

CVS Stores has just beaten Scott Paper in the race to create the world’s smallest roll of toilet paper.  Read all about it here.

– Routing By Rumor

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CompUSA Goes Belly Up

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As Queen elequently put it, Another One Bites The Dust (watch the youtube video)

… and now, we can report that CompUSA bytes the dust.

Gee Whiz, I must be psychic or something. Just a few days ago, I posted a comment on this blog that CompUSA, a chain of computer stores in the United States, would soon bite the dust.I just stumbled across this article on Reuters and this article on cbsnews that confirms that CompUSA is on it’s way out. According to Reuters, the chain has been sold to the liquidation outfit Gordon Brothers. They will be closing the remaining 103 CompUSA stores in early 2008. No surprise, actually, since CompUSA closed most of it’s stores earlier this year. In recent years, CompUSA was controlled by Mexican businessman Carlos Slim Helu, reportedly the richest person on the planet, even wealthier than Bill Gates or Warren Buffet (see this Fortune article on Carlos Slim).

Have you ever seen a tree that was pruned to death? After a certain amount of pruning, the death of the tree is inevitable, because it can’t absorb enough sunlight to survive. So too with computer retailers (or any business, I suspect). I was quite certain that it was simply a matter of time before CompUSA was history. That time appears to be at hand.

I don’t have an MBA. I’m not an accountant or a retail executive. I’m a computer geek. But I know mismanagement when I see it, and CompUSA was a poster child for piss-poor management. I can’t tell you how many times I went into one of several local CompUSA stores to purchase sale items and came up empty-handed. So, I would walk over to one of the computer terminals that the sales staff used, and I would enter the SKU of the item I was looking for. Nine times out of ten, the computer showed that the store had stock on hand, sometimes a large quantity, but it was nowhere to be found. A few times, when I would pester one of the salespeople to go check the stockroom, they would usually find the item in the back, and bring one out for me. Sometimes, they wouldn’t want to bother because they did not have any confidence in the inventory quantities shown in the computer. Maybe that was just an excuse because they were lazy, or maybe their inventory tracking really was inaccurate. Sometimes they would say it was in the store somewhere, but they didn’t know where.

What a joke. I mean, if you go through the trouble of ordering inventory, printing up a sale circular, and shipping the item to your stores, but you don’t follow through and put the stuff out on your sales floor so it will sell, you don’t belong in business. This wasn’t a rare occurance. It was the status quo at CompUSA. I am confident that if you put me in charge of CompUSA, I could have done a better job. Who knows, maybe I could have saved them. I think part of the problem was that the chain had changed ownership years ago. When any business gets sold, especially if the new owners are investors and/or absentee owners who don’t know the business, look out. With some very rare exceptions, nobody will do as good a job running the business as the person or people that founded it. They don’t have the same passion. If the business fails, they’ll just move on to something else. There’s little devotion or emotional attachment, because it’s not their baby.

The sales people at CompUSA were rarely motivated. I suppose they didn’t earn enough to get real excited about their jobs. The store management was pitiful. There were a couple of employees at the CompUSA I frequented the most who did work hard, and I felt very badly for them losing their jobs when that store closed.

I recently posted this article about rebate scams. I had more than my share of problems with rebates on items I purchased at CompUSA. I complained a number of times, both to the CompUSA store where I purchased the items, and to their customer service phone number. There were many rebates on items I purchased at CompUSA that I got cheated out of, and never received.

You know, to be honest, CompUSA was never my favorite computer store anyway. I preferred the Computer City chain, which closed circa 1998 or 1999, if memory serves me correctly. Computer City was purchased by CompUSA. They closed some Computer City stores and turned the rest into CompUSA stores. Egghead Software was also pretty good, although they operated much smaller stores and did not carry a lot of hardware. Today, Egghead is strictly an online retailer. The newest chain to open in my neck of the woods is Micro Center, which started out in Ohio, and has expanded to almost two dozen stores. Micro Center is a pretty cool store. It looks like there are a lot more good deals to be had there, and they claim that they have prices as good as you’ll find on the web. They sell brand name (Dell, IBM, Compaq, etc.) brown-box “refurbished” computer systems alongside their big selection of new systems. They cater to system builders and gamers and have a pretty large Apple department. They also have a nice computer book and magazine section, nearly as large as you’ll find at Barnes & Noble or Borders Books. On several occasions I’ve picked up some bargain-priced (not-current edition) but otherwise new books for under five bucks each. They even have free Internet access kiosks, so you can comparison shop without leaving the store! There’s little in the way of computer hardware that they don’t carry. If there’s a Micro Center near you, you have little reason left to buy stuff online.

Life goes on. Other computer retailers will come and go, to be sure. Perhaps my opinion of CompUSA will mellow as the memories fade to black.

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eBay – A Buyer’s Market or a Seller’s Market?

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I love eBay. I hate eBay. I’ve used eBay since 1999.

If you are looking for a hard to find, vintage, used, discontinued or rare item, eBay is the first place to look. If you want to find the latest tech gadget at less than retail, check eBay first. A lot of people won’t even consider buying something online or at a “brick-and-mortar” local retailer without checking the price on eBay first.

With all those “Get Rich Selling On eBay” books and seminars out there, you would think everybody could quit their day job and watch the money pour in when they become an eBay seller. Don’t bet on it. Most eBay sellers hardly make enough to make it worthwhile. When you factor in the amount of time you have to invest to set up an auction, respond to buyer’s questions, deal with deadbeat bidders, and pack & ship the item, and the cost of eBay’s and PayPal’s fees, it’s hard to make a profit. Meg Whitman, eBay’s CEO, and eBay’s stockholders have made fortunes on eBay. If you want to make money on eBay, buy some eBay stock rather than trying to sell on eBay.

eBay has incrementally introduced new features over time that makes it a more secure and useful platform, but eBay has also devolved into an uneven playing field that benefits few but eBay itself. In category after category, you have sellers selling items for pennies, but charging outrageous amounts for “shipping”. Even the majority of sellers who aren’t selling through “Buy-It-Now” auctions for $0.01 are still inflating their shipping charges to try and make some money. This is especially true with sellers from countries like Chins, which have become a larger and larger presence on eBay.

I’ve seen it over and over again… For example, very small items selling for a few pennies, but with a $29.00 shipping fee. Shipping that will cost the seller anywhere from a first-class postage stamp to perhaps a dollar or two. Few buyers or sellers seem to care much about the practice, and eBay is certainly not complaining. There is so much competition between sellers that they all have to resort to this tactic. eBay actually helps sellers inflate their shipping fees by allowing them to build their margin into eBay’s auction shipping charge calculator.

Why is this happening? eBay does not charge a commission (final-value fee) for shipping charges assessed by a seller, so sellers shift all or most of an item’s cost to the shipping fee. eBay appears to have made no serious attempt to curb this practice. Why? I think it’s because eBay also owns PayPal, the bank thru which the vast majority of eBay transactions are paid for. If eBay doesn’t get their cut thru auction fees, it will still earn it’s money through PayPal fees.

If you’re looking for a bargain on the latest high-tech gadget, I doubt you’ll find a bargain on eBay. Items that are in demand usually sell for prices close to retail, especially when you add in the “shipping” charge. Most eBay sellers will not accept returns or issue refunds. Many manufacturers will not honor rebates or warranties on items purchased thru online auctions. While most sellers do a good job of describing an item and it’s condition, some do not. Some are deceptive.

For items like used or out-of-print books or DVDs, eBay is great, and there are many bargains available. I think eBay has done more for the environment by keeping stuff out of landfills than any recycling program has ever done. If you want to get rid of it, don’t throw it out. Put it on eBay.

One of eBay’s strengths is it’s feedback system. I like the very democratic rating system, where buyers get to rate and comment on sellers and vice versa. It encourages people to treat other eBayers they deal with fairly. It also holds you hostage to some extent. You have to avoid giving negative feedback to someone you’ve dealt with, even if it is justified, for fear of receiving retaliatory negative feedback. The feedback system is a double-edged sword.

…When I continue, I’ll discuss some of the issues I’ve touched on in greater detail.

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The Walmartization of America

Wal-mart

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What better way to start my blog than by bashing Wal-mart? After all, they are the retail behemoth that people love to hate. I guess it must be jealousy.

I was never in a Sams Club or Wal-mart store until last year, when a Walmart sprung up about 15 minutes from my home. With their reputation for low wages, poor or non-existent employee benefits and brutal business practices, I wasn’t too eager to become a Wal-mart customer. In fact, the rumor around here is that “Sam’s Club” actually refers to the big stick that Sam Walton would use to beat up his suppliers and the competition. They don’t call us Routing by Rumor for nothing. I did want to check them out, however, to see if their prices were really that good. I consider myself a very savvy shopper. OK, I’ll admit it… I’ve now shopped there several times since they opened.

My first impression was that Wal-mart is K-Mart on steroids. (I hate K-Mart, and won’t shop there.) Wal-mart is very similar to Target stores also. Lots of low-end merchandise. Cheap shoes. Cheap clothes. Not cheap as in inexpensive; cheap as in, well, cheap. I think Target tries to position itself as selling somewhat more upscale clothing. I’ll call it “cheap chic”. And don’t forget that K-Mart has (or had) Martha Stewart. I guess we’re talking higher quality made-in-China merchandise.

Wal-mart does sell many staple items at rock-bottom prices, but many other popular items are priced no lower than other retailers. You can do better on many, perhaps most items at most other chains or supermarkets, especially when an item is on sale, and particularly on grocery items. I felt that some of Wal-mart’s private-label food items I tried were of inferior quality, and not a very good value. Kind of ironic, since one of their private-label grocery brands is called “Great Value”.

Prices seem to jump around a lot at Walmart. Their price “roll backs” come and go, and I’ve seen some items, especially on the last few visits, jump 20%, 25%, or more. I think the bottom line is that you save on one item, but give back what you just saved when you pick up the next item and place it in your basket.

Being the geek that I am, I gravitate to the electronics department of any store I find myself in. I found a few bargains there, but in general, you can do much, much better buying stuff online, a la Amazon or ebay. On some really hot items, like Apple iPods, Wal-mart prices are pretty close to MSRP. I’ve found some small local or regional electronics chains that beat Wal-mart’s prices on electronics by 10% or more.

One thing I’ll concede about Wal-mart, though, is that returns are never a hassle. They seem to be much more consumer-friendly with returns than many large retailers are these days. One other thing that you’ll only find at Wal-mart is that they sell the local newspaper for half-price. I’ve never seen anyone discounting a newspaper at the newsstand, much less selling it for half-price. Obviously, it’s a gimmic, but it is a nice little surprise.

They have gotten a lot of good press lately because of their very low prices for generic prescription drugs. They also have excellent prices on their house-branded OTC drugs. I guess these cheap drugs make up in some small way for the otherwise poor health benefits they offer their employees. Then again, if you can’t afford to see a doctor, you can’t get a prescription for the cheap medicine. Another Wal-mart paradox, I suppose.

What surprises me most about Walmart is how many items are out of stock on each shopping trip. I don’t think it’s so much a case of them having a run on many items, as it is a logistical or management problem. I suppose the really talented, experienced retail people don’t apply for jobs at Walmart. That’s not to say that they don’t have good people working there. They do, and I empathize with anybody that works hard and does not get a decent salary and benefits. Is America better off with the Walmarts, Home Depots and other giants that have decimated virtually all of their retail competition? I think not.

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