Saturday, June 27, 2020

Does the Future of the Workplace Belong to Generalists?

Is This the Key to Productivity?

Certainly the cost of labour using more productive staff with more comprehensive knowledge will reduce cost, increase profit, and/or increase the standard of living of those productive staff who are paid more for their skills, which will trickle down in their own consumption.

This article by a Harvard Lecturer is spot on. It should be required reading for all recruiters, HR, Hiring Managers, Owners- well- everybody.

Organization structure today is built around silos of specialists, which is not only inefficient but can be dangerous. For example, if someone in Department A makes a critical mistake in product specifications not caught by Department B, whose only responsibility is to execute it, they will not catch the mistake because it is as written, even if it is wrong. A generalist responsible for the whole process would have a 90%+ chance of a. not making or b. catching such a mistake.

Also, I am constantly shocked by companies' ignorance of the fact that, regardless of the product, the sourcing and manufacturing process is almost identical in every case. What is more, I found that if I could successfully produce shirts, which will have dozens of specifications and parts (worth a couple dollars), that it was super easy for me to correctly evaluate a crusher plant worth $500K.

I am not sure what the speed of recognition will be-if at all- but I am sure that COVID-19 may be the stimulus needed to start people thinking this way.


Wednesday, June 24, 2020

Should Amazon Buy Macy's?

Be careful what you wish for? (Or be smart and invest)


Many times in my various marketing courses I have used Scott Galloway’s The Four (Apple, Amazon, Google, Facebook) as a text to highlight what today’s winners in marketing did to become the world’s 5th largest country, combined; Galloway’s T Algorithm tells us what they have in common, and his New Algorithm of Value shows us why they will continue to grow.


In my lecture, using the numbers to illustrate their position vis a vis other famous companies, I compared market cap, debt etc. of the four in historical perspective with companies including Macy’s, Coach, Tiffany, Gap, Sears, Penneys, etc. The winners and losers, as it were.

And I said, repeatedly, only half joking, "Amazon could buy Macy's with pocket change." My investment in Amazon keeps getting better; my avoidance of Macy's keeps getting smarter.


So, when looking at Macy’s, whose name has equal or better name recognition with Amazon, it is shocking to see the difference in market cap. Imagine: With equal name recognition, Macy’s market cap today is a little more than 2 billion, Amazon’s is $1.5 trillion. A multiple of 750 Billion times.


Macy’s has a debt of $7.8 Billion to detract from the market cap, so its value is a net minus. Amazon’s debt is listed today as $78Billion, or .05 of its market cap. Cash for Amazon is listed at $49Billion; Macy’s is $685Million. Not mentioned, rarely mentioned when the vultures are circling, is that Macy’s real estate holdings are probably worth more than its market cap and debt combined.


So, however you value the deal, Amazon can buy Macy’s with chump change. Or, even better, their market cap increased by $548BILLION from its low point in March 2020, and $301Billion since its previous high in February 2020.


The above establishes clearly that, for Amazon, buying Macy’s is NO PROBLEM financially.


But SHOULD they?


From Bezos’ standpoint, first, at least these:


PRO- they are getting a brand name that has as much persona as any other in retail.


PRO- Herald Square location is the prime shopping location in the US, maybe in the world.


PRO- Real Estate value of Herald Square, if sold or rented out, has to beat any price Amazon would pay in a buyout. This doesn’t include real estate value of the balance of the Macy’s locations, many of which are in the heart of other cities in the US.


PRO- There is little inventory risk, as I am sure it would be included as a liability in any deal. Even if it isn’t.


PRO- Amazon/Macy’s could only enhance both brands and would give Amazon extra juice on their web site.


PRO- The Bloomingdale’s division gives Amazon entry into better goods that they have been salivating for. Amazon has not been able to develop anything worth buying for more than $20.


PRO- They (maybe) can add vendors who are not under the Amazon umbrella, such as Canada Goose.


From my standpoint:


PRO- Macy’s has done nothing but talk about rebuilding their brand; but still they exist in the nether world between luxury/designer (few of these will even sell to Macy’s) and mass market like Walmart, Target and TJX. They need a radical makeover, and management are frozen in their tracks, or don’t get what is needed. Amazon can and would do it. Nothing to lose.

(Macy’s needs to become a specialty brand store, and/or a department store in the original incarnation, which they were in the 60’s and 70’s)


PRO- Amazon name and products/other ecosystem components (like ordering from Alexa) can only make the stores not only more relevant, but more interesting.  Amazon can build a unique shopping experience in the best location in the country and others across it.


PRO- Build a Whole Foods in the basement.


Are there any CONS to this transaction?


The only one is for the executives that will lose their fat undeserved bonuses and will have to deal with the reality of their failure.


What does Amazon have to lose? Is this out of their lane? NO. We know they need to strengthen their Brick & Mortar presence. And now, they will be able to inhabit non-food (and maybe food too) retail in every major mall and major city in the US.


IF, in the end, the name Macy’s is worth nothing more than a parade, Amazon will either make profit on the real estate sale or build something better in place of the stores that were there.

Above are the common sense retail marketing reasons; there are more which I will leave to the analysts.


This, friends, is the beginning of Amazon’s Omnichannel Opportunity.

Monday, June 22, 2020

Not Understanding the Relationship Between Price and Value Can Be (Is, Was) Lethal

Brands and Retailers: Urgent Correspondence


In her thought-provoking book, “The Value of Everything: Making and Taking in the Global Economy,” Mariana Mazzucato explains that the determinants of value had changed for many economists- and companies. What does she mean by that?


She says that, previously, the determinants of value actually shaped the price of a good or service. Lately, however, that relationship has gone into reverse and the price of a good is determining its value.


Let me explain the meaning and significance of that statement. Depending on how much value I see in the good or service (be it emotional, functional, or status) will depend on what I am willing to pay for it; In the reverse definition, the relationship reverses itself: The value of a good is determined by how cheaply I was able to buy it.


So, given the first definition, if I pay $100 for a shirt because of its materials, design, quality, sustainability, etc. I will consider that I paid for the characteristics and attributes of the item, and I would have paid more if that is what it took to acquire it; the second way, if I paid $30 for a similar shirt, no matter if it matches the first in quality, design, durability, etc. I got a real value for my money- aka Bargain.


Are there people who just can afford an $30 shirt and can’t pay for the $100 one? Sure. But, as Ms. Mazzucato is implying, most of the potential customers are those who could afford both, but whose minds got infected by the perverted definition of value.


For brands, letting (or encouraging) your customer to apply the second definition of value can be lethal- and has been for many brands and retailers who are, or are about to be, extinct.


Let’s start with Brooks Brothers, who Forbes reports is about to go into bankruptcy after nearly 200 years of existence. When you think of Brooks Brothers, what do you think of? I bet your answer is shirts. In recent years, the company has externally, and clearly internally, deemphasized their shirt business. Instead of making efforts to be in the forefront of fashion, color and pattern, and maybe translating their mens business to women, they decided it would be a better strategy to reduce the price of their shirts (same shirt) for volume purchases. So the $92 shirt became a $69 shirt.


So here’s how it ties to the above concepts of value and is one reason Brooks Brothers is about to die, or at least get very ill: The shirt is a very good shirt that was worth the $92- durable, non-iron, etc. So the characteristics of value $92, determined the price of the item.


Now, at $69 the price determines the value of the item: I can get this shirt for $69 so that is its value. $92 is a distant memory to the consumer as their price/value equation has been reset.

And Brooks brothers encouraged this mentality by continuing to promote instead of coming up with shirts whose value could command the higher price. (Note: once you train the customer as BB did, it is nearly impossible to get them to reset their price/value equation back to the value/price formula.


Wait for it—So the brand is—DEVALUED.


Let’s take another example (I could talk all day here, but I think after this you will get the point)- A Retailer. There are so many stories I could tell, but let’s talk about Macy’s.


Why did people turn to shop in department stores? Tracing the history back to the late 60’s, when I entered the picture in NY (not Macy’s, but their main competitor), it was because they found value in the brands and the reputation of the retailer. Department stores did not only represent one price point of value- there was budget, moderate, bridge, better, designer which represented the tiers of value available to you within the same building. All represented value for their target customers- and even, if you had a special occasion or got a raise/promotion, you could upgrade to the next levels.


Yes, there were sales. But these consisted of two things, neither of which could be expected: Markdowns on items that didn’t sell and specially bought or arranged promotions. But, as buyers, we lived for and were judged on what we could entice the customer to buy at first price- based on our ability to select.


After Macy’s took on tremendous debt by eating Federated, May Company and Broadway Stores in the 1980’s, someone decided that they needed to drive sales in a more predictable (?) manner by buying into and planning promotions rather than staking their business on the ability to select merchandise their customer would pay for because they considered the value. Wait- see- we just went from the first concept of value (value as a determinant of price) to the second one (price as a determinant of value).


And Macy’s did it very well: The price strategy had (and has) layers, conditions, and a schedule. But guess what? The customer figured out the schedule. So here we are at the same relationship- Price determines the value (today it is 25% off) but I know, even though the product may well be worth that price, that it will be 50% off really soon, so THAT is its value to me. Bottom line: nobody believes Macy’s any more.


Macy’s isn’t in Chapter 11-yet- but all the signs are there. If you look at the market cap of Macy’s, especially vs. other retailers like Walmart and Target, and where it has gone, you will feel embarrassed for them. Nobody in the corporation has the courage or insight to recommend a radical restructure. So where can Macy’s go? Their only chance is to become a real estate company (think about 34th Street- the rentals there would exceed the market cap).


Trust me, a company that sacrifices itself by F**ing up the value/price relationship is only left with one option: to secure funds for an impossible revival (because nothing is learned or it is too late) to the vultures of finance. What happened to Sears, JC Penney, JCrew, Toys ‘R Us, is a shameful end to a story; we resent vultures for eating leftover carcasses, but that is their role in the ecosystem. Forbes explains the case we have seen so many times lately:


Gordon Brothers, their new lender, is a fine firm run by smart people and very successful. But it is best known for expertise in bankruptcy and liquidation with extensive experience closing stores and liquidating them. Often when you see Gordon Brothers in a loan, it’s because no conventional bank will lend, and Gordon Brothers gets first dibs on running the liquidation in the event there is one.


Finally, let me answer a question that may be on your mind: What about those retailers, like TJX, who have built their businesses on price? Do they defy the concept?


Answer: No. Why? Because they got the relationship right. It does not matter at which level of the price scale they exist.


Let’s take TJX, with their TJ Maxx, Home Goods, Marshalls etc. stores. Once stores were allowed to open in parts of the country, these stores were mobbed. OK, you say, because their prices are cheaper. No.


These stores have not perverted the value/price relationship. They do not offer any pretense that the price justifies the value- their customer trusts them that, if they say the price is $9.99, that is the value. Unlike Macy’s.


Perversely, their buying philosophy is more akin to what we did in the late 60’s to what retailers like Macy’s are trying to get away with today. If we tell you this s**t is worth $19.99, it is. And their customers believe them in spades. And their selection process as opportunistic purchasers is at a very high level. Unlike Macy’s.


This is the key reason for the phenomenon that Steve Dennis calls Bifurcation 2.0: the department stores not only lost their relevance; they lost their credibility as value-determined locations and gave in to the reverse. In which they also are not credible, as is TJX.


So what is the future? Post COVID-19, many customers may reevaluate their value/price relationship. Anyone can buy a $30 shirt. But, if price is my thing, I go to TJ Maxx and satisfy my value/price relationship in one way, or I find some credible brands to give me the product whose value I want, for which I will pay.


Those who already got it wrong and are too arrogant to change, will see their carcasses consumed by vultures like Gordon Brothers or Eddie Lambert.


To me, this is not rocket science; what needs to happen, as our Native Americans say, is “open my eyes so I can see.” Or, strip away my bonus millions so I have to see.

Tuesday, June 16, 2020

Why you are not buying clothes (and should be)- Post COVID-19

(Author’s note: I first wrote this article in December of 2019- Pre-COVID-19. Now, 6  months later, is not only still valid but I believe it contains critical information and concepts for survival of the fashion industry, and direction for us as clothing consumers)


 AS of December, 2019, following were the top reasons you (and everyone else in US) are not buying clothes anymore:


1.     Clothes are boring- regardless of price, what can you buy that you don’t already have in your closet? How different is what you have and buy now than what your parents bought?

2.     “Low prices are not fun anymore”- As CNBC reported in October of this year, “Consumers have reached peak happiness with clothing purchases” “In other words, consumers already own so many clothes that each new item they purchase doesnt spark happiness.”

3.     Consumers have given up on department stores as a location for fashion inspiration- As you can see from the below chart, by age group, between 34% to 51% of Macy’s consumers have given up shopping there in favor of TJ Maxx, Target, Amazon, etc.

4.     There is too much to look at online; what should I buy?- The Paradox of Choice has befuddled us by giving us so many choices we don’t know what to believe anymore.

5.     Clothes are disposable- So I buy this heavily discounted clothing, and a few months later, I find that either I don’t like it anymore or it looks like crap.

6.     Myth: women should dress differently than men- This myth is probably perpetuated by the old boys club who fear (with good reason), that women will do a better job than them.


(Adding- Post COVID-19 comments)


7.     There is a stereotype attached to mens and women’s dressing which affects what is offered to and thus available to each. As with all stereotypes, it is inaccurate and leaves huge gaps between people’s real desires for clothing and what is available at any price. These stereotypes are perpetuated by cookie-cutter designs whose result is, ultimately, less purchasing because there are little differences between what is offered and what you own.

8.     Post-Pandemic, Apparel will be the least essential purchase, so there will be challenges to get you to buy something new.

9.     That said, you will want to look good because personal interaction will be the primary reward of the veil being lifted; and

10.   You will not have the imperative or opportunity to constantly shop for clothes as you did Pre-Pandemic; therefore, you will want what you buy to be classic, satisfying, and last a longer time.


Does this mean consumers are just not spending money? NO. In fact, for example, Millenials have increased their total annual expenditure by 233% since 2013. Yet, total apparel industry revenue has declined since then. So what are they spending their money on? NOT clothing.


CNBC again: “Put simply, consumers would rather spend their marginal dollar on, say, going out for a meal, than on buying a 60th item of clothing in a year,” 


But we all love clothes- IF they make us feel happy, appreciated, powerful, individual. Can anyone deny this? Social movements have all expressed themselves with clothing and style; in the 60’s and 70’s, the social revolution expressed itself dramatically in a change of style. Today, we have the LGBTQ and women/minority social revolution, (and our survival of the Pandemic) which will have much more of a lasting impact on society and the male/female persona than any other in the last 50 years at least.


SO, if we can feel that each purchase of clothes is an investment, not a fast-food purchase, we might actually buy more (in dollars).


Finally, at the same time, over the past few years, the sales and penetration of luxury brands has increased significantly. Why? Because the number 1 characteristic perceived by consumers is quality


So, what does this tell you about what you should do? Rid yourself of disposable clothing and begin to build a stable wardrobe of stuff that makes you happy when you wear it and will continue to support you as a wardrobe foundation?


But First- Wait, let’s be clear-tell me if you don’t agree- great clothing makes you happy every day. So if we get you excited, you may take some of that restaurant money and buy clothes, right?


Here’s an action plan:

    Throw out your disposables- First, throw out all those items in your wardrobe that you were seduced to buy because of 50% + another 20%, sale ends today, etc.

    Buy VALUE, not PRICE- Focus your expenditure on items that will satisfy your expectations, not just your wallet.

    Don’t buy anything that doesn’t make you happy every time you wear it- The self-esteem generated by a bargain will never match the self-esteem which you get from a really great garment.

    Understand that, in today’s global marketplace, luxury is AFFORDABLE for most of us- Don’t be afraid- you don’t need any tax returns or certification to buy excellent clothing.

    Think about clothing in terms of Lifetime Value: The ROI on clothing is much better if you buy something for $150 and keep it for 5 years than if you buy $29.99 and it falls apart in less than 1 year;

    Buy Brands that reflect your values (or even have some)- then what you are wearing will be a personal statement.

    IF you are not satisfied with the actions taken (not words spoken) re: Sustainability and Responsibility, don’t buy it.

    Interact with your chosen providers; they are anxious to hear from you (or should be)- Today, the customer is the CEO- make your wishes known.


There is no better way to express yourself than through the clothes you wear. Period.

So, until naked is legal in mixed company, let’s find a way to build our own custom presentation through clothing. You can!


Lotus & Michael- The Art of Shirts was started because we were not satisfied with what was out there- we tick all the above boxes. Post COVID-19, I believe you will see more and more brands like us out there-why? Because the customer is the CEO, and that is what they are guiding us to be.


Men and Women will always need clothes. And, if you are happy with your wardrobe, chances are good that others will be. Conversely, if you don’t care, neither will they.

Friday, June 12, 2020

Main Food-My Gift


What does this phrase mean to you? Meat? Fish? Something you eat before dessert? Something else?

I have been traveling to China for 30 years, have lived there for 10, and visited more restaurants than I can remember or count.

Until recently, my focus was to enjoy as many of the unique dishes as I could- meat, fish, even blood and offal.

When I was asked, near the end of the meal, “what would you like for your main food?” I was a little lost. Wait-didn’t we just eat, like, 15 dishes? And we didn’t eat the main food yet? OMG my aching stomach!

Even once I understood what that question meant, it didn’t help me to answer why, even in today’s prosperous China, they are still asking me if I want rice or noodles?

A quick look at the cultural origins of this expression-

To understand, let’s look at what the typical Chinese (or Asian) diet is NOT. It is NOT meat and vegetables or salad with a side of bread, rice, potatoes etc. as in the Western way. Even the language of dining reveals this:

IN the US, a “main dish” is the protein, which also tends to be the largest quantity of food; a single dinner plate may be mostly occupied by meat or fish, with “sides” of vegetables, rice, potatoes, etc. In many restaurants, you order your protein and get your choice of “sides.”

In Italy, the meal is divided into sections: Antipasti-appetizers, “before Pasta”, Primi- Usually Pasta or Risotto; Secondi- the meat or fish; Contorni- the vegetables or rice; Dolce/Cafe- the sweets with coffee.

In Latin cuisine, the main food is known as “plato fuerte”- literally, Strong Plate, really the meat or fish course.

In a typical Chinese meal (not banquets or business entertainment), A large bowl of rice or noodles is by far the largest quantity of food eaten, which is accompanied by plates of meat, fish, vegetables, etc. which are eaten as “flavoring” for the main food.

I am not suggesting that Americans or Westerners change to eat exactly like everyday Chinese; most of us have our eating habits so embedded that it would be difficult to change.

HOWever, what I AM suggesting is that we take a look at our health profiles- cholesterol, overweight, liver and kidney ailments etc. and rebalance our diets to eat more of the “main food” and a LOT less of the meat and fish, PLUS increase the proportion of vegetables in our diet. So, the way I have learned to eat now, and the way that I am recommending for you, is to plan your meal quantities in the follow, descending order (most to least):

            1. Main Food- Rice, Potatoes, Grains, Noodles, etc.

            2. Vegetables- Leafy, Green, the more fiber the better.

            3. Meat or Fish- Don’t worry about the fat content of the meat if it tastes good, once you have the quantity under control.

But, you say, isn’t rice fattening? NO, rice is not fattening; eating too much is.

So your main objective will be to reduce how much you eat.

f you do this, you will be able to stop worrying so much and eat some things that you gasped at before with no negative consequence on health, but tremendous positive consequences on flavor. For example, when I cook duck, which I do often, I render the extra fat and use it later for cooking- you (unless you are a chef or a fanatic foodie like me) have no idea how much that and other tricks like it can change the flavor of your food, for the better.

My health profile, since I started eating this way, is immaculate, especially for someone of my age.

This tip is my gift to you- learned from the wisdom of the ages and a life of traveling to every continent.

(Notice in the picture that follows that the only dish which is yours is the rice; the others are shared)

(Author’s Note: The preceding is a small snippet from my upcoming book, “Travels With Mikey- Global Life of a Business Foodie,” which I am currently working on. The book will be a memoir of my experiences working, living and eating in more than 30 countries around the globe) Follow this blog and my LinkedIn page for more news!)

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