Did Your Mom Pick Those Clothes Out for You?

The economic downturn has now turned its attention to teenage fashion according to an article in The Wall Street Journal—“Teen Stores Cater to the Ones With Money” (9/23/09, section B8).  It seems that the recession has forced parents to take a closer look at what their kids are buying heading into the new school year.  In the past it has been the kids who have dictated to their parents what they have wanted to buy, but not now.  Stores including teen fashion retailers Aeropostale, Buckle and Old Navy are doing their best to appeal to the people that are actually going to be spending the money.  Mom-friendly moves include “wide aisles…longer display tables…wholesome imaging…bright lighting…lowered music levels,” reports the article. 

Parents, like everybody else, seem to be watching their spending more closely these days, which is why there is a greater need for stores to appeal to them.  But the emphasis on parent purchase power is also due to the fact that “youth unemployment…reached 18.5% in July, the highest level for that month on record for the series, which began six decades ago, according to the US Labor Department,” cites the Journal.  A lot of out of work young people naturally means a greater reliance on parents to provide for them. 

            The leadership at these stores has clearly recognized that this year they need to appeal to parents.  So essentially, it seems to me that they are watering down their brand to attract middle age buyers.  The article did mention that stores like Abercrombie and Fitch were not doing this, in other words, staying true to their brand.  It will be interesting to me to see if kids will still want the likes of Aeropostale if the atmosphere of the store and the shopping environment decline in their eyes.  I am not an expert on youngsters, but I do remember being one not so long ago, and I remember this all-important concept that everybody was always talking about—the concept of “cool.”  Is it cool to shop at a store that is trying to make your Mom happy? Once this recession ends, and kids are once again given more autonomy, I wonder if this corporate play for their parent’s approval will be remembered?    

But this year anyway, whether you’re a brain, an athlete, a basket case, a princess or a criminal—if you’re a teenager, Mom will probably play a bigger role in picking out your clothes for you.  How cool is that? 

 

It's Not Hard to Figure Out Why Blockbuster is in Trouble

Blockbuster is the largest video store chain in the United States, but it is having to make adjustments in order to compete with new rivals.  This was detailed in section B1 of the 9/16/09 Wall Street Journal: "Blockbuster to Shutter Up to 40% of Stores."  According to the article the giant chain will "close as many as 1,560 of its 3,750 retail outlets."  Cited as reasons were competition from Netflix and Coinstar.  Though not given as a reason in the article, I would have to think that the ability for people to now download rentable movies online from Itunes, for example, would also cut into their market share.  Add to all this competition the fact that people are not renting as many movies these days in general, and you can see why Blockbuster has a problem.  

I would have to guess that Blockbuster's leadership had known this day will come, though I wonder if they anticipated that things would get this bad for them.  I see them much like Kodak at this point, a giant company who once dominated an industry which is now struggling to adapt to dramatic changes brought on by technology.  

Blockbuster has tried to compete directly with Netflix in the mail order rental market.  According to the article however, they have not been very successful.  Netflix has 10.6 million subscribers while Blockbuster has only 1.6 million.  Blockbuster was up over three million mail order customers while they were aggressively marketing this new medium, but as soon as they stopped they lost nearly half of their members.  I must say that the reason this article intrigued me so much was the marketing of this service, which I found to be so over-the-top aggressive. From a customer's standpoint I can say that it was so bad whenever I went to rent a movie from my local Blockbuster (Carytown) that my wife and I started to avoid the place.  One associate there was so rude and obnoxious in his refusal to take no for an answer that I was forced to complain.  With tactics like these who needs competition to deteriorate business?  It does not surprise me that the enterprise is now falling on its face.  Coupled with this bad business tactic is the fact that they claimed to do away with "Late Fees", while really not, and when people complained about it they simply scrapped the whole thing.  Also, I have noticed that their price point for rentals changes quite frequently, to the extent that it seems like I am paying a different price every time I go in there.  

All of this leads me to believe that the leadership is not united in a common purpose, and is fragmented about how to proceed.  They had better get it right, or the days of having a "Blockbuster Night" might soon be over.  

           

OPEC Leadership's Predicament Leads to Shell's

Two articles from this past weekend's (9/5&6/09) Wall Street Journal caught my attention.  On B6 the article was entitled "Oil Output Quotas Unlikely to Change."  It addressed the leadership challenge of the Organization of Petroleum Exporting Countries (OPEC).  OPEC doesn't often get a lot of sympathy in the US because 1.) our country has become dependent on its product and are at the mercy of other countries to provide us the oil we need to function, and 2.) OPEC is comprised of a lot of countries that often are seen as hostile to American interests.  That said, OPEC is reliant on the US economy to buy its product, and when economic weakness rears its ugly head as it has in the last year, oil prices and the nations that depend on them suffer.  When the recession hit oil prices collapsed from lack of demand.  According to the article "oil prices are up nearly 53% this year," but way down from their all-time high of $147 a barrel in 2008.  As of 9/4/09 oil was trading at $68.02 per barrel.  Oil producing countries, according to the article, "see $70 to $80 oil prices as a comfortable range that rewards oil producers financially without hurting consumers."  This means that these prices are where OPEC feels it needs to be in order make money, but not damage the economies that buy oil from them, which would cause prices to collapse.  

            What I found interesting about the article from a leadership standpoint was that a whole lot of discipline is involved in limiting production in order to stabilize the oil market.  Apparently, too much discipline is involved--"Several OPEC states have pumped well-above their output quotas to capture more oil revenue and keep their ailing economies intact."  This list includes Angola, Venezuela, Iran and even Saudi Arabia.  These companies are pumping more oil than is good for their market because they need the money now.  The leadership of these countries needs to be very strong so that over production does not injure their long-term interests.

            Shell Oil has a related problem, which is discussed on page B5 of the same weekend Wall Street Journal, "Shell Plans 'Significant' New Job Cuts."  Shell is warning of layoffs due to declining profits because prices in oil have fallen so dramatically over the last year.  Shell, like the United States, is in many ways reliant on OPEC, as OPEC is key in setting worldwide oil prices.  The less disciplined OPEC is in pumping and selling oil, the more prices will fall, and the less money Shell will make.  Shell's leadership has to decide what the correct size of their company should be--not an easy task given the fluctuations in oil prices, and the reliance on oil cartels such as OPEC.  

            One bright side to all of this that I see is that Shell appears to be expanding its research into biofuels and solar.  This is where I see a need for real leadership to emerge.  The future depends upon these technologies as oil is indisputably a finite resource.  The energy leaders of the future will need to remain players in the current oil markets in order to sustain their companies, but ultimately they'll need to make the transition to alternative fuels in order to remain companies.