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This, That, and The Other

April 26, 2008

In a week, I read lots of trade magazines and every day I read the newspaper, listen to NPR, watch the news at least twice, and have the Internet going constantly in my office. By immersing myself into all of this info, I am bound to hear something odd daily. This week was no different and I thought I would share some of the most memorable things I’ve heard or read with you. They aren’t in any order and don’t necessarily tie into one another, but I found them interesting.

It never ceases to astound me how vulnerable supposedly rock-solid retailers are. Having said that, I was not so surprised to learn that numerous suppliers have stopped shipping to Linens ‘n Things. It has been reported they are getting ready to file for bankruptcy. Linens ‘n Things is into the first three years of a nine-year turn around plan but many analysts think they got too promotional in the last year causing profits and sales to dip.

It seems to me, between Linens ‘n Things and Bed Bath and Beyond it is hard to find nice . . . well . . . linens ‘n things. I go into their stores with high expectations and always leave disappointed because their selection is so plain vanilla. They put their competition out of business years ago; so, where do you go to find nice stuff!

Which actually leads into the next tidbit I read. In 2002, Bloomingdale’s changed their game plan and started to go promotional. Guess what, they lost business! When they realized this, they decided to trade up their products to compete with Neiman Marcus, Nordstrom and Saks. The strategy worked and today 71 percent of their business is upscale merchandise. That is up 44 percent from 2002.

These two items were reported in the same issue of “HFN” last week. Nice juxtaposition! One retailer goes low end and faces bankruptcy; another goes high end and thrives. Is it just me or is the pendulum swinging back? I think consumers are getting tired of their sheets, towels, and outdoor furniture looking like everyone else’s no matter how much they save.

Speaking of towels, have you bought one lately? Bet you didn’t know that if you hired all of the looms in Viet Nam and Sri Lanka, they still couldn’t produce enough to fulfill a solid color towel program at any major store.  Only China has the manufacturing wherewithall to fill orders like that. Proves two things: major stores sell lots and lots of towels, and, even if they wanted to, manufacturers won’t be able to move out of China any time soon.

You may be saying to yourself, "Do manufacturers want to move out of China?" The answer is yes, many do because China isn’t the bargain it used to be. Labor costs are up, the dollar is losing ground against the Chinese Yuan, China is imposing expensive environmental protection policies, and the high cost of gas is making ocean transportation more expensive than ever. If they could find someplace else to produce cheaper, they would leave in a New York second.

It seems foreign manufacturers aren’t the only ones finding it tough to get out of China. NPR reported this week that Chinese citizens have a hard time getting exit visas to travel to the United States. Their government is concerned they won’t come back after their “vacation.” To insure their return, the government checks to be sure the potential traveler has a good job, a house or car, and even requires a picture of their happy family. Even then, the traveler has to come up with a $25,000 bond that they will lose if they don’t return. That eliminates most travel to the U. S. by Chinese because the average annual salary in China is under $8,000.

Notwithstanding how burdensome it is to get here, if they do get here, the average Chinese tourist spends $6,000 on their visit to the States. That’s more than any tourists of other nationality spend here. Once here, Chinese tourists complain  products marked “Made in the USA’ are too expensive but won’t buy more affordable items because they have “Made in China” tags. So what do they buy - - hugely expensive brand names that are only available as counterfeits in China. Finally, when being shown downtown L. A. by their tour guides, they remark that it is just a smaller version of their Chinese home town and demand to be driven to Rodeo Drive. I don’t know what is more astounding; L. A. is considered small by their standards or they have enough resources to shop on Rodeo Drive.

Yours in confused retailing, Bruce