Walmart’s Hire-a-Vet Program: Patriotic Gesture? Or Good for Walmart?

American veterans returning from war have had a history of finding employment at Fortune 10 companies. After the Korean War they got engineering and sales jobs at IBM and Texaco. After Vietnam they became production technicians and manufacturing coordinators at Dupont and Monsanto.

Those returning from Iraq and Afghanistan will be working at Walmart. Now that’s what I call economic progress.

At January’s National Retail Federation Convention in New York, CEO and President Bill Simon announced the Bentonville behemoth’s pledge to hire any returning veteran who wants a job, in a program it will kick off on (when else?) Memorial Day. It will result in 100,000 jobs for returning military personnel over the next five years.

This is a wonderfully patriotic gesture, and a great opportunity for all those returning vets, right? Or is it? [Read more…]

QA with Eric C. Wiseman, Chairman, President and CEO of VF Corporation

The Robin Report - Eric WisemanROBIN LEWIS So, right off the bat, how the heck can one person run a $10 to $12 billion company?

ERIC WISEMAN You can’t! VF has been, and I hope always will be, a team sport. When I look at the leadership teams around VF there’s no question that we have really talented people, but we don’t have “superstars.” What we do have is people who work extremely well together, who compliment each others talents, and who are committed to the teams success. That dynamic drives whatever success we’ve had. And, since you know me pretty well, you obviously know that I’m not capable of “running” VF….if I was I’d have a much different balance in my life.

RL So, Eric, the numbers on VF under your watch as CEO speak for themselves, and they would say you’re doing a great job.

EW For about five years now, since we’ve changed directions corporately, we’ve been executing on the right things. So, when you execute against the right things it generally works for you.

RL Going into the last half of this year against a rather negative global and U.S. economic backdrop, do you want to revise your earlier 15% growth projection for 2012, or at least hedge your bets, and if so, in what areas of the business? [Read more…]

Dear Reader

Robin LewisGlobalization is no longer some esoteric conversation about how the world’s coming together, inter-connecting cultures and commerce, and wonderful stuff like that. For U.S. brands, retailers and all consumer-facing industries, globalization, or growing their businesses internationally, has become a necessity.

And, the “BRIC” countries, so named by an economist at Goldman Sachs (Brazil, Russia, India and China), were deemed at the turn of the century, emerging engines of growth. And so they were, even faring well through the Great Recession.

Now, however, their growth has begun to slow as the developed world continues to struggle on the edge of further recessionary, financial and political turmoil, all acting as a drag on the BRICs. Even so, their GDP growth is roughly double that of the developed countries, Europe, and the U.S. in particular.

So, while the BRICs are not rising at their earlier blistering pace, for U.S. companies to sideline their entry into GDP growths ranging from 5 to 8 percent would be foolish. However, focus should be on the BICs, since Russia seems to be on a “sabbatical” from its BRIC colleagues, hovering at around 3 percent growth with all kinds of complications, big deficits, rising inflation, and a host of other issues attendant to its plutocratic type government. [Read more…]

To Go, or Not To Go…Into India

As They Shoot Themselves in The Foot

If you’re an entity that’s thinking about making a foreign direct investment in India, either as a capital investment or a commercial venture, the country is certainly not providing compelling reasons for doing so. However, as they say,“ …let’s get past these so we can move forward.”

For starters, economic growth in India has dropped to its lowest level in nine years, down to 5.3 percent GDP for Q1, 2012, from its blistering rates of 9 to 10 percent during its prized inclusion as one of the “BRIC” countries along with Brazil, Russia and China, all of which are now in some mode of slowdown. Further, as of this writing, Standard & Poor’s said that India could become the first of the so-called BRIC economies to lose its investment-grade status, already at BBB-, the lowest possible investment grade rating.

However, the economy and its investment grade notwithstanding, India seems intent on shooting itself in the foot politically, particularly as it relates to attracting foreign investors, as well as the bureaucratic stifling of its own marketplace, thus threatening to exacerbate its decline.

India ranks a pitiful 132nd in the World Bank’s “Ease of Doing Business” countries, between Nigeria and the Palestinian Territories, due to its sea of red tape and sclerotic bureaucracy. The country recently rescinded a 2011 government ruling that would have allowed multi-brand retailers, such as Walmart, to own 51 percent of their business in India; and single brands, such as Nike, 100 percent ownership. It has reverted back to the necessity for U.S. multi-brand stores to only establish wholesale joint ventures, and single brands back to owning only 51 percent. Prime Minister Singh protested the ruling essentially to protect India’s small shopkeepers, forever its primary retail model.

Further, India has imposed new taxes on foreign businesses, even retroactively on past deals. Talk about a reason to have second thoughts on entering or leaving India. In fact, the outflow of capital, partly attributed to this move, is considered one of the reasons for the rupee’s 13 percent fall since the beginning of the year. [Read more…]

Q&A with Darshan Meta, President and CEO, Reliance Brands

Robin: Can you give me a perspective as to why our retailers and brands ought to be looking at India more closely now?

Darshan: There are three ways to answer that question. To speak on their behalf, they should be looking at India just because the U.S. is a saturated and mature market with an aging population, so the headroom for growth can only happen by robbing from someone else’s plate. Fundamentally, starting with the Baby Boomer generation, the 40 to 50 years of unmitigated retail and consumer boom that the U.S. went through is in some forms – in many forms – tapering off. So they need to discover unconquered territories.

Logically I had suspected that space should have been Europe. I suspect now that it comes to the third-tier larger markets, in terms of land mass, population, and GDP. It brings one to markets like Brazil, Russia, India and China. From our viewpoint, it is a fallacious approach to bring up India and China in the same breath. Depending on what you base it on, we are seven to 10 years behind China. Although geographically we are neighbors, China is better off spoken in the same breath as the USA. [Read more…]

The ‘Do Nothing’ Avon Board…Too Little, Too Late — Dividend in Jeopardy

Rarely has a new CEO jumped into a big-time, high-profile turnaround situation such as Avon Inc. presents. And if history is any guide, the ‘Do Nothing’ Avon Board of Directors will not be of any help.

Sherilyn S. McCoy who took over the CEO slot on April 23rd must hit the ground running. And not only must she put out short-term fires, she also has to develop a long-term strategic plan — on the run. Simultaneously, she must learn a new (for her) direct-sell business model. Plus she has to deal with SEC probes of bribery charges in China; insider trading accusations; and a myriad of operational malfunctions. In fact, many are questioning her first major judgment call concerning Avon, and that is accepting the job in the first place.

McCoy, who was formerly Vice Chairman of Johnson and Johnson, was passed over for the CEO job at the $65 billion pharmaceutical giant in February. McCoy gets high marks for  reinvigorating the pharmaceutical division at J&J facing patent expirations on major drugs. She did not have as much luck when she took over J&J’s consumer business that was hit hard by manufacturing problems leading to the recall of products ranging from Tylenol to baby lotions.

Andrea Jung, former CEO and current Executive Chairman, who has controlled the ‘Do Nothing’ Board for over a decade gets the blame for Avon Products’ current sorry state of affairs, and she deserves more than her fair share. But the real culprit is the Board of Directors. Inexperience cannot be the explanation. The majority of the Board has had some experience with the direct selling model, as six of them have been members for 10 or so years. How deeply they understand the model is another question.

By the time the ‘Do Nothing’ Board acted, the company was already spiraling out of control. Unless Avon’s McCoy turns out to be Houdini, and can pull a rabbit out of a hat, it may well be too late to save the 125-year-old direct-selling beauty company. [Read more…]

Why I Am Aglow With UNIQLO

I first heard of Uniqlo several years ago when the company opened a pop-up store in Rockefeller Center. People were raving about the inexpensive cashmere sweaters. Always interested in a bargain, I checked it out. I was underwhelmed. Not enough sizes, a real mish-mash as I recall. It was dark and dreary. A dull basement space that was completely unexciting.

I returned to Uniqlo from a neutral point of view. However, this time around, the energy in the store, the sharp pricing the great overall merchandising and promotion, plus the fiber/product exclusivity, was so pro positive, that I have gone to the cheerleading side.

Over the last two years I received a couple of Uniqlo turtleneck ‘HEATTECH’ tops as gifts. These are made of a proprietary fabric that keeps you warm in winter by generating and retaining heat. The items can be worn as an under-layer or just alone. The fabric is kind of stretchy, “highly resilient and durable,” anti-static, odor resistant and designed to maintain its shape after repeated washings. And it does. [Read more…]

Patriotism When Politically Convenient

And Hypocrisy Over Olympic Games Apparel

Oh, what an election year can cause. Not that I’m for protecting our manufacturing industries when they can’t seem to protect themselves by being smarter and more innovative than those of the low-cost countries that have replaced them, including in apparel. It may have been inevitable anyway. However, I had to laugh at the hypocrisy of our politicians, and from both sides of the aisle, with their bombastic diatribes aimed at the Ralph Lauren company for having selected Chinese manufacturers to make the Olympics uniforms.

Why now? Where has all of this ire and political posturing been for the last half century as we idly stood by and watched China (primarily) take the apparel and textile manufacturing industries away from us? With one brief, “last gasp” effort in the 1980s led by Roger Milliken, then CEO of Milliken & Company, a leading textile manufacturer in South Carolina, a program called “Crafted With Pride in America” was launched to save those industries from being snapped up by so-called low-cost manufacturing countries. Without going into great detail, after several years and many billions of dollars later, the program collapsed under its own weight. [Read more…]

Eastward and Upward: Chinese Consumers Spend with Optimism and Open Wallets

A study in contrasts, China is showing signs that its rapid economic expansion may be  unsustainable, even as western companies continue to develop a presence there to woo a growing middle class.

Some on Wall Street are bearish on China, including Jim Chanos, who said in a recent CNBC “Squawk Box” interview, “If you looked at the performance of the banks over the last two years… they have been great shorts. They have been going down — they’re down 30 percent over the last two years.”

The country has targeted economic growth of 7.5% in 2012, representing a decrease compared to recent years, according to a recent article in IBTIMES. But China’s National Bureau of Statistics recently reported that the country’s GDP decelerated to 8.1% during the first three months of 2012, compared to the previous year, a figure that is lower than the 8.4% analysts had expected.

The Robin Report

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Yet these economic developments have not slowed expansion plans for many western companies. From Levi’s to Louis Vuitton, and from Proctor & Gamble to Starbucks, the last eighteen months has seen a veritable explosion in companies looking to gain a foothold in China, eager to attract its booming middle class.
Just as in the U.S., where “middle class” is an ambiguous term, “middle class” in China also continues to defy classification. Many analysts peg it as those making between $6,000 and $15,000 a year, which represents about 350 million households. Based on international dollars, that figure is about one-third of the average spending power (GDP per capita) in the U.S. [Read more…]

The Omnipresent Retailer: Creating a Demand-Responsive Value Chain

Best Practices from Kurt Salmon

Many retailers are striving to better respond to changes in consumer demand, and it’s easy to see why: They’re pressed to reduce inventories and cut supply chain costs at the same time that the shopping patterns of American consumers have become virtually impossible to predict.

Making matters even more complicated, consumers now have unprecedented access to an infinite number of products and a virtually limitless number of places at which to buy them. They expect to be able to buy exactly what they want exactly when they want it, and if one retailer can’t make that happen, another one (or a dozen others) can.

That’s where a demand-responsive value chain comes in. By shortening cycle times and increasing collaboration across the value chain, retailers can ensure they have the right product, in the right place, at the right time.

1. Shortening Cycle Times

Many retailers are beginning to move production closer to home (leveraging data to inform smarter decisions on the best manufacturing locations) as a way to shorten cycle times. Shorter cycle times can improve responsiveness to demand and increase inventory effectiveness.

The global product margin metric measures the cost from each point of manufacture to each point of distribution and the unique retail price from that point of distribution. Keeping this number in mind allows retailers and wholesalers to optimize total margin by choosing the best manufacturing locations based on discrete costs from multiple points of supply to multiple points of distribution and the retail price at each point.

But after a retailer’s sourcing decisions have been made, there are still several steps that can further decrease cycle times. [Read more…]

The Coty/Avon Dance: A Train Wreck About To Happen

Avon’s sudden hiring of Sherilyn S. McCoy as CEO – almost certainly intended to thwart any takeover attempt by Coty – indicates that the smaller suitor will have a fight on its hands to acquire the giant direct sales company.

Coty would be better off letting this one get away. Its $10 billion offer for Avon is the biggest and most recent effort in its aggressive quest to become one of the world’s major beauty companies – in other words, to play with the big boys. The company has spent over $2 billion on acquisitions in the past two years, including $400 million for TJ Holdings, a Chinese skin care company, and a reported $1 billion for the skin care company Philosophy.  They also picked up nail color maker OPI and Russian brand Dr. Scheller Cosmetics.  Some industry leaders think they have seriously overpaid.  Are they about to do it again?

Avon is a disaster, but Coty (not to mention many on Wall Street) is focused on its worldwide network of 6.5 million sales reps and its big presence in Brazil.  Add some internationally known products to Avon’s product mix and the reps will sell them like crazy. The thought process taking place around that? Synergy, synergy, synergy.  The old school synergistic proponents are drooling.  But drool rarely translates into sales. It can, however, translate into paying too much for an acquisition.

There are questions about the distribution network Coty is so hot to get.  Some believe Avon has drifted off into the Amway multi-level marketing or pyramid model, which counts as revenues the products and promotional materials newly hired sales reps are induced to buy. So, why not hire more reps? A growing share of the company’s revenue, this might in fact be a strategy to offset declining consumer demand.  Avon is losing nearly half of their reps every year. This forces them to troll for and spend most of its advertising dollars for new reps instead of doing heavy consumer marketing to keep the Avon brand brightly lit. In the meantime, traditional Avon sales are slumping.

Coty obviously has access to a mother lode of money, so funding the deal will not be a problem. The banks reportedly still think Avon is a viable company and, if well-managed, can be fixed. The timing is right for Coty and a godsend for Avon.

It’s documented that Coty and Avon have been talking for a while. First it was going to be Avon owning Coty in a stock deal. Now’s it’s Coty owning Avon in a cash deal.

It looks like Coty announced its $23.25 a share offer for Avon to tease out any interest from a giant like Proctor and Gamble, or some large Brazilian company.

If not, then Avon will have to very seriously consider Coty’s offer.  Time is not on Avon’s side. As new CEO Sherilyn McCoy takes over from lame duck CEO Andrea Jung, she walks into a nightmare of bribery accusations in China and other developing markets, slumping sales, a weak senior executive lineup and massive legal fees that are bleeding company profits.

Given all of Avon’s current problems, a thorough due diligence of the company could be very interesting indeed. Imagine what could be lurking in the many closets of such a big, loosely-managed company with so many divisions!

Stay tuned.  As one industry observer said, “They are dancing on the porch now. However, Avon has had other suitors dancing on its porch before, and thus far hasn’t let anyone inside the house. ” Coty’s drive to become an industry giant could become a giant handicap if it results in the purchase of a very expensive, unfixable company.

Time to blow the train whistle long and loud. Hope it’s heard in the Coty executive suite.

How Green Is My Product Line? Measuring Sustainability Success

What is more vital to the survival of an apparel manufacturer or retailer today: commitment to environmental consciousness or keeping production costs low? Five years ago, the answer would have been strongly in favor of being green. Today, amid global debt crises and the rising costs of raw goods, labor and fuel, the emphasis has for many shifted towards the economic from the environmental. Perhaps a better question is: Can an apparel manufacturer or retailer be green while remaining in the black? The answer is “yes,” when a thoughtful, long-term vision fuels the actions.

Prior to 2010, U.S. consumers had enjoyed 15 years of deflationary apparel pricing. Big box retailers attracted an increasingly diverse consumer base, fueled by low prices for apparel staples and the addition of specialty lines by popular, high-end designers and celebrities. Marketers in the highly competitive apparel category seized upon being “green” as a saleable point of brand differentiation. Low-priced and high street brands began trumpeting new and niche ‘sustainable’ fibers within their mix.

The challenges arose, however, when these sustainable fibers proved unsustainable in cost, processing or both. Bamboo, for example, was embraced as a stellar textile fiber because it grew quickly and did not require pesticides for protection. However, the process to convert the bamboo from a plant to a rayon fiber was discovered to be quite chemical intensive. [Read more…]