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Capitalize on this $761 Billion Problem

March 21, 2022 by Lazy Man 2 Comments

A couple of months ago CNBC published this shocking (but accurate) headline: A more than $761 billion dilemma: Retailers’ returns jump as online sales grow

When retailers have a $761 billion problem on their hands it presents an opportunity for you, the consumer. I’m getting ahead of myself. Let’s start from the beginning.

Retailer’s Problem: Returned Merchandise

Since COVID hit, a lot more people are buying products online. It had been trending that way for years, but COVID sped it up. Retailers have become exceptionally good at shipping products out, but they aren’t good at taking them back and restocking them. Sometimes companies will just tell you to keep the product if they make a mistake or if you want to return it. It simply isn’t worth their time and money to deal with covering the customer support, return shipping cost, and handling/restocking the product. After they do all that, they can’t resell it as new, so they have to discount it from the original cost.

It’s not hard to imagine why all their profit margins go away.

Companies with brick-and-mortar stores like Wal-Mart and Best Buy could at least accept the products in their stores and put them on a discount rack. That’s better than having to deal with shipping. It’s also easier to deal with customer support since brick-and-mortar retailers have had return counters for decades. Amazon doesn’t have the retail locations (unless they drastically change Whole Food) to do what Wal-Mart and Best Buy do.

How You Capitalize: Idea #1

The easy way to capitalize on this is to buy the returned products off the discount rack. I think I could do a better job of this. I follow several “deal” websites, but most often the deals are on new stuff. I rarely need something immediately from a store like Best Buy. A few years ago, I needed a new stereo receiver and Best Buy had a good one that was about 30-40% off, so I bought that one. I tried to buy a refurbished Dyson wand vacuum around Christmas, but their store was empty.

I’m more likely to buy cereal boxes that were banged up at a discount than anything else. If any readers out there have tips on how they buy refurbished, I would appreciate it.

How You Capitalize: Idea #2

Often I feel like there are fewer ways to invent a $100 million company nowadays. There used to be news all the time about companies in Silicon Valley getting bought and sold. I’m sure it’s still happening, but it seems like it’s not happening as much. There used to be dozens of search engines like Lycos, Yahoo, Alta Vista, etc., but now it’s just Google. I used to follow all the tech news every day for all the exciting things that were coming around the corner. Now, “tech news” is more likely to report about “entertainment news” like Fortnite than a product or service that will make my life better. I just took a quick look at CNet.com’s home page and the top four stories center on Google, Amazon, Facebook, and Apple.

Okay, I got off-track. It’s time to get back on topic. The big way to capitalize on the retailer’s problem is to fix it. There’s a huge inefficiency in the market right now. I believe someone is going to step in and come up with a solution. If you can solve just a tiny sliver of the $761 billion problem, it’s likely to be a $100 million company.

Could you create that company? If so, it’s certainly better than saving $100 on a refurbished stereo receiver, right?

Filed Under: Entrepreneurism Tagged With: retail, returns

The World Has Turned and Left Us Here

December 7, 2020 by Lazy Man 17 Comments

It’s Sunday, late afternoon, around 4:45PM. I’m enjoying one of the highlights of our summer, an early bird dinner at a local hotel with a live jazz band. My wife and I are the youngest people there by about 20 years, with two notable exceptions… our 3 and 4 year old kids. They’ve been properly napped and are behaving so well that several people will later come up and compliment us all. (If they only knew!)

I pause to reflect… How much are they paying this 5-piece band? Is the restaurant making its money back on this crowd of around 20 tables?

Finally… “I MUST teach my kids how to play the steel drum.”

New Job Funny
Maybe a new job will be finding better images than this one.

(Side Note: I know that’s not a normal segue from a jazz band, but I’ve always been partial to how the steel drum reminds me of vacation.)

I remember when parents would worry if their children showed too much interest in guitar for their career. The common refrain was, “You need to focus on something that is going to pay the bills.”

How did I come to a place where I’m thinking about just the opposite when it comes to something like music?

The World Has Turned

The world is changing very fast and it will continue to do so. I have been thinking about a couple of those big changes lately.

Retail Stores are Being Hit Hard

Hours before the jazz brunch I read that Benny’s will close all 31 stores by the end of the year. You’ve probably never heard of Benny’s because it operates in the freckle of the Unites States called Rhode Island. After 93 years in business, the owners decided to retire. However, in their very short statement they emphasized:

“In a short period of time, the retail landscape has changed dramatically – especially for ‘brick and mortar’ businesses. The decision to retire was strongly influenced by this changing face of retailing.”

This was before Toys R Us announced its bankruptcy filing a few days ago. It was also after a string of other retailers closing stores. There are so many that Clark Howard keeps a running list of store closings. This isn’t exactly groundbreaking news.

What’s also not news is that Amazon and online commerce is the changing face of retailing that Benny’s owners were referring to. Earlier this week, I read Best Buy’s Secrets for Thriving in the Amazon Age (NYT’s paywall). A retailer has to have secrets (one of which is to “get lucky”) to survive in this Amazon Age.

When thousands of retail stores are closed every year jobs are lost. Jobs may be created in other places (such as Amazon warehouses and delivery services), but one has to wonder if enough jobs are being created.

Self Driving Cars will Change Everything

A few months back, I read an incredible article in Quartz about the small US towns that will be crushed by the trucking revolution. Essentially truck drivers are almost the entire economy of many small towns across the United States. In the near future, self-driving trucks will mean that truckers won’t stop at the dinners, gas station marks, hotels, etc. They will become the next Radiator Sprints before Lightning McQueen came to town.

Self-driving trucks are just the tip of the iceberg. Self-driving car fleets (such as the ones I’ve described here), will mean that few people will buy cars, which means car makers won’t make as money. Cars will last longer as electric cars can be almost maintenance free.

It might not be a good idea to work in the auto industry. It might not be a good idea to become a mechanic. It might not be a good idea to be a driver of any kind. It might not be a good idea to be in auto insurance sales. I’m not even touching half of the industries covered in CNBC’s list of 10 disrupted industries.

Finally, many (or all) of those delivery jobs created by Amazon and online commerce may disappear due to self-driving delivery cars, drones, and even self-driving STORES.

On the bright side, nearly everyone should be able to save a lot of money as transportation is one of the biggest expenses in the United States (#2 after housing).

So Where Are the Jobs?

I’ve only touched on a couple of the big things coming down the pike (or already here). The easy answer to the jobs question is that there will be more technology jobs created. That may be true, but I’m not entirely convinced. Software that powers self-driving cars will mature in the same way that word processing software matured.* Once it does all the core functions really well, there’s not much else to improve on. There’s no need to employ thousands of software engineers when everything just works.

I’m sure there will always be new things for the technology people to work on. However, a vast majority of those jobs seem to be centered in a relatively small area in northern California called Silicon Valley. Maybe that will change in the future, but maybe it won’t. If all the new jobs are there, it’s not going to help 99.9% of the rest of the country find employment.

Years ago, I started this blog because I wanted to explore how to become financially free. The driving force behind that was the large push to outsource software engineering jobs to foreign countries where workers could work for a fraction of the pay. It was that same year (2006) that my wife’s pharmacy convention keynote speaker focused on how pharmacists will be outsourced. I haven’t followed the outsourcing of either industry in a long time, but it seems like those predictions haven’t come to pass… yet. That doesn’t mean it won’t happen in the future.

Final Thoughts

This brings us back full circle to the steel drum. While the restaurant could have cued up a few MP3s, it wouldn’t have been the same experience. That band, like many in town, have paying gigs at least a few days a week. It wouldn’t be enough to live off of, but I bet it pays well for a hobby… and they seemed to be enjoying themselves.

One more thing occurred to me. In the future, many of the fundamentals of financial independence will become even more important. If you’ve accrued some dividend income, have a side steel drum gig, and know how to live frugally, you’ll be a few steps ahead of the pack.

I didn’t intend for this article to be all doom and gloom. We enjoy getting things delivered to our door for very reasonable prices. I’m looking forward to being productive while traveling and letting a robot chauffeur my kids to soccer practice, especially when it comes cheaply.

A different world isn’t necessarily a bad one. We need more steel drummers, don’t you think? Let me know in the comments.

* True story: I still use Microsoft Office 2001 as my office suite.

** You score major points if you recognize the title of this article as a Weezer song off their first album. While the lyrics are obviously about something completely different, I admit that I’m a little haunted with how some of them apply:

“And in your place an empty space
has filled the void behind my face
…
You remain, turned away
Turning further every day
…
Do you believe what I sing now?”

Filed Under: Employment Tagged With: futurism, retail, self-driving cars

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