Globalization 2.0: Implications for Consumers, Big Box Retail, eCommerce Leaders and City Planners

On April 27, 2016March 16, 2022 By The Social CriticIn Economics & Globalization, Technology & ScienceLeave a comment

If one were to jump into a time machine to travel back to 1995 or thereabouts, what would the publishers of newspapers and magazines have to say about the “Internet”? One might assume, at first glance, that the Internet would be a publisher’s dream: unprecedented reach beyond the usual regional scope, access to new readership, more advertising opportunities and expanded market share. But that’s not what happened. Hundreds of publishers, both regional and national, found themselves struggling, instead, to make sense of how to translate the digital venue into an improved bottom line.

It didn’t help that this digital medium spawned a paradox: more readers, less circulation; more ad potential, less ad revenue. The very same readership who could be reached at unlimited distance through the Internet now enjoyed a smorgasbord of competing blogs, news and social media outlets from which to gather information. It proved too much, too fast, leaving print media to quibble over an increasingly fragmented market. That the print industry is struggling to remain afloat is widely appreciated now. But what’s only beginning to be appreciated is that much of the economy — bricks-and-mortar retailers, in particular — will face the same paradox: greater sales reach in the face of diminishing returns.

The axe is now poised over the traditional retail space. But are retailers any better prepared than their print news counterparts?

Retail as We Know It — but for How Long?

Until just a few years ago, Americans enjoyed a more diverse retail landscape.

Borders/Walden Books
Barnes & Noble/B. Dalton
Doubleday/Scribner’s

One by one, national booksellers dropped like flies, leaving Barnes & Noble and Amazon to duke it out.

OfficeDepot
OfficeMax
Staples

This time, it’s not only Amazon cutting into the sale of such goods. Office supply chains, too, are slipping thanks to the digital sphere: As more and more businesses and individuals go “paperless” demand decreases. In time, Staples may remain the last bricks & mortar survivor.

CompUSA
Circuit City
Best Buy

For a time, the big three electronics/computer chains coexisted side-by-side. Now only Best Buy predominates on the bricks & mortar side with Amazon all but crushing local retail outlets from the Internet side.

Anna’s Linens
Bed, Bath & Beyond
Linens ‘N Things

Today, Bed, Bath & Beyond is the “last man standing” in the B&M retail segment — even as Wayfair makes rapid inroads on the e-commerce side.

Home Depot
Lowes
Ace Hardware
True Value
Orchard

Although there have been some mergers in this segment in years past, a comparatively wide array of home/garden centers seem to be hanging in there. The same can be said for the likes of AutoZone, Kragen, Pep Boys, Napa and other auto supply B&M retailers. Despite the fact that relatively few Americans change their own oil or repair their own cars, there’s a greater level of diversity in the auto retail segment as compared to the previously mentioned retail segments. Perhaps there’s something to be said for the immediacy of being able to replace a burnt-out taillight — or tap a local hardware store employee’s knowledge to repair a leaky pipe — that helps account for the difference. But that hasn’t stopped Internet-only retailers such as Rock Auto — and the infamous Amazon — from making inroads into this market, too.

Target
Kmart/Sears
Walmart

At present, Kohl’s, JC Penney and Sears comprise the last of the mid-market “anchor stores”. JC Penney is struggling against Kohl’s, while Sears struggles to avert the same fate as Montgomery Ward. The usual Internet pressures apply here, too, but what’s questioned far less is the level of price competitiveness low-end and mid-range B&M retail will offer once the bulk of their B&M competitors are gone. As cost-effective as shopping on the Internet has been through the late 1990s to the present, that, too, has begun to change: Many e-commerce sites now charge sales tax and e-commerce leaders, such as Amazon, are raising minimum purchase amounts to qualify for free shipping.

Serious Questions

As big-box retailers shutter low performance locations in attempt to remain profitable, Internet retailers have less incentive to compete. Let’s not forget that e-commerce gained its appeal by undercutting B&M retail pricing. Without the overhead of showrooms nor the need for physical retail space, e-commerce businesses could afford to pass along a savings. But will that savings continue to land in consumers’ pockets once consumers, by their own pocketbook “vote”, snuff out much of the traditional retail landscape?

Another question that remains to be seen is how long consumers will continue to perceive Internet shopping as a convenience. Immediate gratification has long been within reach of all but the most far-flung rural shoppers. And yet the Internet, much like catalog shopping before it, entails placing an order and waiting upwards of a week to receive an order (with exceptions for a price). Just as consumers have been drawn in by the cost savings or the convenience of shopping at the click of a mouse, it’s also likely that consumers will increasingly appreciate that it’s nearly impossible to ascertain product quality or even judge with accuracy more basic characteristics, such as color, without tangible contact with the product. A significant question going forward is whether consumers will continue to view online shopping as a significant cost-saver or convenience in view of order-to-receipt lag times and the effort it takes to return damaged, defective or unsatisfactory products. If novelty — not merely cost or convenience — is at all a factor, in time the appeal of placing online orders may fade much like big-book catalog shopping through Sears and JC Penney fell out of favor. To be sure, Internet retail is here to stay. But how much more demand exists on the world wide web for the next Amazon?

An important question that regional planners, municipalities and developers should ask at this juncture is whether traditional development projects should go forward under assumptions that prevailed in the past. Until we, as a society, begin to get a better handle on how the Internet will continue to shape economic activity, is it reasonable to break ground on large-scale commercial retail development projects with the expectation of attracting, let alone retaining, big-box anchors? When we hear news of “weak consumer demand” juxtaposed against news of “economic recovery” are we prepared for the fact that e-commerce may perpetuate these seemingly divergent patterns for the foreseeable future — namely, increased commercial real estate vacancies, still more mergers among big-box competitors and the possibility that even in periods of presumed growth big-box retailers may see fit to pull up stake in a given community in order to keep their remaining locations profitable? Are developers and city planners prepared for the fact that it may become increasingly difficult to attract or retain even high-performance anchor stores even in the best of times?

Made In China becomes Sold In China

Walmart made headlines in recent years when an executive email leaked out that asked “Where the hell are the customers?” (or words to such effect). There are only so many Walmarts, Targets, Kohl’s and the like that can enter a given area before the market becomes over-saturated. Many small towns in the 1980s saw their Mom & Pop stores go under when Walmart came to town. What’s lesser appreciated by the public at large is that many of those same Walmarts have pulled up stake upon concluding that revenues do not justify continued operation in such communities. Today, Amazon threatens to do to Walmart what Walmart did to the Mom & Pop stores 20-some years ago. Going forward, commercial retail vacancies may be just as much a fact of life in cities and suburbs as they are in small town America.

It has been said that consumer spending drives about 70 percent of economic activity. And yet, despite the reported recovery, retail returns have remained flat. If decreases in consumer spending were merely a function of economic downturn, it would be reasonable to anticipate a rebound as unemployment rates decline. Economic recovery or not, retail is in the midst of a transformation that regional planners and land developers seemingly appreciate about as well as the print media industry anticipated, in the 1990s, that the Internet may decapitate print. But what lies around the bend is scarier still: Just as the Internet has allowed consumers to bypass their local newspaper in pursuit of free or alternative news sources, the Internet has opened the floodgates to direct commerce with Chinese and Indian manufacturers and wholesalers, among others. In search of better deals, consumers will eventually realize that Amazon, itself, is a “middleman”. (Complicating matters, third-party sellers on Amazon may themselves be Chinese or Indian owned/operated — which would make it that much more difficult for consumers to ask “Who benefits?”) If and when nations with a strong manufacturing base bypass the likes of Walmart to sell direct to the consumer, all bets will be off and most of the profits to be had in the retail sphere will head offshore. Are we ready for globalization 2.0?

If You Build It, They May Not Come

There’s a Perfect Storm inherent in these seemingly unrelated trends. American households have been losing buying power to wage stagnation for many years now. So-called fixed expenses are higher, which erodes disposable incomes further. In many parts of the country — Los Angeles, Seattle, San Francisco, New York, Miami — housing, childcare, energy, food and healthcare costs have gone up ~100 percent over what they were a decade or two earlier. On paper, for example, the median income level in Southern California is far above federal poverty standards, at ~$55K. In reality, however, California has the highest rate of poverty in the nation in part because median wages are considerably lower than they are in other high-cost areas. In some areas of the state, it takes a six-figure income to live modestly. By federal standards, however, a mid six-figure income qualifies as among the proverbial “one percent”. The irony is that SoCal families in the $50-$80K income ranges are taxed as if they’re in a middle class income bracket when, in reality, these families may live paycheck-to-paycheck much the same as their low-income counterparts elsewhere in the country.

City, county and regional planners need to keep broader trends in mind. Housing developers, too, should rethink “business as usual”. The usual set of assumptions about growth and demand may no longer hold true going forward. The situation in over-developed, built-out Southern California may be illustrative of what lies ahead for many areas of the country that attempt to spur economic growth through development. Southern California has an undisputed housing shortage yet an over-supply of vacant retail space. Building still more over-priced housing to correspond to over-priced land values — alongside the usual retail development patterns — may backfire in the years to come. With B&M retail on the decline, existing retail centers alongside new shopping districts are likely cut into one another’s growth. This is to say nothing, of course, on how such trends will shift consumer behavior. Over the coming 15-25 years will suburban consumers, much like their rural counterparts, come to expect that shopping trips, much like jobs, may entail a significant commute? And will this, in turn, export the “car culture” — worsening congestion — elsewhere in the country where urban sprawl has occurred?

Globalization 2.0

For years it was assumed that demand for housing would yield a correspondent retail (and employment) growth pattern. The assumptions and the facts don’t always line up, however. The housing boom in Southern California’s Inland Empire over the past ~25 years has proven, for example, that living-wage jobs don’t always accompany economic development. Now that the Internet competitors are here to stay, spreading “growth” through development becomes an even weaker proposition. Consequently, regional planners in Southern California and beyond should brace for the fact that new housing developments may not correlate to a thriving retail landscape. It has proven challenging enough to attract high-quality jobs to outlying portions of Southern California and beyond in years past. But what these trends suggest going forward is that even low-skill, low-wage job growth — let alone major economic development strides — are far from sure bet.

We are beyond the point of turning back the clock on globalization and the role technology has played in creating some jobs while eliminating many others through increased automation. But perhaps it’s not too late to ask ourselves “What should Globalization 2.0 look like?” After all, if we don’t envision the kind of future that sustains both jobs and environmental objectives, we will exercise little control over either. Positive outcomes aren’t merely a product of free market forces — but the vision to steer the kind of future in which the transformation, instead of threatening the American Dream, extends that opportunity to another generation.

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A Not-So-Unlimited Talk, Text & Web Plan by AT&T

On December 17, 2011March 16, 2022 By The Social CriticIn Technology & ScienceLeave a comment

If you haven’t been in the market for a cell phone recently, perhaps you missed it: AT&T’s Unlimited Talk, Text & Web GoPhone Plan, ushered in by a June 21, 2011 press release.

The FCC, FTC or state attorneys general really ought to look into AT&T for the marketing of their “unlimited web” mobile phone services. Without the benefit of a clear-and-obvious disclosure, AT&T’s prepaid smartphone customers, like their contract-bound counterparts, need to sign up for a separate data package, otherwise there is virtually no web to speak of under so-called unlimited talk, text and web GoPhone plans. A data plan will set consumers back $10 to $45 or $5 to $25 per month in additional fees depending on whether or not the service is under contract (postpaid) or prepaid (with prices subject to change, of course).

For consumers trying to keep their costs down in a tough economy, every dime counts. AT&T and its largest competitor, Verizon, would like us to think they are competitive in the prepaid market so they’ve crafted their own definition of the word “unlimited”. Verizon stipulates parenthetically that their unlimited prepaid option applies only to “basic phones”. By contrast, AT&T makes an implicit suggestion that web access is unlimited to any prepaid handset owner. The reality that it does not comes on top of the industry’s controversial practice of capping or throttling data access on the part of its heaviest “unlimited data” users. It is, in a nutshell, a case of what Sir Richard Branson calls “confusion marketing“.

AT&T titled their press release this past summer “Prepaid Calling Just Got Better: Nationwide Unlimited Talk, Text & Web Plan Now Available for $50”.

Two things stand out: 1) The news organizations and blogs that covered this new plan largely parroted the headline to perpetuate a patently false notion of the true cost of owning a modern prepaid phone, and 2) AT&T and its competitors need to abide by standard English usage in the use of the word “unlimited” when paired to “talk, text & web”. In fact, they have a legal obligation to abide by truth-in-advertising laws.

To the best of my knowledge, no action has been taken to reign in AT&T’s misleading verbiage even as progress on a similar front are on the rise outside the US. When the smaller prepaid providers offer a $45 or $50 “unlimited” pay-as-you-go service they typically mean everything for that price. At present, AT&T, like Verizon, is not competitive in the emerging prepaid smartphone market. Only by engaging in false advertising do they give the appearance of something they do not, in fact, offer at a $50 price point.

AT&T isn’t just throwing curve balls at prospective prepaid customers. The company brochure depicts a la carte data plan “options” that are, in fact, mandatory for any smartphone user — even those who talk or text exclusively. While this practice may be prevalent in the postpaid marketplace, it is not widely anticipated in the prepaid market and, as such, is not adequately disclosed. In looking at Walmart and Best Buy’s selection of AT&T prepaid products — online or off — a disclaimer does not appear indicating that actual costs may be higher, nor is a “smartphone disclosure” printed prominently on the bright orange GoPhone prepaid card packages or online descriptions.

In the interest of full disclosure, I have been an AT&T-exclusive customer since the days of PacBell and Cingular. As a loyal customer, I have an expectation some 20 years after the debut of this technology to enter the market to find that it has become more transparent and competitive. Instead, smartphones and their data-driven 3G/4G service plans have given license to wireless providers to start a whole new round of gimmicks, games and hoop-jumping. There’s a reason I run my phones into the ground and don’t upgrade all that often: the mobile service providers make it too much of a Gotcha! hassle. And therein lies the lesson the cellular services industry ought to catch on to sooner, not later: keep it simple. Kiss and make up with your market by streamlining consumers’ cell phone purchasing experience and mobile phone providers might just see a revenue boost.

When we, the consumer, demand a straightforward buying experience we will get one.

While every other business in the difficult economy of recent years is selling their goods and services on razor-thin margins driven by inflated fuel, commodity and energy prices, the cellular industry hasn’t even stopped the practice of charging tax rates that don’t match the cost anyone actually pays for a handset! Still at play, too, are the perennial “line activation” fees. It’s not that the mobile phone providers don’t have the right to recoup expenses. They just need to stop announcing them in an endless onslaught of fine print. Here’s an idea: Include the usual tack-on fees in the cost of the handset. Consumers don’t care for line-itemized, nickle-and-dime exchanges. Take a cue from Amazon: bundle these charges in such a way that they are accounted for by the set price. When customers believe they are getting more for less — or for free, in the case of “free” Amazon shipping — they will be inclined to express greater satisfaction with the goods or services in question.

Long ago, the wireless industry devised a lucrative if not fatiguing strategy for luring consumers in at one cost, only to tack on innumerable fees at checkout. A straightforward and transparent transaction at the consumer level will not happen until consumer protection agencies at the state and federal level do what they’re paid by taxpayers to do: regulate. Mind you, not like they regulated Enron while the lights were going out on the West Coast (following energy deregulation). And not like they regulated BP, the foreign-owned company that killed US oil rig workers and filled the Gulf with sludge in 2010. And not like the US government regulated the mortgage-backed securities that ultimately toppled markets, taking down entire banks — nations, even — and retirement pension funds as blow-back for the deregulatory binge Republicans and Democrats engaged in during the Clinton Administration.

I am not a member of the Occupy Wall Street Movement. Yet when people talk about corporate malfeasance it’s all too obvious that the lack of law enforcement at the state and federal level is spurred on by the fact that bending and breaking laws in the name of “crony capitalism” are the national norm. Our eagle-eyed regulators look the other way because corporate lobbying firms and hefty campaign donations keep on flowing to the higher-ups in DC.

Consumer mobile phone contracts and services are needlessly complicated by corporate doublespeak. When a mobile phone service provider enters the market that will allow us to buy any carrier’s phone and use it on their service, we will see the democratization — true free market competition — the wireless market has lacked from the outset.

Change is inevitable. It’s only a question of “What direction?” and “When?”. Let’s begin with a demand for truth-in-advertising laws in the cellular industry. AT&T’s GoPhone prepaid cards and product descriptions should strike the word “web” from so-called unlimited plans or instead stipulate “Unlimited Talk, Text & Feature Phone Web; smartphone data access sold separately”. If this sounds too clunky to print on a slick brochure or a small prepaid card package, perhaps AT&T should say what they mean and mean what they say. The current verbiage misleads consumers into believing that that their monthly bills will be lower or at least commiserate with the competition regardless of what type of handset they purchase. It simply isn’t so. Verizon is the most costly overall, while Sprint does not offer a significant month-to-month cost savings over AT&T. T-Mobile is only marginally more competitive. On the whole, however, the cellular industry would appear to be engaged in collusion by proxy — if not out-and-out collusion — the latter of which is noncompetitive and therefore illegal.

In the spirit of the muckraking tradition, I urge consumers who are frustrated by misleading practices to mail company headquarters paperback dictionaries with the word “unlimited” and “web” written on the inside front and back cover respectively. The industry’s marketing practices solicit interest in their products and services with a bait-and-switch gimmick waiting in the wings. As consumers, we can make our position known too.

AT&T Inc.
208 S. Akard St.
Dallas, TX 75202 Map
Phone: 210-821-4105

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RESOURCES

Cell Phone Plans: Don’t Get Caught in the Ringer | MSNBC