Spinning a toy story

By Cameron Ainsworth-Vincze - Thursday, October 14, 2010 at 9:20 AM - 0 Comments

Getty Images

For the second time in three years, the world’s largest toy maker has had to issue a massive recall for some products over safety concerns. Fisher-Price, a subsidiary of Mattel Inc., said last week that more than 11 million children’s toys and accessories were being recalled. The list includes high chairs and toy cars, along with seven million tricycles equipped with a protruding plastic “ignition key” that can cause “serious injury, including genital bleeding” when sat upon improperly, according to the Consumer Product Safety Commission (CPSC).

In 2007, Mattel recalled millions of toys with paint containing elevated levels of lead (for which it was later fined US$2.3 million by the CPSC), or small magnets that could be swallowed. Yet the latest recall may prove to be less serious, especially given the company’s careful and quick response. “They’re doing this as a precautionary measure,” says Niraj Dawar, a marketing communications expert at the University of Western Ontario. Many of the toys are no longer in circulation (the tricycles were sold as early as 1997) and Fisher Price says they can still be used with “simple fixes.” “The recall is a notice to consumers to be careful,” adds Dawar, “and shouldn’t have much of an impact on Fisher-Price.”

J. Crew and the mail-order makeover

By Julia Belluz - Tuesday, September 21, 2010 at 3:33 PM - 0 Comments

FRANK OUDEMAN

Mickey Drexler, known as “the Steve Jobs of retail,” once had a reputation for breakneck retail expansion. Before the native New Yorker took the helm of J. Crew in 2003, he steered the Gap through its heyday in the 1990s, helping the company grow from 450 stores to more than 2,000. The Gap, he once said, should be as ubiquitous as Coca-Cola. But this overreaching contributed to Drexler’s downfall: the Gap’s growth stalled, and after a series of bad decisions, its stock plummeted. In 2002, Drexler was fired.

At J. Crew, Drexler has taken an altogether different approach, and the company has been on a hot streak for the last few years. Between 2003 and 2008 revenues rose 107 per cent, and in 2009, after both Oprah and the first family expressed their ardour for the label, revenues rang in at US$1.57 billion, outstripping pre-recession levels. But Drexler has not responded with aggressive expansion. Instead, the CEO squeezed growth out of the existing footprint of the business (just 321 stores) through a mix of retailing strategies that have transformed the brand. Once synonymous with preppy clothes and mail-order catalogues, Drexler’s J. Crew is now one of the most creative and fashionable retailers in North America.

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Investor spy games

By Jason Kirby - Thursday, September 9, 2010 at 12:20 PM - 0 Comments

ERIK SIMONSEN/GETTY IMAGES

Last year, Wal-Mart tried to thwart analysts from focusing on its short-term performance by ending the practice of reporting monthly same-store sales. No matter. Analysts simply turned to military-style satellite surveillance to grasp what’s going on in the aisles. Before the retailer released its second quarter results, UBS Investment Research issued a preview based on analysis of the number of cars coming and going from its parking lots, as captured in satellite photos.

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Discount chart-topper

By Stephanie Findlay - Thursday, August 26, 2010 at 3:00 PM - 0 Comments

Chris McKay/Wireimages/Getty Images

How do you score the top-selling new album in America? Montreal’s the Arcade Fire did it with a little help from one of the world’s largest online retailers. Amazon sold digital downloads of the album, The Suburbs, for US$3.99, compared to US$9.99 on Apple’s iTunes, dramatically boosting sales. Amazon still pays the band’s label the requisite US$7, but then offers the album to fans at a loss. Executives at music labels say that Amazon will occasionally promote an album like this in a gambit to attract new consumers and build its brand, reports the New York Times.

Apple is by far the dominant online music retailer, with an estimated 70 per cent of the market. Amazon, despite its considerable online presence, has just 12 per cent. But it appears that the stunt is worth the expense. While Apple’s share of digital music sales has flatlined, Amazon’s has grown four per cent over the last year, according to Soundscan, an official music-sales tracking system.

Outlet Malls go online

By Chris Sorensen - Thursday, June 24, 2010 at 2:00 PM - 2 Comments

Getty Images

Originally conceived as a way to off-load discontinued, overstocked and defective merchandise, outlet stores and outlet malls have become a key retail channel over the past decade as consumers chase big discounts on name-brand items. But a growing number of investors believe the future of outlet shopping doesn’t involve cluttered big box stores on the outskirts of town—it’s online.

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The year Amazon.com replaced Santa

By Colby Cosh - Friday, December 25, 2009 at 1:31 PM - 3 Comments

This Guardian story about holiday shopping leaves the slightly unsettling impression that “Boxing Day”, for the purposes of retailing, now begins in the UK at about 6 p.m. on the 24th of December. Maybe those billboards that plead with us to keep the Christ in Christmas should just be changed to request that the Christmas be kept in it?

Econowatch

By Jason Kirby - Friday, December 11, 2009 at 8:30 AM - 7 Comments

Even before Canada’s job market shifted back into high gear with Friday’s encouraging jobs report, it was clear something fundamental had changed. Never mind the recent prognostications by analysts about better days ahead. Sometimes all the cues you need can be found in the lives of the people behind the statistics.

Take the story of an employee we’ll call Janice who works at a small, struggling auto parts supplier outside Toronto. As the economy began to crumble last year, management put everyone on a four-day workweek and slashed pay, even as they rewarded themselves with bonuses. Workers weren’t happy, but what could they do? It was brutal out there.

Then a few days before the new employment data was released, the higher-ups tried to turn the screws again with more pay cuts. Only this time a couple of employees in the sales and accounting departments did something that even two months ago would have been unheard of—they told their boss to shove it. “Quitting felt so good,” Janice said, after giving her notice. And here’s the kicker: she didn’t even have another job lined up yet.

That, folks, is what economists describe as a rebound in confidence. But most people would just call it chutzpah. And it’s something we haven’t seen in the labour market for a very long time.

Make no mistake, the fact the economy added 79,000 new jobs in November doesn’t guarantee a prompt and speedy recovery. There are still vast numbers of Canadians out there fearful for their jobs. Younger workers in particular have felt the brunt of the recession, with an unemployment rate nearly twice the national average. Nor are investors convinced Canada’s economy is back on solid ground. It’s not gotten much attention yet, but Canada’s stock market has been sputtering sideways for months now, with the much-heralded rally actually ending back on Sept. 16, when the TSX closed at 11,555 points—almost exactly where it languishes today.

But put all that aside for a moment. During the recession Canadian employees were repeatedly asked to take one for the team. Yet prior to the downturn, Canada was in the throes of a labour shortage. As skilled workers begin to reassert themselves, the balance of power will shift back to its previous state. It may take some time, but you can bet many disgruntled employees are just plucking up the courage to follow in Janice’s footsteps.

THE GOOD NEWS

Building boom
The Canadian real estate sector continues to drive the country’s economic recovery even as some warn of the possibility of a housing bubble. Statistics Canada said the value of building permits hit a 13-month high of $6.1 billion in October, an increase of 18 per cent. Economists had predicted a one per cent jump.

TARP tamed
The Obama administration is planning to cut its Troubled Asset Relief Program by some $200 billion as Wall Street appears to be on the mend. The U.S. government now plans to spend just $141 billion over the next decade on the financial sector.

’Tis the e-season
U.S. online retailers enjoyed a five per cent jump in sales on the first Monday following American Thanksgiving, now known as Cyber Monday, the day when Americans return from a holiday spent window shopping and place online orders. The US$887 million that was spent equalled the busiest e-commerce day on record.

You’re hired
Restaurants, grocery stores and other retailers are hiring more employees, as confidence in the economic turnaround grows. In November, nearly four per cent of all job applications resulted in hires, the highest level so far this year.

THE BAD NEWS

Cool on cars
Automakers may be seeing a faint light at the end of the tunnel as North American sales of cars, trucks and SUVs gradually pick up—but Canadians don’t seem to be doing much of the buying. Car sales in Canada were down 2.9 per cent in November after driving off a cliff in October. By contrast, vehicle sales in the U.S. market were essentially flat year-over-year, with observers blaming the U.S. government’s Cash for Clunkers program for recent volatility in U.S. sales numbers.

Factory blues
Manufacturing levels in the U.S. did not increase as much as economists had hoped in November. The Institute for Supply Management’s manufacturing index fell two points from the month before to 53.6. Nevertheless, the index still shows an increase in output year-over-year, suggesting the economy continues to expand.

Busted
The number of U.S. companies and people being pushed into bankruptcy continues to soar. Bankruptcy petitions were up 26 per cent in November compared to the same time last year, according to data compiled from court filings by Jupiter eSources. The good news is there were slightly fewer bankruptcy petitions in November than October. Still, the first 11 months of this year resulted in 1.3 million U.S. bankruptcy filings, about 21 per cent more than in all of 2008.

Graph of the week

A real recovery • The very modest GDP growth in the third quarter suggested a recovery in Canada won’t be easy. But there are more encouraging signs that the recession is truly over. Both consumer spending and business investment posted the biggest gains since 2007.

Signs of the times

• Don’t stand between a banker and his bonus. The board of the Royal Bank of Scotland threatened to resign en masse after the British government suggested it might veto bonus payments for 20,000 investment bankers. Hundreds of the bankers have already reportedly quit in protest. The bank received a nearly $80-billion bailout last year, and has come under intense scrutiny for its bonus plans.
• Fore! Close! The game of golf has been sent running for cover by the recession. This year, 114 courses have closed in the U.S. as players cut back on green fees. Several others have been forced into bankruptcy as values of some courses have fallen as much as 50 per cent in the real estate crash. The industry has been hit by its own credit crunch, too, as golf course lenders have turned off the taps.
• Alligator farmers in Louisiana, the alligator farming capital of the world, have felt the bite of hard times. Last year, the farmers picked 500,000 wild alligator eggs. This year, they haven’t taken any as demand for luxury alligator skin products, from watch straps to hand bags, has disappeared. Their troubles have been made even worse by an oversupply of alligator skin in recent years.
• Damn the recession, it’s full speed ahead for the cruise ship industry. Royal Caribbean just launched Oasis of the Seas, a US$1.4-billion ship that rises 20 stories above the sea. Norwegian Cruise Line has an equally big ship in the works—the US$1.2-billion Norwegian Epic. Despite the downturn, the companies say they’re taking the long view with ships that will be plying the seas for 30 years.

Latest intelligence

After months of shedding workers, Canadian companies are finally hiring again. Some 79,100 jobs were created in November, including many in the key private sector. That blew by economists’ forecasts and, when combined with similarly positive U.S. jobs data, raised hopes that the economy is recovering faster than expected.

“Job numbers tend to be quite volatile, but there may be something to this.” - Eric Lascelles, chief economics and rates strategist, TD Securities

“November’s net hiring was all the more encouraging in that it included a swing back toward paid employment at the expense of self-employed jobs.” – Avery Shenfeld, chief economist, CIBC World Markets

“The solid November report offsets the prior month’s disappointing drop.” - Benjamin Reitzes, economist, BMO Capital Markets

“Canada’s economy is transitioning from recession to recovery.” - Sal Guatieri, senior economist, BMO Capital Markets

“This was a surprisingly strong report with details matching
the ‘wow’ factor in the headline print.” - Ian Pollick, strategist, TD Securities

“We consider this pace of job growth to be unsustainable.” - Millan Mulraine, economist, TD Securities

“With the unemployment decreasing and the participation rate rising, there is no doubt that the Canadian labour market is improving.” – Yanick Desnoyers, assistant chief economist, National Bank Financial

The Week Ahead

FRIDAY, DECEMBER 11: The U.S. Census Bureau will release retail sales figures for November. Sales are expected to rise slightly.
MONDAY, DECEMBER 14: The capacity utilization rate of Canadian industries will be reported by Statistics Canada. The rate hit a record low of 67.4 per cent in the second quarter of this year.
WEDNESDAY, DECEMBER 16: Statistics Canada will report manufacturing sales for October. Sales were up 1.4 per cent in September.

Econowatch

By Jason Kirby - Friday, October 30, 2009 at 8:30 AM - 4 Comments

Forget what economists have told you about how stimulus programs are supposed to function during a recession. You can learn a lot more from watching a master illusionist at work.

Take America’s US$8,000 tax credit for first-time homebuyers. Like any stimulus measure meant to jolt the economy out of recession, the tax credit was always more about smoke and mirrors than economic theory. When Washington created the program eight months ago, its aim was to conjure the illusion of stability in the housing market. Until the free fall in house prices could be halted, a broader economic recovery could never take hold. Continue…

Econowatch

By Steve Maich - Friday, October 16, 2009 at 8:30 AM - 1 Comment

The Canadian economy has answered a lot of questions for us in the past few months. Our housing market stumbled, but didn’t go into free fall. Our mining, manufacturing and construction industries suffered, but did not collapse. Retail sales slowed, but you won’t see row upon row of boarded-up stores when you venture out holiday shopping next month. And, of course, it turns out our banks are a fair bit more solid than many gave them credit for.

All of that must qualify as welcome and somewhat surprising news, and the latest bit of encouragement came last week with the release of September jobs figures. As the kids headed back to school, the employment situation in the U.S. continued to worsen—another 263,000 jobs vapourized as the world’s largest economy searches for a way to staunch the bleeding. But in Canada, 31,000 jobs were created, a second straight month of improvement, far outpacing even the rosiest projections on Bay Street. Continue…

Battle of the bag

By Peter Shawn Taylor - Thursday, July 2, 2009 at 9:45 AM - 57 Comments

It could be worse. Cathy Cirko could be the official spokesperson for the Somali Brotherhood of Pirates, or the Mosquito Breeders Association. As it is, Cirko is vice-president of the Canadian Plastics Industry Association and the country’s chief advocate of plastic shopping bags.

The once-ubiquitous plastic bag has quickly become an environmental bogeyman in Canada. Earlier this month, citing concerns over litter and landfill, Toronto launched the country’s first municipal bylaw requiring all stores to charge a five cents per bag fee to discourage their use. Several retail chains—including Home Depot and Canada’s largest grocer, Loblaw Co. Ltd.—have taken the fee nationwide. Emboldened by the speed with which this policy has moved, environmental groups are now talking of the day when plastic bags will seem as repellant as in-flight smoking sections. “It’s taking off everywhere as people realize this is the next right thing to do,” says Steven Price, the senior conservation director of the World Wildlife Fund. Continue…

The death of snooty service

By macleans.ca - Friday, February 20, 2009 at 9:49 AM - 0 Comments

The haughty, often dismissive service associated with high-end retail has become yet another recession casualty reports the Wall Street Journal. Sales associates at Neiman Marcus, for instance, are being encouraged to be “more patient” with customers, says a company spokeswoman. Those who still darken the doors of Chanel, Bergdorf Goodman and the like report salespeople are solicitous and, more shockingly, sometimes even smile. One man says that his choice of a pair of brown loafers at Fendi discounted to US$430 from about US$720 elicited “effusive praise” from three employees and a handwritten thank-you note from his salesperson. Both salespeople and customers report that this seismic shift in the shopping dynamic has proven alienating. Salespeople have quit over directives that they send a minimum number of thank-you notes a week. And one customer was so rattled by the overweening helpfulness of a saleswoman at an Anne Fontaine boutique in New York that she began to view her as pathetic and “only bought what she originally intended to buy in the first place.”

The Wall Street Journal

Bling is dead, says Chanel (and long live bling)

By macleans.ca - Thursday, January 15, 2009 at 10:05 AM - 0 Comments

The recession is hammering the French luxury goods market but stylish Parisians are responding by taking the long view and heralding it as a “revolution in values,” reports the International Herald Tribune. Closures and layoffs are stoking anxiety, but there’s hope that “an era of sometimes vulgar high living is over and that a more bedrock French way of life will emerge.” Some luxury purveyors are actually advocating price-cutting. Chanel designer Karl Lagerfeld views the economic malaise as bringing “a big spring housecleaning—both moral and physical” that will remove gaudy excess. “Bling is over,” he says, replaced by “the new modesty.” That said, he has no plans to cut back at Chanel, which just endured its first layoffs since 1939: “We have no budget, we do what we want and throwing money out the window brings money back in through the front door,” he said. “The luxury in my life is I never have to think about it.”

Herald Tribune