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Chapter 7 Services Resource production (including agriculture, energy, and mining) is often referred to as primary production. In the United States today, it’s a small part of the economy, accounting for less than two percent of GDP. In poor countries ("emerging" is the hopeful euphemism), it averages, as you can see from the graph, about 7.9 percent of GDP, though in some countries it’s much higher. Think Vietnam, India, Indonesia, Thailand, and the Philippines.

http://www.federalreserve.gov/pubs/ifdp/2013/1072/ifdp1072.htm The countries most dependent on manufacturing—sometimes called secondary production—are richer than those dependent on primary production. Think China, Indonesia, Malaysia, and Thailand.

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That leaves us with the tertiary or service sector, which accounts for about 80 percent of GDP in the U.S. and other rich countries (“advanced” is the euphemism). Exceptions? Petrostates come to mind, but the wealth there is usually held by a very few people. Average incomes may be high but median incomes are low.

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Here’s a nifty visualization (a Voronoi diagram) of the world economy in 2015. It shows that the U.S. economy is almost a quarter of the world total and that well over half of the U.S. economy is in the service sector (the darkest shade). Visual inspection suggests that China has a smaller economy and that services are a bit less than half of it. Services are dominant in all the wealthy countries, including Germany, Japan, and the UK.

http://howmuch.net/articles/one-diagram-that-will-change-the-way-you-look-at-the-us-economy

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Here’s another version, this one from 2017. The numbers are only slightly different, and there’s no attempt to distinguish the importance of the service sector. On the other hand, the diagram groups the tiles by continent, which reminds us that most of the world’s economic activity takes place in the U.S., East Asia, and Europe. The shockers are the near-irrelevance of Latin America (hiding in brown) and Africa (hiding in purple). And Russia. Hunt for it! Talk about punching above your weight.

https://howmuch.net/articles/the-world-economy-2017

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Over the last 30-odd years, the service sector’s share of the U.S. job market has continued growing, and if you define the sector broadly to include finance, retail, wholesale, and transport, it’s about four-fifths of that market. Mining and agriculture, including forestry and fisheries, are next to invisible, construction plugs along, and manufacturing… well, you know how factory jobs are doing. (The huge gray zone includes real estate, legal services, health care, education, waste management, entertainment, hotels, restaurants, and lots more.)

http://www.wsj.com/graphics/big-companies-get-bigger/

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Manufacturing has held fairly steady, while the rest of the economy—overwhelmingly in the service sector—has grown and grown.

https://www.nytimes.com/2017/10/14/us/union-jobs-mexico-rexnord.html?emc=eta1

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What parts of the service sector are growing fastest? That’s easy.

https://www.wsj.com/articles/december-jobs-report-11578657600?mod=searchresults&page=1&pos=1

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So how much money do jobs in these sectors pay? Here we can rely on the Bureau of Labor Statistics.

http://www.bls.gov/oes/current/oes_nat.htm#13-0000

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One of the major groups listed there is #45: Farming, Fishing, and Forestry. If you go to the BLS website and jump down to that group, you’ll find that it provides 480,000 jobs paying a mean annual wage of $30,000. Not so great! Manufacturing, listed as Production Occupations (#51), is much bigger, providing 9.1 million jobs paying a mean annual wage of $39,000. Better, but still not so great. These categories account for only a sliver of the total number of jobs in the country, however, which, as the top line of the chart indicates, include 144 million jobs paying a mean annual wage of $52,000. Conclusion: service-sector jobs pay more. We can dig further. The BLS website reports that the U.S. has 1.8 million heavy-truck drivers (53-3032) making a mean salary of $46,000. (Now you know why long-haul trucking companies have to replace more than 90 percent of their drivers annually. Experienced drivers can make $75,000, and the mean for those with even three years of experience is $57,000. Still, you have to put up with low wages for a while to get there.) The U.S. has 1.6 million vehicle mechanics (49-3000) making a mean salary of $46,000 annually. The U.S. has 718,000 carpenters (47-2031) earning $51,000 annually. The percentage of construction workers under the age of 25 declined by a third between 2005 and 2016. Nobody knows quite why, but possible reasons include that many young people don’t like hard work and that the jobs don’t pay enough, especially when so much construction work is concentrated in cities with a high cost of living. The total work force in construction fell from 11.7 million in 2005 to 10.2 ten years later. The U.S. has 3.5 million secretaries and administrative assistants (43-6010): $42,000. Retail salespersons (41-2031): 4.4 million; $28,000. (That’s the lowest number so far among service workers.)

Some kinds of sales jobs pay better: the median for car sales is $44,000. Sound good? Turnover in the occupation is very high, almost 50 percent annually and rising. Why? Young salespeople in particular often are very uncomfortable haggling with customers. One young man working in a dealership said that his friends were surprised at his choice of jobs. They associated it with a “plaid coat and gold pinkie ring, 30 trips up to the office to talk to the manager… and the salesperson pretending to be your friend.” This particular young man was working at a dealership with no-haggle pricing. Instead of working on commission, he got a fixed amount per sale (roughly $100-250). Even so, to make 50K a year at that rate, he had to sell 200 cars.

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Waiters and waitresses (35-3031): 2.8 million; $26,000. (Lower still.) Police officers (33-3050): 665,000; $65,000. (Big jump there! Highest number so far.) Security guards (33-9032): 1.1 million; $32,000 (See the difference?) Registered nurses (29-1141): 3 million; $75,000. (Up again.) Nurse anesthetists (29-1151): 43,000; $175,000. (Whoa!) Anesthesiologists (29-1061): 31,000; $268,000. (Not as far ahead of the nurse anesthetists as you might have thought. And probably more student debt.) Elementary teachers (25-2021):1.4 million; $62,000. (More than you thought? That’s because you’re thinking like an Oklahoman. Oklahoma’s average salary for K-12 teachers is $44,000. Our legislators like their jobs and, knowing their constituents, won’t vote to raise taxes. That’s why Shawn Sheehan, a math teacher at Norman High, won an award for being the state’s outstanding teacher in 2016 and promptly resigned to take a job in Lewisville, outside Dallas. He said he’d make $56,000 to start, $20,000 more than he was making in Norman. He had company: during the summer of 2016, a dozen teachers at Norman High resigned for the same reason.)

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A few months later, Sheehan sent in this fairly detailed comparison of income and expenses before and after the move.

http://www.tulsaworld.com/homepagelatest/former-oklahoma-teacher-of-the-year-who-left-for-texas/article_ec05e18d-ee22-53de-abbd-3170c075c2db.html

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Lawyers (23-1011): 642,000; $144,000. (A bit less than you thought?) Software developers (15-1130):1.6 million; $104,000. (What, they’re not all billionaires?) Accountants (13-2011): 1.3 million; $79,000. (Is that all?) Overall, there are a few surprisingly well-paid jobs (my favorite is nurse-anesthetist), but the really big money doesn’t show up on this listing at all, because it goes to people who are not on salary. Movie stars are an obvious example, but don’t go rushing off to Hollywood: as of 2014, members of the Screen Actors Guild earned, on average, $52,000 annually—and most earned less than $1,000 from acting jobs. (What’s the Bacharach lyric? “And all the stars that never were are parking cars and pumping gas.”) Want more information about job prospects in these and other categories? Information about job requirements? Try the annual Occupational Outlook Handbook, published annually by the Bureau of Labor Statistics: http://www.bls.gov/ooh Want encouragement to complete your college degree? How about this, also from the Bureau of Labor Statistics.

https://www.bls.gov/emp/images/ep_chart_001.png

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The sobering conclusion is that even with a college degree, most jobs don’t pay what most college students hope to earn. The table here shows, at the right, the annual salary earned 10 years after entering college. These are the highest salaries of any of the 1,000 schools The Wall Street Journal ranked in 2017. FYI, the figure for UT-Austin was $53,000; for OU, it was $47,000. Never heard of MCPHS? It’s the Massachusetts College of Pharmacy and Health Science.

http://graphics.wsj.com/image-grid/college-rankings-2018/ The odd thing is that those top-earning colleges aren’t the top-rated schools overall. Here are the Journal’s top-rated schools. The only top-earners on the list are Harvard, MIT, and Stanford.

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Change of topic! Who’s the biggest employer? That’s easy: the federal government, with about three million employees. That number excludes military personnel but includes civilian workers on the national defense payroll. Those contractors form the largest group on this chart, followed by people working for the postal service and in federal hospitals such as those run by Veterans Affairs.

http://www2.census.gov/govs/apes/11fedfun.pdf

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The combined employees of all state governments, however, exceed the federal total. It may surprise you that the biggest subcategory of Education Total is Higher Education (total), but that’s because elementary and secondary teachers are on the payroll of school districts, not states. If you only consider Instructional Employees (not staff), you have a group exceeded only by people working in prisons, listed here as Corrections.

http://www2.census.gov/govs/apes/11stus.txt

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Though you may think that there are lots of federal and state employees, twice as many people work for local governments as for the federal and state governments combined. Here’s where the nation’s schoolteachers show up, with over four million elementary and secondary “instructional employees.” No other category exceeds a million employees; the closest categories cover police and hospital workers.

http://www2.census.gov/govs/apes/11locus.txt

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These employees of local governments are spread out over 3,031 county governments, 19,522 municipal governments, and 12,884 school districts. Numbers like these must drive Tea Partiers nuts, although of course Tea Partiers are also philosophically devoted to local government. Seems paradoxical.

http://www2.census.gov/govs/cog/2012/formatted_prelim_counts_23jul2012_2.pdf

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Some parts of the country (darker shades of green) have more local governments, per county, than others. There’s a pretty good correlation of low numbers (yellow shades) with poverty—which calls into question the Reaganesque contention that government is the problem, not the solution. If the wealthy counties have the most local government agencies, then maybe having lots of agencies isn’t such a bad thing. (Sorry: I know, I’m sounding like a European or even, gasp!, a Canadian. Have to stop doing that.)

http://www2.census.gov/govs/cog/2012/many_layers_prelim_map.pdf

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Oklahoma has almost half as many school districts as both Texas and California. Is that good (power to local communities) or bad (unnecessary bureaucracy)? We can argue about it all day, but between 2012 and 2017 the number of school districts in Oklahoma fell from 550 to 526, of which 73 had fewer than a thousand students. The state helped pay the salaries of any pairs of districts that shared superintendents; in 2017, eight did. The theory was that this would encourage consolidation, which was why the state helped.

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You can see why it is commonly said that in the United States 15 million people work for one kind of government of another. That’s probably a bit low, but keep the number in mind as we move on to employment in the private sector. Here’s a list of the 25 biggest private employers in the U.S. (You gotta love Wikipedia for stuff like this.) Some of the companies are manufacturers, some are transportation companies, some are banks, but most sell stuff to consumers. The names of these companies are a part of daily life in America today: can there be any unimpaired American unfamiliar with Walmart, Yum! Brands (at least as operator of Pizza Hut, Taco Bell, and KFC), McDonald’s, Kroger, Target, Home Depot, and Walgreens?

https://en.wikipedia.org/wiki/List_of_largest_United_States%E2%80%93based_employers_globally

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Here’s a list of the biggest private employers worldwide. Walmart’s still at the top of the list, but other companies come from China, Taiwan, Germany, Russia, Japan, and the UK.

https://money.cnn.com/magazines/fortune/global500/2012/performers/companies/biggest/

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Suppose we narrow it down to retailers, measured by revenue. Here are the top 10 worldwide for 2020. Three are American, and most of the others are European, but Walmart is not just #1: it’s first by a milehttps://nrf.com/blog/2020-top-50-global-retailers. Look who’s chasing it.

https://nrf.com/blog/2020-top-50-global-retailers

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We’ll look at a few of these companies, beginning with Walmart. (Larger circles indicate groups of stores.)

https://en.wikipedia.org/wiki/Walmart This animation shows Wal-Mart’s expansion over 50 years. The company remained heavily focused in the South until the late 1980s.

http://projects.flowingdata.com/walmart/

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The number of stores per person is still greatest around the company’s Arkansas home.

https://ilsr.org/retail-maps-graphs/

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Thinking of moving to New York City? Better get used to life without Sam’s baby. Either that, or get used to hiking over to New Jersey.

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Walmart also operates in many foreign countries, especially in Mexico (over 2,000 stores) and, to a lesser extent, Brazil, China, South Africa, and Chile. Here’s a tabulation as of February, 2017. The chart omits stores in developed economies such as Canada and Western Europe.

https://www.wsj.com/articles/wal-mart-takes-its-time-on-expanding-in-africa-1486216804

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Here’s a complete tabulation a year later. There had been steady growth in China. India was flat. Brazil was declining. There was a shock in the UK, where Walmart in 2018 merged its 642 stores, which operated under the name ASDA, into the rival chain Sainsbury. In exchange, Sainsbury paid Walmart almost exactly the same amount that Walmart had paid for ASDA in 1999. Walmart remained a minority shareholder in Sainsbury but its experience in the UK was still disappointing.

https://www.wsj.com/articles/walmart-looks-to-scale-back-in-u-k-and-brazil-with-an-eye-on-india-1525011080?mod=searchresults&page=1&pos=10

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To service its prodigious network, Walmart operates several sets of distribution centers. The map below shows what Walmart calls general merchandise centers. There are other distribution centers for perishables, apparel, tires, and pharmaceuticals. A typical general merchandise center covers a million square feet, with shelving 35 feet high. Impossible to visualize? A football field without its end zones measures 300 by 160 feet, or 48,000 square feet; that’s a bit more than one acre (43,560 square feet), so the merchandise center covers roughly 20 football fields. The average Walmart store is 124 miles from one of these centers. (Note on definition. The traditional warehouse is obsolete. It stocked lots of stuff, because with unreliable transportation that was the only way to keep retailers supplied. With modern logistics, a distribution center, in contrast, stocks very little, just enough to keep the product on retail shelves. Stuff sitting in a warehouse is money wasted.)

http://www.mwpvl.com/html/walmart.html

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Walmart has thought long and hard about the most rational way of supplying its stores, and its answer is probably not what you would guess. Suppose you’re a supplier: do you want to send trucks to every Walmart distribution center? If you’re Walmart, do you want to be dependent on somebody sending trucks to all your distribution centers? Answer to both questions: probably not. The alternative is what Walmart calls Center Point Distribution Centers. Here’s a map of them. They’re located near clusters of suppliers. A supplier delivers goods to the Center Point centers, which divide the shipments and send them on to the distribution centers. From there, they go to the stores. Here’s the rationale. Suppose you’re a supplier of small items such as hair pins or thumb drives. A distribution center doesn’t want a whole truckload of your product, but it’s expensive to deliver less than a truckload. With the Center Point system, you send a truckload of your product to a Center Point center. There, the truckload is divided into smaller quantities and combined with less-than-truckload quantities of other small items. Together, several small items fill a truckload sent to a general-merchandise center.

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Here’s Walmart’s smaller rival, Target.

This animation shows its expansion from its starting point in Minnesota.

http://projects.flowingdata.com/target/

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Here are Target’s distribution centers. The three shown on the OK/TX border are actually in Fort Worth, Midlothian, and Tyler.

https://corporate.target.com/careers/global-locations/distribution-center-locations Here’s a location map for Midlothian and a snip of the Target center there. The center handles most of Target’s grocery distribution for Texas and probably Oklahoma. The location of Midlothian may seem a little odd because it’s not on an Interstate, but the town of Midlothian has created what it calls Railport and offers low taxes, fiber connectivity, a six-lane divided highway—U.S. 67—and access to both major western railroads. Target is going to be adding a fulfillment center here for online orders. (A fulfillment center is not a Buddhist retreat. It’s a special kind of distribution center, serving individual consumers, not stores.)

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Target has stood up to Walmart better than most. Think of Kmart, which used to be the discount department store leader. No longer: the company opened its 2000th store in 1981 and has now closed all but about 500 of them.

http://www.wsj.com/articles/apache-has-high-hopes-for-new-oil-field-discovery-in-texas-1473245702

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The survivors average sales of about $9 million annually, but there’s one funny exception. We’re looking at the U.S. territory of Guam, about 6000 miles west of the mainland U.S. No Amazon Prime free shipping here; no Walmart; no Target. But (and I don’t know why) there’s a Kmart. Annual sales: about $100 million. Shoppers come from South Korea, Japan, the Philippines, and more.

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Walmart has also decimated traditional supermarkets, which have been forced into mergers or simply vanished. As late as the 1960s, for example, A&P (that’s for Atlantic and Pacific) had more grocery stores than any other company in the nation. Most were back east. After shrinking for decades, the company finally died in 2015. Here’s what was left near the end of the line.

Here’s an A&P shop window in New York City in 1936. “Ann Page” ketchup is an early example of what later became commonplace in all supermarkets: house brands. So is Red Circle coffee.

https://en.wikipedia.org/wiki/The_Great_Atlantic_%26_Pacific_Tea_Company

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Throughout the 20th century there was a tug-of-war between national brands on the one hand and retailers with their own house brands on the other. In 1950, the national brands were winning; lately, it’s been the other way around. Costco, for example, has over 700 Costco stores in the U.S. About a quarter of the company’s $118 billion in annual sales comes from its house brand, Kirkland. Kirkland products are often made for Costco by name-brand manufacturer but sold substantially cheaper. Think this makes the name-brand manufacturer happy? Here’s a good example of retailer hardball: Proctor and Gamble, which makes Pampers disposable diapers, refused to make Kirkland diapers. Costco retaliated by refusing to sell Pampers. Kimberly-Clark, manufacturer of Huggies, watched this little drama unfold and agreed to make Kirkland diapers. Of course Costco now stocks Huggies along with its Kirkland diapers. Costco used to sell Planters nuts but quit (or nearly quit) when Planters raised prices with what Costco considered insufficient justification. Costco asked Planters to package nuts under the Kirkland brand. Planters declined. Result: Costco sources nuts elsewhere, sells almost all of them under the Kirkland brand, and carries almost no Planters products. These aren’t make-or-break deals for P&G or Planters (which is a unit of Kraft Heinz), but Costco’s the second biggest retailer in the country by revenue—nothing to sneeze at.

https://www.theodysseyonline.com/10-reasons-costco/

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What does our crystal ball say about this contest? It says, “Look at house brands in Europe! That’s the future for the United States, too. National brands beware!” Of course, crystals balls can be wrong, but if you were a national-brand manager, you’d sure be aware of the threat.

https://www.wsj.com/articles/whats-working-and-whats-not-in-the-supermarket-1528389904?mod=searchresults&page=1&pos=1

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Back in the 1960s, A&P’s biggest rival was Safeway, based on the West Coast, with a distant foothold around D.C. In 2015, however, the company was acquired by Albertsons, another chain. The Safeway name survives, at least for the time being.

http://find.mapmuse.com/map/safeway So does the name Tom Thumb, a chain acquired earlier by Safeway.

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So does the name Randall’s, another Safeway subsidiary in Texas.

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Of all the supermarket chains, Kroger, based in Cincinnati, has fought most successfully against Walmart. Kroger sales in 2019 exceeded $120 billion. Sounds good, but margins were so tight that operating income was less than three billion.

Like Albertson’s, Kroger operates with other names in other parts of the country. Here I’ve added one of those subsidiaries, Fred Meyer, especially strong in the Northwest. The two names may seem evenly matched on the map, but there are almost 1,300 Kroger locations and fewer than 400 Fred Meyer stores.

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Who scares Kroger? A reporter recently asked Kroger’s CEO that question:

https://www.wsj.com/articles/head-of-americas-largest-grocer-talks-amazon-and-ugly-tomatoes-1503394203 He’s not the only one worried. See that little cliff? That was the day Amazon announced its intention of buying Whole Foods.

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Here’s Aldi as it gets started in the U.S. The stores are very heavy with house brands and compared to conventional supermarkets have far fewer SKU’s (that’s stock-keeping units, pronounced “skews”). Two kinds of mustard, in other words, not 12. Boxes arrive with one side missing so clerks can stack them quicker. Items have bar codes printed on both sides so check-out is quicker. Clever, no? Time is money—and Aldi undercuts even Walmart, on average by 17 percent. Can Kroger survive that difference? Besides, maybe the conventional supermarket is too big: too much walking, along with too much choice. One expert says, “The typical 40,000 square-foot supermarket is a dinosaur, and it’s extinct. Those stores need to die.”

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Aldi began in Germany and has spread steadily across Europe.

https://www.wsj.com/articles/how-grocery-giant-aldi-plans-to-conquer-america-limit-choice-1506004169 Aldi serves its Oklahoma stores from either Denton (Texas) or Olathe (Kansas). It’s all pretty logical, with Oklahoma City stocked from Denton and Tulsa from Olathe. Southern Texas is served from Houston.

https://panethos.wordpress.com/2015/05/26/aldistribution-centers-in-the-united-states/ https://corporate.aldi.us/fileadmin/fm-dam/ALDI_6168_Map.swf?real_estates

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Another German discounter, Lidl (rhymes with “needle”), with about 10,000 stores in Europe, jumped into the U .S. in 2017, when the Dallas Morning News published this map of forthcoming store locations. Would they be Aldi look-alikes? Not exactly: Lidl stores are about twice as large as an Aldi.

https://www.dallasnews.com/business/retail/2017/05/10/german-grocer-lidl-quietly-buying-land-northtexas The Virginia Beach Lidl.

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The first Lidl stores opened in June, 2017, drew in a bunch of customers, then saw a steady drain as shoppers shrugged. It seems the stores had too many organic products and too much wine. “This format will not be successful,” a consultant said. “They need to reset.” No problem. A Lidl executive said, “This is designed for us to learn and adapt and be nimble. It’s not about whether our model works in a market, but what we do to adapt to that market.”

https://www.wsj.com/articles/lidl-stores-gain-little-traction-so-far-in-u-s-1507460402

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By 2020, the company had about 300 stores in the U.S., though none yet in Texas.

https://www.lidl.com/stores

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Have hard discounters like Aldi and Lidl hurt Walmart? I don’t know, but early in 2016 Walmart announced that it would close 269 stores around the country, including 29 in Texas, of which 20 were Wal-Mart Express stores. These small-format stores had been open only a year, but the company pulled the plug on them. Meanwhile, Aldi was planning on having 55 stores in the DFW metroplex by 2018. I’d call that a threat to Walmart, even though Walmart still has 580 stores in Texas (including Sam’s Clubs) and even though it opened about 25 new stores in Texas during 2016. The battle goes on, in other words. Between 2015 and 2016, Walmart’s share of grocery sales in the Dallas-Fort Worth market slipped ever so slightly, from over 28 to under 28 percent. Kroger slipped slightly, too. Whose sales rose? Aldi, Sam’s Club, Sprouts, Trader Joe’s, and Whole Foods.

http://www.dallasnews.com/business/retail/20160729-a-look-at-north-texas-grocers-stores-fruitful-despite-intense-competition.ece

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So, as of 2016, Wal-Mart, Kroger, and Tom Thumb were all losing market share, while Whole Foods, Aldi, Sprouts, and Trader Joe’s were all gaining. Three years later, Walmart was gaining, while all the others were losing. Seems that if you were one of the many people who predicted hard times for Walmart you underestimated the beast.

https://epaper.dallasnews.com/html5/reader/production/default.aspx?pubname=&pubid=d7d94d17-1cc1-4585-94e9-f98d19763bdb

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The list above includes H-E-B, which lags Walmart in Dallas but dominates the southern half of the state. Between them, Walmart and H-E-B dominate in 24 of the state’s 25 biggest markets.

http://beta.dallasnews.com/business/economic-snapshot/2016/08/14/texas-heavyweight-food-fight-h-e-b-vs-wal-mart-lone-star-grocery-war?_ga=1.176006754.1522529403.1471647599

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Here’s a summary shot including a few names we’ve ignored. It treats as separate entities several chains that are now owned by the same outfit. As we saw, for example, Safeway is now part of Albertsons. Similarly, Stop & Shop and Food Lion both belong to the Dutch company Ahold—at least they did until 2015, when Ahold was acquired by an even bigger Belgian company, Delhaize, which now operates as Ahold Delhaize.

https://flowingdata.com/2013/06/26/grocery-store-geography/

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And here’s where the grocery business stood in 2016. Notice poor little Amazon at the bottom.

http://www.wsj.com/articles/amazon-to-expand-grocery-business-with-new-convenience-stores-1476189657

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Well, we all know I shouldn’t be so hasty calling Amazon “poor” or “little.” About half of all online grocery shopping is already done through Amazon Prime and some studies suggest that by 2025 40 percent of the stuff in the supermarket center aisles will be bought online. Here’s a short video showing one of Amazon’s several experiments in grocery stores. This version consists of a store without checkout lines. Pick up the item, and the charge pops up on your phone. Brilliant! Or maybe not. If it works, you can kiss goodbye to grocery clerks; they’ll be an endangered species in no time—even more so than in a self-checkout world, where a clerk is kept busy watching half a dozen check-outs. The ramifications reach out in weird ways. One lawyer complains that if this system works, he’ll lose business because shoplifting will be impossible. Nobody to defend!

http://www.wsj.com/articles/amazon-grocery-store-concept-to-open-in-seattle-in-early-2017-1480959119

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Amazon in 2020 claimed that the technology was ready for expansion, and the company opened a supermarket-sized store to the public in Seattle. Here’s a sketch of how it works.

https://www.wsj.com/articles/amazon-opens-cashierless-supermarket-in-latest-push-to-sell-food-11582617660?mod=searchresults&page=1&pos=1

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Amazon has also jumped with two feet into home-delivered groceries. The program began in Seattle and arrived in Dallas in October, 2016.

http://www.dallasnews.com/business/retail/2016/10/12/amazonfresh-makes-shopping-delivery-serviceavailable-north-texas Here’s where selected states stand with groceries ordered online, then delivered or picked up at the store. I find Oklahoma’s ranking here a big surprise, but that’s because I’ve never tried Walmart’s pickup service. It must be pretty substantial to rank No. 5.

http://www.wsj.com/articles/grocers-make-new-push-into-online-market-1476270231

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The percentage of groceries bought online is small but growing fast.

And although most people still buy most of their groceries in stores, about half of all the households in the U.S. ordered groceries online at least once during 2019.

https://www.wsj.com/articles/safeway-owner-rival-grocers-bet-on-smaller-warehouses-11576152005?mod=hp_lead_pos7

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Sidenote: this new kind of retailing has spread internationally. Here’s the Walmart in Pilar, Argentina, a suburb of Buenos Aires. Tells me that there are a lot of women who have cars but are short on time, probably because they’re working to pay for those cars. Notice the repair center next door! Now you’re going to ask me why the signs are in English. I wish I knew. Something to do with the social status of the language, I guess.

Will this work for Walmart? I don’t know, but if you own Walmart stock you’re probably not too thrilled. Here’s the company’s share price over the last five years (black line), along with the Dow Jones Industrial Average.

http://quotes.wsj.com/WMT/advanced-chart Here’s the last ten years, comparing Walmart (in red) to Amazon (in blue).

https://finance.yahoo.com/

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And Amazon just doesn’t let up. Amazon wanted a cut of the food-stamp business.

https://www.wsj.com/articles/amazon-fights-wal-mart-for-low-income-shoppers-1496732400 What could Amazon do to nab some of those customers? Answer: cut the cost of Prime from $99 to $69 for customers who receive food stamps. That’s a pool of 44 million shoppers, of whom two-thirds don’t yet have Prime. One observer says, “This is a direct attack on a core customer group of Wal-Mart’s.” Next step for Amazon: work with the USDA, which issues food stamps, to allow food-stamp recipients to use the stamps to pay for groceries online. Here it is on the website:

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Meanwhile, Amazon announced in 2017 that it would buy Whole Foods for $13.7 billion. Time will tell whether this was a smart move, but a joke made the rounds. Jeff Bezos (founder and CEO of Amazon) says, “Alexa, get me something from Whole Foods.” Alexa: “Buying Whole Foods.” Jeff Bezos: “No, no, wait!” Why did Amazon choose Whole Foods? Answer: shoppers at Whole Foods are younger than at other supermarket chains. They’re better educated, and they’re richer. In other words, Amazon latched on to a prized demographic.

https://www.economist.com/news/business/21723868-buying-upscale-grocer-new-front-battle-beast-bentonville-amazons One early change at Whole Foods: cutting prices on staples so they’re just a bit more expensive than at the competition. Another: centralizing orders so that individual store managers have less freedom to choose their stock. A third: prohibiting suppliers from putting representatives in stores, a practice “distracting” for employees, according to Amazon. Sounds like less choice but lower prices. Here’s the headline:

https://www.wsj.com/articles/amazon-puts-whole-foods-on-fast-track-to-conventional-supermarket-1505986380

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Longer term, maybe that experimental “no checkout” store in Seattle will really work and the technology can be scaled-up. Imagine Whole Foods with no checkouts. That could be a game changer. A year after the Whole Foods acquisition, it seemed that Amazon was on the right track. (The deal went public in April, 2017, and took a few months to complete.)

https://www.wsj.com/articles/a-year-after-amazon-devoured-whole-foods-rivals-are-cooking-up-countermoves-1528628400?mod=hp_lead_pos5

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There are two ways of looking at the takeover. On the one hand (see the graph) Whole Foods’s share of the grocery market is likely to grow much faster than any other major supermarket’s share. On the other hand, (see the bar chart) Whole Foods’s market share is much smaller than the market share of those other companies—and even with rapid growth is likely to remain so, at least for the next five years.

https://www.wsj.com/articles/amazon-plans-to-add-whole-foods-stores-11546178520?mod=searchresults&page=1&pos=1

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And let’s not forget the 155,000 convenience stores in the U.S. They’re changing. An industry-association rep says, “Young people see the convenience store as a place where they can pick up a good sandwich. Older generations think of the bathroom key attached to an old hubcap or a block of wood.” Between 2016 and 2017, sales of sandwiches in American convenience stores rose over 12 percent; sales of chocolate bars fell over 9 percent. Time to sell your Hershey stock?

https://www.wsj.com/articles/a-big-gulp-of-kale-juice-7-eleven-struggles-to-catch-fresh-food-wave-1525253400?mod=searchresults&page=1&pos=1

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Here’s the first 7-Eleven, then called the Southland Ice Company. The year was 1927, when Jefferson Green first offered milk, bread, and eggs along with blocks of ice.

http://corp.7-eleven.com/corp-BAK/history [Quotation from http://www.dallasnews.com/business/retail/2017/02/16/7-eleven-competes-demand-economy-redefines-convenience ]

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About two-thirds of the convenience stores in the U.S. are single-store operations, but 7-Eleven now has 8,900 here. (Worldwide it has 61,500.) It’s experimenting with self-checkout, but the big change in recent years has been that 90 percent of its stores are now franchised instead of company-owned. Like supermarkets, 7-Eleven has now got its own private label, too, with about 800 products: franchisees decide which to stock. The company has over 400 stores in the Dallas-Fort Worth area alone. No surprise: the company started there and the American unit is still headquartered there, though since 2005 it’s been part of Seven & I, a Japanese company.

http://find.mapmuse.com/map/7eleven/near/TX

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Funny thing: early in 2017 there was only one lonely 7-Eleven in metro Houston. Ridiculous? That’s what 7-Eleven must have thought when in that year it bought 1,100 convenience stores from Sunoco, an oil company ultimately controlled by Energy Partners, the same folks who brought you the Dakota Access pipeline. 7-Eleven also agreed to buy 2.2 billion gallons of gas annually for the next 15 years.

Presto! Here are the Sunoco stations in Houston that will be rebranded. There are lots more in states farther east, and 7-Eleven bought them too.

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How shall we sum up the grocery business? How about one word: “war.” Let’s go back for a moment to that interview with the Kroger CEO. He was asked what his stores would look like in 2025. Mr. McMullen: It wouldn't surprise me that customers would be in the store eating but they would use an app to order what they want. When they are finished, [the store clerk] would deliver the groceries to them. It will be so easy because we'll be able to predict a lot of the things you want. The associates you engage with will be so knowledgeable about where tortillas came from. I believe some stores will be big and some small. And it will be the combination of all those things that make it special. Does that seem like a winning proposition to you? He was also asked where he was when he heard about Amazon buying Whole Foods. He said that he wasn’t surprised and that he believes customers will want both “a physical experience and an online experience.”

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Maybe I should mention that in 2018 Amazon did a deal with Monoprix, France’s equivalent of Whole Foods. Didn’t take it over, but arranged to handle online deliveries through Amazon Prime. Here’s what the CEO of Monoprix, which is part of a company called Casino, said:

An analyst worried that in time Amazon would turn around and destroy the traditional supermarket business in France:

And it’s not just France. Amazon has a similar delivery deal in the UK through a chain there called Morrisons. https://www.ft.com/content/13afa996-313c-11e8-ac48-10c6fdc22f03

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Since we’re in France for a moment, here’s Printemps, a department store in central Paris. It’s still going strong after more than a century.

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Department stores are a much gloomier picture here in the U.S., where internet sales are growing at a pretty steady 15 percent annually, while bricks-and-mortar department-store sales are in deep decline. Floor space is heading down, too, though not quite as fast. A lonely sales clerk says, “Day by day it gets worse.”

http://www.economist.com/news/briefing/21721900-love-affair-shopping-has-gone-online-decline-established-american-retailing Between 2002 and 2017, department stores in the U.S. lost 448,000 jobs. Some of those employees may have shifted to e-commerce, but that sector gained only 178,000 jobs, not nearly enough to make up for the loss.

https://www.wsj.com/articles/kicking-the-tires-on-the-rundown-retail-sector-1496065237

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If you know Chicago, you might recognize this building at 1 South State Street. For over a century it was Carson, Pirie, Scott, a department store designed by a very young Frank Lloyd Wright. One tipoff: big windows, so shoppers could see the color of things in natural light. The store closed in 2007 and the upper floors were converted to offices. Look who moved into the ground floor.

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I give Target credit for taking care of this heritage building; they could have done a lot worse. The company says it spent twice as much getting set up here as at an average Target store. .

https://fortunedotcom.files.wordpress.com/2014/10/chicago-state-street-entrance.jpg

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The department store most dramatically imploding is Sears, a leading national chain into the 1960s and maybe the 1970s. Bought anything there lately?

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Between 2009 and 2017, the number of Sears stores in the U.S. fell from 919 to 615. (Kmart is matched up here because Sears bought it in 2005. Amazon is shown for comparison; the count includes distribution centers and Whole Foods stores.)

https://www.wsj.com/graphics/amazon-vs-sears/ March forward one year to 2018: Sears and Kmart have shrunk even more.

https://www.wsj.com/graphics/amazon-vs-sears/?mod=article_inline

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Employment at Sears has been cut in half; so has revenue.

Shareholders know when to run: Sears’ share price is down about 90 percent.

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Late in 2018, Sears declared bankruptcy. Some investors wanted to liquidate, but a bankruptcy judge a few months later allowed the controlling shareholder, Eddie Lampert, to try keeping his company alive with about 400 stores. That’s down from a peak of 2,300 stores in 2006.

https://www.wsj.com/articles/sears-to-stay-open-after-edward-lampert-prevails-in-bankruptcy-auction-11547636823?mod=searchresults&page=1&pos=2

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Back in the ’60s, Montgomery Ward was the national competition for Sears. The biggest Ward store in the country opened in 1960 as part of OKC’s first shopping center, Penn Square. When “Monkey” (the name comes from the spelling on store signs, which read Montgy) failed in 1981, the Penn Square store was taken over by Dillard’s, which then had two spaces at Penn Square, one for men’s wear and one for women’s. The old Ward’s is at the lower left.

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In comparison with Sears, Macy’s and Penney’s are doing great.

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Macy’s was formed as a national chain when it bought up a great many local and regional department stores. Its emphasis seems to be in the Pacific Northwest, California, Florida, and the Northeast from New York City to Boston. Secondary clusters seem to be around Cincinnati and Atlanta. The company is weak in Texas and absent from Chicago.

http://find.mapmuse.com/map/macys Compare that with Penney’s, which operates almost everywhere. Verdict? Macy’s seems to target wealthy cities, while Penney’s isn’t so choosy

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The maps are impressive, but revenue at Macy’s slipped in 2015 from growing slowly to shrinking, and in 2016 the company announced that it would close 100 stores, including the one at OKC’s Quail Springs Mall and another at Fort Worth’s Ridgmar Mall. Poor shopping-center owners! How are they to replace a department store? It takes a lot of restaurants to fill that much space.

http://www.wsj.com/articles/inside-macys-downward-spiral-1447294559

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Penney has been in a slump even longer than Macy’s. About 45 percent of Penney shoppers are now Latinos. Catering to them may be smart, but the company’s stock price suggests that it’s not enough, and the company in 2016 began introducing new store brands. Push old, tired Worthington to the back of the store; put Belle + Sky, a contemporary women’s fashion line, at the front. Would it work? Would it succeed against specialty stores like H&M and Zara? That was the hope, but in February, 2017, Penney announced it would close 140 of its thousand stores. In Oklahoma, the ax fell on Penney stores in Altus, Claremore, Ponca City, and Stillwater. That would leave larger stores in OKC and Tulsa, plus smaller stores in Ardmore, Bartlesville, Enid, Lawton, Macalester, Muskogee, and Owasso. Fine, but what would shoppers in towns losing Penney do? Walmart had superstores in all those places. Alternatively, people could shop at Amazon and other online merchants. If they wanted a store like Penney, their best choice would be Stage, a Houston-based company that must have welcomed the Penney closures. (I say “must” because I’m guessing.) Stage operates in all four of the towns. (Hard to keep up! In 2018, Penney pulled the plug on its Bartlesville store. A former executive said, “Penney doesn’t have several years to figure this out. They are at risk of becoming irrelevant. They’ve lost a lot of customers. Getting them back becomes more and more difficult.”)

https://www.wsj.com/articles/kicking-the-tires-on-the-rundown-retail-sector-1496065237

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Here’s a lonely Penney store in Hurst, Tx, along with a few Google reviews. They hint at the plans of the fourth chief executive since 2011. Her plan: make it a destination, with a salon, fitness studio, and style classes. Yoga, of course, and a “clubhouse” to park the kids. This store is the lab.

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You can see the urgency behind the makeover from the company’s stock price.

Here’s a plot of share prices over the last decade for Macy’s, Penney’s, Sears, and (in red) the looming giant.

https://blogs.wsj.com/moneybeat/2017/07/11/a-prime-reminder-of-how-amazon-is-rewriting-the-rules-on-retail-stocks/

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Those same Altus shoppers losing their Penney stores also have a choice of specialty stores including (I’m reading off Google Maps) Cato Fashions, Maurice’s, Rustic Rose, and Lad Austin’s. Specialty stores come in chains, too, of course. The only one operating in Altus, it seems, is Rue 21, an 1,100-store chain based in Pittsburgh. In 2017, however, Rue 21 declared bankruptcy with the intention of closing over 300 stores. The Altus store was one of them. Many other specialty-store chains are in trouble. They include Gap and Old Navy.

http://www.economist.com/news/business/21663221-rapidly-rising-super-cheap-irish-clothes-retailer-prepares-conquer-america-rivals-should

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Gap loses money if it prices like the cheaper chains, but buyers say “no thanks” if it charges premium prices. (Inditex is the Spanish company operating the very successful Zara chain.)

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Stock prices tell the story, along with the turnover in Gap CEO’s.

http://www.wsj.com/articles/as-gap-struggles-its-analytical-ceo-prizes-data-over-design-1480282911

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Specialty stores doing well in the U.S. include Ross (in blue) and T.J. Maxx (in red). They overlap a lot, though Maxx is stronger in the Northeast.

Maxx is now a bigger company than Macy’s, whether measured by revenue, profits, or the value of outstanding shares. Ten years ago, the rankings were the other way around.

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Revenues at Maxx keep rising, while at Macy’s they keep falling. What’s the secret? Lower prices? Maybe, but Maxx also “turns” inventory more than six times a year, versus three times at Macy’s. Maybe that keeps customers returning to see what’s new.

https://www.wsj.com/articles/how-t-j-maxx-is-bucking-the-crisis-in-retailing-1497970910

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Here’s another possible explanation for Maxx’s success: inventory is arranged by type, not brand. The reporters who did the research for this story say that this creates a “treasure hunt” atmosphere that attracts some customers.

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One of the big challenges for all these companies is that they have to be super-careful not to piss off (OK: I’ll be polite and say “alienate”) their best customers. The chart below shows that nine percent of Macy’s shoppers account for almost half of Macy’s revenues. This is probably typical of many businesses, but the point remains: irritate the people pushing five of those gray shopping carts, and your total revenue will decline by one or two percent; irritate people pushing five of the red carts, and you just lost a quarter of your business. Here’s the lesson: take care of your brand loyalists.

https://www.wsj.com/articles/a-test-of-loyalty-at-macys-1497519017

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Here’s an epic case of antagonizing customers to the point of damaging an entire industry. Thousands of young women had ordered (and paid for or put big deposits on) wedding dresses made by Alfred Angelo when, in 2017, the company without warning declared bankruptcy and went into liquidation. Angelo had sold wedding dresses and related paraphernalia at over 2,500 bridal shops in 34 countries, but despite the company’s size there was no assurance that buyers would get their money refunded. They weren’t the only ones worried: the owners of bridal stores in general anticipated that Angelo’s failure would make brides reluctant to order expensive dresses when the manufacturer could suddenly fail. (Angelo’s dresses averaged $2,000.) Maybe more women would just order dresses online: a fifth of them already were doing just that. From the company website:

http://www.alfredangelo.com/ A year later, customers and other creditors were still waiting for refunds.

https://www.sun-sentinel.com/business/fl-bz-alfred-angelo-year-later-20180710-story.html

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Everybody who sells clothes, meanwhile, worries about Amazon, which is poised to become the biggest clothing merchant in the U.S. Some Amazon merchandise is sold by Amazon itself, but more than half comes from third-parties. There are more than 2,000,000 of them; 100,000 have sales on Amazon over $100,000 annually. One of Amazon’s challenges is making sure that these vendors are legit and not offering counterfeit merchandise.

https://www.wsj.com/articles/how-amazon-picks-its-seemingly-random-deals-of-the-day-1512820801

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Among these third-party sellers are giants like Adidas, Under Armour and, most recently, Nike. These companies would probably prefer to sell at department stores and specialty stores, but Amazon’s too big to ignore. It’s like years ago, when some retailers didn’t want to sell at Walmart because Walmart pushed them so hard to lower prices. They sold to Walmart anyway, because they calculated that they had to sell there to survive as a national brand. Same now with Amazon. With the same logic, late in 2017 IKEA announced that it would begin selling on Amazon.

http://www.wsj.com/articles/kohls-shows-effects-of-retail-slump-as-some-ponder-the-amazon-factor-1463084218

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Exceptions? Sure: Amazon would love to sell luxury brands, but a bunch of them refuse to sell on Amazon. You’ll recognize these culprits. They’re holding out in an effort to resist price cutting.

https://www.wsj.com/articles/amazon-has-a-luxury-problem-1507460401

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Want to be an online merchant but not deal with Amazon? Good luck. Just to ship your stuff, you’ll have to pay about four times as much as Amazon does, because you won’t qualify for discounts.

http://www.wsj.com/articles/for-online-shoppers-free-shipping-reigns-supreme-1461789381

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Amazon’s competitors are trying to figure out how to fight back. Kohl’s, for example, allows Amazon customers to return Amazon purchases at any of about 80 Kohl’s stores. Perhaps the theory is that this will get Amazon customers coming into a Kohl’s store and maybe buying something. The woman who devised this program, Michelle Gass, previously worked at Starbucks and is credited with inventing the Frappuccino.)

https://www.wsj.com/articles/kicking-the-tires-on-the-rundown-retail-sector-1496065237

https://corporate.kohls.com/company/leadership

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Meanwhile, Amazon’s share of the apparel market is predicted to almost triple to 19% by 2020. A customer says, “It’s so much easier than going to a store.” The CEO of Macy’s says, “I think they are going to have an interesting challenge when they start getting all those returns coming back online.” He’s got a point, because between 10 and 30 percent of online purchases are returned; clothing and shoes are at the high end of the range. Still, Amazon bought Zappos in 2009 and gained experience with that company’s free-returns policy. In 2017 Amazon announced Prime Wardrobe. Order an item of clothing, and it comes with a return label. Try it on, don’t like it, send it back. The same Macy’s CEO, in his job since 2003, stepped down in 2016. He said, “Now is the time to reset our business model to thrive in a future that is being driven by rapid evolution in consumer preferences and shopping habits.” I bet you can see through that word-cloud: he’s talking about online shopping.

https://www.ft.com/content/d17a1da8-cf08-11e7-b781-794ce08b24dc

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Overall, online sales of clothing are forecast to increase faster than any other kind of online sales—over the next five years from the low 20s to almost 40 percent. Amazon might top these projections, however, because the company keeps pushing into other categories. In 2017, the same year it began selling Nike stuff, Amazon announced that it would sell Kenmore appliances. This had been a Sears brand since 1913, and Sears was giving up foot traffic in hopes of building appliance sales. Investors must have figured the arrangement would work well for Amazon, because on the day of the announcement share prices for Home Depot and Best Buy fell four percent. Investors figured that customers would buy Kenmore on Amazon.

http://www.economist.com/news/briefing/21721900-love-affair-shopping-has-gone-online-decline-established-american-retailing

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A bit of comment from readers of an article in the WSJ.

https://www.wsj.com/articles/can-this-man-save-macys-1490270402 The new Macy’s CEO said he had some ideas, but readers were skeptical:

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Am I exaggerating the importance of online shopping? Do malls have a future? The best evidence that they do may come from Les Wexner, CEO of an S&P 500 company longer than anyone else.

His company, L Brands, owns 3,000 stores and several chains (and has owned and sold many others, including Abercrombie and Fitch), but the one he’s best known for is Victoria’s Secret, which he bought in 1982, when it had six stores and a catalog. He built it to a chain with a thousand stores. About a fifth of Victoria’s sales are online, but Wexner says, “If the store environment is exciting, I’m convinced people want to go to the store…. Humans are fundamentally pack animals. It hasn’t changed in thousands of years…. There are times when it gets interrupted, but people want to be with other people.”

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While other chains shrank, Victoria’s didn’t. Online shopping? Wexner said, “I don’t think this is a new norm.” The challenge for store owners is “creating an atmosphere.” In his case that’s not just wall-sized TVs with mostly naked models. It also involves the right merchandise, which is why Victoria’s moved away from swimwear (too seasonal) to sports bras and yoga pants.

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Is Wexner right? When you hear former employees of social-media giants deplore the monsters they helped create, you’ll wonder if maybe we’ll rediscover face-to-face interaction. Wexner says, “I’ve got 5,000 years of history on my side.” On the other hand, look at the L Brands share price. It reflects what investors think of other Wexner chains as well,, including Bath and Body Works and Pink, but the news isn’t good. Finally, in 2020, Wexner agreed to sell 55 percent of Victoria to Sycamore Partners, which specializes in troubled acquisitions. “I’ve thought about where I fit in the picture,” he said, “ [and] have decided that now is the right time to pass the reins….”

https://www.wsj.com/articles/the-boss-of-victorias-secret-bets-on-a-radical-idea-smartphones-will-fade-1517849668 https://www.wsj.com/articles/les-wexner-gives-up-control-of-victorias-secret-11582203604?mod=searchresults&page=1&pos=1

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Here’s another company resisting online shopping. It’s Primark, a mostly British chain with only ten stores in the U.S. in 2020. The company is seeking a niche here between Amazon and the specialty-store chains we know. Primark stores are physically much bigger than those specialty stores, and sales per square foot are very high.

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How is that possible? Answer: super-cheap prices. Online? Nope: just in the store, though you can check prices online. An executive says, “The cost to support home delivery can’t be supported with our price points.” Prices are so low, however, that “volumes don’t go up by a bit, they go up by a lot.” Will it work in the U.S.? A brilliant idea or a bust? We shall see.

https://www.wsj.com/articles/fast-fashion-chain-primark-is-slow-off-the-mark-in-u-s-1514128384 https://www.primark.com/en/store/dresden

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Want one more example of somebody resisting Amazon? Try Barnes and Noble, which is down to about 625 stores. Enter James Daunt, who recently engineered a turnaround at the biggest UK bookstore chain, Waterstones, which has about 275 stores. Daunt’s secret: get rid of central ordering and centrally determined promotions. Replace them by giving store managers lots of information and then the freedom to tailor their stock and their layout to local conditions. Also, create a store atmosphere that is unique and welcoming, rather than generic and cold. Waterstones, which had been losing money, is now profitable, thanks to Daunt. He’s supported by Elliott Management, an American investment firm that bought Waterstones and hired Daunt to work his magic. In 2019 Elliott bought Barnes and Noble for $683 million and told Daunt to have a go. He will now manage both Waterstones and Barnes and Noble. Will the British model work in the U.S.? The American stores are generally much bigger than the British ones, which may make each manager’s job more difficult. The risk will be that shoppers come in, browse, then buy on Amazon. For the time being, we know how history is moving. Borders, which operated over 500 stores in 2010, disappeared in 2011. Five years later, another brick-and-mortar bookstore chain was liquidated. Remember Hastings?

http://find.mapmuse.com/map/hastings

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For every Les Wexner and Primark and Barnes and Noble story, in other words, there are many others showing the irresistible advance of Amazon. Shoes are a good example. Here’s the position of Amazon (with its subsidiary, Zappo’s).

Think investors in Foot Locker haven’t noticed?

https://www.ft.com/content/bd1d5e88-b400-3052-8b7a-f0da299751d3

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Foot Locker isn’t the only shoestore in trouble. In 1956 a shoe store opened in Topeka, Kansas, and grew until it had 4,400 stores in 30 countries. In 2017 it closed a thousand of them, declared bankruptcy, and said it hoped to keep the rest open. This was Payless. Its CEO said, “This is a difficult, but necessary, decision driven by the continued challenges of the retail environment, which will only intensify.” Was he thinking of Amazon? Zappo’s? Both, I’m guessing, but remember that Amazon owns Zappo’s. Two years later, in early 2019, the company decided to liquidate all its remaining 2,100 stores in the U.S. Foreign stores, including Canada, would survive.

http://find.mapmuse.com/map/payless-shoes/goto/782130591/payless-shoes

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Here’s the top of the webpage of still another shoe store, one that specialized in comfortable, inexpensive shoes for women.

http://www.aerosoles.com/store

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It grew to a national footprint emphasizing wealthy, sophisticated markets.

Then in September, 2017, the company said it would close 74 of its 80 stores immediately. It would leave a few open in New York City, at least for a while.

https://www.wsj.com/articles/aerosoles-files-for-chapter-11-bankruptcy-protection-1505481064

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Amazon is pushing into sporting goods, too, forcing consolidation in some cases and failure in others. Green is Cabela’s; yellow is Bass Pro Shops. A line from Chicago to San Francisco almost separates the territories where each dominates. Why not put them together? That’s what happened in 2017, when the yellow squares swallowed the green ones. Price? $4.5 billion. The store names remained separate, but not the operation itself. This was good news for Springfield, Missouri, where Bass is headquartered. It was bad news for Sidney, Nebraska, where Cabela was based and employed 2,000 people.

Cabela’s world headquarters until 2017. Some of the employees moved to Springfield.

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Others were more adventurous.

https://www.starherald.com/out_yonder/outdoors/in-sidney-former-cabela-s-employees-open-online-stores-competing/article_e9b2cc95-2db6-544a-b5fb-34f4a665bfe9.html Another loser: Sports Authority (blue) announced in February, 2016, that it would close 140 of its 450 stores, including all 25 in Texas. The competition from Dick’s (green) and Academy (purple) was too strong. Dick’s had its own problems: it planned on opening 43 stores in 2017 but fewer in 2018 and only 5 to 10 in 2019.

http://find.mapmuse.com/map/the-sports-authority/goto/1000553745/the-sports-authority

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Here’s a little compilation of companies failing recently. Payless was the unlucky “winner.” Other chains on the list, including The Limited, have closed up shop completely. Bebe, a women’s clothing store, has closed all its physical stores but hopes to stay alive as an online business.

https://www.aol.com/article/finance/2017/04/04/payless-has-filed-for-bankruptcy-and-will-immediately-close-400/22025961/ Here’s the square footage of retail space closing annually. An investor says, “Many of these were great businesses at some point in time, but the internet and changing consumer habits have destroyed them.”

https://www.ft.com/content/d34ad3a6-5fd3-11e7-91a7-502f7ee26895

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Even Walmart is scared. It’s a much bigger company than Amazon, with revenues of $500 billion verses $232 billion at Amazon, but for every 100 visitors to Walmart’s website, Amazon has over 150. Walmart’s e-sales are even farther behind Amazon.

https://www.wsj.com/articles/wal-mart-takes-aim-at-amazon-1508811540

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Walmart was scared enough that in 2016 it paid $3 billion for Jet, an online retailer that Walmart hoped would jumpstart its own online operation.

http://www.wsj.com/articles/for-online-shoppers-free-shipping-reigns-supreme-146178938

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Amazon meanwhile continues its expansion. It has about 40,000 people working in Washington State, its headquarters. California, New York, Texas, and Kentucky each have between 10,000 and 15,000 Amazon employees.

https://www.ft.com/content/0f9850de-d8e0-11e6-944b-e7eb37a6aa8e

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Several kinds of Amazon distribution centers are sprouting up around the country.

https://www.wsj.com/articles/how-amazons-shipping-empire-is-challenging-ups-and-fedex-11567071003?mod=searchresults&page=1&pos=1

As of 2019, the company had over 400 distribution centers of various kinds in the U.S. There are many outside the U.S. as well.

http://www.mwpvl.com/html/amazon_com.html

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Here’s an Amazon fulfillment centers: it’s the white roof down near the lower-left corner.

It’s one of six Amazon fulfillment centers in Texas. Four of the centers are in the Dallas-Fort Worth area; the others are near San Antonio and San Marcos.

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Few people work on the floor. Instead, robots pick up items and scoot a bookcase of them to a human packer. To see this in action, try https://www.amazonrobotics.com/#/vision Or this https://www.youtube.com/watch?v=lWsMdN7HMuA Amazon was so impressed by these babies that it bought the company that makes them (Kiva) for $775 million in 2012.

In most fulfillment centers, a human being still packs items in a shipping box, but robots are coming. The link below includes a short video on the subject.

https://www.wsj.com/articles/next-leap-for-robots-picking-out-and-boxing-your-online-order-1500807601?mod=djemlogistics

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Here’s a short video showing several different distribution and fulfillment centers (Amazon, Ocado, DHL) in Manchester, UK. Human beings still do most of the packing, but, as you’ll see, they’re worried about how long they’ll have a job.

https://www.ft.com/content/916b93fc-8716-11e7-8bb1-5ba57d47eff7

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See the change in the company’s ability to make same-day deliveries in the U.S.?

https://www.wsj.com/articles/how-amazons-shipping-empire-is-challenging-ups-and-fedex-11567071003?mod=searchresults&page=1&pos=1

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How does Amazon make those deliveries? For a long time, it relied on UPS, FedEx, and the Post Office for deliveries. As of 2017, the post office was in the lead.

https://www.wsj.com/articles/amazon-aims-for-one-box-fits-all-1513765800

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That’s changed as Amazon has built up its own delivery network. A sign of its ambitions: in 2019 the company ordered 100,000 electrically powered delivery vans.

https://www.wsj.com/articles/how-amazons-shipping-empire-is-challenging-ups-and-fedex-11567071003?mod=searchresults&page=1&pos=1

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Seeing Amazon turning into a competitor, FedEx found a new best friend in Walmart, a company keenly interested in e-commerce but not eager to get into the delivery business.

https://www.wsj.com/articles/fred-smith-created-fedex-now-he-has-to-reinvent-it-11571324050?mod=hp_lead_pos5

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Think e-commerce is only for rich countries? Think again. A customer in Madurai orders a $3 sari from shopclues.com. She probably has no idea where it’s coming from, but the sari was made by Fabdeal in Surat, which keeps about 100,000 saris in its warehouse and sells on 300 websites.

The one just ordered is sent to a nearby warehouse owned by Delhivery. Time: less than an hour. Cost: half a rupee, or less than a penny. (The conversion rate at the time of this story was 60 to the dollar.)

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Next step: a journey toward the Bombay airport, 150 miles away. The trip takes over 8 hours because the roads are flooded. Still, the cost is very low: a bit more than 10 cents.

At Bhiwandi, 30 miles from the airport, the sari is packed with other freight bound for Chennai, the major airport closest to Madurai. Then it’s another four hours for the 30 miles to the airport.

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Here’s the expensive bit: a 600-mile flight. Air freight for the sari: 22 rupees or about 30 cents. Remember, the sari retailed for 199 rupees (three dollars).

From Chennai airport the sari travels for almost 11 hours by truck about 300 miles to Madurai.

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Once in Madurai, it’s a 2-mile trip by motorcycle to the customer. All told, it cost 45 rupees to deliver the sari, or less than a dollar. That’s an awfully good price, leaving most of the $3 order for the manufacturer and online merchant.

http://graphics.wsj.com/indias-great-parcel-race/ (The link above has accompanying videos for each step of the journey.)

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Walmart has been eager to enter the Indian market. Indian laws restrict foreign companies, but the biggest problem is that Indian retail is dominated by tiny family-owned shops, kiranas. They pay nominal rents for very small shop spaces and pay almost nothing in salaries. Kiranas offer credit, and make small home deliveries around the neighborhood. One expert says, “The kirana store has better economics than a supermarket. There is no way to beat them.”

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You can see the dominating position of these kiranas. labelled here as “unorganized” retail.

L https://www.wsj.com/articles/indias-biggest-competitors-to-walmart-and-amazon-mom-and-pop-1527512400?shareToken=st78e450efae994b7a9fb80502f20ea00d&ref=article_email_share

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Looking for a way to make money in India, Walmart opened about 20 Best Price wholesale-only stores, which sell to kiranas. Then, in 2018, Walmart paid $16 billion for a 77 percent stake in a fast-growing Indian e-commerce company called Flipkart. With revenues in 2017 of about $5 billion, Flipkart was founded in 2007 by two ex-Amazon employees who, thanks to Walmart, have become India’s first two e-commerce billionaires. Ironically, Flipkart has never been profitable, but Walmart is playing a long game. We shall see who wins: the big boys or the mom-and-pop kiranas. Maybe there’s room for both for many years to come. (The two men have identical last names, Bansal, but are unrelated.)

https://www.forbes.com/sites/saritharai/2015/03/30/indias-ecommerce-poised-to-mint-first-two-billionaires-flipkarts-sachin-bansal-binny-bansal/#3ad887f542e2

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So e-commerce is not restricted to rich countries. In fact it’s already bigger in Asia than in the U.S. and will probably continue to increase its lead.

https://www.wsj.com/articles/chinese-online-retailer-jd-coms-plan-to-diversify-1497374520

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The question is: who will build these logistic chains? We’ve just seen Walmart’s Flipkart, so let’s consider Alibaba, which is eating Amazon’s Chinese lunch.

https://www.wsj.com/articles/why-amazon-isnt-ready-for-prime-time-in-china-1503835204

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It might not be so bad if China was a small market, but it isn’t. Americans tend to think that they buy more online than anyone else, but look at China, at least with regard to clothing sales.

https://www.ft.com/content/0b892c0c-32c1-11e8-b5bf-23cb17fd1498?sharetype=share

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Measured by stockmarket value, Alibaba is hot on the heels of Amazon. (Similarly, Tencent is chasing Facebook, and Didi has almost caught Uber. Weibo is already ahead of Twitter.)

https://www.wsj.com/articles/tech-in-2018-will-chinas-cowardly-lions-get-some-courage-1514460773

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Alibaba does more than compete with Amazon, because it owns a mobile web browser, UC. Almost unknown in the U.S. it’s dominant in India and strong in many other countries. Alibaba, in short, is like Amazon combined with Google. UC’s secret: the browser uses comparatively little memory (31 megabytes versus 125 for Chrome) and so works well with cheap phones.

https://www.wsj.com/articles/a-browser-youve-never-heard-of-is-dethroning-google-in-asia-1514808002

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Amazon is having trouble in Europe, too, where its share of online sales is half what it is in the U.S.

In other words, don’t think that Amazon is taking over the world the way it’s taken over the United States. Or if it is, it’s got a lot of work to do.

https://www.wsj.com/articles/in-europe-amazon-com-remains-out-of-fashion-1525080604?mod=searchresults&page=1&pos=1

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Why not make e-commerce a global business? Why stop at borders? The main reasons are shipping costs and customs duties. Until recently, customers in the U.S. had an exemption on shipments with a value under $200. More than that, as the right half of this graphic shows, the tariff was steep. Now, however, the exemption has been raised to $800, which means that a lot more stuff can come into the U.S. duty-free. That’s what the projections on the left show. Shipping costs will still be an impediment, but if they come down the impediment will shrink. How much? Sorry, my crystal ball isn’t working that well.

http://www.wsj.com/articles/new-u-s-rules-make-foreign-goods-better-deal-for-online-shoppers-1462411116

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Enough about groceries, department stores, discount stores, and e-commerce. We come now to a much more expensive item. There are about 17,000 automotive dealerships in the country.

https://www.nada.org/WorkArea/DownloadAsset.aspx?id=21474850508

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There are only about 8,000 dealers, however, because some dealers have more than one dealership.

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The average dealer sells about a thousand cars annually, up about 20 percent from a decade ago. Thank consolidation.

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Average sales per dealer are about $30 million annually. That’s about twice the price of the average dealership, in case you’re thinking of buying one. Notice that sales per dealer are much higher in Oklahoma than anywhere else. As the note at the bottom explains, that’s because the data is based on vehicle registrations, and Oklahoma for some reason is where many fleet vehicles (rental cars, for example) are registered, though not necessarily sold.

https://www.nada.org/WorkArea/DownloadAsset.aspx?id=21474857318

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About half of dealership revenue comes from new car sales.

Caution: “new car” in this context includes light-duty trucks. Dealers sell more of them (including crossovers and SUV’s) than cars.

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New car prices keep rising.

That’s why loan terms are getting longer. Very few are less than four years. An increasing share exceed six years.

https://www.wsj.com/articles/the-seven-year-auto-loan-americas-middle-class-cant-afford-their-cars-11569941215?mod=hp_lead_pos4

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Want some free advice? When you’re buying a car, be careful when the salesman turns you over to the finance guy who sits you in his “box,” that windowless room where he nudges you to buy the stuff where the dealer really makes his money.

Another representation:

https://www.wsj.com/articles/add-on-services-emerge-as-car-dealers-profit-generator-11554634800?mod=searchresults&page=1&pos=1

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Or buy used. The average used cars sells for about half the price of the average new car.

Maybe you won’t have to finance the purchase.

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Whatever you do, try not to join the third of all car buyers who still owe on their previous vehicle and who wind up taking out a new loan that covers their previous debt as well as the new vehicle. The number of people in that crowd is growing.

https://www.wsj.com/articles/a-45-000-loan-for-a-27-000-ride-more-borrowers-are-going-underwater-on-car-loans-11573295400?mod=searchresults&page=1&pos=3

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These unfortunate buyers take out bigger than average loans with longer than average terms and higher than average interest rates. They can get deeper and deeper underwater as they buy subsequent vehicles.

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Anyway, here are the biggest dealers. Number 9 on the list below, Van Tuyl, sold about 240,000 vehicles in 2014 and was profitable enough that Warren Buffett bought it.

http://www.autonews.com/assets/PDF/CA98762313.PDF

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The rankings and numbers fluctuate a lot, but in 2019 there were just over 30 “megadealers,” each with revenues exceeding a billion dollars annually.

https://cet.informabi.com/sites/cetbi.com/files/2019%20Megadealer%20100_0.pdf

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The largest company based in Oklahoma is the Bob Moore Group in OKC, with new-car sales of about $300 million annually. The company ranks Number 70 on the national list and sells Audi, Buick, Cadillac, Chrysler, Ford, Infiniti, Kia, Maserati, Nissan, and Porsche.

The biggest single dealerships, such as Longo Toyota in Southern California and Freeman Toyota near DFW, sell about a dozen cars daily. At the other end of the spectrum, Fiat of Dallas, which operated in the 5400 block of Lemmon Avenue, sold all of 141 cars in 2015. In 2016 the owner, John Eagle, quit and now uses the space for Honda service. (Don’t feel too bad for him; he’s Number 47 and operates a dozen dealerships in Dallas, Houston, and San Antonio.)

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It probably doesn’t surprise you that the metroplex’s biggest dealer sells Toyotas: the decline of Detroit has been a long time in the making. It’s true with the luxury brands as well. Notice how Cadillac has far more dealers in the U.S. than Lexus, BMW, or Mercedes yet sells far fewer vehicles than any of them. Specifically, Cadillac has three times as many dealers as BMW, Mercedes, or Lexus, but each of those three sells more than twice as many cars in the U.S. as Cadillac. Maybe there are just too many Cadillac dealers, but there’s a counter argument. Many Cadillac dealers also sell Chevys in small towns. Without those mixed-brand dealers, many buyers in those towns would stick to lower-priced brands. Without those dealers, in other words, Cadillac sales would be even smaller.

http://www.wsj.com/articles/cadillac-bets-on-virtual-dealerships-1465172482

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An example: here are the local Cadillac and BMW dealers. You don’t need me to tell you which color is which brand. (Jackie Cooper BMW, in Oklahoma City, is hiding behind Bob Moore’s Autoplex.) Despite the argument in favor of rural dealerships, Cadillac in September, 2016, announced it would cut 400 of its 900 dealers. GM said it wanted Cadillac dealerships to look good, and many of these smaller dealers didn’t sell enough Cadillacs to justify investment in fancy buildings. Many of them already sell other GM brands, so this isn’t the same as closing the dealerships.

http://find.mapmuse.com/map/cadillac-dealers/near/OK

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Luxury cars are only a tenth of the market, but it’s a growing sector. Trouble is, Cadillac’s slice of the pie has been shrinking for decades.

https://www.wsj.com/articles/gm-looks-to-jump-start-cadillacagain-11557753226?mod=searchresults&page=1&pos=1

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It’s quite a come-down for a brand that in the 1950s almost ruled the world, but there’s a glimmer of hope. It’s not here at home, where Cadillac sales are in steady decline (since the late ‘70s down from almost 350,000 vehicles annually to maybe 175,000). It’s overseas, where Cadillac now sells well over 100,000 cars annually. Almost all those sales are in China, where Cadillac in 2016 sold about 125,000 cars. Audi, Mercedes, and BMW are still far ahead even there, but for Cadillac China now represents almost half of all its sales. The trick is: can Cadillac expand its market share in Chna?

https://www.wsj.com/articles/cadillac-after-years-of-struggle-has-found-its-sweet-spot-china-1504126098

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Think the owner of this car (he ran a fancy restaurant in Pingyao, China) was proud of his wheels?

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Let's shift to fast food with this map of McD’s in the U.S. About the only thing you can say from the dots is that McD is ubiquitous but weighted toward population centers.

http://www.datapointed.net/visualizations/maps/distance-to-nearest-mcdonalds/ What’s the spot farthest from a McDonald’s? Here’s the answer:

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The pattern of McDonald’s in big cities is almost crystalline in its geometric precision, with restaurants carpeting metros very evenly. Here’s part of Chicago.

Here’s part of Dallas.

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McDonald’s also loves interstate highways. West of I-35 in Oklahoma, only nine restaurants are not on an interstate.

Same thing for Montana. Notice how McDonald’s hug Interstates 90 and 94, along with U.S. 2 up north.

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Mcdonald’s dominates the burger chains.

https://www.wsj.com/articles/diners-are-finding-13-burgers-hard-to-swallow-1496241667 The company has a huge challenge, however, with millennials (people who became adults around the year 2000). That’s why it’s shifting to antibiotic-free chickens and milk from cows that do not get artificial growth hormones. You can even chart the steps the company has taken, year by year, to sell healthier food. Will it work? I can feel your skepticism! You’re tough customers.

https://www.wsj.com/articles/coming-soon-to-mcdonalds-happy-meals-organic-watered-down-juice-1505487601

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There’s also lots of competition from high-end burger places, and you can see why: compare the cost of ingredients with the price of the burger.

https://www.wsj.com/articles/diners-are-finding-13-burgers-hard-to-swallow-1496241667

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In 2017 the company announced that it would shift from frozen to fresh beef at all American restaurants except those in Hawaii and Alaska (where transport is expensive) and at some airport locations (where fridge space is limited). There’s a downside to this: burgers won’t be cooked until they’re ordered, which probably means longer wait times; also the burgers will be salted and peppered while they’re cooking, which risks too much or too little spicing. Bottom line: McDonald’s wouldn’t have taken these risks if it didn’t feel it had to. Why did it feel that way? Check this 2014 survey for the answer.

https://www.wsj.com/articles/mcdonalds-to-switch-to-fresh-beef-in-quarter-pounders-1490878800

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In 2017 it tried introducing better but more expensive hamburgers.

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No dice: in 2019 the company announced it would drop all of them. Why? These burgers took too much time to make. Here’s the explanation in the words of a senior executive:

“Some of the complexity that we’ve added into the business has now created a little bit slower drive-through times,” McDonald’s finance chief Kevin Ozan said last month, referring to the signature burgers and other changes.

https://www.wsj.com/articles/mcdonalds-drops-signature-crafted-burgers-11555629655?mod=searchresults&page=1&pos=2 If I was looking for another area of concern for McDonald’s, I might pick cleanliness. The popular impression is that McDonald’s isn’t doing a very good job. (Neither is Starbucks, which is surprising in view of that company’s upscale image.)

https://www.wsj.com/articles/starbucks-opened-its-bathrooms-to-everyone-and-some-people-are-worried-1527159601?mod=searchresults&page=1&pos=3

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The fast-food business has lots of regional chains that may or may not succeed in going national or international.

http://abcnews.go.com/Business/foodie-heaven-local-regional-restaurants-wished-expand/story?id=22625284 Waffle House is obviously strong in the South.

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Here's In-N-Out, a California chain on the move.

Here's Sonic, Oklahoma City-based but clearly on the way to a national presence. In 2018, it was bought by Inspire Brands, which also owns Jimmy John’s, Arby’s, and Buffalo Wild Wings.

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Here’s an OKC-based fast-food chain that’s still independent. It has 51 locations in three states but has signed franchise agreements to add another 52 in three more states. Recognize the company? Hint: it specializes in breakfast and the “J” in the box is significant. Interesting tidbit: it’s owned by a man who arrived from Vietnam as a refugee in 1975.

http://find.mapmuse.com/map/

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Did you know?

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Here’s another regional story. Cheddar’s was established in 1979. It specialized in “simple, honest, natural ingredients” (that’s from the website), and grew to 165 locations in 28 states. How to grow further? The owners did not want to go down the franchise path. Along came Darden Restaurants, a Florida firm that owns Olive Garden, LongHorn Steakhouse, Yard House, Capital Grille, Seasons 52, Bahama Breeze, and Eddie V’s. Sold! Darden paid $780 million for Cheddar’s, whose owners came away saying that “Darden’s expertise will enable us to further capitalize on our growth potential.”

http://find.mapmuse.com/map/cheddars-restaurant http://www.dallasnews.com/business/restaurants/2017/03/27/olive-garden-parent-buying-cheddars-chain

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Somehow I’ve managed to dodge almost completely that perennial student favorite, pizza, but better late than never. All of the big chains try to operate coast to coast, but Godfather’s concentrates in the Midwest, while Papa Murphy’s hardly exists in the Northeast.

http://flowingdata.com/2013/10/14/pizza-place-geography/

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The dominance of Pizza Hut is striking.

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Prefer sandwiches? No problem.

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Who’s in charge? Umm, Subway.

https://flowingdata.com/2015/05/13/where-subway-dominates-its-sandwich-place-competition-basically-everywhere/

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Then there’s Chick-fil-A, whose sales have tripled in the last decade.

At whose expense? One guess!

https://www.wsj.com/articles/chick-fil-as-lean-menu-helps-chain-bulk-up-11557313200?mod=searchresults&page=1&pos=2

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Here’s another student favorite: Panera, with about 2,000 locations.

http://find.mapmuse.com/map/panera It’s been in the news lately because Ron Shaich, who built the chain from scratch, engineered the company’s sale in 2017. He stayed on as CEO, although you have to wonder why, since his share of the purchase price was about $600 million. Maybe money isn’t his only motivation.

https://www.inc.com/magazine/201407/leigh-buchanan/a-ceos-most-important-job-according-to-paneras-ron-shaich.html

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The buyer was JAB Holdings, a Luxembourg company whose owners (the very private Reimann family of Germany) have recently gone on a buying spree, including lots of companies besides Panera. Notice JAB’s acquisition of both Keurig bottled coffee and Dr Pepper Snapple. The logic? Sell Keurig coffee through Dr. Pepper retail channels.

https://www.wsj.com/articles/krispy-kreme-owner-bets-americans-will-eat-at-pret-a-manger-1527594376?shareToken=ste30da22b8f1948109c7fe60c6df7c61b&ref=article_email_share

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Here’s a chain losing ground. Based in California, Del Taco has about 500 restaurants, but it announced in October, 2015, that it would close all those in Texas. “Underperforming,” the company said. More than 200 people lost their jobs, though the restaurants themselves might reopen as parts of other chains.

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All these companies are fighting for a piece of a shrinking pie, because lunchtime traffic is down as more people eat at their desk. Time is money, etc. One solution is fast-food delivery. Most McDonald’s restaurants around Dallas, for example, now partner with Uber to deliver orders. Service charge: $5. Apparently it’s worth the convenience. Will it turn around the decline in lunchtime sales? Stay tuned.

https://www.wsj.com/articles/diners-are-finding-13-burgers-hard-to-swallow-1496241667

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Food delivery itself has become very competitive. Prices vary, and the obvious question is how the more expensive contenders can survive. The answer presumably is through better service. Grubhub’s CEO says, “Scale drives efficiency. There are a lot of smaller players that burden the diner with excessive fees.” As for his own company: “I see a point where we could conceivably have extremely low if not free delivery for consumers.” A step in that direction: order on Yelp for delivery by Grubhub, and Grubhub will give Yelp a cut of the delivery fee.

https://www.wsj.com/articles/grubhub-expands-pact-with-yelp-aiming-for-cheaper-deliveries-1521451921?mod=searchresults&page=1&pos=1

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Breakfast is another possibility. Sales are up, which is why Wendy’s, for example, is back in the game with croissant sandwiches.

https://www.wsj.com/articles/fast-food-chains-heat-up-breakfast-fight-11571678889?mod=searchresults&page=1&pos=1

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Another way for fast-food restaurants to grow is to head overseas. McDonald’s is now basically in every country except those in Central Asia and Africa. There are a few other omissions, too. They include Greenland, Iceland, Bolivia, Syria, Iraq, Iran, Mongolia, Vietnam, Cambodia, Burma, and Nepal. Well, so maybe McD is not “everywhere.” Still, it’s lots of places.

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Measured by number of restaurants, McDonald’s has a big presence in Western Europe and Japan, and it’s very active in Brazil, South Africa, Singapore, Australia, and New Zealand.

http://www.npr.org/blogs/thesalt/2013/07/25/205547517/where-in-the-world-are-there-no-mcdonalds A dozen years later (2016 vs. 2003) the pattern isn’t very different except for China, which is up from under 500 to over 2,000.

https://www.thestreet.com/story/14260701/1/mcdonald-s-doubling-china-locations-by-2022.html

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Here are the 173 cities where McDonald’s had restaurants in China in 2009. Notice the clusters in Beijing, Shanghai, and Guangzhou/Hong Kong.

http://matthartzell.blogspot.com/2009/09/mcdonalds-in-china.html Don’t be scared. They won’t hurt you unless you let them.

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There’s lots of local competition, too, including from Taiwan-owned Dicos and Real Kung Fu, with a Bruce Lee logo. What to do? In 2016, a third of McDonald’s 2,200 restaurants in China were owned by franchisees; the rest, by the company. A new CEO decided to franchise the company-owned restaurants, too. McDonald’s might collect $2 billion up front, plus at least five percent of the revenues the stores earned over the 20-year franchise term. A new owner might also be smarter in locating the 1,300 new restaurants McDonald’s hoped to see in China. In all this, McDonald’s was copying Yum Brands, which in 2015 had gone down the same franchising path with its KFC and Pizza Hut restaurants in China. A year later, the deal was done. The buyer was a partnership between Carlyle Group, a U.S. private equity giant, and Citic, a Chinese-government owned investment company.

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In the Philippines, McDonald’s has approximately 400 restaurants, but a local chain called Jollibee has 890. Filipinos just like Jollibee’s food better, in part because rice is on the menu. (Look good to you?)

http://www.jollibee.com.ph/

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Here are the two chains in metro Manila. You can see Jollibee’s lead.

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Jollibee is confident enough that it’s moved overseas. So far it has only 133 restaurants there, catering largely to expat Filipinos in California and the Gulf.

Looking to grow in the U.S., however, the company recently spent $100 million for a 40 percent stake in Smashburger, a growing American chain, with a heavy emphasis in California, New York, and neighboring states.

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Let’s look at another college-student favorite, Starbucks, now with 24,000 cafes, about half in the U.S. We begin with Norman, where there really is a “wrong side of the tracks,” which is to say that Starbucks stays with the money.

https://www.loxcel.com/sbux# It’s true in Oklahoma City, too, where the only cafes south of the river are on freeways. This map also mirrors the racial segregation of the city. There’s nothing in heavily black Northeast Oklahoma City, for example (south of Lake Aluma).

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Ditto Dallas, where Interstate 30 is a racial, economic, and Starbucks divider. There’s some irony here, because Howard Schultz, the long-time boss of Starbucks, is famously progressive in his politics.

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Starbucks hardly sets foot in the heavily African-American east side of D.C.

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From the middle-class white perspective, such as midtown Manhattan, Starbucks sometimes seems to be everywhere. Still, do the math: 13,000 Starbucks cafes in a country (the U.S.) with 318 million people: that’s one café for about 23,000 people. Implication: there’s a ton of room for growth, provided Americans continue to have money and Starbucks continues to be attractive. You can bet that it’s scrambling to stay that way.

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Internationally, Starbucks began expanding ferociously in the 1990s. Its latest opening has been in Johannesburg, which it hopes will be the first step in diffusion across Subsaharan Africa. The most surprising “hole” is probably coffee-loving Italy, but the company opened its first there in 2018. Schulz anticipated difficulties and said, “We are not coming here to teach Italians how to make coffee….”

http://www.wsj.com/articles/starbucks-opens-first-store-in-south-africa-1461239313 Here it is, just before it opened. Notice the fancy coffee roaster, which should make the place smell good.

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As usual, the company picked a super location: it’s at the left edge of the image, just a short walk from the famous cathedral and galleria.

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Follow the money: Starbucks likes Mexico City. It also likes the industrial city of Monterrey, with 38 cafes. It has almost no interest in poor Guerrero and Oaxaca, even though the two states together have almost eight million residents. (The only restaurants you’ll find there are in tourist centers: a half dozen in Acapulco and one, I think, in Oaxaca City.) Notice Cabo, at the tip of Baja: once again, it’s a foreign-tourist story.

Wonder where the money is in Buenos Aires? Look for Starbucks.

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Are there other factors governing the locations chosen by Starbucks? Sure. As the UK shows, the company seems most comfortable with English-speaking customers, although there’s no immediately obvious reason why this should be so. Maybe the Brits are just especially aware of the U.S. and so were especially receptive to the chain. Istanbul’s another surprise: you’d think Turks would be partial to Turkish coffee, but apparently not so much.

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The company is in Lebanon and Jordan but not Israel. This is very counter-intuitive, but the company in fact opened stores in Israel in 2001, then closed them in 2003. Why? It was afraid that its stores would be a target for terrorists.

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The company is strong in the affluent Gulf but weak in South Asia. There are two billion people there, which means that there’s lots of room to grow, even though the local tradition is tea.

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Proof of the potential? Local coffee chains already exist, including one called Barista. Here are its cafes in Mumbai.

Interior of a Barista café.

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More proof of the potential to grow in India: tea is the common drink in East Asia, too, but Starbucks has done very well in Japan, China, and South Korea.

There’s room to grow even in South Korea, where Seoul seems full of Starbucks yet where there’s only one Starbucks for every 50,000 residents. The tricks remain the familiar ones: finding people with money and remaining attractive to them.

https://www.starbucks.com/store-locator?map=37.566974,126.987031,15z

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Here’s a new Starbucks concept, The Reserve, where coffee will be sold at eye-popping prices. Try a dollar an ounce. It’s a brave experiment, but sales at regular stores have not been increasing at their historic rate of five percent annually.

http://www.wsj.com/articles/middle-market-woes-inspire-starbuckss-bet-on-luxury-coffee-1480966895 For the moment, growth in the domestic coffee business is strongest in canned cold coffee, where sales have more than doubled in the last five years. (Not all the growth belongs to Starbucks, of course.) Young people in particular seem to think the stuff is healthier than soda pop and/or cheaper than barrista-brewed hot coffee.

https://www.wsj.com/articles/coffee-makers-look-to-conquer-the-supermarket-aisle-1510495200

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Another shift: in 2018 Starbucks sold the rights to sell Starbucks coffee in grocery stores to Nestlé, which dominates the packaged coffee business worldwide. Price: $7 billion up front, plus continuing royalties. Starbucks a year earlier had sold its Tazo tea brand to another global giant, Unilever. (“JDE” below refers to Jacobs Douwe Egberts, a subsidiary of JAB, which we met a few pages back as the buyer in 2017 of Panera.)

https://www.wsj.com/articles/nestle-inks-deal-to-sell-starbucks-products-world-wide-1525671469

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Here’s a summary view of the top 20 restaurant chains in the U.S. We’ve touched on many of these, but let me draw your attention to the “segment” column. The first 10 companies are “quick service” restaurants, but Number 11, Panera, is called Fast Casual. That’s the category for Number 13, too (Chipotle). Come down to Number 15, Applebee’s, and the category is Casual Dining. Olive Garden and Buffalo Wild Wings are there, too. Know the distinctions? Casual Dining has table service; the other two don’t. And though Fast Casual makes you order at a counter, it doesn’t give you fast-food style plastic seats and fluorescent lighting. Think ambience. (Fresher food? Maybe, but the fast food operators are moving in that direction, so the distinction can get blurred.)

http://www.restaurantbusinessonline.com/top-500-2018

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We’ve been talking about businesses that sell something tangible, but I want to look now at a few that don’t. They’re going to go by fast, so I’ll give you a little heads-up: we’re going to take quick looks at banks, law firms, accountants, real-estate agents, healthcare providers, journalists, and hotels. As with the hard-product businesses, these ones too are consolidating. Banks in the United States in the 19th century were stand-alone, one-of-a-kind institutions: as late as 1900 there were only 119 branch banks in the entire country. That number grew to about 3,500 by 1930, but the branches were mostly in the home city of the bank. Oklahoma until 1930 had only ever had one branch bank, and it didn’t last.

https://fraser.stlouisfed.org/files/docs/historical/federal%20reserve%20history/frcom_br_gp_ch_banking/branch_banking_us.pdf

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Here’s the 2017 picture, when several banks have far more branches than the entire country had in 1930.

https://www.fool.com/investing/2017/07/19/us-banks-with-the-most-branches.aspx A few decades ago, banks rarely if ever had a retail presence in more than one U.S. state. Here's a map of JPMorgan Chase branches today.

http://www.usbanklocations.com/map.php?zoom=4&lat=39.368279&lon=-98.891603&name=JPMorgan+Chase+Bank

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Here's Bank of America, which used to be just a California bank.

http://www.usbanklocations.com/map.php?zoom=4&lat=39.368279&lon=-98.891603&name=Bank+of+America There are regional banks, too, like Arvest, based in Arkansas and controlled by members of Walmart’s Walton family.

http://www.usbanklocations.com/map.php?zoom=4&lat=39.368279&lon=-98.891603&name=Arvest+Bank

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Will the numbers of branch banks continue to rise? Maybe not, because many are shifting to online operations, which are far more profitable. The switch began in 2010 and has accelerated since then.

https://www.wsj.com/articles/banks-double-down-on-branch-cutbacks-1517826601?mod=searchresults&page=1&pos=1

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Bank of America closed about 1,600 branches between 2009 and 2016. Here’s a close-up of what the bank now has in four states. See the pattern? Goodbye, small towns; hello, places with money. An executive says, “I don’t think we were optimally positioned before.”

https://www.wsj.com/articles/how-bank-of-america-ditched-1-597-branches-across-the-u-s-1505646000

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Here’s a graph of the shift.

The two big jumps? They were the result of mergers.

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Other banks, though not all, have done the same thing.

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You might argue that we don’t need branch banks at all if we do everything online. That’s mostly true, but what about small businesses that still take cash payments and need to deposit them? They’ll have a problem. And what about small businesses that need to borrow money and rely on a local banker who knows them and thinks they’re a good investment? Look where lending to small businesses takes place now. See the downward trend in small towns (dark green)? You could argue that the banks are merely reflecting the decline of rural places, but it’s a chicken-and-egg relationship if rural communities die in part for lack of bank support.

https://www.wsj.com/articles/goodbye-george-bailey-decline-of-rural-lending-crimps-small-town-business-1514219515

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Here’s a list of the world's 20 biggest banks by assets in 2019. They’re spread out: four for the U.S., four for China, four for Japan, four for France, and three for the UK.

https://en.wikipedia.org/wiki/List_of_largest_banks

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These foreign banks, too, have begun intensifying their focus on cities with money. Here’s a snapshot of a window in a closed branch bank in tiny Newman, Western Australia. Back of beyond. The bank recommends that you drop by their office in Port Hedland.

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It’s only five hours away.

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Here’s some data from the UK. Kensington, at the bottom, is the richest parliamentary constituency in the UK and has lost a quarter of its banks in the last few years. Wentworth and Dearne, an old coal mining area with a mean income less than half of Kensington’s, has lost all of its banks. Population might explain the difference, but it doesn’t: Kensington has 60,000 voters, Wentworth and Dearne has 74,000.

https://www.thetimes.co.uk/edition/news/abandoned-how-the-poor-lost-their-bank-branches-but-the-rich-kept-theirs-25dq7gxxn https://en.wikipedia.org/wiki/United_Kingdom_Parliament_constituencies

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Once upon a time, lawyers practiced alone or in small groups. Today, Kirkland and Ellis has 2,000 lawyers and revenues (2018) of almost $4 billion.

https://en.wikipedia.org/wiki/List_of_largest_law_firms_by_revenue About a fifth of the graduates of top law schools will land a job with one of these giant firms. They’ll be happy: in 2016, the base salary for a new “associate,” fresh out of law school, jumped at many of these firms to $180,000. Plus bonus. After eight years, these young people will expect to make twice that much. In exchange, of course, they will have no life. (OK, that’s an exaggeration, but you probably know what I mean.) Think there’s pressure on them? Here’s the number of hours billed annually by attorneys successful enough to share in the profits of their firms. The trend’s down, which means that pressure’s up, which means that some of these folks will be forced to take a step down to a salaried position—or asked to leave. How many? I don’t know, but most big firms are putting some of their partners on salary, and two-thirds are asking some partners to move on.

http://www.wsj.com/articles/law-firms-demote-partners-as-pressure-mounts-over-profits-1476137818

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The firms get bigger, and everybody sweats more.

Pity the young lawyers at the bottom of the pyramid. They sweated like dogs to get through law school and pass the bar exam. Now they enjoy 80-hour work weeks with no promise of survival.

https://www.wsj.com/articles/being-a-law-firm-partner-was-once-a-job-for-life-that-culture-is-all-but-dead-11565362437?mod=hp_lead_pos5

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Accountants often practice individually, but not always. Here are the so-called Big Four. (Their names decode this way: PricewaterhouseCoopers, Deloitte Touche Tohmatsu, Ernst & Young, and Klynveld Peat Marwick Main Goerdeler. You can see why people use the shorthand names.)

Real-estate? Same deal: here are the biggest brokers selling commercial real estate.

https://lipseyco.com/brand-survey/

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The healthcare industry accounts for at least 15 percent of all economic activity in the United States. You’re not surprised, of course: Americans spend more on health care than any other nation.

https://en.wikipedia.org/wiki/Health_care_in_the_United_States#/media/File:International_Comparison_-_Healthcare_spending_as_%25_GDP.png

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Employment in the industry is up by a third over the last 20 years.

Prices keep rising, especially for prescription drugs and hospital care.

https://www.wsj.com/articles/why-americans-spend-so-much-on-health-carein-12-charts-1533047243?mod=hp_lead_pos5

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We should be the healthiest nation on earth, but we’re not, not by a long shot.

https://www.bloomberg.com/news/articles/2017-03-20/italy-s-struggling-economy-has-world-s-healthiest-people

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Can you believe it? In the top 10? Nope. Top 25? Nope. Surely, this can’t be right!

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Maternal mortality rates in the South are especially shocking. The U.S. average is 15 deaths per 100,000 pregnancies. Arkansas, Georgia, Indiana, Louisiana, Mississippi, Missouri, New Jersey, South Carolina, and Texas all have more than 40. (Whew! Oklahoma has “only” 39.)

https://www.americashealthrankings.org/explore/2016-health-of-women-and-children-report/measure/maternal_mortality/state/ALL

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If you want to feel good about this, compare us with some African countries. The figures are from 1990 and 2015.

While you’re at it, however, better not compare us with Europe.

https://data.worldbank.org/indicator/SH.STA.MMRT?year_high_desc=false

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At least our health organizations are big! Here are the hospitals owned by HCA (Hospital Corporation of America) in the Southwest. It's the biggest for-profit hospital chain in the world and manages over 160 hospitals and over 100 surgery centers. HCA has over 200,000 employees and has profits of about $500 million annually.

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Big doesn’t always mean profitable, of course. Community Health in 2016 decided to drop a bunch of hospitals it had recently acquired but which it apparently could not run profitably. The strategy had been to draw customers with better service. Problem: to provide that service, CHS hired 4,100 new doctors in 2015. Not cheap! Talk about globalization: the biggest shareholder in CHS is Tianqiao Chen, a Chinese billionaire who started with online gaming.

http://www.wsj.com/articles/community-health-systems-retrenches-1476091800

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Need a dentist? Have more confidence in a nationally branded office? Not a problem: Aspen has over 500 offices. They cater to people who don’t go to dentists regularly.

https://www.aspendental.com/find-an-office Here are the Oklahoma offices:

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Pharmacies? Two chains have about two-thirds of the national market. Walgreens recently attempted to take over Rite Aid, the third largest chain. It got blocked by the federal government but wound up buying half of Rite Aid’s stores, which left Walgreens with about 10,000 stores.

http://www.wsj.com/articles/walgreens-boots-alliance-nears-deal-to-buy-rite-aid-1445964090

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Here are the same chains by 2016 pharmacy revenues, excluding all the other stuff in the stores. Notice that CVS is the leader, measured this way. Perhaps it’s no surprise, given this reliance on prescriptions, that in 2017 CVS announced its intention of starting next-day home delivery of prescriptions (same-day in some areas). No doubt CVS jumped because Amazon was apparently getting ready to get in the market. Would CVS offer free delivery? Apparently in some markets but not all.

https://www.economist.com/news/business/21730906-vertical-integration-could-put-brake-americas-unsustainably-soaring-health-care-costs Big fish eating small fish? Before the Rite-Aid purchase, Walgreen’s was already Walgreens Boots Alliance, a combination of Walgreens and Boots, a British pharmacy chain. Those companies had been combined by an Italian dealmaker, Stefano Pessina. I think of him whenever I walk in: “Welcome to Walgreens,” he says. Have you ever noticed that most customers ignore the clerk who says that?

http://www.stefanopessina.com/

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Here’s the crystalline Walgreens footprint in the Dallas/Fort Worth metroplex.

Denver is neatly covered, too.

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Here's a list of the biggest U.S. newspapers, by circulation. The WSJ, NYT, WaPo, and USA Today have a national presence; the others are local or regional, which suggests that this is an industry that resists consolidation.

http://stateofthemedia.org/2013/newspapers-stabilizing-but-still-threatened/newspapers-by-the-numbers/

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But (you knew that was coming, didn’t you?) USA today, which ranks second on the list above, is part of the Gannett empire, which owns dozens of smaller papers. It owns the Arizona Republic, for example, which has over 300,000 readers (or did, until it broke from its Republican roots and declared Donald Trump unfit to be president). The Detroit Free Press has over 200,000, and Gannett has another seven papers with over 100,000. It has also been working to acquire the Dallas Morning News.

http://www.gannett.com/brands/ Notice from this older map that Gannett got rid of its Muskogee paper but picked up several in Texas.

http://www.gannettonline.com/external/network/

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Gannett towers over the industry.

https://www.wsj.com/graphics/local-newspapers-stark-divide/?mod=article_inline&mod=hp_lead_pos4 In 2019,GateHouse Media (owner of New Media, No. 2 on the list above) bought the whole Gannett Chain for $1.4 billion. The name Gannett will survive, but both companies will operate under one CEO in charge of 260 daily papers and over 300 weeklies. In Texas, GateHouse already owns papers in Austin, Lubbock, Sherman, Amarillo, Stephenville, Brownwood, and Waxahachie. Now it will also control the Gannett papers in El Paso, Corpus Christi, San Angelo, Wichita Falls and Abilene. Wondering about Oklahoma? The Norman Transcript is owned, indirectly, by the Retirement Systems of Alabama through Community Newspapers Holdings. That company also owns a dozen other small-town Oklahoma Papers, including those in Ada, Claremore, Edmond, Enid, Chickasha, Muskogee, Stillwater, and Tahlequah. GateHouse already owns the papers in Bartlesville, Ardmore, Shawnee, and (biggest of the bunch) Oklahoma City. Between them, GateHouse and Community Newspapers own just about all the papers I can think of. In 2020 the BH Media (which is to say Berkshire Hathaway or Warran Buffett) sold The Tulsa World to GateHouse.

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Newspapers are consolidating for the special reason that, unlike the other businesses we’ve been looking it, print journalism is dying. As one editor recently wrote in a letter of resignation, newspapers are in the middle of a Force 12 digital hurricane.

http://www.stateofthemedia.org/2012/newspapers-building-digital-revenues-proves-painfully-slow/newspapers-by-the-numbers/

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As young people abandon newspapers, circulation nationwide has been cut in half over the last 30 years.

https://www.wsj.com/graphics/local-newspapers-stark-divide/?mod=article_inline&mod=hp_lead_pos4

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President Trump isn’t too far wrong when he complains about the “failing New York Times,” because its circulation is certainly down. There’s not much consolation in the fact that circulation at other big papers is down even more.

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Sure, paid digital subscriptions are up, but in a country of over 325 million people, about one percent subscribe to the usually accepted newspaper of record.

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How many readers of the big national newspapers have shifted to digital? Mighty few.

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Bottom line: newspapers are dying like flies and are only partly replaced by digital sources. For Oklahoma, I see one of them: it’s Oklahoma Watch. Others missed here include nondoc.com

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Advertisers see the writing on the wall, which probably has a more lethal impact on newspapers than falling circulation.

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Take the case of The Oklahoman, which in 2018 offered home delivery, seven days weekly, for $120 a year. That seems pretty cheap, but it’s no use: the number of subscribers kept falling. (I don’t have recent numbers, but circulation fell from 195,000 in 2007 to 113,000 in 2012). Result: the price of a subscription rose in 2019 to almost $200 a year. See the death spiral at work? In 2016 The Oklahoman shuttered its printing plant in OKC and moved production to Tulsa, where The Tulsa World was also losing subscribers. The World’s printing plant was newer than The Oklahoman’s, so if printing was to be consolidated, Tulsa was the place to do it, even if this meant earlier press times—and news stories a bit less timely. Here’s the cheerful announcement of the event.

https://www.poynter.org/business-work/2018/oklahoman-sells-to-gatehouse-media-lays-off-several-newsroom-staffers/

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In 1949, the Dallas Morning News moved into a new, purpose-built building to accommodate its growing circulation. Here it is, with its brave statement of intention. In 2016, the paper announced that to save money it would move across town into an old public-library building with a third as much space as the 1949 building, most of which was already empty. (The printing presses were long gone, with the physical newspaper now produced in Plano.) As for the 1949 building? It would be sold, though nobody knew to whom or for what.

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A few words on my favorite news source, the National Enquirer. Almost nobody subscribes, and almost nobody buys ad space, so sales depend on impulse buying at supermarkets, especially Walmart. The paper costs $4.99 a pop, so a hot cover is imperative. That’s a bit of a problem, because the covers that sell best are bloody. In the old days, when the paper was sold at newsstands, issues ran with headlines like “Mom Boiled Her Baby and Ate Her.” When the paper decided to sell at supermarkets, it had to clean up is covers. It decided to focus on two categories. The first was celebrities, with covers like Pamela Anderson “Destroyed by Plastic Surgery”. The second was politicians, where the paper’s bias is on glorious display. Compare “‘Sociopath’ Hillary Clinton’s Secret Psych Files Exposed” with “Trump Takes Charge! Success In Just 36 Days!” The chief executive of the company knows his audience well. He says, “Do they care about Tiger Woods? No. Do they play golf? No. But do they want to read about his indiscretions? Yes. Do they want to read that someone who is that successful is now failing? Yes. These are people that live their life failing, so they want to read negative things about people who have gone up and then come down.” You might predict that this is a winning formula, but back in the 1970s the Enquirer sold over five million copies every week. (The all-time leader was an issue in 1977 showing Elvis in his open coffin; it sold 6.7 million copies.) Now the paper’s down to a pitiful 300,000. You see the problem: in the old days the Enquirer would have had a cover with a mug shot of Tiger Woods after his arrest. Maybe it still does, but now everyone’s seen the photo on cable TV or the internet before the paper can be printed. The Enquirer plugs along with a bunch of other tabloids produced by the same company, American Media. Enquirer readers are in their 50s; Globe readers are in their 60s, and Examiner readers are in their 80s. For “youngsters” in their late ‘30s and ‘40s the company publishes OK! and US Weekly, so maybe there’s life in the beast yet. That’s what James Cohen thought when in 2019 he paid $100 million to buy the Enquirer and its sister publications. Cohen runs Hudson News, whose shops you see in many airports.

https://www.washingtonpost.com/lifestyle/style/the-national-enquirer-is-being-sold-for-100-million-to-james-cohen-ceo-of-hudson-news/2019/04/18/03fef706-61fe-11e9-9412-daf3d2e67c6d_story.html?utm_term=.d075e3ab5be3

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Taken all in all, and despite the best efforts of American Media, you probably shouldn’t invest in newsprint. Consumption of that kind of paper in the United States has fallen about 75 percent in the last 20 years, and I don’t expect it to rise in the years ahead. At least it’s good news for the forests of eastern Canada.

https://www.statista.com/statistics/278273/total-us-newsprint-paper-supply/

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Let’s talk about hotels. The first chain was probably begun by Ellsworth Statler, whose first big hotel--this one in Buffalo, New York--opened in 1907. It was probably the world’s first hotel with a bathroom in every room. (Statler introduced the plumbing shaft still standard in modern hotel construction.) Statler himself died in 1928, and his Buffalo hotel came down in 1968. Rooms when it first opened were $1.50 a night. Despite prices that seemed low even then, the business prospered.

https://upload.wikimedia.org/wikipedia/commons/d/dc/Original_Hotel_Statler.jpg

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By 1920 Statler had expanded to Cleveland, Detroit, St. Louis, and New York City and was running weekly ads in national magazines. Here’s one from 1928.

https://www.periodpaper.com/collections/vintage-advertising-art?page=732

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One of the last Statlers was a huge hotel in downtown Dallas. After being closed for years, in 2016 it was renovated to reopen as the Statler Hotel and Residences, managed by Hilton. That’s no coincidence, because Hilton in 1954 bought the entire Statler chain. By “Hilton,” I mean the company established by Conrad Hilton, who died in 1979. Control of the company has changed several times since then, most recently in 2018, when a private-equity company called Blackstone called it quits—very profitably—after owning the chain for about ten years. Ownership is now divided among many shareholders, primarily investment funds like Vanguard and Fidelity.

https://en.wikipedia.org/wiki/The_Statler_Hotel_%26_Residences

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The most famous Hilton today is Conrad Hilton’s great-granddaughter Paris, but Conrad himself was a celebrity in his lifetime, as this 1949 cover suggests. Other hotel chains have emerged, of course. The biggest was formed in 2016 when Marriott paid $13 billion for Starwood. The combined company operates a million rooms and has over 30 brands, including Marriott’s brands (Marriott proper but also Ritz Carlton, Courtyard, and Residence Inn) and Starwood’s (including Westin and Sheraton.) Suppose you’re an independent hotel next door to a chain. Do you have a chance? In the old days, the answer was probably no, because customers didn’t want to take a chance on you. Now, with websites like Tripadvisor, your destiny may be changing, especially if you’re in a small town and competing with a budget chain like Motel 6. Good reviews can help in that case, maybe even enough that you survive. Maybe.

http://content.time.com/time/covers/0,16641,19491212,00.html

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I should mention that hotel brands are not the same thing as hotel owners. I mean that you can’t tell who owns a hotel simply from the sign out front. Here is a list of the 10 companies that owned the most hotel rooms at the end of 2015. Number 2, Hilton Worldwide, owned 146 hotels but managed 589 hotels that carried the Hilton name but were owned by someone else. See Number 10, HEI Hotels? It’s a company in Connecticut that owns hotels branded Méridien, Sheraton, Westin, Marriott, Hilton, and others.

http://www.nreionline.com/hotel/2016-top-hotel-owners?full=1

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HEI had no hotels in Oklahoma, but here are its properties in Texas.

http://www.heihotels.com/properties-1/

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G6 Hospitality is first on the list and owns 553 properties, nearly all of them branded Motel 6. Its headquarters are just off I-35 in Carrollton, north of Dallas. Who owns G6, you ask? Answer: the Blackstone Group, which over the years has also invested heavily in Hilton, La Quinta, and Wyndham.

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So who swims against the tide? I mean, what kind of enterprise resists consolidation? Barber shops are usually one of a kind, but chains have moved into the business. Regis Corporation has about 50,000 stylists working for a flotilla of brands. Here are a few of them, lifted from the company’s website.

http://www.regiscorp.com/NA/overview/SalonBrands/default.asp

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Maybe higher education is a contender, since there’s only one Harvard, one MIT, and one University of Oklahoma, but here are the Texas campuses of the University of Phoenix.

The University of Phoenix has even more “campuses” in California—though the “campuses” might better be called “storefronts.”

http://www.phoenix.edu/campus-locations.html Public colleges and universities are a different story.

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Streetview of the Gardena campus. Well, I have to admit, there’s some trees and a bit of lawn. Easy parking, too!

Plenty of consolidation with Phoenix, but most students are smart enough or lucky enough to stay away from for-profit schools and instead attend a school that either stands alone or is part of a state system. No interstate giants here, but some of the state chains are not exactly cozy. Here’s the California system, including both the UC and the Cal State campuses.

https://www.deanza.edu/transfer/map-uc_csu.html

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Who else resists consolidation? Liquor stores come to mind. So do electrical utilities. Both are protected by law from the consolidation that you might otherwise expect. This map only shows the utilities that have contracted to provide power under certain terms to the federal government. Still, here are the big boys. The two with the biggest service territories are the federally owned Bonneville Power Administration in the Northwest (No. 10), and the Tennessee Valley Authority (No. 63). By number of customers, the biggest are Pacific Gas and Electric (No. 45) and Southern California Edison (No. 59).

https://energy.gov/eere/femp/utilities-offering-federal-utility-energy-service-contracts

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Despite the separate organizations, the national electrical system is linked together. Here’s the PJM Interconnection, a regional transmission organization balancing supplies for 61 million customers. (PJM stands for Pennsylvania, New Jersey, and Maryland.)

http://www.pjm.com/library/~/media/about-pjm/pjm-zones.ashx

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Here’s the Southwest Power Pool.

http://www.ferc.gov/market-oversight/mkt-electric/spp.asp That pool is linked into a broader system, the Eastern Interconnection. It’s supposed to be linked one of these days to the western system, which would create a national grid.

https://en.wikipedia.org/wiki/Western_Interconnection

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Here’s the proposed link, the Tres Amigas superstation in Clovis, New Mexico.

http://www.tresamigasllc.com/about-overview.php

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In short, you might argue that electricity in the U.S. has in fact been consolidated. There’s another wrinkle, of course, because different parts of the grid operate at different voltages. Here’s the national grid with different colors for different voltages.

https://en.wikipedia.org/wiki/Electrical_grid#/media/File:UnitedStatesPowerGrid.jpg

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Here’s a close-up of the PJM grid, with voltages color-coded.

https://gis.pjm.com/esm/default.html

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Despite voltage variation, a linked system allows cheap-power areas to sell to pricey areas. Result: the price of power doesn’t vary from state to state as much as it might. As of 2014, the Oklahoma price per kilowatt/hour was 11.05 cents. In Texas it was 12.07, and in Kansas it was 12.62. The extremes? Washington State was 8.53 cents, and New York was 19.56.

http://www.huffingtonpost.com/2014/08/19/electricity-cost-by-state-map_n_5688500.html In general, power moves north to south, from a surplus-power north to a deficit south.

https://www.eia.gov/todayinenergy/detail.cfm?id=4270

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There’s also a growing west-to-east flow. Behold the 700-mile Plains and Eastern Clean Line Transmission Project, designed to deliver wind-generated power from the Oklahoma Panhandle to the grid operated by the Tennessee Valley Authority, which serves 9 million consumers. The unusual thing about this line is that it’s a 600,000-volt DC line (direct rather than alternating current). It will carry 4,000 megawatts, enough for a million homes. Oops: early in 2018, Clean Line announced that it had withdrawn from the line-up of suppliers hoping to sell power to the TVA. What next? We shall have to wait and see.

http://www.plainsandeasterneis.com/interactive-map

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Whether the Clean Line gets built or not, other high-voltage lines are planned to move power from renewable sources. That would be wind power except in the Northeast, where it’s also hydro.

https://www.wsj.com/graphics/powerline/

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By the way, don’t imagine that we’re the leader in long-distance power transmission. The pioneer is China, which is planning its own west-to-east network, in China’s case designed to carry wind- and hydro- and coal-generated power to eastern cities.

http://www.economist.com/news/science-and-technology/21714325-transmitting-power-over-thousands-kilometres-requires-new-electricity

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I know: I’ve wandered a bit from my search for service industries that resist consolidation. It’s just that electricity is important, and I didn’t want to overlook it. So: how about the U.S. restaurants to which Michelin has given three stars? There are about a dozen in the U.S. Half are in New York City, and three are within walking distance of each other. The only ones outside New York City are in Chicago and California.

http://www.viamichelin.com/web/Restaurants/Restaurants-United_States?stars=3

No chains here:

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So we have an exception. How about jewelry? No dice, I’m afraid. Imagine a young man shopping for an engagement ring. He checks out Kay Jewelers. He comparison shops at Zales. Does he have a clue that both are owned by Signet Jewelers, which also owns other jewelry chains? I suspect not. Here’s a map of the retail stores operated by Harry Winston, often ranked as the priciest jeweler in the world. It’s no longer a single-shop operation. Not only that: in 2013 the whole thing was sold to Swatch, whose image in the marketplace could hardly be more different than Winston’s. (Winston himself might have hated the deal, but he isn’t objecting. He died in 1978.)

http://www.harrywinston.com/en/salon-locations/locations?region=287&country=none&city=none Here’s another upscale jeweler, H. Stern, based in Brazil but with shops in New York City and Miami, not to mention Moscow.

http://www.hstern.net/Store/FindStore

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So, unless you can prove me wrong, I think it’s fair to say that, in the absence of government restrictions, service industries almost always consolidate or grow to avoid either failing or being swallowed by another company. Can I think of another exception, besides ultra-fancy restaurants? Well, maybe, if you’re willing to consider construction as a service industry. The percentage of workers in large or midsize employers hasn’t grown since 1980. Most of the business remains in small hands.

Compare that with retail where, in 1980, about half of all workers worked for companies with fewer than 100 employees. Now, the figure is about a third.

http://www.wsj.com/graphics/big-companies-get-bigger/

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Is all this consolidation a good thing? One might say yes because retail prices come down, but one might say no because jobs are lost. We’re back to the worrying subject of employment forecasts. Here’s a reminder that a grocery warehouse can operate with the lights turned off.

https://www.wsj.com/articles/fully-autonomous-robots-the-warehouse-workers-of-the-near-future-1474383024

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Here’s a projection showing the percentage of jobs likely to automate in the next 10 or 15 years across many sectors. Just look at the top line and then think about how McDonald’s is replacing clerks with touch-screens.

https://www.wsj.com/articles/robots-are-replacing-workers-where-you-shop-1500456602?shareToken=st2b3968ef107043e490542d8883086353&reflink=article_email_share

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Here are some estimates for job losses in the European Union. They’re heaviest, as you might expect, at the least-educated end of the spectrum.

https://www.ft.com/content/c4bf787a-d4a0-11e9-a0bd-ab8ec6435630

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The change happens quickly for clerks in the next few years, then for factory workers and others in the 2030s.

https://www.ft.com/content/62fbf660-2651-11ea-9a4f-963f0ec7e134

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Take the case of truck drivers. The United States has about 2 million of them. How long will it be before trucks drive themselves? The engineering chief for self-driving vehicles at Daimler (Mercedes) is skeptical. He says that self-driving trucks are “quite frankly something that we are not looking at.” Instead, Daimler is working on technologies that help a driver. Examples: predictive cruise control, which monitors elevation data to speed or slow a truck automatically. Another example: “platooning,” where gas mileage is improved by trucks following each other closely—and safely, with braking and acceleration controlled by the lead truck. Here are two videos showing it how it might work: https://www.youtube.com/watch?v=X7vziDnNXEY https://www.youtube.com/watch?v=fHibsfiIrhk Drivers themselves are more pessimistic.

https://www.ft.com/content/2d70469c-140a-11e7-b0c1-37e417ee6c76

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Here’s another group of drivers likely to find themselves out of work as soon as Uber can perfect self-driving cars. And it’s not just Uber drivers; it’s drivers for all of Uber’s competitors. Some are shown on this map: Lyft in North America, Yandex in Russia, Didi Chuxing in China, and Grab in Southeast Asia.

https://www.wsj.com/articles/uber-sells-southeast-asia-business-to-rival-grab-1522029863?mod=searchresults&page=1&pos=2

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Walmart used to have backroom clerks counting cash: they’ve been replaced at almost every Walmart store in the U.S. with Cash360 machines. Some of the displaced workers now work as greeters. Another says, “I’m 59 years old. I never worked on the floor. I’ve always worked office positions and I had no desire.” She took a job at another company: lower pay, no health insurance. The CEO of the biggest German bank looks into his crystal ball. He doesn’t sound too happy about what he sees.

https://www.theguardian.com/business/2017/sep/06/deutsche-bank-boss-says-big-number-of-staff-will-lose-jobs-to-automation?CMP=share_btn_link

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What will these laid-off workers do? Some people argue that the industrial revolution threw hand weavers out of work but that, in the long run, it created new jobs and made people richer and more comfortable. The same thing will happen this time around, with many job categories disappearing but others appearing, especially in occupations providing personal services. Perhaps we can’t predict what those jobs will be, but one recent list isn’t very encouraging: it predicts more “flight attendants, hotel workers, tour guides, bartenders, dog walkers, tailors, chefs, ushers, [and] yoga instructors….” https://www.wsj.com/articles/dont-fear-the-robots-1500646623 These jobs will probably pay less than the jobs being lost. Here, just as an example, are recent job cuts at Boeing. The company is offshoring work to China for planes that will be sold in China. Think the laid-off employees will be happy in their new careers as dog-walkers? (Most of the cuts in California are at Boeing’s military unit.)

https://www.wsj.com/articles/boeing-flying-high-stays-course-on-job-cuts-1500731868

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Stories about such transitions are popping up all the time. Here’s a video about a battery-powered, fully autonomous container ship. Nobody on board. This particular ship has been built to carry fertilizer 37 miles, replacing a circuitous road trip near Larvik, Norway, but the fertilizer manufacturer and ship builder that have paired up on this project see it as just the first step. The project leader says that someday such ships “maybe even move our fertilizer from Holland all the way to Brazil.”

https://www.wsj.com/articles/norway-takes-lead-in-race-to-build-autonomous-cargo-ships-1500721202

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In the meantime, workers who still have jobs are monitored by computers. Amazon’s fulfillment centers use ADAPT, the company’s “Associate Development and Performance Tracker” that determines who should be let go for under-performing. Similarly, checkout-clerks are monitored to see if they are scanning items fast enough. Truckers are monitored right down to gear changes and the rpm’s on their engines. Want to chat with a postman? Don’t expect him to dawdle, because he is required to carry a tracker that makes sure he keeps moving.

https://www.wsj.com/articles/for-lower-paid-workers-the-robot-overlords-have-arrived-11556719323?mod=searchresults&page=1&pos=4