Friday, July 21, 2017

Best Buy's Pivoting has Helped the Company Survive Amazon's Expansion



As more consumers look to online sources for many of their purchases, brick-and-mortar retailers have had to work on quickly adjusting their business model to stay in the game. Many such retail outlets have failed and filed for bankruptcy in recent years, including Radio Shack, once one of Best Buy's biggest competitors. Somehow, Best Buy was able to avoid a similar fate and has in fact made great strides since 2012, when most analysts thought they were doomed to fail. A recent L.A. Times article by James F. Peltz and Jack Flemming describes some of the methods Best Buy's CEO used to get the company back on track.

One of the biggest factors hurting the electronics chain's profits was a practice among shoppers called "showrooming." Consumers like to be able to see the products in person before purchasing them, which is one factor that makes people hesitant about making purchases on Amazon. However, they also want to make sure they're getting the best deal and spending the least amount of money. So, what they would do is go into stores like Best Buy, look at the variety of products, figure out which specific model they wanted to buy, then simply order it on Amazon for a cheaper price. To combat this practice, Best Buy invested more into expanding its market to the online sector instead of just focusing on its stores. Additionally, they have cut their profits on individual items in order to match Amazon's prices. In the short run, they may be losing money on an item-by-item basis, but overall, getting back some of their market share on electronics has been beneficial.

Even though Best Buy has been developing the online sales portion of their business model much more in recent years, the CEO of the company still considers the physical stores to be a huge asset. Although "same-store sales," which is a measure of the number of sales within a lasting store as opposed to new locations, was on a decline for 4 years, revenue at the older stores has been steadily increasing over the past 3 years. Online sales rose 21% this year and now account for 12% of Best Buy's overall sales. According to analysts, Best Buy's overall sales have remained flat because the electronics industry has been growing very slowly. The economy may be improving, but people are not buying as many "big-ticket" items anymore. Slower innovation and the vast range of retailers has led to a decrease in prices and less interest among consumers who might otherwise be interested in personal computers or televisions.

By offering the same prices as Amazon and speeding up their shipping times, Best Buy has been able to reel in some customers who want to get their product immediately, rather than waiting a while for it to be delivered. They also integrated a way for online shoppers to pick up the ordered product at their local store, which cuts down on shipping costs for both parties. Finally, Best Buy has invested heavily in education for their employees. By making sure that their employees are tech-savvy enough to explain products to shoppers, they are more likely to make a sale. Additionally, customers are more likely to shop at the store where the product is explained to them than on Amazon, where all they have is a description and some pictures. Improving customer service and lowering prices have helped, but it's still quite a while until we can determine whether Best Buy and other similar retailers will survive Amazon's spread throughout the industry.

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Friday, July 14, 2017

Over 50% of U.S. Households Expected to Have Prime Membership by Year's End



Amazon Prime is a popular service that allows subscribers to pay a yearly fee in order to get expedited shipping on everything they order. Two years ago, on July 15, 2015, which was the anniversary of the company's founding, CEO Jeff Bezos started something new to further incentivize Prime users: Amazon Prime Day. On Prime Day, subscribers get special deals on select Amazon products. According to the L.A. Times article written by Angel Gonzalez and Ethan Varian, this year's Prime Day (on July 10th), attracted over 60% more shoppers than last year.

Prime Day, which has been compared to Cyber Monday or Black Friday, was designed by Amazon founder and CEO Bezos to be a "holiday" of deals. Not only was it intended to reward current Prime members, but it was also meant to attract new users. Although Amazon has only released the numbers of users that made purchases on Prime Day, it's likely that they gained many more Prime users in the weeks or months leading up to Prime Day. Tens of millions of users made purchases on Prime Day, over 50% more than last year, which brought in over $1 billion in revenue for Amazon over a single 30-hour period.

Analysts have calculated that the number of households in the US with a Prime account has increased 7% over the past year, and they predict that over half of the households in America will have Prime membership by the end of the year. Free shipping and various deals led people to buy some of their favorite new gadgets this year. Over the 30 hour period in 13 countries, Amazon's biggest sellers were their Amazon Echo speaker, Amazon Fire tablets, and Instant Pot programmable pressure cooker. Many other items sold well, but users were really after the deals on personal electronics.

Other retailers tried similar promotions to either compete with or ride the hype of Prime Day. Fry's Electronics offered free same-day delivery on select items and Best Buy had a "Big Deals Day." In the years to come, it is likely that many other businesses will follow suit, offering free shipping at the very least. Some day in the near future, Prime Day may become a holiday in its own right, similar in scope to Cyber Monday or Black Friday. As long as the deals keep coming, customers will keep shopping, so we'll just have to wait and see.

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Friday, July 7, 2017

Grocery Delivery: Niche or Mainstream?



Going shopping can be both inconvenient and time-consuming for the average person. People like to save time and money so you might think that a technological innovation to make grocery shopping more convenient might attract a lot of interest. According to David Pierson's L.A. Times article, that might not be the case after all.

Amazon recently put in a $13.7 billion bid to acquire Whole Foods Inc., including all of its stores, warehouses, and distribution centers. Although Amazon already has a service called AmazonFresh, which allows customers to order fruits, vegetables, and other perishable food products to be delivered on the same day, this acquisition seems to show that Amazon is looking to gain greater traction in the grocery-delivery market. But, the question still remains: will grocery delivery be a successful venture in the years to come?

During the dot-com boom of the 1990s. a company called Webvan had a goal of making grocery shopping a thing of the past. They planned to do what Amazon is attempting to do: make grocery delivery mainstream. Unfortunately for Webvan, even after $800 million in funding, they were ultimately forced to declare bankruptcy nearly 20 years ago. They realized too late that, at the time, grocery delivery was both incredibly costly and extremely risky because it takes a certain kind of customer to let someone else pick out their groceries for them.

Research has shown that people have some innate preference for picking out their groceries themselves. They want to be able to look at each and every piece of fruit before purchasing it, making sure that it's unbruised or the right level of ripeness. Consumers don't trust that an employee of AmazonFresh or another similar company will be able to do as good a job as them when picking out their groceries. Especially if they end up paying the same amount for the delivered groceries as for those purchased in the store, customers will not sacrifice quality for a little bit of convenience.

However, if the convenience factor was there and the prices were reduced, studies show that the combination might be enough to convince some customers to try out grocery delivery. People care about the price more than anything else. That's why discount grocery stores like Aldi have been expanding so quickly in recent years. Even if the quality of the food is not phenomenal, the lower prices bring customers in faster than at any other chain. So, although many people in this day and age want organic fruits and vegetables, few of them purchase their organic foods at Whole Foods, because the chain is known to have high prices. If Amazon somehow found a way to reduce the prices and deliver the food, all while still making a profit, their goal might be achieved in the near future.

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Friday, June 30, 2017

Uber to Make Improvements to App After CEO Resignation



Uber has been going through issues lately with maintaining a positive public image. Various scandals, especially regarding its CEO, have been hurting the company's public relations, which can hurt its bottom line. Ever since the CEO, Travis Kalanick, recently resigned, the company has been working to regain customer loyalty and get back a portion of their market share that had been lost to Lyft and other competitors. Tracey Lien's L.A. Times article outlines some of Uber's planned changes to make the rides better for riders and drivers alike.

Uber's first planned change is to enable a feature that Lyft has had for a while: passengers will be able to tip a driver through the app. By adding this capability, Uber hopes to show its users that the company cares about improving relationships between drivers and passengers. Additionally, in an effort to make the relationship less one-sided, Uber's policies on ride cancellations is changing. Previously, riders had 5 minutes to cancel a request after summoning a driver, which often left drivers sitting around for a while, waiting for passengers that might cancel at the last second.

The changes make it so that a customer has only two minutes to cancel without paying a $5 penalty, and riders will be charged per minute for keeping their driver waiting for them. In this manner, riders have fewer opportunities to take advantage of their position, in much the same way that enabling both parties to see their own ratings could help both rider and driver modify their behavior in the relationship, which makes for a more pleasant overall experience.

Many of Uber's changes are intended to improve driver-rider relationships, to show that the company cares about its users and to improve customer loyalty. However, one change seems to both address a concern raised by users as well as expand Uber's user base. There are many potential users out in the world who don't own a smartphone or don't have access to mobile internet. To address this problem, Uber's latest update will allow a customer to book a ride for someone else. The driver will receive the passenger's contact information, and the passenger will receive a text message with the driver's description and a link to track their route. This feature is especially useful for seniors and other users who may not be as tech-savvy.

Some of the features designed to benefit the senior demographic were already made available through services run through third parties. For example, Uber has a partnership with 24Hr HomeCare that allows customers to book rides via a phone call rather than through the smartphone app. Additionally, there are other services called GoGoGrandparent, Instacart, Munchery, and Postmates, that all utilize telephone calls to allow users to book rides or have food or groceries delivered. So, it seems that Uber is getting into that portion of the market a bit late. Hopefully, all of the proposed changes will do enough to overpower the negative influence that months of scandals formed.

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Friday, June 23, 2017

LAX to Allow Select Passengers to Check-in Using Fingerprints or Iris Scans



In this day and age, partly due to continually advancing technological innovation, the ability to avoid time-wasting activities like waiting in lines has become a necessity for many consumers. People value their free time and want to save as much of it as possible for activities they enjoy. For example, when people fly in an airplane, whether for their job or on their way to a vacation, they don't enjoy how long it takes to make their way through security and check-in lines. Fortunately for many, according to Hugo Martin's L.A. Times article, passengers leaving from Los Angeles International Airport may soon have the option to speed through check-in using iris scans and/or their fingerprints.

Depending on the type of flight and time of year, it can take anywhere from 20 minutes to 2 hours (or sometimes even more) for a passenger to get all the way through check-in and security before they are finally able to get to their boarding gate. For many people, especially the more affluent travelers and people who travel often for business, it can be worthwhile to pay a fee to get through security faster. Well, a company called Clear just installed new kiosks at LAX that allow passengers to use biometric markers to get through security. The service is membership based and costs $179 per year so it would be the best deal for frequent fliers.

Clear already has connections to 22 airports and 6 sports arenas around the country, so LAX is not their first foray into the world of biometrics. Accounts can be easily made at one of the kiosks by scanning a government-issued form of identification, answering some questions, and having one's iris and fingerprints scanned. After the short process to set up the account, check-in becomes faster and much more convenient. When using Clear to check-in, passengers get to interact with Clear employees (LAX has approximately 90 such individuals), bypassing most of the line and moving directly to the X-ray portion of security.

Clear may be one of the biggest presences in the field of biometric security, but other companies are beginning to get in on the industry, as it is likely to keep growing in the years to come. Jet Blue and Delta have begun using facial recognition and fingerprint scanning for the checking in of some of their premium passengers. Not only does scanning someone's fingerprints take much less time and is more convenient than classic methods, it can also be a more secure method. If biometric check-in were to become mainstream, wanted suspects would potentially be unable to get through security without raising an alarm, because their fingerprints and iris scans would be in the system.

However, that can also raise the question of privacy concerns. What will the companies do with all of that biometric information if this practice became mainstream? Would the police be able to get a subpoena for someone's fingerprint scans if they are a suspect in a crime? Many potential issues could arise from the integration of biometrics into security protocol, but many benefits are inherent as well. For now, it is only being used by a subset of passengers as a way to save time and make life more convenient. Everything else is too far in the future to know definitively now.

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Friday, June 16, 2017

LADWP Pauses Planned Work on Natural Gas Power Plants in Favor of Green Alternatives



Energy is one of the most important commodities in this day and age. Whether it comes from fossil fuel, natural gas, or green sources, energy is a necessity in our increasingly technological world. Up until recently, California legislators had plans to build new natural gas power plants and renovate some older ones that run on fossil fuels. According to Ivan Penn's L.A. Times article, they are instead looking at other potential options for energy generation throughout the state.

Before this week, a $2.2 billion plan was in the works to fix up some older natural gas power plants and get them ready to produce electricity. The Los Angeles Department of Water and Power put that plan on pause while they look into green electricity alternatives. Among a few other reasons, this change in trajectory is likely due mainly to recent investigative journalism that found that California has an oversupply of electricity, which drove prices up instead of down as expected.

It is expected that by 2020, the state's power plants will be able to produce over 20% more electricity than is needed, which will lead to Californians being stuck with a $40 billion-per-year bill for energy they're not even using. Even after reducing energy usage and installing more energy-efficient appliances, Californians will still be paying almost $7 billion more for electricity than they did in 2008, the state's record high.

Now that the LADWP sees that generating more power from natural gas is not going to solve the problem, they have to turn to other alternatives. Because so much energy is produced that is not being used, it makes more sense to look at different ways of producing energy rather than methods of producing more energy. For example, many homes are beginning to install personal solar panels and batteries to store excess collected energy. Solar farms or wind turbines could be a potential source of green energy for the state.

No matter how the LADWP ends up generating the proper amount of electricity for the state, it seems clear that natural gas will not be invested in without a fight. It will be difficult to hide oversupply, especially if the excess energy comes from sources that are not environmentally friendly. Legislators hope to have California 100% reliant on renewable energy by 2045. This is just the first step, but with enough work, it could be a feasible goal.

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Friday, June 9, 2017

Latest Fortune 500 List Contains 53 California Companies



The well-known "Fortune 500" is a list of 500 of the nation's top companies, published each year in a list by Fortune Magazine. The companies are those that bring in the most revenue and show the highest profits, which means they are likely to do well in the coming year. Basically, they are the 500 best companies on the market in a given year. Many, especially in recent years, are tech companies, and some have even been on the list for many years, even decades in some cases. According to Makeda Easter's L.A. Times article, of the 500 companies, 53 are based in California.

While California is not the number one state in regard to their number of Fortune 500 companies, California falls in a close second behind New York's 54 companies. The remaining 400 or so companies have headquarters spread throughout the rest of the country. California has two companies ranking in the top 10 of the Fortune 500 list: Apple is in third and McKesson Corp. is fifth. Trends show that California's biggest earners are technology companies and pharmaceutical/biotech companies.

Even with some companies having difficulties with slowing sales or scandals within their board of directors, California companies still improved quite a bit this year. Chevron came in 19th place on the list and Wells Fargo unexpectedly rose to 25th place, even after recent bad publicity. In Los Angeles specifically, construction company Aecom was in 161st place, real estate firm CBRE Group was in 214th, and Reliance Steel & Aluminum Co. placed 320th.

The percentage of companies with women CEOs that make it onto the Fortune 500 list is very small, only about 6.4% of the 500 companies. However, of the 32 companies on the list with women CEOs, 7 of those companies are based in California. Apple Inc., which is based in Cupertino, California, made the largest profit this year, at approximately $46 billion, but Wal-Mart still holds the number one spot on the Fortune 500 list based on revenue alone. Approximately two-thirds of the US's total GDP come from the 500 companies on the list. If trends continue as they have been, California's companies could end up being the most valuable on the list in time.

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