"365 by Whole Foods" Market Boasts Lower Prices and Higher Efficiency

This week, Whole Foods opened their "365 by Whole Foods Market" in Silver Lake, the first of a set of 13 such stores to be built around the country this year. The supermarket chain's new style of smaller store has already interested many customers in its first couple of days, and the company expects the fad to grow rapidly. In her L.A. Times article, Samantha Masunaga describes the new type of store and some of the ways it differs from the classical Whole Foods supermarket.

365 is Whole Foods' first smaller format store. However, it features many high-tech options and better deals than their regular stores, making it a highly sought-after alternative. People, especially Millennials, go to Whole Foods because they are looking for healthier, organic food options. However, eating healthier is often costly, and most people have pretty inflexible budgets when it comes to groceries. Therefore, when shoppers found out that 365's products were the same, but at a cheaper price, they flocked to the new store.

On Wednesday morning, when the store opened its doors for the first time, the parking lot was full and then some.  Interested shoppers circled the lot, having trouble finding a spot to park their cars, but when they finally got into the store, they were amazed by what they found. While the 365 has a smaller selection than a normal Whole Foods, its prices are significantly cheaper, which, too many Millennials with little disposable income, is a worthwhile trade-off. Additionally, the displays of produce feature electronic readers that measure the weight of fruits or vegetables and print stickers based on the measurement. In that way, the check-out process is quick and easy, saving time for both customers and employees.

Besides the reduced variety, the new 365 will also be missing Whole Foods' signature deli counter. However, it still has a large salad bar and a variety of pre-cooked hot food items. Analysts believe that 365 is likely Whole Foods' response to losing their share on the health food market. Other stores like Ralphs and Target have begun to provide organic options for their customers, which means Whole Foods is facing much greater competition in a once-blue ocean. Over the past three quarters, Whole Foods has shown declining sales, but the management hopes that the smaller, less cost-intensive 365 stores will help to turn that around over the coming year.

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Faraday Future to Break Ground on Billion Dollar Nevada Plant in 2016

Like its competitor, Tesla Motors, electric car start-up Faraday Future has decided to open up shop in Nevada. Faraday Future, a new, relatively small rival to the other electric car producers, was debating among California, Nevada, Louisiana, and Georgia for their billion dollar production facility, but eventually made their decision and will start construction in the beginning of 2016. a main factor influencing Faraday's decision was an offered package of over $300 million in tax incentives by Nevada legislators, According to company executives, this wasn't the only reason, though, and a more detailed analysis of the choice is made in Chris Kirkham's and Ivan Penn's L.A. Times article.

Faraday Future, which is branded as an electric car company, has not yet produced an electric car. One of the company's founders and primary backers is Chinese media mogul, Jia Yueting, who has a net worth of several billion dollars and is ranked as China's 17th-richest person. Many of Faraday Future's top executives previously worked for Tesla and luxury car companies like BMW and Porsche. As such, they have quite a bit of experience with electric vehicles and the selling points behind them. The market for electric vehicles, while it is still undetermined based on Tesla's sales over the past decade, has the potential to grow larger, especially as people become more environmentally conscious and try to find ways to be more energy efficient.

Nevada legislature offered similar perks to Tesla Motors a year ago. With the help of $1.3 billion in tax abatements, Tesla began work on a $5 billion factory outside of Reno. While Faraday only received a $335 million deal, that is still nothing to scoff at, and will go a long way toward creating more jobs in Nevada and producing vehicles that rely more on renewable energy sources rather than fossil fuels. These deals, which might look to some like a waste of money on the part of legislators, can actually be quite beneficial to the state as a whole due to the production of jobs and the increase in goods for export to other states and other countries. The money in tax incentives that Nevada is providing to these companies can be earned back many times over by increased productivity over the long-term future.

Faraday's business model must be pretty sound for the state to take a risk and invest in them and in the hope of domestic growth in the future. Faraday doesn't just get the $335 million immediately; they have to prove that their company is moving forward. According to legislators, Faraday will not receive all of the tax abatements and other promised perks until it has invested at least $1 billion toward construction of the plant. Even without help from the tax incentives, Faraday's investment could pay off very well in the long run. As gas prices stay low, more individuals are going back to larger SUVs, since they can better afford to fill up the tanks of such automobiles. However, if and when gas prices rise again, people will be more interested in the fuel efficiency of electric vehicles and hybrids. So, as companies like Faraday and Tesla start getting ready now, they may be able to have their production running smoothly by the time demand for electric vehicles increases again.

While the tax incentives helped Faraday to make their final decision of Nevada, there were aspects of the other potential states that could have made them better choices. California, Louisiana, and Georgia all have direct ocean access, which means that they have ports and, therefore, make shipping and receiving of products and parts much simpler. Between California and Nevada, the latter has more wide-open spaces in which to build large factories. All in all, Nevada, which lacked direct access to seaports, still provided close enough access to make shipping of parts not too much of a nightmare in transportation. Highway 15 provides Nevada an almost direct route to the West Coast's ports, which, when combined with the tax incentives, made Nevada a better choice for Faraday's base of production. While we don't know whether California's legislature offered similar tax incentives to convince Faraday to choose the Golden State, in the end, Faraday made its choice, taking the best deal for itself while also benefiting the state of Nevada.

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Grocery Chain Haggen's Bust May Have Little Effect on Competitors' Prices

Grocery chain Haggen Inc., which spent approximately $1.4 billion last year in a dramatic expansion along the West Coast, was forced to file for bankruptcy this month, undoing everything it had accomplished over the past several months. While Haggen believed that its buy-outs of several dozen Albertsons, Vons, and Safeway supermarkets would help the Northwest-based company grow, in Shan Li and Andrew Khoury's L.A. Times article, it is explained why their business plan may have been flawed from the start.

According to experts, Haggen's purchases were doomed to fail from the beginning. Not only was the cost of purchasing and converting 146 supermarkets of various brands remarkably high for the 18-store chain, but Haggen's prices were seen as too high for the quality of produce being provided. According to the founder of DJL Research, a research firm specifically for supermarkets, no one believed that Haggen had any chance of success with their large acquisition.

Analysts go on to claim that Haggen's prices were determined too much by the prices already in place at the purchased supermarkets. Instead of doing their own research, they chose prices similar to those of rivals like Albertsons or Safeway. Haggen is known for its higher quality meats, seafood, and organic produce, which would normally be reason enough to qualify higher prices than their competitors'. However, complaints from customers seemed to all point to less than fabulous service and produce of lower quality than advertised.

Perhaps the lack of proper business planning in the stores was due to the stresses Haggen experienced because of the buy-outs. Albertsons, one of the former owners of some of the stores, broke off their tenuous business relationship shortly after the purchase. Albertsons opened lawsuits against Haggen, stating that $41 million worth of inventory had not been paid for, and in response, Haggen sued Albertsons, claiming that the competitor was consistently working behind the scenes to push Haggen out of the market. Perhaps Haggen's legal struggles interfered with its ability to run its newly obtained markets properly, Now that Haggen plans to pull back and keep only its 37 stores in Washington and Oregon, its reputation for high-quality may one day be restored.

For the over 8,000 Haggen employees in California alone, the bankruptcy will hit hard, The Local 324 United Food and Commercial Workers Union is rightfully upset, especially after having filed recent grievances against Haggen for layoffs and reduced hours. For others in the community who do not work for Haggen, however, economic analysts and regular shoppers alike do not expect to be affected by the closures. Since there is enough competition going on in the community, between Ralphs, Wal-Mart, and other stores, they believe that prices will not likely rise significantly. Who knows? In the end, perhaps Haggen will earn enough money from the sale of the closed stores to get back on their feet in their Northwest home base.

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Longshore Unions Provide Rich Benefits for Members

3/20/15 - If you were asked to list some types of people with jobs that pay over $100,000 per year, you might mention doctors, lawyers, and software engineers. Would you think to name dock workers? While many transit employees throughout the West Coast have been laid off or have seen their wages cut due to a recent increase in global trade, longshoremen (the laborers who move goods from the ship to the shore) have generally been able to protect their wages. In their article, Chris Kirkham and Andrew Khouri investigate the ways by which half of longshoremen on the West Coast make over $100,000 per year.

Not only do these many of these longshoremen make about $20 per hour on the low end, they earn even more on overtime and night shifts. It all comes down to the power of the International Longshore and Warehouse Union. As witnessed during last month's shutdowns up and down the West Coast, those who control the ports seem to control international trade. Even now that contract negotiations have been completed and the ports are open once again, it is predicted that the docks won't be back to normal for up to three months, and many businesses may never get back the money they lost during the port closure.

Although many members of the longshoremen union make well over $100,000 and all members receive free healthcare benefits, union spokesman Craig Merrilees claims that there are thousands of “casual workers” who are unable to get full-time work and don't get the benefits provided for union members. Merrilees states that these workers often spend years, without such benefits, trying to become a member of the union. Unfortunately, the Pacific Maritime Association, through which the wage statistics for union longshoremen were received, refused Kirkham's and Khouri's requests for the wage statistics of non-members, so Merrilees' assertions could be neither confirmed nor denied.

Longshoremen and the ILWU have a kind of monopoly on the ports. Not only did the port union leaders successfully create a contract in 1930 that linked most of the West Coast ports together, the unions have over the years been able to negotiate for better pay and benefits in the midst of technological improvements. Even the advent of such innovations as shipping containers, which require far fewer workers to transport, have led to better pensions and richer buyouts for those workers who are laid off due to the new technology.

The ILWU knows how to work the system. That appears to be how longshoremen are making so much money in a field where most workers make $10 - $11 per hour. When billions of dollars worth of goods pass through a set of ports each year, those people working the ports control the goods. The unions seem to be able to negotiate whatever contract they want, because companies need the ports in order to have any kind of international trade.

Slowly but surely, the unions may be losing their control. As computers systems and machines come in and replace employees, especially those doing clerical work, the unions may have trouble keeping benefits and high wages. While goods can be produced in other countries, and manufacturing can be easily outsourced, ports are a constant, unable to be moved somewhere with lower wages. Despite this, Kirkham's and Khouri's sources are confident that the high wages in the current low-wage transportation industry will not last. It's only a matter of time before technology and innovation force a change.

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