All About Convenience Stores--DNTO from Feb 25, 2012

This posting will be of interest to all readers and students

Convenience stores are a particular type of business that all of us have various familiarity with.  They're where we stop for a quick bottle of Dr. Pepper, gas up our cars, grab a quick cup of bad coffee or lottery tickets.  As a kid my local Stop N Go was where all the kids would go after school to get a Slushie, buy a candy bar, play Asteroids or Defender, and it was a neighborhood hub for various casual social activities.

They've played an important role in Generation X Icon Kevin Smith's movies--specifically Clerks.  Where the two local Dope Dealers, Jay and Silent Bob, hang outside causing trouble for long-suffering employee Dante "I WASN'T EVEN SUPPOSED TO BE HERE TODAY!!!" Hicks and his cohort Randall Graves.  Thanks to this movie, the Quick-stop in Red Bank, New Jersey, has become a place visited by fans of Smith for years.

On this past week's DNTO, Guest Host Rosanna Deerchild speaks with several interesting people who offer their own perspectives. One entrepreneur who caught my attention was Howard Mullins, the inventor of a device called The Mosquito.  This device takes advantage of a hearing range that kids and teenagers have, but adults don't, and is used by convenience stores to make rowdy teenagers hanging out in front of conveniences leave if they won't behave live civilized people.  What I found interesting was a lot of teenagers have downloaded its sound as a ringtone so they know if they have a text in class but so teachers won't realize it since Adults can't hear it.  :Shaking My Head:

Another person who's perspective was worth listening to was Ins Choi--a Canadian of Korean Ancestry who wrote the play "Kim's Convenience." It deals with how in Canada (and in the United States for that matter) many immigrant families start convenience stores as a way to make a living, giving them a chance at a slice of the North American Dream. However it also deals with the fact that their US and Canadian born children who are acculturated to their countries of birth, move on to university educations and do other things, many of them not wanting to continue to operate or own the family business. This play is a story of culture, of entrepreneurship and of cultural shifts from immigrants to their native born children. This story would give a unique perspective to those of us who are customers of immigrant-run and owned convenience stores that we don't always know or realize.  And included music that played on the live show, an Indo-British band called Cornershop (how many Brits refer to Convenience stores) singing a song about a Bollywood star and how lovers date in secret violating Caste conventions in "Brimful of Asha"



A Brief History of the Convenience Store (from the NACS website)

Convenience stores evolved from a variety of sources early in the twentieth century. They drew upon characteristics of many types of retail establishments in existence at the time: the "mom-and-pop" neighborhood grocery store, the "ice-house" (from pre-refrigerator days), the dairy store, the supermarket and the delicatessen.

The Southland Ice Company is credited with the birth of the convenience store in May 1927 on the corner of 12th and Edgefield Streets in the Oak Cliff section of Dallas, Texas. "Uncle Johnny" Jefferson Green, who ran the Southland Ice Dock in Oak Cliff, realized that customers sometimes needed to buy things such as bread, milk and eggs after the local grocery stores were closed. Unlike the local grocery stores, his store was already open 16 hours a day, seven days a week; so, he decided to stock a few of those staple items. The idea turned out to be very convenient for customers.

Joseph C. Thompson, one of the founders and later president and chairman of The Southland Corporation, recognized the potential of Uncle Johnny's idea and began selling the product line at the other ice dock locations of The Southland Company. Further, these stores were open from 7 a.m. to 11 p.m., seven days a week.  (Hence the name 7-Eleven)

In addition to convenience store development at The Southland Ice Company, other types of stores were emerging. There were "midget" stores in the 1920s and "motorterias" or mobile convenience stores. "Bantams" and "drive-in" markets were also around in 1929 where motorists never had to get out of their cars. "Delmat" vending machine type of stores were also popular for obtaining milk, eggs, produce and fresh meat. Dairy cooperatives (Such as Lawson's in Ohio,which is now mostly in Asia) often ran "dairy stores" or "jug stores" as outlets for their operations. Sometimes supermarkets had small outlets in rural areas for people who did not travel to the city enough for eggs, milk, etc.

The pattern of the emerging "convenience" types of stores grew modestly until World War II (although they were not yet called "convenience stores"). The big factor in all of these operations was fast service. The stores were most successful in warmer climates where the open front was a big attraction.

The end of the war and the increased ownership of automobiles sparked the rapid growth of the industry in the 1950s. The automobile helped fuel the growth of suburban living--of families wanting the "American Dream." Americans, with bigger cars and better roads, began flocking to the suburbs where they found plenty of space to live and raise children... but too much space between shopping centers.

The industry grew rapidly along with this consumer need for convenient shopping and supplanted the neighborhood grocery stores and became established in new suburbs and areas too small to warrant a supermarket. Once again, convenience store companies were opportunistic and innovative, thriving in market niches too small for others to operate profitably.

Additional forces continued to drive convenience store growth. The growth of the supermarket industry affected convenience stores. As grocery stores became larger and larger, they became less convenient for the customer who was in a hurry. Convenience stores filled in. Suburban families often had two cars and two incomes; both spouses working meant more discretionary income and less time for using a supermarket. Also, the increase in the number of working women reduced the amount of time available for shopping.

Stores were conveniently located. Customers could park in front of stores and could even leave children in the car and keep an eye on them. With the variety of items available, it was virtually one-stop shopping without waiting in line. Stores were easily franchised since it was getting expensive to start up a new store. They entered the northern regions of the country and continued to grow through merger, acquisition and new building.

Convenience stores continued to evolve from characteristics of the competitors: supermarkets, mom-and-pop grocery stores, specialty food shops, drug and variety stores, vending fast food chains, and gasoline service stations.

In the early 1970s, more states began allowing self-service gasoline, so the number of convenience store selling gasoline grew. In 1971, less than 7 percent of all convenience stores sold gasoline. That figure reached 50 percent in 1984, and today stands at around 80 percent.

While gasoline sales make up more than 70 percent of a typical store’s revenues, gasoline is a
very low margin commodity and only accounts for about one-third of a store’s profits. Over the past 15 years, stores have sought to expand their in-store sales by growing their foodservice programs, especially expanding their fresh coffee and sandwich programs. As the economic downturn hit in 2008, many stores found that they were able to maintain – or even grow – their in-store sales, as more customers sought quick take-out meals instead of sit-down meals at restaurants.

Lawson's in Japan 

In 2008, the convenience store industry’s U.S. sales stood at $624.1 billion – accounting for roughly 4.4 percent of the country’s gross domestic product. The industry also sold an estimated 80 percent of the country’s gasoline purchased. The convenience store industry’s scope was largely a result of its enormous number of locations. By the end of 2008, there were 144,875 convenience stores in the United States – more than the stores from all other competing channels (supermarkets, drug stores, mass merchandisers, dollar stores and wholesale clubs) combined. With the U.S. population now at about 305.5 million, there is one convenience store for every 2,100 people in the country

Some other things to think about


In Japan, convenience stores are commonly called “Conbinis” in Japan (sounds like cone-beanie). There are conbinis everywhere in Japan. It’s insane. None sell gasoline like the American version and the staff is very nice (again, unlike the American version). Stores are really clean and they have a ton of items including ready to eat fried chicken and other random fried things that I’ve eaten but can’t tell what they are. They’re often used as landmarks too when you’re trying to navigate through town.

Having visited Japan I can also add that many convenience stores were offering many more goods and services than their American and Canadian counterparts for many, many decades. However in the 1990s, we began to see North American convenience stores start to sell prepaid phone cards and pagers, then cell phones, then prepaid gift cards and other such items once reserved for discount stores or department stores.      Some stores even had services like neck massages, as well as fresh food cooked while you wait.  Many of them are considered hubs for the neighborhood and are often destinations of choice as much as a restaurant or a park.

As a resident of Vancouver, BC two weeks out of the year, I can also say that Canadian convenience stores have been more similar to their Asian counterparts since the late 1980s, but many US conveniences stores (especially those in small towns) have started to catch up as well.


Some examples I can think of are two convenience stores in Columbus, Texas, on State Highway 71 that are well known Kolache Stops for UT students, as well as for Texans on Road Trips.  Plus consider the Bucc-Ee's chain of Convenience Stores and Truck stops, and the institution they are here in Texas.

Questions To Consider:


1.  (2302 students)  Under what output market structure would convenience stores be considered (think by Corporate Owner, as well as by individual franchisee)?

2.  (2301 students)  Would you consider their contribution to US GDP to be significant or insignificant?  Why or why not?

3.  (Any students or readers)  What are some possible explanations as to why a bottle of soda pop. a half gallon of milk or a loaf of bread would be sold at a higher price than at a Supermarket or Discount store?  Is this higher price justified?  What are customers getting from buying at a convenience store instead of buying from a Supermarket or Discount Store?  Is it worth the mark-up to the consumer?

The Venus Project, Jacques Fresco and the Resource Based Economy

This post will be of interest to all of my Economics Students and Readers.

Thanks to Netflix streaming, I recently watched a documentary entitled Future By Design, which largely told the story of Jacques Fresco.  Jacques Fresco is a futurist.  He grew up in New York in the early 20th Century and has studied a large number of subjects, becoming an expert in architecture, sociology, medicine, energy, and even economics.  He is considered a modern-era Leonardo DaVinci.  Like DaVinci or any competent reference librarian, Mr. Fresco is a generalist--someone who has expertise in multiple academic and practical disciplines.  He is also a prolific inventor.  As a teenager he had conversations with Albert Einstein and Buckminster Fuller.

While I do not necessarily agree with all of his philosophy, I find his ideas would give anyone with some intelligence pause for thought.  The economic ideas he has come up with are very radical on some levels.  Yet on other levels, they are somewhat similar to Gene Roddenberry's ideas from Star Trek with regards to the human condition and the economy.

The Resource Based Economy


Not entirely command, not entirely capitalist, nor socialist, but another approach to the economy based upon the views of technology and land resources and our relationsthip to them.  In some ways this system resembles barter, but at the same time is not entirely barter either.

From The Venus Project's Website:

The term and meaning of a Resource Based Economy was originated by Jacque Fresco. It is a holisticsocio-economic system in which all goods and services are available without the use of money, credits, barter or any other system of debt or servitude. All resources become the common heritage of all of the inhabitants, not just a select few. The premise upon which this system is based is that the Earth is abundant with plentiful resource; our practice of rationing resources through monetary methods is irrelevant and counter productive to our survival.

Modern society has access to highly advanced technology and can make available food, clothing, housing and medical care; update our educational system; and develop a limitless supply of renewable, non-contaminating energy. By supplying an efficiently designed economy, everyone can enjoy a very high standard of living with all of the amenities of a high technological society.

A resource-based economy would utilize existing resources from the land and sea, physical equipment, industrial plants, etc. to enhance the lives of the total population. In an economy based on resources rather than money, we could easily produce all of the necessities of life and provide a high standard of living for all.

Consider the following examples: At the beginning of World War II the US had a mere 600 or so first-class fighting aircraft. We rapidly overcame this short supply by turning out more than 90,000 planes a year. The question at the start of World War II was: Do we have enough funds to produce the required implements of war? The answer was no, we did not have enough money, nor did we have enough gold; but we did have more than enough resources. It was the available resources that enabled the US to achieve the high production and efficiency required to win the war. Unfortunately this is only considered in times of war.

In a resource-based economy all of the world's resources are held as the common heritage of all of Earth's people, thus eventually outgrowing the need for the artificial boundaries that separate people. This is the unifying imperative.

We must emphasize that this approach to global governance has nothing whatever in common with the present aims of an elite to form a world government with themselves and large corporations at the helm, and the vast majority of the world's population subservient to them. Our vision of globalization empowers each and every person on the planet to be the best they can be, not to live in abject subjugation to a corporate governing body.

Our proposals would not only add to the well being of people, but they would also provide the necessary information that would enable them to participate in any area of their competence. The measure of success would be based on the fulfilment of one's individual pursuits rather than the acquisition of wealth, property and power.

At present, we have enough material resources to provide a very high standard of living for all of Earth's inhabitants. Only when population exceeds the carrying capacity of the land do many problems such as greed, crime and violence emerge. By overcoming scarcity, most of the crimes and even the prisons of today's society would no longer be necessary.

A resource-based economy would make it possible to use technology to overcome scarce resources by applying renewable sources of energy, computerizing and automating manufacturing and inventory, designing safe energy-efficient cities and advanced transportation systems, providing universal health care and more relevant education, and most of all by generating a new incentive system based on human and environmental concern.

Many people believe that there is too much technology in the world today, and that technology is the major cause of our environmental pollution. This is not the case. It is the abuse and misuse of technology that should be our major concern. In a more humane civilization, instead of machines displacing people they would shorten the workday, increase the availability of goods and services, and lengthen vacation time. If we utilize new technology to raise the standard of living for all people, then the infusion of machine technology would no longer be a threat.

A resource-based world economy would also involve all-out efforts to develop new, clean, and renewable sources of energy: geothermal; controlled fusion; solar; photovoltaic; wind, wave, and tidal power; and even fuel from the oceans. We would eventually be able to have energy in unlimited quantity that could propel civilization for thousands of years. A resource-based economy must also be committed to the redesign of our cities, transportation systems, and industrial plants, allowing them to be energy efficient, clean, and conveniently serve the needs of all people.

What else would a resource-based economy mean? Technology intelligently and efficiently applied, conserves energy, reduces waste, and provides more leisure time. With automated inventory on a global scale, we can maintain a balance between production and distribution. Only nutritious and healthy food would be available and planned obsolescence would be unnecessary and non-existent in a resource-based economy.

Future By Design

 

In my opinion, The Venus Project has noble goals and has great potential.  However, some of it is a bit idealistic in nature.  For example, we are dealing with several realities in place:

1.  Certain non-renewable resources are running out and there is a huge imperative and incentive to replace their use, but alternatives are not being developed quickly.

2.  Human nature tends to be rationally self interested--the desires of the individual outweigh the needs of society for much of us, though many of us make an effort to think beyond our own desires and wants.

3.  Our current markets and systems provide incentives to those who waste, though thanks to the Sustainability movement we are seeing many of these incentives shift to those who conserve, don't pollute and work for the greater good of society.

4.  Our system of money and debt, or barter/trade beyond this is heavily embedded in society and this would require a major paradigm shift that might cause global chaos for a time.   That chaos may be very destructive, and preventing it is of concern.  I ask how can this be done?

5.  The population of homo sapiens has passed 7 billion and is not declining.  In order to manage the scarce and limited resources of the Earth, we must get the birth and mortality rates in balance, and then perhaps we must allow the birth rate to drop below the mortality rate for a number of decades in order to reach a sustainable population for the planet.  How can this be done without violating proper moral codes we all recognize across religious and cultural boundaries?  How can this be accomplished without mass use of birth control on a large scale (as in surgical sterilization of mass numbers of men and women after they have a single child)?  This produces a very difficult moral and ethical quandary, just as having too many children produces a similar quandary as well.

I recommend viewing this movie and reading the information on the website for the sake of stretching your thought and considering several ideas about a Resource Based Economy and what it could accomplish for humanity, as well as how it might be abused.

As always, I welcome thoughtful comments and discussion.

Prof. Hank Lewis

In the news: GM Records Biggest Profit Ever

The following post is more directed to my ECON 2302/Microeconomics Students:

Recently on Yahoo News, the Associated Press reported record profits for General Motors.  This is just 2 years after it nearly fell apart due to financial difficulties.  General Motors went through major downsizing and had shuttered the Oldsmobile, Pontiac and Hummer makes during the past few years, closed plants, and went through a government sponsored bailout.

Per the article:

Strong sales in the U.S. and China helped the 103-year-old carmaker turn a profit of $7.6 billion, beating its old record of $6.7 billion in 1997 during the pickup truck and SUV boom.

GM is a vastly different company than it was back then. It's smaller, has less debt and its contract with the United Auto Workers is less costly. But it took a government bailout and a trip through bankruptcy protection in 2009 to cut its bloated costs. The company made record money last year even though U.S. auto sales were near historic lows at 12.8 million cars and trucks.

But problems surfaced in its 2011 results. GM lost $747 million before taxes in Europe, and its South American operations lost $122 million. Sales growth slowed in the U.S. in the fourth quarter, even as more Americans bought cars and trucks. Also, GM's fourth-quarter profit fell 8 percent and results missed Wall Street expectations.

This year, GM expects to increase its revenue as global auto sales grow and it charges more for models. However, it will make less money per vehicle as the mix of sales continues to shift to cars from trucks, which have bigger sticker prices. It also expects to invest $8 billion on new products and technology, and says pension expenses will rise. The company wants to keep expenses down by freezing its underfunded U.S. pension plan for salaried workers.  

Several Unit 2 concepts in Microeconomics are covered within this particular article and as we go through Unit 2 I would like you to add to the discussion in the comments.

Questions for Discussion:


1.  Under which of the four output market structures is the Automobile Industry?  How well does it fit the descriptions?  Consider all attributes: type of product, size of an individual firm relative to market, ease of entry/exit to the market, degree of price control an individual firm possesses, degree of non-price competition in the market.

2.  What type of costs are detailed in the news article (explicit or implicit, fixed or variable)?  Explain why these costs fit the description.

3.  What economic term could be used in the place of the phrase "money per vehicle"?  Explain why that is the appropriate term.

As always, any articles presented in the blog are NOT AVAILABLE for students to use for their semesterly article reports.

I welcome all thoughtful comments/discussion.

Success to you all!!!

Prof. Hank Lewis

In The News: Retail Sales/Leading Economic Indicators

This blog is more directed at my ECON 2301/Macroeconomics Students.


Just today on Yahoo News, we saw a report about Retail Sales being down.  This then led to a drop in various Stock Indices as well.

The S&P 500 index retreated from near a seven-month high Tuesday after weaker-than-expected January U.S. retail sales data curbed investors' appetite for risky assets. U.S. retail sales rose less than expected in January as consumers cut back on car purchases and shopped less online. The disappointing data added to concerns stemming from Moody's downgrade Monday of ratings on six euro-zone countries.

"The state of the consumer is still pretty mild. We have had some good economic news but still pretty mild trends all around," said Sean Incremona, an economist at 4CAST in New York. The Dow Jones industrial average (DJI) was down 28.01 points, or 0.22 percent, at 12,846.03. The Standard &Poor's 500 Index (SPX) was down 3.97 points, or 0.29 percent, at 1,347.80. The Nasdaq Composite Index (IXIC) was down 10.23 points, or 0.35 percent, at 2,921.16. On Monday, the S&P 500 rose near a seven-month high, up more than 25 percent from a low in early October.

The benchmark index is hitting strong resistance in the 1,355-1,360 area, a possible trigger for a pullback. Pressuring the financial sector, Citigroup downgraded Bank of America Corp (BAC.N) to "neutral" from "buy," saying earnings headwinds would continue at the company even as capital concerns subside. Bank of America shares were down 1.1 percent at $8.16.

Students in Macroeconomics who've read the chapter on business cycles should recognize these stock indices and  retail sales as leading economic indicators.  These are different kinds of time series economic data whose behavior precludes the business cycle by about 6 months.  Granted these are just 2 or 3 of the whole index which includes:

     Average workweek (manufacturing)
     Initial unemployment claims (new unemployment benefits claims)
     New orders for consumer goods (durable goods)
     Vendor performance (retail sales)
     Plant and equipment orders (durable goods)
     Building permits (new housing construction)
     Change in unfilled durable orders
     Sensitive material prices (as in gold, silver and crude oil)
     Stock prices (S&P 500, DJIA, Nasdaq and other stock indices)
     Real M2
     Index of consumer expectations (a/k/a Consumer Confidence Levels)

Question for comments:  What does this news article suggest about the economy for the next few months?  In other words, what are these leading indicators predicting?

As always I welcome your comments and thoughtful discussion.

Success to you all!

Prof. Hank Lewis

Would you use these products?

Economics Students and Readers:

This past week there were several great pitches on Dragon's Den as well as Shark Tank.  Here are a few of the products:'

From CBC's Dragon's Den:

1.  Dans Un Jardin (In a Garden)--Deteregent Dispenser.  You pay $1.00 for a refillable bottle, and then refill it with detergent rather than waste plastic bottles.  This isn't the pitch, and it is in French, but I think this is something that would be best installed in Apartment Complex and Dormitory Laundry Rooms.  I'd actually use it since the Soap is Phosphate Free and the reusable bottles are better for the environment.  One of the Dragons (Jim Treliving) nearly made a deal but then changed his mind.


2.  Jitterbee Pancake Shaker.  Frank here is doing something that has already been done by Bisquick and Aunt Jemima.  However, those who've tried the product have said they taste better.  Frank is a dad raising kids so I get why its been hard to promote the product.  Again, this isn't the pitch, but would you consider trying this product?


3. Chillbed laptop cooling stand.  I personally see this product as having been done a number of times before.  I realize aluminum makes  a good heat sink, but come on!  It may be cheaper than those with fans or freon, but really, this product is too easily duplicated since nobody has nor can they get a patent on the metal Aluminum.


From ABC's Shark Tank:


1. Chord Buddy Guitar Learning Aid.  Robert Herjavec went nuts for this one.  It seems to be a good idea to me!


2.  Tail Lightz. Lighted patches for your rear end. uh... NO!!

http://www.taillightz.com/As-Seen-on-Shark-Tank.html

3.  You Smell Soap.  This gal was shrewd and got a deal for her organic soaps and soap paper!!!




There were some good deals and some stinkers!

What are your thoughts?

Success to you all!!!

Prof. Hank Lewis

Small Players on a Big Stage: from CBC's DNTO

Students and Readers:

Many of you are aware that I am an avid consumer of many different kinds of media, and in this blog, I am pulling from many sources to show economic relevance.  One of my favourite radio shows that I listen to online or via podcast is called DNTO: Definitely Not the Opera on CBC radio.  The show is mostly about sharing different stories from folks all over North America and the world, and is hosted by Sook-Yin Lee.  The show can be funny, heartwarming, and sad; but it is also highly thought provoking and one that I do not miss.

In the most recent podcast Sook-Yin interviews several people that had very minor roles that ended up making a huge impact in many markets as well as the world. Some people who come up big economically in this week's show included:

J. David Armistead, an optometrist from Texas whose assisting musical artist Buddy Hollie created a definitive look that influenced other famous people from Malcom X to Drew Carrey.

Henrietta Lacks, whose not so well known contribution to medical science created the Biotechnology industry and have enhanced all of our healthcare.  Her story is very timely and show a contribution that needs to be acknowledged far and wide by all of us.

Jesse Heiman is the most prolific Movie and TV extra who is one of the most active working actors you've probably seen but never heard of.

Bill Fernandez, whose casual act of introducing two friends led to the creation of the most valuable electronics firms on the planet.

and

Noam Galai whose crazy scream photo was used around the world  on T-shirts, books, and graffiti.  His photo blew up so huge, his face appeared on banners used in the Arab Spring Revolutions of 2011.

The podcast can be heard directly on the website or downloaded for free from iTunes.  A link with pictures and other media can be found here.  I advise you listen to the podcast and consider how such small actions could lead to much bigger things for markets.  Especially in the case of what we call viral marketing.

Success to you all!!!

Prof. Lewis