Keep quarterly reporting – Robert Pozen

From CFO

On August 17, President Trump waded into another complex area by a short tweet. He had apparently asked several top business leaders how to “make business (jobs) even better in the United States.” He then directed the Securities and Exchange Commission to study one business leader’s reply: “Stop quarterly reporting and go to a six-month system.”

Trump’s tweet reflects the belief of many corporate executives and commentators that quarterly reporting pushes public companies away from attractive long-term investments. However, the long-term benefits of semi-annual reporting are doubtful, while its costs are significant.

Shifting company reports to every six months does not meet anyone’s definition of the long-term. An extra three months to announce financial results would not induce American executives to take off the shelf the hypothetical stockpile of long-term, job-creating projects — now allegedly stymied by quarterly reporting.

For years, public companies like Amazon have achieved large market capitalizations by following long-term strategies, as investors waited patiently. Indeed, most biotechs go public successfully without any history of profits, so investors must be endorsing their plans for completing clinical trials and marketing their drugs.

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With better leadership, Sears could’ve been a contender – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From The Hill

When I arrived in the U.S. for graduate school in the mid-1980s, I asked my host family in a Philadelphia suburb where to shop to outfit my dorm room. They didn’t skip a beat: “Sears,” they said. “It has everything you need.”

To say that I was in awe of Sears would be an understatement. Having grown up in small cities in India that were dominated by mom and pop stores, I’d never seen anything like it. I bought pillows and bed sheets; a hot pot, microwave, a mini fridge; and also rain boots, socks, and a pair of earrings. I remember thinking, “This is the American store of my dreams.”

So last week’s news that Sears filed for bankruptcy struck a personal chord. The company has been under pressure for years: shuttering stores, jettisoning assets and taking on ever more debt. Finally, facing a $134 million payment that it could not afford, Sears capitulated.

The main culprit, according to media coverage, was the rise of online shopping and Amazon. Amazon, of course, has become the familiar villain in these tales — allegedly responsible for the death of many once-dominant American retailers, from Toys “R” Us to Sports Authority to Radio Shack.

But considering e-commerce accounts for only 9 percent of all retail sales, that explanation rings hollow. The truth is, Sears’s bankruptcy is of its own making. Its management, led by Eddie Lampert — Sears’s chairman and its biggest individual creditor and shareholder, made a series of missteps that ultimately crippled the iconic chain.

These include focusing too narrowly on cutting costs at the expense of investing in the in-store experience, spinning off key brands and competing on price.

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Retailers need to get real about security – Lou Shipley

MIT Sloan Lecturer Lou Shipley

MIT Sloan Lecturer Lou Shipley

From Xconomy

It seems a distant memory now. In December 2013 – light years ago in technology time – the retail giant Target disclosed a massive software security breach of its point of sale systems. The bad guys fled the virtual premises with the credit card information of 40 million customers. This astounding number would later rise to 70 million customers.

Target’s embarrassment, its loss of market share, its brand erosion, and its legal costs to settle claims collectively should have served as a nerve-jangling wakeup call for retailers large and small nationwide.

It would be hopeful to believe that retailers learned from Target’s data breach, but in fact the opposite has happened. In 2016, retail software security breaches were up 40 percent over the prior year and in 2017 the following familiar brand names suffered breaches – Sonic, Whole Foods Market, Arby’s, Saks Fifth Avenue, Chipotle, Brooks Brothers, Kmart, and Verizon. Retail software security is getting worse, not better, and the dismal trend seems likely to continue in the near term. Why? Read More »

Viewpoint: How can department stores survive in the digital era? – Sharmila C. Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Boston Business Journal

How can a department store survive in the age of digital shopping carts and free home delivery? It’s a question that some of even the most iconic retailers struggle to answer.

As a result, many are closing up shop. Last month, for instance, Macy’s identified seven stores for closure as part of its previously announced plan to shutter 100 locations nationwide. In November, Sears said it would close 63 stores on top of the 350 that it announced would shut earlier in the year. And last summer, J.C. Penney closed about 140 of its stores around the country.

Closing less-profitable locations makes a lot of sense, but that alone is not enough. What’s needed is a reinvention of the traditional bricks-and-mortar model. Stores must rekindle the magic of department store shopping by providing a holistic customer experience, one that’s efficient and satisfying from a purchasing point of view, but also engaging and exciting.

For starters, brick-and-mortar stores need to change how they view their online counterparts: digital stores should be seen as complementary forces rather than competitive ones. Shopping in the future will be a blend of the electronic and physical realms. Read More »

What Blue Apron needs to do to survive the threat of Amazon – Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From MarketWatch

For a while, it looked as though Blue Apron was destined to become a culinary juggernaut in the American kitchen.

Founded in 2012, the company APRN, +1.89%  carved out a clever business model by mailing perfectly portioned, pre-packaged ingredients and recipe cards to home cooks in need of handholding. It’s not yet profitable, but growth is impressive. Last year, the company had $795.4 million in 2016 by delivering about 8 million meals per month to customers.

Recently, though, there have been challenges. Shares that the company had hoped to sell between $15 and $17 apiece in June were priced at just $10, hurt in part by Amazon’s AMZN, +0.23%   announced acquisition of Whole Foods WFM, -0.02% earlier that month. They now trade for less than $6, pummeled in part by Amazon’s plans to launch its own meal kits.

The twin revelations about Amazon are no doubt unnerving to Blue Apron’s executive leadership team and investors. And yet, they should also see them as encouraging signs. That Amazon sees so much potential in the industry is proof positive that the meal kit represents a new American staple, and not just—pardon the expression—a flash in our collective pots and pans.

True, Amazon is a formidable rival. And yes, the meal kit business is increasingly crowded. (Current contenders include: Plated, HelloFresh, Purple Carrot, and Sun Basket.) But Blue Apron has an opportunity to differentiate itself. To do so, it must focus on the needs, wants, and values of its target audience: mainly millenials.

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