If retailers want to compete with Amazon, they should use their tax savings to raise wages – Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

MIT Sloan Adjunct Associate Professor Zeynep Ton

From Harvard Business Review 

Walmart announced today that it is raising its starting wages in the United States from $9 per hour to $11, giving employees one-time cash bonuses of as much as $1,000, and expanding maternity and parental leave benefits as a result of the recently enacted tax reform. It is part of Walmart’s broader effort to create a better experience for its employees and customers. The new tax law creates a major business opportunity for other retailers as well — if their leaders are wise enough to take advantage of it.

The U.S. corporate tax rate is dropping from 35% to 21%. Retailers, many of whom have been paying the full tax rate, are going to benefit substantially. Take a retailer that makes 15% pretax income. Assuming its effective tax rate goes from 35% to 21%, it could save the equivalent of 2.3% of sales. Specialty retailers with higher pretax income will save even more.

Retail executives have a choice in how they use these savings. I believe the smartest choice — one that will help them compete against online retailers like Amazon — is to create a better experience for customers and to achieve operational excellence in stores. For most retailers, doing both requires more investment in store employees — starting with higher wages and more-predictable work schedules. My research shows that combining higher pay for retail employees with a set of smart operational choices that leverage that investment results in more-satisfied customers, employees, and investors. Read More »

This big retailer could kill your subscription startup — Sharmila C. Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

MIT Sloan Senior Lecturer Sharmila Chatterjee

From Fortune

Watch out, Birchbox.

Some of you might be old enough to remember the milkman – the person who delivered dairy products to your home every few days. Or you might recall the Columbia Record Club, which regularly brought music to mailboxes. And then there’s the venerable and still-going Book of the Month Club, which keeps subscribers abreast of trends in literature.

Let’s keep that history in mind as we consider the soaring popularity of subscription services in which boxes of products or food or goodies appear regularly at your door. Companies like Birchbox, Blue Apron, Club W, OwlCrate,BarkBox, and Bespoke Post are among those leading the way in services that let consumers sample beauty products or exotic food or young adult books or other specialty items without leaving the house. “Best of” suggestions for subscription boxes are also popping up this season as hot items on numerous holiday gift guides – which would certainly lighten Santa’s sleigh.

Yet the basic concept is as old as the cheerful man in white who left bottles of milk in the box on your front step. What’s new about subscription boxes is their use of Internet technology, in which consumers can order subscriptions online, customize the items they want in some cases, and record and upload their reactions to social media. And then there’s the emotional effect that the milkman didn’t spark – the experience of opening the box, that anticipation of the surprises inside and the sense of gift giving … to yourself. It’s like Christmas every month without the standard rejoinder of: “Oh, you shouldn’t have.”