What stocks to invest in
This is another mountain-out-of-a molehill thing.
We have Toto toilets in our house. Toto is the leading brand in Asia and has been making significant inroads in the US over close to two decades. Yes, they’re the toilets that play music, heat the seat, double as a bidet and make fake urinating noises (a Japanese must)–but we just have plain old toilets.
The other day, I went to the local Home Depot, which, by the way, sells Toto toilets, to get a replacement part for one of ours. A friendly employee showed me where the replacement parts were–all aftermarket brands, not Toto, but that was ok with me–and which was the right one. The replacement didn’t look much like the broken part, but the employee assured me that it would work.
It didn’t. And, in fact, in looking back on my trip, the HD employee may, strictly speaking, have only told me that that was all they had. If so, kind of embarrassing for me, since for most of my working life I was on the alert for verbal gymnastics aimed at papering over problems.
Rather than launch a telephone search for a plumbing supply store in the neighborhood that might carry the part I needed, I found it on Amazon.
Around the same time, I found I needed a replacement part for a Weber grill. Same story. HD sells Weber grills, but not replacement parts. So, after a wasted trip to the local HD store, I ordered from AMZN.
What’s interesting about this?
In the early days of the internet, there was lots of speculation about the “long tail,” meaning that e-retailers like AMZN would make most of their money from selling obscure items that potential buyers couldn’t find in bricks-and-mortar stores.
A great story …just not the case back then. Just like bam, online exhibited the “heavy half” phenomenon, i.e., 80% of the business came from 20% of the items.
But maybe the long tail is beginning to come true. It’s not because weird stuff that no one really wants has suddenly come into vogue. Instead, I think computer-driven inventory control programs that eliminate slow-moving items from a store’s offerings may have gone too far. Yes, carrying fewer items has the beneficial effect of requiring fewer employees and less floor space. But at some point, the process begins to have negative consequences, as well.
For instance, it’s training me not to go to a physical DIY store, so I’m not passing by enticing end cap displays or being tempted by the sparkly high-margin junk arrayed along the checkout line.
My experience as an analyst has been that any cost-control measures always seem to go too far. They work for a while, but the continual application of the same process somehow eventually ends up creating the opposite of the intended effect (yes, experience has made me a Hegelian, after all). This may be what is starting to happen with inventory control programs that retailers use.
If I’m correct, this is another plus for AMZN.
What stocks to invest in