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Tuesday, November 13, 2007

When Wal-Mart Reports Inventory Control Success- Short Their Suppliers

Wal-mart-Gets-Theres Wal-Mart is the 800lb gorilla of distribution and they know exactly how to throw their weight around in order to keep the dung off their fur.  Today their stock is up after they reported Inventory Control Success and savings in other cost cutting efforts.

 

Inventory control success

Consolidated inventory rose 2.7%, against year-to-date sales increase of nearly 9%, Wal-Mart Chief Financial Officer Tom Schoewe said in the pre-recorded call. That was better than Wal-Mart's goal of expanding inventory at half the growth rate in sales.

That's also allowed Wal-Mart to lower markdowns used to clear out inventory in its U.S. stores. 

Wal-Mart's shares gain on earnings surprise, holiday outlook - MarketWatch

That spells almost certain trouble for Wal-mart suppliers.  Those products do not get controlled and cut and moved through the system faster without a cost hitting somewhere.  Since Wal-Mart is unlikely to pay the bill for discounting and cost cutting, that means that Wal-Mart's supplies are even more likely to feel the pinch.

That's a double whammy for most Wal-Mart suppliers.  They are almost universally locked into contracts that prevent price increases.  So as the cost to manufacture and transport products increase, suppliers have to continue to sell to Wal-Mart at the same old price.  Then Wal-Mart comes in after the fact and discounts items away to clear the supply chain.

Suppliers selling to Wal-Mart better be out there aggressively finding cheaper source alternatives themselves or else their own reporting is not going to be half as positive as Wal-Mart's garden of life.

The Market Analysts Always Read Wal-Marts impact on the Market Backwards

So with all that said, its rather funny that Wall Street always reads Wal-mart reports like this as a positive sign for the economy.  Wal-Mart in fairness is keeping the supply chain honest, but they make things look a little more chipper than they really are.  What is OK for Wal-Mart is rarely OK for the rest of the industries working with Wal-Mart.

If you are looking for a positive economic sign in Wal-Mart's financial's, you will not find it in their Inventory Control Success.

Thursday, November 08, 2007

Date Rape Drug in Children's Toys Causes Another Chinese Product Recall

GHB has been found in children's toys.  GHB is commonly known as the 'date rape drug,' a drug that is sometimes slipped into drinks at parties or bars.  The person that consumes the drug often loses consciousness or forgets what happens next.  This results in assaults, robberies, theft, and rape.

aqua-dot-recall-ghb

That same drug has been found in kids toys imported from China.

The coating on this product actually turns into GHB (Like a gel filled cap almost), when the toys are swallowed or put in a child's mouth.  Children in the US have already been hospitalized as a result of putting these small beads in their mouth.

This popular product is on Wal-Marts list of most popular toys for the season. 

I have a feeling that a corporation somewhere is going to be looking for a realtor for their offices very soon.

Monday, November 05, 2007

Why Can't Microsoft Stomp Google in Phones?

Microsoft has been planning a mobile phone play since 1994.  They have worked with Smart Phones.  They have rolled out the second coming of the Zune with WiFi.  Yet Google threatens them with the advent of the GPhone.

Microsoft should have the advantage here, but oddly enough they do not.

They should be able to leverage their search business, their phone business and their mobile media player business to hit a home run.

Third To Market Strategy At Play Here?

They have all of the ingredients and the only one that could possibly be holding Microsoft back, must be Microsoft.  They do not play well in markets where they are first to market.  In fact, they do not even like to be second to market.  Are they waiting for Google to follow the IPhone and pave more ground in the final round of device convergence?

Once convergence is completed, Microsoft might then be ready to swoop in and roll out the MPhone or Zphone or maybe even the XPhone (They have a lot of brand names to choose from  . . .)

Is it possible that they are following a strategy cooked up on purpose to allow the market to be further paved with a few early adopter GPhones before they then swoop in and clean up a market share number that means something (like 90%).  How needs a phone popup blocker, when the phones actually enable them to commoditize the market and do business the Microsoft way.