The Business Strategies Behind Chick-fil-A, Costco, Starbucks and More | WSJ The Economics Of

From a fried

chick

en sandwich and coffee to beauty and retail, we discover the surprising stories behind the world's most successful companies, their profits, how they have expanded and how they have navigated a changing economic climate. Our first story is about America's favorite fast food

chick

en company. Chick-fil-A, a

business

based on a secret recipe, this is the Chick-fil-A chicken sandwich that, according to multiple industry surveys, is America's favorite fast food. Visit a Chick-fil-A anywhere in the United States and you will likely see a long line of customers waiting patiently to order the restaurant's main menu item, here you go, thank you very much, it's my pleasure, have a great rest of the day, in part thanks to their famous chicken.

Today Chick-fil-A is the third largest restaurant chain in the US by national sales, we're still seeing tremendous growth in our

business

so far this year, we're up about 20 percent, so? How did this privately held Atlanta-based fast food chain become one of the most popular restaurants in America? This is the

economics

of Chick-fil-A Chick-fil-A has long had a unique business approach to which the company attributes its success from the beginning. Chick-fil-A's business was built on a recipe after trying hundreds of methods. Truett Kathy developed a faster way to cook boneless chicken using a pressure cooker and peanut oil.

It's perfect, which is why we've kept it stored in a vault and will continue to use the same recipe, none of the employees have access to it. It is still shrouded in much mystery. There are recipe sites where you can try to recreate it, but they have never officially published it. The original chicken sandwich is the same today as it was in 1967. A breaded chicken breast. Two pickles, both placed. a buttered toasted bun Chick-fil-A has long prided itself on its commitment to selling high-quality products; In fact, Chick-fil-A's name is a version of chicken tender with a capital A at the end symbolizing top quality, while other fast food chains tend to expand their menu offerings over time to attract New customers.

Chick-fil-A's business model has always been to maintain a small menu focused on chicken sandwiches. They like to say it's simple, so they want customers to know what's on that menu. able to easily decipher what they want we think in the way we serve guests that consistency is really important we get hot sandwiches cold salads and just tasty products customers seem to agree since its inception in 2015 the customer satisfaction index American has been dominated by Chick-fil-A Chick-fil-A often has very high ratings even though service and drive-through can be slower. People are very happy with the quality of service they receive.

In general, many Chick-fil-A restaurants today use a practice known as up-ordering in which an associate takes a customer's order while they are still waiting in line to get started before the pandemic, but it has actually proven to be very important for the pandemic when they closed their dining rooms, which really meant that the drive-thru is the main sales channel, so if you go to Chick-fil-A now in many places you will see workers in the drive-thru with tablets and, instead of talking into a speaker and mumbling your order, you might be screwed are you telling this person right next to your car or what do you want to ensure the quality at each of their locations Chick-fil-A uses a different franchise model than most other fast food chains, unlike most chains where the franchisee covers most of the costs of opening the restaurant.

Chick-fil-A owns each of its locations. The company also selects the premises and builds the restaurants. We really believe that's a key differentiator in how we operate. We are not looking. For a financial investor or people who want to buy a big market and open a bunch of Chick-fil-A States stores on their website, franchising is not an opportunity for passive financial investment working from the sidelines or adding to a portfolio of commercial projects. Franchisees are called operators, and Chick-fil-A carefully selects each operator after a rigorous interview process. Chick-fil-A likes to say it's like going to the Harvard MBA;

It can take 12 to 24 months, so you really have to want to do this and be willing to go through the initial paperwork but then with extensive interviews of the

more

than 8,000 applicants that Chick-fil-A receives annually, the company only selects about 130 new operators per year, which is a lower acceptance rate than Stanford. One of the skills we're really looking for is someone who is really good at developing people. Many stores have

more

than 100 employees. If Chick is selected, they have to be really good at onboarding and developing people into teams and leadership teams. Fil-A franchisees only need an initial investment of ten thousand dollars that covers the franchise fee to become an operator, which is much less than the initial cost of a McDonald's franchise, which requires a franchise fee of 45 five thousand. dollars and between 1.3 and 2.3 million dollars. of additional investment if they are paid for 10 or 15 locations, it is difficult to have that presence in the market and really know your team members and the communities that we serve and we are very interested in becoming operators and feel that that model It's going to be really important It's what has gotten us to where we are Chick-fil-A attributes this hands-on approach to the success of its restaurants, which, on average, earn much more with each location than its competition for years Chick-fil-A's Their footprint was mainly in the southeast, but today they can be found throughout the country.

They have around 2,600 restaurants throughout the country. They are also located in Canada and are opening in Puerto Rico. We're opening about 100 stores a year right now. We have a lot of growth potential here just domestically in the United States, but we're also looking internationally since 2007. Chick-fil-A has almost doubled its number of restaurants to 2,598. Compared to many other chains. is still slow like Chipotle, it's opening 200 restaurants a year, no matter which Chick-fil-A location you eat at, the company says its values ​​are reflected in its daily operations. A very close culture. They also invest in their values. They say they are based on Judeo-Christian values, that you don't have to be Christian to work there, but you know?

Take some of these basic values ​​of humility and generosity and, if you want, go to a prayer service. while you're there, you can certainly do so from its Inception founder, Truett Kathy. The Christian faith played an important role in the company's business strategy, which is why Chick-fil-As never opens on Sundays, not only so that workers can attend church but also so that they can rest. We generally feel like we make up sales Monday through Saturday and that anticipation of "I can't get Chick-fil-A today so I want to make sure I go first thing on Monday morning is also why the company it has never been made public I don't think we will ever actually do it I know we will never make it public and there is no real benefit for us to do so we have grown conservatively and therefore we do not need many investors or extra money to carry and to build new stores or new businesses part of Kathy's values ​​are reflected in how employees are treated and how they are expected to treat customers thank you, pleasure, have a great day, although you won't see it in restaurants where employees are in droves Chick-fil-A has long asked employees to greet customers warmly with a smile, even if it's just in a very small interaction, you can share a lot with just the smile the team member has with guests. just a little thing.

What we can do and that makes a difference Occasionally Chick-fil-A's values ​​have attracted scrutiny, especially when the company's foundation donates to conservative groups or causes, there have been some groups perceived as anti-gay and this is something that attracted the attention of progressive groups. Over the past year, the company's foundation has focused its charitable giving on three different areas: homelessness, hunger, and education. I think the most important thing for us in the restaurant business is that we serve everyone. My grandfather. I love how he talked about it with politics. Say I'm not right or left, I'm all chicken when you go to the headquarters in Atlanta, there's this rock with a Truitt quote prominently displayed that says what the corporate purpose of Chick-fil-A is. . glorify God by being a faithful steward of all that has been entrusted to us having a positive influence on all who come into contact with Chick-fil-A.

I think that reflects this noble sense of very superior company that they have, they believe that they do more than just serve chicken sandwiches. Thank you so much. Glad you have a nice one. If you've ever shopped at Costco, you may have noticed that it's a little different. Costco is not designed for a quick shopping trip. It's exactly the opposite. This is the economy of Costco it is not a grocery store it is not a small corner store it is huge it is cavernous the ceiling is high the products are literally stacked on pallets up to this almost the ceiling that is part of the model and the experience I have That cost well, the first thing we do If you have five dozen eggs, then we have salmon for you.

Unlike most stores, there are no aisle signs or in-store maps to help direct shoppers. Instead, the hallways are simply numbered. Additionally, Costco constantly moves some of its products and cycles new products. What explains why Costco stores are designed this way and how has it helped the company become the retail giant it is today? Costco is a big fan of using treasure hunt retail psychology to draw you in, which is basically having items on the shelf that are at a great price because they're discounted really well or they're just really interesting and aren't going to be there forever. , the big idea behind Costco's treasure hunt strategy is to encourage customers to explore and ensure that there is always a new batch of interesting deals.

Customers end up shopping longer and buying more products today. I went to Costco thinking that only I was going to buy a few items but I ended up with a whole whole when you walk into the store it doesn't feel the same as the last time you were there so you get a feeling of urgency to buy and also a feeling of wanting to come back and see what's there going. If it were the same every time, you might not come to Costco as often today. is one of the largest retailers in the world, with more than 803 locations and 275,000 employees.

Costco was part of this initial concept of the Warehouse Club, which was really that instead of going to the store, buying a single item, go to the store, pay for a membership and maybe your small business and we'll offer you wholesale prices. Basically lower prices, most members pay a $60 annual fee for the basic plan, but customers can upgrade to the executive membership, which offers more benefits for $120 a year. Membership dues are also how Costco makes most of its money. I think the main goal of Costco management is always this spirit of: can we offer more interesting items at a better price so that memberships continue to grow? ?

The model is to make money on memberships, sell things as cheaply as possible, they can't just increase the price. pricing something to increase profits, that's against the internal code and that also includes things like saving money and how much time we spend putting products on the shelves, that's part of the reason you see these product palettes stacked to the ceiling. Isn't a lot of time spent breaking down those granules and putting each individual product on the shelf? If they eliminate that, there is a little bit of labor savings. There are some time savings because they just put all that stuff on a pallet and you take it.

Costco says the average item in the store only has an 11 percent markup compared to the 25 to 50 percent markup often seen in retail. This commitment to low prices has not only kept customers loyal but has also helped spread the word about the brand. There is a psychology to finding a deal that is very satisfying for people and people enjoy the product selection at Costco. They have very knowledgeable merchants who have usually worked there for a long time and really know what a Costco customer would probably want and are good at getting good results. I bought the prices of those products.

I bought your protein withvanilla flavor and that creates a certain frenzy when finding those things. I bought Kirkland brand microwave popcorn. I bought two packages of bottled water. Most retailers might assume that shoppers want more options, not less. They sell a limited number of items which means they have to be pretty precise, they think about giving space to a product in their store differently than Walmart would and if that product doesn't sell like it's out of there, it's very ruthless if you are For a product on the shelf, you have to earn your place. The average Costco Warehouse stocks about 3,700 products at any given time, less than a tenth of most supermarkets' 40 to 50,000 items, but while Costco stocks fewer items, the items they do have in stock have a reputation I see you've noticed that I rolled up the sleeves of my new Kirkland Signature quarters that my mom bought me for the holidays Kirkland is from Costco, you know, a private label, it's their store brand, it's a brand that when they want to offer something at a price a certain price that they don't feel uh manufacturer A supplier can do it themselves they build it since its launch in 1995 the in-house brand has earned a reputation for quality and low prices on everyday items today Kirkland products represent a quarter of Costco's annual sales are $166 billion, but when you talk to customers I think they generally feel like it doesn't necessarily have to be fancy because they have already accepted this pitch from Costco, which is high quality and at a lowest price, and there's no fear that customer loyalty helped Costco stay strong during the pandemic.

Costco is undoubtedly a model that has not only survived the pandemic. But it has really thrived during the pandemic despite the growing popularity of online shopping. Costco has leaned into its strategy of attracting members to its stores. It's really interesting to me because for years people have questioned Costco, you know Amazon is going to get you, you have to get it. bigger online and that hasn't really been developed yet, they have explicitly said that we prefer people to come into the store and buy, we want impulse purchases, we want people to come in and see what we have and buy more, we work better that way way and it's cheaper if you've ever ordered anything at Starbucks, you've probably loaded up on one of these Starbucks between October and December.

Something like three billion dollars in value is loaded on these cards. I mean, that's a lot of money, a lot of money, actually. that if Starbucks were a bank it would be the 385th largest in the country and it is money that Starbucks can use up front as revenue before a single product is purchased, eventually it is a liability if someone decides to use it and you will find that in many gift card programs are being planned by people who never use them, so how important are the Starbucks mobile app and gift cards to your bottom line and what role does technology play in their continued evolution?

This is the economy of Starbucks in 1971, the first Starbucks, a small unassuming coffee shop, opened in downtown Seattle 50 years ago and that store is still in business, but Starbucks is a global coffee giant, only McDonald's is bigger than Starbucks when it comes to market capitalizations, so they are really a powerhouse when it comes to The entire restaurant industry in its first years of operation Starbucks expanded slowly and only within Seattle it was not until 1987 , when the original owners sold the company to its then-chief marketing officer, Howard Schultz, that the Starbucks we know today took root. Schultz began expanding Starbucks. out of town and introduced Americans to what was then a little-known Italian drink, the espresso, they were actually founded on this coffee shop culture where they make each drink by hand in order as Starbucks has grown, which has become more complicated nowadays.

Starbucks says they make more than 100,170,000 different varieties of drinks. These drinks can be very complex. They may take a while. They can have many different ingredients. So it's good for Starbucks because they tend to be higher priced drinks, but for the workers, the baristas, they can do it. Being very complicated The company's initial investment in espresso has morphed into many different signature drinks, from the creation of the Frappuccino to the launch of the Pumpkin Spice Latte Pumpkin Spice Latte High Private, they really didn't know it would take off like it did, but clearly, A whole phenomenon has formed throughout the world.

We really introduced pumpkin for seasoning here. Starbucks. One additional thing in the evolution of Starbucks is that cold drinks have become much more important to the company, whether it's just an iced coffee or a Nitro iced coffee or everything. These cold foams and cold drinks are increasingly important for your income. The company has gone through periods where Frappuccino sales have softened, but they have created more cold drinks to keep people interested in continuing to order, in part due to the company's founding in Seattle. Technology has played an important role in mastering change. A key moment was the founding of their mobile app in 2009, which was very early for one of these types of apps and they really saw this as a digital flywheel in late 2021.

Orders accounted for almost a quarter of all Starbucks transactions in the US, many of which were purchased via a virtual Starbucks gift card, which was previously the only way a customer could order on their phone. Today, a little less than half or 44 percent of all transactions at Starbucks. are made with a Starbucks card, in fact, many Starbucks customers use a Starbucks card or the Starbucks mobile app to purchase items. Starbucks says it has about $2.4 billion in cash that was loaded by customers to use later. That number exceeds the deposits at Many American banks, Starbucks, they also get a lot of data from which they own a lot of that data in a way that a lot of companies don't because they've created this whole ecosystem where people you know use the app.

Starbucks on their mobile ordering and We're hooked on that exclusive Starbucks system as mobile payments increase. Starbucks' business priorities have changed before the pandemic. About 80 percent of Starbucks' U.S. transactions were on the go, either through drive-thru or mobile ordering. Starbucks starred in cities, but it has actually spread everywhere. Across the country, including the suburbs, and much of that is done through drive-thru, these alternative pickup options are becoming increasingly important to the company's bottom line, especially during the pandemic. I mean, these stores have been a lifesaver for Starbucks because they were still operating and people could easily line up. get up and go and not have to go into an actual coffee shop Starbucks has long said it remains committed to a set of values ​​established at the beginning of the company's existence.

Starbucks is very committed to trying to create a connection between its baristas and its customers, even in its drive. Through earnings calls, they talk about this, that there are these customer connection scores, they want to make sure that everyone feels good about their experience at Starbucks, which becomes increasingly challenging when you order through from a self-service service or a mobile application. We're trying to get in and out Starbucks says those values ​​also show up in the way their stores are designed, the items you'll find in the store, they really choreograph that down to where the water basket is placed in a store, they want all of this.

To feel very similar, Starbucks has long touted its internal culture, which it says is based on a strong relationship between management and employees. The workers in their stores are not called workers or baristas, they are called partners and this is very central to the ideological part of the company. The important thing is that all of these partners get shares in the company called Beanstalk. That relationship may look different in the future for some Starbucks locations after two of the three Buffalo stores voted to unionize. Since then, Starbucks has invested a lot of energy and resources. on this issue and the executives have traveled extensively to Buffalo to meet with workers and try to understand their concerns according to the company they want to maintain this direct relationship with their workers they call the unions intermediaries they do not want that relationship to be broken but according to these workers , who support the union, want a more direct relationship with the company in a statement to the Wall Street Journal.

Starbucks said that Starbucks' past, present and future success is based on how we have always partnered with our mission and values ​​at our core since the beginning. We have been clear in our belief that we are better together as partners without a union between us in Starbucks and that belief hasn't changed, they are the largest coffee chain in the world, they are very dominant when it comes to coffee sales and they are really synonymous with coffee shop culture in many ways, but they are facing increasing pressures. You know, they don't tell you, don't lie in bed, you're supposed to lie in bed if you've ever visited an Ikea.

I've probably come across their stores with infinitely sinuous floor plans. This layout can be confusing. By design, Ikea may be the largest furniture retailer on the planet, but it's certainly not mainstream. The Swedish furniture giant asks its customers to build their own products and stores. distributes those products in minimalist, flat-packaged boxes, so how did these retail

strategies

, as well as its famous Swedish meatballs, contribute to the company's huge success? This is the Ikea economy. A look at the innovative business practices that have transformed modern life when you walk into an Ikea you are immediately put on a Type A path.

The IKEA store layout is a fixed path layout, meaning there is a designated path that all Customers must follow and guide you through the store in One Direction, it's not about grabbing a carton of milk and politely leaving. of the store is the opposite of that is very prepared to spend a day think about the rooms you know dream about what you really want your bedroom to look like a floor plan of most Ikea stores looks like a maze the curves every 50 feet approximately Keep customers curious about what comes next, as the average IKEA store is around 300,000 square feet or five American football fields, which means that walking a lot through an Ikea is frustrating for some, but in It's actually designed as an experience to get you to buy more.

Ikea is famous for putting its customers to work, unlike most furniture retailers who sell pre-assembled products, many of Ikea's pieces have to be built by their customers, but why, as many couples know and your therapists, building your own IKEA cabinet can be a challenge for the big ones? The idea behind the Ikea effect is that consumers are more attached to having more positive feelings towards objects or things that we have put effort into and that we actually think are more valuable because of that foreign Ikea effect that was first coined. in 2011 by researchers. who noticed a similar phenomenon in other products and businesses when instant cake mixes were first introduced in the 1950s, didn't sell well, and then said, let's add a fresh egg.

It was this idea that we want to feel like we are simply participating. enough that I don't feel guilty about taking a shortcut when making a cake from a mix, do you want a fresh egg cake or a cake made with dried eggs for a lighter, more flavorful cake? Why fresh eggs, of course, the idea that we should love building products? It's not necessarily what Ikea intended. If you've ever shopped at one of Ikea's huge department stores, you probably know the unconventional product names, but what you may not realize is that when creating these items, Ikea sometimes features a price tag.

The first type of classic example that they could talk about all the time is the dollar light bulb if they had the idea that a dollar LED light bulb, you know this new type of light bulb would be difficult to achieve, but if they could achieve it, many people would buy LED bulbs, so they simply designed backwards from the preparation with price in mind. The obsession with low prices is a big part of why Ikea is the largest furniture retailer in the world today. Ikea has 445 operational stores. In 52 countries, obviously, if you go to astudent residence you will find a lot of Ikea products, but you will also find some Ikea products in a wealthy person's house and that is really what they are looking for nowadays.

Ikea is the very definition of mass-market appeal, but when the company began as a Swedish mail order business in 1943, well-designed furniture tended to be expensive and, as a result, out of reach for most, it was considered A serious long-term investment. Ingvar Comprad who founded the company when he was a teenager pushed the idea that furniture could be flat packed to greatly reduce the cost of shipping and transportation, so flat packaging is really Ikea's biggest invention that really led to growth. of the company and the idea is that instead of buying, you know, a piece of furniture, all together, it is deconstructed into a flat package, you can put more in a truck, you can put more in the Ikea warehouse and you can also put it in your car , and the compensation is that you know that you put it on. together in the end flat packaging is a practical aspect of the philosophy that has long guided Ikea's success called democratic design is this idea that everything is in balance both price and function aesthetics sustainability this vision of creating a better everyday life for many people was sent more than 30 years ago by comprod in a Manifesto that is now presented to all Ikea employees and they talk about it almost religiously and fundamentally it is the idea that when they design a product they think that it cannot simply Not only is it functional, it has to be all of those things, so despite long shopping trips and DIY customers can't seem to get enough of Ikea, maybe it's as simple as work leaves to love, they're so cute and even smell like cereal, y'all Crocs, the colorful shoe that first became popular in the early 2000s, peaked in 2021.

The company recorded a record annual revenue of $2.3 billion in 2021, up more than 60 percent from the previous year and its shares have hit all-time highs in the past. A few years for Crocs have been this time of intense collaboration and constant releases. They're really trying to get in front of people who might not have considered a Crocs before. The company's success coincided with the pandemic, leading some to attribute the shoe's popularity to timing especially. As its stock price has been falling since the pandemic boom subsided but other comfortable footwear brands didn't take off like Crocs did, how did Crocs make a name for itself during the pandemic and how did it find success as one of the major fashion brands? divisive shoes this is the

economics

of Crocs the company was founded in 2002 the same year it debuted its classic clog the name Crocs was inspired by the crocodiles that live on land and in water when the cracks were first released they were aimed at a consumer who was looking for We see them as something functional, so probably gardeners, people you know, were on boats, people who worked all day on their feet, people who worked on a line in the kitchen, part of What makes them so functional is the material, a patented closed-cell resin called Crosslight that is non-slip, lightweight and easy to clean.

Producing a molded shoe is certainly simpler in many ways than assembling a sneaker. The most underrated advantage they have over the market is that it is clear that we are capable of doing things that other companies could not do due to their scale and production capacity. Crocs sales took off in the first three quarters of 2005: it sold 4.4 million shoes and achieved revenue of $75 million. The reason for its initial success was that the shoe was easy to get, available in retail stores, gift shops, and mall kiosks in 2006. Crocs purchased gibbets, a company that made small plastic shoe ornaments, that same year. the company went public and became the largest. once had a footwear initial public offering in the United States, but in 2008, in the midst of the financial crisis, the company suffered a net revenue loss of $185 million.

In just a few years, thanks to its global presence, Crocs in 2014 began making major changes to its business model by closing dozens of stores, moving away from malls and turning to online sellers like Amazon. Crocs announced today that it will eliminate nearly 200 jobs and close several retail stores as it moves forward. As part of a restructuring effort, the company also reduced the number of styles it sold by 30 to 40 percent and refocused on the classic clog that made it famous the following year. Crocs invested in a global marketing push to relaunch its brand image Despite its efforts, the company's stock remained stable until 2020, when the global pandemic hit before people were working from home and you know they weren't wearing dress shoes or heels, there was already this rising wave of comfort first.

Footwear that was really becoming more popular. Of course, that accelerated during the pandemic. The comfort aspect is what many call the key to Crox's success, but another important factor is how easy it is to customize the shoe with pitchforks; Over time, you move them to different Crocs since you have a green pair. a camouflage pair or a pink pair that, like gibbets, would stay with you and were yours, they were almost like the way a keychain on a backpack was at a certain point, this idea of ​​individuality and self-expression is something the brand emphasizes . Through its marketing campaign and on social media, the uniqueness of the shoe's design has sparked debate, even if we go back to the early days of Croc, there were two warring factions.

Crocs are ugly and they are a sword to society and we need to get rid of them. no matter how comfortable they are they're ugly and then there were people who said no they're cute and a little doughy and fun look how monstrous they are for you these Crocs leaned into this polarization by teaming up with celebrities and well-known brands to create versions limited edition of the classic clog. I think that's probably the biggest change within the fashion world in the last decade is that people really seem to design for Instagram because you want to stop people from scrolling and certainly a fried chicken plastered shoe does that in 2018 Crocs says which is a Balenciaga clog, a 4-inch 850 platform shoe sold out in a matter of hours and in 2021 Crocs says it has partnered with more than two dozen artists and brand creators through collaborations and licensing programs, sometimes It was through pitchforks, but sometimes it was like a kind of crazy renewal of what his clog constantly released, new collaborations have not only kept Crocs in the press, but have also helped him enter new markets, there are collectors of Croc looking for every model Penny I.

I am stocked with Crocs in the same way as Nike reselling on websites like stockx and eBay. Crocs are now reselling. Crocs and other comfortable shoes may have peaked with the pandemic as people begin to return to work and consider more traditionalist footwear, but many others are still prioritizing Comfort, we're seeing that with many of the pasty sneakers you wear people, we are seeing that certainly with the growth of slides it is a big business in the luxury market. Crox stock is down about 60 percent from its November 2021 high, I believe. The market is nervous about the near term, so we are definitely seeing supply constraints in the first quarter, but the company says its fourth consecutive year of revenue growth was driven by continued global demand and expects revenue to grow at more than 5 billion dollars. by 2026.

I think at a certain point you'll only be able to reach so many consumers, but I think for now they've been able to convince enough consumers that they deserve space in their closet and that they should have both fingers of the business model from Dollar General. is a retailer that can make a lot of money by selling very cheap products to a relatively small number of people. If you've ever shopped at a Dollar General, you may have found the store on a remote road like this one, it has all the appearance of it. in the middle of nowhere, but it is a meticulously planned and very well thought out strategy, a strategy that has been key to Dollar General's success in rural America.

The company is bucking current retail trends by expanding rapidly and opening stores far from population centers. Dollar Generals go where Walmart. They aren't, but it's not just the strategic locations away from big box stores. Dollar General employs a number of tactics to keep operating costs down, including leasing stores, paying low wages to employees and selling limited products and yes, that includes things that aren't actually a dollar general. Almost something in itself, it takes pieces from many different retail models. This is Dollar General's economics after more than 30 consecutive years of sales growth. Dollar General has become one of the most profitable and fastest-growing retailers in the US.

Last year, the company made more than $30 billion in sales, so how can a store that sells products at rock-bottom prices manage such extreme growth? It adds about two and a half stores every day in the United States just to have margin. There are over four times as many Dollar Generals as Walmart, there are more Dollar Generals than McDonald's in the United States, there are currently over seventeen thousand Dollar Generals in the U.S., but if you don't live in rural America, you may not Have you ever set foot inside the store where you would normally find a Dollar General?

You would think of a two lane highway. You think about places where the houses are very far apart. Farmland, low income communities. You could find them. a post office, a church or at a major intersection, this is usually a deliberate decision. The company has formulas to identify locations to open stores. Often the Dollar General will be miles away from the nearest city and Walmart areas with limited shopping options. quarters of Dollar General stores serve communities of twenty thousand people or less, according to the company, it looks first and foremost for need, so it will look for a place that we could call a food desert where there is no, there is no grocery store, there's no big box store it's kind of the target demographic: households with people making forty thousand dollars or less and you're looking for a place where you can get cheap real estate to keep costs down.

Dollar General tends to lease its properties rather than buy them and inside. In stores it has a limited selection of products that it buys in bulk, which gives the company more purchasing power with suppliers. Most Dollar General stores do not carry fresh produce and compared to grocery stores, they have less perishable items that have a shorter shelf life and at the lower margins, you walk into a Dollar General, you will see metal shelves, It will be pretty basic. I think linoleum, you know, think bright lighting, you won't see many people working there paying low minimum wages. often part-time staff the company keeps labor costs low the average annual employee income is just over sixteen thousand dollars according to Dollar General Dollar General says they employ more than one hundred and fifty-seven thousand people and that they offer employees employees competitive salaries and benefits These stores have minimal staffing levels, so there aren't many employees who are paid closer to a gas station attendant than even a Walmart employee, so they are people very similar to your customer base, people who live in an area where there aren't tons of other options despite the name, not everything costs a dollar, but the prices are extremely cheap and often significantly lower than grocery stores and pharmacies, critics say Dollar General's

strategies

harm local communities by not offering healthy food options and potentially hurting the economy of local small businesses.

Dollar General says they are not a grocery store and that they serve customers who otherwise wouldn't have access to an affordable retail option, ultimately the low prices and convenience for rural customers is what keeps people coming back. ; some shoppers have even found items for less than a dollar. Shopping for pennies at Dollar General, let's go to the first store I found. Propel water for at least a penny is the Dollar General app, scan and verify it's a penny before you head to the register. Dollar General is on pace to continue growing, the company grew 16 during the pandemic. a time whenOther retailers saw growth in e-commerce, not in-person shopping.

Dollar General plans to open about a thousand stores this year and when they have a business model that involves small stores without many frills or bells and whistles as a company. they can do it quickly and they can do it at low cost. Dollar General is also diversifying and going in New Directions. It has been experimenting with storing more fresh and refrigerated foods and moving toward urban centers. He plans to expand Pop Shelf, a new chain aimed at higher-income suburbs. Customers open shelves, in addition to being located in different places, their goal will be to sell things that are more fun, so not so much the basic products that you need for everyday life, but things like decorations, party supplies a little more . funny than necessary Dollar General says the new expansion is not necessarily a change to its overall growth strategy;

They say they can serve a diverse customer base with stores in urban, rural and suburban locations, but even as Dollar General expands its offerings and targets demographics, the company expects its biggest customers to remain shoppers in small towns with no other options. There really is a before and after of Sephora when it comes to the makeup industry until about 20 years ago. This is how most Americans buy luxury makeup. A sales representative from the brand would stand behind the makeup counter and help customers make a purchase that completely changed with Sephora. Now it's free for everyone. People come into stores, try what they want.

There is nothing behind the glass. So how did this French retailer come to dominate? The global beauty and personal care products industry and what business practices helped make it the industry leader it is today. This is Sephora's economy today. The beauty retailer employs more than 36,000 people in more than 2,700 stores in more than 35 countries. Over 250 beauty brands right now, Sephora is like my second home. The Sephora we know today has its roots in a small perfume store that opened in 1969 in Limoges, France, at which time the perfume and cosmetics market was dominated by one service. based retail model in which staff generally received commissions based on sales, instead Sephora used the assisted self-service model in which customers are free to try products in the store.

We have a whole station where you can literally pick up anything and try it on. the lipsticks you can try on the eyeshadows I always leave looking like a literally different person than the one I arrived in. Sephora customers can still ask for help from a sales associate whom Sephora calls a beauty advisor. There is a little more trust with the sales representatives at this Forest store. because they are brand agnostic so they can tell you that maybe you should buy them mascara from this brand but you should buy blush from a different brand. Sephora also bucked convention in the way it displayed its products, so makeup items are side by side. while from the same brand a fragrance would be in the fragrance aisle and the same brand a skin care product would be in the skin care aisle, then in 1997, founder Dominic Montano sold Sephora to the large conglomerate Luxury retailer LVMH, one of the advantages of being owned by a conglomerate like LMH is that the company can jump on trends very quickly, and in fact, several of the brands sold in Sephora stores are owned by LVMH.

One of the popular brands owned by lvmh is Rihanna's Fenty Beauty and then Fenty of course has a huge section, the whole Fenty row, we have the lip glosses at the beginning. Sephora's success is also due to its exclusive line of products. There is a bit of focus on the relationship between a store and a brand because Sephora is a very popular store for makeup brands. Selling your products at Sephora ends up having much more influence on that relationship. The Sephora collection. The challenge for high-end beauty brands these days is that they really face a conundrum: They've become increasingly dependent on Sephora for growth. of sales, but because alvia Mage also produces beauty brands and there is an element of competition there and more brands are constantly coming out, shelves are shrinking five Sephora products, you should try part 10. partly because of the exclusivity of that product, Sephora has a loyal customer base here There are five Sephora products you should buy tonight.

Sorry, I don't make the rules, you just have to do it, what are you going to do? What I find a lot of times on Instagram or Tick Tock is that people have these videos where they show all the products they bought at Sephora and they go one by one talking about they. This is the closest tinted facial oil and it is 42. I recommend this product to everyone and they always say I am paying 42 dollars for a facial oil. Yes, many loyal customers are members of Sephora's Beauty Insider program, which has three different levels and over 25 million members.

The lowest here is the Beauty Insider later, the next tier is Vib or very important Beauty Insider whose users have to spend 350 dollars in a calendar year to unlock the top tier is called Rouge which customers can access after spending at least a thousand dollars in a calendar year, benefits such as savings. increase with each level I'm Rouge, don't judge me, I know I spend a lot of money, okay I get it, but the real advantage of Sephora for the beauty rewards program is that every time a customer enters there, Sephora knows exactly what bought and that is very valuable information for the company to understand who the customer is, what they are buying and then be able to market in a very personalized way for that customer, but no matter how much the company benefits from exclusivity with its products when it comes of Sephora's consumer base, the retailer takes inclusivity seriously.

One of the ways Sephora has tried to be more inclusive is by featuring a greater number of brands in their stores, they made an effort to include black-owned brands, and then also pushing brands to expand their product lines and offer products that appeal to people of different racial groups and different ethnicities in 2021, Sephora relaunched Color IQ, a skin tone-matching technology the company offers to help customers select the most natural products for their skin tone and Sephora continues Expanding in December 2020, the company announced a partnership with department chain Kohl's to install 850 stores-within-charcoal stores by 2023. Since opening 200 Kohl's locations this summer, Sephora has added 200,000 new beauty experts in a statement to the Wall Street Journal.

The Sephora spokesperson said we want to be an unequivocal global leader in the prestigious beauty space and a purpose-driven brand that is a transformative opportunity for everyone we touch. They went on to describe three main areas: customers, brands and teams, sometimes when customers leave, Sephora says. store, they will have makeup stains all over their arms and it really shows what they have been doing in the store. If you walk into a Target anywhere in the U.S., you're likely to find sleek mannequins, elaborate displays, and elegant lighting. Target is very focused. in the aesthetics of their stores, their products, that's what they expect, it makes it feel like an elevated discount store experience.

This elevated experience that has led some to nickname the store Target is part of the company's strategy to differentiate itself from its competitors and get customers through the door, but what happens in the front of a Target store is only part of it. of the secret to the retailer's success. This is Target economics. To me, Target is very interesting because they are actually a department store that became a discount store and they were always looking for a kind of high-end discount store image and that has stayed true to this day, Target It is positioned as the go-to for cheap but stylish items, and customers can see the two ideas combined when they walk through the store in certain areas, such as clothing, home goods and electronics.

It features fancy lighting and displays, but across the way you'll still find the standard merchandise aisles with uniform fluorescent lighting. Target has always tried to merge these visual expectations that we have of a department store like the mannequins and the good guys. lighting and as a cosmetics display with a discount model, they also want you to feel like you're getting a good deal and I think you see that as they iterate on store layouts, they're still striving for that combination, according to a study from Hawk Incentives. When a customer feels that he is getting a good deal, he can make him feel smart and, in turn, increase sales.

Don't get distracted by Target. Don't get distracted by Target. Don't do this. I need retailers to always be. Finding this balance between the things you get to the store that you need, like a gallon of milk, and the things you might buy on a whim that actually make you more money with Target store design is one of several factors that have helped The retailer expand in recent years, the business has grown more than 35 percent in the last two years, surpassing $100 billion in annual revenue driven largely by the pandemic and a decision that Target It took five years to invest in its stores. said hey Amazon is here let's stop building stores let's remodel what we have let's develop an e-commerce model let's invest in other things target has continued to add stores some of them tend to be smaller stores different types of formats while they have invested in e-commerce, but They haven't completely abandoned their store account expansion, the retailer has more than 1,900 locations in the US, which is smaller than Walmart but larger than Costco, about 75 percent of the US population You live within 10 miles of one of these stores, so Target, like many established retailers, the big box retailers have this big benefit right now, which is that they already have the stores and you probably live pretty close to them. one and that allows them to say offer things online to pick up in the store parking lot, which has been tremendously successful for them during the pandemic because they have that store so you can go pick up your online order in most operations, like in-store and curbside pickup and online order fulfillment, starting in the back rooms of stores, so it's been interesting because they started to say we're going to use our stores, we're not going to build big warehouses of e-commerce, you know, we were going to use our stores several years ago and there was a little bit of skepticism in the market because it didn't seem like you could really be that efficient in that model, but in the end they say that they have saved a lot of money because they are not building a huge warehouse that costs a lot of money up front and you know they already have the trucks coming to their stores with their products and they are just using those stores as much as possible last year.

Target's physical locations handled more than 95 percent of more than $100 billion in sales, so walk by any Target. and you are likely to see this operation in action. Workers move carts throughout the store. They gather and scan items. While others watch the cars approaching and deliver their orders. In effect, Target hires workers specifically for its fulfillment operations. The company calls this role a compliance expert. Whether they're on the floor picking products off shelves like a shopper, whether they're in the back room packing things into boxes and labeling them properly, they're actually more like warehouse workers and now the company is taking this a step further. an effort to bridge the gap between their stores and their delivery location by doing these things called certification centers that allow them to basically have orders from the stores that are being packed by fulfillment workers sent to that more central location but still close to the stores . and then picked up and shipped from there Target's success also depends largely on the items in its stores at any given time.

About a third of Target's inventory is exclusive to the retailer through private labels. Similarly, designers often partner with Target for a limited time. time capsule collection these capsule collections for Target are a kind of marketing, it's a way of saying hello, we are high design designers. Big designers are interested in working with us, so it gives them a little bit of that prestige. These collections are almost as fundamental to Target. like her Bullseye logo in the late '90s, prominent makeup artist Sonia Kashikpartnered with Target to create a line of professional makeup at affordable prices. 16 years later, Target bought the line and today this line is just one of over 45 Target private brands that have become huge. brands for Target and they've added more and more and now it's a pretty significant percentage of their sales and private brands, like in all companies, can be lower priced for the consumer but more profitable for the retailer, so there are a great interest for any retailer to go.

In that direction, according to a CB Insights report, retailers can achieve 25 to 30 percent higher gross margins on private labels compared to the manufacturer. Brands Target has not yet shared the precise margin on its private brands, but currently 11 of its brands are worth at least a billion dollars with four fans of the brand crossing the 2 billion mark, while Target has passed many iterations since its inception in 1962. Changing store layouts many times and acquiring businesses within its larger brand, the company continues to evolve with the ever-changing customer that tends to change strategies quickly when things don't work out and believe that we see them in the midst of another potential version of that because the consumer is changing a lot right now, but even as the company evolves, I think some aspects remain the same.

The most consistent thing for Target has been this image, this idea that they are an elevated brand, they are different from their competitors, they have held on to that from the beginning and still rely on it today, this is a tiny house on Airbnb So far this year, this list has generated over twenty thousand dollars for its host. The typical US host in 2021 earned over thirteen thousand eight hundred dollars according to the company. The tiny house doesn't cost much to build, yet it could command hundreds of dollars per night Airbnb posted a profit in its second quarter as guests booked a record number of stays and experiences and hosts raised rental prices in amid high inflation, but people didn't book as much as analysts had projected and the company's summer booking forecast fell short. of expectations, obviously, it's an incredibly dynamic period of time, but I'm still expecting an incredibly strong travel period, even if people stop spending some.

So how did the largest Home Sharing platform in the US overcome its biggest crises, and could it borrow those lessons? To Weather Fears of a Recession, This is the Airbnb Economy Airbnb started around the time of the financial crisis in 2008. This was a time when people were hit hard by the recession and were looking for a way to make extra money. In 2016, the company launched Airbnb experiences that led travelers to book classes, tours, and outings. Airbnb also spent more as it grew. The CEO diversified into all kinds of things, like he wanted to have media studios, he wanted to diversify into transportation and then the pandemic hit the business. 80 percent forced Airbnb to take on $2 billion in debt and suspend all non-essential projects.

I hope to never do a side project again in my life. I learned a lesson. I think the lesson is when you try to do new things. they don't work The summer of 2020 was a turning point for Airbnb. People began to quarantine with their families. The friends began taking vacations while they were able to work remotely. That's something that definitely benefited Airbnb. Local travel became its strong point and people started using the platform for longer. remains one of the most popular public listings of 2020, although its share price has since fallen amid a broad market cooldown in August.

Airbnb projected record third-quarter revenue thanks to higher rental prices and said it expects to publish its first full listing. - this year many companies have moments of luck, but there is something to be said about being lucky and also being able to ride that wave and capitalize on it, that's what Airbnb says it has done since the beginning in 2008, many people turned to the accommodation because they were losing housing prices and a lot of people, because they didn't have as much money, were looking for more affordable ways to travel than ever, which really helped them attract a lot of people looking for accommodation. ways to make up for lost revenue on the platform and you can really see them making the most of the time during the pandemic, plus Airbnb redesigned its app and website to focus on local stays during the pandemic last summer launched a flexible search feature that curates trips For people who don't know where they want to go, the pandemic and remote work gave us that flexibility.

You know we can travel during the week and still work remotely, so Airbnb is starting to notice this trend and say, "Oh my gosh, we can, you know we can." They kind of use this and do it in May. Airbnb launched another redesign of its search tool that divides homes into more than 50 categories as a way to direct people to places they otherwise wouldn't have chosen, so what they're trying to do is they're trying to fill the gaps. existing houses instead of adding more and more houses. Some analysts say this is key to the company's future growth, as global occupancy rates are low when it comes to addressing security issues on its platform.

Some cities have complained that Airbnb has gone too far, they're not actively monitoring these properties because, frankly, they can't, they don't own them, so that's where a lot of their problems really arise: four people died, another skin heard everything that happened at a home rented on Airbnb after a shooting on Halloween 2019, the company announced safety measures including a 24/7 neighborhood hotline to receive complaints. We have banned all parties globally on Airbnb. We have a risky reservation queue where we analyze any suspicious activity and we have nice hands. -The team is using some fairly advanced technology, such as machine learning technology, to essentially identify anything that we consider suspicious, if it is, we will continue to look for more information.

The company says the number of complaints from parties has decreased by 44 percent in the last two years. Airbnb has been trying to reduce that, too. Rate it even higher by doing things like blocking one or two night stays on New Year's Eve and Halloween for guests without a history of using positive reviews, but cases are still happening earlier this year, we had a shooting in Pittsburgh and again You know there were people hurt. City officials have also blamed Airbnb for ruining the long-term rental market in some small communities. What has happened is that many people are simply buying properties and renting them out and as a result locals do not have enough properties to rent long term.

Airbnb doesn't believe it has actually affected the long-term rental market, but if you ask city officials, they have a different story - for example, in 2020, the mayor of Sedona, Arizona, a tourist hotspot, said that the demand for Airbnb rentals worsened the affordable housing shortage and demolished the long-term rental market, yes we know that part of the problem is that we are going to work with cities, that is why we have made numerous agreements with cities to create restrictions which we really want Airbnb to get more and more into. long term accommodation we want people to really feel involved in the community.

One of the things that Airbnb is doing now is trying to direct people to areas where it has supply and that also takes the burden off of certain places that everyone could go to and that could be a little overloaded. In April, Airbnb announced that its employees They can work from almost anywhere without a pay cut, so if more companies follow Airbnb's example, Airbnb will win in its home rental business because that would mean more digital nomads. People are traveling and are likely to book more on Airbnb, but some travelers are concerned about rising nightly rates and some analysts believe hotel chains and competitors such as Expedia Group will benefit as business travel increases this year. , so the question is: can Airbnb maintain the momentum we have?

We're an incredibly efficient company, we've already been preparing for a storm that we thought was inevitable in the coming years, Airbnb slashed costs during the pandemic, and analysts have credited the company for keeping them down even when Travel rebounded during a potential economic downturn. Could Decrease Demand Airbnb says it could also attract more hosts to the platform as the economy slows. I think more and more people will be interested in saving money and I think they will also be interested in new ways to make money and unlike hotels with fixed fixed lighting properties that cater to the changing needs of travelers, as was the case during the shift to local travel, I think even as we're going into a recession, people have been a little bit isolated for years and they're yearning to get and the one thing I think you're going to see them spend money on is they're going to continue to travel.

If you've ever seen a Home Depot commercial, you may be familiar with this song, it's a good time to Be a Doer Home Depot and its theme have inspired a wave of videos on social media revealing its cultural status as the home improvement store preferred by many during the pandemic. Home Depot is the world's largest home improvement retailer with more than 2,300 stores worldwide. In North America, what we have seen is home price appreciation and real estate activity at unprecedented levels and what we know is that when homes become more valuable, homeowners are more willing to spend on them, as fiscal 2021 sales are higher than those of Lowe's and Ace Hardware.

Combined, one of Home Depot's biggest advantages is its presence in the professional customer space, meaning electricians, remodelers, plumbers and other home professionals who place more lucrative orders. So how exactly Home Depot has attracted more professional customers and what other strategies have helped it become a leader in the home improvement retail industry, this is Home Depot economics. Walking into a Home Depot, you'll see a huge space, dozens of long aisles with everything from screws and other accessories to large tools and appliances, garden supplies, doors, windows, toilets, really everything you need. For a home improvement project, a typical Home Depot store stocks between thirty thousand and forty thousand items year-round, most locations are around one hundred and four thousand square feet, the scale of the store gives customers customers the opportunity to purchase raw materials in bulk and pick up items.

They quickly try to be a place you can go if you're just an individual trying to fix something in your kitchen. They are also trying to be a place you can go if you are a contractor trying to purchase lumber to help renovate someone's kitchen. home or if you're a plumber who needs all kinds of pipe fittings, so they really try to be a good source on both sides of that equation. Home Depot began when co-founders Bernie Marcus and Arthur Blank were fired from a home improvement company called Practical Dance. They wanted to launch a store that was significantly larger and cheaper than the competition.

In 1979 they opened their first two Home Depot locations in Atlanta The Home Depot founders had a vision of a home improvement retailer that could be a one stop shop for the DIY or do it yourself customer, you have never seen anything like it, the home improvement customer to us is unique , is a doer, that's where that word comes from since its foundation. Home Depot has grown into a multi-billion dollar company. dollar company that increasingly caters to the professional contractor as well as the DIY consumer, while many industries such as service and hospitality have been impacted during the pandemic.

Home Depot's revenue continued to grow, the pandemic fueled a boom in the home improvement industry as people spent more time and money on remodeling projects, but between mid-2020 and mid-2021 there were four consecutive quarters in Home Depot increased its sales by more than 20 percent year over year, which is a very fast pace for a large, established company. Home Depot says they are seeing increasing demand for professional projects as people feel comfortable inviting contractors back into their homes, there has been a backlog of projects requiring professionals that more recently people have been willing to turn to. andthat has led to a second spurt of sales growth.

What kind of person? I would come here at 5 a.m., well, there's Carly, a carpenter. Home Depot has positioned itself to attract more business from these contractors and home professionals, particularly those who place large orders. Everything we do in fiscal 2021, about 50 percent of its sales came from Pro. customers even though they represent less than 10 percent of its customer base, by comparison, between 20 and 25 percent of Lowe's total sales come from Pro customers, according to the company As a key part of its Pro customer strategy, Home Depot has invested $1.2 billion in Expanding its supply chain and distribution network, the company says it is building 150 new distribution centers to help speed replenishment of store shelves and quickly deliver purchases to customers' doors.

Each facility, some as large as 14 professional football fields, can accommodate a large amount. of inventory and deliver orders directly to the project site. One thing we know is important to our professionals is the delivery of the product to the job site. We have changed our model to a network of nearly 150 distribution centers designed to deliver those large, bulky products. products that are exclusive to Home Depot and exclusive to the professionals think wood think doors think windows think dressers we are designing a network that will deliver those products same day or next day to 90 percent of the population in our market, The home improvement giants distribution network works in tandem with their online strategy, giving Pro customers more flexible options that better align with their busy schedules.

We are one of the largest e-commerce retailers in the country by volume when people come to pick up orders from our lockers or our service counter they often buy more products in the store, so our website creates a flyer economical for our company. These possibilities have really helped the company to increase its sales quite a bit in the last two years. Sales from e-commerce channels have increased. increased by about a hundred percent, so it basically doubled, although Home Depot has experienced a long period of consistent revenue growth, the home improvement retail space remains a competitive and fragmented market, this is a space where customers are very price sensitive, so if a brand charges a higher price for a certain type of equipment, that's something that shoppers could pick up on and easily switch to another retailer, so Home Depot is definitely very sensitive to other large chains and smaller mom-and-pop stores;

The industry is also sensitive to economic fluctuations, especially with spending trends tied to the housing market dating back to the Great Recession and the financial crisis 10 years ago, which was a very difficult time for home improvement retailers. A turbulent period for Home Depot over the past two years during the pandemic. The real estate market has been very strong. Certainly a company that would be in a very different position if there were any sort of big downturn in the broader property market overseas.