Starbucks focusing on human beings. How odd!

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I recently read an interesting article written by Chris Matyszczyk titled, ‘Starbucks Just Made a Major Decision That’s Really Going to Annoy Some People’, followed by the sub-title, ‘Turning its back on the modern world’

Even though Starbucks has no presence in WA, I would bet my last long mac topped up that there isn’t a West Australian who hasn’t heard of the famous coffee shop chain, so naturally I was intrigue.

So what was the breaking story, the headline news that has half of the US up in arms? Starbucks made the decision to close its online store, their new CEO Kevin Johnson is focusing on human beings.

How odd! (as aptly described by Chris Matyszczyk)

In a world that is blissfully digital, where barely a decision is made without some form of digital interaction, where a day doesn’t start or end without us looking at our phones, a world where just about every response to every question is ‘google it’.

In a world where the retail landscape is changing and changing fast, more and more outlets are pushing, not to create a strong online presence (because if you don’t have that you are already out the race), but to dominating search engine results and to find the magic algorithm that will put their business onto their potential client’s social media feed.

In a world where the restaurant and take-away businesses haven’t escaped this digital apocalypse. That’s right, just in case you missed it you don’t have to leave home for a gourmet meal or venture outside of the office during your lunch break, hell no, simply click on Menulog, Hey You, Foodora, Skip, Delivery Hero or Deliveryoo. For crying out loud we live in a world where our school kids are no longer pushing inline at the tuck shop but ordering Eber Eats!

Yes, how odd in this world!

 

BUT, Starbucks understands and has realised that ‘Humanity stills matters’.

Even with this cataclysmic shift from the traditional (if you were born before the year 2000) to the digital, Starbucks has taken the brave decision to do something quite stunning. The coffee chain has stopped, thought, and realised that what it’s offering is a human experience, something an online store struggles to or in fact cannot deliver.

When your core brand experience occurs in physical stores, it’s wise to enhance the value of that. The return, Starbucks hopes, will be that going to one of its physical locations will offer some level of actual joy. You know, the human kind.

Creating an experience is about reaching the emotional side of people, something that can only truly occur when all five senses are evoked.

 

We Get It!

Auction Services understands that as the real estate world has moved on, there has been an evolution in methods of sale available to sellers. Sure these methods offer convenience and save you time but they strip the true emotional element out of the sales process.

An auction is designed to create a human experience, it brings all the buyers together in an open and transparent environment, it is an environment that is filled with excitement, an excitement that can only be understood through the study of human psychology. We don’t generally tell others that we secretly revel in winning something while others lose, but face it, that’s often the truth!

There’s the adrenaline rush of bidding against an opponent to see who will ultimately win.

Interestingly, even if we end up paying more than we planned for, because the competitor bid us up, there’s this sense of ‘I showed em! I won!’. There’s a certain sense of satisfaction that comes with winning an auction.

Hearts beat faster. People have to catch their breath. Decisions must be made, often quickly. Since timing is always an issue with auctions, that alone causes excitement. Will a person make a big bid at the last minute, surprising everyone else? Will something that you thought no one would want end up going for more money than you ever thought possible? That sense of unknown coupled with an ‘anything’s possible’ mentality helps make the auction process uniquely exciting.

Auction Services conducts exciting real estate auctions. It’s your call!

The Decline of Toys R Us…What Happened?

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Toys R Us filed for bankruptcy towards the end of September. Yes, arguably the most popular toy store in the world, Toys R Us which has over 35 stores in Australia and 750 international stores (outside of America) and more than 245 licensed stores in 37 countries has recently filed for Chapter 11 Bankruptcy.

It has often been said that Toys R Us, established more than 60 years ago set the standard when it came to toys. There is no question that if the popular TV game show ‘Family Feud’ had to go out and survey 100 people asking them to name a toy store, that Toys R Us would come up as the number 1 answer every time.
So what happened? Where did it all go wrong?

The obvious response is ‘another retailer slaughtered by Amazon and on-line retailing.’ But this conclusion comes short of describing why the Toys R Us leadership did not do the obvious things to keep Toys R Us relevant.
In the events leading up to the bankruptcy of Toys R Us, it was more a case of the wrong assumptions leading to bad outcomes!

In 2005 KKR and Bain Capital bought Toys R Us for about $6.6 billion, plus assuming just under $1 billion of debt, for a total valuation of $7.5 billion. But the private equity guys didn’t buy the company with equity. They only put in $1.3 billion, and used the company’s assets to raise $5.3 billion in additional debt, making the total debt a whopping $6.2 billion. What did this debt mean for the company? In short it created a cash outflow of $450 million per year just to pay interest on the loans.

Although risky, leveraged buyouts as described above are not unusual, the problems were in the assumptions used to analyse the risks.

The biggest assumption behind a debt-financed takeover is that the company can cut costs to improve cash flow and thus pay the interest. But behind that assumption is an even bigger assumption. That the marketplace won’t change dramatically.

Their plans were to lower operating costs, close some stores that were under performing, license some offshore stores, and sell some assets (real estate) to raise cash and repay the debt.

But what did they miss?

1. The accelerated growth and popularity of online stores such as Amazon.
2. That growth of on-line retailing would stall traditional retail stores, thus creating a major loss of value for retail real estate
3. The changing landscape of games. Let’s face it with the advent of technology and the advancement of video games kids today are not spending much of their time paying with traditional toys.

Toys R Us choose to focused on the war with WalMart and Target who had decided to launched a full scale price war to dominate holiday toy sales. A war these giant retailers were winning not only because of price but because of convenience. Parents could now do their toy shopping while they were doing their general weekly shop.

Simply put because of their debt Toys R Us did not have the resources to fight the traditional discount and dollar brick-and-mortar retailers and build a major on-line presence plus keep up with the changing landscape of traditional toys and keep paying their debt. They wanted to, let us not forget Toys R Us actually had a very strong online presence launching toysrus.com over 20 years ago and further strengthening their online presence in 2007 when they bought etoys.com and toys.com which all happened after the LBO.

In layman terms, it is like being forced to take a pay cut but still having the same mortgage repayments. Their lack of financial resource meant they were always behind the ‘8 ball’.

Because of poor assumptions, poor decisions were taken resulting in lower earnings and profits putting Toys R Us in a position where they simply could not afford to service their debt.

So what does this have to do with real estate?

The real estate market is more dynamic and harder to predict than ever before. Yet, agents are still listing properties using a pricing strategy. To price a property, you have to make far too many assumptions and often these assumptions result in properties remaining on the market for 90 days or longer (current average days on market is 72) and selling well below market value.

Auction Services 5 Stage Selling Strategy strips price from the equation and allows the market conditions to control the sales process. Throughout the 5 stage selling strategy you have up to 5 opportunities to create a competitive environments resulting in properties selling in less time (on average 28 days) and for the highest the market is prepared to pay!

To find out more about the 5 stage selling strategy contact Auction Services Australia

(Article Note: The Toys R Us chapter 11 filing did not include operations in Europe and Australia, licensed stores and joint venture partnership in Asia, which are separate entities)