The Stock Market can be a scary place but I've used a simple method to develop my portfolio-- I buy stock in companies that I either discover and have a really good idea (Priceline) or products I use and I can get behind (Apple).
As such, I'm always watching and interested in how companies are doing. Retailers in particular are facing a DIRE future if they don't adapt to the threat of online shops which exist with virtually no overhead and an ability to beat them on price nearly 100% of the time-- the only answer for brick and mortar stores is to pump up the SERVICE level of their stores and give shoppers the best possible experience-- and that's not happening.
Let's look at SUBWAY for example, by the way a privately held company so you can't buy stock in it, but it still works for the model.
SUBWAY came along like gangbusters didn't it? Take a look around you. Ten years ago they were virtually non-existent. I remember the very first one that opened in the Woo-- it was at Webster Square and I knew it because a friend opened it.
Excited that my friend had broken away from his corporate life and charted a course on his own (albeit franchised) course I was one of his first customers. I ordered a Turkey Sandwich with all the fixin's and a Steak and Cheese and headed home. On the way I stopped at a mini market to pick up milk and when I got back in the car I was overwhelmed by a very unpleasant smell-- and I'm talking just took a big dog for a walk kind of smell -- this didn't bode well for Subway.
Fast Forward a few years and there are Subways on every corner. Within a 3-4 mile radius from my suburban home there are THREE of them that I'm aware of. When I had a weekly Sunday night dinner with the boys we often went to Subway because it was, as the ad campaigned championed, a "healthy" choice.
The problem was it just wasn't very good.
The sandwiches were very bland and as we got to know the kid that worked behind the counter at this particular location I asked him about it-- he went out back and got a HUGE bag of lettuce, it was sealed in plastic.
"See this? We get this once a week."
See, Subway tried a few things to generate sales-- mostly gimmicks, and Dominoes and Pizza Hut are right behind them, but the bottom line is they offer an inferior product. Most of the locations I've gone to have poor service too. The model is flawed as a customer follows a sandwich maker down the line as they make their order, meanwhile a line forms as other customers wait.
But according to a recent article in Business Insider-- lines are a problem they aren't having anymore.
The last few years have been tough on the chain, I don't know how much value Jared the former Fat Guy who lost all his weight eating Subway and then decided to diddle little kids brought to the company, but when he went to jail they lost their spokesman. They also ended their number one gimmick which is the five dollar footlong, primarily because Franchises complained that they were not making any money selling them.
See, that's the problem with Franchises. You buy a business, you pay for nearly everything, and then corporate still makes you do things you might not think are particularly good for your business.
The quality model always intrigues me. Subway offers poor quality food and yet they were able to expand their base and bring people in. Is it a case of "hey it's not great but it's only $5!"? I can't explain why people still buy pizza from Dominoes or Donuts at Dunkin's when both those chains ALSO offer sub par quality products.
Dominoes had a campaign a few years ago where a person on TV complains that the ingredients don't taste fresh on their pizza and then a wall slides open and a farmer is revealed and we learn that the customer is actually wrong the ingredients are completely fresh!
Who thought that was a solid idea? It would be like having all your co-worker stand around you and say you have intense BO and then you pull back a wall and there's video of you taking a shower that morning.
OK, you showered, but you still smell. Nothing was fixed by this revelation, there is clearly another problem then.
Dominoes has since moved on to another gimmick that if your pizza is destroyed as you try to get it home it'll be replaced for free. I'm sure that's not leading any college kids to buy a pizza, walk back in a few minutes later and claim they dropped the pizza down the sewer by accident.
Subway suffers from the same attributes that Wal*Mart does, they hire the staff at the lowest possible rate and then give them no training so that they are both inept and slow at their job, which leads to poor morale and the whole cycle just repeats itself.
Wal*Mart near me has just added about 10 self service checkouts and its a game changer. I can now be out of there in less time than a cashier can even start punching his or her keys with nicotine stained fingers because you know what? I'm not getting paid to be there so I want to get the hell out as quickly as possible. I have a friend who refuses to use the self checkouts because he feels like he's doing Wal*Mart's work for them and he's right-- but I prefer to avoid the experience of standing in line with DMV like patrons while the cashier blinks her light or yells for a supervisor no where to be found to diddle her keyboard. Hey, maybe Jared could be the Wal*Mart spokesman when he's out in 13 years.