Inventory

Did a little shopping today. Went to Kenneth Cole to buy shoes and Staples to buy a file cabinet. I found two pairs of shoes that I liked and a file cabinet that was perfect. When I asked the sales associates for my size and for the file cabinet they came back with the same answer: "out of stock -- best to check online."

This has been happening to me so often lately. It happens almost all the time at Banana Republic. What happened to all of that Kanban, just-in-time inventory stuff I read about in business school?

I'm convinced that this is not happening by accident. I'm convinced this is a calculated business decision; that is, the risk of having me not go home and go online to buy the items I want is outweighed by the costs associated with ensuring full inventory.

Interesting.

By the way, I'll probably wind up buying all this stuff online.

Leasing Everything?

I heard about a pretty cool idea on the Harvard Business Review podcast today. There's a company (can't remember the name) that is basically leasing high-priced handbags to women. Women can't afford to buy more than one or two of these things but they'd like to be seen with way more than that. Leasing them allows them to use several different handbags based on the season or to match the outfit they plan to wear. The idea could easily be applied to cars as well -- you could have a convertible in the summer and an SUV in the winter.

I suppose you could also do it with a high-end snowboard and a high-end bike. Maybe an HDTV during football season? Or a BBQ during the summer?

I think this model is consistent with consumer's increasing demand for mobility. That is, I believe consumers want less stuff and more of the ability to move around; freedom is becoming more important than material items. If I'm right the economics could work for this model.

I think we're going to see a lot more leasing in the future.

Airlines

I heard a good quote from Warren Buffet that went something like this...

If a capitalist witnessed the first flight of the Wright Brothers, he would have been wise to have shot them down.

The Best Business Lesson Ever

Perception minus expectations equals satisfaction. I believe the first time I heard this was in reference to Disney World.

Disney's customers would spend hours waiting in line for a 2 minute ride.  They would enter the line really excited about the ride (high expectations).  But at the end, after waiting more for two hours, they felt like it was a waste of time (low perception).

So Disney had two choices:

1. Improve Perception (create a better ride/create more rides to reduce demand/let fewer people into the park.)  Or...
2. Lower Expectations (make it very clear upfront what the customer was getting into.)

You've already guessed that Disney went with the second option -- they lowered expectations.

They simply added a sign at the end of the line that would tell each customer approximately how long they would have to wait (I heard that they even added a few minutes to these estimates just to be sure that expectations were really low).

This was a brilliant (and nearly free) solution to a big problem.  The net effect was that satisfaction increased because expectations decreased -- the perception of the ride itself stayed the same.