Office Depot Liquidity

Office Depot has just announced its Q4 2008 results. Overall, revenues were down by 15% compared with same period in the previous year, and while the decline was exactly the same in the International Division [meaning all business outside North America], in local currency sales declined by a far more manageable 4%. Office Depot reports on three segments in its International Division - the Direct Channel, where sales were down by 7% in local currencies; the Contract Channel, where sales were down 2%; and the Retail Channel, where sales were up by 1%.

As Reuters later reported, Office Depot's shares took a hammering as a consequence of these results, falling by some 26%, principally because the company said that it would be seeking new liquidity sources in 2009 - a combination of sale and leaseback deals on its US and European properties, and factoring its receivables in Europe. It was only back in September last year when the company announced that it had entered into a $1.25bn asset-based credit facility - secured by their inventory, receivables, and cash and depository accounts.

Belkin Blooper

Back in January, The Daily Background, Arlen Parsa's blog, revealed that a Business Development Rep at Belkin had been offering to pay for positive reviews of an otherwise poorly regarded Belkin USB Hub. As David Pogue explained in the New York Times, "There's no grey area here, no possible room for doubt: manipulating online reviews is contemptible. It violates our trust in the web's ability to harness the wisdom of the masses."

As a result of this 'discovery', Mark Reynoso, President of Belkin, posted a letter on his firm's website to apologise, saying: "We know that people look to online user reviews for unbiased opinions from fellow users and instances like this challenge the implicit trust that is placed in this interaction. We regard our responsibility to our user community as sacred, and we are extremely sorry that this happened".

Global 100 law firm Pinsent Masons explains, " In Europe it is illegal for a company to commission glowing reviews for its own products if they create the false impression that they were written by consumers. In the UK, the rule is found in the Consumer Protection from Unfair Trading Regulations. Company directors face a maximum penalty of two years in prison if convicted of breaching the regulations which came into force in May 2008".

PointMobl

Friday's Dallas News tells us that RadioShack has soft launched a new concept store in the Dallas area. The reporter, Maria Halkias, tells us that the PointMobl store "sells portable devices in an upscale decor of white fixtures and clean glass" with absolutely no sign of the store's owners, RadioShack. In fact, if you look at the PointMobl website, the only reference to RadioShack is the contact address for any queries regarding their privacy policy - and that happens to be RadioShack's corporate headquarters in Fort Worth, Texas. These concept stores - and there appear to be three right now, all in Texas -  were originally described in a report by Deutsche Bank analyst, Mike Baker, back in July 2008.

Working Capital

Booz & Co, the recently re-named consulting firm, has a new Working Capital Profiler on its web site. It comes pre-loaded with company data for the most recently reported four quarters [those ending up to 29th November 2008]. At present, the Profiler only covers US-based companies. In the retail sector, that amounts to a little under 100 organisations, including the leading US retailers of consumer electronics: Amazon, Best Buy, Costco, Office Depot, OfficeMax, Radioshack, Staples and Wal-Mart.

The tool does not explain exactly how the calculations for Receivables Days, Payables Days and Inventory Days are calculated. As there is certainly more than one way to make these calculations, a little more transparency would be good. Nevertheless, as Booz applies the same formula to each company, the real benefit of the tool is comparing individual companies with their peer group.

As an example, the numbers for Best Buy show that compared to its retail peers [and that's not just those in the consumer electronics business, it's in comparison with the whole retail segment], it could improve Receivables Days by 8, when compared with the performance of the top quartile and Inventory Days by 12, whereas Best Buy's Payables Days are already well within the top quartile. Overall, Best Buy's Working Capital Days, or Cash Conversion Cycle, if it were based on average top quartile numbers, could improve from a positive 13 Days to negative 7 days. According to the Booz Working Profile Calculator, that would be the equivalent of reducing Best Buy's working capital needs by over $2bn...

Experience Store

When is a store not a store? When it's an 'Experience Store'. Microsoft's announcement that it will start opening its own retail stores begs the question - are these going to be commercial retail stores which trade to make a buck, or are they going to be more like the Retail Experience Centre in Redmond? Perhaps it will be like the occasion when Nokia opened its first Experience Centre in Moscow, and one journalist described it as more like a "mini-science museum that a high street mobile phone store".

Maybe Microsoft will try to emulate Hewlett Packard? HP has opened three Concept or Experience Stores in EMEA. It opened its first in Johannesburg, South Africa in April 2008. This was designed by US-based agency, Polychrome, as was a concept store in Harrods, the upscale department store in London. The latest HP Experience store opened in Lagos, Nigeria in December 2008. It's not at all clear whether these are just high profile presentation suites or demonstration centres, or whether they mostly serve as experiments in retail design which may be used subsequently in HP's program of store-in-store sites. HP's Store-in Store openings have been announced all across EMEA - in Dubai, in The Netherlands, in Norway, in Portugal, in Saudi Arabia, in Sweden, in Turkey, and several other countries.

Microsoft!

Monday 16th February 2009 marks the first day at Microsoft for David Porter. It's also the first day in the office for Porter's title - Corporate VP of Retail Stores. The company's announcement says that Porter will: "Lead Microsoft's efforts to create a better PC and Microsoft retail purchase experience for consumers worldwide through the development of the company's own retail stores". It goes on to say that: "Defining the timeframe, locations and specifics for planned Microsoft-branded retail stores will be Porter's first order of business. The purpose of opening these stores is to create deeper engagement with consumers and continue to learn firsthand about what they want and how they buy".

Porter is currently Head of Worldwide Product Distribution at DreamWorks Animation SKG, but his real value lies in a 25 year tenure at Wal-Mart. This all sounds uncannily like Apple's appointment of Retail SVP Ron Johnson from Target back in January 2000. But that's probably the only similarity between the way these two companies can approach running their own retail stores. 

Best Buy's Wall Numbers

Three years ago, Cabel Sasser, founder of shareware company Panic, wrote about a set of numbers posted on the wall of Best Buy stores. At that time, this post drew a lot of attention, and something over 100 comments. It turns out that each of these numbers is a store performance metric - related to either shrink performance or attach rates. 

Working from right to left, and top to bottom, these numbers report on the following:

[1] 469 - this is a shrink metric, possibly connected with a bonus pay-out;

[2] .23 - this is also a shrink metric, probably expressed as a percentage;

[3] 77 - this is an attach metric related to Best Buy's PRP or 'Product Replacement Plan';

[4] 7 - this is also an attach metric, bizarrely related to magazine subscriptions;

[5] 2.22 - this is also an attach metric related PRP attach performance;

[6] 100 - this is a measure of MasterCard applications [related to the metric below];

[7] 3 - this a measure of Best Buy card applications; and

[8] 100 - this is an attach metric for Account Shield.

Trade-in Program #3

For those of us with a hoard of out-of-date electronics which is not going to attract a decent trade-in allowance, and if you're based in the US, try Best Buy's US-wide recycling program which is being launched in two weeks time.

Starting on 15th February, consumers will be able to take up to two units per day per household to any Best Buy store in the US. They will be charged a $10 recycling fee for products with a screen, but for other products, it would seem that it's fee-free. In exchange for these unwanted products they will receive a $10 Best Buy gift card straight away.

Best Buy already operates recycling kiosks for used toner and ink cartridges and other types of consumable. It also offers a 'haul away' service for old TVs when when replaced with new one installed by Best Buy's Geek Squad or home delivery facility.

Trade-in Program #2

In an earlier post we described how RadioShack works with CExchange to run its trade-in program. But CExchange isn't the only game in town. Best Buy runs a similar operation for what it calls 'gently used electronics', but powered by Dealtree.

Another, US-based, trade-in merchant, but seemingly without major retail affiliates, is Gazelle. And specialising in the mobile phone category there are ReCellular and Cell for Cash.

Elsewhere, there are other trade-in operators making inroads into this 'credit crunch friendly' business. In the UK, SpeedSell was set up about one year ago, and currently works independently, without retail affiliates, and just in the games category. And in Germany, there's Trade-a-Game, which seems to operate a slightly different business model to SpeedSell, but competes in the same category.