benjaminthomasphillips's Profile

Interesting case study! In the coming months / years it will be fascinating to see how Jet deals with disintermediation attempts by manufacturers and retailers (e.g. Home Depot, Gap, Walgreens Boots Alliance and L’Oreal pulling out of or blocking Jet). It is difficult to compete as a retailer when you have less to sell … Further, Marc Lore has been accused of founding Jet simply to get revenge on Amazon. Both the author and a previous commenter mentioned the problem of competing with Amazon: (i) taking sticky Prime customers from Amazon; (ii) Amazon as a broader and deeper online marketplace; and (iii) Amazon’s fantastic logistics platform. These barriers to entry present huge, and well-publicised, challenges to Jet. If Marc Lore is indeed targeting Amazon, a further challenge for him is that Amazon is well past being an internet retailer and more and more its future lies with Amazon Web Services and its Fire / media platform.

Fascinating article, either from an operations or an economic history perspective! Interesting that nowadays the business model of steel production has completely changed: (i) the proximity of coal and iron is not necessarily the determinating factor of steel mill locations, and other inputs have become more important (especially labour costs); and (ii) I would think it rare to find a vertically integrated steel operation these days. Finally, just from an economic history perspective, this is a classic “Second Industrial Revolution” example of success and why the US and Germany were able to match and in many ways surpass the UK in late 19th century. In the UK, industrialising first meant by this period they had relatively subscale production and relied on increasingly outdated methods due to path dependency (i.e. you will keep using technologies even once they become outdated because the incremental cost to continue is less than the huge cost to change and gain some big improvement). Not only was Carnegie able to adopt the best technology at the time, as you mention “he continually reinvested profits into the mills and frequently ordered even modestly outdated equipment torn out and replaced”.

So, interesting article and a just a few clarifying points on Ryanair. Their low labour cost is not quite due to “working really hard” but due to the use of non-unionised labour. This means they are able to employ fewer workers and pay them less than Lufthansa and their legacy agreements (who have c.120k employees vs. Ryanair’s 10k). Second, Ryanair are unlikely to pursue transatlantic flights in the near term as the economics simply aren’t as attractive as European short haul and they have a lot more market share to take from Euro flag carriers (see the following Bloomberg article http://www.bloomberg.com/gadfly/articles/2015-11-25/discount-airfares-don-t-make-sense-for-airasia-x). You are absolutely correct that they are trying to raise average fare per customer (although average fare per customer is nowhere near flag carriers like BA or Lufthansa), but instead by improving customer service through their “Always Getting Better” programme aimed at reversing years of poor perception, as well as a new Business traveller targeted product at a price premium.

Interesting to see the dynamic in competition versus other instant consumption-driven delivery/logistics start-ups like Jinn. Perhaps the key to success for food-only Deliveroo so far versus food and non-food players like Jinn is that Deliveroo focuses on reaching critical mass in one industry vertical in a particular area. On paper it might be better to cover all products but Jinn is 90% food anyway, despite looking to service all instant deliveries, because that’s where instant consumption (i.e. I want this particular thing in one hour) is strongest (i.e. I’m hungry now versus, oh I can pick up that apple laptop charger on the weekend). You have a fascinating spectrum of instant consumption logistics all the way from Just Eat (relying on the restaurant’s fleet) to Deliveroo (third party delivery for restaurants) to Jinn (third party delivery for all stores) and even new entrants like Uber Eats and Uber Rush. Though it doesnt appear to necessarily be a winner-take-all market, scale and density help wonderfully in these sorts of businesses and I wonder what will determine the winners in this space.

Ryanair will likely not engage in long haul routes for the near future, there is enough runway for growth in Europe taking share from flag carriers ceding routes and the economics are just really not as good as short haul (you might the same price for an aeroplane on long haul but earn much less than you do on short haul constantly churning passengers on and off). For this reason it’s also unlikely they will shift from the 737, especially since they have an order book for hundreds more craft lasting them at least to 2024. See this article for a taste on long haul low cost carriers (summary, it doesn’t really work). http://www.bloomberg.com/gadfly/articles/2015-11-25/discount-airfares-don-t-make-sense-for-airasia-x

Interesting that Next / Tock is being rolled out with a prime-first strategy (e.g. Per Se, French Laundry, Clove Club in London). Perhaps the thinking is that this kind of ticketing / dynamic pricing solution really only works for restaurants that are heavily de-commoditised, that is to say destination restaurants rather than those relying on foot traffic.

Further, from an organisational perspective, as mentioned by others, fascinating that this seems to be developed primarily in-house / by the owners as opposed to reaching for a third party solution (e.g. Resy, OpenTable). Doesn’t seem to be intuitive for most leisure businesses to do this as tech isn’t their forte, they are really bad at it.