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On December 14, 2015, RiseTheShine commented on COSTCO: Big Bad Amazon can’t blow this brick and mortar house down. :

Great post. I am pretty interested in further understanding the operating model here. There are several cultural aspects that are important (Focus on frugality, employee congeniality and longevity, service orientation) but I think the real magic is SKU and product curation, supply chain design and a focus on a premium private label in Kirkland.

On the SKU and product curation front, it sounds like they spend a significant amount of time identifying only one or two suppliers per consumation area, culling suppliers for quality and then guaranteeing large volumes over time to help those partners scale to the filling needs of Costco. On the Supply Chain design part, they have a global sourcing operation that is supported by centralized analytics (faciltiated by membership cards) that can predict and help time product needs and ensure that volume needs are addressed at the individual warehouse level. On Kirkland, the investment and focus on branding Kirkland as a quality private label with a separate team to help build that product line creates for a unique value proposition to customers.

On December 14, 2015, RiseTheShine commented on Somebody Hates Amazon and Has Something Else to Offer :

Great post! Great company and great read. On the business model side, it all makes sense. They’ve found all of these hacks and are offering customers discounts funded by the cost hacks. Sounds like the gamble is all on volume. Thinking more critically about the operating model, how does the technology differentiate the business? They have a ton of folks trying to find more cost hacks and optimization solutions to reduce expenses and therefore deliver value to its customers through its business model. The obsessive focus on efficiency and optimization in delivering products to customers seems to be unique and special – others focus on providing greater flexibility and services, but here, it looks like Jet is focusing its teams on finding “tolerable” inflexibility that its customers would agree to in order to capture price value.

On the business model side, the one issue is that this could become a race to the bottom with even thinner margins with low switching costs / barriers to entry. As Amber mentioned, the sustainability here will be the challenge.

On December 14, 2015, RiseTheShine commented on Uber: A Winning Strategy :

Awesome read. I’d even go a bit further and describe Uber as a “logistics platform”. I wonder how much the operating model is impacted by the “City Manager” approach, whereby young, enterprising leaders are hired to effectively manage an entire City on behalf of Uber (across service lines, including, UberEats, UberEvents and Uber For Business). This decentralized organizational model seemingly provides for a high level of localization, product-market fit and growth anchored by local needs. I’d also venture to argue that Uber’s focus on iterating around its interaction with drivers is another important part of its operating model. It went from issuing whole smartphones dedicated to the Uber app, to now running the driver-side uber app on a smartphone fielded by the driver himself, which lowered the barriers to entry for new drivers, reduced the capital expenditures borne by Uber and creates for even more lightweight, high-touch interaction with the driver fleet.

On the business model side, it’s interesting to imagine how UberEats, UberEvents and Uber For Business will impact the opportunity set moving forward.