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Thanks for the interesting read, Amanda. I agree with the points made that it is difficult to draw the line between sacrificing short-term for long-term gains and vice versa, given that the political environment is volatile. It is interesting that other manufacturers like GM have also sided with Trump to invest $1B in new US manufacturing plants and to create up to 5,000 new jobs in the near future. Despite claiming that these decisions were made prior to the new president taking office, I’m sceptical toward management incentives in this case as the tax benefits and subsidies offered to GM and Ford are likely offsetting part of the incremental cost of manufacturing in the US versus in low-cost countries in the short-run. Over time, as the subsidies are eliminated, the company will bear the burden of a high-cost asset base. I wonder how alogned management incentives are, given that the useful like of these plants is longer than the average CEO tenure.

Thanks for the interesting read, Amanda. I agree with the points made that it is difficult to draw the line between sacrificing short-term for long-term gains and vice versa, given that the political environment may swing either way and we’ve seen some radical shifts in strategy over the past year. It is interesting that other manufacturers like GM have also sided with Trump [1] to invest $1B in new US manufacturing plants to create 1,500 jobs this year and additional 5,000 in the near term. Despite claims from both managements that decisions for these projects were made prior to elections, it is clear that there is an element of pressure and I’m curious to see whether a reversion will occur if sentiment in the White House changes.


Thanks, Charlie! Great read.
An interesting psychological consequence from Tesco’s reduction in selection from popular brands is consumer’s inclination to “frantically search” [1] on Amazon for things that they need fast and are not able to get in their local grocery store. This, I think, will have some modest and short-lived benefits for Prime Now, however, it’s worth noting the human behavior aspect to out of stocks. I think that it’s a fine line between satisfying the customer promise on availability versus price when you need to trade off one for the other. I see how currently Tesco is eliminating selection from their shelves as they negotiate more favorable terms with suppliers like Unilever, however, if this strategy fails, I wouldn’t be surprised to see these products back with the mark-ups.


On December 1, 2017, Violina commented on Amazon Dominating Competition with Tech-Driven Supply Chain :

Thanks Aaron, I love reading positive articles about Amazon 🙂

Amazon has done great strides in optimizing their inbound supply chain in terms of getting products from vendors in their warehouses in the shortest time possible and I agree that a lot of their practices can be used as best-in-class examples of operational excellence. Drew brings up an interesting point – an even bigger opportunity to all e-commerce players now is around the last mile delivery both on the cost-cutting side and on the customer-promise side to the point where they are intertwined. Consumers are having increasingly high expectations to receive products faster virtually for free and Amazon is embracing this by offering free one-day and even one-hour delivery with Prime Now in certain cities. Satisfying this customer promise adds another level of costs to the P&L of retailers and it will be interesting to see how each one (especially smaller direct-to consumer brands) respond to these pressures and who from the big players first (or if anyone) sacrifices an aspect of the customer promise in order to save on costs.

I take a positive view on this strategy and will argue that a retail brand doesn’t need to go down a cost curve like Tesla because the industry economics are different. Gross margins in retail are inherently high and increase proportionally with price point increases because people pay for intangible promises like “brand” and “fashion”. R&D is significantly lower to the point of non-existent and because Reformation is a direct-to-consumer brand they don’t give up margin to whole sellers and retailers. Granted, they need to invest in Marketing and SG&A, however, they can do so at their own pace versus aiming at satisfying a retail store in terms of price and supply, thus effectively negotiating how much they discount. Reformation is positioned higher (@ $200+ for a dress) than fast fashion brands like Zara and Mango, so I’m not worried about their profitability prospects in the near term. My concern would be with quality and as some consumer would be unwilling to pay a premium for a brand that offers an inferior product even if that product is environmentally save.

On November 30, 2017, Violina commented on Starbucks: the future isn’t brew-tiful :

Even though I drink coffee every day, I knew little about the magnitude of the environmental issue facing Starbucks’ in terms of the shift and overall decrease in land available to grow coffee crops. What makes the problem even bigger is that even a small increase in temperature in areas where coffee is grown can dramatically affect the taste of coffee [1] and Starbucks doesn’t have full control over each field where coffee is grown to ensure environmental friendly practices are always followed by growers. What I would be curious to see is how what it looks like increasing investments to develop pest- and temperature-resilient beans will translate into prices to consumers and how much will Starbucks absorb from this spend. A grande mocha latte for $4.25 is already quite pricey 🙂


Thanks, Sarena. Really interesting read in light of the emerging consumer trend of demanding for increased transparency in not just grocery products but also apparel, shoes, beauty and others. Food and beverage are particularly sensitive categories and I think that the opportunity here outweighs all the risks. Consumers are educating themselves on a lot of topics related to the origin of ingredients and are actively seeking brands that can not only promise but also have a track record of maintaining high standards of quality.

Other retailers are also building programs that allow shoppers to see where the products come from and track the production chain of individual units. Less than a year ago, Amazon launched a program called Transparency (still limited to a few strategic vendors) where each product that is ordered into an Amazon warehouse from the manufacturer has a QR code. A customer can scan the code, log into the Amazon app and see where the product has been manufactured, what are the ingredients in it and where the product has been in each step of the supply chain (from manufacturing facility to distributors to warehouse). This also solves for counterfeit products that are specifically dangerous in the vitamins and supplements space. Below is an example of what a detail page looks like for one of Amazon’s private label brands of vitamins:

Amazon Elements Calcium Complex: