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How to Use Financial Early Warning Indicators to Understand Competitor KPIs
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How to Use Financial Early
Warning Indicators to Understand
Competitor KPIs
A Complimentary Webinar from Aurora WDC
12:00 Noon Eastern /// Wednesday 17 August 2016
~ featuring ~
Ryan Macumber Derek Johnson
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Ryan Macumber
Ryan Macumber is Sr. Manager, Competitive & Market Insights, at Best Buy Company. He has
worked for Best Buy for 10 years and in the Competitive Intelligence and Market Insights
groups since 2011.
Ryan is a subject matter experts on competitive, macro-economic, and consumer trends that
impact the retail industry in addition to providing marketplace research and analysis for
strategic projects throughout the enterprise.
Email: rpm587@gmail.com
The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and
other friends and dedicated to exploring how to apply intelligence methods to solve real-world business problems.
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at http://AuroraWDC.com.
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BACKGROUND
CEO
CMO
Personalization
and Strategy
Enterprise
Research
Primary
Research
Competitive
and Industry
Insights
A bunch
of other
stuff
Best Buy Where We Reside
⢠Consumer Electronics and
Appliances
⢠Founded in 1966 (50 years, yay)
⢠Formerly called Sound of Music
⢠$40 Billion Annual Revenue
⢠1,600 Stores
⢠125,000 Employees
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1. You tried to trade 50 basis points for a prize at Chuck E Cheese
2. You think Alan Greenspan is a 24/7 news channel.
3. You canât spell 10K or 10Q.
4. You wonder why some profit is gross.
5. You think Paul Volcker is a bad guy in Star Trek.
6. You think an abacus is the first name of a character in To Kill A
Mockingbird.
7. You think Net Present Value is the amount Santa spent on your kids.
8. You think a balance sheet goes in the linens drawer.
9. You tried to look for the Cash Flow ride at the Wisconsin Dells.
10. You think COGS is a style of wooden shoe.
TOP 10 SIGNS THAT YOU MIGHT NEED HELP
FROM YOUR FINANCE PARTNERSâŚ
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Your finance
partner can help
âdecodeâ financial
results to help
understand the
health of a
competitorâŚ
⌠for a fraction of
the cost of a
doctor.
Doctors are
required to
âdecodeâ output
from medical
instruments to
understand the
health of a person.
MUCH LIKE MEDICAL INSTRUMENTS HELP EXPLAIN
HOW HEALTHY A PERSON IS, FINANCIALS HELP
EXPLAIN THE HEALTH OF A COMPANYâŚ
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Competitor
Profiles, CI
Frameworks,
CI Process,
etc
Leadership
Financial
Background
Information
MarketingStrategy
Products
Etc
Enhances ability toâŚ
⢠Break apart your competition into
digestible portions
FINANCE AS AN INPUT AMONG MANY
⢠Identify key performance metrics
and vulnerabilities
⢠Connect competitor actions to
results
⢠Create early warning systems by
identifying KPI trends & deviations
⢠Scenario plan (do they have money
for this strategy?)
⢠âBend and stretchâ existing insights
and observations
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A FRAMEWORK CAN HELPâŚ
Customers Stakeholders Shareholders
Customers
Revenue
Suppliers
COGS
Employees /
Landlords / etc
SGA
Banks
Loan Interest
Expense
Government
Taxes
Business
Reinvestment
CapEx
Pay Outs
Dividends / Stock
Buybacks
Cash
Flow!!!
=
Financial results help you understand how well (or not well) a company is doing at
making money.
All companies have the same basic goal â make money.
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Cash
Flow!!! Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
BREAK YOUR COMPETITION IN TO COMPONENTS. START BY WORKING
BACKWARDS FROM A COMPANYâS ULTIMATE GOALâŚ
⢠Awareness Initiatives (Advertising)
⢠Promotions
⢠Employee Training
⢠Product Availability
⢠Upsell / Add-on Tactics
⢠Assortment Strategy
⢠Vendors
⢠Logistics Model
⢠Labor Model, Labor Strategy
⢠Store Strategy, Types of Stores
⢠Management Structure
⢠Company Stage: Growth, Stable, etc
Goal Drivers / KPIs Company Psyche Tied to Financial OutcomesFinancial Path
Is the company generating cash flow?
-Why or Why Not?
What are key vulnerabilities keeping it from
generating cash flow?
How does it typically generate cash flow?
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Cash
Flow!!!
Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Return
Re-Invest
Pay
Shareholders
⌠BREAK OUT THE FINANCIAL PATH A COMPANY FOLLOWS TO ACHIEVE
ITS GOAL
⢠Awareness Initiatives (Advertising)
⢠Promotions
⢠Employee Training
⢠Product Availability
⢠Upsell / Add-on Tactics
⢠Assortment Strategy
⢠Vendors
⢠Logistics Model
⢠Labor Model, Labor Strategy
⢠Store Strategy, Types of Stores
⢠Management Structure
⢠Company Stage: Growth, Stable, etc
Goal Drivers / KPIs Company Psyche Tied to Financial OutcomesFinancial Path
Does your competitor rely more on
volume and lower costs?
Are they struggling in a particular
financial area?
Does your competitor operate in
a lean manner?
Or higher prices/premium
products?
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Cash
Flow!!!
Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
WHAT ARE KPIs (KEY PERFORMANCE INDICATORS) THAT DRIVE THE
COMPANYâS FINANCIALS? NOW YOU HAVE A PROFIT TREE!
⢠Awareness Initiatives (Advertising)
⢠Promotions
⢠Employee Training
⢠Product Availability
⢠Upsell / Add-on Tactics
⢠Assortment Strategy
⢠Vendors
⢠Logistics Model
⢠Labor Model, Labor Strategy
⢠Store Strategy, Types of Stores
⢠Management Structure
⢠Company Stage: Growth, Stable, etc
Goal Drivers / KPIs Company Psyche Tied to Financial OutcomesFinancial Path
If your competitor is
struggling, where and
why are they
struggling?
Do they have too much
management, too
many stores, etc?
Are they not drawing
enough customers?
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Cash
Flow!!!
Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
FINALLY, ADD COMPETITOR BEHAVIORS AND STRATEGIES
⢠Awareness Initiatives (Advertising)
⢠Promotions
⢠Employee Training
⢠Product Availability
⢠Upsell / Add-on Tactics
⢠Assortment Strategy
⢠Vendors
⢠Logistics Model
⢠Labor Model, Labor Strategy
⢠Store Strategy, Types of Stores
⢠Management Structure
⢠Company Stage: Growth, Stable, etc
Goal Drivers / KPIs Company Behaviors Tied to KPIsFinancial Path
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Cash
Flow!!!
Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
GREAT. WHO DOES WHAT?
⢠Awareness Initiatives (Advertising)
⢠Promotions
⢠Employee Training
⢠Product Availability
⢠Upsell / Add-on Tactics
⢠Assortment Strategy
⢠Vendors
⢠Logistics Model
⢠Labor Model, Labor Strategy
⢠Store Strategy, Types of Stores
⢠Management Structure
⢠Company Stage: Growth, Stable, etc
Goal Drivers / KPIs Company Psyche Tied to KPIsFinancial Path
Finance Partners CI Team
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Revenue
Metrics
Costs
Newton: âTo every action there is always an equal and opposite reaction.â
Business: âTo every action there is hopefully an unequal and opposite reactionâ
Most strategic decisions involve an
inherent trade-off between revenue
and cost / profit rate metrics
The idea is to âleverageâ costs to produce
disproportionate revenue
Examples
Increasing advertising spend (lowers
income) in hopes of increasing
revenue (increases income)
Sacrificing gross margin by cutting prices
(lowers income) in hopes of driving
close rate and/or traffic (increases
income
âCost Leverageâ
ANOTHER WAY TO THINK ABOUT THE METRICSâŚ
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HOW DO DIFFERENT RETAILERS VIEW THEIR
BUSINESS? THINK BACK TO THE PROFIT TREE
Cash
Flow!!! Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
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Each companyâŚ
⢠Has different growth strategies
⢠Has different merchandising/assortment strategies
⢠Pays attention to different financial indicators
In short, each of these companies defines âwinningâ
differently, which means you cannot treat them the
same when analyzing their business models.
THESE COMPANIES ARE ALL DIFFERENT
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⢠Amazonâs goal is to offer as many products as possible (ideally all
of them)
⢠SKU and vendor setup is highly automated; it does not need to scale
headcount to scale assortment
⢠This is the opposite strategy of a Costco, which offers a tightly
curated, carefully selected sku assortment and sells those fewer
items in tremendous quantity
⢠Walmart splits the difference
⢠Target is sort of like Walmart with a bigger focus on experience,
but with fewer skus and less revenue
WHAT DOESTHIS MEAN?
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NOW, YOU CAN ORGANIZE AND UNDERSTAND COMPETITORS
BY SIMILARITIES AND DIFFERENCES
The {Insert Industry} Pentagon is an
effective way to do thisâŚ
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Targetâs focus on experience is
more costly and therefore
requires the company to drive
higher margins
CONVENIENCE
Costcoâs focus on low prices
results in low margins, but is
made up for in volume and a lean
cost structure
TARGET VS COSTCO
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THE MOST VALUABLE PART OF
THE FRAMEWORK ISNâT ACTUALLY
THE FRAMEWORK.
RATHER, THE TRUE VALUE COMES
FROM THE EFFORT AND PROCESS
OF COMPLETING THE
FRAMEWORK.
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CASE STUDY TIME
ISSUE:
AMAZON WAS TAKING OVER THE WORLD
GOAL:
WE WANTED TO BUILD A DEEPER
UNDERSTANDING OF AMAZONâS PSYCHE
AND FINANCIAL MODEL VS OTHER
RETAILERS, FOR PURPOSES OF
EDUCATING KEY DECISIONS MAKERS.
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⢠"We've done price elasticity studies, and the answer is always that we should raise
prices⌠by keeping our prices very, very low, we earn trust with customers over
time, and that actually does maximize free cash flow over the long term."
⢠âWe are stubborn on vision.We are flexible on detailsâŚ.â
⢠âWe see our customers as invited guests to a party, and we are the hosts. â
⢠âStart With the Customer and Work Backwardâ
⢠âA brand for a company is like a reputation for a person. You earn reputation by
trying to do hard things well.â
⢠âWe can't be in survival mode. We have to be in growth mode.â
⢠"There are two kinds of companies:Those that work to try to charge more and
those that work to charge less.We will be the second.â
⢠âIf we can keep our competitors focused on us while we stay focused on the
customer, ultimately we'll turn out all right.â
Source: Fool.com,
goodreads.com
FIRST, WHAT IS AMAZONâS PSYCHE?
To understand Amazon, understand Jeff BezosâŚ
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AMAZONâS FINANCIAL GOALS REFLECT THE
COMPANYâS PSYCHE
Sources: Amazon.com
âDo a bunch of stuff to make
money. Invest all of that money
back in to the business to improve
the customer experience. â
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Amazonâs Growth Formula
⢠Consumers come to Amazon for three things:
â Selection
â Price/Value
â Customer Experience
⢠Amazonâs strategic focus:
â Driving Traffic
â Enhancing Selection
â Providing Value
â Personalized Experience
This formula results in a lower cost structure that
Amazon passes to consumers in the form of
lower prices, which further accelerates the wheel.
âEvery time the math tells you that you shouldnât lower prices because youâre going to make
less money. Thatâs undoubtedly true in the current quarter, in the current year. But itâs
probably not true over a 10-year periodâŚ.
â Jeff Bezos, Amazon CEO
Sources: Amazon.com, Forester Research
HOW DOES AMAZON MAKE MONEY?
THE FLYWHEEL
Amazonâs Flywheel of Growth
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SO, WE STARTED TRACKING AMAZONâS FREE
CASH FLOW AS A KEY FINANCIAL METRIC
From Amazonâs Q4 2012 Earnings Call:
âTrailing 12 month free cash flow
decreased 81%â
âThe increase in capital expenditures
reflects additional investments in
support of continued business growth
consisting of investing in technology
infrastructure including Amazon Web
Services and additional capacity to
support our fulfillment operations.â
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Cash
Flow!!!
Revenue
Transactions
Traffic / Sales
Leads
Close Rate
Revenue Per
Transaction
Units per
Transaction
Avg Price
Variable Costs
Materials or
COGS
Average Cost
Shipping
Hourly Labor
# of Employees
Avg Wage
Fixed Costs
Facilities Cost
# of Locations
Avg Size, etc
Management Headcount
Remainder
Shareholder
Returns
Re-Invest
Pay
Shareholders
Observed Scott Devitt of Morgan
Stanley during Amazonâs Q4 2012
earnings call:
ââŚit looks that you have successfully
begun the transition of your logistics
costs in the direction of being more of
a fixed fulfillment cost with lower unit
based shipping costs..â
SPEAKING OF COSTS, RECALL THE
FRAMEWORK AND CONCEPT OF COST
LEVERAGE
from
to
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Net Income Percent of Revenue (Past 10 Years)
Companies like
Walmart and Costco
focus on costs while
maintaining fairly
predictable business
models and results
âŚ
⌠Amazon clearly
doesnât, which is
what makes them
dangerous.
WHEN COMPARING AMAZONâS FINANCIALS AND PSYCHE TO
OTHER RETAILERS, THE DIFFERENCES BECAME
APPARENTâŚ
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Costco CEO Jim Sinegal:
MUCH LIKE AMAZON, COSTCOâS RAZOR THIN FINANCIAL
STRATEGY REFLECTS THE MENTALITY OF ITS
LEADERSHIP
⢠âWeâre low-cost operators, and it would be a little phony if we
tried to pretend that weâre not and had all the trappings.â
⢠âWe want to turn our inventory faster than our people.â
⢠âWe pay much better than Wal-Mart. That's not altruism. It's
good business.â
⢠âPaying good wages is not in opposition to good
productivity.â
⢠âCompetition makes you stronger. If our top competitor didnât
exist, we would have to make them up.â
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⢠Product Mix: Treasures (1/4) and Triggers (3/4)
⢠Costco stocks only 4,000 Stock Keeping Units
(SKUs)⌠also know as âthingsâ
⢠The average supermarket stocks 40,000 SKUS
⢠Wal-Mart stocks 125,000 SKUs
⢠Amazon stocks 8,000,000 SKUs
COSTCOâS MODEL
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HOW COSTCO ACTUAL MAKES MONEY
Source: Fool.com
⢠Costco just about breaks even on productâŚ
⢠And makes most of its money on membership fees
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COSTCOâ STORE GROWTH
Despite pressure to scale
more quickly, Costcoâs
model is to open stores
in a measured fashion.
Store growth drives total
salesâŚ
Is store count
reaching saturation?
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⢠A change in SG&A
⢠A change in the number of new stores
⢠A change in same store sales
⢠A change in its inventory model
COSTCOâS EARLY WARNING INDICATORS
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⢠Similar to Amazonâs â Grow quickly, use scale to
muscle suppliers to the lowest possible cost
⢠Acquire international players
⢠âSave Money, Live Betterâ
⢠Itâs not just WMTâs tagline, it is a mantra within the
company as well
⢠Reduce SG&A (save money), grow the company
(live better)
WALMARTâS MODEL
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Walmart Found SamWalton:
WALMARTâS PSYCHE
⢠âYou can make a lot of mistakes and still recover if you run an
efficient operation. Or you can be brilliant and still go out of
business if you're too inefficient.â
⢠âGive ordinary folk the chance to buy the same things as
rich people.â
⢠âControl your expenses better than your competition.This
is where you can always find the competitive advantage.â
⢠âCapital isn't scarce; vision is.â
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SLOW GROWTH TRIGGERS STRATEGIC CHANGES
âWal-Mart is spending $1.5 billion in
higher wages and training next year.â
âWal-Mart also said it was adding curbside
pickup for groceriesâ
Source: Google, Walmart.com, AdAge, Reuters
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WRAPPING UPâŚ
GET HELP FROM YOUR FINANCE
DEPARTMENT IF YOU CANâT SPELL 10-Q
OR WONDER WHY SOMEONE PUTS THE
WORD GROSS IN FRONT OF PROFIT
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WRAPPING UPâŚ
BY UNDERSTANDING THE FINANCIAL
PERFORMANCE OF A COMPANY,
LISTENING TO PUBLIC COMMENTS, AND
BUILDING THE âPSYCH PROFILESâ ON
COMPANY LEADERS, YOUâLL BE WELL ON
OUR WAY TO DEVELOPING AN EARLY
WARNING SYSTEM AND HAVING
INFORMATION TO POPULATE CI
FRAMEWORKS.
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Thank you!
Now how about a little Q&A?
Email: rpm587@gmail.com
Phone: (612) 291-5860
LinkedIn: linkedin.com/in/ryan-macumber-
172a122
The Intelligence Collaborative is the online learning and networking community powered by Aurora WDC, our clients, partners and
other friends and dedicated to exploring how to apply intelligence methods to solve real-world business problems.
Apply for a free 30-day trial membership at http://IntelCollab.com or learn more about Aurora WDC
at http://AuroraWDC.com. See you next time!
Hinweis der Redaktion
Thanks for sticking around and Iâm honored to be todayâs barrier between you and beer.
Obligatory background
Why Finance: The intent of this is not to be a finance 101 course. Rather, itâs hopefully convince you that finance can be a valuable addition to your CI arsenal. Then Iâll give you thoughts and framework for how might work with your finance team. Within that seciton, weâll walk through a couple of examples and applications. Finally, Iâll walk through some components of a project that Phil and I worked on a few years ago.
A key thing to keep in mindâŚ
Before getting into it, weâll walk through a few signs that indicate it might be in your best interest to get finance help. (Please hold cringes until the end of the
A key thing to keep in mindâŚ
there are a number of frameworks that come in handy for different situations. To construct those frameworks you need to understand a lot of different things about the competitor. To understand those things, you need inputs such as secondary research, primary intel gathering, etc. Adding the finance angle to your CI toolkit enhances your ability to do a number of things:
Does anyone currently work with finance partners? How so?
12
Once youâve established the profit framework, you can rearrange it by starting on the right and working backwuards. Since every companyâs goal is to make money, understanding how they make money becomes important. A systemic way to do this is to break the business into financial components, then into drivers or KPIs, and finally add your own understanding of the company. There may be a few bits of information where you and your finance partner have to work closely on to estimate⌠through making assumptions, doing competitive research, etc.
Since every companyâs goal is to make money, understanding how they make money becomes important. A systemic way to do this is to break the business into financial components, then into drivers or KPIs, and finally add your own understanding of the company. There may be a few bits of information where you and your finance partner have to work closely on to estimate⌠through making assumptions, doing competitive research, etc.
You can now start breaking out the financial metrics into drivers or KPIs. Once you get this level, you may as well pull up a chair in the boardroom because this is likely the level of detail of those discussions. The KPIs can also be seen as key points of vulnerability.
Are wages too high? Is it not drawing enough traffic or generating enough sales leads? Is it drawing traffic but failing to close the sale? Does it have too many locations for its volume base?
Finally, you can start to tie in what you know about the company psyche, strategy, etc. that you gathered from other parts of the CI process
Your finance partners can help you get the information for the left side of the framework. The CI can then add its knowledge of the competitor to the right side of the framework. Not all information will be available in the public realm, however. This is when where you leverage your CI knowledge and your finance team to make assumptions to fill in the blanks. For example, your finance team may not be able to find actual labor costs for you competitor, but you can build estimates for employee counts by observing employees in stores, researching articles, etc. Wage information can be estimated from sights like glassdoor.com. After awhile it almost becomes like a fun jigsaw puzzle.
After going through the framework exercise, you should have a better idea for how strategies and tactics drive financial outcomes, where to look for early warnings, where your competitor is vulnerable.
The real value of the framework is necessarily
Why retail?
You all have shared context â youâve likely visited each of these stores.
Plus, itâs what I knowâŚ
You organize competitors around key points of differentiation that youâve identified in your analysis.
A key thing to keep in mindâŚ
A key thing to keep in mindâŚ
Amazonâs business model prioritizes growth by focusing on the customer, often flying in the case of what Wall Street wants.
Relentless.com is owned by Amazon. Itâs an inside joke. Itâs also a glimpse in to the founderâs psycheâŚ
Letâs push the translate button.
n terms of the way weâre looking at Iâm certainly it is based on the free cash flow potential, and we have a -- weâre in some really interesting great businesses that have a lot of potential from a free cash flow generation standpoint with good and high ROICs which is exciting.
âSo, again our goal is to, we donât focus on individual margins. Our goal is to make sure that we generate free cash flow, large monthly free cash flow and use that capital efficiently, and so those are goals that we have and we certainly think that opportunity is there in each of the business that we operate in.â Amazon CFO Tom Szkutak Q2 2013
Amazonâs flywheel basically summarizes the mentality the company brings to every initiative⌠if the initiative doesnât fit, kick it out. Itâs also a picture of Jeff Bezoâs retail brain.
We started to track free cash flow and noticed it start to deteriorate around 2010. Up until about 2010, Amazonâs free cash flow tracked with operating cash flow, meaning they werenât investing as much of their earnings back in to the business. To us this âdeteriorationâ was a sign of Amazon getting serious about building a competitive moat around its business.
As Amazonâs Free Cash Flow started approaching 0⌠they had a decision to make⌠stop investing or generate more operating cash flow. Guess which one they chose?
Amazon keeps a lot of the cash freed up by not paying suppliers until after it sells the product.. This didnât make them happy⌠and eBay smelled blood. Further, Amazon went against every grain in its body and raised the price of Prime. Finally, Amazon hoped to start seeing some payoff from its warehouse spending spree the previous few years.
However, at some point Amazonâs free cash flow dipped pretty close to 0, so
- Prime Fee increased in Mar of 2014
Shipping costs
Investments
Expansion into more categories requiring more inventory
More warehouses requiring higher safety stock
More purchases being financed, delaying cash from customers
Diversified payment options for customers (example â use Discover points to buy on Amazon)
Potential Strategic Changes:
Increase upfront cost of Prime and other value props
More stringent vendor terms and marketplace seller fees
Amazonâs fulfillment investments were indeed intended to create a better customer experience, but they also had the financial impact of making costs more manageable in the longer term
Most companies focus on maximizing profits in the short term. As such, they may be less likely to try new things that payoff in the long term. This is what makes Amazon so dangerous.
Three-quarters of Costco's products are what it calls "triggers" - staples such as paper towel, detergents, and cereals. The remaining one-quarter are "treasures"Â - items that make shopping an adventure. These items change frequently: one day you can find it's luxury watch offered at a ridiculous discount and the next day, it's gone. This creates a sense of urgency and the thrill of shopping that hooked people on what's been called the âTreasure Hunt"
Costco typically marks up its goods a maximum of 14% over its cost (most items have an 8% to 10% markup - Kirkland Signature brand has a 15% markup)
After accounting for expenses such as real estate costs and wages, Costco just about breaks even on product
Eighty percent of the company's gross profit actually comes from the membership fees (between $55 to $110) from its 64 million members. That's nothing to sneeze at: Costco's annual profit is roughly $1.5Â billion. Nearly 90% of its customers renew their membership every year.
Notice the SGA levels of the various companies⌠Target is the highest as it places more emphasis on customer experience.
Walmart saw a revenue drop for the first time in 45 years last year, it may be trying to offer more to its customers than merely low prices and a consistently âmehâ shopping experience.