Best Channel Check? Walk a Store's Floor
Sometimes what's right in front of your eyes doesn't lie.
Having been in Chicago and away from my children for the past week, I decided to take the two-block jaunt over to Michigan Ave. to the Disney (DIS) store so Daddy could return with the requisite gifts for my five-year-old girl and three-year-old boy. The midday excursion turned into a reminder that Peter Lynch’s feet-on-the-ground approach to investing still has merit.
In a two-block stretch on that Magnificent Mile, I bopped into what could be considered flagship stores: Disney (which took $60 from me), Nike (NKE), Apple (AAPL), and Garmin (GRMN). Walking the floor is the most basic form of channel checks.
Lured by Cheese
It might have been laziness and guilt that sent me to Disney but it was the certainty that the trinkets I ultimately purchased would be familiar and well-received that separated me from my money. So while I'm completely embarrassed to having succumbed to the marketing cheese of the MouseHouse -- I mean, I live in Manhattan and have Internet access so nothing I bought was special or unavailable on any other day of the week -- the ability of Disney to become a default destination and the efficiency of the operation was impressive. The staff was seductively friendly in the helpful way they directed me in purchasing two of a similar items so as to get the “discounted” price. I know this is a small, and probably not eye-opening slice of Disney’s business, but it reminded me how deeply embedded the company is in our culture and lives.
Seduced by Apple
Next stop was Apple. The store was an interesting juxtaposition of sleekness (in terms of design), products, and display, but was populated by disheveled and awkward people in terms of both staff and customers. But the key is that even at noon, it was populated. There were over 100 shoppers checking out devices, and there seemed to be a blue-shirted employee for every one of them. Maybe it’s because I’m a bit of a Luddite that I was intimidated by the experience. It felt like when you're trying to take a mellow bike ride and you keep hearing shouts of “on your left” as packs of Lycra-wearing people zoom past. Yes, you're faster than me, but do you have to be so annoying? That said, I won't stand in the way of that kind of speed and momentum.
Lastly there was Garmin (GRMN) -- a beautiful store on a prime corner. Nice welcoming displays of more products than I could have imagined they offered; countless variations of the basic GPS unit, watches, belts, and footware. But barely a live body in the shop. The single purpose of utility -- basically every smartphone now offers similar capability -- makes this product destined for the dustbin. Unless the company can figure out a way to evolve and make its product unique and relevant I don’t expect the store or the stock to be around next year.
Today’s walk down the ticker tape reminded me of the mid-1990s, when I'd been living in Chicago and the first Starbucks (SBUX) opened next to the Chicago Board of Options Exchange. Even though I wasn’t a coffee drinker, I had some skin in the game in that I had been shorting the stock, which was going up too much. A visit to the store was in order. After seeing that they had a 300-square-foot storefront serving $3-$5 cups of liquid as quickly as the revolving door could turn and a price point similar to McDonald's (MCD) but without the costs associated with a kitchen and food storage, I covered my short that afternoon. And I became a coffee drinker for the next year or so.
Sometimes what's right in front of your eyes doesn’t lie. If a company is taking your money, maybe buying their stock is a way to get a rebate.
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