Earlier this year, I was at the gym which has a pool on the roof surrounded by the city. Following my laps I decided to enjoy the view from the hot tub. In it were two bubbes – Jewish grandmothers – passing time before their water-aerobics class. I waded between them, said “hello,” and sat down. They both looked my way pleasantly, but I could tell my entrance had forced a lull in their conversation. Not having anything in particular to say, I asked “So, do you ladies mind is I take off my swimsuit?” One stared in disbelief. The other, smiled wryly, cocked her head and replied in a gravely voice, “I would prefer that.” Then she added, “But I don’t know if you really want to. You did just get out of the pool.”
It used to be that Amazon worked on a very simple and expected principle: customers ordered product, paid for shipping and it arrived a half a week or so later. Prices were comparable to the stores, and users avoided tax, so they could handle to wait a few days for their copy of Braveheart to arrive because they saved a little money and gained convenience.
Then Amazon added Amazon Prime and everything got better. This change allowed users to pay $69 once a year, place their orders, and product arrived the next day. At first there was still no tax, but even after they did away with that, the taxes paid were still lower than they would be at a local retailer. So now customers were saving money and getting product insanely fast.
Initially it was DVDs, CDs and home goods, but people soon realized that this worked for lightbulbs and toilet paper too – things that cost more to ship than they offered in margin. Amazon – and more importantly their competitors – realized that shipping things that had no sense of customer urgency through their regular speedy channel meant they were leaving money on the table.
So Amazon started dabbling with customer-directed shipping alternatives. Some products became add-on items. If you really wanted that $1 roll of tape, you needed to order an additional $10 worth of other stuff. They offered bulk items on subscription where you could only get the lowest price if you promised to buy them every month. And they started offering Prime customers the ability for forego the speedy shipping in return for a $1 credit on digital media – the one product they offer that doesn’t incur a shipping cost.
But it wasn’t hard to work around the add-on restrictions, users eschewed subscriptions and continued to order their diapers when they needed them, and the whole digital credit thing didn’t appeal to a lot of people. Meanwhile customers continued to place single item orders for dog food or bubble bath continuing to thwart Amazon’s intentions.
And then along came a new company called Jet and with it the concept of “share of box.” Jet is a new start-up taking on Amazon that has reportedly raised $750 million. This is a true incentive to buy the dog food, bubble bath, tape, and diapers all at once and have them shipped together. Where Jet fails, is that they still ship everything separately and from different vendors, their selection is paltry, and they augment prices with the funds they have raised from Investors. A recent order showed that Jet paid $55 to buy products from a third party and sold them for $38. They claim that these practices will go away once they negotiate more inventory from additional vendors but obviously no company can sell product for less than they pay for it for too long.
Amazon has responded with yet another new service called Prime Pantry. Prime pantry charges customers $5.99/box for shipping and then allows users to “fill” the box with as many non-perishable groceries, pet supplies, and sundries as will fit. Each item comes with a price and a percentage number that represents how much of the box it will fill. A bag of dog food may take up 7% of the box where a tube of toothpaste takes up only ½%. Even though inventory limitations currently make it difficult to completely fill a box, this service works well. A few days after placing an order, a single, sturdy, handled box arrives with all the pantry items packed neatly together. Clearly Amazon is also trying to tackle the “share of box” issue and seems to be doing a better job of it.
But what cost is Amazon paying? Returning to my opening points, Amazon used to be simple and Amazon Prime was even simpler. Now customers have to wade through Prime pricing, Add-on items, Subscription services, the Prime pantry store, third party vendors, and Prime Now service (same day delivery). Meanwhile, Prime membership has increased to $100. I appreciate Amazon’s need to remain competitive but I fear that all this effort to gain one more customer, is straining their relationship with core customers.
I don’t have a solution to offer them, but I might suggest they wait and see how this whole Jet things turns out. Jet may be getting a lot of attention and financing, but their business model is spurious, their first major revenue pivot came after only two months of operations, and their value proposition is not yet being delivered. Meanwhile, Amazon seems to be forgetting that simplicity was a big part of the “Prime” brand, and this complicated smorgasbord of delivery options may be costing more in brand erosion than it is gaining in incremental revenue.
Most Chicago readers have never visited Rockford Illinois – although many say they have. “Yeah, that’s the place with the Clock Tower.” Yes. It has a clock tower. Yes, you drove by the clock tower while you drove by Rockford, but you did not visit Rockford. And I’ll be honest, three’s not much reason to do so.
Rockford has a long and storied history of depression. Starting in the 1980s when unemployment hit 22% it started getting ranked as the worst city to live in the nation. Over the last 35 years it has stayed on many of those lists bouncing up or down, jockeying for position with Flint, Detroit, and Baltimore. According to the Bureau of Labor Statistics, the current unemployment rate is 6.9% – 25% higher than the national average. Wages are on average 10% lower.
In the early part of the 20th century, however, Rockford was a thriving community. For many years, it was the second largest city in Illinois and supported many companies in aerospace, hardware, and machined metals. Amerock, Ingersoll, Sundstrand, Barber Colman, and Woodward Governor were the bedrocks of this manufacturing community, and the downtown bustled with shops, restaurant, theaters, churches and lots and lots of people! In 1940s and 1950s it was a picturesque American town.
I can only guess, but it may have been that appeal that lead the mid-century civic leaders to make the mistakes they did. As automobile transportation and trucking logistics began to shape the American suburbs, Rockford’s leaders elected to eschew a highway that went through town in favor of one that went around town. Their thinking was likely that the eminent-domain acquisition and demolition of property followed by the scarring construction would disrupt Rockford’s quaint urban appeal. And they were right.
But what they didn’t realize was that the new highway built along the outskirts of town would be a powerful draw and many of those businesses would move toward the outskirts taking with them all those people. Mega in-door shopping malls were built, businesses moved to improve access to transportation, and people simply lost their reasons to be downtown. It began to die. The department stores and restaurants began to suffer.
Meanwhile, there was another powerful demographic shift at work. The manufacturing industry that provided the jobs for Rockford’s working class was moving to Mexico and China where labor was cheaper. One by one the major corporations closed their manufacturing centers. Today, only Woodward Governor is still a presence.
The image in the upper right corner of this blog is some of what is left of the Barber Colman plant. I think it looks like a scene from Fallout 4.
This is when Rockford’s civic leaders made their second grand mistake. Thinking they were taking a page from a European playbook, and hoping to return vitality to the downtown area, they – get this – paved over the streets and created a “walking mall” (what the what what?). The unanticipated consequence of no cars was no people. Of the 50 or so business that were there, all but two closed. The “pedestrian mall”, as they called it, became a no-pedestrian wasteland. The theaters and churches hung on a little longer but eventually they went away too.
They church buildings are still there and you can buy them. My childhood church which is referenced in a previous post recently sold for about $500K.
Rather than admit defeat, the City leaders defiantly erected a huge (I mean 30 ton!) contemporary sculpture called “The Symbol” by Alexander Liberman that the citizens hated.
There was no precedent for modern art appreciation in Rockford. With their hubris, the city leaders were shoving their misinterpreted definition of modernity down the citizens’ throats. No matter how many times they barked with unconvincing bravado that “this sculpture represents the intersection of culture and manufacturing blah blah something else blah” the people of Rockford still saw no reason to call it anything other than the “The Monstrosity.”
Soon after this the Rockford Public School Board (more civic leaders) was caught in a funding scandal and the ensuing lawsuits decimated the boards coffers ensuring that Rockford’s children would receive second rate educations for generations to come. Most recently Rockford built a $8MM bridge from one park that no one goes to to another park that no one goes to. One has to wonder, when will it end?
Meanwhile many of the valuable downtown buildings that were abandoned when I was a kid in the 70s and 80s still sit in shambles. These beautiful buildings deserve to be developed and could be great projects for community investors. A truly revitalized downtown could bring business, people, artists, civic pride, and best of all tax dollars. Unfortunately the continuing weak civic leadership has only been able to:
Tacitly encourage a pocket of retail development at State Street and the river. This effort and the city’s commitment to it ebbs and flows with seeming revitalization some years and decay in others.
Encourage social service organizations to occupy the buildings downtown bolstered by state, city, and federal grants. The problem with this is although social services are important to every community, they do not build a neighborhood and their presence tends to repel the they crowds that the residential, retail and restaurants developers are trying to attract.
But with bold leadership, downtown Rockford could be the jewel in Northern Illinois’ crown. It requires municipal expenditures, but not much relative to what will ultimately be recouped by the entrance of sustainable tax payers.
First. Rockford needs to incent the social service organizations to move their operations out of the city hub. The focus needs to be retail, restaurants, and for-profit businesses and the end-goal needs to be up-market residential.
Second. Offer developers financing or TIF incentives to renovate whatever they can make a case for. Like many of the towns in which I have lived, this type of development starts with funky residential lofts and coffee shops. Some of this is already happening. With cultivation they will be followed by boutiques and apartment renovators. Then mid-sized and and start-up white collar offices. And finally Those huge old decrepit houses on Main street will become attractive renovation opportunities.
Third. Rockford needs great egress and ingress into the downtown area. There needs to be wide roads with properly timed traffic lights – fast streets that allow people who live there to get to work fast and allow people who want to visit a way to get there without hassle. Any remnant of that damned mall has to go. On a positive note, all the abandoned lots and demolished buildings means there is plenty of parking, so there’s that!
This strategy has proven successful in many cities throughout the US including Chicago and Omaha. In Chicago’s Bucktown/Wicker Park neighborhood it happened organically. Thirty years ago you couldn’t safely walk there and now people are investing millions of dollars in crumbling old mansions because the neighborhood housing market can support it. In Omaha, it happened intentionally when the city made investment attractive around a couple funky blocks called the Old Market and rejuvenated much of downtown.
For years Rockford’s leaders have blamed their problems on the migration of machine tool industry to other countries. But the truth is, these same leaders have done more damage with their terrible decisions – trying to protect something that was already dead – than any damage caused by the march of progress. The more Rockford unwinds these mistakes and embraces the best practices of similar communities, the better the chance of a real resurgence.
Thanks to my friends at Rockford Rocked inspiring for this post. You can visit them on Facebook. Antique photos from Bob Anderson.
There has been a lot of talk recently about the gap between the wealthiest Americans and the poorest Americans. If you listen to our President and Democratic candidates, it’s the biggest problem facing America. That is why, according to them, it is so important that we increase the minimum wage. But does increasing the minimum wage accomplish this objective? Is there a policy that does? Is this really the problem, or is it just some focus group tested rhetoric that polls well with Democratic voters?
To find out I ran some numbers on my own. It has been widely reported that the top 1% of Americans makes in excess of $300,000 per year. With that as our starting point, the proposal to increase the minimum wage from $7.25 to $10.10 would decrease the income gap by 2% (change in gap/gap). That’s not a noticeable enough dent to merit an increase on this issue alone. In fact if we increase the minimum wage to 15 bucks an hour as many progressives have called for, the decrease is still a mere 5 1/2%. So clearly increasing the minimum wage in-line with proposed legislation does not decrease the income gap in a meaningful way.
On the other side of the coin, there is a policy that dramatically decreases the income gap. If we cap incomes at 200K or institute a 100% tax rate for every dollar earned over 200k, we can decrease the income gap by 35%. Decrease the income ceiling to $100K and the income gap drops 70%. Clearly this accomplishes the stated objective, but no one in their right mind wants to see this sort of policy instituted. It would destroy aspirational productivity and decimate our tax base.
So if moving the bottom – i.e. increasing minimum wages – does not affect the income gap, and moving the top – i.e. capping wages – isn’t something even progressives want to do, then clearly the gap is not the problem. As long as we are lucky and our entrepreneurial spirit is in tact, people will always figure out how to make more money which increases the size of the pie and increases potential tax revenue so the top earners are not the problem.
The real problem is just poverty. People in poverty need options to move up and away from the bottom. They need better education and training. They need options when their schools are not meeting their needs. They also need jobs, and our neighbor states offer great lessons in how to create them – reduce costs, and reduce corporate tax rates (not sweetheart deals), and create a pro-business and pro-hiring environment. Growing companies need people. They also need a government that is more focused on job training than on welfare.
The minimum wage is going up. Some people will make a little more money and some companies will hire less. But it won’t affect the income gap, nor will it lead to people currently making minimum wage to making more than minimum wage. They will still be minimum wage workers.
So although the income gap is a convenient and emotionally satisfying rallying cry for the left, it obscures the real issue which is not that rich people make too much money, but that the poorest Americans – generally urban blacks – lack the opportunities and options to better their situation. Let’s get this minimum wage thing behind us so we can focus on the problems that really matter like public schools and job growth.
I was between flights. Stuck in an airport. I was sitting in the black leather and aluminum chairs of the boarding area and watching the people around me. Nearby, there was a businesswoman using the delay to catch up on some work. She was professionally dressed and over-burdened with luggage, over-coat, purse, several briefcases, computer open and papers about. She was preparing for an impending presentation when a fit of coughing stole her focus. From briefcase number two, she pulled an unopened packet of mints. Stress Mints they were called – presumable for their calming effect. As she tried to get the box open, the wrapper got in her way. She tried using a fingernail but was unable to puncture the seal. Taking out a gold pen, she tried to lance through the plastic, but it only stretched until the packet jumped from her hand to the floor, landing under an adjacent chair. She retrieved it and seemed to be about to put it away- unopened, when she realized that the thick plastic wrapped around only four of the six sides and slid off like a ribbon. Moments later she slipped the fought-for prize into her mouth. She reread the name on the box and shook her head. She placed the box back in her briefcase and pulled out “Don’t Sweat the Small Stuff and Everything’s Small Stuff.” I thought – that’s probably not going to work either.
When I first learned that the red light, speeding, and school zone cameras were to be erected around Chicago I was in favor of the idea. What better way to plug the city’s budget deficit than fining people who were actually breaking the law. My thinking continued that it should force everyone to be more conscientious drivers. The fact that it wouldn’t affect driving records or insurance premiums made it seem all the more innocuous. Besides, as a good driver who has never had a ticket, I appreciated not being the target of a government revenue program for once.
And then I realized I was very much the target. It turns out that the city wasn’t after just the scofflaws that were driving recklessly, ignoring signs, and putting people’s lives in danger. They were after every penny they could squeeze from this new resource. In situations that would have generated no tickets in the past – like a pattern of traffic where everyone is driving a bit above the limit – the City can now efficiently issue a ticket to everyone. In school zones when no children are present, no real cop would ever pull a driver over, but robot cameras can facelessly issue tickets to everyone who passes through. As for the appeal process? There is one and you are encouraged to follow the process. A few weeks later, you will get a nondescript “NOPE!” (and an implied “HA HA!”)
No, the red light cameras were not erected to segregate taxation between the scofflaws and the lawful. They were erected with the assumption that every citizen is presumed guilty and any punishment the City chooses to heap upon them is deserved.
Interestingly, this revelation parallels the one I have gone through with Mayor Rahm Emanuel. I was a pretty big support of Rahm up front. I liked the idea of a guy waking up every morning with a list of whose ass he was going to kick that day. It struck me that there were a lot of bad guys in politics around here and on the City’s payroll and I was darned happy to have a fighter coming in to bop some of them in the nose, get rid of others, and ebb the tide of corruption. Finally, a “my guy” I could vote for mayor.
But instead of putting his gumption to use to eliminate Madigan’s spending shenanigans he has used it to shove through a property tax that forces you and me to pay for more of them. He sort-of stood up to Karen Lewis, but lost to her PR machine and came out looking like a bully with no financial improvements to show for it. His hand-picked staff which should have been a Justice league of no-bullshit straight-shooters has been string of lightweights, buffoons, and hand-in-the-cookie-jar criminals.
Meanwhile, gun violence in four small south-side neighborhoods – Auburn Gresham, Grand Crossing, Chatam, and Englewood, approaches the level of countries at war. Four neighborhoods! Less than 5% of the City’s total area. How hard can it be to augment the police presence in such a small area to the point where the neighbors don’t shoot children? Certainly these are communities have many problems, but in the short-term, is there a reason why the Illinois National Guard can’t be used to stop the shooting?
I still think Rahm Emmanuel is a smart man, and I believe he wants Chicago to be a better place. But the voters need to be convinced that everything in between there and here is more than just a nuisance to him. A teacher’s strike, black people killing each other, and all us irritating citizens expecting something for our tax dollars need to be things he becomes passionate about. If he can’t do that, it’s going to be tough for any of us to see him as “my guy” next time around.