Five Below Performs Well Above Expectations

The Wall Street Journal: Five Below, “which sells everything from Spalding basketballs to Bluetooth headphones and yoga mats for $5 or less, might be the most successful retailer you’ve never heard of. By the end of this year, Five Below’s store count will have nearly quadrupled to 750 locations since its 2012 initial public offering … Five Below uses a formula that has largely insulated it from competition from Amazon.com Inc. The chain keeps prices low by creating products from scratch with hundreds of suppliers around the world and sells them in an environment where children want to hang out. Its own e-commerce sales are so negligible the company doesn’t break them out; shipping often costs more than the entire purchase.”

“At 8,000 square feet, its stores are relatively small, making it easy to wander the mazelike floor plan grouped around eight categories: sports, technology, party, candy, style, create, room and now—the latter filled with seasonal products such as Halloween costumes or Christmas decorations … Shelving is no higher than 5 feet, creating a comfortable space for preteens and teenagers who have outgrown traditional toy stores and are Five Below’s core customers. They are encouraged to bounce the basketballs, test-drive radio-controlled cars and participate in slime-making contests—anything that will help them spend their allowance money.”

“Five Below also has items for grown-ups, including cucumber face-masks, yoga mats, storage bins, greeting cards and vintage candy from Mike and Ike fruit-flavored chews to Goetze’s Caramel Creams. Unlike other bargain stores like Dollar Tree or Family Dollar that focus on necessities such as laundry detergent and toothpaste, Five Below is the place to come to find things you didn’t know you wanted, such as squeezable foam toys called ‘squishies’ that have gone viral on YouTube .. It also is testing ‘Ten Below’ sections in four stores that offer items such as wireless home speakers and skateboards for $10 or less.”

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Retailers Aim To ‘Swipe’ Rewards Cards

The Wall Street Journal: “Consumers have become addicted to credit cards with generous rewards programs. Retailers are trying to cut them off. Large merchants including Amazon.com Inc., Target Corp. and Home Depot Inc. are pushing for the right to reject some rewards credit cards, which typically carry higher fees for merchants.”

“The retailers are trying to end the card networks’ ‘honor all cards’ rule, which requires merchants that accept Visa- or Mastercard-branded credit cards to take all of them. If merchants could pick and choose among Visa or Mastercard credit cards, those with the highest merchant fees—and most generous rewards—likely would be on the chopping block.”

“Some 92% of all U.S. credit-card purchase volume is currently charged on rewards credit cards, up from 86% in 2013 and 67% in 2008, according to estimates from Mercator Advisory Group Inc., a payments research and consulting firm. Yet merchants say the most generous rewards credit cards with the highest fees are cutting into their profits … ‘swipe’ fees vary widely, but are higher on rewards credit cards—sometimes around 3% of the cardholder’s purchase price.”

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Seltzer Hackers Pop SodaStream’s Bubble

The Wall Street Journal: “SodaStream’s popular countertop machines helped lower the cost of sparkling water by allowing users to make their own. For a hard-core group of fizzy-water fans, it’s still not cheap enough … In an effort to save more on each pour, these customers are hacking into their SodaStream machines by attaching their own canisters of carbon dioxide, often purchased at welding-supply or paintball stores … These gambits allow the hackers to avoid the roughly $15 fee the company charges for refill gas canisters—which fit into the back of the machine and can carbonate 60 1-liter bottles of water.”

“The practice of SodaStream hacking has become so popular that a small cottage industry has sprung up to support it. Vendors sell special adapters to support unofficial carbon dioxide canisters on the SodaStream, while others offer to refill the SodaStream canisters in ads on Craigslist and Facebook … In one popular video, the poster points to a 5-pound aluminum carbon dioxide tank and says, ‘You can steal these from landfills pretty much anywhere’… Israel-based SodaStream International Ltd. discourages the hacking and said tampering with the gas canisters violates its terms of service. It added it isn’t responsible for any ‘bodily harm that could be caused by misuse’.”

“Deviant Ollam, 42, of Seattle, said he bought a special adapter that allows him to attach a 20-pound carbon dioxide tank directly to his SodaStream machine … He said he purchased ‘food grade’ carbon dioxide from his local gas-supply store, which some SodaStream customers consider to be safer than the grade of carbon dioxide welders use. For him, the appeal is less about saving a few cents than using his wits to get ahead. His family is drinking far more sparkling water than they did before, just because they can, he said. ‘Why drink regular water again when you can have the ‘I’m sticking it to the man’ feeling?’ Mr. Ollam said.”

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The A5 Ozaki: Lunch as $180 Sandwich Caper

Jason Gay: A $180 steak sandwich is an indefensible purchase. It is a foodstuff strictly for vulgarians, a decadent symbol of 21st-century gluttony and the over-luxurification of everything. To buy it is to wallow in one’s privilege, one’s shameless indifference to the plight of humankind. Other than that, it’s pretty tasty … This $180 Katsu sandwich can be found in lower Manhattan, around the corner from Wall Street, at a hole-in-the-wall establishment called Don Wagyu. Don Wagyu is a spartan place with a small bar counter, a partly-open kitchen and a half-dozen stools. It is visible from the outside thanks to a red neon sign of a cow smoking a cigarette, a nod to the vaguely-illicit goings-on inside.”

“How could a sandwich cost as much as a plane ticket to Florida? This is, after all, the type of thing that makes the rest of the planet think New Yorkers are out of their minds. Was the $180 sandwich (aka the A5 Ozaki) a legitimate food experience or some kind of commentary on late-stage capitalism? … Ordering the A5 Ozaki is not a showy experience. The lights do not dim, the kitchen does not clap; it does not require much more of a wait than a turkey club at a diner. A slice of beef is encrusted with panko, fried, placed on toasted white bread and served quartered, like a preschooler’s PB&J. Nori-sprinkled french fries and a pickle spear are the only accompaniments.”

“But the A5 Ozaki was light and buttery to the point of being almost ethereal, as if the sandwich knew the pressure of delivering on its comical price. Which, of course, it does not. There is no sandwich that is possibly worth $180. But that’s the thrill (and the crime) of extravagance, is it not? Eating this thing felt right and completely wrong—more like a caper than a lunch.”

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The Price is Right — Or is It?

The Wall Street Journal: “A simple mathematical error leads shoppers to make mistakes when evaluating offers that promise to save them money. Sometimes they inadvertently pick the priciest option. Sometimes they overestimate the benefit of a bargain. And sometimes they don’t recognize that competing promotions offer identical savings. The problem involves percentages.”

“Instead of comparing unit prices, shoppers tend to judge offers based on the size of the benefit. Getting 50% more of a product must be better than knocking 33% off its cost, right? Wrong. The savings are identical, but on the fly, even savvy shoppers make mistakes … Consider a pound of coffee beans that normally costs $15. If a shopper receives 50% more free, the price is $5 for each half-pound. A discount of 33% reduces the original cost to $10, which is also $5 per half-pound.”

“One of the most common ploys used to sway consumers is the double discount. A 40% discount on a $1,000 suit drops the price to $600. Marking the suit down twice, first by 20% and then by an additional 25% decreases the cost to $800 before shrinking it to $600. The deals are identical, but the double discount feels more generous … To test responses to offers of discounts or bonuses along with shoppers’ ability (or willingness) to calculate percentage change, .. several experiments revealed that consumers generally favor product bonuses over price discounts, reduced quantities over increased prices and double discounts over single discounts.”

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Slow Sizzle: Raising The Peak Steak

The Wall Street Journal: “There are cows that eat only grass and roam free. There are Kobe cattle, whose muscles are massaged for months to tenderize the meat they eventually produce. And then there are José Gordon’s oxen. An animal lucky enough to be part of the restaurateur/rancher’s herd in northwestern Spain gets to laze about in mountain pastures redolent of thyme and other fragrant herbs. It is stroked with metal brushes. It might even get a pedicure … the cattle in Mr. Gordon’s herd are allowed to live for years, sometimes close to their life spans of nearly two decades, before being turned into steaks for his restaurant.”

“Mr. Gordon, proprietor of Bodega El Capricho in Spain’s Castille-Leon region, believes he knows when an animal in his herd has finally reached its peak condition and is ready for the abattoir. He decides this by the look and feel of the animal. It’s a matter of instinct, Mr. Gordon says. A few weeks too long or too short can mean less-than-perfect meat … The current king of Mr. Gordon’s herd is 16-year-old Divino, a majestic animal of 3,700 pounds, nearly triple the weight at which most beef cattle go to market. Mr. Gordon has nicknamed him El gran jefe—the big boss—for his haughty manner.”

“Such care doesn’t come cheap. Mr. Gordon estimates each animal costs nearly $3,000 a year, in a combination of its feed, hoof care and vet bills, which is at least twice the cost of traditional ranching. A steer like Divino, who will probably go to slaughter this year, will have cost more than $30,000 to raise. Mr. Gordon says he breaks even on most animals, charging €120 a kilo (about $63.50 a pound) for a premium chuleta steak that he says is more delicate than regular beef … Mr. Gordon admits he loses money with some of the animals he keeps longest.” He comments: “I believe that what I do is mystical, magical. It goes beyond profitability. This is my work and my world. I would never change it.”

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Step Right Up: Hot Dog Water

Global News: Thousands of people packed Vancouver’s Main Street on Sunday to take in the annual Car Free Day festival. And among the food vendors, merchant stands and music was one stall that stood out, inviting the public to enjoy a chilled, refreshing, healthful glass of Hot Dog Water … The drink’s impressive marketing advertises it as gluten-free, Keto diet-compatible, rich in sodium and a source of electrolytes. It also promises to help the drinker lose weight, increase brain function and look younger.”

“A bottle of Hot Dog water would set the adventurous water fan back $37.99, while a Father’s Day special’ will get you the bargain price of $75 for two. Hot Dog Water lip balm, breath spray and body fragrance were also for sale.”

“Tucked into the fine print at the bottom of the Hot Dog Water sales pitch is this: Hot Dog Water in its absurdity hopes to encourage critical thinking related to product marketing and the significant role it can play in our purchasing choices.”

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Disney Tries ‘Dynamic’ Pricing

The Wall Street Journal: “After raising some ticket prices for its theme parks by more than 20% over the past five years, Walt Disney Co. will set a new benchmark this week when it offers die-hard fans the chance to attend a six-hour preview of a new attraction at Disneyland—for $299. Even for fans used to high prices, the $50-an-hour sneak peek at Pixar Pier on Friday, a day before the attraction officially opens, breaks new ground.”

“Raising prices—currently around $100 on average days and more than $120 during ‘peak’ times around holidays—could mitigate tourist appetite and increase Disney’s profits. The company, however, is wary of appearing to gouge customers, according to theme-park executives and analysts, and going against founder Walt Disney’s vision of affordable family entertainment.”

“Disney parks executives are working on adopting a dynamic pricing model similar to airlines, in which prices fluctuate depending on when a ticket is purchased, this person said. Disney already has introduced a limited version of dynamic pricing to its parks, charging a range of prices based on three categories of dates: ‘value,’ ‘regular’ and ‘peak.’ Prices range from $97 to $135 for Disneyland and between $102 and $122 for Walt Disney World.”

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Lightbox Jewelry: Lab Diamonds via DeBeers

The Washington Post: “De Beers, the diamond giant that for years has promoted gemstones as pricey and precious, said it will begin selling man-made diamonds that cost about a tenth of the price of a mined gem. The line of pink, blue and white laboratory-grown diamonds, which De Beers will sell under a new brand, Lightbox Jewelry, is designed to persuade shoppers to think of synthetic diamonds as a ‘fun piece of fashion jewelry’ instead of a lifelong investment, executives said. Prices will start at as low as $200 to appeal to a new generation of shoppers.”

“The lower-priced jewelry is as much about changing consumer habits and preferences as it is about economics, industry experts say. Today’s 20- and 30-somethings — bogged down by heavy student debt loads and stagnant wages — have less spending power than their predecessors did, but they have different values, too: A recent study by De Beers found that millennials would rather splurge on overseas holidays, weekend getaways and electronics than on diamonds.”

“Lab-grown diamonds — which are created in hot, pressurized chambers over weeks, instead of a billion years underground — have been growing in popularity as Americans spend less on traditional diamonds. The stones are increasingly marketed to younger shoppers as a cheaper, ethically sourced alternative to mined diamonds. But their chemical makeup is the same (all diamonds are made of just one element: carbon), and experts say they are indistinguishable to the naked eye.”

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Sam’s Club, Walmart & Parental Pricing Supervision

Business Insider: “Sam’s Club, which is owned by Walmart, has for years told customers in stores and on social media that it won’t match Walmart’s prices, or any competitor’s prices … This is highly frustrating for customers like Craig Barnes, a Sam’s Club member for more than two decades, who said the warehouse chain should at least match the prices of its parent company if it’s charging members fees to shop there.”

“Barnes was recently shopping for a copper grill mat at his local Sam’s Club store in Torrance, California, and discovered that the price, at $8.98, was 11% higher than at Walmart. He also found that a Kumho car tire cost $84.66 at Sam’s, and $73.17 at Walmart.”

When Business Insider contacted Sam’s Club about these complaints, the company said that the price-matching policy needed clarification’.” Spokespersona Carrie McKnight “said Sam’s Club doesn’t have a specific policy enforcing price-matching, but that it empowers its store managers to use their best judgment in providing refunds or price-matching on certain items. For identical items carried at both Walmart and Sam’s Club, the club chain should match prices, she said … If customers are denied price matching on identical items by their local club, they should contact customer service or reach out to Sam’s Club on social media to resolve the matter, she said.”

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