essays pieces of the puzzle
Thursday, December 23rd, 2010
at the megamall

My annual sojourn into the beating heart of consumer capitalism — the Mall of America — took place on Tuesday.  The most interesting new development was the addition of a Microsoft (MSFT) store a few feet across the hall from the Apple (AAPL) store.  The very effective “Mac and PC” advertising campaign has defined the companies as “cool” versus “nerdy” in our minds, and the chart above of their respective total returns over the last eleven years yields the additional descriptions of “successful” versus “not.”

I spent a fair bit of time in the stores and the hallway between.  I’d say in general the stereotypes held, but the playing field was more level than I expected.  There was an age differential, as I could tell by going back at different times.  Consistent throughout the day was the comment, “Wow.  Right across from each other.”  I couldn’t believe how many times I heard it.  People see the competition, and by acknowledging it Microsoft has achieved a modest victory.

While the iPad is great, I need some real computing capabilities in a device, and the tablets with Windows 7 provided that.  (Although I think I’ll use my TabletPC until it dies and then figure out what’s best.)  What was interesting to me was that the real computers in the Apple store, which don’t get all the press, seemed to be attracting more attention than the mobile devices that do.  And in the Microsoft store, Kinect really drew crowds when there was someone using it with enthusiasm.

To the chart above, I should have added the one from the ten years previous — the profile was almost identical, but with the lines reversed.  However, the relative outperformance of MSFT back then makes AAPL’s since 2000 look minuscule.  I can’t wait to see what the next decade will bring.  (Chart:  Bloomberg terminal.  MSFT is owned in managed accounts.)

hacking your way

While the megamall showcases the latest in consumer gizmos, they are just part of the revolution in computing that touches every part of our lives.  Those of us who toil in the investment markets use all manner of electronic tools to do our work.  Yet, the benefits of hacking your way through the business by excelling at the implementation of those tools is often lost on new entrants to the industry.  In my latest letter to a young analyst, I urge him to dive in head first.

site visits

I was never a retail analyst, but if you are interested in investments and don’t have a lot of shopping to do, it’s hard not to put on your amateur-analyst hat and speculate away.  It is helpful that I have been going to the same place at the same time for many years now (and I am almost never in shopping situations otherwise), so I can see how fads and fashions have changed, and how businesses are attempting to leverage or modify their competitive positions and marketing strategies.

The evolution of the “anchor” tenants has certainly changed drastically, with today’s versions often feeling more like dead weights rather than mall building blocks.  If they aren’t promotional, there aren’t customers.  Specialty retailers define the game.

It’s also amazing how the purchase of apparel now seems for the most part removed from the holiday shopping experience.  (The Mall of America opened at about the time that began to change.)  You might still buy mom a gift card instead of the sweater itself, but you may remember last year when she was upset that she didn’t get a new electronic toy like everyone else.

Site visits can be deceiving, but if it’s in your blood to come to conclusions, they are hard to avoid.  We are all waiting for the death of information on paper, but I can report to you that at least once a year Barnes and Noble has the longest lines of any store.  And those waiting have magazines and books and calendars and a few CDs in their hands.  The Nook stand was relatively quiet when I was there.

There was much more to see, including a Crox store.  I was drawn by Michael Bigger’s commentary, and I came away with a different impression than his (at least of the store; I know nothing of the stock).  But such is the challenge of retail observation — who knows whether SoHo or Bloomington, Minnesota will give you the better read?

years past

If you want to relive prior years and think about what was hot and what was not, check out a nice little compilation from Josh Brown on his site, The Reformed Broker.  Maybe I can get him to add a Mall of America column for me to complete.