A Farmer’s Market in a Corporate Center

This was the busy scene at The Farmers Market at Great Valley last Thursday. The farmer’s market sets up in the heart of a corporate center for three hours at lunchtime every Thursday. It has been running since September, and winds down for the season a week from today.

It’s hard not to admire the efficiency of the operation. It occupies a corner of a university parking lot, an overflow area that is otherwise only used for evening events. Thousands of people work within a few blocks of here and can stop by to buy produce on their lunch hour. The produce is at least a day or two fresher than anything that goes through wholesale channels, and less food gets damaged or wasted along the way. And the farmer’s market helps to build community by connecting the farmers, the university, and the workers in the employment center.

Auto Sales Bounce Back from Post-Clunkers Lull

The U.S. auto sales reported for October suggest an industry operating at an even keel — not one in the kind of distress than many observers, including myself, had imagined. Sales were generally the same as in October 2008, the first time in two years that sales were not lower than the year before. This should not be taken as a trend, though, nor as a major accomplishment. If you remember the doom and gloom coming from Washington last October, that month set quite a low bar for the auto industry to clear. Still, auto dealers recovered from the post-Clunkers hangover faster than expected, and this is a reason to hope that auto sales could stabilize at a level around 1/3 lower than what was seen in the years before the recession.

The news is not good for General Motors or Chrysler, however. Chrysler sales are down 30 percent from a year ago. General Motors sales are up 5 percent, but these came as a result of the largest incentives of any automaker in recent years. The incentives are necessary, as General Motors still has a huge inventory of model year 2009 vehicles to clear out, including everything that is left of the Saturn and Pontiac nameplates. But the high incentives mean that General Motors is probably still losing money on most of the vehicles it sells. Worse news for General Motors, though, is that it has failed to sell either Saturn or Opel, two sales that it was counting on as part of its return to solvency. Instead, General Motors will wind down Saturn in the coming months and try to keep Opel going, though the division (which includes the Vauxhall nameplate) is continuing to lose money rapidly. At least the sale of the Saab division appears to be a done deal.

The news is much better at Ford, which saw sales increase by 3 percent from a year ago while its per-vehicle incentives fell 25 percent. With its recent financial statements, Ford showed a profit for the third quarter and said it could return to regular profitability in 2011.

Beyond the Supermarket

When I stopped buying milk in February, I didn’t realize it at the time, but I was part of a movement. Around the same time, millions of people, in the United States but also in countries as far removed as Belgium and Argentina, looked at the soaring prices of milk and cut back sharply on their purchases, or stopped altogether as I did. Prices have fallen somewhat since then, but are still very high by any historical comparison, and milk sales have shown no sign of rebounding.

If milk is no longer a grocery staple for millions of consumers, though, this changes the shape of the supermarket. The traditional American supermarket layout is built around the milk. It places milk in the corner farthest from the entrance, in order to lead shoppers in a circle around the whole store. (This arrangement also allows milk to be moved in a very short trip from the loading dock to the display case.) Milk is so central to the supermarket experience that if you stop buying milk, it is logical to ask whether you still need a supermarket.

That reaction might seem extreme — is milk so important that it is the defining product of the supermarket? But it turns out it is. The short shelf life of milk is the main thing bringing supermarket customers back once or twice a week. Without milk, it becomes very easy to plan your supermarket visits just once or twice a month. Fewer visits, of course, means fewer impulse purchases, and a smaller selling opportunity for the supermarket. And some people will just stop going. If you aren’t buying milk, it is easy enough to skip the supermarket entirely.

I thought about this when, at one point this summer, I postponed my planned supermarket trip week after week until more than a month had gone by. No pressing need to make the trip ever came up. I had always thought of the supermarket as the source for a variety of fresh food, but:

• Most supermarkets take a half-hearted approach to produce, and are a poor substitute for an actual produce market.
• Meat is not affected by freezing nearly as much as the meat industry would want us to think — if it were, the average restaurant would have a hard time operating.
• Other popular perishable food items, such as eggs, cheese, and orange juice, can last for weeks.
• Ordinary groceries and toiletries have a shelf life of months or years.
• It’s not so hard to make bread at home in a bread machine, with a food quality that no factory can duplicate.

Last week I got a mailer from a discount store that said, “Look how green we are now.” It wasn’t a reference to their environment achievements, but to their new produce section, which is part of their expanded emphasis on groceries. It truth, a discount store could easily handle produce nearly as well as the average supermarket. Discount stores have always sold candy and household cleaning supplies, so why couldn’t they add many of the standard non-perishable and frozen groceries too? It’s not really the same as buying food in a supermarket, but if you’re buying half your food at the produce market anyway, the discount store is probably good enough for everything else you need in an average week.

Under pressure from both sides, supermarkets will surely have to change in the coming years. Perhaps some of them will start taking produce more seriously, while others will compete directly with the discount stores. And I won’t be surprised if a few of them close down, or get bought out by discount store chains. Because there’s one change I’m sure of, and that is that more and more households will not find the need to go to the supermarket nearly as often as they have been.

CIT: Christmas in Trouble

Yesterday’s bankruptcy filing by CIT Group spells trouble for the Christmas shopping season. In theory, CIT should continue to operate and make loans during its Chapter 11 financial restructuring. Realistically, though, it won’t be possible for a bankrupt CIT to do all the things you would have expected of it just last year, including the inventory loans that put merchandise on store shelves, and there aren’t other lenders waiting in the wings to fill the void.

Store shelves, then, could be relatively bare. This could create a very unfamiliar shopping experience, at least for specific products and places. To show you what this would mean, I want to use a story of something that happened last week.

Last week, I wore out my computer keyboard and went to the local consumer electronics store to buy a replacement. I found the USB keyboard I wanted, and I noticed there was only one in stock. The store sold a wireless keyboard, and there was only one of those in stock too. Looking around the store, I noticed that there was only one box on the shelf for quite a few items that were on display.

This works out for the store — it doesn’t have to borrow money and pay interest to keep a large inventory. As soon as I checked out, an order for a replacement unit automatically went out, and was delivered to the store the next day, so it wasn’t out of stock for long.

At a consumer electronics store, a thin inventory means having only one unit in stock for many of the electronic devices you might want to buy. For a clothing store, it could mean selling only black military jackets. If the stores don’t have as much to sell, then whatever you were thinking of buying won’t be so easy to come by — either because the store is sold out for the day, or because it couldn’t stock that item at all. Wherever retailers and manufacturers can’t get inventory financing, inventories can only be thinner — in some cases, much thinner than you are used to seeing.

But it’s not just the inconvenience and limited selection. Wherever inventories are less than the store can sell, there won’t be any clearance sales. Of course, we couldn’t see a Christmas shopping season without sales, but only the well-financed items will be in plentiful enough supply to make it to the clearance sales with prices cut to levels that are less than you would expect to pay. Paying full retail price, or just 25 percent less, may come as a shock to shoppers who, last year, saw the first after-Christmas sales start the day after Election Day. Yet shoppers who wait for the sales may come back to find some store shelves picked clean.

With few deep discounts, and many items out of stock toward the end of the day or the end of the week, there will be fewer impulse purchases. Most shoppers won’t have time to go from store to store trying to find suitable presents, so they may just buy fewer and simpler gifts. If that happens, people will barely notice the difference on Christmas morning — the holiday, as in the story of How the Grinch Stole Christmas, is not strictly measured by the quantity or quality of gifts — but it could have a profound effect on the national economy. With retail results considerably less than last year, there could be more stores closing in January, new layoffs, and other economic repercussions from the CIT collapse lasting well into next year.

Chronic Fatigue Syndrome Virus Identified

Chronic fatigue syndrome is a medical condition so vague that there were serious scientists arguing for more than a decade that it did not really exist. Most of that vagueness is about to disappear because of the discovery described in Scientific American:

Retrovirus Linked to Chronic Fatigue Syndrome, Could Aid in Diagnosis

A virus, which had been known to scientists for a few years, was found in chronic fatigue syndrome patients. The researchers found the XMRV virus, which had previously been linked to forms of cancer, in 2/3 of patients with a chronic fatigue syndrome diagnosis, but in only 1/27 of other people. Finding this virus will give scientists a place to start to understand the mechanisms of chronic fatigue syndrome. After the cause is understood, the disease will probably be renamed to distinguish the majority of cases that are related to this virus, along with possibly other viruses that have similar effects, from the smaller number of cases that still have no known cause.

Lyme disease was originally misdiagnosed as chronic fatigue syndrome. Then scientists identified the bacteria that causes Lyme disease, and that discovery clearly separated Lyme disease from chronic fatigue syndrome, and the treatment for Lyme disease quickly came into focus. In the next three years, I expect we will see the same thing happen for the majority of cases of chronic fatigue syndrome.