Great piece, Sarah – thanks for sharing. To echo some of the earlier comments, I’m frankly shocked at the lack of penalty to the e-verify third party agency in this situation and the fact that LFP was forced to bear the brunt of the burden. Personally, I’m not sure what the root cause of the problem is – whether LFP failed to include appropriate clauses in its contract, or whether it’s simply poor policy from above that doesn’t impose enough blame on the agency – but either way, I think it’s a fault of policymakers that in changing the degree of supervision over these third-party agencies, there wasn’t suitable protection built in for the companies at the other end of the equation who, in my opinion, are the least at fault but are paying the highest price.
Thanks for this, Natasha! Given our case this week on Marriott, I was immediately tempted to start thinking about ways that Marriott could use digital technology to more effectively compete not only with OTAs, but with Airbnb and other platforms that are fundamentally technology-based – for instance, through an App-based concierge service that helps drive the “experience” component of a guest’s stay (e.g., restaurant reservations, guide to local attractions, etc.). As I thought about it, though, my gut told me that rather than focusing on the vacation customer, the higher priority customer to target might be the business traveler – someone who would appreciate the convenience offered by mobile check-in or, say, the ability to pre-order room service while en route to the property, and who could represent a high-frequency, high-spend revenue source on an ongoing basis if he/she deems your properties superior to another chain’s. In the long run, I suppose Marriott might take a 2-App approach: one that could focus on the very different needs of its two core customer groups. In the near term, I might prioritize the business customer, but I agree with you that more quantitative analysis might be required to justify!
Thanks, Landen – great piece! I think this raises a lot of really important questions about the role of large corporations – particularly consumer-facing ones – for setting the industry standard on sustainability.
To your question around the consumer’s involvement – and to Karen’s point about customer willingness to pay more for sustainably sourced products – I wonder if Pepsi should think about this only from the perspective of altering its existing products (e.g., with different packaging, different ingredients, etc.), but as an opportunity to introduce (or acquire) new product lines that more explicitly focus on sustainable sourcing as their value proposition and branding. There is quite a trend in packaged food right now toward brands and marketplaces offering more local, sustainable products (Thrive Market and Movebutter are a couple cool examples on the marketplace side) – a trend which, regardless of its beliefs about sustainability, PepsiCo needs to be aware of. I know PepsiCo has put a great deal of focus on its nutrition vertical and expanding its portfolio of healthier options – this seems like a logical extension of that strategy, as well as an opportunity to use more environmentally-friendly offerings as a way to extract higher prices from a specific customer segment rather than “imposing” it on all of its customers immediately.
Thanks for this, Kimberly! I definitely agree – within the last couple of years, I have become an extremely demanding customer when it comes to shipping. My expectation for speed has certainly increased, but even more than speedy delivery, I expect it to be free, and to get free returns on top of that. You are definitely right to call out the implications of these rising expectations for companies’ operations and profitability, but I do also imagine that the implications are different – and potentially worse – for some categories more than others. For instance, as I’ve moved more of my apparel spend online, I find myself ordering multiple items to “try on” at home knowing full well I’ll likely return many of them…but this then puts a double shipping burden on the company I’m purchasing from (versus many categories of purchases that I’ll rarely, if ever, return). I imagine that as Amazon pushes selectively into different categories (e.g., I know they’re making a big push on apparel), they’ll have to consider these types of differential shipping / return rates as well as impact on profitability at a category level.
Thanks so much for this, Kamau! To me, this piece helps highlight one of the most fundamental tensions that exists between economic theory and economic reality. There are few concepts that economists more strongly agree upon than the idea that free trade is a good thing; by allowing each party to specialize in producing those goods for which it has a comparative advantage (that is, for which its opportunity cost of production is lower than the other party’s), all parties should end up unambiguously better off.
The issue in implementation, however, is that those benefits don’t accrue evenly to individuals within a particular country, and in fact, can distort existing inequalities even further by rewarding the owners of capital. And often, those who are harmed the most (in the US case, those in labor-intensive industries) are able to generate significant political influence to defend their own wellbeing. The challenge, then, is first, to help individuals understand the benefits of free trade – e.g., the availability of lower-priced goods at Target – but second, and more difficult, to figure out schemes to reallocate the benefits reaped from free trade to those groups whom it made seemingly worse off. This latter piece is, in my opinion, one of the biggest economic and political challenges nations (the US in particular) face today – and, to an economist, it is devastating that political realities force us to be unable to fully realize the utility gains of free trade. In the meantime, this example from Target shows us at least one immediate consequence of trade barriers to all parties (and potentially even more so to the groups who resist trade the most) – a higher near-term price on what we’ve come to know as low-cost products.
This piece raises the challenging question of how a company’s sustainability equation has to change when it is primarily selling other companies’ products rather than its own, as is the case with Sephora – as well as who has the power when it comes to dictating standards. Is Sephora a significant enough distributor for major cosmetic brands that it would have the leverage to mandate a set of sustainability standards partners must comply with in order to be stocked on Sephora shelves? And even if Sephora did have that leverage, should they choose to use it on sustainability?
On another note, I wonder how actual changes to the ingredient composition of Sephora products (e.g., elimination of certain chemicals) changes the perceived quality or functionality of the products. While swapping FSC-certified wood for non-certified wood at IKEA shouldn’t (in theory) make a difference in a table, I imagine that without certain ingredients, there may be a difference in makeup that’s noticeable to the consumer. If so, I’m not sure that the Sephora customer cares that the product is sustainable – or that Sephora should even tout it as such in its marketing, for fear that. Consequently, I wonder if Sephora can be doing more not so much by developing sustainable products itself, or by requiring them from partners, but by helping smaller companies with full lines of sustainable products to grow, and expanding their presence and brand awareness through Sephora’s vast and highly-visible retail footprint.