To Laurent’s point, I wonder how Aldi factors into the bigger picture for Trader Joe’s operating model and organisation. It seems like the model is successful, so I’m curious as to why Aldi hasn’t sought to replicate it in some of their other chains. Aldi is incredibly successful as a grocery store franchise, so I have no doubt that they outperform your average supermarket – but it seems like they could benefit from using this or trying to incorporate some of its elements into their broader operating model. Could it be moving some of its ‘best’ identified ‘Trader Joe’s’ products into Aldi chains? Could it eliminate scales and go to per unit pricing elsewhere? Do they use a centralized stockroom for their existing stores?
Thinking about their distribution, I’m not sure Chicago is the most logical choice for their distribution hub. While I think being inside a larger operation and being able to attain economies of scale without actually having to provide that scale is key, locating the distribution center in Chicago seems a bit out of place if they are really focused on the NY and SF markets.
I wonder why Everlane wouldn’t consider two separate and smaller distribution networks on either coast in order to be able to better service its primary markets. It could outsource and achieve scale in a manner similar to what it has going on in Chicago and potentially reduce shipping needs, not only to consumers but also to its factories (China to SF, Europe to NY). This is particularly true if the goods are coming by costly and environmentally-damaging air freight, but also if they are coming by boat. Reduced shipping times and costs could also potentially enable the operations to be even leaner.
I’m sure there are other reasons which make Chicago an attractive or more cost effective option – lower rent, wages, Chicago shipping freight schedules – and, as long as shipping costs can be passed onto the consumer, this might not matter all that much – but thinking about hubs nearer to its customers could potentially provide even more value to its model.
After reading your post, I’m not entirely sure that I’m sold that this was actually a bad business operating decision. I see the issues surrounding the two business running into problems with similarly declining markets – being primarily a fast paper delivery service wasn’t a particularly good idea in the early 2000s. However, even though their business strategy was flawed, I still think that operationally it was a good idea. In order to compete with UPS, they needed a broader network in order to be able to reach their customers, with convenient, accessible locations for consumers. Kinko’s provided just that network, a reasonable stand-alone business model (think Mail Boxes Etc. would have been exposed to the same declining market problems), and a stand alone business which made sense with Fedex’s existing business model. Also, had Fedex pursued a stronger ground shipping strategy or better captured some of the e-commerce delivery opportunities, acquiring Kinko’s still seems like it would have been an operationally sound decision in order to provide coverage for those services.