November 9, 2005: Distribution Channel Commentary (DCC) #84


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Best questions lead to better dialogue and better ideas to implement. If we hope to have a better company plan and results in 2006, then we should get better at discovering and writing down better questions. To help to turn the art of asking better questions into more of a science, I’ve included 5 quotes below out of a total of 39(!) which I have arranged in a "value-added" way along with comments in a new exhibit. This new opus is available for viewing at our web site at this link: Here are the warm up quotes:

"It is not the answer that enlightens, but the question." --- Decouvertes

"Questions focus our thinking. Ask empowering questions like: What's good about this? What's not perfect about it yet? What am I going to do next time? How can I do this and have fun doing it?" --- Charles Connolly

"To find the exact answer, one must first ask the exact question." --- Tobin Webster

"A prudent question is one-half of wisdom." --- Francis Bacon

"Quality questions create a quality life. Successful people ask better questions, and as a result, they get better answers." --- Anthony Robbins


On 11-6, there was an article in the New York Times entitled: "Just Googling It Is Striking Fear Into Companies Hearts". It’s an important read which should provoke some interesting questions. Here’s the link to the article:

You will have to hurry to get this article, because after about a week the NYT makes you pay for it. But, if you put the title of the article within quotes and search the web at, you may find other syndicated sources that will still have it posted for free.

Here’s one idea/scenario from the article. You buy a soon-to-be-out cell phone that reads bar codes of items you are interested in. Then, via wireless web service, Google’s "froogle" shopping service will then show on the phone who else is selling the item for less in the same area (local search is coming) with the phone number to call to confirm that they have it in stock. And, of course you can get a Google map to and a satellite view for the vendor’s building if you would like.

Here are some questions to consider:

  • As every bigger, better customer that matters adds broadband to their offices and cell phones, how will they get all of the product knowledge that they want, their way 24/7?
  • Will our information be included, because we are web-integrated with Google?
  • How much will it erode - what value-added services of - our people and their compensatory worth?
  • What new, next level needs might appear for our people to re-skill to provide?
  • By when could this happen? What should we do, starting when, to be ready?
  • Are these some of the right or wrong questions to be asking about the problems and possibilities that will occur when Google’s expanding services and universal, wireless broadband web service intersect?

In the Saturday, Nov 5, issue of the New York Times, there were two separate, but related articles on Wal-Mart (WMT) that were sparked by dueling documentary films. The superficial, muckraking, popular film is entitled: "Wal-Mart: The High Cost of Low Price". It tries to point out how Wal-Mart is liquidating good businesses and jobs, treats their employees like dirt, etc.

Wal-Mart is attacking the film and promoting a competing one entitled: "Why Wal-Mart Works: And Why That Makes Some People C-r-a-z-y." This film supports the findings of an economic study by Global Insights that concluded:

  • Wal-Mart pays about average compensation for retail employees.
  • WMT held down prices of food nationwide by 9.1% and non-food goods by 4.2% by forcing both suppliers and competitors to minimize the gap between WMT prices and their own.
  • WMT increases the net consumer purchasing power in the US by 118 Billion or $401 per capita.
  • The 118 Billion in net savings has in turn been spent on other stuff that has created 210,000 net new jobs for the US.

If you want more on this story, I couldn’t find still-free links on the web to the two NYT articles entitled: "Our Love-Hate Relationship with Wal-Mart" and "Wal-Mart Gets Report Card and Gets a ‘C’". But, there are links to trailers for the two dueling documentaries in an 11-9 article out of USA Today at this link:

But, my big question is: why isn’t anyone pointing out that Wal-Mart could, over time, innovate their way towards a compensation/productivity scheme like Costco’s? Costco pays their employees, on average, 42% more in total compensation than Wal-Mart, but gets over 50% more total, strategic productivity out of their employees to outperform Sam’s Wholesale Club in every financial metric in the ultimate sell-commodities-for-lowest-prices game. For more on the comparisons between Costco and WMT go to google and type in: + costco. It’s all there, Google, BTW, is my new web site search engine!

If companies engage their employees’ hearts, minds and wallets into what the company is doing, then high performance economics for all stakeholders is possible. WMT used to have good career earnings economics for its employees in the early days of rapid growth, promotions and stock appreciation. Now, with the stock going sideways and promotions being few and far away, the vast number of employees are just left with average retail compensation. To create new, improved jobs for America, all companies should consider doing well by doing good by pursuing the principles and practices of "democratic capitalism". For more on that google" + democratic capitalism.

In 2006 would you like to raise your employee’s total compensation twice as much as the national average and see both your profitability and productivity measured by margin dollars generated per full-time equivalent employee grow even faster? If so, invest in a copy of our DVD-based total training solution entitled: "High Performance Distribution Ideas for All". The 11.75 hours of video programming and valuable implementation guide are almost for free, especially through "resellers", and the product is unconditionally guaranteed for a 30-day-trial period. For more info, see the links in the middle of our home page at


I’ve been a big fan of Wolseley Plc.(symbol:WOS), especially their monster plumbing distribution chain, Ferguson Supply, since advising Dave Peebles, a Ferguson founder, in the ‘80’s before he sold out to Wolseley. Followed their great story ever since. But, as I read an article in the 11-7 issue of the Wall Street Journal entitled, "Wolseley Prepares to Remodel"- I wondered if Wolseley will have to take their "good" innovation capability up to "great" starting immediately.

Here’s their challenge:

  • The company is $18.5 billion in sales and has grown at a 15% compounded rate, doubling every 5 years, over the past 20 years. Half the growth has been organic; half has been from acquisitions.
  • Their stock price has more than doubled over the past two years and sports a strong PE for its industry sector (16.2 X). Investors are expecting the growth to continue from a now huge base.
  • With so much of their volume dependent upon the housing sector, the seemingly endless housing bubble has been a boon until now, but rising – interest rates, property taxes and energy costs – for McMansions has started to soften the housing market.

In the article, CEO Charlie Banks’ response to this potential challenge was to point out that:

  • WOS has been through downturns before.
  • During downturns they will step up their acquisitions and go after more markets in the commercial sector.
  • They are experimenting in other sectors; notably the self-serve, C-store branch business for small contractors (and all contractors) for emergency, quick, small buy needs.

What are "the questions" WOS executives might already be asking themselves? Here are a few:

  • What if the housing bubble pops faster than all of the people who have been prospering by it expect? Are they guilty of wishful thinking? Toll Brothers announced on 11-8, the day after the WOS article, that they are trimming their sales forecast for luxury homes for 2006. The stock tanked by about 8% and took down the rest of the publicly traded builders by a similar amount
  • Why were investors surprised? Insiders at all of the builders have been dumping stock for some time. What do they know and see?
  • In super-hot housing markets, about one-third of all purchases have been made by "investors" who have been looking to rent and/or flip quickly. What happens to property values if they quickly stop buying, because they are most sensitive to interest rates and flattening property value growth?
  • About 50% of the starter homes have been selling to young people with nothing down ARMs for some time, what happens when the monthly payments start rising past what they can pay and property values aren’t appreciating to refinance against? If their property values decline below their mortgage amount, why not walk and move in with Mom and Dad? Wouldn’t that create a big surplus of housing stock quickly?
  • In other words, will this upcoming housing downturn be just like past ones? The gap between property values and income levels is at an all-time high. We never had so much investor activity or young fools buying condos with nothing down ARMs.
  • On another note, when you get big by buying up companies, are there enough big independents left to buy that also want to sell? In both the foodservice and lab products supply channels, the big rollup distribution chains started buying up each other to satisfy Wall Street; but, they couldn’t find and buy enough little guys at reasonable prices.
  • I have a billion dollar distribution chain client that brings in a container a day of imported, private-label goods from Asia. With WOS’s scale and scope what backward integration supply chain opportunities might they have? Could they partner with other distribution chains in other channels to do some novel Asian-sourcing, master-distribution plays with shared-cost economics?

I could go on, and these would not be the final, written questions or sequence before formal "dialogue" commenced towards better ideas and answers that would emerge. Don’t many companies have big innovation gaps that they must fill in 2006? Could they use our exhibit of "quotes about questions" to start down the path of closing that gap?



Bruce Merrifield