“Bring the Taxes On!” An early Christmas or Nightmare?

Conline-shopping(1)urrently, online sellers are only required by law to collect tax on the states they have a physical presence in. Online only businesses are not required to charge sales tax and consumers who don’t pay sales tax on purchases they make online are supposed to pay that tax to their state. But, that rarely happens. Only 1% of consumers actually follow that law and the rest get away with it.

Consumers enjoy the concept of buying online to avoid tax and this may be coming to an end soon if the bill for internet sales tax law is passed.  Some say, that the bill passing will be an early Christmas for Retailers that have a physical presence.  In a survey taken by an advisory firm (Alix Partners),  30% of online shoppers said they would stop shopping online and shop more at retail stores that have a physical location if all online business started taxing.  The other half of the people surveyed said the sales tax would not affect their online shopping habits. Management for retailers need to figure out the pros and cons of the sales tax online.  Some will be affected while others will not be.

Companies like Amazon were against the online sales tax bill passing at first. After years of opposition, Amazon also is supporting the bill because they are already collecting sales tax in nine of the states where it has warehouses.  While Amazon is supporting the bill now, many other online retailers are opposing the bill saying that it would hurt their business and it would be an administrative nightmare because they would have to manage to determine tax rates for different states and locations at checkout. EBay another large online retailer like Amazon, has a slightly different opinion on the tax law.  John Donahoe, the CEO of EBay  says that if congress does pass the online sales legislation, small businesses with less than 50 employees or less than $10 million in annual out of state sales should be exempt from the sales tax law nationwide.  EBay is not completely opposing the legislation, but they are saying that it should have some exemptions to it.  Americans for Tax Reform, an anti-tax group also strongly opposed the bill as well as other online retailers.

The law would only apply to online sellers that have at least $1 million in sales and do not have a physical store or warehouse.  If the bill is passes it is estimated that more than $12 billion in additional sales taxes will be collected from online purchases each year. The only concern of the bill passing is its affect on online businesses. This could be a possible nightmare for them and really hurt their business. The bill has the full support of retailers including Best Buy, Target, Wal-Mart, and Barnes and Noble because they already are required to charge tax online because they have physical presence in most states.

What could be possible techniques for online business to keep running despite them charging online tax?  Do you think that retailers with physical presence will benefit from this bill passing?



That’s the Way the Cupcake Crumbles: Is the market for the sweet delicacy crashing?

Molly’s. More. Sweet Mandy B’s. Chicagoans may recognize these names as local eateries specializing in the most convenient of small pastries: the cupcake. Though recipes for these treats have been around for hundreds of years, and are a major staple at birthday parties and big celebrations, it was not until the early 2000s when the country started to develop a demand for gourmet cupcakes. You can thank the TV series Sex and the City (of all places!) for that; with the show prominently featuring the popular Magnolia’s cupcake shop, the nation went cupcake crazy. Today, hundreds of gourmet cupcake shops thrive in our city and throughout the country, rallying behind its industry’s largest leader, a New York-based publicly traded company called Crumbs Bake Shop. With mouth-watering flavors ranging from red velvet to cookie dough, you would think this market would continue to thrive off of our taste buds.

Unfortunately, that may not be the case anymore.

Source: The Wall Street Journal

At the peak of its success, Crumbs launched their initial public offering in June 2011 with a strong $13 per share. This past month in mid-April, though, its shares have sunk to $1.70, and they continue to fall at a disquieting rate. Because of this, the company adjusted their 2013 sales forecast from an initial $73 million to an unsettling $57 million. The declining performance of such a huge company as Crumbs has caused some analysts to claim that the market for gourmet cupcakes is beginning to collapse. A recent Wall Street Journal article poses the question, “Is the cupcake bubble that inflated relentlessly over the last decade finally about to burst?”

There are many factors that could have caused this impending cupcake recession. Probably the most apparent of these is the oversaturation of the market. Since the trend began, cupcake making became one of the prime choices for young entrepreneurs to kick-start their small business ventures. This has obviously led to increased competition and a staggering number of locations selling the same product; in Chicago alone, there are nearly three hundred different gourmet cupcake shops. But even these specialty stores have to compete with other establishments like grocery store chains, which are trying to attract the same market with their own cupcake concoctions. With all of this competition, the lines of differentiation start to blur, and it leaves consumers wanting a change of pace.

This change of pace is an additional factor contributing to the cupcake’s demise: consumers are growing tired of the fluffy delicacies and want to indulge in something new. The aforementioned Wall Street Journal article attempted to scour Twitter for the next big tasty treat. Responses differed from gourmet ice cream to mini-pies, but the uncertainty itself is pretty clear. Cupcakes are no longer king, and many successful cupcake shops are starting to feel it in their wallets… and their stomachs.

What do you think is the next big trend in the pastry/delicacy market? Do you think the “cupcake economy” will bounce back, or is it all heading down south from here?





How Six Flags could learn from this class


Six Flags Entertainment Corporation filed for bankruptcy protection in 2009 after years of being in devastating amounts of debt, poor management and multiple changes in who owned the company. This initiates the first issue as there is no way there can be a good way to manage a large company like this with so many changes in leadership. By the time the people that work for Six Flags got used to the new style of leadership, the ownership changed again therefore messing up the whole system again. A long-term plan should have been established with somebody that would be there the whole time this be through the different stages of ownership.

The company started doing a little bit better again in mid-2010, and today in 2013 analysts say that the company can have a good season ahead of it as it has new attractions that can improve the attendance and therefore the revenue. Through finally having good management again the company has improved season pass sales, less discounting and more financial income through parts of the business such as dining. What the earlier owners and managers should have realized is that forecasting plays a huge role in how their business is doing. They should have realized that discounting is good but definitely can not be the end all be all as it may attract people, but there has to be a line draw to make sure it is still profitable for the company and therefore the employees.

The fact that there are a lot of new rides and attractions posts a lot of opportunity in terms of that a lot more people will start showing up. One of the reasons that Six Flags Corporation had been struggling is that old customers were getting saturated with the rides and attractions that were available to them because they had been to the parks so often. With the new rides a lot of the long-time goers will start going again and the season ticket sales will go up again.

Management also mentioned that this will not be the old Six Flags ever again as it will establish a new business plan and “has willingness to rethink its business model and track record of success.” It seems as if this new set of management knows how to promise the company future success, but the question is if it will actually be able to successfully implement all of these new strategies to guarantee they won’t slide into losses again. The keys to success for a company like Six Flags are good forecasting for what needs to be done in order to get a lot of tickets sold, good management of the employees and facilities, along with making sure the rides and attractions provide variety and do not get boring.


Why the housing market may not be a “real” comeback.

Wow! So, the housing market appears to be back on track towards making a comeback from a historic downturn.  At the rise of the housing bubble the housing market saw homes selling at all time highs and construction of homes and subdivisions as well.  With the

The housing market crash was the worst America has seen in decades.

economic downturn Americans and countries around the world watch as the hope that the trend in a rise or increase in housing market sales and prices rise.  The hope is that this uprising trend is a sign of the end of the historically horrible economic time and a beginning of another housing “boom.”  Unfortunately this rise looks all too similar.  As we know history does repeat itself.

The problem with this theory is that the housing market seems to be led by investors.  Does this sound familiar? Yes, the same occupation of people that led the last housing bubble and eventually led us to this situation that we are in as we speak.  The investors bought up homes at low prices and rehabbed them and sold them at higher prices.  This “boom” caused thousands and even millions of people to ride the wave and in turn inflated prices unnaturally.  Many ethical questions come into play when remembering these choice tactics. Do you agree with any of the following causes or actions that contributed to the downturn in the housing market? The greed of builders and investors in a capitalist mind state, the greed of borrowers who borrowed funds that they knew they couldn’t afford, the greed of lenders giving funds that they knew would default on the loans.

In order to purchase homes consumers need a steady income.  You may have heard the craze about the home mortgage loans currently being at an all time low approximately 3-3.5% for a 30 year fixed loan, but the problem appears to be that many consumers don’t have the jobs or monthly income to obtain those low rates on the wanted loans.  As people buy more homes the demand will go up and the loan rates will rise as well, which will make it more difficult for people to afford to purchase homes.

The federal government budget cuts are personally affecting me, as well as thousands of other employees.  The government sequestration and military spending cuts takes finances out of many of those peoples and families household income.  Furlough days have been placed on many workers throughout the nation and I’m just not sure if taking income away from the consumer is the best way to urge the consumer to purchase more homes.  I would like to see the loans held at these low rates when the demand for homes eventually rise up again.

Sources Cited:


Christie, Les. “3 Reasons the Housing Market Recovery May Not Last.” CNNMoney. Cable News Network, 18 Apr. 2013. Web. 19 Apr. 2013.



Goodbye Small Business?

Small businesses in the United States have it bad. This is true because of too much regulation, high taxes, and now an increase in minimum wage.

So many rules and regulations exist its hard to keep up with the sheer volume of it all. With over 160,000 pages of rules, small businesses are having a hard time making sense of what is right and wrong. Alison Fraser, Director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, says this is “a regulatory assault on our system of free enterprise and on our job creators” and I have to agree (1). The only people who will be able to withstand and flourish alongside more regulation are big businesses. This is because they have the capital, resources, and power to manage operations according to any new rule the government spits out. In comparison, small businesses will be scrambling to make ends meet.

What’s worse is that the United States also has one of the highest corporate tax rates in the world. At a rate of 35%, corporations of all sizes are suffering. Corporate taxes consume the part of revenue that  could otherwise be spent on research and development, more efficient technology, and on job creation. In direct relation to operations management, Laura Tyson, a contributer to Business Insider, says that “corporate-tax expenditures narrow the base, raise the cost of tax compliance, and distort decisions about investment projects, how to finance them, what form of business organization to adopt, and where to produce” (2). And when project costs go up, the burden indirectly falls on consumers and shareholders: “American workers, consumers and shareholders bear the greatest part of the cost of higher corporate rates and a complex tax system because it ultimately can raise product prices and lower investment and growth in the United States” (3).

Finally, on February 12, 2013, President Obama asked Congress to increase minimum wage to $9. This proposal sparked negative outcries from all across the country because at a time when people are asking, ‘Where are the jobs?’ why would you want to make it harder for small employers to hire people? (4). Raising the minimum wage simply reduces the availability of entry-level positions across all industries. “The minimum wage is a learning wage, the first rung on many workers’ career ladders. A higher minimum wage saws off this rung” (4). By raising the minimum wage, high school students, college students, and disadvantaged adults will suffer not only monetarily, but also they will have less chances of learning valuable disciplines like getting to work on time and  interacting with customers. This can only negatively impact future business environments.

All in all, we can conclude that our current government is slow at trying to build a better foundation for small businesses. If they cannot act more quickly, the economy’s recovery will stall and there will be increasingly less work and productivity in America.


Works Cited

(1) http://www.foxnews.com/opinion/2012/03/28/too-many-rules-are-killing-america/

(2) http://articles.businessinsider.com/2012-05-04/markets/31567901_1_corporate-tax-rate-tax-code-special-tax-provisions#ixzz2QVMBZqrl

(3) http://money.cnn.com/2007/07/26/pf/taxes/business_tax_conference/

(4) http://www.huffingtonpost.com/2013/02/14/obama-minimum-wage-republicans_n_2680397.html

Wage Expectations for 2013

The recovery from the 2008-2009 recession has been tepid at best, and has disappointed many.  Coming out of such deep recessions we have historically seen accelerated growth for several years, which has somewhat softened the pain of recessions and enabled businesses large and small to recover their losses.  This tepid recovery is projected to develop into slower growth long-term, as has been concluded in independent evaluations by a leading economist and a leading money manager, according to the WSJ article “U.S. Stocks: Look Out Below?”  While not the point of the WSJ article, this slower economic growth will directly and necessarily reduce the wealth creation of firms, which will directly and necessarily impact wage expectations for 2013 and beyond.

The first impact that this slower growth will have on wage expectations is through an increased gap between the income earned by the top tier wage-earner and rest of the workforce.  While not desirable for the economy, this will be the logical result of an economic environment that has less opportunity for growth.  This environment will increase the relative value of workers who are able to find opportunities for growth, especially those able to lead the implementation of expansion into new areas of business for company ownership.  The most critical of these will be the CEO’s and company leaders who are able to successfully implement these growth initiatives; the pay of these individuals will therefore increase due to this value that they are bringing to the ownership.

The rest of the workforce, meanwhile, will be pressured from two sides.  The flip side of the previous paragraph is that although the work they do is still important, it is not as critical because the Big Question will not be “How Can We Do This?” but more fundamentally “What Should We Do?”  On the other hand, the slower growth will reduce the availability of jobs and result in a higher unemployment rate.  As a simple matter of supply and demand, this slower demand will necessarily work against salary growth for the bulk of the workforce.

This raises the inevitable question of how wage negotiations must be managed especially with a unionized labor force.  Unionized labor forces in the long term have shown negative impacts to the profitability of a company, although they have been able to “negotiate” lucrative contracts in the short run.  This long-term negative impact has resulted in bankruptcies at GM and Chrysler, and most recently at Hostess.  A concept missed by the unionized labor force is the fact that if the growth in profit does not exceed the increase in value that the labor force provides such as through higher efficiency, the long-run viability of the business is at risk.  From the perspective of the labor force, the workers as a whole and every worker individually must pursue how he can add more value to his work for his employer, and this will be the only way to justify wage increases.

In a low-growth environment, what ideas are there to reduce the income gap?

U.S. Stocks: Look Out Below?
Hostess Preparing For Bankruptcy-Protection Filing
Right to Work Isn’t All It’s Cracked Up to Be

Made in America – Jobs Trickle Back to U.S. Plants

U.S. manufacturing employment was reduced by about six million jobs, or one-third, between 1997 and 2010 but the new trend that has been growing over the past two years is the re-shoring of some manufacturing work that was “off-shored” to low-cost producers like China in the past few decades. Producing in Asia is not as big of a no-brainer as it was 10 years ago.

U.S. manufacturing has become attractive for some companies as Asian wages have surged over recent years and the wage gap between the U.S. and China has narrowed. The drop in the dollar over the past decade has also made U.S. produced goods more competitive. And higher oil prices have increased the cost of shipping goods across oceans, making domestic manufacturing more appealing.

The U.S. also suffers from a shortage of trained workers in some areas vital for manufacturing, such as engineering and operation of computerized machinery. U.S. corporate taxes are higher than those in most other industrial nations.

Products more likely to be re-shored include heavy or bulky items for which the shipping costs are high in relation to the price, such as heavy machinery. Other candidates for re-shoring include expensive items subject to frequent changes in consumer demand for certain colors or styles, such as high-end clothing, home furnishings or appliances. Makers of products for which safety is a paramount concern—such as food or baby products—might choose to make them at home so they can closely monitor all of the suppliers of parts or ingredients.

In terms of labor costs, China still had a big edge, despite rapid wage increases there. Assembly workers at plants in the U.S. typically earn about $12.40 to $16.50 per hour, plus benefits. By contrast, manufacturing wages in eastern China’s big manufacturing hubs are as much as $3.40 to $3.50 per hour. While those Chinese wages are only about a quarter of the level in straight comparison, the effective difference is narrower with estimates that U.S. manufacturing workers on average produce about three times as much per hour as their Chinese counterparts because of greater use of automation and more efficient manufacturing processes.

Call centers in India were having typical turnover of 100% or more each year, while typical turnover in U.S. call centers that handled more serious problems was in the single digits which allows U.S. call centers to provide much better service and customer satisfaction. Also currency fluctuations and rising wages in emerging markets are making the United States a lot more attractive in the long run.

Chinese labor costs are rising about 15% to 20% a year, which makes producing goods in China not nearly as cheap as it used to be. For many manufacturers, that narrowing is enough to tip the balance back to U.S. plants.

One factor that is helping the U.S. manufacturers is that many companies were forced to cut back and are reaping the benefits of restructuring. GM is a prime example of how the most drastic form of reorganization — bankruptcy — can work.

The news are great but U.S. still has to re-shore a considerable amount of manufacturing jobs in order to improve unemployment and every American can help by choosing “Made in America” products over products made elsewhere.

“We’re Happy with our Return on Investment”

So many companies have taken a similar approach to the continued weakness in the world economy of downsizing that it was a nice change of pace for me to hear about a local Chicago-based company, William Blair, who has taken the approach of increasing in size. This company’s approach of staying debt free and staying away from risky trading strategies has kept it profitable even in this time of economic uncertainty and William Blair continues to expand its staff in order to increase business and serve its customers better. “What fed William Blair’s growth spurt”, an article in Crain’s Chicago Business, explained this approach and stated, “We’re happy with our return on investment”. This statement seemed strange to me as many companies think that profits are most important, no matter the costs. This could contribute to some of the issues that we are currently facing with our economy.

Lehman Brothers and MF Global are examples of companies that used excessive debt and risky trading strategies to try and make excessive profits. These companies seemed to have never been “happy with their returns”. By overleveraging and having risky trading strategies that did not provide a correct risk hedge, these companies went bankrupt. In turn customers lost their life savings, jobs were lost, and some clients will probably forever have trust issues with banking institutions.

It is my experience in the grain industry that many customers are willing to pay extra for great customer service and this service from a trustworthy company can be well worth any extra cost. I have also noticed from my trading experiences that although excessive debt and risky trading strategies can produce huge profits and be very sexy when receiving a salary these short-term profits can affect the long-term strength of the company. This can affect perhaps the strength of the industry as a whole.

In the end, companies in the current market seem to be hesitant to hire more people with the complete uncertainty in the world economy. While companies, such as William Blair, are taking a strategic approach of sucking up talent in this market and have given up short-term profits by keeping debt low and limiting risk for that of a solid return on their business strategy, others have chosen the opposite and are now suffering the consequences. The question becomes do short-term profits justify possible long-term negative effects as shown by MF Global and Lehman Brothers? I think it’s refreshing to see a company with management willing to give up these short-term profits. To me it almost becomes an ethical question, where a manager can decide what is most important to the company.



  1. Marek, L. “What fed William Blair’s growth spurt”. Crain’s Chicago Business. 26 Nov. 2012


  1. “Lehman, MF Global Dominate October Claims Trading”. WSJ. 29 Nov. 2012


Are smartphones changing our youth?

Smartphone’s continue to innovate the way in which society functions. A growing trend in the US is creating Apps and games for museums across the nation. The growing trend hopes to capture the attention of children and teens to make their experience at museums more enjoyable, and more importantly more educational.

Many museums such as the Paul-Getty museum of Los Angeles, The Philadelphia Art Museum, The Metropolitan art museum in New York, The National History Museum to name a few. The museums are using technology in their favor; much of the American youth does not know what it is like to live without an iPhone, or iPad. Rather their generation has become dependent of technology, because of this technology can encourage learning. An example of such app is the Getty’s museum in Los Angles; the museum currently uses the app Switch. The App simulates an evil genie that replaces all the paintings in the museum with replicas that are not same as the original, making the child look for the differences between the two paintings. In addition, the National Science Museum offers a self-guided tour for children, which is narrated by different animals to increase interest. The Apps are wildly successful and many museums are rushing to create educational apps.

Museums are also using the sale of apps as growing source of revenue. Though the cost of the creation of the app is somewhat steep, I think in the long run it will pay off. The success of the Apps with the American youth I believe offers insight of what the future will entail. If the apps can enhance the experience for consumers as well as serve as a means of revenue for the owner it will change many aspects of our economy. It is important for industry leaders to adapt. This means that many faucets of our everyday life will have more technological interaction. It is a growing trend that management styles will have to reflect as well as technology quality management. It is vital that industry adapts, if museums can so can the retail and industry. Smartphones I believe have the ability to reinvent the way that society looks upon many goods and services.




OPA! Mariano’s invading Greektown

Shoppers who enjoy a great experience at grocery stores and finding international products can look forward to new expansion of Mariano’s in Greektown.  In a recent article in the Chicago Sun-Times, Bob Mariano, owner of the Mariano grocery chain, unveiled a new plan to open up the new store in the Halsted area.  The plan would be to open up the 71,132 sq. ft. store at 40 S. Halsted that would include a walk in beer cooler, where customers could make their own craft beer 6-pack, a classroom kitchen, a gelato cafe with bar included, energy efficient water and electrical systems and a parking lot that could fit 150 spaces.  Opening up such a store could create as close to 450 jobs.

In the state the economy is in, I think opening up the store can have both good and bad effects.  The upside would be the creation of jobs and added attention to an already diminishing Greektown area.  It could put that area on the map for diversifying it’s client base and adding more revenue and attention to surrounding businesses.  The downsides include, taking business away from the small specialty shops that have been in the area for years.  Along with that, Greektown has gotten smaller by the years.  With people not having money to spend on local businesses, this area will just be known as one that once housed the greatest Chicago Greek community.

A few questions to think about.  Do you shop at Mariano’s?  What effects do you think it will have on the overall economy?  Should Mariano’s choose a different area and leave Greektown alone?  How could this store be beneficial/disastrous for Greektown?