Month: July 2014

On Monday, the national discount store chain Dollar Tree announced that it would buy out its competitor Family Dollar for $8.5 billion in cash and stock:

Both Dollar Tree, which sells items $1 and less, and Family Dollar, which sells $1 items but also higher priced goods, have struggled amidst a weak economy. While years ago recession boosted deep-discount stores’ sales, Family Dollar reported in April declining second-quarter profits while announcing that it could cut jobs and close nearly 400 underperforming stores. Earlier this month, its third-quarter report noted a 33% drop in profit. Difficult economic conditions have become financial headwinds for discount store shoppers, who are forced to choose between discretionary and necessary items. … [A]verage shoppers have an annual income under $40,000, and 50% receive government assistance.

But the recession bonanza for discount stores has faded, Annie Lowrey observes, and now some of these chains are struggling:

So what’s happening in the consumer economy that might help explain the malaise? The answer is “not much” — that is, not much is happening, and that’s hurting retailers.

Unemployment is dropping, but consumers from the very low end of the market all the way through the middle remain skittish. Wages aren’t rising. Government support for strapped households has faded. As a result, retailers are struggling mightily to juice sales. The low end of the market is also seeing more competition for the penny-pinching customer, a result of the expansion of brick-and-mortar dollar stores through the Great Recession, retailers across the board offering lower-cost options and amped-up competition from online giants like Amazon.

To Matt Phillips, the Family Dollar/Dollar Tree merger is a perfect illustration of Thomas Piketty’s critique of contemporary American capitalism:

Let’s start with the backdrop: Essentially, the lower-income Americans that are the target customers of dollar stores have gotten too poor to buy anything other than food (a vivid illustration of Piketty’s point about income inequality). That has depressed margins and profits at these discount retailers. The fact that these poor Americans—and the retailers that serve them—are doing so badly attracted the attention of some of the richest and best-connected investors in the world. Funds associated with the activist investors Nelson Peltz and Carl Icahn have snapped up significant chunks of Family Dollar in recent months—as has the hedge fund manager John Paulson.

And they have been pushing for a sale. Which makes sense, from their point of view: Combined, they stand to earn hundreds of millions on the deal, at least on paper. (Again, the fact that financiers have done well on the deal, even as low-income folks struggle, squares with Piketty’s view that large fortunes tend to grow faster than overall income, resulting in mounting piles of capital owned by the wealthy.)

Extensive Dish cover of Picketty’s book here.

Readers – not to mention Dish staffers – can relate to a recent post:

I’ve worked from home for 15 years and I can’t imagine working any other way. The thought of having some middle manager keeping tabs on when I enter or leave the workplace, how long my lunch is, and when I choose to take off early for the day is now repugnant to me.

As a self-employed home-based freelancer, exactly the type reviewer Jenny Diski is describing, I decide how much my time is worth. When I want to take a few days off, I take them. When I’m finished with work at 2pm, I don’t sit in front of my computer trying to look busy for someone else – I go outside to play with my kids. If I want to take a vacation or pay off a credit card, I don’t have to figure out how to slice up a fixed monthly income differently; I can just take on an extra project or two, spend a couple weeks working longer hours, and get a fat check for my efforts.

I admit I’m extremely fortunate; I’ve been working this way for a long time and have a large stable of clients and steady work. Building up to that from nothing can be a tenuous and nerve-wracking prospect. And there are, of course, downsides.

You experience a kind of existential angst when you don’t get new jobs for a couple of weeks. I do take on too much work at times because it’s hard to say no. And it took me a long time to learn how to create boundaries between my work and home life, because I was the only one who could enforce them.

But those downsides are far outweighed by positives. The vast majority of us did work a normal job once and have chosen this path with eyes wide open. Whatever sense of stability a non-freelance job might offer, we’ve decided that being in control of our time and our money and our lives is infinitely more valuable.

Another nods:

Not everybody working from home is taking on small projects for an ever-changing list of clients. I’ve been working out of my house for more than 10 years now as an independent software developer. I have two long-term clients who pay me well to create and maintain software for them. I spend very little time networking and I enjoy the flexibility that I get from working out of my house.

I make more money, and because of the tax laws I’m able to dump a huge percentage of my income into my retirement plan tax-free while making a number of tax deductions not available to the average full-time employee. My car is 10 years old with only 100,000 miles on it because I’m not commuting 50 minutes each way to work each day. As for stability – I’ve survived a number of layoffs that full-time employees did not.

That being said, I know that this could all end tomorrow and I’d be back out looking for another client or two or even a full-time job. For the last 10+ years, however, I’ve been enjoying the independent contractor deal.

Another suggests that working from home is a different experience for mid-career professionals than for entry-level employees:

I’m a filmmaker who’s been working from home as a freelancer since 2008, mainly as an editor or producer of web content and the odd documentary film. At this point I wouldn’t trade it for the world, but I’ve had it good because I didn’t jump into it without a plan.

I’d been employed at a commercial production company prior to working for myself. That production company immediately became one of my primary clients, unloading work on me that they were too busy to handle. Additionally, I had built relationships with some of their clients, who – once they found out I’d gone into business for myself – were quick to throw work my way (and, more importantly, to recommend me).

So I made the jump from the baseline of having already built a solid professional network. I wouldn’t advise someone coming into the job market to try this without having already established themselves professionally. Desirable clients (meaning the ones willing to pay a premium for skilled craftsmanship, rather than the clients prowling Craigslist for discount labor) will always work with someone they know over taking a chance on a newbie. Acquaintances who have tried to make the jump to the freelance work without having an established network have invariably ended up working too many low-pay gigs, and eventually returned to the comforts of a 9-to-5.