Explaining Southern California's economy

Fresh & Easy's competition problems in California

Tesco Opens First Of Its "Fresh & Easy" Stores In L.A

David McNew/Getty Images

This was one of the first 16 stores that Fresh & Easy opened in the U.S., and this was — and still is — in Los Angeles. But now the British-owned chain, after a $1.6 billion investment, will likely leave the U.S. market or see its parent, Tesco, sell it.

The L.A. Times reported last year that Fresh & Easy, a relatively newly arrived grocery chain owned by Britain's Tesco, would be closing stores in the U.S., including seven in California.

At the time, the LAT quoted a Fresh & Easy spokesman who said that it would continue to grow in the U.S.:

Despite the store closings...Fresh & Easy will maintain a brisk pace of expansion, with an average of 50 stores opening per year.

More than two dozen new stores will open their doors through March, including seven smaller-format Express stores in Los Angeles and Orange counties and five stores in Sacramento.

KPCC Business Reporter Wendy Lee filed a story Thursday that suggests those plans have changed. And the Wall Street Journal has a long story about how Fresh & Easy is a $ 1 billion-plus debacle for Tesco and quotes Clarke declaring that it's "likely, but not certain, that our presence in America will come to an end."

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How Chinatown could keep Wal-Mart from expanding in California

Robyn Beck/AFP/Getty Images

Wal-Mart is the largest private employer in the U.S. It has its critics. It's expanding in California. And it want to bring a smaller store to L.A.'s Chinatown. But opposition is mounting.

One of the most famous movies ever made about Los Angeles is Roman Polanski's "Chinatown." In that 1974 film, starring Jack Nicholson and Faye Dunaway, "Chinatown" is 1930s police shorthand for cynicism: a place where everything is so complex that it's better to do nothing.

Discount retailing giant Wal-Mart is currently going through it's own Chinatown moment. Today, a protest by labor leaders and U.S. Congresswoman Judy Chu will take place in the neighborhood. The reason? Wal-Mart wants to bring in a Neighborhood Market — a smaller-box concept that the big-box retailer introduced in the late 1990s and has established as a middle tier, between its well-known Super Centers and it's recently developed Express Stores.

You might think of Wal-Mart as a place where you can buy everything from snow tires to computers to very large quantities of frozen everything, but that's not what the pretty unimaginatively named Neighborhood Market is all about. A good analogy in the SoCal grocery space would be British retailer Tesco's Fresh & Easy stores, which offer a broad variety of everyday goods in a no-nonsense, relatively discounted shopping environment where customers handle their own checkout and bagging.

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Venture capital isn't over — it's trifurcating!

TechCrunch Disrupt SF 2011 - Day 3

Araya Diaz/Getty Images for TechCrunch

Venture capitalists and founders at a recent TechCrunch Disrupt conference. Are the those who disrupt about to get disrupted?

Scott Anthony, who runs venture investing for Innosight — a consulting firm founded by the founder of "disruptive innovation," Clayton Christensen — has applied the master's lessons to the venture capital space at Harvard Business Review's blog. Like a lot of folks, myself included, he takes a recent Kauffman Foundation report as his starting point. 

And then he effectively deploys Christensen's best-known concept to explain why venture capital — and particularly big VC funds — isn't performing as well as an investment class as it has in the past. The way disruptive innovation works is that in an established industry, a new player will enter at the low end and wind up disrupting the major players.

A good example might be Japanese carmakers attacking first small motorcycles and later small cars, then moving up the food chain to make plenty of trouble for Ford and General Motors. More recently, you could argue that Instagram did this to Facebook by creating a lightweight mobile photo-sharing app that was so easy to use that it acquired 50 million users practically overnight. 

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California's underground economy: The cost of doing business in the state

Cleaning services are vulnerable to the underground economy and price competition.

How much does the "underground economy" cost California every year in lost tax revenue? A whopping $7 billion, according to LA Times

A recent review of records from nearly 1,500 employers revealed that nearly a third lacked legally required workers' compensation insurance coverage to pay the medical bills of employees hurt on the job, Baker said.

Many of those workers seek treatment at hospital emergency rooms, a burden that ultimately falls on insured patients and taxpayers. They also seek benefits from state workers' compensation courts and money that comes from a special state fund that passes the costs along to law-abiding employers. Off-the-books laborers likewise don't pay income taxes, while their employers avoid payroll taxes to fund unemployment insurance benefits.

Bottom line: Tax-paying companies, consumers and taxpayers are stuck paying the bill for cheats.

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The Future of Wealth in LA: Entrepreneurship is the name of the game

Dollars

AFP

The California Community Foundation has released a new study, "The Future of Philanthropy in L.A.: A Wealth of Opportunity." My KPCC business vertical colleague Brian Watt will have a report on air later that you can listen to, and I'm going to provide a bit on insight in the overall trend of wealth formation and transfer in the LA area.

The numbers are far from trivial: "Despite the recession, Los Angeles County residents have an estimated net worth of almost $1.3 trillion." Just to put that in perspective, the entire annual GDP of the United States is about $14.5 trillion. What's truly staggering, however, is how much of this money will transferred generationally: the RUPRI Center estimates $1.4 trillion by 2060 — a huge increase over 2020's projected $114 billion.

What's truly fascinating about these numbers is where the wealth is coming from. According to the report, "LA's growing and future wealth will be driven by entrepreneurs, especially immigrant entrepreneurs." 

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