The Dying Chinatown

At 6 p.m. on a Wednesday, things were desolate outside New Great Wall Books and Culture on North Broadway in Chinatown. In the past half an hour, one customer stopped into the bookstore, buying a 75-cent newspaper.

“It maybe the worst Chinatown in America. I think it’s already in the worst situation. Cannot be worse,” said Yupeng Yu, store manager.

Businesses are struggling, and residents are leaving. The now 75-year old Chinatown in downtown Los Angeles seems to be losing visitors as well as its Chinese taste. The question is why.

“Many stores close just after 6. We are waiting to die,” said the owner of NOM-HOA Fish Market, who refused to reveal his name.

Some local workers blame the downturn on a lack of parking, others focus on the competitive edge of Chinese restaurants and shops in the San Gabriel Valley.

“Young people are leaving,” a clerk in NOM-HOA Fish Market said, “Old people cannot drive. They are left here.” He has worked there over 10 years and witnessed the demographic changes in Chinatown.

According to an urban planning report released in 2013 by University of California, Los Angeles, in the 2010 Census, almost a quarter of Chinatown’s population is above the age of 65, significantly higher than the ratio of Los Angeles County’s (11 percent).

Inside NAM-HOA Fish Market is a huge poster that states, “ NAM-HOA Fish Market Inc. moving soon to 711 ¼ New High Street, LA, CA 90012.”

“We have rented the place over 30 years. The landlord suddenly wants to raise the rent. I don’t understand. We cannot afford it anymore. We have to move,” the clerk said.

The same thing happened to residents, too. On one hand, more and more Chinese new immigrants flood into Los Angeles. Chinatown with limited space cannot harbor them anymore, so they have to find other places to live. On the other hand, high rent and crowed apartments in Chinatown force original residents to find other affordable housing.

As early as 1970s, Chinese have begun to move eastward to the West San Gabriel Valley. According to Association of American Geographers, Chinese, Taiwanese, and Chinese-Vietnamese in Monterey Park, Arcadia, Alhambra and Rosemead have comprised 46 percent of the four cities’ total population.

“I live in Monterey Park. It’s cheaper to live there. And my children can have education from kindergarten to high school without moving,” Liya, who owns a fashion shop in Chinatown, said. In her neighborhood, 8 out of 10 households are Chinese.

Moving along with Chinese people are the businesses and services. Chinese restaurants, supermarkets, bakeries and KTVs are gathering in West San Gabriel valley, forming a “new Chinatown”.

“Even many Chinese people here hang out in San Gabriel Valley at night,” Yu said, “So the stores in Chinatown cannot get so many people.”

Compared to the “new Chinatown” in West San Gabriel Valley, the restaurants and services in Chinatown have limited choices but higher prices. Many Chinese are reluctant to make purchases here.

Liya says her customers are mainly Philippines, African-Americans and whites, but she barely has Chinese customers.

“My business is fair. But the shops near me are closing one by one.” Liya said.

There used to be a shoe store facing Liya’s fashion shop, but now the door is tightly closed. A glimpse through the dusty windows reveal an abandoned mess of shoes and shoe racks.

Last June, Empress Pavilion, a restaurant popular for dim sum, was evicted from Bamboo Plaza after running for 24 years. The eviction came after a combination of low sales and unaffordable rent.

Empress Pavilion’s leaving caused a chain of shutdowns in Bamboo Plaza. Now there are only two shops still open on the first two floors.

Los Angeles Chinatown Business Council refused to talk about the current situation in Chinatown and its future development plan.

Chester Chong, president of Chinese Chamber of Commerce of Los Angeles, thinks to improve the current situation, businesses in Chinatown should be more open-minded to welcome mainstream companies like Wal-Mart, which can bring in more visitors to Chinatown.

Chong is also working actively with city council members and Chinatown community leaders to develop more parking lots. “When you have convenient parking, people will come in,” he said.

Although facing fierce competition with businesses in other Chinese community, Chinatown, Chong said, is the only place that promotes real Chinese culture.





Overseas Purchasing Agency, A Trend of Student Buyers

On November 30, 2014, Yang Gu, a Chinese student in California State University, Northridge, received a phone call from her cousin in China asking Gu to buy coach bags from the coach outlet store for her. When Gu headed to the retail store of Coach Factory in Citadel Outlet, Los Angeles, she found that the store was flooded with Chinese customers. Among them, except visitors coming to the U.S. for shopping, many are purchasers buying for others like Gu.

According to 2013 China eCommerce Market Analysis Report published by China Research Center, 40 percent shoppers purchasing overseas via purchasing agent is motived by cheaper than local pricing of luxury brands.

Screen Shot 2014-12-15 at 12.36.20 AMScreen Shot 2014-12-15 at 10.27.34 AM

Coach outlet online store, coach, opens to the public for several days per month with much lower price than regular market price. Realized that the price of luxury goods is much cheaper abroad, sites like has been a popular online store for Chinese customers including Gu’s cuisine, Ming Zhu. This year the website closed Zhu’s account, because of her over purchasing history, according to Coach’s customer service.

Screen Shot 2014-12-15 at 12.14.31 PM

To sustain ability to control the distribution and pricing of products, brands tend to manage the amount of products to be sold online. This year, some Chinese buyers with China’s IP or Chinese credit card payment methods were also blocked in the online store. To solve the problem, in Zhu’s case, a relative studying in the U.S. enables her to buy bags without extra expense, while more often, customers like Zhu seek for overseas purchasing agents as alternative with extra service fee. Gradualy, a hidden market of purchasing agents (called “Daigou” in Chinese pinyin) is emerging.

Purchasing agents shop for “commissions.” Most of time, this “commission” means price difference between original price and offering price. In a overseas purchasing site under Tmall (Alibaba),  an Armani shoulder bag with original price at 250 Euro is charged for 3,300 RMB. With exchange rate of 1:9.3, each bag comes with 973RMB profit. Screen Shot 2014-12-15 at 10.27.34 AM

The scale overseas purchasing agency market is getting biger year to year, according to the 2013 Chinese E-Commerce Market Monitoring Report. In 2013 total transaction via overseas purchasing agent market is $12.30 billion, a 59 percent up from 2012. Analysts estimated that the scale would be doubled in 2014 to $24.84 billion. Popular goods are clothing, bags, cosmetics and beauty products, milk powder, and electronics.


Screen Shot 2014-12-15 at 11.15.28 AM

Based on scale and motivation, purchasing agents can be divided into amateurs, specialists and masters. Masters and Specialists are the main focus of online discussion, for the mature purchasing model and a wider variety of brands and products. The common feature of masters and specialists is the fact that they purchase for profits. On the contrary, Amateurs are usually individuals who purchase more occasionally for friends out of goodwill. Students like Yang Gu are usually amateur purchasing agents, though, but these years saw a trend for students to be specialist or master buyers.

Screen Shot 2014-12-15 at 10.27.49 AM

Yolanda Zhong, studying public relations in the University of Southern California, earns $3,000 to $7,000 per month as an overseas purchasing agent.

She earns 8 to 15 percent of the original price, depending on the products. Usually, Zhong lists available products on Weibo, and waits for orders from Chinese customers.

Since calculating shipping fee is tricky, her offering price is often shipping fee included. In her words, “both size and weight count for shipping cost, thus it might be different to ship the same product if you use different boxes.” Therefore she has calculated an average shipping cost and adds it to the price.

Zhong’s parents don’t have a problem with her purchasing agency business. “As long as it doesn’t impact my study, they are very supportive.” Zhong said. “Indeed, it feels good to apply public relations knowledge to the real world.” Zhong said. “I constantly need to communicate with customer service of stores like Bloomingdales, Neiman Marcus, Nordstrom, Fifth Saks, and retailers like Juicy, Coach, Michael Kors. I learned how to ship, return, and negotiate with customer service.” She explained.

If packages are inspected through customs, “customers themselves need to take care of the tariffs.” Zhong said. For buyers like Zhong who only randomly accept order in spare time, customs inspection or package lost bring heavy losses, so tariffs and insurance are mostly at buyer’s expense.

Unlike part-time student buyers, Shanshan Hou has been a full-time purchasing agent after graduated from Cal State Northridge. To Hou, a tariff to be charged on one out of 20 packages is not a big deal to a big purchaser like her. Unlike Zhong, Hou has her own B2B sites on Taobao and Tmall (Alibaba), and has hired her own specialist buyers from all over the world to enlarge her overseas purchasing business. Right now, she receives more than 10 orders from taobao per day, and doesn’t charge for tariffs if inspected through customs. To her, enlarging customer base is more important, “ it is still profitable, as long as I have enough orders,” Hou said.


Mother Tongue, The Upper Hand for Some Los Angeles Startups

Online food ordering and delivery service is a highly competitive industry in Los Angeles. Some startups, however, smartly take advantage of their upper hand and successfully get into the market left untouched by many bigger players like GrubHub and Eat24.

Kirin Kang emigrated from China to U.S. six years ago. Until 2013, He worked as a sales man in a trading company. In his one-hour lunch break, Kang usually spent 40 minutes on ordering and waiting for his lunch, and then the rest 20 minutes on quickly swallowing the food. Kang later found his friends, colleagues, and other working class people have the same issue.

“How I wished to have a 10-minute break after my lunch,” Kang said, “ So I though if I can order food online and someone can delivery it for me, then my life would be much easier.”

In 2014, he decided to be person who provides the convenience. Since arrival, Kang has been living in the San Gabriel Valley, where the telephone area code is 626, so he named his company as ToGo626.

“I live in the 626 area and it’s also my major market now” said Kang, “I want to do something good: bringing Chinese food beyond this area.”

ToGo626 has partnered with over 90 businesses within 2 months. Most of them are Chinese restaurants.

“Speaking Mandarin helps me a lot in this process,” Kang said. “I communicate with the businesses owners in Mandarin and translate their menus from Chinese to English.”

As most of his customers are Chinese people, Kang had both Chinese and English version of

English Webpage of ToGo626

ToGo626: English Version

Chinese website of ToGo626

ToGo626 Chinese Version





In April 2014, the biggest online food ordering and delivery site, GrubHub, initiated public offering at the price of $26 per share. It raised $200 millions in total. As the CNN Money reporting says, the company estimated to worth $2.7 billion at the current price. On the website, there are 3564 restaurants in Los Angeles partner with GrubHub.

Valley Boulevard in San Gabriel Valley harbors many popular Chinese restaurants like Boiling Point, Shanghai No.1 Seafood and Szechuan Impression. But these restaurants on can barely be found on GrubHub.

Eat24, as another big player in this industry, provides a few more Chinese food options, but still, many popular Chinese restaurants are off its list.

“Language barrier might be the reason why they haven’t opened the Chinese restaurant market for so long,” Kang analyzed.

Another startup called RushOrder shares the same notion. Like ToGo626, RushOrder focus on the Koreatown area.

“A lot of our team members, including myself, were raised in Koreatown. I still live there,” said Henry Choi, leading the sales and marketing department of RushOrder. “So we have this advantage than the bigger players in the industry — we know the area, the language, and the popular restaurants.”

With the help of the mother tongue, Korean, Choi and his team members were able to bring in 55 Korean restaurants within 3 months.

“Overall we are planning to go live with about 300 restaurants in the next a couple of months,” Choi said. “One of our goal is to provide Korean cuisine to people that may not have necessarily known about it. So if they go to the restaurant and see the menu, they might be intimidated and they don’t even understand what it is. So what we can do is we can fully translated and explain to them.”

Americans are estimated to spend $70 billion on food takeout and delivery in 2014, according to BI Intelligence. $9 billion out of that amount will be spent on online orders. Grub and Seamless merged in August 2013, and they will altogether take up 19% of the share. The rest 81% is divided by different smaller service providers.

Annual U.S. Spending on Food Takeout/Delivery|BI Intelligence

Annual U.S. Spending on Food Takeout/Delivery       |       BI Intelligence


Uber, the ride sharing company, is also trying to get a slice of the cake. Since August, 2014, it has been testing a food delivery service called UberFRESH. Currently, the service cover two areas: Westside and Beverly Hills/West Hollywood. The ordering time for lunch is between 11:00 a.m. to 1:30 p.m.; for dinner is 5:30 p.m. to 8:00 p.m.

UberFRESH claims the meals can be delivered within 10 minutes, compared to 45minuts to 1 hour of other similar services. And the delivery fee starts from $3 no matter how many meals the customer order.

Just like requesting the Uber ride, customers can order food delivery service online.

EatStreet is also an online food ordering and delivery service provider. Marcus Higgins, VP of sales, told “The reason consumers prefer online versus traditional (phone or in-person) orders is because it offers instant gratification. It’s all about being able to have the convenience to go online, look at a menu, look at the items you want and not have to wait for someone,” he continued “There are also other benefits, such as order accuracy and price checking, the elimination of any language barriers, and the convenience of already having your payment information on file, instead of having to enter it every time.”


Benefits of Ordering Online     | Statista

Benefits of Ordering Food Online | Statista

Higgin’s analysis echoes with the survey done by Statista.

The convenience brings ToGo626 around 100 orders during weekdays. “There may be more on weekends,” Kang said.

Age Group  | Statista

Age Group | Statista


Thanks to the spread of Internet and smartphone, the age of customers using online ordering and delivery service is getting younger and younger. Most of the customers’ ages are between 18 to 45 for both ToGo626 and RushOrder.

“There are students, working class people, and parents that order food for their kids at home,” Kang said.

The online food ordering and delivery service not only benefits customers, but also helps bring more orders to businesses, and the service providers, in return, generates revenue from that.

“The way our business works is that the restaurant pays us depending on how many orders we bring to them,” said Choi from RushORder. For every months, “0-25 orders, is free. 26-100 orders, is 50 dollars. Anything over 100 orders is 100 dollars”

“We actually use a delivery company. The cost that the delivery company charging us, is what the customers paying for,” Choi continued. Therefore, the major revenue of RushOrder comes from businesses rather than customers.

Unlike RushOrder, ToGo626 has a 15-driver delivery team and some volunteer drivers. “But our delivery fee is only about $0.99 per mile,” said Kang, “So delivery is actually a supplementary service.”

Kang treats ToGo626 more as a platform to promote and advertise restaurants. Most of the restaurants provide sponsorship to keep the partnership with ToGo626.

However, not every business owner is aware of the influence of the Internet. Some of them are middle aged or even seniors. The big age gap made it hard for Kang to persuade them into joining the adventure.

When communicating with some traditional Korean restaurants, where orders are written on a piece of paper and orders can only be paid by cash, Choi encountered the same problem.

Accumulated popularity and fan base help solve the problem. Not only fans help recommend businesses to ToGo626, restaurants are also reaching out to Kang to get their name on the website.

As Kang promised, ToGo626 is helping restaurants with the online ordering and delivery service, as if they have branches in different cities.

RushOrder is trying to bring in more Korean restaurants. As Choi explained, one of their goals “is to provide access to non-Korean speaking people in Koreatown. Introductin them to the food, making it convenient for them…so they can try it out.”

Kang expressed the same feeling for ToGo626.

“This is only a start. A good start, maybe,” he said, “We will start from the 626 code area. After fully developing the market here, we will explore further, providing more choices, more restaurants and more cuisines to our customers.”


U.S.-China film co-production: an expected path proving bumpy?

paramount-studios-logoFirst time in its 102-year history, Hollywood tycoon Paramount has partnered with China Film Corporation, the country’s largest state-funded film group, to produce a movie about the legends of Marco Polo. The movie will mostly be shot in China, directed by Rob Cohen from Fast and Furious, with Chinese supporting characters speaking Mandarin on set.

What Paramount has been involved now, is the U.S. – China co-production, which is officially recognised by the Chinese government. The co-production projects has been backed up by the Chinese government in the early 2000s, but really gained its popularity after 2011.


Nevertheless, Xiaotian Mao, who represented the Chinese government at the 2014 U.S.- China Film Summit held in Los Angeles, thought the co-production business was far from success.

“So far, I would say I haven’t noticed any successful U.S.- China co-production film,” Mao said in Chinese while giving a speech at the summit.

Despite the discouraged feedback from Chinese official, the ticket to the co-production is already hard to get. To gain the co-production status, films must be licensed by China’s media regulator, which sets rules on the film’s finances. The movie must have a fair amount of filming location in China, and a percentage of Chinese stars in the cast approved by the government. The government also has the right to rip off the co-production label anytime when they find the project is no longer qualified.

Under the tedious rules, the co-production still seems booming with more and more Hollywood studios and investment coming in. Paramount is the fifth oldest surviving film studio in the world, yet the latest newcomer to the co-production game.

“Sometimes I woke up in a cold sweat, picturing myself 20 years ago and asking: why would we do that?” said Mark Badagliacca, Paramount’s executive Vice President and CFO. Badgliacca has served the company for more than 30 years and recently just got back from China, where the details of this co-production project has been finalized. “But they (the Chinese filmmakers) are willing to learn from us and we also need the access to the Chinese market.”


The tricky land of profit

Hollywood may have found another treasure land more than six thousand miles away in China. It was only from January to November 2014 that 11 Hollywood movies have made to the top 20 China box office list, with a total accumulative record of RMB 7.9 billion ($1.28 billion U.S. dollars).

The latest movie from the Transformers franchises, Transformers: Age of Extinction, is the most successful Hollywood blockbuster in China this year. From its world premiere in Hong Kong, which was also a first for Hollywood, it has swept the China silver screen. The movie has topped both annual and opening week box office record in China. Despite its flat performance in north America, Transformers: Age of Extinction still became the 19th movie that has a billion dollar box office sales in the history. According to China’s film consultant Entgroup, over 30% of the ticket sales came from China.




According to the statistics from the Motion Picture Association of America (MPAA), the North America theatrical market has experienced nearly zero growth last decade. Meanwhile, China has become the world’s second largest movie market with a steady and rapid annual increase. In 2013, China’s box offices pulled in RMB 21.6 billion ($3.17 billion), a 27% increase from 2012. In China, there are 13 new cinemas opening in China each day according to MPAA, which in recent years has helped boost box office sales.


Still, China remains a tricky place for the Hollywood filmmakers to do business.

The success of Transformers: Age of Extinction is rare. A number of productions coming from Hollywood never made it to release in China, due to the government’s strict control. The government keeps a tight grip on foreign films that are shown in the country, requiring everything from preliminary script approval to sign off on the final cut. Foreign film releases are limited to 34 per year.


A path to the triple-win?

Despite how tedious the process of a co-production could be, the benefits, however, may be worth the pain. A co-production gets to keep 47 percent of box office receipts, while the imported films only get as little as 13.5 percent. Most importantly, the co-production doesn’t need to go through the release quota control set for the foreign movies by the Chinese government.

Chinese investors, on the other hand, have noticed the profit margin and eager to join the co-production game. Early 2014, Dalian Wanda Group said it is in talks to acquire a stake in Lions Gate Entertainment Corp. Alibaba Group’s Chairman Jack Ma paid a visit to Hollywood in October 2014, seeking alliances.

In recent years, Chinese government has vowed to grow the nation’s “soft power”. “The stories of China should be well told, voices of China well spread, and characteristics of China well explained”, said China’s President Xi Jinping in the 2014 new-year speech. According to Bloomberg Businessweek, scholars interpreted the new-year speech as a signal of political purpose for the government’s willingness to promote China’s culture and systems with Hollywood’s competence.

The propaganda mission of Chinese government, the eagerness of Hollywood studios to get access to the Chinese market, the desire of Chinese learning the Hollywood expertise in film and making profit… Co-production seems able to simultaneously work in line with all the agendas.

In 2014, there are more than 60 co-production applications sending to the media regulation department in China. But judging from the previous performance of co-production out in the real market, a strong possibility for disappointment remains.


The dilemma

The frequent box office failure of the U.S.- China co-production have brought the first wave of disappointment.

China’s web content provider has put a collection of the co-production movies that bombed at the box office. Man of Tai Chi, which is Hollywood star Keanu Reeve’s directorial debut, ranked No.9 at the list. The movie made ¥ 27 million RMB ($4.3 million) in China and only $0.1 million in North America, leaving a huge loss of more than $ 20 million uncovered.

In the co-production business, some stories have utilized the benefits of the Chinese partner’s involvement with a story appealing to both the Chinese and North American audience, such as the Karate Kid (2010), made by Columbia Pictures and China Film Group in 2010, grossed $358 million in ticket sales worldwide. By contrast, the Chinese version of High School Musical, made by Huayi with Walt Disney the same year, earned less than $155,000. It is not an easy job to anticipate the audience’s preference and get the formula right.

“By far the biggest challenge for the co-production is finding the right story to tell,” said Robert Cain, who runs and is a consultant to producers and others doing business in China. “Mostly they film stories that has been suitable for either the Chinese audience, or for the international audience, but not for both.”


Chinese authorities’ vague regulation has become another major challenge for the practice of co-production. There are no specific rules of the percentage for either the investment or the casting coming from China written in paper. The application may get approved smoothly; but the authorities can take the co-production title away in the milddle, or disapprove the final work after censorship and put the movie back to the “imported” category.

In response to the vague regulation, Hollywood blockbusters like Iron Man 3 chose to ignore the official co-production process. Instead of waiting in the line for co-production approval, “the film is challenging conventional wisdom about how best to tap China’s lucrative but tightly controlled film market”, quoted from the report by the Wall Street Journal.

“Generally speaking, the U.S.- China co-production is not a success,” said Stanley Rosen, political professor at University of Southern California specializing in Chinese politics and society. Rosen thinks there are two major reasons that lead to this failure; one is the tighter co-production policy from Chinese government; the other is that U.S. and China actually join the co-production with different purposes- China wants propaganda and experience, while Hollywood simply just wants to make profit.


A future of uncertainty

After years’ of development, the U.S.- China co-production has encountered with the bottleneck.

Robert Cain thinks it is possible to find better co-production story ideas through increasing the Chinese team’s film literacy and enhancing the quality of communication. After better stories ideas being made, the Chinese government censorship will become the next biggest obstacle on the way.

“If the censorship rules stay the same, it will be always hard to do co-productions,” said Cain. “The creative people in China don’t like the rules either. I think a government as strong don’t really need that kind of protection; but I don’t know if the censorship rules going to change in the future.”

Meanwhile, rumor goes on and off about the possible quota increase by the Chinese authorities to let more foreign productions in. China signed an agreement on its current quota system with the World Trade Organization in 2012, valid for five years. This means the second round of negotiations will start around Feb. 17, 2017.

It is uncertain for either the change for the co-production rules or an increase on the film import quota. The only thing people may know for sure, is that China has a huge film market with great potential.

According to an Ernst & Young report on China’s media and entertainment industry in 2013, China, which now stands as the second-largest film market in the world after Japan, will surpass the U.S. and become the biggest film market by 2020.


 Data retrieved from Ernst & Young

Facing China, the under-developed huge market with uncertainty, there are several options opening for the Hollywood filmmakers. It may be a good idea for the Hollywood studios to get a better understanding is role and keep involving in the co-production; it may also be a wise choice for the filmmakers to work with the storylines, avoiding sensitive elements, in order to get a bigger chance to release the works in China when the door opens up a little bit more.

For Paramount, the choice is doing whatever they can to get the access to the Chinese market, according to Mark Badagliacca.

“I think it is best for us to do everything we could; we are even going to make films in China for the Chinese audience only,” said Badagliacca. “China is a giant market; and it is something really have an impact on us.”

California’s Offshore Aquaculture Farm to Compete with Imported Seafood

Green Mussels Imported from New Zealand

Green Mussels Imported from New Zealand

Catalina Sea Ranch, a six-mile offshore shellfish farm near San Pedro, CA, is planning to feed Californians with local raised mussels which has been mostly imported from Canada and New Zealand.

As the aquaculture industry has thrived in the past decade, the seafood imports – including mussels – by the United States has grown dramatically. About 91 percent of the value of the seafood consumed annually originates abroad, which represents an $11.2 billion trade deficit, according to National Oceanic and Atmospheric Administration (NOAA). To narrow the deficit and compete with foreign seafood, Catalina Sea Ranch aims to cultivate in a 100-acre ocean and produce high-quality mussels in a sustainable and scientific manner.

[Read more…]

Retail Therapy: Exploring retail pharmacies’ promising cure for healthcare bloat, and the side effects of a competitive new market

No one enjoys dealing with rejection, but “no” can be especially difficult to cope with when it concerns someone’s health. Brittany Smith*, who was diagnosed with Type I diabetes in 2012, knows this to be true. “I didn’t cry when I found out I had diabetes, “ Smith said. “But I found myself sobbing to the pharmacist at the back of a CVS the first time I couldn’t get the medication I needed.” Diabetics rely on the proper medication and medical devices to constantly monitor and maintain healthy blood glucose levels. Smith must constantly replenish lancets, test strips, and needles. In spite of her diligent efforts, a miscommunication between her family doctor and the pharmacy forced her to choose between spending a small fortune on a different brand of medication, or going without it. “Being diagnosed with a chronic illness is shocking, but you can learn to live with it. My medication is one of the few tings that I cannot live without.”


Recent reforms in healthcare law have the potential to simplify medication management and reduce costs for patients with chronic illnesses, like Smith, as well as

The number of pharmacies is on the rise, but people may not realize it. People do not notice them as readily.

The number of pharmacies is on the rise, but people may not realize it. People do not notice them as readily.

everyday consumers. Provisions in the Affordable Care Act (ACA), affectionately known as ObamaCare, create financial incentives for providers and insurers to improve patient outcomes and reduce overall costs, as opposed to rewarding physicians based on the cost of services and medications. Healthcare payers are responding to these incentives by working with retail pharmacies to expand their services and adapt the role of pharmacists. Companies like Walgreens, Rite Aid and CVS are aggressively investing and trying to expand their retail pharmacy businesses. Their goal is to make healthcare services cheaper and more convenient for consumers, while also providing medication counseling. At they same time, they are helping to meet medical service demands that the current infrastructure cannot support well, while still turning a handsome profit. Healthcare payers are please because they will now benefit financially from improving patient outcomes. The nation should feel the same way, given that this model has strong potential to lower the unsustainably high cost of healthcare. Expanding retail pharmacies is not just a win-win situation, it’s a quadruple win. It is remarkable that this scenario could arise simply from properly aligned industry incentives. Is it too good to be true?


Time will tell, but the present is filled with promise. The changing healthcare landscape and the retail pharmacy model are poised to improve the consumer experience and better meet demands. The revolution will not come easily; healthcare retailers will face substantial competition from aggressive competitors and will remain beholden to price factors beyond their control. For consumers, however, the change has lasting transformative potential.


Why Now?

Retailers have compelling economic reasons for investing in or expanding their investment in the retail pharmacy space. They anticipate increased demand for healthcare because of the ever-aging population and because 30 million new customers are expected to enter the healthcare market thanks to Obamacare. Data indicates that Healthcare insurance coverage adultsconsumers will buy more services if they make them cheaper and more convenient. A Center for Medicare and Medicaid Services (CMS) study found that many people decline to pay for some preventative care solely because of cost. By reducing the costs, retail pharmacies can recapture that lost business while improving public health.

The time is ripe for the rise of retail pharmacies. Americans have begun taking more responsibility and initiative in their healthcare, albeit not necessarily by choice. Out of pocket costs increased 250% in the last five years. The ACA has led employers to switch to more high-deductible plans. Last year 13% of employers offered such plans, up from 3% in 2006. This change may be unpopular, but passing off costs created an unsustainable burden on the system. Increased deductibles are forcing people to take a more active role in managing their healthcare.



A Promising Prognosis

Retail pharmacies can make services and medications offered under the century-old traditional model cheaper and more accessible. Physicians, depending on the patient’s plan, are reimbursed by insurance companies or the government for volume of business, so the amount they bill directly correlates to their bottom line. In contrast, pharmacies make higher profit margins on generic medications than on more expensive brand names, so they are incentivized to encourage generic alternatives. For example, CVS has gradually increased the amount of prescriptions it fills with generics, rising from 71.5% in 2010 to 83% in 2013. Minor medical services, like administering vaccines, conducting physicals, and treating non life-threatening illnesses, are much cheaper at a pharmacy than at a doctor’s office or hospital. Rapidly improving medical technology makes it easier for pharmacists to diagnose illnesses, expanding their range of services and saving customers expensive trips to the doctor. Visiting a retail pharmacy costs $79-$89 on average, less than half the cost of the typical doctor visit. Picture this: the next time you fall ill, you can drive or walk five minutes to your nearest pharmacy, likely closer than your doctor’s office, get diagnosed, and pick up your medication on the spot. The trip cost you less time and money, and you’re home again before you can say “Uncle.”


In addition, retail pharmacies plan to offer services the current healthcare system cannot provide, such as medication management and adherence. While those terms may not sound significant, they are vital for people with chronic illnesses. Consider Smith, who notes, “When I think of management, I laugh about the ‘I have diabetes, but diabetes doesn’t have me’ phrases. No, it doesn’t run my life or prevent me from doing most things I want to do, but if I want to live a long, healthy life I have to make choices every day because of my illness”. She has to test her blood sugar levels 12 times a day, and administer an insulin shot when necessary. Along with maintaining and carrying a supply of medical equipment, Brittany has to have snacks and glucose tablets with her just in case. She is a model patient, and if every diabetic followed her regimen, the nation could potentially save billions on healthcare costs. Analysts estimate America spends $290 billion on healthcare services that could have been avoided if patients adhered to the medication they were prescribed. There is a clear need to help people manage their medicine, but meeting that need is not practical for doctors. They are dramatically overqualified, so it would not cost effective for them to fulfill this role, nor would it be convenient for patients. In contrast, national retail pharmacies can invest in the technology, like smartphone apps, websites, and backend software to help schedule prescriptions, notify patients when they are ready, and remind them to take their medication. Doctors would be hard-pressed to offer comparable services.

Side Effects

Fluctuations of brand name and generic drug prices have a significant impact on pharmacies’ profitability. They have no way to control significant price fluctuations; the best they can do is plan for them. Brand name drugs are considerably more expensive and are sold on lower margins. Consider that in 2009, generics accounted for only 9% of revenue, but 56% of profits for the biggest three wholesalers, while brand drugs accounted for 88% of revenue and only 38% of profits. The reason for this disparity is that the largest pharmacies can buy generic drugs directly from the manufacturers because they have the negotiating power and warehousing capabilities. They are uniquely poised to do this. Most other generic retailers, including supermarkets, small independent pharmacy chains, and physicians’ offices buy generics through drug wholesalers like McKesson, AmerisourceBergen or Cardinal Health. Nearly every drug retailer purchases brand name drugs through a wholesaler. Switching to generics can help make the retail pharmacy model more profitable, especially relative to competitors who lack comparable negotiating power; however, fewer drugs are expected to go off-patent in the coming years, which means generic substitutes may not be available. Those that are available may not be much cheaper, as the same economic principle applies to generics as to brand names. If they have a monopoly they will exploit it. Generics that are launched with exclusivity are priced just 10% below the reference brand.

Brand patent expirations


fewer brands going generic future



Further complicating the economics for retail pharmacies, costumers are less concerned with brand loyalty than they are with cheaper prices. The Walgreens-Express Scripts dispute serves as a reminder of this reality. When the two companies parted ways because of a contract dispute in 2011, Walgreens lost customers and roughly $4 billion in revenue, or about 21 cents a share. Customers left Walgreens, not Express Scripts, because they cannot make decisions about their plan benefit manager, and were not infuriated because they could easily find another pharmacy.



Purchasing test strips adds up quickly. Costs vary among retailers, but, for Smith, not significantly enough to motivate her to sacrifice convenience.

Today’s market is highly competitive. Pharmacies are expanding, making it more convenient for people to go to any one. They all offer the same basic services and range of medications at similar prices, so location is key. Walgreens opened its first location in downtown Los Angeles in 2010, right across from the Rite Aid on 7th and Broadway. In 2013 the company opened its second location on 5th and Broadway, once again right across from a Rite Aid. Walgreens, CVS Rite Aid and the like are making strong efforts to acquire and retain customers. Their websites encourage visitors to create accounts to manage their prescriptions and take advantage of rewards programs. In comparison, Target, which has been less aggressive in its entrance to the market, displays its prices online and makes it easy to compare services. They make less effort to encourage signups, treating health services more like an impulse buy. Target’s profitability depends much less on its pharmacy business than a company dedicated to wellness though. Retail pharmacies must find ways to retain customers in a competitive market, because their services are so comparable that it is difficult for any one to stand out.


The retail pharmacy industry is trending in a very promising direction for consumers, which is refreshing given the state of the American healthcare system. There is clear opportunity for companies looking to break into this market or expand their business, but much of their success and profitability will hinge on finding ways to create customer loyalty. Retail pharmacies must generate enough demand in sufficiently large markets to avoid out-competing one another.

There will be more pharmacies in the future. May not hold promise to people with chronic conditions that they can get the specialty medication they need anywhere. But their options are improving, it’s a great start that stuff is cheaper and more convenient. Future will test how well these incentives are aligned.

Best Buy’s Struggle in the Digital Era

On December 4th, 2014, Best Buy, the largest consumer electronics corporation in the US, announced officially that it would sell its Five Star business in China to the Jiayuan Group, a China-based real estate firm.


This was another huge movement for Best Buy in the Chinese market after it closed all its retail stores in China in 2011. After several years of struggle, the company finally decided to exit the Chinese market, only keeping some of the private label operations, with brand names that included Dynex, Insignia, Modal, Platinum and Rocketfish.

Although it seems to be the signal of Best Buy’s failure in China, investors are actually happy about that. The truth is, the company’s business in China didn’t bring any profit, but instead, it became a huge burden for the company on its way to further development.

The sale of Five Star business will bring about $300 millions to Best Buy, which allows the company to focus more on the North American business and further develop its online business section. Facing strong competition from online shopping websites like Amazon, the only way that Best Buy could survive is to transfer from a big box store franchise to a consumer electronic provider with different distribution channels, both online and offline.


Best Buy entered the Chinese market in the year of 2006 by acquiring local electronic franchise “Five Star.” Then, it opened nine mortar-and-brick stores in big cities like Shanghai and Beijing. At first, Best Buy applied the same business model it used in the US market to the Chinese market: the stores were located in city centers; the company operated it own inventory and bought products directly from other brands; the stores focused more on customer experience and after-sales service.

However, this kind of business model was not applicable to the Chinese market. Chinese customers are extremely sensitive with the price. However, as Best Buy insisted on managing its own inventory instead of lending space to other brands and letting them operate on their own, it was hard for Best Buy to lower its operating expense and provide a competitive price. While local electronic retailers, for example, Guomei and Suning, were able to provide consumers with a much lower price by lending space to other brands and saving huge operating expense, it was almost impossible for Best Buy to earn a favorable market share in China. Chinese consumers might go to Best Buy to experience the product, but when they actually made the purchase, they went to local electronic stores that offered a more competitive price.

The situation was the same in the US market. However, this time, Best Buy’s competitor was no longer mortar-and-brick stores, but the world’s e-commerce giant, Amazon. Unlike Best Buy, Amazon did not have to pay for the operating cost of real stores, and was thus able to provide a lower price. Also, the online environment for consumer electronic industry was already mature in the US. People felt comfortable with ordering electronic appliances online. As a result, Best Buy became a place where consumers could touch and experience the product, but it eventually failed to turn the store traffic into buying power.

Under this situation, Best Buy realized the need to make a transformation in its business model. However, as it was impossible for offline retailers like Best Buy to compete with Amazon on price, the company had to figure out another way to differentiate from its competitors.

As a result, in 2012, Best Buy’s new CEO Hubert Joly initiated a transformation project “Renew Blue,” aiming to combine the offline stores with online website and thus create an “ominichannel” that could make Best Buy products available to customers everywhere.

On one side, in order to save operating expense, Best Buy changed its business focus by closing big mortar-and-brick stores. In 2013 alone, the company shuttered 47 stores in the US, which saved it nearly $ 765 million in operating expense. At the same time, the company also opened more Best Buy Mobile stores, which were 10 times smaller than traditional stores. These small-sized mobile stores were located near the community, which made it easier for consumers to order online and pick up in the nearest store. At the end of 2012, the number of Best Buy Mobile stores had already reached 409, and was expected to increase continually in the future.

On the other side, Best Buy put more emphasis on developing its online business through “” Best Buy realized that the only thing that differentiated itself from Amazon was that the company had real stores where consumers could touch and feel the products. Hence, since 2013, Best Buy has been dedicating itself to connect its mortar-and-brick stores with the online website. Before that, Best Buy managed its offline store inventories and the online website separately. Some products might be available in the store, but didn’t show up in the official website. Now, as Best Buy successfully connected the two folds, people were able to shop across different channels, which not only brought more traffic to the offline big box stores, but also saved the company huge money on the shipping cost. In addition, it became easier for consumers to return if they were not satisfied with the product they ordered online after experiencing it in the store. In fact, Best Buy used its offline stores as a shipping center to support online sales, which provided better shopping experience to the consumers.

In addition, Best Buy also initiated store-in-store concepts inside the company. In 2011, Apple, Samsung, Microsoft and Sony reached an agreement with Best Buy to open their boutiques inside Best Buy stores, which saved money on both sides. By the end of 2014, Samsung has opened more than 1400 boutiques in Best Buy stores, which was almost the same number as Best Buy’s existing stores.

In the latest fiscal third quarter results, Best Buy reported a significant increase in its profit, which were two times the number of last year. In addition, the offline sales in the US also increased by 3.2%, which was relatively high comparing to other similar companies, for example, Wal-Mart.

Although the increase in sales doesn’t necessarily indicate the effectiveness of the transformation, it at least shows that the offline retail business is not dying. In fact, nowadays, e-commerce websites like Amazon have also realized the advantage of mortar-and-brick stores in their ability to provide better shopping experience to the customers. For those who want the product immediately, stores like Best Buy are still their favorable choice. As a result, in order to acquire that segment of customers, Amazon announced its first showroom in New York City while eBay put extreme emphasis on its “eBay Now” shipping service.



And as for Best Buy, its real stores seem to be the only opportunity for the company to differentiate from the other e-commerce websites. The combination of offline stores and online websites might be the only way to save companies like Best Buy in the future.

The Market for Gluten-Free Groupies

It’s a protein, it’s found in plants, and it’s the most hated ingredient in the food industry right now. No, it is not sugar that leads to a high risk of diabetes, and it is not sodium that is linked to prevailing rates of heart disease – it’s gluten. Absurd at it seems, gluten has become public enemy number one, and is getting kicked out of households across the country. Because of media outlets spreading news of gluten like wildfire, gluten has been transformed from an ordinary ingredient to the culprit of a variety of health issues. The consequence of this has grown an anti-gluten passion into a multibillion-dollar market.

Found in wheat, barley, rye, and a couple other grass-grown grains, gluten is formed when two molecules (glutenin and gliadin) are conjoined during the germination cycle of a plant. The bond of these two molecules allow for elasticity in food products, an element that is essential for cooks to create desirable cuisine for their customers. Gluten can be manipulated to form different textures for food; however, it is essential to keep in mind the origin of this protein molecule.


A depiction of the gluten forming process. (Source:

The beginning of the gluten-free tale came about in 2011 when Peter Gibson, a professor of gastroenterology, published a double-blind research study indicating the detrimental affects gluten has on an individual’s health. When his subjects did not eat gluten, their health improved. When gluten was added into their diet, they immediately reported pain and other gastrointestinal issues. As astonishing as the results seemed, it was noted that all thirty-four-test subjects had irritable-bowel syndrome – but the public overlooked this defining detail.

This study raised the awareness of a “gluten anxiety” phenomenon, initiating a new group of people to develop an interest in the topic. To add fuel to the fire, two books about the malicious acts of gluten were released not too long after Gibson’s study was published in the American Journal of Gastroenterology. William Davis penned “Wheat Belly” in 2011, and David Perlmutter followed suit with his book “Grain Brain: The Surprising Truth About Wheat, Carbs, and Sugar – Your Brain’s Silent Killer.”

Celebrity endorsement of the gluten-free movement further pushed along the awareness of this new trend. With the likes of Oprah, Gwenyth Paltrow, and other influential leaders in the social media realm, the notion to ditch gluten slowly crept into the minds of individuals from all different age groups. Soon, this newfound awareness of gluten warped into a trendy diet, initiating the demand for gluten-free food. The magnitude of the gluten free market has astonished both doctors and investors alike, whom are both struggling to keep up with the changing landscape for ditching gluten.

The market value for gluten free products provides evidence for the growing mass of consumers that are vying for gluten free food. With a $10.5 billion dollar price tag in 2013, a 48% increase is expected for gluten free products, leading to a $15 billion dollar estimated market by 2016. Investors have picked up on this development, hoping to get their own piece of the gluten free pie. In 2011, Smart Balance, an investor in small food companies, turned their attention to Glutino. With a price tag of $66.3 million, Smart Balance purchased this gluten-free baking operation.

A year later, the same investment group acquired another gluten-free establishment called “Udi’s” that was about twice the price. It seems the investment paid off, as sales for these two gluten free establishments are up 50%. The Chief Executive of these companies, Stephen Hughes, explained the motive of his purchases in an interview with the New York Times. “Three years ago, we could have bought a Greek Yogurt Company, but instead, we bought Glutino…we think this is a trend with long legs because there is some insulation from the big players- it’s hard to produce gluten free.” Hughes brings up a valid issue with this booming market – and that is the ability to honestly produce a gluten free product.


Glutino’s approach at marketing its gluten free food at a local convention. (Source:

The Food and Drug Administration (FDA) was prompted to take action with the labeling of gluten-free foods when just about any company could slap on a label indicating it was free from the feared food product. Years ago, the primary reason companies would make gluten free food was for the population with Celiac’s disease – an autoimmune disorder that produced a dangerous enzyme in the body to make up for the lack of being able to digest gluten. The smallest bit of gluten can set off this chain of response for a Celiac’s patient. The importance of correctly labeled food is vital, and their trust in food companies could potentially be a life-or-death matter.

Deception amongst companies who mislabeled their food “gluten-free” became a highlighted issue for the Celiac community; however, the new boom in this market was not looking to attract this group of consumers. The driving force of this market is the population with a self diagnosed gluten intolerance – where believing they were eating gluten free was “good enough.” The FDA cracked down on many inaccurate claims of foods supposedly having gluten-free ingredients.

Surprisingly, the FDA set a gluten limit of 20 parts per million. It is controversial whether or not this is a low enough limit, but this was not the only discrepancy. The FDA requires food products to declare any possibility of cross contamination with wheat, nuts, dairy, and soy; however, gluten is not yet included on this list. A company may not be able to have a “gluten-free” label on their product, but they still do not have to report any possible added gluten.

The barrier the FDA inflicted upon the gluten-free market put a dent on the pace of growing food products, but this did not negatively impact the social influence of eating gluten-free. Almost 30% of Americans reported they wanted to reduce or eliminate their intake of gluten last year, shedding light on the public opinion of pursuing this type of diet. It became a norm for an overwhelming amount of people who jumped on the “gluten-free bandwagon” to diagnose themselves as having non-celiac gluten sensitivity. Conveniently, this type of diagnosis does not involve the approval of a specialist; people have simply taken it upon themselves to play the role of health care provider.

Beyond this, other health care providers are beginning to play along with the gluten-free blaming game. In an interview with the New Yorker, Peter H. R. Green, the director of the celiac-disease center at Columbia University medical school talked about the impact of this growing issue. “A life coach is now prescribing a gluten-free diet. So do podiatrists, chiropractors, even psychiatrists…we are now seeing more and more cases of orthorexia nervosa. First, they come off gluten. Then corn. Then soy. Then Tomatoes. Then milk. After a while, they don’t have anything left to eat…”

This withdrawal of eating that Peter Green refers to highlights the hidden foundation of a fad diet – taking away an element of food that is supposedly “bad.” The point of the diet is to stop eating a harmful ingredient for his or her body, but this is not the same mindset for the patrons of the self-diagnosed gluten-free clan. Losing weight is the main marketing strategy for gluten free food, and the individuals are more concentrated on how many pounds they have lost since (supposedly) giving up gluten. Yet another trick the gluten-free market has cooked up is keeping up this notion of associating “gluten free” to being healthy, no matter the food product. The industry attempts to cater their food items to people who want an exact replacement of the food they ate, just without gluten. Without this pesky ingredient, their once junk food has instantly become healthy. Unfortunately, this is usually the opposite case. Green stated, “Often, gluten-free versions of traditional wheat-based foods are actually junk food…our patients have jumped on this bandwagon and largely left the medical community wondering what the hell is going on.”



The bona fide gluten-free customer is treasured by grocery stores; they spend about $100 per grocery trip compared to $33 for the average consumer. It does not pose as a coincidence that the individuals who are diagnosing themselves as gluten intolerant are also able to afford this price hike. Stores like Whole Foods and Trader Joe’s specialize in supplying large supplies of gluten-free foods, knowing their clientele will purchase it. Trader Joes even joked to sell “Gluten Free Greeting Cards” at a surprisingly low cost of 99 cents each. This notion that the gluten-free lifestyle is aimed at the middle to upper class adds to the hyped up culture of the diet.

To successfully sell gluten-free food to a consumer base with money, it is necessary to “know your audience.” The farmer’s market every Wednesday at the University of Southern California attracts vendors who wish to sell their goods to its students. This is where the “CaveGirl Cupboard” first caught my eye – an all-natural bakery that creates treats with ingredients you can pronounce. They also pride themselves on being gluten-free, non-GMO, low-carb, soy free, dairy free, grain free (and the list goes on). Leia Blanco, one of the founding partners of the company had some time to talk about the vision of the CaveGirl Cupboard, and the success they have found in the Los Angeles area. When asked about the production of their food, Leia made it clear that they bake the products themself.

“At CaveGirl, we make the items in our own kitchens and buy our own ingredients to ensure there are no cross-contamination issues we have to worry about.”


Leia Blanco, on left, at a farmers market. (Source:


Leia noted that they stick to a gluten-free diet, and she has already lost a significant amount of weight from this. She does not have a medically diagnosed gluten allergy herself; however, she insists that she has more energy because of ditching gluten. When I asked about her customer base and how many of them had Celiac’s disease, she hesitated, and said, “Most of our customers love our cookies and other food because it is delicious and fits with their diet. I do not know how many specifically are medically allergic to gluten, but I do not think it is too many.”

CaveGirl Cupboard tables at different farmers markets around Los Angeles, and has built a significant following since their start in 2013. It seems that they have started their company in the appropriate location to flourish in this industry, as their prices seemed a bit steep. “We keep our prices competitive with other products like ours, we know there are customers out there who do not mind paying more for baked goods they can trust.”

CaveGirl Cupboard markets their product to reach out to the stereotypical self-diagnosed gluten free customer, which has brought them success in this industry. As I walked away with a box of four poker-chip sized cookies for five dollars, it dawned on me how much potential companies like this have with prices like that.

The opinion of social media on the topic of gluten has taken a turn for the comedic side. Talk show hosts have taken advantage of the ridiculous growth for gluten free products and services – such as gluten free dog food, gluten free dating services, and the sudden onset of banning gluten from households. A popular show on Comedy Central, “South Park,” illustrated this humor during a recent episode by comparing it to the anxiety of Ebola.

With a firm group of believers in the gluten-free trend, this industry is only expected to continue to grow. Although the endless misconceptions about gluten have doctors shaking their heads, the consumers that can afford this lifestyle are supposedly feeling all sorts of positive effects. Although these same customers believe they can have their gluten free cake and eat it too, the reality is that it is still a cake – and the long-term benefits are not going to pan out.

Young Entrepreneurs Navigate LA Startup Culture

Adam Jacobs, co-founder of Santa Monica based BuddyTruk, felt the risk of a startup was wortwhile

Adam Jacobs, co-founder of Santa Monica based BuddyTruk, felt the risk of a startup was wortwhile

Adam Jacobs, co-founder and Content Director for BuddyTruk – a Santa Monica based startup that aims to be the Uber for people in need of help moving – made a decision most people in their mid-20s would loathe: he moved back in with his parents.

For Jacobs, though, it was merely a byproduct of “tightening up the budget” and taking a chance on being a part of the next big Los Angeles tech startup.

“In [startup ventures], you absolutely have to be willing to take risks,” said Jacobs, while sitting on the rooftop of their office two blocks from the ocean. “I see it as the next step to something that is a huge success.”

Founder Brian Foley had the genesis for the company when he was using a U-Haul to move into his new apartment, and crashed into his roommates car before even meeting her. As he puts it, all he needed was “a buddy with a truck,” and he would have avoided trying to steer such a cumbersome — and expensive — vehicle.

The idea was too good to pass up when Jacobs was approached by a mutual friend about joining the startup, and convinced the 25-year-old UCLA graduate it was worth quitting his “comfortable” job at Apple to pursue full time.

And walking the halls of the office building BuddyTruk shares with more than 100 other tech startups, it becomes clear many more entrepreneurs share Jacobs’s desire to be part of the changing zeitgeist in LA.

The Company Town that was built on the film and entertainment industry is now becoming one of the premier locations for startup innovation. LA is now the third largest tech ecosystem in the United States (behind Silicon Valley and New York), and the fastest growing market, according to TechCrunch.

LA is the fastest growing startup market

LA is the fastest growing startup market

Altogether, there are more than 1,000 startups in the Los Angeles metropolitan area, according to company tracker Represent.LA. Silicon Beach is becoming a formidable southern counterpart to Silicon Valley.

While the LA startup scene appears to be blossoming, there remain a myriad of growing pains for companies like BuddyTruk, which launched their app this past August. Development, funding, and acquiring users remain the core roadblocks to success.

“The first two weeks we had two transactions, so it was like ‘ok, there’s a lot of work to do,’” said Jacobs.

Finding a way to get the app name recognized became paramount. Jacobs had to set aside time for “guerilla marketing” by passing out flyers on his old campus.

Things eventually began to turn around with the college move-in season, and the company was featured on TechCrunch and on KTLA 5 in LA. Still, the whiteboard behind Jacobs’s desk outlining the company’s goals for December – 1,500 users, 2,000 Twitter followers, 3,100 Facebook “likes” – highlights the importance and difficulty of simply making your app stand out.

Users are essential to venture capitalists looking to fund these companies in their early stages. For most startups, the game plan becomes: gain a following first, and worry about monetizing afterwards.

Wildly successful LA startups like Snapchat and Tinder understood the gravity of acquiring a large audience before monetizing. Snapchat, valued at $10 billion, only recently began experimenting with short advertisements.

Foley, the gregarious face of the startup, said the business received $175,000 in its opening round of investment, and is now trying to raise an additional half a million dollars. BuddyTruk also met with Target and Costco this month in an effort to provide their service to customers needing large items delivered.

From the outside, everything would appear to be coming up roses for the company: traction, a nice Santa Monica office, and room to grow.

But Foley understands how difficult it is to create a successful startup. The native of Austin, TX started four companies before BuddyTruk. Each one of them failed.

Rather than leaving him dejected, those disappointments galvanized the Pepperdine graduate even more when he was ready to tackle his next venture.

“Each time we ran a company in the past and it failed, I knew exactly why,” said Foley. “So this time around I was more confident than ever raising money and sticking by our mission statement.”

It’s an attitude that entrepreneurs must have to be successful in this industry. Failure is often synonymous with tech startups.

70 to 80 percent of startups fail to see a return on their projected return on investment, according to a study by Professor Shikhar Ghosh of Harvard Business School. And the numbers are even more dire for companies that issue projections and then coming up short of meeting them, with 95 percent falling through.

Blake Arnet realizes the high stakes nature of the startup world. His first company, CollegeHop, a social network to connect students with the “most fun and unique places around their area,” floundered.

“You fail a lot before you succeed,” said Arnet. “Building connections and a small company – the whole process was invaluable.”

The experience of starting his own tech company left an impression on the former UCLA basketball player, though. Arnet knew he wanted to get back into the startup world, and recently launched his latest idea.

His latest app, Castoff, allows users to anonymously receive votes and input on pictures from their friends. Arnet believes the idea is more efficient than sending a mass text message, and is perfect for someone trying to figure out what to wear out on the town.

Any residual pain from his experience with his first company has been mitigated by the allure of making Castoff a success.

“I’m very optimistic as a person and with the app,” said Arnet, sitting at the Literati Café on Wilshire, two days shy of his 25th birthday. “I think [Castoff is] a great app and if people get it in front of them, they’ll like it.”

Like Jacobs, he’s driven to make his startup work by any means necessary.

Arnet personally split the $20,000 needed to get the app off the ground with his longtime friend and co-founder, Adam Jacobson, and Jacobson’s father. He’s working as a private sports coach, Uber driver, and helping with his father’s construction company in Orange County to give him enough time to work on the app. Coffee shops on the West Side and working from home are Castoff’s office space until further funding.

Funding, along with acquiring users, remains the biggest hurdle. While the venture capital market is rich in LA, it still falls well short of Silicon Valley. A company starting with a well-known LA incubator like Amplify figures to raise about half as much as a company in Northern California.

The high failure rate of new apps, which have been personally monetized, only exacerbates the importance of finding angel investors.

“When you’ve bootstrapped a business where you’re not drawing a salary and depleting whatever savings you have, that’s one of the very difficult things to do,” said Toby Stuart, a professor at UC Berkeley’s Haas School of Business to the Wall Street Journal.

To take his company to the next level, Arnet is preparing to pitch Castoff to investors. His goal of $300,000 in seed money would mostly finance the marketing and front-end help necessary to bring Castoff to a larger audience.

Still, the hardest part of being a young entrepreneur can often be simply getting your foot in the door.

“Being first time entrepreneurs, that’s our biggest struggle right now,” said Arnet.

“If you’re a guy like Biz Stone [co-founder of Twitter] you get money ‘like that’ – you get $100 million.”

With the potential funding, Arnet hopes to expand Castoff’s reach to more college campuses, where anonymous apps like Yik-Yak have become increasingly popular.

And while Arnet knew a co-founder he was confident in starting his company with, for others it can be one of the more difficult and time consuming aspects of building a team.

The inspiration for Nick La Maina’s app, Tikr, stemmed from an overly excited friend.

“This girl kept posting on Facebook that her birthday was in 50 days, 49 days, 48 days,” said La Maina. “I was like ‘that’s so annoying, she should do this in a countdown app.’”

After researching and noticing the market for a social media app that would countdown to events was relatively barren, La Maina decided to pursue the idea head-on.

But for the 2013 graduate of USC’s Marshall School of Business, there was one main issue: he couldn’t find the right person to start with.

It took countless mixers, hours talking to friends and professors, and working connections to find a match. La Maina compared the experience to dating.

“It was really hard to find someone,” said La Maina. “It too me a year and three months,” to find a co-founder.

The moment was both exhilarating and a relief for La Maina, but there were many other issues to solve. For tech startups, each day is like playing Whac-a-Mole, where one problem pops up the moment another has been taken care of.

Development talent In Los Angeles is growing, but still trails Silicon Valley. Finding a developer for Tikr was a headache, with bids as high as $100,000 to design the app.

As a new company working on a tight budget, La Maina felt it was imperative to get Tikr launched and A/B tested as soon as possible, rather than building the most refined app. Ultimately, he was able to secure a design for under $10,000, and see Tikr featured among the Best New Apps on iPhone’s store.

The rush of growing their user base and trying to bring in additional seed funding makes the high-stress nature of startups worthwhile to La Maina. Like BuddyTruk, Tikr was recently featured on KTLA 5.

“I woke up and there we like 2,000 installs in one morning. It was an amazing feeling,” said La Maina.

La Maina views being an LA startup as an advantage because of its proximity to the entertainment industry. Tikr did a countdown promotion with the History Channel’s Vikings television show and is looking for similar deals.

The 23-year-old is now an associate professor at USC, helping students outline a plan for their own startup ideas. But despite the early success, La Maina is aware the tech startup world is a minefield, and knows the odds are against having the next billion-dollar sale.

“Overall, the app market right now is a really tough one to play in,” conceded La Maina. “People don’t use a lot of apps, they’re tired of downloading them, and to break into someone’s daily habits is a big ask.”

Like other young entrepreneurs looking to make their mark in LA’s startup scene, he knows it’ll take two things – “a lot of hard work and a little luck.”

The Fundamental Reason Why “Abenomics” is Not Working

Before jumping right into what I want to talk about for this final project, I want to take some time to explain what Abenomics is. Basically, it’s a term derived from combination of Abe + economics. It refers to the economic policies implemented by Shinzo Abe, the current prime minister of Japan, since the December 2012 general election, which elected Abe to his second term. Using monetary policy to tackle the 15-year long deflation problem and doing anything to try to reach 2% inflation a year is Abenomics in a nutshell.

Abe has since 2012, tried to revitalize the slow growth of economy by using “three arrows” of “a massive fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to boost Japan’s competitiveness”.[1]

Did Abenomics improve Japanese economy? Well, no one seems to be sure about this. With the third quarter reports that have been announced a few weeks ago and with coming up election in Japan that is going to be held on the 14th, articles about whether Abenomics is a success or not are flooding. There is a huge controversy even among intellectuals on whether Abenomics is actually working or not. It’s hard to tell. However, one thing we know for sure from the official numbers is that Japan is in recession whatsoever.


In November, Japan has officially slipped into a recession despite Abe’s ambitious plans to revive the economy. Everything seemed to go fine until quite recently. In the first quarter, Gross Domestic Product increased by 1.6%. 130,000 new jobs have been created every month since Abenomics started. The excessive quantitative easing by Bank of Japan sharply weakened the value of Yen. This helped big exporters such as Toyota and Sony, driving up company profits to almost a double and increasing stock prices. The new economic measures also resulted in a slight increase in wages and hike in consumer spending.

Sadly, delight in Japanese economy did not last long. As Abe anticipated, prices for goods also began to rise, however, this was mainly due to the weak currency pushing up import costs instead of increase in consumer demand, which meant people’s actual income value has been negatively affected.

To make matters worse, the government made a decision to increase the sales tax from 5 to 8% in April in order to make up for the national debt created by Abe’s radical economic policies. What this means is that Abe’s policy that was trying to encourage people’s spending only resulted in making citizens feel more ‘squeezed’.

Deflation cannot be fixed without increase in consumer spending. Consumers not spending money means demand is low in the market. Because demand is low, suppliers have no choice but to lower the prices to create demand. The whole point of Abenomics is to activate the stagnant economy by making people spend money.  Nonetheless, despite Abe’s struggling efforts, nothing seem to be easing the problem as of now.

As I have been doing research, I have realized that it’s not a matter of how many jobs Abe is creating or how much profits corporations are making. It’s rather more about how the money flows in the market through domestic consumption, which accounts for 60% of Japanese economy. I quickly realized it was people’s lack of confidence that’s really hurting the economy. Therefore, I wanted to find out the fundamental reasons to why Japanese people are so reluctant to spend their money. [2] I tried to give my best reasoning behind it but please remember that my hypotheses on why Japanese people are not willing to open up their wallets are entirely based on my assumptions drawn from my own informal research. They are not scientifically proven or anything.

First of all, my assumption is that it has to do a lot with Japanese culture and people’s characters. I know each and every one is unique in their own ways but I also understand that culture is something that cannot be easily disregarded. People get influenced by the culture they live in and it’s one of the biggest things that shape a person’s character.

Everywhere I looked, most generalizations about Japanese people’s characters were that they were 1) polite, 2) hard to become friends with and 3) hard-working. Among these, polite appeared the most; according to JapanToday, the number one word that describe Japanese people according to foreigners is polite or reigi tadashii in Japanese[3]. Now some of you may be wondering how being polite has to do with people not spending money. It was hard for me to find the connection in the beginning as well, so I decided to conduct a little interview with my Japanese friend Mario. The interview was very informal; it was done online through facebook chat. Mario Fukuo is an undergraduate student at Kwansei Gakuin University in Osaka studying economics. The conversation has been edited slightly to make it seem more assignment-friendly.

Me: “I am trying to find the connection between Japanese people’s characteristics of being polite or their other distinct traits to why they are so reluctant to spend money. Do you think you can explain this to me?”

Mario: “Yeah I definitely see a connection. I think it’s not that Japanese people are stingy. We just like to be vigilant and wary about the future.”

Me: “Hmm.. I don’t understand. I still don’t see the connection. Can you please explain to me more in depth?”

Mario: “Japanese people are definitely suspicious. Being polite can be a very good thing but it also means we don’t easily show our personal thoughts to other people. Also, we are very careful and the last thing we ever want to do is cause nuisance or harm to others.”

Me: “Sorry, I still don’t understand how that has to do with people being careful when spending their money.”

Mario: “Well, as in my case, the last thing I want to do is get money from my parents after I graduate from school. I don’t want to be broke in the future and ask you or my other friends to lend me some money. I don’t want to let my family suffer because I don’t have any money saved when I get fired from work. I mean, nobody wants that but Japanese people are way more extreme when it comes to things like this. Do you get what I mean?”

Mario: “Also, as I mentioned, I don’t really trust others or the government. In the end, I am the one who has to be responsible for myself. This is the common notion among Japanese people and this is the big part of the reason why we are so careful when it comes to spending money. We want to be ready for whatever will happen in the future.”

I have arrived at two conclusions from my own little research. The first conclusion is that word polite can mean personal and individualistic in this context. This also means Japanese people are more suspicious and reluctant to trust other people or the government which naturally lead to saving up money for the future. My second reasoning is that because Japanese people are so polite, they don’t want to be a burden to others (friends, family, etc.), therefore this leads to them saving up money right now so that they won’t have to ask for help and support even when they face hardship.

My second assumption on why people don’t open up their wallets so easily  has a lot to do with the recent history of Japan. I think it has a lot to do with the Lost Decade (Ushinawareta Jūnen) referring to the years from 1991 to 2000. Recently, the new phrase Lost Two Decades are often being used as well which refers to early 1990s to the present. Over the period of 1995 to 2002, GDP fell from $5.33 to $3.98 trillion and was at $4.90 trillion in 2013 in nominal terms. [4] This is the time after the Japanese asset price bubble collapsed causing an abrupt end to Japan’s strong economy in the beginning of 1990s.



According to this chart made by The Wall Street Journal, consumption is weak especially among people in their 30s. My guess is that it has a lot to do with them being brought up at a time when Japan hit crisis. These people were born and raised until around age of 10-15 at a time when there was huge prosperity in Japan. During 1988, 33 Japanese corporations made it to the top 50 world’s biggest corporate list. [5] However, things started to change all of a sudden–Japan has lost international competitiveness and many corporations had to fend off competitions from rival corporates based in China and South Korea. As a result, employment rate dropped as well; a huge part of workforce had been replaced with temporary workers who get lower wages and less benefits.

Although economy has been made much more stable comparing to the Lost Decade, those who have experienced it are still very careful about the future. People in their 30s right now who have seen their fathers lose their jobs and experienced abrupt change and who have come of age at a time when economy was still shaky are especially scared of the future. This is why confidence just cannot grow. Obviously if government is not doing well with the economy, how are these people likely to get confident about the future and start spending money right?

My third assumption is that decrease in unemployment rate is only nominal. It in fact does not really reflect real world situation.

I conducted another mini-interview over facebook with my other friend from high school, Tairei Natsuki who is studying law at the University of Tokyo to hear about what job market situation is like in Japan.

Me: “You are graduating soon too right? Do you know what you are going to do after you graduate from college?”

Tairei: “I am graduating in March and I am planning on going to law school after this.”

Me: “What is job searching like for your friends who are not planning on going to law school or other grad schools?”

Tairei: “It’s really hard. It’s even hard for students who graduate from my school (University of Tokyo is the number one university institution in Japan). I know one extreme case. I have a good friend who goes to Waseda University (one of the best private universities in Japan) that sent 100 resumes and had interviews with 30 companies. He at last got accepted by JR-East (railway company) and Japan Airlines.”

Me: What about those who don’t go to a good college if even those who go to a good university. It must be so much harder for them.

Tairei: A lot of people end up being the so called “freeters”. This is a combination of two words free + Arbeiter, which refer to part-time job in Japan. Many people are choosing to go this path this way because companies are still not offering enough full-time job offers.

According to The Wall Street Journal article, “a third of the workforce comprises so-called nonregular workers—temporary, often part-time employees who typically earn less than those who have the security of full-time permanent employment.”[6] Being a temporary worker means having an unstable standing in society. This is another factor that leads to people feeling insecure about the future and making them hesitant to spend money.

As a whole, consumer confidence is the biggest challenge Japan must overcome to revive its economy. It is the conviction Japanese people need to make the economy grow–the assurance that future is going to be better as they move forward. What Abe needs to do right now is not just simply printing out pages and pages of money, what he really needs to do is find a way to make his people happy and have high hopes about the future.




During the time, Japan was the second biggest  but saw an abrupt change in their country when they started going to school and came of age at a time when economic challenges were still there.






[1] “Definition of Abenomics”. Financial Times Lexicon. Retrieved 28 January 2014.