‘Tis the season. Yesterday, I read this WSJ article Consumer Keeping Growth Afloat. It's not surprising at this time of year where the lion share of retailers' fortunes are made that we are reminded that 70% of spending in the USA is consumer-based. Yet, we also read about a manufacturing slump. This got me to thinking about Santa and the Elves.

The Elves

The Elves are in manufacturing. Even with their resurgence into the American psyche with the hugely popular The Elf on the Shelf, it does not take away from their difficult reality. The North Pole toy factory faces fierce offshore competition from lower wage countries. Toys are becoming increasingly complex requiring expensive R&D and semiconductor foundries. Seriously, the poor little Elves were never trained to build toys that required more than a hammer, hard work, and pieces of wood. They're struggling to compete globally, and their handcrafted toys are becoming commoditized over time. The Elves are having an increasingly difficult time achieving their targeted annual growth rate of 15%. Selling 150,000 more spinning tops next year compared to 1 million this year is hard work!


Now let's turn to Santa. Santa is in the service sector. Not sure if I need to remind you but this is where 78% of US GDP comes from. Saint Nick gets a lot of attention for his visibility and many photo opps (that's my clan above) in early December, but his true core expertise comes tonight, December 24th, in shipping and logistics. Santa's business is a lot less capital intensive. He does not need to build factories. He does not need to sell widgets. As the global population grows, he is required to work harder but he ships more year after year. Santa's business is a lot more predictable and visible. With commodity prices down, reindeer feed is hitting new lows so Santa is poised to kill it this Christmas.

Service Sector Wins

I consider Santa Claus a kerchunker® company. He's as dependable and steady as they come. No matter the weather or lack of Christmas Spirit, Santa Claus comes year after year. It is easier to sleep at night investing in kerchunker companies. So don't forget the significance of the US Service Sector which provides Santa with advantages that the poor Elves will never have.

Merry Christmas and Happy New Year!


Care to weigh in on the Santa (services) versus Elves (manufacturing) debate? Please leave a comment.