business news in context, analysis with attitude

We’ve had a number of stories over the past week that have touched on the issue of customer service and the challenge to differentiate. We had an essay about Trader Joe’s…one about Krispy Kreme…and a story the other day about how the chains in the Denver market were attempting to negotiate in the role of the meat cutter there, and we worried that “what we think really is being devalued by the chains isn’t just the role of the meat cutter, but the need to differentiate themselves in the marketplace. Once again, it looks like they are going for lowest common denominator marketing, content with slashing costs without seeming concern for how it affects the shopping experience. If Wal-Mart is to be the role model, once these stores become Wal-Mart clones, what will be the compelling reason for a shopper to pick a Safeway or a King Soopers over a Wal-Mart. It’ll just be price, price, price…and we all know who tends to win that battle.”

These pieces all generated a number of responses from the MNB community…

MNB user Thomas D. Murphy wrote

It is clear that a grocer can differentiate themselves across three dimensions (excluding location which is a bigger, longer-term issue):

1) Assortment

2) Price

3) Service

Traditional thought says that at best, a grocer can be great at one of these, good at a second, and probably weak in the third. It is also obvious that some combinations are mutually exclusive. For instance, if you have a broad assortment and high levels of service (including service areas such as deli, meat, bakery, etc.) it is doubtful that you are the market leader on price!

However, I believe the Big Three (Albertsons, Kroger & Safeway) have a strategy to be average in all three dimensions by offering a moderate assortment with a minimum level of service (lowest labor cost possible) at a reasonably competitive price (but not anywhere near the market that Wal-Mart). This strategy is consistent with their labor negotiations, the quality of their stores and the role they have traditionally played in the market..."all things to all people."

Given this, I suggest that only one of the Big Three can be successful in any given market with this strategy because the polarized ends of the market, i.e., value/price players and specialty/service players, leave too little room in the middle. In short, watch for more market shakeout!

No question.

We believe that in this case, “average” is a synonym for “mediocre.” Name us another industry where three of the top four players can be accused of aiming for “consistently mediocre” as a strategic imperative.

Now, we’re not sure that it is fair to lump all three in together. Our experience – and the numerous conversations that we’ve had with industry insiders – leads us to believe that Kroger is headed in the right direction, moving toward a model that is more marketing and consumer driven…though that is an enormous cultural challenge for a company so big.

At the same time, we’d told by most people that it is hard to say whether Albertsons gets it or not – and a lot of us are waiting to see how it treats its Bristol Farms acquisition as a measure of the company’s future. And, people generally are concerned whether Safeway has learned the lessons of Genuardi’s and Dominick’s as it focuses on efficiency rather than effectiveness.

We have to say that “average” is becoming one of our least favorite words, even as it is a word seemingly embraced by much of society. In the educational system, teachers had out “C” grades and tell the students that they are “average,” which is a rating that most kids embrace. But we tell our kids that when we were growing up and the nuns hit us with a “C,” it was to tell is that we were “fair” or “mediocre.” Which isn’t nearly good enough. In the classroom. The retailing business. Anywhere.

MNB user Carol A. Edinger wrote:

Wal-Mart may well be on its way to redefining how America does business - what a sad commentary on our culture! We're becoming a nation of greedy consumers who demand a wide variety of products, and will drive miles to have access to the lowest prices available. Then we wonder why outsourcing is killing our labor market and our local merchants are struggling to survive.

We'll be the first to complain when there is no longer any convenient place to pick up a loaf of bread on the way home, but we fail to see Wal-Mart as the global neighborhood bully who has no interest in playing nice with the rest of the kids. We feel entitled to higher wages, competitive benefit packages and convenient work schedules while demanding the best products at the lowest prices. It's way past time to listen to those who say, "Be careful what you wish for!" I've not set foot in a Wal-Mart, nor will I. My vote may be small, but it's cast with conviction!

The choice whether to shop at Wal-Mart is one that almost everyone has to make at some point. But it is important not to overstate the “bully” analogy…because keep in mind, Wal-Mart is excellent at what it does. (Our bigger problem is with its competitors, who aren’t “excellent” at anything.)

By the way, this is going to get us in trouble, but let us digress for a moment…

Reading yesterday about all the ABC-TV affiliates who refused to run “Saving Private Ryan” on Veteran’s Day because of concerns about the violence (it is a movie about D-Day, World War II and ultimate sacrifice…so violence is sort of important to the story) reminded us of the story that came out a year or so ago when there was a guy who was sanitizing films like “Saving Private Ryan” so they were PG or PG-13…and these movies were being sold by companies like Albertsons. At the same time, you always read stories about Wal-Mart not carrying movies, books or CDs that it deems inappropriate…which it certainly has a right to do.

But this is the cultural question that we think arises when discussing Wal-Mart and its impact. Is the overarching trend toward a vanilla approach to culture? Is this trend being encouraged by a Wal-Mart-style attitude toward what can or should be sold?

We don’t believe that every film should be a Disney film, nor that every film should be “Saving Private Ryan.” There is room for both. What there is not room for, in our view, is an attitude that tries to turn “Saving Private Ryan” into a Disney film, or does not accept the fact that a mature, adult approach to movie-making (or book writing, or TV program producing) is perfectly legitimate.

Okay, we got that off our chest.

Now, let’s get back to the “bully” accusation, and an email sent to us by MNB user Glen Terbeek:

When I read words describing Wal-Mart as a "bully" or having "economic power and cultural ubiquity" I chuckle. It was only 1970 when Wal-Mart had about 30 stores, much smaller than most of the mature chains at the time. Hardly a bully; hardly economic power. What happened? Aren't these the words of sore losers?

I suggest their power resulted instead from attacking the weakness of the mature retailers' practices at the time. Wal-Mart built a business model that puts their targeted shoppers first. If they currently are a "Bully" or have "economic power," maybe they deserve it.

It's not too late for the name callers to realign organizations, measurements, and business processes around the shoppers and local store markets. Potentially, a mature retailer could even become the new bully.

I suggest the media should do a story on why the mature retailers aren't the current bullies.


Another MNB user wrote:

I read with great interest your Essay on customer Service 2004. Let me start out by saying, I love Krispy Kremes and waited patiently for years for one to open in my neighborhood. Having said that, had you met Mr. Tulgan at the recently opened Krispy Kreme in Grand Chute, Wisconsin, the article would have had a complete opposite slant. The entire "opening" of this location went from bad to extremely bad. I had to point out to the Corporate office that two weeks before it opened, this location wasn't even listed on their web site as "opening soon". When it did open, 90% of the people behind the counter had no idea what they were doing. Drive up or counter service, it didn't matter. Two dozen "originals" for $11.98 turned out to be two dozen assorted for $13.35 (I thought they must have added tax) when I got to work and opened the boxes. Inside has proven to be little better. While bagging up a LB. of coffee beans for me, (the bag ripped and she asked if that was ok), the other 5 or 6 people in line had to stand and wait after they had gotten their order because evidently only one of the 4 or 5 people behind the counter were "trained" to use the cash register. I have talked to several others who have had the same type of experience. It seems as though the only thing the people there get consistently right is giving away a free one when the light is on, and while I certainly can't complain about that, it does not bode well for stockholders.


Another member of the MNB community wrote:

Your Trader Joe's example touches on so many different things about retail today. I think most corporations stress customer service, but what customers experience is far from customer expectations. That is why the recommendation for the Kmart CEO to shop stores anonymously is so productive. He will see a lackluster store and wait in a checkout line with two people in front of him for fifteen minutes (think that's why they removed the wall clock from the front end). Then, he should go to the store and ask people for suggestions (so they buy in to the program) to explain why the company is falling short. I have thought about customer service issues before (although that is not my area responsibility with my current grocery employer) and other things that relate to grocery stores and their view of employees.

The thing I find disturbing is that many grocery stores use sales to determine labor budgets instead of staffing their stores properly to drive sales. Grocery chains whine about the low profit margin and continue to poorly staff their stores. As sales decrease, so do hours. Sounds like a death spiral to me if I ever heard one!! What happened to thinking outside the box? Everyone is so concerned about Wal-Mart, they are destined to continue in their own narrow-minded ways. As you've said before, competing with Wal-Mart solely on price is not an effective long term strategy.

MNB user David Staverman wrote:

No one likes Goliath. Being big does not automatically make them bad, just makes them a bigger target to hit. Bottom line, if you want Wal-Mart to go away, convince America to stop shopping at Wal-Mart.

No argument here. That’s what we keep saying…

And, from the “Wal-Mart isn’t so bad” file, we got the following email…

In the "Your Views" Department today, one respondent had this to say about Customer Service, "The Wal-Mart's of the world believe that underpaying the floor employees is a way to save money, long term. But what does it cost them, really?"

I can't tell you what it costs them, but I can tell you what it gets them. When my wife and I were in Wal-Mart the other day, we purchased an ironing board. Of course, this is a somewhat clumsy and awkward item to carry around and get out the door. When we finished checking out, a very pleasant older Wal-Mart worker/greeter came to the rescue and opened the door for us (it was in an area of the store where the door isn't automated). As I recall, this woman also provided a cheerful smile and told us to "have a good day". A simple gesture, but something you don't always get elsewhere. In fact, something you rarely get anywhere.

This isn't the first time something like this has happened at Wal-Mart. I know we all have had experiences there both good and bad, but they aren't exactly chumps when it comes to customer service. More often than not, despite their "supposed" lack of pay, they seem to do a better job than most of their competition in this area - even ones that "supposedly" are more focused on customer service. Maybe it's just me, but most of the time I don't find the quality of customer service and the amount of the paycheck as being directly proportional.

We think that smart hiring is the key.

There’s a wonderful little piece in Rodale’s excellent new magazine, Best Life, profiling polar explorer Sir Ranulph Fiennes (who also has done things like running seven full marathons on six continents in seven consecutive days – just four months after suffering a massive heart attack and undergoing double bypass surgery).

Asked what rule he never breaks when putting together an expedition, Fiennes says, “When putting together a team, take people who have the right character even if they don’t have the skills. You can teach skills, but you can’t change character.”

We think this is a rule that more retailers ought to embrace, and use to evaluate everyone on the organizational chart – from top leadership to the people working at checkout.
KC's View: