business news in context, analysis with attitude

We got a lot of email responding to Michael Sansolo's column this week about uncertainties in people's economic lives, and the likely impact on retailers.

MNB user Mark Raddant wrote:

Statistics are maddening things.  If you read the definition used of those of us whose economic lives are “uncertain”, it would include ME, since at one point in my early thirties I was out of work for a brief time and filed for benefits.  I don’t believe I stayed unemployed long enough to GET benefits, but if I did, it wasn’t long, there wasn’t much out there but I got by selling cars for a while, moved up, and then moved on.

My point is that life has uncertainties, but just simply having had a setback or two in life may just mean one was temporarily sidetracked, the benefits did what they were supposed to do and provided a temporary minimal level of support, and people grow and move on—and up.  That’s how the system is supposed to work.  The researcher’s stretched definition of “uncertainty” and “at risk” would cover nearly all of us—which is why the numbers are so extreme.  Makes for a good headline, but obscures the real story—that of those whose plight isn’t temporary and circumstantial, but chronic and a product of systemic issues that run deep.

From another reader:

The economic reality you write about and the importance of a strong value proposition are spot on. But it's critically important that folks in any business not confuse value with price. During the recession years of 2008-2010, Whole Foods enjoyed record profits and same store sales growth while Walmart sputtered, with declining same store sales for 7 straight quarters. Starbucks sales, and share price, are soaring--the stock price is up 80% in the last 2 years. Let us not forget about the fast-casual trend. And the luxury car market has never been better.

And finally, adjusted for inflation, consumer spending is once again at record levels. Indeed, because of our looming economic instability it is more important than ever to deliver a high value product or experience, but don't think that lowering your prices will accomplish this goal. The absolute worst strategy possible for mid-market retailers enjoying record success such as Publix or Kroger would be to refocus their brand proposition on what they perceive to be a frugal shopper.

MNB user Diane Letson wrote:

In response to Michael Sansolo’s article about the growing scope of poverty.

When I began working at Feeding America in 1996, we knew through USDA food insecurity rates that 1 in 10 Americans was facing hunger.  Feeding America is the largest domestic hunger-relief organization so those food insecure Americans were most likely relying on our nationwide network of food banks and their partner agencies for food.
In 2013, 1 in 6 Americans is facing hunger.
I work in an industry that wants to put itself out of business.  However, we are headed in the wrong direction with regard to hunger and food insecurity increases which are directly tied to poverty rates and issues.

MNB user Brian Blank wrote:

The Big Study being reported by all news outlets this week (including MNB) painting such a dour picture of the American attitude:  It really seems to have been painted with an excessively broad brush.  While I have not read the report itself, several news reports indicated that the respondents were not only reporting current financial woes and/or worries, but also if they had EVER fallen on hard times or worried about falling into poverty.  That’s just horse hockey, as Col. Potter might have said.  I fell on some pretty hard times years ago, but I am pretty comfortable now and have a pretty confident outlook for myself and the national economy.  So that would put me as one of their “4 out of 5”, despite the fact that economic worry or pessimism does NOT represent my current view—that’s twisted.  And what’s worse:  now I’m very suspicious of the 4 out of 5 dentists who recommend sugarless gum!

MNB user Mike Franklin wrote:
Michael ... Your best think piece yet. Thanks for sharing.

From another reader:

It is also not a coincidence that the only the polar ends of the food business seem to be growing, that is the "price" end with Aldi and the big boxes and specialty, Whole Foods and Trader Joe's, etc.  This is a pure reflection of the growing gap between the haves and the have nots.  We are debating which economic policies or missteps contribute to this phenomenon, but as this gap grows, so will the polarity of the supermarket viability.   The consequences of this trend is the continued pressure on traditional supermarkets to stand for something beyond convenience.  They must be able to attract a mix of both the frugal and the regal shopper.

As this last email suggests, Michael's piece tied in with another theme we've been working pretty hard here on MNB, which is the economic disparities that often exist between top executives and the front lines, which hard-working employees putting in a lot of hours in respectable jobs unable to support themselves and their families.

One MNB user wrote:

I think more companies (maybe ALL companies) should take a look at the business model in place at Whole Foods.  At Whole Foods the salaries of co-CEO’s Walter Robb and John Mackey are capped at 19 times the salary of the average full-time employee.   Both men have been very vocal about what they call “conscious capitalism” and the idea that companies should aspire to a higher purpose than just being profitable.
In 1950 the CEO-to-worker pay ratio was about 20-to-1.  Today the S&P 500 CEO salaries are 204-to-1.  That’s outrageous. 
But I don’t think this idea should stop with CEO’s.  I would like to see my elected officials tie their salaries to the economic conditions in their respective areas.  Maybe then we could get some sensible economic policies out of Washington.

A bunch of stories have erupted around this issue. There's the "living wage" taking place between Walmart and the washington, DC, City Council. There's McDonald's putting up a financial advice website for its employees that seemed woefully disconnected from those workers' needs and concerns. And there have been the strikes by fast food workers in various cities as they call for higher wages.

One MNB user wrote:

Fast food workers striking to get a $15 an hour wage need to grow up.  First it would be incredibly unfair to the people who have chosen to work harder and smarter to get to $15 an hour or more. How would you feel if you worked hard to get to $20 an hour only to see the most unmotivated among us simply handed a higher wage?  Complaining about wages and making excuses is a cowardly, immature, and classless.  Brave people go out work everyday for higher wages because they made a personal decision to take a job that requires skill, responsibility, and are often put in danger.  Cowards make excuses, complain, whine, and go on strike.  People serious about making higher wages use their brain and figure it out.  They can start by working two more jobs and put in 60-70 hours a week, hmmm kind of like the way successful do.  The worse thing we can do is reward mediocrity.

And then, that same user wrote in about yesterday's story concerning the declining number of US adults aged 18 to 29 who reported working full time. It dropped to 43.6 percent in June 2013, a dip of more than three points from the same time period last year.

Here's what this particular MNB user had to say about that:

Young people today just don't seem to have gumption and drive.  Thirty or so years ago, me and many of my fellow college graduates simply moved to where the jobs where.  Instead of mooching off our parents we "manned up" and took jobs in Houston, Dallas, Oklahoma City, Las Vegas and Phoenix.  Living with parents and sucking off their health insurance was not an option.  We did not have access to 2 years of unemployment and an endless Food Stamp buffet.  We need to go back to the days where being unemployed was a living hell and not a lifestyle choice.  There are plenty of good jobs available for everyone .  If you ain't working, you ain't trying.  No excuses accepted.  So please don't offer any.

It must be nice to live in such a black and white world. It is a world, apparently, in which everybody has the same opportunities ... where everybody who does not make a living wage is unmotivated, lazy or cowardly ... where young people don't have the gumption of their elders ... and where people who are not successful simply are not trying hard enough.

What a load of crap.

You paint with such an enormously broad brush, and you only know two colors.

But the facts are that life is not that simple. There are plenty of hard-working people who are doing the best they can, putting in as many hours as they can, who simply cannot support their families ... and more often than not, they don't complain. They just work. And sometimes, they get exploited. Not all the time, but sometimes. And y'know something? Sometimes it takes real courage to stand up and say that perhaps there is something wrong with the system.

And it takes compassion - something with which some people are unfamiliar, or count as some sort of character flaw - to recognize that for some people, the system has not worked.

I'm not saying for a moment that there aren't people who try to game the system,or who want something for nothing, or who are not willing to do the work necessary to be successful. Of course there are. In all generations.

But I think most people do their best. Sometimes, life works against them. That's not an excuse. It is fact.

Sometimes people can't go to other markets because they are married to people who also have careers, and they can't afford to give up that existing job. Sometimes they have aging parents to care for. (Pity you when you get old and want to have your children around, they move away because, hey, it's the job. When you get lonely, you can always listen to Harry Chapin sing "Cat's in the Cradle" for company.) Or, there can be a variety of other reasons - some good, some not so good. My point is that life is not simple.

I cannot conceive of being the kind of person who would simply dismiss so many people as being mediocre and somehow not worthy of concern.

Regarding the bankruptcy at Mi Pueblo, which has been linked in part to immigration probes that forces the company to fire a number of employees and then replace them at a higher cost, one MNB user wrote:

The way I read this article, the company struggled with higher payroll costs since caught employing illegal aliens. Aside from being completely unfair to these workers, this gave the company an unfair competitive advantage. I feel for the illegals who lost their jobs, they want a better life; however, I feel nothing for the company officials who made the decision to do business in this manner.

We had a piece the other day about how Procter & Gamble is in part hoping that the manscaping trend will help it reinvigorate Gillette sales. One MNB user responded to my comments this way:

Regarding "manscaping," you're once again precisely right to note that you feel so old, as do I. One of the things that has always bothered me is that the vast majority of analysts are always talking about the same things w/r to Millennials--frugality, helicopter parents, entrepreneurial, digital generation, blah, blah, blah. And with all of the repetition one gets the sense that they aren't spending time with them as much as they are writing about them. Being my age and getting to hang out with my friends' Millennial children, I've been nothing less than floored by what I have learned, much of which has been documented by research that often flies under the radar of most analysts.

Several examples. In the vast majority of US high schools, openly gay students can be seen walking the hallways holding hands with their partners without incident because to this generation it is viewed as "perfectly normal." And while the age of one's first sexual encounter is actually increasing, the amount of people experimenting with multiple partner encounters in college is astounding. Most research points to roughly 40%. And finally, around 75% of kids under 30--boys and girls alike--participate in this practice of man & woman-scaping. The worst part is that when you speak with them they equate the opposite proposition to something that reminds them of "creepy people from the 70s" We are indeed old.


I wrote glowingly of WinCo the other day, which prompted MNB reader John Domino to send the following email:

It would be hard to argue that WINCO is not one of the strongest and best competitors not just in the West, but across the country.  But they are not alone, there is Market Basket here in New England, Shop-rite in the Mid-Atlantic, Trader Joe's, Costco, HEB, Whole Foods and Publix and I am sure a few others.  What is it that makes them all successful.  In my view two things:

One: they have very strong and courageous leadership.  They promote from within and most importantly are either privately held, or (and this is where the courageous comes in) in the case of Costco and Whole Foods (and often Kroger) they are willing to totally disregard what Wall Street says and make decisions that are right for the company in the long term versus the next quarter.  They focus the company on meeting customer needs and build the rest of the organization to make that happen. They gain efficiency by having a long term vision and sticking to it, and they grow their sales by trying new things, but not necessarily abandoning their core processes and foundational principles.  Jim Collins has talked about this for over 10 years in his book, Good to Great.

Two: and here I sound like MNB, they invest in and find ways to engage and reward their front line employees.  Whether it is the ESOP at WINCO or a very aggressive profit-sharing plan at Market Basket, or great benefits at Costco; they have lower than average turnover and a staff that is in a good mood when they come to work and therefore, are friendly and helpful to their customers.
This is not rocket science.  Yet why do so few companies follow it.

Good question.
KC's View: