business news in context, analysis with attitude

Got the following email from MNB fave Glen Terbeek:

I get a kick out of all of the commentary regarding the Amazon acquisition of Whole Foods. It is all centered on the impact it will have on the current food industry. And for sure it will. But I believe that the Amazon's objective is far greater than food.

It was only 30+ years ago that a discount department store (Walmart, that "alternate format") started selling 850 food store, high volume items at low prices to divert 2 to 3 times a week grocery traffic to their stores. After all, if they sold one shirt or other item during that “food” shopping trip, they got their losses back. They focused on the winning the shoppers’ traffic, getting shoppers in their stores. They expanded that concept to offering a complete food store within their stores to become the largest food store chain in the US. That traffic for sure has helped the other categories in the store as well.

The combination of Whole Foods’ strong value added store image and brands plus the ability of getting any national brand for pick up or home delivery via Amazon will be a hard shopping experience to beat for food retailers. But as importantly, it will only enhance the reason for shopping via Amazon for any item the shopper may want. It will build the shoppers trust and therefore traffic at Amazon. Why go any place else? Therefore, I believe that the merger will have as much impact on non foods retailers as it does on supermarkets.

What will the retail industry (or should I say the shoppers' industry) look like in the next 30+ years (if it takes that long)?

It will be fun to watch!

On the same subject, another MNB reader wrote:

As a consumer as well as making my living for 25+ years in the  natural products industry, I’ve watched this amoeba with delight.

Whole Foods had a mission to educate the world about better nutrition.  Phase one accomplished, to the point where their competitors started to beat them at their own game.

Whole Foods had a core value stating commitment to the planet through more ethical sourcing of food and raw materials.  Education mission accomplished, it’s becoming mainstream after being considered fringe and weird for decades.

Whole Foods stated they were committed to truth in labeling of genetic modified organisms in foods and body care.  That’s more complex, but they made GMO a nearly mainstream word, the average American has now heard of GMO’s. 
Amazon has broken all kinds of mental barriers and thinks outside the box as it’s MO.
I’m thrilled – two trailblazers merging forces.  Excited for what’s to come.

On the possibility, apparently unlikely, that Walmart could make a competitive bid, MNB reader Hy Louis wrote:

Imagine being a Whole Foods employee and you find out you have been bought out by Walmart.  That would be like being a student at Harvard and finding out Harvard was sold to the University of Phoenix.  IMO Whole Foods shoppers and employees have little respect for Walmart.  Amazon would get the last laugh.

From MNB reader Rick Werner:

One element of the acquisition I haven’t heard much about is the location of the WF stores.  I don’t have data to support this, but I would venture to guess that WF stores are surrounded by people who OVER-index on Amazon use.  That is, there is strong overlap in the two customer bases and specifically the WF locations and where Amazon shoppers live. 
Combine that idea with the presumption that many WF stores are larger than they need to be for today’s declining retail environment.  These stores could be the distribution centers that Amazon needs to reach many of it’s customers and without too much investment of time and money.

This MNB reader is skeptical:

I'm finding it fascinating that people aren't discussing how much Amazon is paying for Whole Foods since Whole Foods has a really small footprint. If you look at the Safeway/Albertsons merger, Albertsons paid $9 billion for roughly 1800 stores. I'm sure brand name/power was factored into the sale but wow, Amazon is really drinking the Whole Foods Kool Aid.

We rarely shop Whole Foods due to price, selection, and location. If Amazon wanted a footprint, I'm guessing they overpaid for a toe print.

You could be right. But I would caution you that it is important not to assign too much importance to how you shop. I can't afford to shop much at Whole Foods, either ... but that doesn't mean the deal will be a failure.

Regarding how Kroger is responding to dual challenges from the Amazon-Whole Foods deal and Lidl's US invasion, one MNB reader wrote:

A financial analyst asked a senior Kroger exec about the impact of Lidl. I'll paraphrase, but basically the Kroger exec said that he was glad that Lidl finally opened, so Kroger could see what Lidl had to offer. He mentioned that Kroger took all competition seriously, but they were very used to competing with similar stores ( Aldi & Sav A Lot). Kroger faces more challenges competing with retailers that offer broader assortment like Walmart (and Amazon!).

In my opinion, Sav a Lot, Aldi, and Lidl will grow in USA, but really through a huge building spree versus consumer gravitation to the format. Can anyone tell me what new and exciting innovation that Lidl will bring that will cause our family to add a Lidl trip to a list that already includes Publix, Costco, Target, CVS, Trader Joe's, Whole Foods etc.

From another reader:

I have been following this story for some time, and while Kroger continually gets pounded by Wall Street, they keep their eyes on the prize - the customer!

On another subject, one MNB reader wrote:

Reading "The $15 Minimum Wage Debate" got me thinking. If you raise wages so workers can afford to pay for food, rent and goods, it makes goods more expensive, which impacts jobs. Using “the market” to determine wages keeps costs down, which impacts workers’ purchasing power. These realities are generally accepted by everyone, regardless of political leaning.

In either situation, the worker ultimately bears the brunt. Yet, many of our elected leaders are seeking to reduce government aid to the poorest (and even middle class) by cutting funds for public education, food assistance, and Medicaid to name a few. Why do so many people have an issue with the government trying to ease financial burdens for individuals? Aren’t we about life, liberty and the pursuit of happiness?

We got a number of emails yesterday responding to Seth Mendelson's critique of Target.

One MNB reader wrote:

I won't be the first to suggest Target should participate in its replacement program for its stores.

Or the last.

From MNB reader Melissa Setser:

I have to agree with Seth.  The purportedly highest volume Target in my DMA is a couple miles from my office.  I went a few days before Father’s Day to pick up a few things.  The place was decimated—from women’s clothing/swimwear, all the way over to the home goods section (which used to have some fun/trendy/inexpensive items—nope, not any more).  I thought about wandering through the shoe aisle (I work for a shoe retailer)—and it was such a disaster I could hardly stomach the thought.

So many retailers have taken an eye off the basics in the e-comm shuffle, it’s a real shame.  I was looking forward to spending 45 minutes meandering, probably buying a few things that weren’t on my list, and generally being able to enjoy the experience.
Here’s another one:  I recently went to 2 stores TRYING to spend my $$ at b/m instead of ordering online.  Styles/fashion were so out of date, and out of stock, I found nothing.  Came back to my office, ordered exactly what I wanted and it showed up 2 days later at my house. 
What b/m retailers bring (and the reason I still believe Nordstrom will survive/thrive) is the human element—and if we aren’t differentiating ourselves from the less profitable e-comm by providing the human element, ultimately b/m loses…

Many bricks-and-mortar stores are not being killed. They're committing suicide.

From MNB reader Neil Brown:

Seth's commentary regarding his recent visit to Target resonated with me, since I also visited a local Target (Arden, NC - near Asheville) for the first time in over a year. The task seemed simple enough...find some simple clothes for my wife to wear around that are not necessarily top fashion (we are in our 60s), but which also didn't scream out for negative attention. We had accomplished this mission at various Target outlets many times over the years.

On this visit, several things hit the potential customer right in the face: (1) where are all of the customers, (2) summer just started last week, so shouldn't there be some summery items in the Seasonal section, and (3) what a friggin' mess! To the store's credit, there were over a dozen associates speedily trying to fill the holes on the shelves, especially in women's clothing. This latter area was an absolute pigsty, with items just thrown onto shelves without folding and others lying on the floor where they had fallen. The store would have been far better off redeploying some associates into basic folding and other presentation skills. Interestingly, the men's clothing section was neat and tidy, which I attributed not to men's basic cleanliness (let's not be ridiculous!) but instead to a complete lack of men browsing.

On the positive side, there was essentially no wait at the two checkout registers that were open.

Additional sidebar to Target - when there are competing items in a narrow niche and comfort is a sought-after attribute (as in folding camping chairs), why not have a sample of each on display so customers can test them out? Big Lots, about 100 feet from this Target, took that approach and landed the sale from us.

Yes, Target certainly has fallen from where I first encountered it thirty years ago.

From MNB reader Anne Maas:

I grew up in MN and spent eight years early in my career at Target's corporate office. I had immense pride working for them and loved everything about the company.

After moving to NH in 2004 and now living in NJ since 2014 I sadly am always disappointed with their stores. I have shopped multiple stores in both states and the experience is consistently poor. There are rarely baskets or carts available, out of stocks are the norm, merchandising is sloppy, store team members are rarely friendly and the restrooms are deplorable. I DREAD having to ever use them.

This past weekend I was visiting MN and shopped in two separate Target stores during my visit - Southdale in Edina and the Quarry in NE Minneapolis. Both stores were beautifully maintained, any out of stocks were unnoticeable and the restrooms were spotless. I didn't interact with any team members so I cannot comment on them.

Perhaps the poor store experiences I've encountered are isolated to the Northeast and are regional management issues. I'd be curious to know the location of the store Seth's blog is based upon.

I wish the company would ensure all stores would have the same requirements and be held to the same standards as those that are in close proximity to the headquarters.

When a company's best stores are the ones in headquarters' back yard, I think it proves very little.

From still another reader:

The commentary on Target by Seth Mendelson really nailed Target’s issues.  Our household should be in Target’s wheelhouse, married, urban household with a 2 ½ year old kid.  Unfortunately for Target, my wife stopped shopping there when our child was 6 months old.  She would come home fuming after finding 40% of the shopping list was out of stock in the store.  Need help while you are at Target, good luck.   She would come home so frustrated, when you have a young kid you can’t wait for certain things, diapers, wipes and baby food are essentials. 
Target pricing, location and selection lured her in, the lack of inventory and lack of help ensured we don’t shop there anymore.  Just too many better options in the world today.

And finally, responding to yesterday's story about how President Donald Trump launched a Twitter attack on Amazon, writing on the social media platform that Amazon isn't "paying internet taxes (which they should)." It was, in fact, an inaccurate accusation - Amazon appears to be in full compliance with existing law, collecting state sales taxes in the 45 states have such taxes.

MNB reader Roy St.Clair wrote:

Trump accusing anyone of anything to do with taxes…oh that is really rich.
KC's View: