business news in context, analysis with attitude

Responding to my piece and commentary last week about a new study of Amazon Prime members illustrating the power of automated replenishment systems, MNB reader Matt Nitzberg wrote:

Thanks for your recap of the study! In addition to loyalty (for retailers) and convenience (for shoppers), subscription and auto replenishment models have important systemic benefits. 

For retailers and brands, this can include more accurate forecasting and decreased reliance on promotion. And, particularly for categories with recommended (but often-ignored) usage patterns, steady and effortless resupply can increase “compliance“ and consumption, and create better consumer experiences. 

One (older) study that showed men often use the last razor blade in a pack for the same duration that they use the first three or four combined, because “razor blades“ never got on the shopping list. And in categories like vitamins, the largest and most persistent growth opportunity is consistent daily dosing. I may be an outlier, but knowing that my next 60-day supply of vitamins will soon be on the way is one factor that drives my daily usage. 

We also continue to get a lot of email about Starbucks' unionization issues.

One MNB reader wrote:

One of your consistent views that I appreciate is relentless focus on how changes at any retailer will have a positive impact and be valued by their customers.  What is your POV as to what, if any, changes that the individual Starbucks’ store unions will ask for and their impact on customers’ experience and perceived value of Starbucks?

To be clear, I am not confident that unionization is some sort of panacea that will improve store experiences and labor relations.  For a whole host of reasons, it may make things worse, not better.  But retailers have to accept some level of culpability for how things have gotten this way … and if they're not in the middle of a labor crisis, should act now to prevent one from occurring.

From another reader:

Having a number of experiences at union organization attempts the one thing I can say with certain confidence is the Starbuck employees will need to look very closely at the promises made by company leadership and the union leadership. None of the statements should be taken with absolute trust.

MNB reader Steven Ritchey wrote:

From what I'm reading and hearing, it sounds like Starbucks, and in particular Howard Shultz need to hire a COO, Chairman Optics Officer.  I couldn't hurt.

I think Shultz needs to remember or at least realize something, if employees are being talked to by unions, and deciding they want to vote to unionize, it means something either is wrong, or employees feel something is wrong.  Either was means there is a problem, either in how they are treated or how they perceive their treatment by the company they work for.  What he is doing isn't helping, it's making things worse.

As anyone in retail should know, perception frequently becomes reality in people's minds.

Finally, as a Store Manager I once worked for told us, "If it doesn't happen on the front end with the customer then my efforts, the companies efforts don't count, we've lost, if ti doesn't happen in the checkout and with the last people our customer sees, we've failed.

If it doesn't happen on the front line, it doesn't happen.  I don't care how many cute programs a company comes up with, how well their stores are designed, how sharp their pricing is, how much knowledge their systems give them on customer behavior, if it doesn't happen on the front end, they are losing sales, they aren't being as successful as they could be.  If the front line worker doesn't feel valued by their employer, they simply aren't going to be a happy, effective employee.  It's not all about money, though being paid well helps, it's also in the attitude companies have toward their employees.

There is a WalMart Neighborhood Market down the street from my church, it is convenient so I'll stop there after church on Sunday for a few things I can get cheaper there.  After every trip, I get a survey from the store in my email.  The survey asks about my store experience, the quality of the products I bought, and they ask about specific items I bought..  My response is always that WM has nothing to do with the quality of national brand products, and that their customer service stinks, is mostly non existent and is the reason I don't do more shopping in their stores.  I only go there when it's to my advantage, not for my major grocery shopping.

And from another:

Sorry, but I find it hard to believe that workers at a Starbucks have brutal working conditions, compared to the beginning of unions in our country so long ago. People in factories were working under atrocious conditions. My Dad was a blue collar worker that avoided unions because he would rather deal directly with the owner. Throughout my career, I have never felt the need to be represented by a union. I would work or not work, get a raise or not based on my performance. I worked for great bosses and poor bosses. I have worked my entire life in retail. I tell everyone retail is not for everyone.

I feel the same way about teacher’s unions. I served 15 years on a School Board and in my experience unions only really exist to self-perpetuate their own existence.

Never have been and never will be a fan of unions.

Workers today don’t realize how good they have it.

On your last point … I am the son of a teacher who later became a principal, and who until the day he died was covered by medical insurance that he received because of contracts negotiated by his union.  (Of course, in his later years he also said how much he hated unions - my dad was gifted with many things, but a sense of irony was not among them.  Must've skipped a generation, because I have enough for about six people.)

I also am the husband of a now-retired teacher … and the father of a teacher.  I've spent some time in academia, though, to be fair, compared to others in my family (I also have sisters and a brother in the education game), I am but a dilettante.

That said, I would agree that unions protect bad teachers, which is unfortunate.  But they also protect good and great teachers … though not nearly enough these days, to my mind.  I've covered school boards as a reporter and watched them as a taxpayer, and it is my impression that some members are more interested in their own politics and indulging their own biases (I can think of at least one current member of my local school board who exemplifies this characterization) than in really focusing on teaching and learning.

BTW … I'm also fed up with federal and state education departments that stress teaching to the test rather than encouraging independent thinking.  So I have plenty of disdain to go around.

But unions only existing to perpetuate their own existence?  That's way too broad a brush, I think, that ignores the reality of what is happening here.

Last week, we took note of a Bloomberg piece entitled "Tesco Is Being Way Too Pessimistic About Inflation," in which it argues that while "Tesco Plc has become the first British food retailer to warn about the impact of the cost-of-living crisis," it is "worth remembering that inflation — even at a 30-year high of 7% in March — isn’t all bad for grocers."

I commented:

Of course, grocers cannot appear to be enjoying inflation too much, or taking advantage of their customers.  It is a balance that has to be struck in reality, but also a situation in which optics matter.  (Maybe companies need a new COO position - Chief Optics Officer.)

One MNB reader responded:

I agree with your comments on this story .  Yes grocers are seeing an increase in sales.  The Wall Street journal recently reported that the Grocery Industry is experiencing a 6.4% increase in sales.  We are seeing an increase in sales at are our stores too.  What the Bloomberg article and many other publications fail to mention, however, cost of goods, utilities, supplies, and wages have also increased. What most reporting is ignoring is the impact on the other side of the ledger.  Do not misunderstand my point.  This is not me signing the blues.  I acknowledge there are companies who have/doing  very well on the bottom line and CEOs have lined their pocket quite well. I am not writing to debate that.   My perspective is from a smaller grocer’s point of view, a small local grocer who admittedly did very good during the pandemic, and now taking those earnings and investing in employee wages and capital improvements. 

While the industry is seeing an increase in sales dollars, are the stores actually seeing an increase in units sold?   I suspect not.  Inflation is out pacing take home pay, gasoline is up 48% the past 12 months, groceries are up 10% the past 12 months.  The amount of money consumers have to spend is getting smaller.  Shoppers are trading down, shopping for multiple stores for deals.  Independent grocers cash flow  is decreasing for many of the reason previously sited.  Their investment in their employees, stores, and community dwindle.

I argue that inflation “isn’t all good for grocers”.

From another reader:

This is an interesting view.  But I have just one question, if the sales increase because of inflation are they truly gaining.  If you think about the process, the reason they are having to raise the price is because they are paying more for the product because of the inflation that is being passed on to them.  They are also raising price to offset for other costs they are incurring that are higher.  So, in the end, are the stores really gaining?  If these inflated sales figured are adjusted for inflation and then compared to the sales over the past year, even though the numbers look better, did they really gain anything or are they just passing monies along?

We had a piece last week taking note of a Fox Business report that Amazon told its third-party sellers yesterday that "it will soon implement a 5% "fuel and inflation" surcharge on top of existing Fulfillment by Amazon (FBA) fees, saying the move was in lieu of making a permanent fee increase … While fuel surcharges are common for shipping firms, this is the first time Amazon has added such a fee amid the persistence of soaring inflation driven by high gas prices."

One MNB reader responded:

So, Fuel surcharges are certainly understandable in this environment….one has to wonder a little about the calculation.

If there is a need to have a surcharge (temporary charge due to cost factors) instead of a simple increase, then where is the transparency as to WHEN the surcharge would go away?

Fast Company last week had the results of an anonymous survey of close to 1500 c-suite executives around the world in which 58 percent of them admit to "greenwashing," or making unsupportable sustainability claims.  In the US, it is actually worse - 68 percent admitted it.  To me, this is a combination of two sins - not doing what needs to be done when it comes to sustainability, and lying.

One MNB reader wrote:

Surprised?  Not surprised.  These C-Suite characters should be required to take Greta and a group of US kids the same age on a camping trip and let the kids have a chance to ask the tough questions most BOD’s or C-Suite seems capable of addressing.

Responding to last week's piece about accident rates at Amazon warehouses, one MNB reader wrote:

Regarding the view on the potential that the increased accident rate at the Amazon facility was related to understaffing, our experience supports that view.  When we decided to change our approach and increase staffing based on both turnover and a chronic pattern of injuries which had resulted in obscene workers compensation premiums, our safety record became virtually perfect and our workers comp premiums plummeted.  A more supported workforce, higher morale, and less turnover was the result.  We are paying about 300K less in workers comp premiums annually and about 300K more in wages and benefits.  Ask yourself, would you rather pay the Team Member or the premium?  The answer has been pretty simple, for us.  

And finally, on another subject, from MNB reader Angie Criswell:

I was very happy to read about the FMI nominations; I cheered out loud for two of the nominees.  I live just outside of Keene, NH, so was very happy to see our very own Monadnock Co-op on the list.  It is a very warm and friendly place to shop, enhanced by its small footprint.

I have also had the pleasure of working for Meijer store nominee Rob Vassar in several Ohio and Kentucky locations.  Rob is a savvy businessman, sets very high standards, then coaches, counsels and mentors his team to achieve store goals.  Rob’s ability to connect with his customers is second to none.  Meijer stores are generally huge.  It’s very difficult to make a 200,000+ square foot super center feel like your local family-owned grocery store.  Rob has made that happen in every store he has ever worked, for both the team members and the community.  The welcome and inclusiveness Rob shows every day is felt by all, and he treats every customer like a long lost friend.   I am very proud to have worked for him; he is a gem.