business news in context, analysis with attitude

Yesterday we posted a missive from MNB reader Craig Espelien on the subject of "externalities," which he defined as "when one party produces something that creates a problem and another group (too often the consumer or the taxpayer) has to deal with the problem at a later date."  The posting was in response to - and in support of - an article that we featured on MNB about the importance of adjusting capitalism's traditional benchmarks to account for new realities.

One MNB reader wrote:

My experience with sustainability initiatives showed that there was significant financial incentives to being more sustainable as well as moral and social benefits.  Efforts to reduce any solid waste to leave a production facility was enlightening and a way for local management to engage all employees on a project they could be proud of and incidentally lowered the cost of removing solid waste.  There were ways for similar efforts to make a positive impact on climate change and reduce packaging, energy and operating costs across the enterprise.  Capitalism can be a driver for reducing carbon footprints across the organization and therefore can support climate change in a positive way.

MNB reader Phil Herr wrote:

Kudos to the reader who described the concept so well. When I used to teach PR, I used the example of the T-Shirt purchased for $5.00 at Walmart. While a great bargain for the buyer, I asked about the externalities that enabled WM too charge so little. And these include all the processes in creating the item — fuel, fertilizer, bleach, cheap labor, plus shipping and merchandising. So who pays for the externalities in depleted resources, carbon, pollution and so on? Obviously, we all do, but not directly.

But MNB reader Mike Sommers argued:

I understand Craig's thought that creating compost doesn't solve the issue of rampant food waste.  However, his assertion that compost is 'better trash', is in fact, a trash argument.  Having experience working on an organic vegetable farm that offers CSA membership, compost is black gold when it comes to harvest yield.  Using compost is a good start to regenerating depleted soil caused by conventional farming practices, used to grow commodity crops, under a more is better, get big or get out ag policy.  All of which, is trash and contributing to the climate crisis.  FDR was correct in saying, 'The nation that destroys its soil destroys itself'.    

On another subject, from an MNB reader:

Amazon has a big problem with its Chinese vendors.  It can be demonstrated with the recall of eclipse glasses that were not safe to wear by a Chinese merchants that did not exist while Amazon could have determined that.  Whereas US merchants are subject to US court decisions Chinese merchants are not and will scurry under a rock and change their name to avoid US Court decisions.

Amazon can do several things to reduce the problem.  They can require Chinese merchants to carry Product Liability Insurance from US insurers.  They can make sure that the name of the company is a real company in China.  For individuals, they can require a picture of the Chinese passport to verify identity.  And they can make sure that when they are sending payment they are sending it to China.  Or Amazon can remain complacent with the commissions it receives.

From another reader, a comment about a recent story:

The headline of this story “Sears Said To Be Closing Dozens of Stores” was quite surprising.  I would never have thought they still had  “Dozens of Stores” left.

We took note the other day of a Los Angeles Times piece saying that, "citing the climate crisis, the Los Angeles City Council voted Friday to ban most gas appliances in new construction, a policy that’s expected to result in new homes and businesses coming equipped with electric stoves, clothes dryers, water heaters and furnaces."

One MNB reader responded:

Here in So Cal we have plenty of clean burning natural gas.  It is efficient and affordable.  The leftists that run this state are working to push us to all electric when we do not have an electrical grid that meets our needs today.   We keep hearing on the radio and TV about curtailing our electrical use in the afternoons and evenings and that is before summer when the demand will increase.  There is a Reuters story in US New & World Reports about how we are facing a potential shortfall of 1,700 megawatts to as high as 5,000 megawatts.   We are seeing more and more black outs and those foolish enough to sign up for the Smart Energy Program will see brown outs when demand exceeds supply.  If feels like we are moving towards being a third world state. 

These are all interesting points.

Though I would point out that it is a little unfair to describe California as being on the verge of becoming a third-world state.  It still has one of the largest economies on the planet … though it does face some enormous long-term challenges.

Yesterday MNB cited a Wall Street Journal piece about how "supermarkets and distributors are pushing back on higher prices from food makers, as escalating inflation drives more consumers to rethink their spending.

"Kroger Co. and other grocery chains said they are asking brands to prove why higher prices are necessary before accepting them, and warning manufacturers that they will stop carrying products if food companies won’t negotiate prices. Some companies said they are switching to new meat suppliers with cheaper products, and are delaying price changes for items like canned goods."

I commented, in part:

Retailers are entirely justified in taking this approach.  This is the kind of environment in which both retail and packaged brands can lose market share, as some players may be better positioned - sometimes in terms of perception, sometimes in reality - to take advantage of tough economic times.  Think dollar stores and limited assortment stores.  And so, retailers and manufacturers may need to reduce their margins in some areas as a way of preserving relationships with their longterm shoppers.

At the end of the day, it is really important for retailers to figure out ways to give consumers wins wherever and whenever they can.  Relationships with shoppers aren't just to be pursued during the good times.  In fact, they are even more important during tough times, which can be an opportunity for retailers to demonstrate to their customers that they are on their side.

One MNB reader disagreed:

I don’t agree on this at all.  The retailer has no right to justify costing for a manufacturer.  Let’s turn this around on the retailer.  The manufacturer now has the right to demand line-item costs of the retailer to run their business.  The manufacturer will then validate those costs to see if the retailer’s operation is efficient enough to justify the margins they require.  Neither have the right to demand this internal information.  Each only has the right to sell or buy ones products. Retailers are not the watchdog of the industry; they are equal contributors to the problem.  Readers ask yourself these questions: How come inflation has increased food costs over 11% and Dollar stores prices went up 25%.  How come retailers in this environment are charging for late fees on deliveries, increased slotting fees, penny for penny promotions,  reset fees, increased ad costs, etc.??  You state both sides should reduce margins in this environment for the mutual goal of the consumer.  Agreed, but in reality that will never happen when the cost to sell and produce an item increase on both sides of the “aisle”.

I would argue that if a retailer is positioning itself correctly, it indeed should be a watchdog, serving as an agent for the consumer.  Since it is the gateway to the shopper, a retailer can demand anything it wants of a supplier.  The supplier has a perfect right to walk away - there is such a thing as the intelligent loss of business.

I'm not saying that retailers always behave in the best interests of shoppers, nor that they always make the most ethical and equitable decisions.  I am saying that they should.  And can.  And that this can be their moment.

MNB reader Kelly Dean Wiseman made the following observation:

With respect to inflation in meat it needs to be clearly stated that the major retail food chains have been and continue to be a significant part of the problem.

By constantly pushing prices lower and lower all of the chains have been complicit in the inevitable consolidation of the meat packing industry.

None of them resisted this as they enjoyed watching prices being artificially suppressed at the expense of ranchers across the nation.

Those of us in the independent and/or cooperative grocery sector have seen this, clearly, for decades, and have instead created relationships with local and regional ranchers and small processors.

Hence, shocker alert: our beef prices have not escalated anywhere near what we see down the street at the big box stores.

We reported yesterday about how Amazon is pushing back against a rare piece bipartisan piece of legislation called the American Innovation and Choice Online Act, which would prevent tech giants - specifically Amazon - from giving preference to their own businesses on their websites."

I commented:

I continue to maintain that if Amazon cannot give preference to its own products online, then bricks-and-mortar retailers ought to be prevented from giving their private label items preferred positioning on store shelves.  What's good for the goose…

MNB reader Glenn A. Cantor wrote:

I love hearing about old, out-of-touch legislators trying to create laws to address supposed issues about which they know little.  Not that I favor Amazon, but when you hear these Congresspeople try to explain their reasons for supporting this kind of legislation, it is clear that their perspectives are based purely on politics and not in addressing actual issues.  BTW, I did not know that they solved the gun problem to be able to free up time to talk about Amazon.

I do think that legislators ought to be able to do two things at once, but I take your point about the gun issue.

Yesterday I wrote about an email customers received from Alison Weick, the president of e-commerce company Boxed, in which she used plain talk about inflationary pressures to make what is an admittedly self-serving pitch for why people should shop at Boxed, but also was an explanation about how her company is working in shoppers'' best interests.

I commented, in part:

Let's stipulate that this email doesn't reinvent the wheel.  But it doesn't need to.  The email is a simple, non-product oriented effort to establish common ground between the store and the shopper, and lay out how Boxed is working to be the agent for the consumer.

It may not move the needle a lot.  But it is  likely to move the needle at least a little, and that's important in times like these.

Simple question for MNB readers:  Has your company written a similar email to your customers?

If not, someone else may have … and may be filling a vacuum that you created.

One MNB reader reacted:

My company has not but I love the idea. Customers have many questions around inflation and supply chain and the answers they receive are from us, at store level.  Often, most do not ask and assume, in the case of supply chain, that we are not ordering the product.  Once we explain, they are appreciative for the answers. 

Exactly.  Can I get an "Amen"?