business news in context, analysis with attitude

•  CNBC has a story suggesting that "in the current confusing economic environment — marked by inflation, supply chain bottlenecks and a volatile consumer changing spending patterns due to the high prices which followed Covid — small business experts say that Main Street should be more optimistic about the advantages of being small.

"The inventory builds and subsequent markdowns from the biggest retailers, including Walmart and Target, show that even the best can get this consumer economy wrong. In fact, small business owners, being closer to relationships on both the supply and customer ends, may be able to more nimbly manage a fast-changing environment."

According to the story, Nada Sanders, Northeastern University distinguished professor of supply chain management, argues that the moment presents "a tremendous opportunity" for small retailers:

"Her opinion is that the biggest companies have become too reliant on inventory algorithms to forecast data, but in the current economy, which has defied many historical patterns, 'historical data in this space right now isn’t really good data. It’s not clean data, it doesn’t indicate the future that is very volatile,' she said.

"This gives small business owners who can connect directly with customers, to understand what their needs are, a potential advantage that can’t be calculated by an algorithm.

"Whether a small business is B2B or B2C, Sanders said direct communication is a 'real answer' for them right now in dealing with changing consumer behavior.

"'What I’m seeing with the big companies, they’re trying to hire futurists and trying to figure out ways to actually predict demand. But every time we look at the numbers, the Consumer Price Index, all of it, we’re looking backwards,' Sanders said. 'The fact of the matter is, we’re in a very quickly changing landscape and I think we have to look forward. Small business owners really need to connect and use judgment to forecast and to understand what their customers need'."

•  The Wall Street Journal has a piece about 10-store Karns Foods of Mechanicsburg, Pennsylvania, where management is making adjustments in anticipation of a recession … and trying to do exactly what the Northwestern professor is suggesting.

According to the story, the company "is carrying more low-cost food brands and dropping some expensive products altogether. The grocer removed quart-size heavy cream products from some stores as they became more expensive and put less expensive store brands and smaller packages on shelves instead … Karns stores got rid of 200-count bottles of pain-relief medicine because executives believed that the item was too expensive and wouldn’t sell. The grocer is considering eliminating one or two of the least popular salad dressing items that executives said are unlikely to sell if they get more pricey.

"As people increasingly seek lower-cost products, Karns is adding more of them. The company is focusing on store brands while expanding its so-called $10 Max Packs in the frozen meat department where it sells three- to five-pound bundles of protein. Karns, which said it highlights Pennsylvania suppliers to draw customers, buys meat made for restaurants and repackages them for the value section."

The story notes that "amid an economic slowdown and high inflation, companies are trying to forecast shifts in consumer demand and recalibrate their business. A number of retail giants and consumer companies have issued profit warnings and projected falling sales in recent weeks as consumers start to pull back on spending. Small operators like Karns face particular challenges of managing growing costs and juggling competition from bigger peers."

•  And, the Wall Street Journal also has a story in which "some big U.S. companies say hiring is getting easier, at least by a little.

"Employers in hospitality, retail, healthcare and other industries hardest hit by worker shortages over the past two years say they are seeing emerging signs that recruiting workers - and getting them to accept jobs when offered - is becoming less of a challenge, even as the overall job market remains tight … Corporate leaders say the job market still favors workers over employers and that challenges remain in drawing enough staff. Still, many say the worst of the hurdles appear to be over."

One reason for the shift may be the tenuousness of the economy:  "Fears of a recession or inflation … appear to be keeping some workers in their existing jobs, economists and executives say, leading to a drop in turnover in some industries - another boost for companies."

KC's View:

Just a few points, if I may…

I'm not sure it is entirely fair to sat that independent retailers are better positioned to deal with current economic challenges.  The ability to be more flexible and nimble certainly helps, and there are some independents who will take advantage of this to a greater extent than others, but there also can be a lack of resources making life more difficult.  No offense to the Northeastern University distinguished professor - I am but an academic dilettante, distinguished in nothing - but her observations strike me as a little naïve.

I think the Karns example is an intriguing one, but I do find myself wondering if the company has done enough SKU rationalization and price optimization in the good times.  I do think that retailers in general can be a lot sharper in their approach to merchandising, being more specific and targeted in a way that speaks more specifically to the store's core value proposition.  

And finally, while the pendulum may seem to be swinging back - slowly - toward employers, I think it is critical to establish and sustain a culture of caring within organizations so that the swings of the pendulum are less consequential.    Maybe employers should favor employees over investors, and in doing so, create retail businesses that can sustain themselves for longer periods of time.