business news in context, analysis with attitude

Yesterday we took note of a Boston Globe story about how youth organizers with the Hyde Square Task Force in Jamaica Plain, Massachusetts, did significant market research and figured out that a grocery cart of items at their local Stop & Shop cost $34 more than the same products at the chain’s store in suburban Dedham - the kicker being that Dedham is a lot more affluent than Jamaica Plain.  They estimated that in an average year, this might cost poorer families as much as $2,000 more for groceries than wealthier families;  as one of the 15-year-old sleuths put it, "That’s $2,000 of college tuition, $2,000 on your bills, $2,000 that could go towards building generational wealth."

The Globe pointed out that when queried by the Task Force about the pricing differences, Stop & Shop responded this way:

“Unfortunately, we cannot respond to all the questions about our operations, products and services that we receive as it is important that our focus remains on our business and serving our customers … Additionally, the information requested or sought is often proprietary … good luck with your project.”

Stop & Shop wouldn't even respond to the Globe's questions.

I commented:

I have to say that I am filled with admiration with these kids - they're young, but they are demanding respect and attention, and they have every right to both.

The report they compiled makes the point that in a year, if they bought the same things, a family would spend two grand more a year at the Jamaica Plain store than at the Dedham store.  A 15-year-old who worked on the project, Euniss Yoyo, says "that’s $2,000 of college tuition, $2,000 on your bills, $2,000 that could go towards building generational wealth."

Now, I suppose that Stop & Shop would argue that its expenses may be higher at the Jamaica Plain store, and so higher prices are justified.  But it didn't make that point.  Rather, it responded with an email that strikes me as condescending, and then doesn't even answer the Globe's questions.  And it appears to be a front-page story in the Globe - maybe the folks at Stop & Shop (and its Ahold ownership) need to rethink their media strategy.

If there's an explanation, make it.  Talk to the kids.  You may not convince them, but you have to engage.  Condescension is not a good look.

In its email, Stop & Shop says that its "focus remains on our business and serving our customers."  Well, the kids on the Hyde Square Task Force, and their families, are Stop & Shop's customers, too.  Right now, they feel ripped off, and those feelings are being communicated to everyone in New England who gets the Globe, and anyone who reads the paper online.

Like I said.   Not a good look.

Here's what I'd so if I were with Stop & Shop.  I'd immediately invite the kids to a meeting, and allow the Globe to be there as well.  I'd engage in an open exchange of perspectives, and, where possible and appropriate, equalize prices.  And then I'd invest in collage scholarships for members of the Hyde Square Task Force and maybe bring on some of them as interns.

People like these kids are the future.  I'd make the most of this moment and turn it into an opportunity.

MNB reader Scott Nelson responded:

This is a tough one.  Like you I am impressed with these kids.  One important piece of information is missing.  Crime.  I looked at the crime rates in Jamaica Plains and Dedham, and Jamaica Plains gets a F/failing grade while Dedham gets an A.   Young sleuth Danny Vargas says “Finding this out means that we’ve had our money stolen, that we’ve been ripped off,”  and I cannot disagree.  The article points the finger at Stop & Shop when much of the blame needs to go to the criminals, politicians, and those in the legal system where a blind eye is turned to crime in general.   I’m betting that the shrink at the Jamaica Plains store is much higher than at the Dedham store.  

On a side note I was driving by the Vons in Oxnard CA a few weeks ago when two young males ran across a busy six lane road with a 50 MPH speed limit.  They were coming from the store and they each had two 12 packs of beer.  I brought it to the managers attention the next time I was in the store and they said it happens regularly.  It made me mad because I know that I will have to pay for that in higher prices.     

And MNB reader Bill O'Neill wrote:

You couldn’t wait to go after Stop & Shop. It is true that pricing in urban stores may be higher than other areas due to shrink in stores due to theft. However this is no different than any other chain in the country. Retail pricing zones exist in all of chains and is dictated by competition and shrink in stores due to theft. I admire the initiative by the group here however they need to look at it on a larger level rather than a granular level. 

First of all, a note to Bill:  You make it sound like I was lying in wait for Stop & Shop to screw up.  Not true.  This is business.  Not personal.

But Stop & Ship did screw up.

I actually agree with the point made in both these emails that shrink/crime/security can be blamed for higher costs and therefore higher prices.  But Stop & Shop didn't make that argument.  It dismissed the kids and didn't even engage with the Globe.

If Stop & Shop actually sat down with these kids and explained why prices are higher in a poorer neighborhood than in a richer one, that actually might have stimulated an important societal discussion among them and their peers, one that might have created a conversation in their schools and communities that might have addressed the problem in a meaningful way.

They, in essence, could've said to the kids:  This is business.  Not personal.

But that didn't happen.  The opportunity was there for the kids to be enlightened and for Stop & Shop to connect with a portion of its customer base to which it is demonstrably condescending.  

It's not too late.

We've had a lot of conversation here about how consumers are reacting to inflation and the possibility of recession, which hasn't happened yet and may not, in fact happen.  Or it could.  Who knows?

One MNB reader wrote:

Well , the only thing about your view is it doesn’t touch on the greater problem here, inflation.  In my past encounters in the business world before retirement, it was not uncommon to see this as stores were asked to be profitable at sight level as you suggested might be the case.  But the corporate response seems a little weak, but not unusual, especially if they have Budweiser types running the PR departments:-).

However, I give them a pass because these are different times and a lot of folks are trying to adjust but I am appalled at the avoidance of talking about the real culprit which is inflation.  Approach seems to be jobs are good, buy electric cars to avoid gasoline prices and tighten you belts by eating chicken instead of steak - the answer is equivalent to “ we don’t know how to fix it”.  We have idiots at the wheel of our economic policies, and all Americans are feeling it, especially the poor. Last four years food prices have been up 3.9. 6.3, 10.4 and already 7.7 this year. We can’t sustain that long term.  Gasoline that cost me $1.92 a gal in 2020 is now $3.45 a gallon in 2023, that’s an increase of almost 80% not to mention all the other petroleum based products.

Inflation affects us all and forces us to make decisions that often compromise who we are, business is no different.  And the stockholders are extra sensitive now regarding performance and managements are trying to deal with it, all the while economic leadership was saying “this is temporary and needs no action” - another equivalent to we don’t know how to fix it!! I don’t have to do a field study to see how prices vary in different areas for retailers, I am sure there is some pricing hanky lanky going on, but no more than I have seen before.  Inflation is the elephant in the room and pricing strategies is the gnat, and food retailers are just trying to do what they have always done.

I'm a little surprised that you don't think anyone is talking about inflation - I read about it all the time, and see numerous stories about it on various news programs.

I don't think most people would disagree that it is a problem, nor that the Fed probably waited too long to address it, nor that Covid-related economic stimulus packages may have gone too far, thus creating the inflationary problems we have now.

And you're right.  Gas prices can be a shock, and we're reminded of them in large numbers at virtually every major intersection in America.  It is important to keep things in perspective, though.  When I got my driver's license in 1970, gas was about 35-40 cents a gallon. (I try really hard not to be that old guy who ruminates about this stuff and the "good old days.")

I was curious, so I found a website that lets you calculate the price of gas in years past in 2023 dollars.  In fact, 40 cents a gallon in 1970 apparently would be $3.15/gallon if you factor in all the inflation that has taken place since I turned 16.   So, we're not that far off, despite the relatively high inflation of the past year or so.  (I say relatively because while mortgages currently are a little over seven percent, my first mortgage in 1984 was close to 14 percent - almost double the current rate.)

Also, according to AAA, the average price of regular gasoline in the US was $4.85, so in fact the idiots at the wheel of our economic policies may be doing something right in confounding times.

Let me be clear - I do not want to minimize the impact and implications of inflation.  Far from it.  I just think that context and perspective are important.

I totally believe that retailers can and should be telling a story about inflation - and in fact I've pointed out numerous times here on MNB how Stew Leonard's does that in a remarkable effective way, explaining where and prices are going up, and how to save money around the store.

The other day we cited a Wall Street Journal piece about the "confusion over what constitutes 5-star behavior for certain services, combined with the guilt of potentially hurting someone’s livelihood, has people defaulting to perfect scores. Ratings padding is particularly rampant for services involving personal interactions. 

I commented, in part:

This reminds me of a column that Michael Sansolo wrote for MNB years ago, pointing out that when he bought a car, the salesman told him that he would be receiving a survey and that he'd appreciate five stars - less than that, he said, would be tantamount to failing an exam.

Which, as Michael, pointed, out is crazy.  The survey becomes all about running up the score and not about seeking legitimate input that would improve the customer experience.  That's not helpful - for anyone.  Not really.

MNB reader Howard Schneider wrote:

Yet more evidence of the “tyranny of metrics,” which can often lead to unintended consequences, as in some hospitals avoiding risky but necessary surgeries to improve their mortality stats.

MNB reader Lisa Malmarowski wrote:

I once (once!) left a 3 star review for an Etsy seller. They sent me what I ordered, but it was misrepresented as vintage. I kept the item because I needed it for a project, but noted that the item arrived promptly but the description wasn’t accurate. 

The seller bullied me into changing the review  - relentlessly - and threatened to report me to Etsy. I changed it to a 4-star because I they wore me down and I didn’t want to wade into a battle over what was really a small issue. 

Leaving a low star review on ride-sharing apps can also bite you back and get you labeled as a bad customer. 

It’s all so tiring that I often just skip reviewing unless I’m completely wow-ed by something. Not worth my time otherwise. 

On the subject of the electrification of the nation's automobile fleet and whether the infrastructure exists to support this shift, one MNB reader wrote:

I have a little different take on the issue. I just got an EV, last Saturday matter of fact, I like it but looking at places I can charge it up locally brings up a different issue. From what I have seen on the map I think I can make it from one charging location to another but what do I do when it is charging? Most of the chargers out there are Type 2 and it can take 1-3 hours to charge up the vehicle. Where I live of the five closest locations, two are in neighborhood gas stations with not much around them, two are in the downtown area, and the fifth is in our craft district in a corner parking lot with a great local coffee shop on one side and an award-winning microbrewery on the other side. The downtown and craft district also has lots of restaurants, shops, coffee shops and microbreweries within walking distance. I think Walmart is smart to install chargers at their stores, I think grocery stores or any place that people may hang around for an hour, two or three would have a marketing edge, but if there were other things to do in the area it gives it more of a marketing edge, especially as the years go by and more people buy them.   

From another reader:

I agree that range anxiety is a huge issue for many buyers. I also think that the build out of charging stations will not be an issue; If there's a chance to make money, it will happen. The bigger issue I see is that the speed of charging is so much slower than the time it takes to fill your gas tank. If you only take day trips around your home and can charge overnight, the EV is a good choice. If you are taking a trip longer than 300 miles, it might be a deal breaker. Most trips like that in my experience include a time factor as well-we want to get there, as quickly as possible. Until they can perfect a fast charging technology, I think this will continue to be a factor.

We've spent a lot of time here on MNB talking about how retailers should adjust their offerings to an EV age.  If it takes 5 minutes to fill your tank, but 50 minutes to charge your car, a retailer becomes preferred by offering unique and differentiated ways to fill that time productively.

MNB reader Andy Casey wrote:

Personally, I think you are dreaming but we will know in a few years. No doubt charger will expand quickly, perhaps even explode, but there is a world of difference in the number of refueling places needed when you consider it takes 5 minutes to put gas in a car and the time required for even the fastest chargers to do the job.  And while chargers are indeed popping up at Walmart and others, 10 or 20 just won’t go very far against their daily customer count.

Responding to our piece about speculation that Amazon might offer low-cost or possibly free nationwide mobile phone service to Prime subscribers, MNB reader Steve Anvik wrote:

There is another revenue stream: selling phones. Amazon is savvy.

They did.  The Fire Phone was launched in mid-2014 and discontinued about a year later.  It was, from all accounts, a commercial disaster - Amazon had to take a $170 million write-down.

But, what Amazon learned from the experience informed the creation of the Alexa virtual assistant technology.  So not a total loss.

On the subject of an aging workforce, one MNB reader wrote:

I recently read a quote that stated “you don’t know what you haven’t experienced”. A tremendous amount of experience and wisdom is exiting the workforce and the necessary mentoring for the up and comers is lacking.

We quoted the other day from a fascinating piece in the New York Times about some resistance Dollar General is facing in one small rural community to its plans to build a new store there, with one cohort objecting to the changes they feel such a store would bring to their town.

MNB reader Steve Petersen responded:

Interesting article as DG continues to grow.  Are you aware of the slotting fees they charge, 1-SKU can cost you $250K , second year slightly cheaper.  They use manufacturers $$ to fund their growth.

Yup.  Check this out.

On the subject of Wegmans deciding to close a six-year-old, two-story store at the Natick Mall in Massachusetts, one MNB reader wrote:

The Mall hours, for the most part, are 11am – 7pm. Some stores stay open until 8pm on Friday and Saturday, but still. Wegmans Natick closes at 10 pm, where other Wegmans in the area are open until midnight.

The Natick Mall lost two anchors – Neiman Marcus and Lord & Taylor.

The car traffic at the mall, save for holidays, wasn’t really that bad. I think the pandemic, anchor store closings and shift to online buying hurt this store more than others. I’m wondering why Wegmans doesn’t just move into the new supermarket that is being built at Shoppers World where B&N and Old Navy used to be? No name has been announced that I’ve come across. Or the abandoned Amazon Fresh in the old Bed, Bath & Beyond location (although THAT would be a pain vis-à-vis traffic).  

I have a question for others in Massachusetts near the Natick Store – did anyone else get an email from Roche Bros asking them to take a survey soon after the Wegmans store closing announcement? I didn’t take the survey because they have to know my answers would be better generic offerings and they need to lower prices items by 20%.

I'd say it is a pretty good bet that you're not the only one to get that survey.

Responding to a story we ran yesterday, MNB reader Doug Larsen wrote:

This is not the first time I have read that people are now spending more on going out to eat than on groceries.  All I can say is, “Not at our house. Not even close.”  We are probably not typical with no kids and the time and desire to cook.  But, that is still amazing to me. 

What was more amazing to me than this was the breakdown I saw recently on who gets how much from meals delivered by Grub Hub, etc.  In the priorities section, having food delivered is way down the list.  Frankly, even when I do order pizza out, I usually go pick it up because I want to control when I get it and how hot it is when it gets home.  Where we order pizza from is less than 5 minutes away and I just can’t justify the cost.  I hate to sound like Clint Eastwood saying “Get off my lawn.” But I do wonder if people having food delivered regularly will wake up years from now wondering “where all the money went” and waiting for their parents to die so that they can retire.  

Well, that's kind of gloomy.