What top supermarket chain is likely to announce a major labor downsizing this week, using layoffs and early retirements that will be a reaction to both tough quarterly sales and profit numbers as well as to expectations that the rest of the year isn’t likely to get much better?
- KC's View:
- And from what we’re hearing around MNB World Headquarters, this is likely to be just the first in a series of similar moves that could occur in coming months. The more people I talk to, the more I keep hearing cautionary words about the state of the economy…with people noting that every time gas or energy prices go up, it has a ripple effect on food sales.
For example, I wouldn’t be surprised to see more stories like the one in the Wall Street Journal about so-called “salvage grocers,” which sell closeouts, including “products that manufacturers have discontinued, seasonal items that are outdated and goods that are near the date when manufacturers expect freshness to wane. Many such grocers also sell products that were damaged in transit but remain edible, such as a dented box of Cheerios. Prices tend to be significantly lower than those at conventional stores and big discounters like Wal-Mart.” For at least one segment of the consumer population, the Journal suggested, it doesn’t mater if an item is past its sell-by or eat-by dates…the rising cost of food and fuel has put them in a position where they cannot afford to make such distinctions.
There was an excellent piece in the Boston Globeover the weekend about how a recession can be a business opportunity. Some excerpts:
• “Business leaders confident about making decisions and deploying assets in a period of growth find they have to operate differently when sales slump and resources shrink. In some cases, the skills that had previously served them well - hiring talent, rolling out products, anticipating market demand - are no longer valued … While it's still uncertain whether the economy will stumble into recession, popularly defined as two consecutive quarters of contraction, many businesses already are feeling the squeeze. And managers are feeling the pressure. How they react will be critical to steering their enterprises through the gathering storm into calmer waters.”
• “But managing through a slowdown is more than a matter of psychology. Like it or not, it calls for making tough choices, cutting costs, improvising, and allocating resources more efficiently … This may indeed be the time to trim payrolls, wring out excess capacity, streamline retail outlets, consolidate suppliers, or farm out production or software development to lower-cost contractors. Any of those steps could have adverse consequences, however, such as draining brainpower, ceding business to rivals, or losing control over processes. They should be done only as part of a strategic plan that would make an enterprise more competitive, advisers said.”
• “Depending on a company's ownership structure, cash reserves, and competitive position, it may also be a time to make smart investments in new products or markets that promise growth when the economy rebounds.”
And here is perhaps the most important passage:
• “Businesses shouldn't lose sight of their customers when times get tough. When manufacturers raise their prices, airlines ladle on fees, or retailers skimp on customer service, it can come back to haunt them.”
It seems to me that regardless of whether the nation enters a recessionary period, two things are likely to be true. One is that many or most people are going to be more careful about spending, and the other is that many or most people will not stop being aspirational in their tastes. As one consultant told the Globe, "The earth is going to keep spinning, day is going to follow night.” And, I would add, truly successful companies are going to figure out how to keep moving forward, even while being careful about resources.