retail news in context, analysis with attitude

Yesterday, we had a long email from an MNB user that defended the notion of an increase in the minimum wage. Now, in the interest of fairness, here is a rebuttal:

I have spent my entire career in and around the grocery business - 44 years and counting.  For more than a few years I worked for one of the country’s best national retailers, in a job that specifically dealt with labor budgets and union contracts – summarized here as “store 1 receives $2000 per week to spend on front end labor”.  If labor costs $7.25 per hour, the store gets 276 hours.  If it’s $10.00 per hour, the store gets 200 hours, meaning that 76 hours have to go away – either through across the board cuts or from “targeted workforce efficiencies” – meaning that 3-4 part-timers become no-timers.

It’s a very straightforward business proposition tied to a 1-3% profit margin.  Given that wages and benefits make up more than 1/3 of total expenses, a 39% increase in wages (not just for the bottom end of the scale, but ultimately filtering to those above as well, particularly in union operations) not only doesn’t leave any profit but could actually put a retailer instantly in the red.
 
I am not just projecting this – I HAVE SEEN IT HAPPEN more than once.

The statistics the reader included don’t lie – wages have fallen since 1972.  However, they really tell a different story than the one intended:   Overall earnings are down from 1972 to 2011 to a large degree because the nature of employment in this country has changed – the good old US of A has largely transitioned from a skilled manufacturing economy to a service economy – to some degree because our labor rates were too high compared to those in other countries, and the jobs moved away.
 
Arbitrarily raising the minimum wage won’t create spending power – it will just move it from those who lose their jobs to those who get to keep them.


And, another reader offered:

You shared some data, from an MNB user, showing weekly earnings (based on 1982-1984...source Fed Reserve Bank of St. Louis).

It might be interesting to run some other data along side...the weekly pay of our Senators and Congressional Representatives.

I wonder how their pay rates have changed over the same time span...1972 - 2011. Do you think that their pay scale trend is performing better or worse versus the data points we saw from Monday's MNB Your Views?





Also had some reactions to yesterday's piece about Walmart focusing more on "Made in the USA" products. MNB user Mark Boyer wrote:

It seems that a focus on “Made in the USA” would provide more and better jobs in the US, resulting in a more financially stable consumer base that spends money in places like Walmart and other retail outlets. This is the type of “stimulus” that provides repeatable, enduring results.

From another reader:

The question to ask here is, is this just like the” commitment” to buy local produce, which has turned out to be one sku and limited quantities? Could this be WalMart concern that sourcing in China maybe being changing, that China is looking to drive its economy internally vs. just relaying on exports. Perhaps they see the growing instability in the Mid East (India) ? Last, and I think this is big, that they don’t want to have the government point to them as one that’s not helping the US with jobs, and growth as the learned this lesson with health care.. In fact, Walmart is continuing to cut labor, increase its part time ratio (today the ratio of full to part time is 50/50 chain wide and 60/40 part to full in many stores). So hiking up the red, white and blue is the thing to do…

Another MNB user chimed in:

Am I the only one who sees the hypocrisy (or irony if we choose to be more kind) in this initiative? I remember over the past two decades how Walmart  would specify the “China Price” – the actions that effectively drove down prices and enabled lower income families to participate in the material part of the American Dream. And oh, at the same time accelerated the gutting our manufacturing base. (I know, it isn’t all Walmart, but when that much market power was wielded, our economy was irretrievably changed). And now the tide has turned and the economic factors favor domestic manufacturing. But somehow I can’t see a real rise in real wages – labor has been beaten into submission.
 
Can’t dispute the laws of economics but really has the world flipped?


And, from yet another reader:

I am a Food Broker in California.  While “Made in America” sounds great, the fact of the matter is that “Assembled in America” is a more accurate term in many cases.  Paper products, for instance, are simply “converted” here in the USA.  The pulp comes from overseas in large rolls and is simply re-rolled into consumer size packages.  We recently lost a private label bid because the source statement said “Made in China” while the competitor who won the bid sourced his product from the exact same place.
 
Almost all beef jerky comes from South America in bulk and is packaged here.  Beyond that, packaging for many products comes from China including plastic, glass, and labels.  I question what the exact parameters are for the “Made in America” logo on a product to qualify.


MNB user Mike Franklin wrote:

How about sourcing in the USA because it is good for the USA…instead of strictly self-motivated reasons?
 



I predicted yesterday that JC Penney CEO Ron Johnson won't last in the job and that he'll be out by Memorial Day. (I like what Johnson is trying to do ... I just think the deck is stacked against him.)

One MNB user responded:

I don't give Ron Johnson till Memorial Day.  I suspect they will launch the parachute by mid-April.  Their Sunday print ad featured just one unsmiling female model on almost all pages of their multi-page ad.  The unspoken message?  We sell to only one demographic here.

From another reader:

I’ve worked as a buyer for JCP, Target and Eckerd Drug which spanned a 25 year career.  I’ve observed retailers over that period and know it’s a tremendously difficult task to go from a Hi/Lo strategy (beaucoup Tabs, coupons, ROP ads) to an everyday low price strategy.  Mr. Johnson should have taken the advice of some of his operations people who wanted to test the concept prior to launching; unfortunately his stint at Apple made him an “all in” guy.  The stores are looking good and their new ad strategy publishing comparable pricing can work in the long run.  The question will be can they hang on until the strategy takes hold.  What a mess to go back to the old strategy by raising prices so that you can lower them on sale.




Finally, I wrote yesterday about a Tampa Bay Times report that Publix is testing a new nutrition and meal planning service in its Riverview, Florida, store, offering a registered dietician "on hand to help costumers make sense of food labels and plan healthy meals ... The program includes personal shopping assistance, nutrition counseling, meal planning, and group tours of the store."

I commented:

Think of this as Apple's Genius Bar, adapted to the supermarket. Great idea ... the only problem is that more companies should have been doing it years ago.

One MNB user responded:

ShopRite has been providing dietician consulting services in selected stores since 2006.  Today there are 56 Registered Dieticians covering 64 of our stores -- and our numbers are growing.  Not only do they provide nutritional consulting services, but they frequently reach out to the community (schools, senior centers, etc) to educate on healthy eating.  Just thought you should know.

And MNB user Connie Clifford wrote:

Noticed your comment regarding Publix RD program. Hannaford has had in store Registered Dietitians since 2003 ... They are now in close to 60 of our stores.


You're right ... and I was imprecise in my commentary.

What I should have said is, it is surprising that it has taken Publix so long to catch up with a smart trend that a number of retailers embraced years ago...
KC's View: