Published on: May 12, 2015
Got the following email from an MNB reader who was ruminating on all the observations we've had here about Walmart suffering from a serious and systemic out-of-stock problem:
I have often wondered if Walmart’s high out of stock levels are another example of “making money on the buy, not the sell”, although I can’t for the life of me figure out how they think it helps their business … unless they are withholding payments long after products have sold through, and then delaying reordering long enough to make money on their money. I guess it could be a strategy, but a very short-term one.Uber is testing the water on food deliveries with a 10-minute guarantee. leading one MNB reader to write:
Is my memory correct that Dominos once did a 20 or 30 minute or free delivery? End result was stopping the guarantee and stopping the accidents caused by speeding drivers. Just thinking.On the subject of Whole Foods' decision to launch a new chain of stores next year that will have lower prices and appeal to millennials, one MNB user wrote:
I feel that constantly pandering to the lowest price is not necessarily good for business or stakeholders. It seems to me that ever since Whole Foods has tried to focus on value brands and lower prices to bring in new customers, the stock price has been going down. There have been some ups, but the sales growth each year is softer and softer. That could, to a certain extent, be a matter of saturation of the markets where they already are. There are only so many tummies to fill. But I think they are negating their main demographic.
It seems that they are just a “grocery store” now…not someplace special you can brag about getting that cheesecake from, or amazing produce. They may still be the best at what they do, but they need to focus on their foundations and not just running after any extraneous shopper. Maybe the new brand will let them do that – maintain the higher end feel and demographic while still creating an engine that everyone can benefit from.
Sometimes, it’s not just about spending the least amount of money. It’s about quality and values. Americans spend a much smaller proportion of their income on food than most other countries. And, in general, in this country you get a lot of crappy food for your money, filled with government subsidized corn and soy fillers in various forms. I don’t mind paying for good, decent food – that is actually food.From MNB reader Larry Ishii:
I fully agree with your assessment of Whole Foods’ strategy for this new format.
But being targeted at the “20-30 somethings”, don’t they run the risk of making these shoppers so comfortable to the new format that they will resist the current format as they get older?
We baby boomers will all be gone in time (at least not able to do our own food shopping) and Whole Foods could be left with shoppers that will only accept the lesser sort of program.
This could be very risky.On another subject, referring to a comment I made the other day, MNB reader Alina Gagnon wrote:
Just curious. How come you are not a CVS fan?Mostly, it is the long receipts that are responsible for the death of millions of trees, and a loyalty program that strikes me as totally store-friendly and not nearly as usable by consumers as it should be.
On the subject of Blue Bell's listeria problems, one MNB user wrote:
People who don’t live in Texas will have a hard time understanding what Blue Bell Ice Cream means to Texans, and what a shock it is to learn what is truly a part of Texas Life has been mismanaged and misrepresented.
I agree that the violation of the public trust will be very hard if not impossible to recover from, and the executives involved should be prosecuted. Blue Bell will make a great case study of what can happen with a very private family owned company where in my opinion they became convinced that they were invincible based on the success and growth of the company over the past 20 years from small town roots in Brenham, TX.MNB reader Andy Casey wrote:
Definitely agree, it would surprise me if Blue Bell ever recovers from this as a company – beyond the costs of the recall, the litigation will be lengthy and expensive. Probably the best we can hope for is they sell their recipes to someone who knows how to do it right because it was really good ice cream.The biggest surprise of this story to me was not that a major corporation would know about a listeria problem for two years and do nothing about it, but that Blue Bell was the nation's second largest ice cream company.
But I do have a thought about what to do with all that ice cream. Apparently there are all these tunnels in Texas that are being used to house federal troops with designs on imposing martial law on the Lone Star state. Maybe they could dump all that listeria-infected ice cream down there and wait for the troops to keel over.
We had a piece recently about a study that suggested that a pretty large percentage of people find grocery shopping to be a fun experience, leading one MNB user to write:
Since it is a global survey, I will give them the benefit of the doubt. But I have to say, it is not a fun day for me grocery shopping when the family is ushering cranky kids through the grocery store. I sympathize, been there, done that, but I don’t enjoy the experience any more than the crying child in the cart or the slow moving moper bringing up the rear. It is a necessity, but I can’t bring myself to shop via e-commerce yet, I like looking at the produce and picking out my own meat. Maybe someday but I am not ready to give up my trip just yet.I mentioned that even though I shop at Stew Leonard's, once referred to as "the Disneyland" of supermarkets, I try to make the experience as short as I can, leading MNB reader John Couch to write:
"Because as pleasurable as Stew's is, it is a good day when I can get in and out in a half-hour" ... you apparently judge the speed of the event as the appropriate measure of fun. You must prefer the trailers over the actual movie as the trailers are so much faster. Yes?Not the same thing. In fact, I can think of a number of experiences that, the longer they last, the better. It is just that grocery shopping doesn't make the list.
To be honest, though, there have been times when the trailers have been better than the movie they preceded.
On the subject of Amazon's various food-related innovations, MNB user Gary Loehr wrote:
Wouldn't it just be easier for Amazon to invent a transporter. Or perhaps a holodeck, so you could experience using things without actually having to buy them at all.Considering Jeff Bezos' enthusiasm for space flight, it would not surprise me at all if he had people on staff trying to turn
Star Trek solutions into reality.
It would only be logical.
I've been a little critical of supermarket chains that seem not to be as far along as they should be in the technology department, especially when it comes to loyalty programs that seem in some ways to be antiquated. One MNB reader offered the following observation:
I work for a chain that cannot access a frequent shopper card through a phone number. Why? Privacy protection. As a customer, do you really want to give your phone number out when checking out so that it could be overheard? Or how about the potential identity thief standing at the next register watching the cashier type that phone number in? The less information I give out when signing up for a frequent shopper card, such as a phone number, the better. I believe most chains will accommodate a customer if they forget their card.Maybe there are all sorts of reasons that this does not make sense, but when I was at PetSmart the other day, the keypad asked me to type in my phone number, which resulted in access to my account. It then asked me if I wanted to have the receipt emailed to me, which I did...and the keypad simply verified that my email address had not changed. It didn't seem insecure, and in fact seemed pretty efficient. If I am wrong, I am willing to be educated.
On another subject, one MNB user wrote:
I have written to you before on this subject of Made in the USA. It is good to see that we have more products that are made in the USA and it is also good that we Americans are willing to pay a bit more for goods that are made in the USA. The WTO, NAFTA, CAFTA, etc. might have had good intentions for open and free trade, but the jobs that we once had, were outsourced to those countries where the labor was much cheaper than those jobs we had in the USA. Every major retailer was forced to buy goods that were made where the goods could be made cheaper. The American consumer was forced to buy goods that were not made in the USA, and the unintended consequence was the jobs that were here in America left.
The answer is plain and simple, WalMart, Target, K-Mart, Home Depot, Lowe’s Costco, Sam’s Club, and every other major retailer has to change where they source their merchandise from. It is all good that Walmart has an initiative to have hundreds of million dollars that they have committed to buy Made in the USA goods to sell, in their stores, but that is a drop in the ocean, dollar wise.
In addition to the major retailers, GM, Ford, NIKE, Apple, GE, Boeing, etc. have also outsourced quite a bit of their manufacturing to countries with cheaper labor.
An over simplification, as the capitalistic system determines who will make the goods and where they come from.I get your point. Though I'm not sure that the use of the word "forced" in your opening paragraph is quite accurate.
We had a story the other day about demands that Whole Foods places on its suppliers, which led one MNB user to write:
Sounds like Walmart’s demands on vendors.I get the reference, but I'm not sure that's entirely accurate. The story you're referring to talked about how Whole Foods pushes its vendors to get things like organic certifications, GMO labels, higher quality ingredients and more effective brand names. When those vendors buy into the Whole Foods approach, they get shelf placement.
But when Walmart places demands on its vendors, based on everything I've read and heard, it tends to be mostly about costs, so Walmart can lower its prices. If that means dwindling margins for the supplier, or lower quality ingredients, so be it ... because Walmart wants to be consistent with its low price brand message (or at least the perception of low prices).
Not to over simplify, but one strikes me about being a high common denominator approach, and the other is about the lowest common denominator. Of course, this could all change as Whole Foods launches a new, lower-priced chain of stores, and Walmart looks to find ways to appeal to the Amazon consumer.
We had a piece in MNB the other day quoting a
New York Times story in a way that grabbed Kevin Hollenbeck's attention:
My biggest takeaway……Amazon has only a 2% share of the 1.2 trillion dollars of purchases American made……time to buy more Amazon!Caution: MNB is not responsible for any stock purchases or sales that you may make.
Responding to yesterday's piece about the Dufl app, one MNB user wrote:
So for just $120 a year, plus $100 for *every* trip I take (good luck getting that through your expense account unless you're the boss...), I can trust my wardrobe to being lost at every hotel I stay at? I can't begin to count the number of boxes and envelopes I've had sent out of necessity over the years to various hotels, and how few of those hotels can even find the box, let alone manage to get it to me on time (whether handing it to me, having me trek through a rabbit-warren of corridors to find the shipping office, or leaving it in my room). Most of them eventually find it -- almost every time too late to matter. Kinda makes the nightmare about giving a presentation in your underwear seem unnervingly real.And from MNB reader Chris Utz:
I’ll bet that the owner of MorningNewsBeat will allow Dufl as a reimbursable business expense. Not so sure that would extend to many Fortune 500 companies. I’m afraid I’ll just have to keep washing/ironing my own clothing in the field as needed. Perhaps someone could come up with an app that would keep clothes packed in a suitcase from getting creased and wrinkled…And, on another subject, from an MNB reader:
Your article today on Kroger makes me wonder. How can the largest supermarket chain in North America continue to fumble with e-commerce. Kroger's recent purchase of Harris Teeter should have been the answer to their e-commerce dilemma. Why would Kroger spend thousands of dollars trying to internally construct an e-commerce platform when Harris Teeter is successfully running the one of the best programs in the US and their shoppers love it. Is this another example of the "I have to build it myself" mentality that many of large retail chains seem to be embracing? It seems to me that instead of reinventing the wheel, Kroger needs to get into the market with a proven product that works (like the Harris Teeter model) and establish themselves as a player in the e-commerce field.
Stockholders should be asking why aren't we there and why are we building our own when we already have access to the best model in the business.On the subject of McDonald's, a company about which I have great fun making rude remarks, one MNB user wrote:
As a former stockholder, I made a lot of money on McDonald's but had to bail when the stock started to plummet. Having said that, I am probably the only one you'll ever meet who loves McDonald's. Why? Because it's consistent. I'm never disappointed. I always know exactly what I'm going to get. It tastes the same hot as it does cold. And they have clean restrooms. My vote is yes, they should try it. Maybe I'll even buy the stock back. Food that tastes the same hot as cold. Now, there's a ringing endorsement.
Which reminds me ... On the subject of McDonald's deciding to sell a bunch of company-owned stores to franchisees, MNB reader Bob Warzecha wrote:
We think that MCD’s move is a brilliant one in the near term. By moving more toward a franchise-only model they not only save some expenses but will generate additional free cash flow. The company can give some of this cash back to investors in the form of stock buy-backs and increased or a special dividend. Looking at the universe of fast food operations that operate at a nearly franchise only model (for example Dunkin’ Donuts has 99% franchises), those stock trade at higher multiples. So in the short term the stock price should trade in the $105-$110 range.
In the long term if this model does not work we can quickly short the stock and make money on the downturn as we have in many other failed retail stocks.Ah. Good to know that there's always a silver lining for the investor class. They succeed, you make money. They fail, you make money. Capitalism at its best.
Maybe I am getting old. I kind of yearn for the days when people made stuff, and when the stuff was good stuff that people wanted, it generated revenue and profits, which allowed them to employ people and make more good stuff.
Then again, maybe the days I'm yearning for never existed.
Finally, a couple of weeks ago I mentioned in an OffBeat piece that I'd had the best eggplant in my life at a Toronto restaurant ... which led to my favorite kind of email:
The next time you’re in Toronto, look me up. My wife makes my mom’s recipe and it’s the best on the planet.You bet. I'll bring the red wine.
by Michael Sansolo