retail news in context, analysis with attitude

We had a story the other day about how the Singapore postal system has totally changed its business model in order to be relevant to modern needs, which led MNB reader Laura Amick to write:

Funny story.  I was in my local post office last week to buy stamps for a special event (normally just use the kiosk during off hours).  The huge ad over the counter had a message about holiday shipping with snow and snowmen.  In May.  Turns out the ads were from last year.  Was told that “They won’t send me any replacements.  Nothing I can do.”

Talk about being relevant!

From another reader:

Regarding the Singapore Post Office changes Kevin: I went to the largest USPS in my state on Friday, where they were protesting and did not seem to know why other than fear of units closing. The workers and union representatives blamed everything on the retirement payment mandates. While that is a financial burden, I do wonder if they will ever get it?

After questioning them, I think not. They handed out post cards that can be mailed to the Postmaster General. I briefly thought of mailing it and enclosing a letter questioning if they will ever understand the changes not just for the future, but today. Then I thought, why waste those precious minutes, I had already wasted some on people that thought they worked for the Union and not the PO. Odd thing is there are more packages available for delivery then in the past due to on-line shopping, seems simple, change the darn business model.

I recently questioned a survey's conclusion that Trader Joe's is one of America's best supermarkets ... I like Trader Joe's and shop there often, but I find it hard to accept that particular designation.

One MNB user responded:

I love their friendly customer service and the chatty cashier, but that's not the primary reason I go there. I am a Trader Joe's loyalist due to their combination of low prices and food "adventures". And how about that 2 buck chuck? They're also a convenient place to get wine and beer. I even find their produce to be ok, but maybe it's because I live on the West Coast. My grocery spend is split between Costco and TJ, I rarely go to another store for grocery despite the coupons!

Okay. That's the thing about opinions. It is okay if we differ.

From another reader:

To respond to your post on Trader Joe's I agree that they have cluttered stores, but they are able to stock a relatively small store that is easy to get in-get out of on a weekday, with a large selection of items for a really great price. Trader Joe's has the highest square foot sales in the industry, double that of Whole Foods despite higher prices at Whole Foods. It's pretty clear that they make a lot of money from those tiny, tiny stores.

Have you ever been to a Trader Joe's that's not very busy? I haven't.

They're loved by Millennials and Gen X alike. And also some seniors. They also attract all income levels - from low budget students or inner city dwellers to higher income families. Perhaps, the only group that may not frequent Trader Joe's is lower income (below 65-70K) larger families as they don't meet the primary needs for that demographic.

The reason is organic foods, smaller packaging suited to smaller families or even for larger families where everyone has individual dietary needs and food preferences, lower prices and ever changing variety. Each trip to Trader Joe's is an adventure and even children don't mind going there as they love the samples and the fun games set up for them in the store. It's also small and very easy to navigate - convenient when you're picking up stuff after work and don't want to go through a large store or fight the crowds at Costco just to get milk.

Trader Joe's has $1723 sales PSF vs. Whole Foods at $937 and Kroger at $496. Given that they sell all private label their ROI isn't too shabby either.

Like I said, we all have different opinions.

On another subject, one MNB user wrote:

A reader made a comment on the differences between the Haggen  and the Mariano's conversions of old Safeway stores.

I would make one comment.  MOST of the old Dominick stores in Chicago were in excellent condition and recently remodeled in the past 3-5 years.  There was really NOTHING wrong with the physical facilities of most of the stores.  Safeway had alienated Chicagoland customers to the point that most did not shop there anymore.  As I had lived in Chicagoland only 14 years, I did not remember the "Dominick's Finer Foods" days, but most of my coworkers thought that Safeway destroyed it.

Since I have moved to Arizona, I have yet to see one Safeway store that was anywhere as well designed or as clean as the shuttered Dominick's stores.

Yesterday we took note of comments by the editor of USA Today that it may only be a few years before the print edition is shuttered in favor of an all-digital strategy.

One MNB user wrote:

Interesting take on the decline of newspapers and the estimated end of the print edition of USA Today. Obviously technology is the major driver of this occurrence. But I also think that papers no longer deliver the same qualities to the consumer base that they once did(not keeping up with the times). Papers used to "report" facts. Reporters would dig into facts surrounding a story and verify the truth and validity. As they have drifted more and more to the left, they have tended to just pass along any information given to them by the politicians and political consultants. So as their consumer base moved more to the right and got older, they moved to the left and lost the business.

I think that the problems with newspapers has more to do with technology than politics, but we're all entitled to our own opinions.

MNB user Rich Heiland chimed in:

As a former newspaper publisher I do try to notice little things. For years I have felt hotels were keeping USAToday numbers up. I am starting to notice now that some hotels are dropping USAToday and subbing in a local paper or the Wall Street Journal. Not sure what that dynamic is because as a road warrior I use USAToday as it was intended - to stay in touch across the board on a surface level. I used to work for Belo in Dallas and we printed USAToday and I can tell you if the hotel numbers start dropping, so will the circulation figures.

Not surprisingly, we got a lot of emails about the minimum wage issue, responding in part to my disagreeing with the fellow who maintains that a mandated $15/hour minimum wage in Los Angeles will lead to wildly expensive hamburgers.

One MNB user wrote:

You are right about In & Out burger, their prices may go up slightly, but they already pay above the minimum wage and promote from within which builds loyalty and passion. You have to be flexible and understand the economic realities around you. Companies are paying more than minimum wage in most part because it is now a economic reality that you will have to pay more to get qualified people. Change is not only certain, but ongoing!

From another:

I finally have to respond to your position on increasing the minimum wage after your comments on Weis Markets' pledge to not increase prices being evidence that increasing wages will not increase prices.

I am confident that many retail operations professionals are users of your site, and am surprised more have not responded on this issue.  There is no question that the minimum wage has not kept pace with inflation, and for that reason I support an increase that is many years overdue.  I also support the idea that the wage difference between executives and front line workers has grown, and that front line workers who are performing well deserve to be well compensated for the important contribution they make to the success of the company.

What I do not support is the idea that increasing what is often the largest cost in retail and food service—labor—will not result in significant pressure to raise pricing.  While a small increase to $9 per hour may be managed by cutting expenses in other areas in the short run, the reality is that any increase in costs must be offset by either an increase in productivity or revenue.  In other words, fewer worker hours must produce as much revenue or prices must be raised to increase revenue.

I also question your suggestion that increasing wages results in a more engaged work force—it may or may not.  It depends on the company culture and if employee feels supported in his or her role, and wage rate is just one factor.  I understand we live in a world of sound bites, but these are very complicated issues with many moving parts, so while things like “living wage” and $15 per hour sound great, implementing them without creating unexpected negative consequences will require more than a simple law increasing the wages of the lowest paid members of the workforce.  Having said all that, a living wage for all is a goal worth working toward, but it will come from better education and training, increases in productivity and economic growth.

MNB reader Tom Herman wanted to elaborate on a position he took earlier this week:

I would really like someone who favors large increases in the minimum wage to sincerely answer the question.  Why not $30?  I think it is a fair question that deserves a serious response.  I think that everybody deserves to have the opportunity to live the American dream.  The minimum wage increase has some advantages and it also has some disadvantages.  A serious debate is needed.  Most liberals just dismiss the other side as “hating the poor” of “being in the pocket of big business”, when in fact neither of those things are true.  It is just a lazy and disingenuous way of shutting down the debate.

It is a known fact that when labor becomes more expensive, businesses will find other ways to address it and lower costs.  Cutting back on staff, finding technology to replace the labor, or moving to a more favorable local are just of few things they can do.  This is how the market works in the real world.  Most businesses will stay and find ways to mitigate the costs probably through technology, reduced hours, more reliance on part-time workers and raising prices.  Probably a combination of many different approaches.  The biggest issue will be companies that decide not to be located in LA in the first place.  The combination of higher regulatory costs and higher labor cost make moving your business to LA very disadvantageous.  Who does this hurt, the very same people who will benefit from the minimum wage increase and countless others who are not currently in the labor market. 

Most people currently in the labor market have upward mobility and only stay at the minimum wage for a shorter period of time.  The problem being that you can’t move up the economic ladder without being on that ladder in the first place.  We are seeing that today in many large metro areas like LA.  Higher levels of poverty and higher levels of unemployment.  It is not just one decision made by politicians that probably feel they are doing the right thing, it is the combination of all of these regulations, rules and laws that have put these large metro areas in dire shape we are seeing today.

Big business will survive in this environment, and a lot of these things actually help big business to keep out newer small businesses that may compete with them.  Business formation and new small businesses are the love blood of communities.  They are being driven elsewhere, and there will be long term consequences of this flight away from larger metro areas.  Just my two cents on this.

The thing is, I agree with a lot of what you say ... and I think that the debate on the issue is far from over, and we're going to learn a lot from what happens in communities where wages are being increased.

One quick point. You are absolutely correct that a lot of liberals like to shut down the discussion by dismissing the other side as “hating the poor” of “being in the pocket of big business." But there also are a lot of other people who like to shut down the argument by saying that these folks want something for nothing, that they have a lousy work ethic, and should just get a second job. Which I don't think is a fair characterization, either.

MNB user Gregg Raffensperger wrote:

I tried to stay out of this but can't after reading some of the responses. It's real simple, higher labor costs equals higher cost for products.

Also consumers magically don't buy the same amount or more products when they cost more.

Therefore if the "cost of a hamburger" stays the same or slightly higher you will have less people doing more work.

Question to your "motivated worker" dreamer.  How motivated do you think people are when their work load is increased? They grumble and moan.

This is a typical short sighted governmental bandaid.  Stop taking a socialist approach to everything.  Why is it the responsibility of the government and not the individual to support themselves. 

If one job isn't enough, get another.  Hard word and strong work ethics built this country.  Let's never forget that as we move into the future.

MNB user Virginia Berman wrote:

Equal Exchange has been around 29 years and we support wholeheartedly increasing the minimum wage.  We source, roast and sell organic, fair trade coffee beans, and source and sell organic tea and chocolate and olive oil ... It’s absolutely possible to run a profitable business, give fair prices to consumers and pay people enough to live on.  Thanks for highlighting that and still the minimum needs to be higher.

And from another:

I have a philosophy that there is fair profit and obscene profit. If raising the minimum wage drops a business from the latter to the former, I am fine with that. And, if it pinches a business, those who survive will be the ones who take what may be a long overdue look at processes and systems, as well as missed revenue opportunities and do what businesses always should do - innovate and improve. Thus it always has been and should be....

MNB reader Michael Phelan wrote:

McDonalds has served as the premier example of a successful and at least one time,  innovative, franchise business model for decades, instituting a network of 30,000 stores worldwide. The consistency insisted upon in franchisee contracts is extensive and applies to many areas, many at the franchisee’s expense.

The suggestion that McDonalds corporate couldn’t insist upon and improve wages for the tens of thousands of employees who represent their brand every day almost made me laugh out loud and spill my coffee on myself. Really adorable.

KC's View: