retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: August 17, 2015

    by Kevin Coupe

    Heartening story in the Chicago Tribune about a job fair held at Chicago's McCormick Place late last week "kicking off the Starbucks-led 100,000 Opportunities Initiative drew to a close. About 4,000 young people turned out for the fair to interview with more than 30 companies, from Domino's to Uniqlo to Hyatt, and some 600 of them left with job offers, organizers said ... It was the first of what organizers hope is a series of job fairs across the country uniting corporations and community nonprofits to get jobs or training for 100,000 disadvantaged youths ages 16 to 24 by 2018. The aim is to target the 5.6 million youth who are neither in school nor working, particularly African-Americans and Latinos, who face high unemployment rates."

    The story notes that there was a fairly high-level attendance for a job fair - among the people in attendance were Starbucks CEO Howard Schultz, rapper Common, JC Penney CEO Marvin Ellison, rapper T.I., Taco Bell CEO Brian Niccol and Chicago Mayor Rahm Emanuel.

    One of the more interesting anecdotes concerned Nordstrom President Jamie Nordstrom, who "listened to 20-year-old Lawrence Mead dispense advice about how the retailer could improve its marketing. 'Let me ask you guys a question,' Nordstrom said to his tablemates. Why, he wanted to know, isn't Nordstrom getting more applicants for entry-level retail jobs?"

    Mead told Nordstrom that location was one problem, and added, "Nordstrom looks almost very tempting to the average eye to apply for a job there, because it looks like you are looking for specific people — like, uppity people who know more so about Nordstrom and that type of stuff, versus someone who might apply for, I don't know, a Foot Locker or something like that." There is, he said, a perception issue.

    The Tribune writes that Nordstrom "interviewed 144 people and made 64 job offers that day for sales, support and customer service jobs at Nordstrom, Nordstrom Rack and Trunk Club, a company representative said.

    "The Nordstrom president said later that the company promotes from within and that it wants people to join at the ground floor to develop into leaders. The event demonstrated, he said, 'that we need to get out more ... Here's all these candidates who we never would otherwise have talked to probably, or may not have considered themselves a candidate when they saw a posting,' Nordstrom said."

    The obvious lesson is that businesses can profit enormously by reaching out to disadvantaged youths and communities that can serve as a source of talent ... but it seems to me that this story illustrates that these communities also can serve as a source of intelligence about demographic groups that these companies may not understand.

    It is an Eye-Opening story. Kudos to Starbucks for leading the charge, and to all the companies that decided that this was an opportunity worth embracing.
    KC's View:

    Published on: August 17, 2015

    The New York Times over the weekend featured a long and exhaustive story about the workplace atmosphere at Amazon, which is described as often "punishing" and highly competitive, with a premium placed on big ideas that can create and/or take advantage of changes in consumer behavior.

    Changes, it should be pointed out, that will benefit Amazon.

    It is an atmosphere, the Times writes, that encourages even the lowest level employees to put forward game-changing ideas, but that also encourages people to tear apart each others' ideas, and that can leave people in tears.

    An excerpt:

    "Tens of millions of Americans know Amazon as customers, but life inside its corporate offices is largely a mystery. Secrecy is required; even low-level employees sign a lengthy confidentiality agreement. The company authorized only a handful of senior managers to talk to reporters for this article, declining requests for interviews with Mr. Bezos and his top leaders.

    "However, more than 100 current and former Amazonians - members of the leadership team, human resources executives, marketers, retail specialists and engineers who worked on projects from the Kindle to grocery delivery to the recent mobile phone launch - described how they tried to reconcile the sometimes-punishing aspects of their workplace with what many called its thrilling power to create.

    "In interviews, some said they thrived at Amazon precisely because it pushed them past what they thought were their limits. Many employees are motivated by 'thinking big and knowing that we haven’t scratched the surface on what’s out there to invent,' said Elisabeth Rommel, a retail executive who was one of those permitted to speak.
    Others who cycled in and out of the company said that what they learned in their brief stints helped their careers take off. And more than a few who fled said they later realized they had become addicted to Amazon’s way of working.

    "'A lot of people who work there feel this tension: It’s the greatest place I hate to work,' said John Rossman, a former executive there who published a book, 'The Amazon Way'."

    And the story says that the atmosphere codifies some of founder Jeff Bezos' basic approaches to business, such as "You can work long, hard or smart, but at you can’t choose two out of three." And Bezos himself warns potential hires that "it’s not easy to work here."

    Fascinating story, and you can - and should - read it in its entirety here.
    KC's View:
    Now, to be fair, Jeff Bezos is taking issue with the Times story, saying that it describes a place he does not recognize and where he would not want to work. He says that if people see some of the transgressions mentioned in the story, they should bring it to the attention of HR ... and even email him.

    Now, some of this probably was necessary - the anecdotes describing an environment inhospitable to parents, for example, are pretty tough. And it isn't hard to imagine that Bezos could be isolated from some of the behavior described in the piece.

    I've talked to a number of former Amazon employees over the years, and the general consensus seems to be that while Amazon can be a very tough place to work, with little in the way of work-life balance, it also tends to be a place that brings out the best in its employees. Unless you're at the very top, people tend not to stay there for more than a few years ... but when they leave, they often do so for entrepreneurial enterprises that build on what they've learned at Amazon.

    In a lot of ways, I think, Amazon's creative contributions have to be measured not just what happens within the company, but also about what happens further out on the branches of the family tree.

    Personally, I have two reactions to this story. If some of the behavior described in the Times piece is accurately depicted, it is reprehensible ... and not the kind of place I'd ever want to work.

    But there is a part of me that is envious of the folks who work at Amazon, because however tough a place it may be, many of the people there are being offered the opportunity not just to work incredibly hard and be amazingly creative, but also to really believe in the place where they work and the mission it espouses. Until I started MNB, I never really had that ... the places where I worked, while hardly unpleasant, were by and large top-down bureaucracies with no sense of boldness or feeling that they could change the world. (One of Amazon's basic principles is that its leaders must "seek diverse perspectives and work to disconfirm their beliefs." Most leaders, in my experience, are far more comfortable with people and data that confirm their beliefs.)

    The Times story about the Amazon workplace - even if flawed - can serve as a great starting point for conversations within many companies about how to aim for a creative and engaged workplace, and what the costs (in the broadest definition of that term) of such a goal should be.

    Published on: August 17, 2015

    Target announced that it is expanding its click-and-collect service from the San Francisco Bay Area to New York and New Jersey, with the rollout of 10 Target locations being serviced by the Curbside tech startup.

    The announcement notes that "Curbside allows consumers to shop directly from their mobile phones and pick up right in front of the store without having to find items on shelves, wait in checkout lines or deal with the hassles of parking. The Curbside service is free, the app is free and the company does not mark up store prices." Curbside uses "proprietary location technology to provide a seamless and reliable handoff of goods in front of the store. The Curbside system notifies staff when shoppers are on approach."

    “We know today’s consumers are looking for faster and more convenient ways to shop. That’s why Target is constantly exploring new ways to improve the shopping experience and save our guests time and money,” says Casey Carl, Target’s chief strategy and innovation officer, in a prepared statement. “Curbside has proven popular among our Bay Area guests, and we’re excited to expand the service to guests in New York and New Jersey.”
    KC's View:
    Curbside strikes me as a better alternative than Instacart, because Target is outsourcing less of the fulfillment experience, and seems to have more of a dedicated relationship with the tech company. The broader message is that Target is getting serious about competing in the online/mobile environment.

    Which it must be.

    Published on: August 17, 2015

    The Bergen Record reports that John T. Niccollai, president of the United Food & Commercial Workers Union Local 464A, is saying that executives at the Great Atlantic & Pacific Tea Co. (A&P) are telling him that the company "does not plan to operate any supermarkets once its Chapter 11 bankruptcy is finished."

    "According to the initial bankruptcy filing, the stores must be sold before Oct. 30," the story says. "The Great Atlantic & Pacific Tea Co. would not comment for this story."
    KC's View:
    There is a pretty good argument to be made that A&P hasn't really been operating supermarkets for years...

    Published on: August 17, 2015

    Seeking Alpha has a story this morning reporting that Amazon founder/CEO Jeff Bezos is dropping hits that because of the UK's more progressive attitude toward the use of commercial delivery drones, the e-tailer "may launch its flying delivery service in the U.K. before initiating lift-off worldwide."

    The story says that "Britain's Civil Aviation Authority has already allowed more than 850 commercial groups to conduct aerial work using the machines."

    Bezos, Seeking Alpha writes, "still cautions the system won't be seen in the skies for many years, but 'one day Prime Air deliveries will be as common as seeing a mail truck'."
    KC's View:
    I have no idea how this will all play out, but I have very little doubt that somehow, somewhere, Amazon will be launching drones to deliver product.

    In some ways, the notion already has become an accepted part of casual discourse. I was hanging with some friends yesterday, one of whom commented that she'd been at a party not long ago where adult summer beverages were on the menu ... and then the blender broke. She said that the general consensus was that this was a moment that simply cried out for one-hour drone delivery.

    I wonder if in some ways, this will be one of the things that drives the concept - having had the possibility of drone deliveries dangled before them, some consumers may actually begin to demand them.

    Published on: August 17, 2015

    • The Wall Street Journal has a report about how Sam's Club is trying to move beyond it parent company's DNA, "breaking away from the low-income consumers who shop at Wal-Mart." In part, the story says, the problem is that Sam's has to compete with Walmart ... and in part, the problem is that Sam's not necessarily the top priority for corporate leadership, which has a lot of irons in the fire.

    "'We want to be less of a Wal-Mart,' said Rosalind Brewer, chief executive of Sam’s Club, during a recent interview. That means carrying fewer products that appeal to households that earn $45,000 a year - Wal-Mart’s sweet spot - in favor of targeting wealthier shoppers with more organic food, brand-name clothes and 1,000-thread count Egyptian cotton sheets, she said."

    The story notes that "Sam’s has made forays into more premium products like those at Costco, but frequent leadership changes have stymied efforts to shake its parent’s influence. In 2001, Sam’s added expensive jewelry and said it wanted to sell high-end art to better compete with Costco. Those plans floundered however when Sam’s president left in 2002. More recently Ms. Brewer’s predecessor, Brian Cornell, added more fresh food and upgraded merchandise. Mr. Cornell is now CEO of Target Corp."
    KC's View:

    Published on: August 17, 2015

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • The Post City Daily reports that Publix plans to open its first store in Wilmington, North Carolina, in late 2016.

    The story says that the store will be sandwiched between a Harris Teeter and a Food Lion, and is part of the company's "aggressive" drive to open stores in North Carolina.

    That's a helluva retail sandwich ... Publix, Harris Teeter and Food Lion.

    Fascinating piece in the New York Times about why Starbucks recently raised the price of sups of coffee purchased from its stores at a time when wholesale coffee prices actually have been dropping significantly.

    The reason, it seems, has very little to do with coffee, which represents less than 10 percent of Starbucks' expenses - a lot more money goes into real estate, wages, extensive employee benefits, equipment, distribution, marketing, and technology. In addition, Starbucks made the determination that it needed to wring a little more profitability out of its stores, which meant raising prices a little bit ... which delighted the investor class and didn't seem to have much impact on its core customers.

    Speaking for myself, if spending an extra dime or so on a latte allows Starbucks to treat its people better and offer stronger benefits, I'm okay with that.
    KC's View:

    Published on: August 17, 2015

    MarketWatch reports that Jose Barra, an executive vice president at Target who headed up merchandising for a number of large categories including beauty, electronics and grocery, is leaving the company ... just a month after Target's chief merchandising officer, Kathryn Tesija, also stepped down.
    KC's View:

    Published on: August 17, 2015

    MNB reported late Friday via a "breaking news" alert that Haggen, the Washington State-based grocery retailer that tried to grow from 18 stores to 164 virtually overnight through the acquisition of stores that needed by be divested when Albertsons bought Safeway, said that it will close 27 stores as it looks to reverse revenue and traffic problems that have beset it since the expansion.

    The stores being closed included 16 in California, five in Arizona, five in Oregon and one in Washington. This follows a period during which Haggen has been reducing employee hours and laying off some staff because of what some of its suppliers have said privately are enormously disappointing results.

    The stores will either be closed or sold in 60 days.

    "Haggen’s goal going forward is to ensure a stable, healthy company that will benefit our customers, associates, vendors, creditors, stakeholders as well as the communities we serve ... By making the tough choice to close and sell some stores, we will be able to invest in stores that have the potential to thrive under the Haggen banner,” Haggen Pacific Southwest CEO Bill Shaner said in a prepared statement.

    “We’re grateful to have an outstanding team along with the support of our vendor partners, financial backers and friends in the community as we take our next steps forward,” wrote John Clougher, Haggen’s CEO of the Pacific Northwest. “Looking ahead, we will work hard every single day to earn the trust and business of our guests."

    Even as Haggen tried to find some competitive equilibrium, it has been hit with two lawsuits - one from Albertsons, which said that Haggen owned it more than $36 million for inventory it got as part of the sale, and one that accused the company of discriminating against developmentally disabled employees during the recent layoffs.
    KC's View:
    Is this the beginning of the end for Haggen, or just the end of the beginning?

    Hard to know. But a few things seem likely.

    One is that these almost certainly will not be the end of the closures. Right now, they're trying to stop the bleeding by closing the stores that are performing the worst. But there are still plenty of other stores that are not meeting expectations, and management is going to have to look hard at them fairly quickly.

    Just think how awful the morale must be at those remaining stores. Employees have to be wondering if they're next, which means that they may be more engaged in writing resumes than in taking care of customers and running shipshape departments. Customers are going to be aware of the problems ... and if they've been willing to overlook what has been described to me as consistently high prices and out-of-stocks (which many haven't), they're certainly not going to be enticed by the image of a company in serious trouble. (Haggen isn't just heading toward the iceberg ... it appears to already have smashed into it.)

    One has to imagine that suppliers are taking notice, and are wondering, if Haggen's troubles continue, if they're going to get paid for goods delivered. The guess here is that the out-of-stocks problems are going to get worse before they get better.

    I have no idea if this company can be saved. If I were in charge, the first thing I'd do would be to look for a retailing superstar who could come in immediately and address both the financial and morale issues, and at least create a little breathing room for the company to get back on its feet. (And he or she would run the whole damned company, not just part of it.) And I'd be aggressive to talking to consumers in every possible venue, explaining that Haggen bit off more than it could chew, is choking as a result, but has a plan to emerge a stronger (and much leaner) company. And these statements would have to be convincing, as opposed to the platitudes I'm hearing now.

    Let's be clear, by the way, that the demand by regulators as part of the antitrust decisions that Haggen had to take ownership of these stores and begin operating them in fairly short order probably created this mess. But if someone offered me a bet that hinged on me getting into a boxing ring with someone a lot more talented than I, and then fighting with one hand tied behind my back, I'm not taking that bet. No way. (I'd probably lose the fight anyway, even I got into the ring with both hands fee and one of them holding a gun ... and maybe Haggen would have, too. But this fight wasn't even fair.)

    I'm not sure what will happen to these stores, though I would imagine that there may be some opportunities for retailers that could come in, not face the same kinds of time constraints, and then create memorable and differentiated store experiences in some of these units. I'm thinking companies like New Seasons, Metropolitan Markets, Sprouts, and maybe even Whole Foods' new 365 concept. (Maybe WinCo could come up with a small-store format? Or Aldi or Trader Joe's could figure out a way to use footprints that are a little bigger than they usually like?) But when and if this happens, the folks who said they believed in the wisdom of the Haggen expansion deal - people who appeared to be breathing their own exhaust - will be left to ruminate about what went wrong in one of the retail business's fastest and more predictable collapses.

    Published on: August 17, 2015

    Got the following email from MNB reader Cynthia Fisher, regarding the point I keep making here about CEOs who make sometimes outlandish salaries, and even get rewarded for driving down labor costs in stores where employees are on the front lines of making those units successful:

    With all due respect to the points made about high salaries for CEOs vs those of their employees, I think some balance is needed in the conversation. How many employees of a company have the complete responsibility of that of a CEO, especially a CEO of a publicly traded company? There is a huge point, not being mentioned, about the respective responsibility and accountability of a CEO vs that of an employee. As an employee I do my job and walk away at the end of the day. As a CEO, everything is laid at his or her feet with regard to all aspects of the company including, but not limited to, employee safety and job security, company marketplace viability and the financial solvency of the entire organization as well as the value to the stockholders. Stockholder investment makes possible the creation of companies and the subsequent jobs for those employees.

    The media enjoys their national drama campaigns promoting the picture of all these poor employees being unfairly treated while fat-cat CEOs enjoy the lavish life. That’s really an unfair and over-generalized assessment and with a little research into the daily life any CEO running an organization, large or small, it would unravel that fairytale. We need to stop vilifying and creating divisiveness between those who take on risk and responsibility against those who choose to settle for a paycheck. Long gone are the days of workers being mistreated in sweat shops in the U.S. Our laws and the work of labor unions have made it more than fair for employees to work in this country and no one has to work for a bad or unfair CEO - we all have choices. Of course there are bad, undeserving CEOs just as are there bad, undeserving employees. With today’s journalist continuously on the hunt for anyone successful whom they can destroy with a tweet or a post, and usually with little factual content to back up the whole story, we have made it a crime to be successful. I challenge anyone who has not done so, to go out and start a business, risk everything financially, work through the sleepless nights and stress of the multitude of issues that plague owners, CEOs, presidents, etc., of any company, small or large. Trust me, it’s a much better life punching a clock and walking away at 5:00 to enjoy your evening. And in fairness, I believe most companies pay their CEOs and employees based on that difference of responsibility and value added to the success of the organization. I’m not a CEO; I’m a mid-level manager, but I believe my CEO is severely underpaid for the weight placed on his shoulders every single day he is responsible for and to his employees and his shareholders whose jobs and investments are secured or risked by his decisions. That’s a heavy load to bear alone and for this responsibility these leaders, job creators and economic drivers should be well compensated. If we are going to have this discussion, let’s make sure we tell the whole story with all the facts. If you haven’t worn the shoes, it’s unfair speculation to criticize and make general judgements.

    Thank you for taking the time to read my viewpoint. We, as American business leaders and generators, can and should do better. We should want to encourage others to become entrepreneurs and help create companies and jobs that will keep our economy strong and make it possible for all to prosper. We need companies both large and small to accomplish this. I challenge any employee to learn what it takes to be a CEO and reach for that goal. That knowledge alone will make them more valuable as employees. No one is appointed CEO to a company worth mentioning without first having been tested by fire and having earned it. Who among us, quick to criticize, is up for that test?

    While I have a problem with the sometimes outlandish salaries, in the end I think CEOs ought to make pretty much whatever the market will bear ... my bigger issue is when these same CEOs will not acknowledge and adequately reward the people at store level who are responsible for making the shopping experience a pleasing one.

    Few shoppers know who the CEO is when they walk into a supermarket ... but they probably know who the good checkout people are, or who the people are behind the seafood counter, or who bake the fresh rolls. Those people, I would argue, are extraordinarily critical to a retailer's success ... and I think that's the same argument that Jim Sinegal would've made when he ran Costco, and Howard Schultz of Starbucks would make now.

    I think smart CEOs know that while they may bear the ultimate responsibility for their company's success, they also know that they only are as successful as the people on the front lines make them.

    Now, concerning a related commentary - my suggestion that if Haggen is to have any chance at succeeding, it needs to hire a rock star CEO who can instantly change the culture and push the company in a viable direction through force of personality - MNB reader Robert Hemphill wrote:

    Hey, would you support paying the “retailing superstar” a premium financial package?  Might need to do so, and it might be the best investment you could make.

    Again ... I have no problem with premium financial packages. But if it were me, I'd immediately tell the folks working in the stores - all of whom have to be feeling vulnerable and insecure at this point, without a lot of hope for the company's future - that we're going to sink or succeed together, and that if we succeed, they will share in the financial profits. It would be my goal to get every employee to feel engaged, and to have a palpable sense of ownership.

    And that could be the best investment the company would make.

    Also, regarding Haggen, another MNB reader wrote:

    Have you seen the pricing structure at Haggen??  Every week their ads come out and they get beat up…I mean beat up.  Don’t get me wrong, I appreciate the look and feel of Haggen but they need to be more than competitive and they haven’t been out of the gate. Try being competitive first and I believe customers will come.

    The big question is whether customers will come back ... since so many of the ones who had an initial negative impression will have to be persuaded to give the company a second chance.
    KC's View:

    Published on: August 17, 2015

    Jason Day won the PGA Championship in decisive fashion, becoming the first golfer ever to finish 20 under par at a major.
    KC's View: