retail news in context, analysis with attitude

Published on: August 20, 2015

This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, Kevin Coupe here and this is FaceTime with the Content Guy.

We've had a lot of discussion about workplace environments here over the past week, largely prompted by the New York Times article about Amazon, so it seemed like a good time to tell you about one of the more negative workplace experiences I've ever heard of ... at a retailer where one of my sons worked part-time until recently.

The job was at American Eagle, the clothing retailer, and it served as a sort of placeholder for my son as he did all the stuff he needed to do in order to position himself for a career job in broadcasting and, eventually, sports. (A job he has now, by the way.)

I worked my way through school for a couple of clothing retailers, and I've been writing about retailing for more than 30 years ... but I'd never before heard of a retailer that would give its part-time employees maybe a dozen hours a week, at just over minimum wage, and then would require those same employees to be on-call for maybe another dozen hours. My son would have to call in, would only actually get brought into work 10 percent of the time, but he wouldn't get paid for those on-call hours and the practice prevented him from getting a second part-time job. (This is a practice, by the way, being challenged as illegal in New York State courts.)

Needless to say, he was thrilled to leave...and not just because he was moving in a direction with far greater career fulfillment opportunities.

But all I could think to myself when he was doing this was that American Eagle seemed to be going out of its way to create a workplace environment that was unfriendly to the people who worked there. They seemed not to have learned the Jurassic Park lesson ... that just because you can do something does not mean that you should do something. And in taking this approach, the company virtually insured that its people would be looking for other places to work and would not serve as enthusiastic ambassadors for the company. How could they?

I suppose the opposing argument would be that American Eagle's business model requires virtually disposable employees, and it seems to be working out well so far. And to be fair, just yesterday American Eagle apparently reported strong second quarter profits and earnings ... so what the hell do I know?

But I do think that customer-facing companies that want to create differentiated and sustainable business models - especially in the face of so much competition from both online and bricks-and-mortar retailers - ought to not be so cavalier about how they treat their employees, because in the end the whole business model depends on how those employees treat their customers. And other retailers ought to talk about their best practices when it comes to employees, firmly establishing themselves as being employers of choice.

American Eagle may be flying high right now. But I suspect that, down the road, it'll be grounded. I certainly would never shop there.

Anyway, that's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

Published on: August 20, 2015

A note from the Content Guy: MNB reader Bob Vereen sent me an email this week that I thought worth posting in this space - a chronicle of his visit to an Amazon Fulfillment Center in Jeffersonville, Indiana. It is fascinating reading, especially for those of us who have never been to one. So, enjoy...

1.2 million sq. ft., opened in 2012.   Entire center devoted to soft goods, and that’s what Amazon does—devotes a center to a type of product.  It is high-cube, and parts of it consist of 4 levels.   It is open 24/7 and has 2,500 employees.   The guide says the company now has more than 100 centers around the world, and 180,000 employees.

There are 3 or 4 centers in the Indy area, including one about 3 miles from where I live - located in Plainfield.   Wonder what it contains?

I asked how many SKUs it contained, and the tour guide said 30 million.   I don’t know if it is really that many, but some of the “bins” were only 6" wide, so it could well have been that many.  This compares with much larger bins found in a wholesaler’s DC.  The bins often were only about a foot tall, so there certainly could be millions.  It didn’t look like many of the bins were designed to contain large quantities of items.

Note: that 30 million number seemed high, so Bob reached out to the company. In a follow-up email, an Amazon spokesman said that "currently, we have roughly 30 million items stowed in our SDF8 fulfillment center. Additionally, our Jeffersonville site has the capacity to exceed that. Only a selective few fulfillment centers have the ability to possess a high volume of inventory, however the majority can store from 5-15 million products on a daily basis."

I asked how many orders they filled daily, and he said that was proprietary, but I did some guesswork.   We saw 6 people packing items to ship out.   Their computer spits out information as to each package’s size, so they know what it needs—what size box, or envelope, or bag.   And a label, which shows how it is to be shipped—USPS, UPS, FedEx or what-have-you.    As I watched, it took only a minute or slightly more per item, so if it would average 40 items per hour times 6 times 24, it would seem like 5,000 or more daily.   It was amazing to see how fast they could assemble a box, insert the product, seal it and apply a label.

Compared to wholesaler distribution centers where each order consists of a limited number of SKUs but often multiple items per SKU, most of their orders consist of single items or maybe a couple items per customer.   This, I think, is one reason they have so many employees—need to pick all those items daily to ship and also to put away.

In some of those tiny little “bins”, there sometimes were several different items. The guide said the computer puts items together that often “go together”, to speed up the picker’s productivity.   This center did not use any robots, maybe because of the type of merchandise or maybe because it was built before robots began to be used.

With parts of the center consisting of 4 levels, there were miles of conveyors, as you would imagine, and all those little “bins”.  This center also contained a studio, where pix were taken of items and then uploaded to the Amazon web site.

Couldn’t take pix, naturally.   They use yellow totes and I never saw so many totes in my life.

Thanks, Bob ... your account is an Eye-Opener.

Published on: August 20, 2015

The Wall Street Journal reports on the growth of companies opting to have their products labeled as "non-GMO."

Here's how the Journal frames the subject:

"The U.S. food industry is under siege from consumers’ growing demand for natural and less-industrially produced fare, with sales of everything from conventional breakfast cereals to Cheez Whiz suffering. Part of that skepticism has focused on GMOs, which, according to a vocal core of critics, damage the environment and may harm human health.

"While the U.S. government and most major science groups say evidence shows that GMOs are safe, consumer concern has grown so strong that some vendors of products like blueberries and lettuce are paying for non-GMO labeling even though their products aren’t among the small number of crops that are genetically modified in the U.S."

The story goes on:

"Exact data on how many products claim they are GMO-free isn’t available, but the number is growing. Of the 33,000 newly launched products that market-research firm Mintel adds to its global database each month, 3.8% of food and beverage products included a GMO-free claim on the package last year, up from 1.6% in 2010 ... The Non-GMO Project, a not-for-profit organization that, for a fee, can certify that a company’s product has no genetically modified ingredients, has logged a big increase in the number of fruit and vegetable sellers requesting its stamp of approval in the past two years, according to Megan Westgate, executive director."

The Journal notes that "supporters of biotechnology object to putting the non-GMO stamp on fresh produce with no commercially available GMO variants. It spreads misinformation and casts unfounded doubts on the scientific process and the safety of the food supply, said Jon Entine, executive director of the Genetic Literacy Project, which generally supports biotechnology."

Published on: August 20, 2015

The New York Times reflects on the growth of the quick-cook meal business, writing that "Silicon Valley is now trying to speed up the process for home-cooked meals. Start-ups with names like Gobble, Blue Apron, Marley Spoon, HelloFresh, Plated, Peach Dish, Platejoy and Home Chef all offer variations of the same service: Pay a small fee for a box of food that arrives on your doorstep with premeasured, prepicked and (in some instances) precut and precooked ingredients. All you have to do is heat up the stove, and voilà, you have a 'home cooked' dinner for you and your family.

"These quick-cook meals are supposed to be healthier and tastier than fast food, yet offer the convenience and speed of takeout."

The story concludes that if such programs encourage families to eat more dinners together - which experts say results in children with higher self-esteem, better grades, and fewer alcohol and drug problems - then they probably are a good thing.

"Lynn Barendsen, executive director of the Family Dinner Project, a group with ties to the Harvard Graduate School of Education that promotes the benefits of home cooking, said it depends entirely on which services you use, who you are, and what you did before these companies came along," the Times writes.

"If your family eats pizza every night in front of the TV or laptop, a meal from Gobble or one of its competitors is a much better alternative, Ms. Barendsen said. But if you’re teaching your children about cooking and where food comes from, then you’re depriving them of the full home-cook experience."

Published on: August 20, 2015

Fortune reports that "three California law firms have filed a class-action lawsuit against Costco and CP Foods, its Thai seafood supplier, and are seeking an injunction to stop the company from selling shrimp unless it is labeled as a product of slavery."

The lawsuit is related to an investigation last year that discovered "horrific conditions" connected to the farmed shrimp industry, and the story says that "the plaintiff in the class action suit is Monica Sud, a resident of California who had purchased shrimp from Costco without knowing that she had essentially been supporting slavery."

Published on: August 20, 2015

The Associated Press reports that yesterday Target "raised its annual profit outlook and said its second-quarter net income more than tripled. The upbeat report is evidence efforts to spruce up fashions and other merchandise are paying off for CEO Brian Cornell, who has led the company for a year with marching orders to reinvent the 'cheap chic' retailer after a series of problems."

The story notes that "Cornell aims to reinvent Target as a more nimble force amid fierce competition. The company is investing in e-commerce and said it's improving its shipping time this fall by testing a program that will give online shoppers a precise delivery time, not a window."

However, the Star Tribune has a story suggesting that Target is suffering from some "fundamental" problems: Cornell told analysts this week that "over time, Target has developed an incredibly complex supply chain built to serve an outdated, linear model in which products flowed from vendors through distribution centers to stores."

But, he said that c-commerce actually has disrupted some of the company's systems. “Frankly, as a result, some retail fundamentals have started to suffer,” Cornell said. “Specifically, in-stocks in our stores have been unacceptable so far this year. Our guests deserve better.”

Published on: August 20, 2015

The Milwaukee Business Journal reports that a Wisconsin law form has filed five complaints against Meijer Inc., accusing the retailer of selling products below cost, which would be a violation of the state's Unfair Sales Act.

The complaints have been filed on behalf of an unnamed client, says attorney Jerry Gonzalez in the complaint: "Our information shows that Meijer is selling well below cost to attract patronage to new store openings and to divert trade from competitors," the filing says. "My client sells many of the same items Meijer is selling below cost and, consequently, is well aware of the costs associated with these products."

A Meijer spokesman tells the Journal that the company is investigating the charges: “This is a bit peculiar for us, (as) we are not accustomed to regulations that limit our customers’ ability to save money when they shop with us," the spokesman said.

While there has been speculation that Milwaukee-based Roundy's is behind the action, a spokesman for that company said that it is not the unnamed client.

Published on: August 20, 2015

The Bergen Record reports on a delay of the bankruptcy court hearing into whether the Great Atlantic & Pacific Tea Co. (A&P) should be freed to labor contract obligations so that it can expedite the sale of it stores.

"One point of contention," the story says, "in the 156-year-old supermarket chain’s liquidation strategy is its request for so-called 'cost-neutral bumping.' Union contracts would normally allow senior workers at the 25 stores scheduled to close to bump, or replace, workers with less seniority at stores that stay open under new owners. However, under the cost-neutral strategy, senior workers would be retained at the junior workers’ wage and seniority levels."

The United Food and Commercial Workers (UFCW) objects to the strategy, arguing that when A&P emerged from its first bankruptcy, it specifically negotiated certain terms with organized labor that resulted in reduced costs, terms from which the company now is trying to walk away. The UFCW wants to preserve "traditional seniority rights and severance benefits."

The Record says that the delay in the hearing suggests that management and labor "were unable to resolve those issues within the time allotted by a judge."

The story notes that A&P "has said in Bankruptcy Court filings that it is 'burning cash at a rate of $4.5 million a week' as it seeks rulings that will help it sell 118 of its 301 stores."

Published on: August 20, 2015

The New Yorker has a good piece by John Cassidy about how Amazon's apparent workplace problems reflect broader issues that may be endemic to the so-called New Economy.

An excerpt:

"As the “New Economy” celebrates its twentieth anniversary - on August 9, 1995, Netscape’s initial public offering took place - it is becoming harder to ignore some of its negative aspects. Behind all the technological advances and product innovation, there is a good deal of old-fashioned labor discipline, wage repression, and exertion of management power."

The story goes on:

"To be sure, there is a lively debate about whether the official statistics are adequately capturing some of the innovation that is going on in the New Economy, such as the proliferation of new goods and services, including comparison-shopping sites and streaming media. But those debates have been going on since the original productivity slowdown in the seventies and eighties, and they are unlikely to be resolved. In any case, the acid test of productivity growth is whether it leads to higher wages and living standards for most of the population. On this score, so far, the New Economy has been a disappointment."

And Amazon, go figure, provides a prime example.

You can read the entire story here.

Published on: August 20, 2015

• Lowes Foods said yesterday that it is expanding its e-commerce offerings across "all 60 Lowes Foods-To-Go store locations. This expansion is a phased rollout across markets, and is the result of a successful pilot."

Among the features that are part of the expansion is one that "allows the Lowes Foods guest to view the entire product catalogue by any combination of filters, including previously purchased, on sale, organic, gluten free, local and more. Guests can also sort through products based on popularity, personal relevance, date of last purchase, pricing and more."

Lowes CMO Michael Moore says that the company has "ambitious plans for providing a personalized experience for every Lowes Foods guest, no matter if they engage with us digitally or within one of our stores. We are confident that the continuous improvement within our digital shopping experience will result in even stronger guest satisfaction, deeper loyalty and larger baskets.”

The Lowes e-commerce expansion is the result of a collaboration with service provider Unata.

Published on: August 20, 2015

Bidness Etc reports that Amazon "will soon roll out its latest service, Amazon Flex, which allows users to place orders online and pick the orders up from designated outlets ... With the company’s plans to release Flex, Amazon may help boost the trend of pick-up points for online orders, while helping customers shop and receive orders in a timely fashion.

"The addition of the service will help the surrounding Seattle markets and merchants boost business and retail in the Kirkland area, with the constant flow of Amazon customers. Following its policy of instant home delivery (within one hour for $7.99, and free delivery charges within two hours), the new Seattle outlets will help Amazon strategically branch out the delivery service to a broader target market."

At the same time, the story says, Amazon "has also unveiled plans to expand its Amazon Prime Now delivery service to the Seattle area, with the addition of alcohol delivery, following the approval of alcohol licenses."

Published on: August 20, 2015

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

• The Sacramento Bee reports that "Raley’s has laid off 29 non-store employees and will soon close its supermarket in Winnemucca, Nev., as part of a continuing effort to streamline operations ... The Winnemucca closing is the fourth store closure announced by Raley’s in recent weeks."


• Reuters reports that "Tesco moved Monday night to dismiss a securities class action in Manhattan federal district court that alleges the company’s coverup of an accounting scheme eventually resulted in a 15 percent plummet in the price of Tesco’s American Depository Receipts." According to the story, Tesco maintains that "because Tesco ADRs do not trade on a U.S. stock exchange – they are only sold over the counter – investors cannot sue in federal court under the U.S. Supreme Court’s 2010 ruling in Morrison v. National Australia Bank."


• The founder of the Fresh Market supermarket chain has acquired a Park Avenue penthouse in New York City for for $21.4 million, in a transaction described by the New York Times as "the most expensive closed sale of the week."

The reason it is noteworthy? Ray D. Berry bought the apartment - which also has carrying charges of $16,272 a month - from Donald Trump.

The Trump organization said that the sale was not done to put money in the Trump presidential campaign offers, and that the unit was on the market before Trump declared his candidacy.

In this case, I guess Trump did not consult his "The Art of the Deal." The penthouse originally was on the market for almost $25 million.

Published on: August 20, 2015

...will return.