retail news in context, analysis with attitude

Got the following email about Walmart's announced closures:

In the end business is business but what the closing of some of these stores will do for some of these small communities is heart wrenching.  I live in one of the small communities that has a WM Express store that will be closing at the end of the month with the next nearest food store, a Walmart format, being roughly 30 mins away.  When the WM Express opened, the local grocery store, Marvin’s, was forced to close its’ doors.  This is not the only community this has happened to.  There are several other small towns close to me where this same instance has occurred.  These small towns are now clamoring to understand where they are supposed to buy their food and we all know that the probability of another grocery store opening in these small towns in slim to none.  Facebook pages are blowing up with hurt and anger due to the closing of the Express’s which now leaves these towns as a food desert.  I get it – it is business but I feel for these small towns who depend not only on the Express store to feed their community but also the tax dollars that it provided to the city.

We had some conversation here last week about sales taxes on internet purchases, and the impact that they've had on sales by companies such as Amazon. Which led one MNB user to write:

I’m a state and local tax accountant for Supervalu/Albertsons and I find all of the sales tax nexus legislation very interesting. It’s the pesky Quill case and Commerce Clause that prevent states from taxing a lot of online retailers that do not meet the definition of substantial nexus.

States are trying as quickly as they can to define substantial nexus and go after those businesses who do business in the state but do not collect or remit tax. This is one area I think the federal government should get involved and might produce a positive result . I believe the research is probably correct on the Ohio study but will not disrupt Amazon’s growing empire. I think most people at income levels less than $500k/Yr. are somewhat price conscious. Maybe they want to go to the local store to see if it’s the same price since Amazon is finally charging tax in 27 states (luckily not Idaho yet but I honestly had to look up if they do charge tax so it’s obviously not on my radar). This is where Amazon will have to continue to price things competitively given they don’t have the sales tax advantage. If they want to implement their drone program they will have nexus in those states.

Another idea that you might pass along to any Amazon higher ups you know. I’m sure Amazon has a ton of people that are way smarter than me working on this but what if the whole drone program is going about the process backwards on the transaction side. What if Amazon got people to buy their own drones for a shared cost (i.e. Store credit or even better a leased asset they can depreciate) and the people could schedule when their drones leave and come back to their home with the packages? If you need a new battery the cost is shared but you can purchase drone protection for an additional $50 a year, creating yet another market for Amazon customers. Imagine a world where you want something delivered/shipped between 5pm-10pm. You set your drone out and send to the local Amazon distribution center as soon as you get home and your drone gets in line for the products to be loaded. Then its delivered to your house before you go to bed and you put your drone on the charger for the night. Each drone would receive less wear and tear and honestly people usually take care of things they can call their own. Call me crazy but I think it’s closer to the present than we think...

Consider Amazon higher-ups so informed. Interesting idea.

On another subject, one MNB user wrote:

It’s interesting that people keep pushing the idea that Millennials will be the big purchasers and early adaptors of autonomous cars, I tend to think it’s the other end of the spectrum. Especially when this generation has become adverse to purchasing large monetary assets when they can share or rent not to mention the migration back to the city lifestyle.  I believe that you will see the tail end of the baby boomers and Gen X people be the big buyers/early adapters of driverless cars.  These are the people that grew up with car industry and value the freedom the car brings and will have the resources to afford them, what better way to keep your mobility as our body’s begin to break down as we get into our 80’s and 90’s.   With these generations having extended families and/or no families close by, what better way for these individuals to be able to live on their own and feel as if they have worth.   I can very well see our mature generations becoming buyers of these vehicles just to keep their mobility and give them a way to get out of the house and maintain their freedom.

Also got the following report from an MNB reader:

Albertsons did a very nice job of converting former A&P or Pathmark stores to their Acme banner.  The converted stores are, at once, vibrant and clean.

That's what I've heard.

I described last week the NFL decision to allow the St. Louis Rams to return to Los Angeles as part of a musical chairs philosophy at the league that allows its owners to reap hundreds of millions of dollars in fees paid by people and companies looking to move their teams. It is, I said, a "win-win" decision, which prompted a bit of outrage from an MNB reader:

How is it a win-win for the very loyal St. Louis fan base?  It will be a win for the St. Louis Cardinals and Blues, but a loss overall for that city.  Understand that it is a business move, and Stan Kroenke (Rams owner) more than doubled his franchise worth in one day, but there is negative impact.  I do not believe the “rationales” from the Rams organization for the move or the city of STL as reason to stay as I am sure the truth is actually somewhere in the middle, but for Kroenke to say that STL fan base was not there supporting the franchise is a flat out lie.  There is always a loser in these deals, and it is usually a fan base.

I misspoke if I left the impression that I thought this is a good deal for the city ... I was actually being sarcastic, since I think the NFL owners generally will fleece any city if they think they can get away with it.

That said, let's remember that the Rams once moved from Los Angeles to St. Louis, and nobody in St. Louis complained then.

From another reader:

I went to Chipotle for lunch yesterday with some coworkers.  We were frequent eaters there prior to their health troubles and this was our first group outing back since about October.  The store wasn’t as full as it used to be, but there was a light stream of customers while we sat and ate.  More importantly, I noticed the staff checking temperatures on the steam table and refrigerator and logging information on clipboards.  I’m sure this happened in the past, but it was very obvious this time, possibly just because I was in-tune with their issues.  It certainly makes me feel better as a customer.
Having worked in the restaurant business for years, I’m generally more forgiving of things because “accidents happen” even in the best managed businesses.  Having multiple accidents in succession, however, does give me cause for concern from any retailer.  I question if their model is truly conducive to an international food retailer.   Sourcing as locally as possible means so many more chances for poor supply chain controls to have an impact on their business.  Unfortunately, this means more pre-prepared foods, which could impact freshness and overall quality. 
As an unsweetened tea drinker, I noticed they didn’t have any lemons for my tea.  I know those lemons can be prime candidates for food-borne illness since they liable to be touched by lots of people in a day.  I can only assume that this was one avenue they thought was better to be safe than sorry and removed them from the store.  Over-reaction or not, it’s a smart business decision, but they missed an opportunity to put single-serve lemon juice concentrate I can squeeze in my tea, thus negating the impact of this health-driven change.  It won’t stop me from going back, but it’s indicative of the little things that can get lost in a big change like this.  Executing the details shows how much a company pays attention to what they’re doing to and for their customers!

Hopefully they can figure this out without ruining a great product in the name of safety!

Responding to my FaceTime piece about Roche Bros. last week, one MNB user wrote:

If you ever want to point out a retailer that is a model for giving back to the community look no further than Roche Bros.

We had an extended debate last week about Amazon's business model, which prompted one MNB user to write:

Interesting insights from both sides of the argument, now in YOUR VIEWS. Right now the dialogue has both sides saying that the emperor (on the other side) has no clothes.

What is the line credited to Jeff Bezos? "Your margin is my opportunity?"

If you are building a new business (or opening a new channel), you're not obligated to do everything that the established brands are doing. Nor are you required to do things the way the incumbents are operating. 

If a company squeezes the costs out specific business practices or eliminates them, the advantage shifts in some way to the "squeezer." If that same squeezer, presses the advantage against every activity and every line in the P&L, eventually the established companies are disrupted. That becomes a classic case of disintermediation at work. 

Amazon as described in this MNB dialogue is the squeezer. And perhaps the same is true for Netflix in the earlier posting.

Look back to when the Walmart distribution pipeline was the envy of other retailing brands. They were using "big data" long before it was being described that way. They ran fast and lean; both effective and efficient. 

Like any advantage, the edge can fade, Just in time inventory can mutate to become, let's run the business with less inventory. If you do that across the entire store, eventually you might have a big problem with out-of-stocks. Didn't that happen? 

It is still early in the game for Amazon (and Netflix too). I will bet that the disruptive players will make the businesses better. If the incumbents do not improve, they risk losing share of market, sales and profits.  

Is it true that emperor has no clothes? Don't know that we can make that call yet.

Regarding Amazon's decision to offer a discount on Prime memberships last weekend, MNB reader Mark Delay wrote:

While I agree that Amazon is doing a smart thing they need to be cautious. As someone who has been a “loyal” Prime member for years and just paid his annual fee of $99 I’m not sure my loyalty is being rewarded by this kind of promotion. Just sayin……

And MNB user Pete Louree wrote:

You continue to provide great industry content and perspective. This week I particularly enjoyed the debate / discussion around Amazon's business model.  Appreciate what you do.

Hey, I'm lucky. I've got a diverse readership willing to share their opinions and feelings about important issues in a way that other sites can't or won't ... and because I don't have anything resembling corporate oversight, I can pretty much do whatever the hell I want, and think only about a) illuminating and entertaining the reader and b) illuminating and entertaining myself.

Finally ... the MNB Eye-Opener on Friday looked at how Zappos' Holocracy experiment - attempting to create a non-hierarchical organizational structure - is not going as hoped, with about eighteen percent of the company, or about 260 people, departing since the new and controversial approach was adopted.

Which led MNB reader Russell J. Zwanka to write:

Your Eye Opener reminded me of the "Star Trek" episode "The Enemy Within" where Captain Kirk is split by the transporter into his "good" side and "bad" side.  Eventually it becomes apparent that the good side, full of caring and niceness has no idea how to make a decision.  The bad side, with determination and un-fettered drive is the side Kirk needs to be the actual Captain.

Egalitarian environments work as long as everyone can agree and get along. Unfortunately, that means everyone in the organization needs to be self-driven, never have a bad day, and able to empathize and see all points of view.  Never happens.  And, since it never happens, someone has to be able to sort through the various points and make a decision.  The absence of decision-making is either chaos or complacency.

True. (And extra credit for the "Star Trek" reference...)

In the episode you mention, Kirk comes to the conclusion that it is his darker side that gives him the ability to command and make decisions, but "Bones" McCoy points out that it is his "good" side - intelligent and kind - that may provide his courage. And that's an important observation.

We all have these two sides, and Spock makes the following observation:

Being split in two halves is no theory with me ... I have a human half, you see, as well as an alien half, submerged, constantly at war with each other. Personal experience ... I survive it because my intelligence wins out over both, makes them live together.

That's important ... and why intelligence never should be underrated or minimized.
KC's View: