retail news in context, analysis with attitude

I love it when I get emails like this one from MNB reader Howard Carr:

As a person on the real estate side if retail for more than 45 years, I cannot understand what the problem is with the Bricks and Mortar operators.  I find it incredible that they do not do every day, what they do on Black Friday to entice customers into their stores.  Offer goods at special pricing for items purchased in store.  If people will line up on Thanksgiving night at Best Buy for the next hottest TV or computer, they will do so for other items if the pricing warrants someone to make the trek, and if they can figure out how to make it work on Black Friday, they should be able to figure out how to do it weekly.  They develop flyers every week, ,they just need to calculate the costs of losing sales against the overall costs associated with their occupancies, and use the difference to support the aggressive pricing model to entice the customers into the store.

Once there, they then need to find ways to “add on” to the buying trip with related and associated items that they can hold better margins with.

I think this is pretty much within the fundamentals of retailing.

You'd think.

And here's another thought-provoking email from an MNB reader:

I spent well over thirty years in the supermarket retail business, working for chains in the southwest, northeast, and southeast. And in that time, there is one thing that is perfectly clear to me, and that is there are two primary retail cultures; what I would call Merchandising Driven Retail Cultures and Operations Driven Retail Cultures. In my mind, Whole Foods, Wegmans and Dierbergs are great examples of Merchandising Driven cultures while a chain such as Walmart might perfectly define an operations driven culture. And chains such as Safeway, and yes Kroger are in my opinion also examples of operations driven retail cultures.

What’s the difference in such retail cultures? Just my opinion, but I believe that Merchandising driven cultures evolve from their beginning through defining how they are going to uniquely deliver visual merchandising objectives, customer service levels and store condition parameters from an identity standpoint and then operationally execute to meet those goals to maintain profitability, it’s not that they aren’t great operators, it’s that they employ great operational execution in order to deliver their brand promise which typically is not about price, but the shopping experience.
Conversely, Operations driven cultures typically do have a low retail price component as a part of their brand promise and tend to identify costs of doing business and then build processes to deliver results around those constraints. I know this is way over simplified, but that’s basically the way it works. Issues arise such as the one you identified when operations driven companies  step out of their lane and work to deliver unique shopping experiences that they aren’t prepared to support. They know what displays should look like, what offerings should be, but the hard fact is that as merchandising techniques, variety and fresh foods offerings become more complex, more labor is required to maintain those displays and manage all the backend consequences, like appropriate inventory management, in store production needs, not to mention shelf and display conditions…etc. etc. In an operations first environment, results of such initiatives quite often end up looking exactly like the pictures you took when they are managed by the same operations folks that manage their base format, it’s a square peg in a round hole. It works the other way around too…just look at Whole Foods low price format initiative. In my opinion, the investment in the necessary ingredients in any retail initiative have to match the expectations...Just has to happen. When things don’t go just right, the kneejerk reaction in an operations driven culture is not to invest to improve the shopping experience, it’s to remove the expensive ingredients. Keep your eye on the ball indeed.

Reading your email, I found myself thinking about where Amazon fits into the equation. I suspect Jeff Bezos would refer to his company as a third iteration - as a Customer Driven Retail Culture.

On another subject, from MNB reader Chris Vukich:

I agree that subscription is a big opportunity for online retailers and it definitely builds repeat purchases and loyalty.  However, one thing I would caution the online retailers is the pricing model on these subscription items.  I think the temptation to raise pricing once customers are perceived to be inelastic will be great.   Today, the online retailers give a 5-15% discount for subscribing, but if the e-tailors start playing pricing games, there could be blow-back if customers find out that they are paying more for a subscription than the everyday delivery price.

Responding to our story yesterday about the decline of the MP3 format, MNB reader Bob McGehee wrote:

I continue to reference a scene from ‘Men in Black’, 1997.  It’s when Will Smith is getting his initial tour of HQ.  Tommy Lee Jones picks up something the size of a dime and says, “Lookie here.  I guess I’ll have to buy the White Album again.”  Those two sentences were way more prophetic than anyone could have imagined.

We had a story the other day about an Arkansas murder trial at which audio files from an Amazon Echo are being examined to see if they will offer any clues as to the what was happening in the accused murderer's home at the time of the crime.

And I commented, in part:

To be clear, we don't exactly know what is on the audio files ... police may only know what song was playing when the murder was committed. (If the song is Eminem's "Kill You," though, just the music choice may offer some insight.)

Which prompted one MNB reader to write:

I guess I’ve never thought of you as a fan of “The Real Slim Shady” ... the things I learn reading your blog each day.

Actually I'm not. This is a perfect example of my knowing a little bit about a bunch of stuff, as opposed to being deeply knowledgeable about anything.

Though I should note that Mrs. Content Guy actually is an Eminem fan ... or at least a fan of some of his songs. After 34 years of marriage I must confess that I don't really understand this ... but then again, she doesn't really understand why I like sushi. So I guess we're even.
KC's View: