retail news in context, analysis with attitude

There is a story in the New York Times entitled “Grocery Wars Turn Small Chains Into Battlefield Casualties” that looks at the “tremendous shakeout” taking place in the retail food business right now.

The premise is that the entry of Amazon into the food business, and the expansion of Walmart’s efforts there, and the resultant machinations from other major retail food chains, all have added up to enormous pressure on small and regional chains.

“At stake,” the Times writes, “is not only the price of toothpaste and bananas, but the fate of thousands of cashiers, cake decorators and meat cutters, many of whom belong to labor unions and are owed pensions when they retire … Like businesses in other industries — including Toys R Us, which announced liquidation plans this month — many failing supermarkets are owned by private equity firms that have loaded the companies up with debt.”

Burt P. Flickinger III, managing director of Strategic Resource Group (and an MNB fave), tells the Times, that this debt “hampers their ability to compete in an environment where prices in some markets have dropped by as much as 25 percent.”

Among the companies mentioned in the piece as vulnerable to varying degrees are Tops, Marsh, Fairway, and WinnDixie.
KC's View:
The theme of this story is one that we’ve been talking a lot about lately. What it all comes down to is that it is tough competing when you don’t have a clear differential advantage and compelling narrative; it is even tougher when you are burdened with debt that makes it hard to invest in the kinds of initiatives necessary to survive.

I got an email from my old friend, the great Jack Allen - legendary for his career teaching at Michigan State University - that pointed to another issue highlighted by stories like these: Can an industry with these sorts of issues be seen as attractive to talented students looking for career opportunities?

It is a good question. In my view, there are a lot of companies out there that never will be seen as interesting by students who want to work for innovative, disruptive companies. But I do think there are some companies that have a different mindset, that want to challenge their employees and want to have their employees challenge them, that will be attractive.

But only some companies.