Published on: November 26, 2019
Got a number of responses to yesterday's story about Kroger;'s struggles and decision to "get back to basics".
One MNB reader wrote:In reading your article it seems the problem with Kroger is they simply have grown too big, too fast, and got into areas of business they did not properly plan for or fully understand.That seems to be the essence of what both Millerchip and Gundelach state in your article.
Being in Chicago my experience with Kroger comes 100% from shopping at Mariano's. While I do agree "back to basics" sounds like regression in a world where progress and change are driving success, I see opportunity at Mariano's to improve some foundational basics. By that I mean things that are core to any grocery shopping experience. I shop less and less at Mariano's due to high prices, change in selection that has driven me elsewhere, and significantly lower quality produce than when Roundy's was independent. Plus the store by me recently removed another 4 or 5 checkout lines to install more self-checkout (obviously related to cutting 1,000 jobs). However this has caused noticeably longer lines. People struggle with self checkout systems as there are many older and immigrant shoppers in my area . There is also a lot of family shopping done at the store by me, so there are half as many lanes to handle all the full shopping carts that come through. I'm not near a downtown store with a healthy "to-go" clientele that pick up a minimal amount of items multiple days per week. I'm not sure Kroger did the work on a by store/by market basis when implementing store level changes.
You remind me of something that my old friend and MNB fave Glen Terbeek used to say - that 100 store companies would be better off if they operated as independent pods of 10 … that it would make them more responsive to local customers in a way that bigger corporate structures cannot.
Another MNB reader had a similar take:Kroger’s problems began to weigh them down when they purchased Roundy’s. Don’t get me wrong - Bob Mariano is the Picasso of grocery, but he builds unsustainable platforms with huge debt for the infrastructure, entertainment and design he offers. He has never been able to sustain a profitable regime.
Many of us in the grocery industry - said at the time of the acquisition, “just wait he will weigh even Kroger down”.
Mariano - is a designer/entertainer and innovator for grocery - but not a bottom line, sustainer. Kroger was foolish to buy and try to sustain his visions.
One MNB reader asked:Does this remind you of A & P’s failed “Price and Pride?”
Not a comparison that would make any retailer happy, methinks.
From another reader:Being based in Kroger’s hometown, we have a birds-eye view of so of the challenges facing Kroger. Yes the industry is skeptical of the multitude of investments behind the Restock Kroger initiative and the fact that the ROI behind the millions of dollars of investments is way down the road and not today whether it be the Ocado warehouses, MFC’s, the partnership with Walgreens to Nuro. The one initiative that I thought was most promising was in training. We heard that the category managers were to get negotiating skills set training to strengthen their ability to compete. But the biggest challenge they face is the morale of its people. Laying off thousands of employees to cut costs doesn’t help.
A great example is in the frozen departments where the execution of Nestle going from DSD to warehouse is under way. The frozen managers now have to stocks hundreds of more items everyday with no additional man-power. I was in my local Kroger Saturday at noon, and the GM aisles were cluttered with 4 pallets of goods and not one person in sight. I couldn’t even navigate down the aisle in search of freezer containers for my butternut squash soup I was simmering back home. Talk to any store employee and the cutback in labor hours is their biggest gripe. Maybe Kroger is right, they need to get back to the basics and support their store staffing.
And from another MNB reader:Lessons learned … "If you never forget the basics, you never need to go back!"
Pithy. And a good point that everyone should learn.
Responding to our piece about Target's advances, one MNB reader wrote:I am in my hometown of Minneapolis for the holiday week and, as always, I’m in awe of the Target stores here compared to the ones I regularly shop at in NJ and NH where I previously lived.
I ran into the Target store in Edina, MN yesterday for a couple of quick things and will make a point to head back to that store for a longer visit before heading back to NJ. I only wish the stores in the Northeast were half that nice! Beautiful lighting and presentation and pristinely clean. As I mentioned it was a brief trip but I saw fully stocked product throughout, unlike what I routinely experience in my NJ stores.
I agree with you and hope the company implements some of these changes in the Northeast stores.
It always is easy to update the stores near headquarters - you know, the ones where management shops and where spouses, friends and family members shop. Sure, they're easy to check on … but they're also good for lulling management into a sense of complacency, thinking that these stores are typical of the fleet.
On another subject, from another MNB reader:I am not surprised in the stories about Walmart closing Jet fresh deliveries or the story about Kroger going back to basics. I have spent 5 years trying to see how any retailer can make a profit at eCommerce in food items and am still looking. Walmart seems to have found the same and Kroger struggles can be traced to their fascination with click and collect to the detriment of their base business. I propose that even Amazon loses money on food eCommerce and makes it up with other businesses due to the attraction of the number of food transactions.
The eCommerce business is very attractive to high value customers for many retailers, but the cost to pick, assemble and deliver to curb or home is hard to recoup by charging the customer who expects the service free or at little cost. Former Walmart CEO Bill Simon traced the decline in Walmart profitability as they have grown their eCommerce business impressively and Kroger’s results are open for all to see. It costs $15 or so to prepare a 50 item grocery order for pick up and another $10 or so for delivery of that order to a home. When you add up to $25 in cost to any grocery order, it is hard to make any money.
And, regarding yesterday's piece about the problems malls are having, one MNB reader wrote:I would like to add a little information to “Inside The Death Of A Mall” article in reference to Southdale Center in Edina Minnesota. First Southdale was one of four “Dale” malls built in the Twin Cities. They are Southdale (Edina late 50’s), Brookdale (Brooklyn Center early 60’s), Rosedale (Roseville late 60’s) and Ridgedale (Minnetonka mid 70’s). The four Dales all did well, each in their own way until the decline of Malls took over and we all know the outcome of that story. Southdale was a premier mall until 1992 when the Mall Of America (about 5 miles away as the crow flies) came to town and “Ate their Lunch”.
At this point the number and quality of stores at Southdale declined and many areas had the now familiar false walls covering many storefronts as time went on. Brookdale closed in 2010 after being a ghost town for many years and in 2011 was demolished and replaced by a Walmart Supercenter. Point being Brookdale closed and nobody cared because it was in a working class part of town. Rosedale and Ridgedale still hold their own being they are in affluent areas. As for Southdale, also in an affluent area, the repurposing of the mall is a good thing. An example is that the local county library (Hennepin county) is moving into another empty big box space at Southdale. The name Southdale will live on for this “Life Style Center” not because of the once great shopping mall it was, but because it is part of the local DNA of the Twin Cities area.
Responding to the piece about how increased minimum wages may not be inhibiting economic growth as some predicted, MNB reader Robert Smith wrote:I had a conversation with some retailer friends over the weekend about minimum wage. The consensus was that competitive forces have driven wages in Wisconsin well above the legal minimums.
They said it almost impossible to hire at Wisconsin’s minimum wage of $7.25 per hour and difficult to keep good people unless you’re paying about $12.00 to $15.00.
Perhaps this is why some of the predicted negative impacts of increased minimum wages have not been felt. Market forces are helping solve the problem by driving wages up even faster than the government mandated increases.
And finally…MNB reader James (Mac) Patrick wrote:Thanks for recommending the segment on Frieda Caplan, but you should know, it was never broadcast! It was even noted in the information regarding the various segments on food. We love CBS Sunday Morning and this week was quite interesting, but no Frieda, boo.
From MNB reader Deborah Faragher:I was looking forward to seeing the Freda Caplan piece on CBS Sunday Morning. In my opinion, they could have easily dispensed with the segment devoted to the growing phenomenon known as Mukbang which I found gag-inducing. (If, like me, you didn’t know what Mukbang is, you will add no value to your life by learning.) I sure hope she gets a reprieve as learning about her would have been a far richer experience for me.
Unfortunately, CBS doesn't run its programming decisions by me. (They should.) But I am assured that Frieda will be featured on a future program.