business news in context, analysis with attitude

Got a number of emails responding to Instacart's plans to test 15-minute delivery, and my criticism of the idea as being not just a likely violation of most laws of physics, but also an example of making promises to consumers that are likely to disappoint them and hurt client retailers.

MNB reader Lynn Olsen wrote:

IMHO, this is ridiculous on the face of it. Even in a society and economy driven by relentless consumption. The laws of both physics and economics work against this premise, as those investors foolish enough to buy into this will find out. 

One MNB reader wrote:

Can we Americans just take a chill pill and wait for our food to be delivered?  I can only imagine the pressure on the Instacart gig workers!  I’m sorry, but this seems unseemly and selfish.  Geez.

MNB reader Dale Tillotson wrote:

15 minute delivery is what is making instacart a dangerous operation to be near. Their shoppers charge through stores, interrupt associates waiting on other customers and have no qualms of pushing customers aside to get what they want. Then this carries out on to the roadway where they drive the same way with no care of anyone. Bottom line see an instacart shopper due everything you can due to slow them down to prevent them from killing someone. Of course that is the same attitude of  many in the general public. Slow down take it easy.

And, from another reader:

I think the April Fools' headline ought to be, "Instacart to pilot 'standing outside your bathroom door to hand you the roll of TP when you run out...' program.

Now, that's a commercial I'd like to see.

The other day we had a piece about companies creating Chief Customer Officer positions.  MNB reader Tom Murphy observed:

I get a big kick out of this movement…really, in the last 5 years this has become a trend?  Remember what happened to Efficient Consumer Response (ECR) in the early-mid 1990’s?  It was never about the customer, it was about lowering costs, creating efficiencies and squeezing the hell out of the manufacturers.

Which, in turn, earned this response from MNB reader Tom Ewing:

I spent two years working on the ECR Category Management group and we focused directly on the consumer in everything that we did, approaching every aspect of merchandising from how the consumer viewed shopping and how retailers could best align their processes to consumer satisfaction.  Now not every retailer implemented ECR Category Management the same way and some may have used it as Tom Murphy describes, but the actual work we did was very consumer focused.

I'm not questioning your experience, but … I think it is fair to say that a prevailing point of view within the industry is that the word "consumer" was the least important part of the ECR movement, which was far more focused on retailer-centric efficiencies than on customer-centric effectiveness.

I also got this email yesterday from an old friend and longtime MNB reader Richard Kochersperger:

Your conversations with Tom Furphy are insightful, thought provoking, and effective. Every retail food executive should be tuning in! They would learn much about where the industry is going and what issues they should focus on. Well Done!!

There are two points that you should share with your audience about Amazon that most people do not understand:  1) how it focuses on the customer and 2) uses manufacturer monies to fund the operation.

Focusing on the customer…

Amazon is focused on the consumer with the goal of servicing the customer more effectively that anyone else can. From day one Bezos understood that ‘owning’ the customer was an unwavering commitment no matter what!

Although they have made many mistakes and bad decisions, he never lost sight of the primary objective. Most retail food executives ‘talk’ about the customer, but they waffle as the world/economy/issues/competition evolves.

The original design for Amazon was to outsource most activities. Bezos had to learn the hard way as his third-party supply chain, USPS, FedEx and UPS, continually failed to live up to his standards, especially at Christmas time. Bezos had to experience failure to change his model. As a result, Amazon invested heavily in logistics and supply chain systems so that they could ‘own’ their supply chain from manufacturer to consumer. In short, they will become the largest supply chain operator in the world capable of delivering almost anywhere, on time, in perfect condition. This investment has enabled them to experience tremendous growth which will continue indefinitely.

Using manufacturer funds to manage the business:

The second strategy that Bezos employed was effectively using payment terms to fund his company. Amazon’s model is clearly distinct from other retailers.

Amazon operates with a negative position meaning they use ‘manufacturer’ money to manage his multi-billion $$ company. Amazon is generating revenue from customers before it must pay its suppliers. An interest free way to finance operations that can be used for the company’s growth initiatives. The average payment cycle is almost 80 days while the average US grocery retailer pays within 30 days.

On the subject of the Major League Baseball lockout, one MNB reader wrote:

It’s hard to have any sympathy for either party in this dispute, nether the billionaire owners nor the multi-millionaire players.  Max Scherzer just signed a contract that will pay him $43M per year to throw a baseball.  The Mets' owner, Steve Cohen, can easily afford to pay the freight because he made billions of dollars manipulating stocks as a hedge fund manager.  As a Mets fan, I will be excited to see Scherzer don the orange and blue (if the 2022 season isn’t cancelled, that is), but find the numbers staggering and more than a bit repulsive.

My daughter, like her mother before her, is an intensive care nurse.  I am somewhat embarrassed that she gets paid a fraction of what I earn as a real estate executive given the relative value of our work to society as a whole. That being said,  Scherzer’s annual salary is over 400 times higher than hers.  While his haul is record-setting, the “qualifying offer” amount this year (the average of the top 20 salaries) is still more than 200 times higher and even the major league minimum is multiples of what she earns to provide life-saving care.  Look in the mirror fellas and be grateful.

I completely agree with you that people who throw (and hit and catch) baseballs for a living earn salaries completely out of proportion when compared to the wages of people who contribute far more to society.  But that's actually an old argument that can be applied to many industries.  I would argue that a lot of CEOs are way overpaid when their remuneration is compared with that of people on the front lines.

The opposite argument is that Scherzer isn't just being paid to throw a baseball.  How many more tickets will be sold to games when he pitches?  How many more tickets will be sold to all Mets games if he helps the team compete and go to the playoffs?  How much more can be charged for ballpark advertising and TV commercials if he makes the Mets a better team?  How much more team merchandise will be sold?  In the end, how much more value will the team have if/when Steve Cohen decides to sell the Mets?

The Mets may be able to make the argument that Scherzer, in the end, is a bargain … if things work out.  Because, as Robert B. Parker once said, "Baseball is the most important thing that doesn't matter."

Of course, all of this pales when compared to the labors of intensive care nurses and special education teachers and all the other people who work incredibly hard and are incredibly underpaid.

MNB reader Bill Spoehr weighed in:

MLB needs a salary cap, just like every other major league sport in the USA.    Without one, it’s just the Dodgers, Mets and Yankees outspending everyone else and paying ridiculous amounts for marginal players.   Misguided Mets fans like you may enjoy that, but most do not.  Sadly, I don’t see a salary cap as an issue in this round of negotiations.   MLB lost me as a fan for a couple of decades after they cancelled the 1994 World Series – they’re playing labor games again, and with attendance down across all sports, they are once again messing with the people who pay the rent. 

I wonder how people in the business world would respond if their industries had a salary cap, which would prevent them from negotiating for higher salaries at competitive companies?

However, if MLB were to impose one, they also ought to have a salary floor.  It is patently absurd that the Cleveland Indians have a total payroll of about $23 million, and that the five teams with the lowest payrolls in baseball - the Indians, Pittsburgh Pirates, Baltimore Orioles, Tampa Bay Rays and Miami Marlins - together have a total payroll that is roughly approximate to that of the Los Angeles Dodgers, which had the highest payroll in baseball in 2021.  (Though give the Rays credit - they get a lot of bang for their limited expenditure of bucks.  Be nice if people actually showed up to watch, though, in the fans' defense, they are playing in one of the crappiest ballparks in baseball.)