MNB reader Doug Galli has a reaction to my argument that while Amazon may try to steer shoppers to products with higher margins, so do many retailers:
Kevin, you are correct on this point of how retailers “merchandise” and market their respective stores. You work to steer customers toward higher margin products, which might not always be a higher retail. I’m not a regular Amazon shopper (unlike my wife), so I can’t speak to exactly what the concern here is, but if it is simple merchandising it seems like people simply complaining or attorneys looking for a fee.
Got the following email in response to some of our stories about streaming services:
Yesterday when my family was discussing various movie studios, I mentioned Paramount. My 12-year old son said, “Paramount is a studio? I thought it was just a streaming service!” Point is – there is a whole new generation that views the old school studios versus new school streaming services as entirely beside the point. We only subscribe to Paramount+ so my Italian husband can watch his beloved Series A soccer (excuse me, “football”). Finding these interesting little niches that people will pay for is really smart, but we rarely watch the TV or movie content that presumably should be the draw for many. Translation to the grocery business? Sell something that others can’t or won’t, but be darned sure there is a large enough audience to make a go of it.
Got the following email from MNB reader Howard Carr about my dismissive attitude toward Macy’s:
I must completely disagree with your final conclusion about Macy’s.
A major portion of the US market is not a Bloomingdales customer, and most likely, never will be. The need for a department store model that caters to the greater masses is one which can remain viable and necessary in our economy. If you were to transfer all the square footage that Macy’s currently operates in, in their retail format, to the alternates you mention, there is no existing format for that space to move into. Where would women purchase the different fashion items that May’s carries, where would the fragrance and cosmetic business go, the less costly jewelry formats, foot ware, brand name men’s fashions go? Just to pick out a few categories.
The marketplace wants, and needs, alternatives for a real shopping experiences, and the public will soon learn that the time they spend online browsing and making decisions on their purchases, can be shorted with a single trip to a store, rather than the time spent searching the internet, and then repacking and returning 80% of what they buy, because it does not fit, is the wrong color, or is of inferior quality, or just does not work for what they were seeking.
If Macy’s can remain viable as a retailer by offering value and service, because we know it can be done ( Bloomingdales and Nordstrom), then there is definitely a future for them.
I talked recently about a piece focusing on local vs. national retail. Among other things, one MNB reader pointed out, I mispronounced the name of a community:
Minot is pronounced MY-Knot. As they say “Why not Minot.” If you asked for directions to Minnow you would be directed to a bait shop.
The Hsieh-Hansberg Study “The Industrial Revolution in Services” postulates that IT, communications and new management techniques made it possible for firms outside of manufacturing to scale not-tradable industries. They state that industries that scaled had observable fixed cost expenditures in R&D and headquarters. Higher fixed cost investment lowers the threshold of cities non-tradable services can operate.
While that conclusion seems intuitive the study was done on data between 1977 and 2013 missing the pandemic and the internet boom. The data based on MSA’s and zip codes is too large for some grocery conclusions. The anecdotal references to the survival McCaffrey’s in Princeton New Jersey is not evidence that local merchants can survive. Walmart’s 30% market share has come with the destruction of local grocers along with other nonfood retailers. While many local grocers neither have the expertise nor the financial resources to compete against the fixed costs of the IT that the new competition was and is building the ascension of Walmart was simpler. Wal-Mart overbuilt the trade area in size, lowering the average dollars per square foot below the breakeven point. If a retailer lowered prices Wal-Mart matched, accelerating the competitive time to elimination. A small hardware store with 3-4 inventory turns per year would take a little longer to eliminate as the owner might live off of his inventory for a while. Hsieh-Hansberg argue that costs are lowered. They do not consider the costs of the elimination of local owners and leaders only to be replaced by clerks.
In North Dakota people used to by a car from the local dealership; not go to Fargo for a cheaper price. After all if the local dealership is gone, who would fix it?
Out here on the plains, self-reliance is a team sport.
On the subject of self-checkout, one MNB reader wrote:
The one issue with limiting self-checkout to only 10 items is if you do not have enough cashiers for the larger orders, you will cause frustration with customer. Is a Schnucks employee really going to enforce that a customer who has 15 items can’t use self-checkout and may have to and wait to be checked out by a cashier who is helping a customer with a much larger order.
Self-Checkout wouldn’t have exploded the way it did, but retailers forced the customers to self-checkout with lack of cashiers. This policy at Schnucks could turn them into a large convenience store where customers only buy 10 or less items and do their large shipping at a competitor.
Retailers short sighted focus on decreasing labor at stores could have a negative impact on sales. Cut CEO’s pay to a reasonable level you could pay for a lot of cashiers. Sorry my inside voice goes outside sometime.
Another MNB reader wrote:
“When self-checkouts were first introduced, they were intended for smaller orders. Over time, larger orders began moving through self-checkouts, and we are hoping to address that concern.”
Maybe the larger orders went to the self-checkout because of the reduced number of manned checkouts?
Maybe because of my work history, but I still remain one of the fastest cashier in most stores today….lol.
On another subject, MNB reader Duane Kolsrud wrote:
It’s interesting that Target is considering a subscription model. How about making their current program more attractive and valuable to the shopper? How about instead of thinking like you are still in the old “Target Run” days when shoppers visited for toilet paper and cleaning supplies every month but instead, go after the 52-week grocery shopper? To my knowledge, every Target these days has a grocery department- from the Super Target stores with full grocery to the smaller versions with a reduced product mix(footprint) as well.
Customers shop grocery on avg. from 1-2 times per week. They don’t need to charge for a subscription if they just go after the customers to shop at their stores every week. Just imagine turning a once-a-month shopper into a once-a-week shopper. Just ballparking the average cart size at $150- that would translate to $1200 per year to $7000+ per year. The program will pay for itself. Be the leader and not the follower. Promote your program, promote the heck out of your grocery.
Responding to the assertion that Costco has such a stable work culture that it does not need to have non-compete agreements with its executives, one MNB reader wrote:
I’m sure Costco loves the narrative that “the company is so stable and the culture so positive that nobody will want to leave. And they rarely do” as being the reason they don’t have non-competes for top executives. But I think it may also have at least a little bit to do with the fact that non-competes are illegal in Washington, one of nine such states where that is the case.
Additionally, I wonder if that also makes non-competes from companies in other states, i.e. Ohio, unenforceable there…?
That’s what I love about MNB. I learn something every day.
Responding to our piece about Amazon having to choose between curating products and being deluged with cheap Chinese items that turn it into an online flea market, one MNB reader wrote:
Let’s see a made in the USA designation on products sold by Amazon. Not everyone would be willing to pay a little more, but some would. That could be a point of differentiation versus Temu and others. How quickly we forget how our reliance on Chinese goods hit us during the pandemic.
I made the argument years ago that Amazon ought to curate “Made in the USA” products. I still think it is a good idea – as long as it can trust the company evaluating the claims. Not all the people and companies doing so are trustworthy. They’re better at issuing press releases than acting in an ethical fashion.
MNB reader Phil Censky had a broader assessment of Amazon:
Once upon a time, shopping on Amazon was fast and easy. They had the assortment no physical store could approach, and they offered the convenience of having product arrive at my doorstep within a couple days (at most). But then Amazon, in its quest for endless aisles and unlimited shelf space, opened the doors to international third party sellers with too few guardrails related to quality, legality (especially patent and copyright infringement), and safety.
Is it really a value to the consumer to force them to sift through 5,000 different products when they search “iPhone charger”? Buying a simple product makes me feel like I’m wandering around the secret government warehouse searching for the Ark of the Covenant. Furthermore, are reviews worth anything when some random products have tens of thousands of 5 star reviews? Do we believe it? Should we?
It’s easy for me to say with no skin in the game, but competing with Shein on price and assortment seems like a losing proposition. Sometimes the tail is just too long, sometimes there is too much choice. If Amazon wants to be a trusted retailer, my advice is to start curating assortment like a trusted retailer. After all, the hardest part about sticking to a strategy is having the strength to say ‘no’.
And from MNB reader Theresa Zaske:
I’ve been a Prime customer for years. And for years I’ve been glad to be. I’m becoming less sure though as service from Amazon has continually gotten worse.
Pre-covid I could get items purchased from Amazon in a day or two (I’m one of those folks who does NOT live within 10 miles of a WalMart – nearest one is 17 miles away, next closest is more than 50 miles away) now, I’m lucky if I get an Amazon order in a week – not a third party order through Amazon – but an order sold by Amazon and coming from an Amazon warehouse. Whether it’s a Fire TV (took 7 days to arrive) or keto syrup ordered with a couple other items (took almost two weeks) delivery times have been disappointing.
Prices on items I order via subscribe and save can shift by 20% or more as the day to “lock in” the order for a month comes closer. Items I regularly order are regularly out of stock – which I don’t find out about until the order is already processing so it’s too late to pick a substitution with subscribe and save savings. Almost every month, one or two items stop being part of subscribe and save and the substitutions Amazon suggests sometimes make no sense at all.
I’m not impressed that with all the money I’m forking over, services have gone down and now they want me to pay more for good sound and no commercials breaking up my Prime viewing.
Responding to the lawsuit filed by Snoop Dogg against Walmart and Post, charging that they pretty much buried a brand of cereals that he helped create, one MNB reader wrote:
Post is one of our valued clients and I sold the Snoop-branded cereals to one of my customers when they were launched. They were not all that popular. In my opinion only, they were excessively sweet in a market in which moms are looking for healthier foods for their families. Neither manufacturers nor retailers can create shopper demand and sales for products that consumers don’t want. According to a professor at Harvard Business School, 95% of new products fail.
I was wrong yesterday when I suggested that there were only about seven members of the MNB community who would get my veiled reference to taking a contract law class from Professor Kingsfield. It ended up being a lot more than that – dozens of folks who remembered the movie and subsequent TV series “The Paper Chase,” which featured the great John Houseman as Kingsfield.
I feel less alone.
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