Responding to the controversy generated by accusations that Instacart was engaging in dynamic pricing, one MNB reader wrote:
I read the Instacart response a couple of times and I am not sure what Instacart’s price policy is. They seemed to be throwing their customers, the supermarket companies, under the bus. When Instacart started they had two models. Under one plan you were charged the supermarket’s shelf price with a service fee and delivery fee tacked on. Then they emailed you soliciting a tip for the delivery driver. The alternate plan was eliminate the service fee and build it into the product price. The grocer choose which model to go with online.
Long ago the head of Merchandising at a chain I worked at claimed you could break products into three groups. The first third of products would be those items customers frequently purchased for which they were very familiar with prices, The second third were items purchased every few weeks or so for which customers had a general idea on price but couldn’t tell what they paid last. The back third were items purchased infrequently for which customers rarely remembered the price. The merchants had to be very meticulous on price changes and price comparison to competition on the first third of the store. The middle third required a light touch but the back third was open to heavy markups and some time what we referred to as insult pricing.
On this scale I think Instacart would need to be very careful on price variation on those items frequently purchased by online shoppers and if customers realized the prices were subject to dynamic adjustments would leave Instacart. Remember what happened when Wendy’s just floated the idea of dynamic pricing in their pricing depending on busy periods. It took a fair amount of back peddling to clean up that misstep. The reputation of Instacart is not only on the line but the Grocer as well.
On another subject, one MNB reader wrote:
I’m reacting to your comment about Market Basket/Demoulas. You said that you agree with Arthur T. and that the sisters just want to sell the business. I guess I was surprised at this comment. The sisters may want to sell the business, or maybe they want higher dividends. So what? As 60% owners that’s their right. Perhaps you like Arthur T. better than his sisters, or you think he is a great retailer and puts his associates and customers (and his own family) first, but I have a hard time agreeing with his position. Let’s remember his position is that he wants to run the business as his own fiefdom with no accountability to a Board. This has resulted in no budgets, Arthur T. spending tens of millions on new stores and real estate without Board approval, and demanding that his son become the next CEO while his daughter also benefits from nepotism.
I agree that Arthur T. is a great retailer, treats his customers and associates well, and successfully created a David vs Goliath story during the last family fight. But he has no appreciation for sound corporate governance. I’m not a lawyer but there is every indication he will lose in court. He only owns 28% to his sisters owning 60% (the other 12% is in trust for grandchildren, etc.). That means he has a boss and that boss is the Board. If the Board asks for budgets, wants to approve real estate project above a certain amount, and choose the next CEO, that is their right. These are not unreasonable requests for any Board. In fact, the Board is open to lawsuits if they don’t exercise their fiduciary responsibilities on these matters. In addition, if there is any evidence Arthur T. was planning to harm the business with a strike, the court will not look favorably on a CEO trying to harm the business, for their own personal agenda.
So while I agree with you that no good can come from this family dispute and I respect Arthur T. as a merchant, I land on the side of good corporate governance, versus CEO’s doing whatever it is they want to do.
There was a story the other day about an FTC probe into Pepsi giving preferred pricing to Walmart, with the two companies conspiring to keep prices high elsewhere. One MNB reader wrote:
The tactics described in the FTC investigation are exactly how the grocery business works, with the exact anti-competitive results it cites.
Walmart has consistently pursued the goal of having lower retail prices than its competitors. Before it developed market power it achieved that goal by applying operational efficiencies that allowed it to run at lower gross margins than competitors. Now Walmart’s gross margins are similar to those at competing retailers’, and it achieves price gaps in exactly the ways the FTC found. In some cases Walmart bullies suppliers with threats of less shelf space or even discontinuation. In other cases Walmart promises volume growth that no other retailer can provide because of its sheer size.
The result is lower costs for Walmart and higher costs for everyone else. Some retailers match Walmart’s retail prices and suffer lower profit margins. Some retailers maintain their profit margins and suffer lower sales because their prices are higher than Walmart’s.
There’s no doubt that other retailers get hurt by this. Whether or not consumers get hurt is not as clear. If Robinson-Patman was enforced, would prices at non-Walmart retailers decline, or would prices at Walmart rise? I guess the answer is that the market would decide, and if you believe in free markets then enforcing Robinson-Patman is the right choice for consumers as well as for retailers.
Another MNB reader chimed in:
As a sales rep for over 40 years, nothing surprised me in your article. Robinson- Patman has not been enforced since Wal-Mart burst onto the scene. Other large trade customers receive similar discounts with wink-wink justification. Small retailers are getting the shaft everyday.
Regarding self-checkout, one MNB reader wrote:
The continuing self-checkout discussion is interesting. Market Basket, under Artie T, was adamant about no self-checkout. It will be interesting to see if MB gets self-checkout in the future.
The Chestnut Hill MA Wegmans just re-did their self-checkout this year. There is now room for people who prefer to self-checkout when they have 20+ items as well as smaller baskets. Vast improvement over the original setup.
And, I got this very nice note from MNB reader Ben Boseman:
I really enjoyed your interview with Randy Arceneaux and Randy Fields regarding FSMA.
Affiliated Foods is a customer of ours and we are certainly doing our part to be at the front of this movement.
Thanks for creating so much good content throughout the year. Your email is part of my morning routine.
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