History and Supidity in Retail
I read recently that Winn-Dixie market chain is in bankruptcy. Not too long ago the Furrs market chain in the west went under. Retail and grocery stores from mom and pop operations to large chains all across the country are under pressure and many have vanished. Some people blame competition from Wal-Mart for their demise, but I blame management by history and stupidity.
For years it seem that every time I find a brand of product that I like and become a loyal purchaser, it soon is discontinued. For example, my wife likes that French sparkling water, Perrier. It's pretty expensive so I'm sure they make a good markup on it. It's distributed all over Europe and North America. Last month it vanished from the shelves of our local Safeway sores. She asked the management several time, and after being lied to 3 or 4 times we finally learned that some other distributor had paid them more for the shelf space and was distributing a brand-X product that nobody has ever heard of.
That's right, the shelf space at Safeway (and most grocery chains) is sold to the highest bidding supplier. Safeway management does not control it. They have no control over their shelf space when a loyal customer gets screwed by not being able to buy the products we go to Safeway to get. If you go into many grocery and other stores, especially early in the morning, you will see rout men from a dozen suppliers stocking the shelves. These people do not work for the store. They work for distributors who have purchased the shelf space on a highest bidder basis. It's sold to the supplier who can extract the most money out of us, the customers, without regard to what we want to buy. Often a good product is replaced with a poor quality product because the poor product has a higher markup. So just when you and me find a product we like and become loyal customers our store sells the shelf space to some higher bidder, takes the product we like off the shelves, and offers us crap.
Some years ago I worked in a retail store for a year, not the big grocery chain but a small retailer of specialty products. The management brought in a line of Chinese made products that were an imitation of a name brand. I asked why we didn't just obtain and sell the name brand. The answer was because the name brand had only a 25% markup while the Chinese knockoff had a 50% markup. So they gathered a lot of dust. In the year I worked there I think we maybe sold 3 units in total. People would come in and look, notice the cheap imitations, and not buy. Instead of selling 100 for 25% we sold 3 at 50%. But our manager thought he was making more money.
Let's look at the economics of the purchased shelf space at your local market. There are route delivery men who have to purchase their routes from the distributor. They are not hired drivers who stock shelves. They have had to pay for the privilege of having the job of stocking the shelves. One of two things are going to happen, or both. Some delivery routes won't earn enough to pay decent wages plus pay back for the purchase cost. These routes will have a turnover of failed drivers, men who have been suckered into a losing investment of time and money only to be screwed by the system. They will leave and a new sucker will be recruited to take over by more lies and false promises. Some delivery routes will earn good money and be able to pay the driver back for his investment. But that means that the products you buy are being sold for higher prices to pay more for distribution than is necessary. All of these distributors and individual drivers have a huge cost that has to be passed on to us, the consumers.
Another thing that has always pissed me off is their disregard for selling quality products. They care more about image than taking care of customers. For example in the bakery department many stores feature fresh "French" bread. It never is sold with plastic wrappers because "French" bread comes with paper bags. Forget the fact that bread gets old, dried, and hard as a rock by the next day in a paper bag, that's not their problem. They intend for you and me to waste half the loaf because it gets dried out, and then come back tomorrow and buy another. Big chain bakeries, the ones who have purchased space on your market's shelf, always put their bread in plastic bags. But the store bakery does not. They have plastic bags, and will frown and give you one if you pester the baker, but they don't want your bread to last 2 days.
Let's compare the history and stupidity management model used by your local market to that used by Wal-Mart. Wal-Mart has been phenomenally successful by disregarding all the "rules" of retail. They are now the largest grocery retailer in the US. Wal-Mart does not sell their shelf space to the highest bidder. Instead of selling space Wal-Mart tires to figure out what we want to buy and then put it on the shelf. Wal-Mart does not have a fleet of route men stocking their shelves who had to purchase the routes. Instead, Wal-Mart buys truck loads of products from manufacturers or large distributors and hires employees to put them on their own shelves. Instead of a series of insane sales followed by inflated prices that you find at your local store, Wal-Mart always has a reasonable markup of the wholesale price without all the expensive hoopla.
Could Winn-Dixie, Furrs, Safeway, Krugers, and the rest adopt the Wal-Mart model and improve customer service while avoiding bankruptcy? Of course they could. But it's hard for the managers to give up that $2,000 that they are getting paid for a few feet of shelf space. Often the individual managers are pocketing a kickback from the route men under the table while the customer and the store owners get screwed. Of course it's a system that leads to corruption and double dealing all down the line. Big chains and local independents go bankrupt, shuffle around and are taken over by other chains, employees and customers get screwed, and the system of stupidity and history goes on and one.
Many people blame Wal-Mart for it's success when we should be blaming our local market for it's failure. I blame my local market when we go there and no longer can purchase Perrier water. I blame my local market when the French bread only comes in paper bags designed to dry out the product. I blame my local market when the price of a pack of Coca-Cola varies from $2.50 to $4.79 and back in two weeks. No, Wal-Mart isn't perfect, but they do almost everything in their business better than my local market chain. If any of you readers are in retail or grocery, get off your butts, drop the history and stupidity, and ask your customers what WE want. In any retail endeavor WE are the secret of success. Getting paid more for shelf space to offer a line of crap is a false economy. We'll go to Wal-Mart and pay less.
Bob
For years it seem that every time I find a brand of product that I like and become a loyal purchaser, it soon is discontinued. For example, my wife likes that French sparkling water, Perrier. It's pretty expensive so I'm sure they make a good markup on it. It's distributed all over Europe and North America. Last month it vanished from the shelves of our local Safeway sores. She asked the management several time, and after being lied to 3 or 4 times we finally learned that some other distributor had paid them more for the shelf space and was distributing a brand-X product that nobody has ever heard of.
That's right, the shelf space at Safeway (and most grocery chains) is sold to the highest bidding supplier. Safeway management does not control it. They have no control over their shelf space when a loyal customer gets screwed by not being able to buy the products we go to Safeway to get. If you go into many grocery and other stores, especially early in the morning, you will see rout men from a dozen suppliers stocking the shelves. These people do not work for the store. They work for distributors who have purchased the shelf space on a highest bidder basis. It's sold to the supplier who can extract the most money out of us, the customers, without regard to what we want to buy. Often a good product is replaced with a poor quality product because the poor product has a higher markup. So just when you and me find a product we like and become loyal customers our store sells the shelf space to some higher bidder, takes the product we like off the shelves, and offers us crap.
Some years ago I worked in a retail store for a year, not the big grocery chain but a small retailer of specialty products. The management brought in a line of Chinese made products that were an imitation of a name brand. I asked why we didn't just obtain and sell the name brand. The answer was because the name brand had only a 25% markup while the Chinese knockoff had a 50% markup. So they gathered a lot of dust. In the year I worked there I think we maybe sold 3 units in total. People would come in and look, notice the cheap imitations, and not buy. Instead of selling 100 for 25% we sold 3 at 50%. But our manager thought he was making more money.
Let's look at the economics of the purchased shelf space at your local market. There are route delivery men who have to purchase their routes from the distributor. They are not hired drivers who stock shelves. They have had to pay for the privilege of having the job of stocking the shelves. One of two things are going to happen, or both. Some delivery routes won't earn enough to pay decent wages plus pay back for the purchase cost. These routes will have a turnover of failed drivers, men who have been suckered into a losing investment of time and money only to be screwed by the system. They will leave and a new sucker will be recruited to take over by more lies and false promises. Some delivery routes will earn good money and be able to pay the driver back for his investment. But that means that the products you buy are being sold for higher prices to pay more for distribution than is necessary. All of these distributors and individual drivers have a huge cost that has to be passed on to us, the consumers.
Another thing that has always pissed me off is their disregard for selling quality products. They care more about image than taking care of customers. For example in the bakery department many stores feature fresh "French" bread. It never is sold with plastic wrappers because "French" bread comes with paper bags. Forget the fact that bread gets old, dried, and hard as a rock by the next day in a paper bag, that's not their problem. They intend for you and me to waste half the loaf because it gets dried out, and then come back tomorrow and buy another. Big chain bakeries, the ones who have purchased space on your market's shelf, always put their bread in plastic bags. But the store bakery does not. They have plastic bags, and will frown and give you one if you pester the baker, but they don't want your bread to last 2 days.
Let's compare the history and stupidity management model used by your local market to that used by Wal-Mart. Wal-Mart has been phenomenally successful by disregarding all the "rules" of retail. They are now the largest grocery retailer in the US. Wal-Mart does not sell their shelf space to the highest bidder. Instead of selling space Wal-Mart tires to figure out what we want to buy and then put it on the shelf. Wal-Mart does not have a fleet of route men stocking their shelves who had to purchase the routes. Instead, Wal-Mart buys truck loads of products from manufacturers or large distributors and hires employees to put them on their own shelves. Instead of a series of insane sales followed by inflated prices that you find at your local store, Wal-Mart always has a reasonable markup of the wholesale price without all the expensive hoopla.
Could Winn-Dixie, Furrs, Safeway, Krugers, and the rest adopt the Wal-Mart model and improve customer service while avoiding bankruptcy? Of course they could. But it's hard for the managers to give up that $2,000 that they are getting paid for a few feet of shelf space. Often the individual managers are pocketing a kickback from the route men under the table while the customer and the store owners get screwed. Of course it's a system that leads to corruption and double dealing all down the line. Big chains and local independents go bankrupt, shuffle around and are taken over by other chains, employees and customers get screwed, and the system of stupidity and history goes on and one.
Many people blame Wal-Mart for it's success when we should be blaming our local market for it's failure. I blame my local market when we go there and no longer can purchase Perrier water. I blame my local market when the French bread only comes in paper bags designed to dry out the product. I blame my local market when the price of a pack of Coca-Cola varies from $2.50 to $4.79 and back in two weeks. No, Wal-Mart isn't perfect, but they do almost everything in their business better than my local market chain. If any of you readers are in retail or grocery, get off your butts, drop the history and stupidity, and ask your customers what WE want. In any retail endeavor WE are the secret of success. Getting paid more for shelf space to offer a line of crap is a false economy. We'll go to Wal-Mart and pay less.
Bob
posted by Bob | Sunday, June 26, 2005
1 Comments:
Ask Frito Lay what their shelf space costs them on a quartely basis. The practice has been going on for eons. Free enterprise I guess. (But at what cost). Just another Bob.
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