Category Archives: Retail

True Cost Reduction Doesn’t Increase Risk

While reading a recent article over on the Inbound Logistics site on Serving up the Perfect Meal, I came across the following quote from a general manager for C.H. Robinson that worried me:

“One thing all restaurants are doing is managing labor farther up the supply chain, and pushing inventory levels back to suppliers to manage, thereby controlling costs, keeping inventory fresh, and allowing menu planning variability.”

Can you see why? While managing labour considerations further up the supply chain is a great idea, as it forces you to have good supply chain visibility, and keeping inventory fresh will give you an edge in the food service industry, pushing inventory levels back to suppliers to manage is a disaster waiting to happen unless:

  • they are at least as competent as you in inventory management,
  • they have deep insight into your expected demand requirements over time (at least six months into the future), and
  • they have a basic understanding of the market volatility and the ability to handle unplanned demand surges.

If any one of these assumptions are false, at some point in time, your supplier is going to be out of inventory when you need it most, and you’re either going to have to spot-buy elsewhere, at considerably higher prices, or, even worse, go out of stock and have to slash profitable menu items for the duration of the shortage.

You should only let your supplier manage your inventory if you have deep visibility into the supply chain and collaborate with them to make sure they have all of the data they need to predict your needs as well as you can. And you need this visibility, given that quality, safety, and traceability are critical to a food service provider’s supply chain, especially given the recent introduction of the Food Safety Modernization Act.

Sears’ Deadly Sins

By now, everyone knows the story of K-Mart, and its bankruptcy that was well chronicled in Marcia Layton Turner’s book on Kmart’s Ten Deadly Sins: How Incompetence Tainted an American Icon, which was summarized in a recent article by Vivek Sehgal on why Business Strategy Should Design and Determine Supply Chains over on the Supply Chain Management Review this spring.

But not everyone knows that Sears, part of the Sears Holding Company, may not have learned the lessons K-Mart failed to learn and may be going down the same path, at least North of the Border. Consider the following sins in particular:

  • Brand Management
  • Underestimating Walmart
  • Ignoring Store Appearance
  • Supply Chain Disonnect
  • Repeating the Same Mistakes

Let’s take them one by one. It hasn’t made a top 100 brand list in 3 years, since it made the virtue 100 in 2009, and 24/7 Wall St (.com) predicted it would vanish this year. It’s still around, but it’s not a household name. In fact, the only good rankings it is getting are for its mobile site, but we all know how limited mobile sales still are, and one has to wonder how long it is going to fare well in the online world now that you can get most of its products through Amazon Supply. There was a time when Sears was a household name, and would always be in the top 50 brands. Not anymore, although Lands End was recently recognized, but Lands End is not Sears. Just an apparel line.

Like every other big average consumer retailer, Sears underestimated, and North of the Border, continues to underestimate Walmart in my estimation. In the Great White North, Walmart is expanding like mad while Sears is barely holding the few locations it has in many places. While many of you are likely aware that Target is about to expand rapidly into Canada through its acquisition of the leasehold interests of over 125 stores from Zellers Inc., what many of you do not know is that many of the remaining stores that are (in the process of) being closed are being scooped up by Walmart. the doctor can’t remember the last time a Sears location opened in his province.

While Sears store appearance generally isn’t that bad, it generally isn’t that good. While Walmart stores are kept new, clean, and shiny, some of the Sears stores the doctor has been in lately are starting to look run-down, dusty, and drab. And many of the displays, which may have been attractive in the 80’s and 90’s, are looking dated. What’s going to happen when Target bursts onto the scene?

And the Supply Chain Disconnect is still there. Consider the fact, as reported in the SCMR article, that in 2010, four years after the merger, only 4 distribution centres out of 39 were shared between Sears and Kmart, while others continue to serve Sears or Kmart stores exclusively. Walmart is going to eat Sears alive!

Sears is repeating the same mistakes that Kmart made, and focussing in the wrong areas. Brands (like Lands End) are not going to save it. A good mobile site is not going to save it. The only thing that is going to save it is a renewed focus on supply chain (to get its operational costs in line with Walmart’s) and a focus on brand rebuilding. It has to be a household name again. Otherwise, it may not make it’s 200th anniversary, which is a mere 8 years away! I hope I’m wrong, but we’re in an age where billion dollar enterprises can go bankrupt almost overnight.

Walmart Changed the World 50 Years Ago, But Did It Change For The Better?

I certainly agree with this recent Time Business article on “10 Ways Walmart Changed the World” (July 2, 2012) since the first Walmart store was opened in Rogers, Arkansas on July 2, 1962 (four thousand, four hundred stores ago). But I’m not sure all of the changes created by the world’s largest private employer are for the best.

Let’s start with this nice and succinct quote from the article:

Walmart’s relentless drive for efficiency has bankrupted companies, put downward pressure on wages and upset a retail culture that some believe was less efficient but more personal and aesthetically pleasing.

It may be the story of American capitalism at its finest, but is that the story it wants to bring to the rest of the world as it continues its rapid (or is that rampant) international expansion?

Now, while everyday low prices, supplier partnership, data driven management, supply chain connectivity, focus on decentralized management, and sustainability are good things; and while better selection is neither good nor bad in and of itself; the suburban sprawl it generates is bad for the environment, the relentless drive for efficiency is an accelerating factor in the outsourcing of American jobs and stagnant wages for North American employees is making us poor, and the creation of an overconsumptive (& disposable) culture will make it almost impossible for true sustainability to creep into our culture.

From a simplistic perspective, 6 changes for the better compared to 3 for the worse would appear to be a balance in Walmart’s favour, but it’s not how many good deeds and how many bad deeds, it’s the extent of the damage of the bad deeds that matters. And the extent is pretty bad when we look at things from a modern perspective.

First of all, as the article notes:

The selection that Americans began to demand required bigger stores that could only be built on the outskirts of small towns or in the suburbs of large cities.

Thanks largely to Walmart, we began to sprawl so much that your average big American city is now sprawling into the next big American city. That’s why we have Mega-Regions where it’s hard to determine where one city ends and the next begins. This is about as un-green as you can get. There’s a reason that San Francisco, Vancouver, and New York are the greenest cities in North America. (See Metropolis.) Why? For starters, the bigger the city, the more gas we have to use to get around because public transportation covers less and less. Plus, we need more resources to distribute power, water, communications, and everything else we need to live.

In the last 10 years, the US economy has last over 4 million blue-collar jobs, mainly as a result of manufacturing job losses, which is largely due to outsourcing. Outsourcing accelerated by Walmart in its pursuit of the lowest possible cost.

But this doesn’t pale in comparison to the creation of the overconsumptive and disposable culture it has created. Thanks to Walmart, we not only want to buy more, because some products have become so cheap, relatively speaking, that we don’t even think about buying them. And, more importantly, because some products have become so cheap, we don’t even think about repairing them when they break, even if they repairable. As a result, we now generate more waste per capita then one would have ever thought possible even a few decades ago. Without Walmart, something else might have come along, but the reality is that Walmart came along and Walmart did the damage.

Any differing opinions?

Has the Best been Bought from Best Buy?

StorefrontBacktalk recently ran a couple of pieces on Best Buy that followed up their recent pieces on “Best Buy’s Black Friday Fiasco” and “Best Buy’s Wifi Porn”, which was expanded upon by SI in its recent posts on how if you wanted a best buy experience, you weren’t going to get it at Best Buy (Part I and Part II). In its first piece on “Best Buy’s Last Hope”, the author says that Best Buy has one shot — an expensive, painful, highly disruptive shot — to truly turn itself around. It must embrace customer service in-sore to an extent that would make Nordstrom, Trader Joe’s and Whole Foods blush. That means store associates who are true experts in the electronics they are selling.

Frankly, I don’t think this is going to happen. The mentality would have to change from “who will work for us for minimum wage and pretend they know enough about this product to actually sell it” to “where can we find someone who knows what they are talking about, is passionate about the products they sell, and will actually work for us as a sales rep” and “what is it going to take to get that kind of people”. Right now, the type of service I’m used to is “this isn’t my department, you’ll have to find someone that is working in this department” to queries as simple as “can you tell me if you still have any of this product in stock” (which any associate can do simply by logging into one of their terminals and doing a query) or, my favourite, in response to “I’d like that” (pointing to something in a cage). Get the key, open the damn cage, give it to me and/or walk it to the cashier. An untrained monkey could do it! (And monkeys are smarter than you think. Pete the Monkey taught himself to do dishes.)

Plus, as the author notes, they would probably have to fire most of their staff and replace them with Apple-store caliber employees. And any employee of that caliber is probably going to go work for Apple or, if they prefer Windows, Sony where knowledgeable associates are preferred.

After all, as the author notes, they currently think they can win a price war with Amazon. A company with massively deep pockets, minimal physical overhead (compared to a retail store chain), and a willingness to go eight years without turning a profit just to conquer a market. Winning a price war against Amazon in the electronics space is not going to happen. Amazon can, and will, win on margin every time if that’s what it takes to be the next major electronics retailer and put Best Buy and its competitors out of business. (And it won’t be hard when it’s customer service reps often give better service over the phone than Best Buy associates in store!)

The other piece that got my attention was that “Best Buy Planned Outages Due to Its Move to the Cloud”. If you believe the hype (and the doctor does not), the whole point of moving to the cloud is so that you don’t have outages. But the most ironic aspect to this story is that Best Buy is cutting Amazon a check for its cloud efforts. They might as well just sell to Amazon.com now and become Amazon’s mobile presence. One little glitch and a propagated purge command and — voila! — no more Best Buy online. (Not that it would make a huge difference anyway. What good is a web store that a growing portion of your market can only order one item from at a time anyway? [See Best Buy Experience? Not at Best Buy! Part II.] the doctor is now ordering more electronics from the local office supply depot because their web site actually works! And if you send them an e-mail, customer support actually responds! On the other hand, it seems that Best Buy’s method of dealing with problems is just to ignore them. It’s not a problem if you don’t recognize it, right?)

The nostalgic part of me would like to say that Best Buy still has a Bright Future, but, in the doctor‘s view, the only chance of Best Buy lighting up the sky is if the same thing happens to it as happened to the Buy More in the season three finale of Chuck. The way things are going, it’s going to be closing 50 stores (CNN Money, March 29, 2012) on a regular basis. And I don’t think China’s going to save it. If Best Buy truly takes off in China, there’ll likely be so many indistinguishable clones in three months that it will just be hastening its demise.

Best Buy Experience? Not At Best Buy! Part II

Yesterday’s post recounted the recent problems that has had Best Buy in the sights of Storefront BackTalk, which include coverage of how Best Buy is “Making the Same Data Mistakes Again”, while being the latest example of a “Black Friday Fiasco”, and offering free “Wi-Fi Porn” to minors in its store. And the last story was the doozie — not only can it apparently not keep its own in-store networks secure enough to prevent porn from being displayed on HD TVs for half an hour, but when a customer asks for the manager, he’s told “You want to see the manager? You go get him. He’s over there.”.

As far as examples of bad customer service go, that’s a response that always take the cake. So, not only does their IT suck, as highlighted by their now not-so recent website update to BestBuy.ca which prevents those of us still on Mac OS X 10.6 from adding more than one item to our cart for a purchase (which we can only do if we log-in first), but their customer service, in-store and on-line leaves much to be experienced. So, not only can we buy only one product at a time (which is a great inconvenience if we want to buy five items, as this would require five separate session and purchase processes, but a cost-prohibitive inconvenience if the items are small as multiple purchases means multiple shipments which means multiple, unnecessary, shipping charges), but they don’t seem interested in doing a damn thing about it. I reported the issue back in the end of January when I first noticed it, received an e-mail saying someone would contact me within 2 days, but over a month later, still no response. I reported it again last week when I again tried to purchase more than one item (with no luck), got the same e-mail, and again no response.

But it’s their in-store customer service that takes the cake. I’ve been to the new Best Buy in Halifax exactly three times, and each time was a customer service nightmare. I’ll just describe the last visit, last week, as it was just a repeat of the problems I experienced in the first two visits, with a few extra aggravations thrown in.

This time, I went there to return an item I ordered in early February that was defective before my time ran out as I would otherwise have to deal directly with the manufacturer directly (which was not a pleasant thought given that they have been in financial and media trouble lately and were certain to be understaffed in their customer service department). Best Buy allows you to return / exchange items in-store that were ordered online and this sounded preferable than trying to deal with an agent over the phone to explain “it literally shorted out”, try to get a pre-paid shipping box, try to insure that someone actually processed the item when it was returned, etc.

So I go to the store. I explain the situation, show my on-line receipt, and ask to exchange in-store (because I know they had stock) as I only had a couple of days left before their return policy expired on the item. The rep said “sure, but you have to go back to computers and get the replacement — I can’t leave the desk”. Huh? You can’t leave or call back and get someone to get it? O.K., Fine. So I go back and ask an associate to get me the item, behind a glass door, right in front of me. First thing, “I don’t think we have any more of those”. They were right there and I was pointing at a row of three. “Oh, well, I have to go get a key.” Fine. I wait, and wait, and five-or-so minutes later notice him half way across the store talking to someone else, with obviously no interest in trying to track down someone with a key. So, I wait for another associate to become free, ask if he can help me, and note the item I want is in the case. He says sure, follows me to the product, and says “Oh, I don’t have a key for that. I’ll have to get someone behind the desk.” So I wait a few more minutes, and finally someone comes and says “What can I help you with.”. This associate should know, as I explained it to the associate that fetched him, and then again I get “Oh, I need a key. I’ll have to call the manager.” Well, I guess that’s progress as he actually called the manager, but it took three associates and over ten (10) minutes to get a product out of a case that the customer knew he wanted. Had I been trying to buy it for the first time, I would have given up and went to a different store.

But the fun didn’t stop there. The manager hands the item to the associate, who brings it to the desk, and on my return, the associate says “I can’t do this return, as the item was purchased on-line, and I haven’t been shown how to do that, I’ll have to get someone else”. Uhmm? I told the associate it was purchased online before the associate said she could do the return. Fine. Wait for another agent, who goes through most of the return process only to mumble something along the lines of “Oh, it’s above my limit, I need a manager’s authorization.” The price was clear on the receipt. So I wait again. Finally, after a few more minutes, a manager comes buy, punches in a code, and walks away. And after some stumbling (which, based upon prior experience, makes me want to swear that they didn’t train anyone on their own systems), finally completes the exchange.

And the fun didn’t stop there as I also wanted to pick up a game for my son. I should have tried the games store across the street first, but I happened to have checked the on-line system before I left and knew there were over 10 in stock when I checked the quantity reported on the website earlier that day. I go to the section where the games are, and where I believe it should be, only to find it’s not there. I ask an associate in the section as to where it is, only to hear him say “I don’t work in games. I think it should be here”. This was annoying, but not as annoying as him taking me to a section for games for a completely different console by a manufacturer. So I take him back to the section and say “It should be here, as this is where the other games are for this console, but it’s not. Where else could it be?” I’m told “if it’s not here, we don’t have any” and he walks away.

Since I couldn’t believe they’d sell 10 in a day as it was not a brand new release, and there was no sale on, I go to the back of the store, find a tablet with working Wi-Fi (which, I’m happy to report, appeared to be porn free), go to their mobile site, pull up that there are still nine (9) in the store, go back, find the associate, and tell him this. He stumbles around, fails to find it, so decides to ask the customer service desk if there are any in stock (and ignore the fact that I just checked their online system less than five minutes ago). They say yes, and when he asks where, they say they don’t know. He says I’ll have to ask someone who works in games, but that he doesn’t know if anyone’s working in games tonight. Great. So I decide to check ends of rows, displays, etc. and basically wander around until I eventually find one. Then I go to the cash, where the cashier, of all people, tells me (when she is struggling to get the security device off of a $40 game) that it would have been faster if I had just came to the cash and asked for one to be pulled out of the locked game cabinet next to the customer service desk. That’s right, the customer service agents apparently didn’t know about the game cabinet right beside them! (And this wasn’t even the most ridiculous customer service experience. On my first visit, where they didn’t know how to process an American Express card, which, as you know, has the security code on the front, and not the back, the associate also didn’t know how to listen to a customer who repeatedly tells him: “No, the security code for AMEX is on the front – you can type the numbers on the back as many times as you like, it’s not going to work”.)

So what is the lesson to be learned — it doesn’t matter how good your supply management organization does if the retail / merchandising side can’t get its act together. Because, at some point, customers will get fed up with the bad customer service and go elsewhere (as I have with most of the electronics I order on-line — I like the selection, price, and/or speed of delivery less, but it’s still less aggravating dealing with these sites). That’s why Supply Management has to make itself the go-to organization that other organizations in the company come to for advice. This is the only way that it will be able to insure that best practices are applied down the chain as well as up, as, otherwise, all of its effort to source quality product won’t mean squat when customers won’t be able to put up with the shoddy experience of trying to acquire the product and just give up entirely.