Archive for October, 2015

Amazon vs. The New York Times, part 2

Amazon chose to respond to The New York Times reporting (from last August) about the company’s relentless employee culture — two months after the fact. And the Times, naturally, responded to the response. Today’s RetailWire discussion asks the question: Was it smart on Amazon’s part to stir up the controversy two months later, either from an HR or PR perspective? Here’s my take:

Jeff Bezos’s initial response was, essentially, that the Amazon described in the original article was not the company he knew. But the reporting painted a convincing picture of his company’s culture — fair or unfair in his view — that might have caused a period of introspection.

Amazon chose not to take that route, but instead to re-ignite the controversy with Carney’s comments. It’s not surprising that the New York Times moved quickly to defend its reporters and reporting, although Amazon may have been caught by surprise by the speed and forcefulness of the reponse.

Bottom line: Amazon may have been smarter to look in the mirror first, and to announce some reforms, but that doesn’t appear to be the Bezos way. “Take no prisoners” is more like it.

Is omnichannel a losing proposition?

As stores ramp up their efforts to be true “omnichannel” retailers, they are finding unexpected costs. It’s not only about the lower margins on goods that need to be priced competitively, but also about the costs of IT and logistics investment to make it work. I suggest patience on the following RetailWire comment:

As more retailers try to figure out true omnichannel strategies (unlike parallel e-commerce and brick-and-mortar operations), they are finding the logistics to be an expensive proposition. Initiatives like BOPIS, ship-from-store, same-day delivery and others cost money. And right now, stores are in a market share battle where they are trying to absorb many of these costs — just as they do with so-called “free shipping.” Until stores capture some economy of scale in their overall omnichannel strategy, the profitability of these customers may indeed hit a bump in the road.

McDonald’s Breakfast: Is the sky falling?

To the question I pose above, it depends on whom you ask. Franchisees are complaining about McDonald’s decision to serve a limited breakfast menu 24/7, while the company says it’s working. My comment at RetailWire suggests that everybody take a deep breath:

Part of what we’re seeing is the longstanding pattern of public sniping between McDonald’s franchisees and “headquarters.” The same operators who probably complained for years about menu complexity and declining traffic are now complaining about all-day breakfast — one week into the launch. McDonald’s has been dogged by slow service and menu complexity for years, but there are probably tech-oriented solutions to the issues.

Give CEO Steve Easterbrook some credit for trying to light a fire under this stagnant organization, and give McDonald’s a chance to report the results (comp sales, traffic, average transaction, etc.) before writing off a customer-centric initiative. “We’ve never done it this way” is usually not a winning philosophy.

Was Wall Street right to spank Walmart?

Last week’s Walmart presentation to analysts was not well received. The CEO (Doug McMillon) got blame for the short-term costs of the long-term improvements that Wall Street has been clamoring for. One commentator questioned whether Walmart is now “too big to fix,” and I responded on RetailWire:

To say that Walmart is “just too big” is like saying that Apple or InBev are “just too big.” Scale matters, but so does the execution of a successful strategy. It’s ironic that yesterday’s stock-price meltdown is caused by the rollout of the very strategy that Walmart investors have been asking for: Cleaner stores, better customer service and a more robust omnichannel model.

Long-term investors need to judge Walmart not on the results in a given quarter (when most general merchandise chains are lagging) but on the outcomes of investment spending in three to five years. Judge Walmart by its long-term market share gains and operating efficiencies, not by yesterday’s news.

Can restaurants eliminate the “tipping culture”?

Danny Meyer, CEO of Union Square Hospitality Group, is considered an industry leader and is taking a bold step in his higher-end NYC restaurants like Gramercy Tavern. He is raising menu prices and also eliminating the expectation that the customer will leave a tip. The service charges (meant to be shared among both servers, cooks and others) will be reflected in the higher prices. The question (discussed at RetailWire) is simple: Will it work?

If Mr. Meyer raises prices by, say, 20% but no longer expects customers to leave a 20% tip, will they see any big difference in the tab? Probably not. But American diners are trained to acknowledge good or excellent service and may find it hard not to leave some extra cash on the table. Even in European restaurants where a service charge is included, I usually “round up” anyway.

The economics are interesting, because it’s clear that the “back of the house” workers — from chefs to dishwashers — are short-changed by the current system. At the same time, Meyer may need to raise “front of the house” wages significantly to offset the loss of servers’ tip income. I’m sure there will be a shakedown cruise at USHG restaurants before the new model is widely adopted.

Urban Outfitters asks salaried employees to “volunteer”

There were plenty of comments similar to mine (at RetailWire) on the subject of Urban Outfitters. The company has asked salaried employees — many of whom are making around $35k per year — to work extra hours for free in its e-commerce distribution center. This is supposed to be a “team building” exercise, but I disagree:

This is not appropriate, especially for the lowest-paid salaried workers who are earning about $17/hour — assuming they are working 40-hour weeks without being asked to put in extra hours already. In light of proposed regulations to pay salaried workers under $50k/year for overtime hours, this is tone-deaf on Urban’s part. Just because “this is how it’s done in retail” doesn’t make it right, and retailers wonder why Millennials want to find other careers.

Ralph Lauren hires outside the luxury box

The management transition has begun at the company Ralph Lauren founded years ago. He’s hired the head of the Old Navy division, whose previous background was at H&M. Here’s my comment, from RetailWire:

Time will tell whether Mr. Larsson’s evident business acumen extends to the importance of brand image at Ralph Lauren. More than almost any company crossing multiple retail channels, Lauren has maintained a focus on near-luxury (and higher) lifestyle merchandising. Most people know what the Lauren brand stands for, which is a credit to Mr. Lauren’s vision and consistency over the years.

You have to assume that Ralph Lauren was sold on Mr. Larsson’s own vision for the company, not simply his ability to manage fast fashion or global sourcing. But clearly some kind of management succession at a big public company like RL was bound to happen, and probably overdue.