Archive for the 'Retailers and the Government' Category

Menards says “Thanks, Obama”?

Menards, the Wisconsin-based DIY chain, announced that it’s postponing the opening of a new location in Ohio pending the results of the Presidential election. Apparently the family-owned business is hopeful for a different regulatory environment…or something. (The Menard family has donated generously to Republican candidates.) As you might imagine, this topic brought forth all kinds of reactions among RetailWire panelists, depending on their side of the aisle. I’ll let my comments speak for themselves:

It seems to me that the home improvement/DIY sector has done nicely since the Great Recession. I guess Mr. Menard’s memory is short regarding the housing bubble, the unemployment rate above 10%, and so forth.

As I’ve mentioned before, I worked for Kohl’s from 1982 (18 stores) to 2006 (750 stores and much higher now). Kohl’s has opened stores during Republican and Democratic administrations, in times of economic boom and bust, and when the regulatory environment varied greatly. (Remember that the Americans with Disabilities Act was passed by Bush 41, and brought some sweeping design changes to the retail landscape.)

My point: If your company has a valid strategy, go for it. In the meantime, run for office if you want to use your megaphone more effectively.

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Walgreens and RiteAid: The big get bigger

From a recent RetailWire discussion, here’s my comment on the proposed acquisition of RiteAid by Walgreens. The drive to consolidate has never been stronger, and it makes particular sense in an industry wrestling with cost control issues:

Consolidation in the pharmacy industry parallels the same trend among health insurers — not to mention just about every other industry you can think of, from brewers to airlines. Whether the combined Walgreens/RiteAid company can develop more pricing leverage from pharmaceutical suppliers is a different question, even though their store count now far exceeds CVS. Unless I’m mistaken, CVS (through its Caremark subsidiary) is a bigger player in the “pharmacy benefits” side of the industry, so Walgreens still has an opportunity to become a more vertical company in the future.

“Everything on sale”: Reality or illusion?

When state regulators get in the way of retailers’ promotional calendars — to attempt the establishment of “real” regular prices — it provokes a lot of commentary. Here’s an example from a recent RetailWire discussion. My point is that promotional department stores’ prices are more carefully monitored than the average shopper might think:

The barrage of promotional events, often with weeklong sales overlapped by one-day sales and so forth, has created the impression that “everything is always for sale” in many promotional department stores, and it’s a powerful marketing tool. But I’m guessing that a study of the actual number of days items are on or off sale might paint a different picture.

Most of the stores mentioned in the story have to deal with the reality of various states’ regulations, especially when they operate coast-to-coast. So there is probably a science applied to the establishment of regular prices, followed by a strict calendar of “on sale” and “off sale” days.

As a hypothetical, just because Macy’s puts a private-label polo shirt into every one of its “one day sales” doesn’t mean that the goods are on sale 365 days a year. And just because they do sell goods at “regular price” some of the time, doesn’t mean they can compel customers to pay full price for them.

Indiana stirs up a hornet’s nest for local retailers

When the “religious freedom” act in Indiana was on the front pages a few weeks ago, RetailWire panelists weighed in on the business impact of the legislation. Here’s my take:

Without turning this into a political discussion about the stampede to pass “religious freedom” laws, it’s worth noting the pushback from the business community. Mainstream companies like Walmart and Eli Lilly see the laws in Indiana and Arkansas as a threat not only to anti-discrimination practices but also to the recruitment of a diverse workforce. And as companies start to “vote with their checkbooks” by taking convention business or expansion plans to other states, maybe some state legislators and governors will realize the misguided impact of their actions.

While the focus of the discussion has been on the LGBT community, especially in states where it is not treated as a “protected” class by anti-discrimination laws, I wonder about some of the other unintended consequences of the RFRA and similar laws. By the same theory, does a Quaker restaurateur have the right to refuse service to a uniformed military member because her conscience opposes waging war? Can a Kosher deli owner refuse service to a Christian customer who does not follow the same strict dietary rules?

I’m guessing that the legislators in question would answer “Of course not!” to the last two questions, which makes the targeting of the legislation more blatant. We’ll see whether the 800-pound Arkansas gorilla has any sway in its home state.

Tesco deals with an accounting issue

Tesco, the giant UK-based food retailer, reported a large accounting error that cost several of its executives their jobs. The question posed at RetailWire was whether this sort of event (shifting vendor income from quarter to quarter) is more commonplace than it seems. Here’s my take:

It’s startling that a large, high-profile public company like Tesco would mismanage its quarterly accounting to this degree. I don’t know whether the underlying regulatory policies in the U.K. make it easy or difficult for this to happen, compared to the U.S. where there has been close scrutiny of quarterly reporting for at least a decade. Call me naive, but it’s still surprising today that any company with presumably tight internal controls — and the oversight of an outside auditor — would try to manipulate its way around standard accounting practices, whether it’s in the retail business or not.

Merger speculation hits the office supply segment

A financial analyst who covers the specialty retail industry is talking up the benefits of an acquisition of Office Depot by Staples. (This follows the recent merger of Office Depot and Office Max.) There are arguments to be made for and against, and I discuss the issue in a recent RetailWire comment:

A merger of Staples and Office Depot would provide economies of scale in a mature business, although it would be under the same regulatory microscope as any pending merger of dollar stores. The bigger issue for Staples — whether or not it acquires its top competitor — is the rapid change in big box specialty stores, driven by more online competition like Amazon.

But the office supply store has unique challenges as a result of technology. Consumers simply aren’t using PC’s and laptops as much, and likewise the market for printers, paper and ink is shrinking. Staples (and Office Depot) ought to be accelerating its small-format and cloud service businesses, because the decline of the big box format is tough to reverse.

Should Walmart buy a dollar store?

With the frenzy surrounding the combination of Family Dollar and Dollar General (and/or Dollar Tree), there is also speculation that Walmart ought to enter the bidding war. I have a brief response (posted on RetailWire)…not a good idea:

I think this came up a few weeks ago when the original Dollar Tree bid took place. My answer then was “no,” and I still feel that way. Walmart has more opportunity expanding its own small-format concepts, and has never had much track record acquiring and growing businesses that did not develop organically. Stick to your knitting and find new ways to leverage your brand.


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