Walmart & Zero-Based Shopping Bags

The Wall Street Journal: “Wal-Mart has started using zero-based budgeting in some corporate units and has made cost cuts as mundane as printing receipts on smaller strips of paper—a change that has saved $7 million so far this year … Wal-Mart expects to save $20 million this year by using slightly smaller plastic shopping bags.”

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Lidl Effect: So Far, Not Much

The Wall Street Journal: “Since opening its first U.S. store in June, Lidl, the German grocery giant, hasn’t exactly upset the American grocery cart … When Lidl’s first nine U.S. stores opened June 15 in Virginia and the Carolinas, they lured customers away from other grocers, according to an analysis by inMarket, a location-based data firm. But Lidl hasn’t been able to sustain that level of traffic, and grocers including Kroger Co. and Wal-Mart have recovered much of their lost market share, according to inMarket.”

“The timing of Lidl’s U.S. arrival wasn’t ideal. It opened its first stores the day before Amazon.com Inc. surprised the industry by announcing it would buy Whole Foods Market. Supermarkets responded, slashing prices to keep up with growing competition on many fronts while investing in online ordering and delivery. Lidl doesn’t currently have an online grocery-shopping operation in the U.S.”

“Missteps in store location and merchandise have hurt Lidl’s U.S. rollout, consumer analysts say … Other analysts said Lidl stores give prominent display to items that seem geared toward Europeans, whether it is $39.99 cycling shoes or $15.99 badminton sets. Some stores’ produce sections have run low on conventional items while stocking big organic offerings, and in some stores emphasis on wine hasn’t squared with local tastes focused on beer.”

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How Whole Foods Steals Walmart Shoppers

Business Insider: “When Amazon’s acquisition of Whole Foods formally went through in August, the e-commerce giant immediately made some changes — most notably, significant price cuts … The biggest source of foot traffic for Whole Foods were regular Walmart shoppers. People who visited Walmart at least twice a month accounted for 24% of new Whole Foods customers the week of the price cuts.”

“Across the board, the customers who defected to Whole Foods from grocery rivals were wealthier than the retailers’ average shopper … Walmart’s regular customers’ average income is $59,264, according to Thasos data; the average income of a regular Walmart customer that is defecting to Whole Foods, however, is $71,697 … While Walmart has aimed for more aspirational customers as Whole Foods cuts prices, Thasos data proves that both retailers are competing for the same shopper: the upper-middle class customer who is increasingly important as wages stagnate for much of the US.”

“All of this means that wealthier shoppers are increasingly influential, forcing bargain-centric retailers like Walmart to expand into more aspirational brands … Walmart is gearing up to cash in on wealthier customers, especially as it expands its e-commerce lines. Whole Foods winning over high-income customers could force Walmart on the offensive in this battle — one that both retailers are determined to win.”

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Danny Meyer & Enlightened Culture

Fast Company: “How do you persuade your waiters to forgo a 20% tip on each table they serve? Danny Meyer says they never wanted to hire people who would only have been nice to you if they assessed it out of the four tables in their section, you were the richest or you were the most generous.”

“By that he means building a culture where employees focus first on pleasing one another, creating a warm energy that in turn fuels the staff as it tends to patrons, the community, and suppliers. His restaurants offer employees a variety of rewards, from bonuses to birthday cakes. And employees in turn have discretion to give customers free extras, all creating a virtuous cycle of hospitality.”

“Meyer regularly tests his approach to see if it’s is working by asking members of the team to share their understanding and experience of the culture … He says these discussions happen at pre-service meetings and in employee town halls, and through multiple internal channels that employees can use to offer their honest feedback.”

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Strategic Selection: Less is More for Aldi

The Wall Street Journal: “German discounter Aldi, is betting billions it can win over spoiled American shoppers. How? By offering them fewer choices—way fewer—than rival retailers. The unlikely proposition has worked nearly everywhere Aldi has set foot … It offers a deliberately pared-down selection, sometimes a tiny fraction of the number of items sold by rivals, which helps Aldi cut costs to levels U.S. grocers can only dream of. Among other benefits, fewer items means faster turnover, smaller stores, less rent, lower energy costs and fewer staff to stock the shelves.”

“About 70 years ago, brothers Karl and Theo Albrecht, fresh from military service in World War II, took over their family’s store in Schonnebeck, a mining neighborhood of the bombed-out industrial city of Essen. In the early 1950s, they began rolling out their ascetic concept to other branches throughout the region. Back then, their stores offered just 250 items, the essentials miners’ and steelworkers’ families needed to survive—flour, sugar, coffee, butter, bacon, peas and condensed milk. In the 1950s and ’60s, Germany’s economic miracle took off, and a wave of glitzy supermarkets selling thousands of items sprouted up to serve the newly affluent middle class. Aldi didn’t flinch.”

Today: “Aldi is gambling it is more in tune with the American tastes, rolling out small, nimble stores instead of sprawling warehouses and supermarkets that take longer to navigate … One of Aldi’s strengths that has eluded many discounters is its ability to draw middle-class shoppers—those with more money to spend—despite its limited array of goods. It did this by cultivating the image of a company focused on quality rather than pinching pennies … There too, executives say, the limited assortment played a central role. The small number of items ensured that staff could carefully choose, taste-test and quality-control each item.”

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Extreme Aging: Rotting Beef Commands Top Dollar

The Wall Street Journal: “The hottest menu item at New York restaurants may be a plate of rotting beef. Dining spots around town are offering steaks that have been aged anywhere from 90 to 180 days, pushing the limits well beyond the typical aging period of 21 to 45 days. Restaurateurs and chefs say the added time allows for greater tenderness and depth of flavor than the norm.” Billy Oliva, executive chef of Delmonico’s, describes it as “like the taste of roasted hazelnuts and dehydrated mushrooms.”

“The lower Manhattan restaurant is marking its 180th anniversary by offering a 180-day dry-aged bone-in rib eye, served on a keepsake plate, for $380. The special is offered through Oct. 14. The reason for the high cost? Beef that has been aged loses a considerable amount of its weight over time, Mr. Oliva explains, so diners are essentially paying for that shrinkage.”

“While beef that sits in a meat locker for months on end may sound like a dicey dietary proposition, food-safety experts say it is generally fine for consumption because of how the steak is prepared. Before cooking, chefs trim the exterior of the meat where any bacteria might grow, reducing the safety risk. And the cooking process itself adds another layer of protection … Which isn’t to say the flavor of the steak is one that every carnivore appreciates … ‘It’s like blue cheese on a bone,’ says Michael Lomonaco, chef and owner of Porter House Bar and Grill, a steakhouse in Midtown Manhattan’s Time Warner Center.”

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5 Ways Best Buy Beats Amazon

The New York Times: “Best Buy’s rebound has been surprisingly durable. Revenue figures have beaten Wall Street’s expectations in six of the last seven quarters … How do they do it?” Highlights from a conversation with Best Buy CEO Hubert Joly: 1) Price. “Price-matching costs Best Buy real money, but it also gives customers a reason to stay in the store, and avoids handing business to competitors.” 2) Humanity. “The associates in our stores are much more engaged now, much more proficient,” Mr. Joly said.

3) Showcase & Ship. “Mr. Joly realized that with some minor changes, each of Best Buy’s 1,000-plus big-box stores could ship packages to customers, serving as a mini warehouse for its surrounding area … Best Buy also struck deals with large electronics companies like Samsung, Apple and Microsoft to feature their products in branded areas within the store. Now, rather than jamming these companies’ products next to one another on shelves, Best Buy allows them to set up their own dedicated kiosks … Even Amazon has set up kiosks in Best Buy stores to show off its voice-activated Alexa gadgets.”

4) Quiet Cuts. “Under Mr. Joly, Best Buy has used the scalpel as quietly as possible … he has never announced a huge, public round of layoffs, which can crater employee morale and create a sinking-ship vibe.” 5) Luck. “It’s lucky that the products it specializes in selling, like big-screen TVs and high-end audio equipment, are big-ticket items that many customers still feel uncomfortable buying sight unseen from a website. It’s lucky that several large competitors have gone out of business, shrinking its list of rivals. And it’s lucky that the vendors who make the products it sells, like Apple and Samsung, have kept churning out expensive blockbuster gadgets.”

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Truth to Power: Tesla Flips The Switch

Quartz: “In 2016, Tesla sold two different versions of their Model S and X electric cars. One version had a 60 kilowatt per hour battery, and another a 75. The 75-kilowatt version cost $9,000 more. Prior to Irma’s landfall, Tesla announced that it would flip the proverbial switch, and allow the 60-kilowatt cars to become 75-kilowatt cars. This enabled the 60-kilowatt vehicles to go 230 miles per charge, rather than 200 … Tesla was able to upgrade the kilowattage in the cheaper version of the car because both models actually have the same 75-kilowatt battery. The company just chooses to limit the capacity in some cars so they can have two different price points.”

“The response to Tesla’s decision has been mixed. While some observers congratulated the company for proactively reacting to the impending storm, others were disturbed by the revelation that the company could so easily increase the capacity on their cars. If the battery could be more powerful without any extra cost to Tesla, ask critics, why deny this capability to certain drivers?”

“The answer: Limiting battery capacity actually makes Teslas more affordable. The extra $9,000 that Tesla gets from its less price-sensitive customers is what allows it to charge a lower price for the lesser version of the car, the one that more cost-conscious consumers might purchase (though of course anyone purchasing a $60,000 Tesla is not poor). Perverse as it may seem, having a version of the car that gets less mileage actually makes it more accessible.”

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