business news in context, analysis with attitude

To be honest, we weren't entirely surprised that we got a number of emails in response to a note that we posted yesterday from an MNB user who noted that they "took a field trip to Wal-Mart last night" and "was appalled at how filthy it was..." The note went on to describe in detail why Wal-Mart operates awful stores…

MNB user Larry Soza responded:

This seems to be the mantra of the Wal-Mart haters. I went to Wal-Mart last night too, and yes, it was a mess. There was also about 8,000 Christmas shoppers (and their kids) climbing over every square inch of the store, picking things up and setting them down anywhere they pleased. And yes, the floor was dirty because that many pairs of shoes tracks in a mountain of debris. But tell me, what did the store look like at 6 a.m. the next morning?

There are three Wal-Marts within 20 minutes of my home. Consistently I have found the stores to be well stocked and clean in spite of the large amount of traffic through them. I will however concede that the stores tend to reflect the neighborhoods they're located in. One of the stores, in a somewhat sloppy neighborhood, brings in people who do not even attempt to hang up a piece of clothing after they're done looking at it - they just drop it on the floor. Meanwhile, their kids are treating the toy department like their own personal playground. Conversely, the store in the better part of town has a correspondingly neater appearance.

I'm sick of these people that seem to want Wal-Mart prices but expect a Nordstrom's shopping experience. What's next, are they going to complain about the selection of laundry soap at the 99 Cents Store?

You make a legitimate point. We would agree that one of the reasons that Wal-Mart stores often look abused is because they do so much business, often with people who don't give a damn.

That said, some of these stores do age better than others, and some of their staffs are more motivated than others. But those are faults shared by a lot of other retailers.

And MNB user David Livingston chimed in:

In defense of Wal-Mart having dirty floors…of course they do. What do you expect when the store is busy 24 hours a day in sloppy December weather? I doubt its top priority to shut the store down and clean the floors. Also have you ever noticed that some of the lowest volume unsuccessful retailers are often the cleanest. Why? Because no one is shopping there to mess them up.

Maybe. But we shopped last night at a food store that does $2 million a week in sales, and that is dealing with pretty sloppy December weather. We checked, because we were curious. And the floors looked pretty clean to us.

Another MNB user responded to the original email by saying it was "straight from a union leader's diary," and offered some additional perspective:

If the "floors looked like they hadn't been cleaned in a while" and being that the "(the aisles were filled with pallet upon pallet of unstocked product)", then I can only surmise that the visit was late in the evening before the night cleaning crew (made up of ex-Ivy League newsmen now out of work) got to their daily job of cleaning them and the night receiving crew had only finished unloading their trucks and hauling the merchandise stacked on pallets to their respective areas of use, before working towards finishing their duties of putting the stock on the shelves.

I, too, drove down the street Saturday night (It was enough to make me drive down the street to Target. (The Target, for the record was its usual clean and bright self) and shopped at a North Fulton County, GA Target. It was bright, clean, but…almost completely empty of shoppers. This was a Super Tar-jay, the first I had visited in quite a few months and if the shopper count, less than two weeks before Christmas, wouldn't make any of Wally's store managers have nightmares, then I don't know what would.

We think that "ex-Ivy League newsmen" crack may have been aimed at us. (Though we're neither 'ex" nor "Ivy League.")

This same correspondent noted, quite correctly, that while we made a crack about the floors being dirty possibly because the company was having trouble finding legal immigrants to clean them, in fact Wal-Mart has not been charged with employing illegal immigrants.

And we repeat what we said yesterday: it was a joke.


We also had a piece yesterday about slotting allowances that earned a lot of response…

MNB user Al Kober wrote:

Slotting fees are just one of the many additional costs for manufactures. The retail industry has created this system, which is crippling the efficiency of many buyers and sellers. When the placement of item into the retail market place is more dependent on the up front money and not on the intrinsic value of the item, we are going to experience conflict. It is not unusual for buyers to be so pressured by their companies for additional funding on the buy side that they make poor decisions on products that do not deserve to be on the shelf.

Creative buyers should take a page from Wal-mart on this issue. Buyers should base their buying decisions: First on the needs of the consumer. What do they want and what do they need? How can I help meet that need, and do it at the lowest cost to the consumer and still make sufficient profit. When buying decisions are made more on, how much money can I get on this buy, everyone looses. The manufacturer, because he has to increase his cost to cover it. The retailer has the potential for "dead" merchandise on his shelves, and the consumer pays more for lower quality that what it is worth. All this takes up time and energy working through exercises that benefit no one. Sure, these extra funds might provide some short term cash flow, or temporarily help a buyer look good to his boss, but in the long term, it is an exercise in futility

Every manufacture knows the cost of the raw material, add production costs, labor, etc, distribution costs, add a reasonable profit, and stop there. No slotting fees, no ad money, no discounting, no nothing else. The most efficient method is net, net, net, bottom line cost. Remember there is no free lunch. There is no bottomless pocket in manufacturing. Anything you "get back" from a manufacture is your money. That had to build it into the cost of goods. Where else can they get it?

So, the seller adds additional money to the cost of goods. The buyer beats up the seller in order to get his own money back. This additional money goes around and around, changing hands through manufactures, producers, distributors, banks etc, and eventually ends up back where it started, in the hands of the buyer. Why go through all of that. Everyone else in the whole process uses the buyers money to make money off the buyer's money, meanwhile the buyer is not able to use those funds until it get back to him.

And we sit back and complain about Wal-Mart, who allows the seller reasonable profits, high volume sales, they provide sales information that others make them pay for, with as little hassle as possible, except to get them to product the product at the lowest cost. Sounds like a fairly good plan. Maybe the industry should start learning from them and stop complaining about them.

Funny how it always comes back to the Bentonville Behemoth…

MNB user John Welsh added:

When greed gets involved, things always change...for the worst.

Originally, some 25 years ago, slotting allowances actually bought a "slot" on the steel racks where a new item would be located within the warehouse's picking line. This was at a time when new items were swamping distribution centers, already very tight for space. Distributors also had an ongoing cost with new items because they had to relocate items to make room for new ones.

Manufacturers and suppliers were not opposed to slotting allowances at that time because they were usually less than $500.00 per slot per distribution center. In due time, major distributors recognized a "cash cow" in slotting allowances, kicked up their "slot" charge big-time, and stuck the money in their pockets.

We should not be so naive to think Wal-Mart and Costco don't "have them." They may not call what they get "slotting allowances," but you can bet they get similar (or larger) funds in lieu of them.

It always has been our impression that the reason they don't get such funds is that Wal-Mart and Costco simply make money on the sell. Does someone else want to disabuse us of this notion?

Another MNB user chimed in:

I am a buyer for Lunds and Byerly's in Minneapolis and we see that our supplier's like Supervalu and Gourmet Award offer free cases on only some New Items to our stores but only products from small or new companies. In most cases the big companies like P&G, Unilever, Nabisco offer nothing !

Only the small companies have to offer this or they will not authorized by most grocery stores. On top of the free goods there are warehouse slotting fees into the thousands of dollars for each item for the little guy but no cost to the big guy. This makes it very hard or even imposable for the little guy to bring a New Item to the market. I should know this because in the last ten years I have entered the market with products of my own and it was very difficult to obtain distribution for my products with out paying for slotting fee or offering free goods. Being on both sides of the fence, I can clearly see that this is commercial bribery at the cost to the consumer. Manufacturers have to build this into their cost creating inflated retail prices.

And yet another MNB user wrote:

Not only had slotting become a "drug" to Fleming, once the company "centralized" to Lewisville, Texas, slotting became budgeted. The Category Managers and Directors were directed to bring in "x" dollars per month; higher at the end of the budget quarters, and especially at the year end. How you budget what previously have been an unknown was never explained, except, it became a way to reach the necessary bottom line.

Category management? No, it was merely harvesting every dollar available without any regard to the sales potential or contribution to growing a category. I've been around long enough to remember the pre-slotting days when the decision was: "will the item sell." What a concept!!

We also had a piece yesterday about a new credit card technology that used RFID to allow cards to be read without being swiped. One MNB user responded:

Hmm..."faster and safer because the customer never actually has to hand over the card"? Does this mean some enterprising people could, hypothetically, develop a reader, have it in a pocket in the "general vicinity" of my wallet--say while sitting in a restaurant or hailing a cab or something--and walk away with whatever vital information is maintained in this computer chip? Perhaps (I know, I know, it could never happen because people are altruistic to the core), but perhaps without our knowledge because we never had to hand over the card?

Am I alone in being just a bit frightened of RFID technology?

Not alone. Nope.

Another MNB user weighed in:

The swipeless credit cards using RFID technology sound interesting…they also sound like possible high-tech pickpocketing when RFID readers become more common.

But not everyone was worried:

Sounds great to me! I hate those swipe machines, either they do not work or you have to try another way. This is an area where standards should be used to keep from confusing the customer.

And finally, in a story about a new category of mid-calorie soft drinks, we wrote that "we've never thought of the diet drinks that we consume as being

One MNB user wrote:

I disagree, and I think millions of other people do, too. If diet drinks were better tasting, there would be much higher, nearly total consumption. If Diet Coke tasted like Classic Coke, I would drink it everyday. Instead, to my palate, it tastes like chemicals. It's hard to describe exactly what is wrong, it just has no flavor appeal for me. The same is true of most diet drinks. The only one I can tolerate is Diet Dr. Pepper. When the manufacturer claims that it tastes more like the original than other products taste like theirs, it is true. I think the market for mid-cal drinks could be huge, if the flavor profiles and the marketing are done properly. I will certainly give them a try when I see them available in my area.

Fair enough. That's why they call it "taste."

The thing is, if Diet Coke tasted like Classic Coke, it'd probably be too sweet for us.

Then again, we still like to drink Tab.
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