Yesterday I posted a couple of pictures from a Target store in Portland, Oregon, that I felt simply screamed out for Target to find a grocery partner who knew something about fresh food merchandising.
One MNB reader thought I was being harsh:
I’ve got to disagree with you here: nothing about that picture is ‘a disgrace.’ To me, it looks like a clean, neatly organized display of stocked, decent looking, well labeled produce. Sure, it’s next to candles, but it’s not getting me down (unless the candles are creating a Yankee Candle store-like environment, where the scents are all fighting and it gives you instant allergies and a headache). It’s even next to what seems to be a clean, neat carriage corral, and we know how gross those can sometimes be.
Additionally, I’ll mention that last week I was at Target for more Brita filters and decided to swing by the grocery section to see if it’s as bad as you’ve led me to believe. My observations were that I was almost the only person in those aisles (3PM on a Friday) whereas the rest of the store was seeing normal traffic, the dried goods seemed to be well stocked, and the freezer cases were more empty than they were full (however I appreciated the motion-sensing lights that turned on inside them upon my approach).
That said, the produce area was a solid A: weirdly I couldn’t find a tomato anywhere, but they had avocados on a good sale that were not veritable rocks, I was able to get plain store-brand no sugar added yogurt, cucumbers and peppers, salad greens, and even the only type of eggs I will buy (Nellie’s certified free range). That last part was a very pleasant surprise, as was the price. Sure it’s an overall mixed result, and it’s not the same as a dedicated grocery store, but I’ll definitely be swinging by that section anytime I find myself in Target just to fill in the gaps.
One of us is grading on a curve. I’m just no sure which one.
MNB reader Todd Ruberg wrote:
Your Target display picture is all too common and one wonders if this is a self fulfilling prophesy of being “Penny wise…pound foolish” and the continual cuts to in store labor…the belief that all merchandising ideas can come from a corporate planogram and in store execution is robotic follow thru only.
Here is some simple napkin math…..what if they added a Merchandising specialist to that store? Let’s say that cost them $100K a year, or roughly $2000 a week. At 25% margins, to pay that out they’d need to create incremental $8000 sales per week, or about $1100 a day. Could a store with that kind of traffic generate that type of sales increase if merchandised better, with an eye to local tastes and trends?
There are great local retailers (New Seasons, Market of Choice) that aren’t scrimping as much on labor and are merchandised excellently without out of stock problems like Target.
Another MNB reader wrote:
Somebody's head should be on the chopping block for this display, especially considering the size of Target. Can't they attract better talent for fresh foods? Or beg Kroger to take it over?
Yesterday we reported that the US Supreme Court ruled 5-4 that American Express was within its legal right to include in its contracts a stipulation that retailers cannot encourage customers to use other, less expensive forms of payment.
I commented that I did not understand any of the reasoning behind the majority’s argument (though conceding that I’m not a lawyer), and added:
Retailers ought to be able to be transparent about the factors that go into the prices that shoppers pay. To prevent that kind of transparency protects one class, and victimizes the consumer … which strikes me as being a shame. I don’t get it. But then again, I didn’t go to law school … and I’m used to disagreeing with the some of the rulings made by this SCOTUS.
MNB reader Dr. James M. Kenderdine responded:
I did not go to Law School either, however, in my opinion this is a clear example of an anti-competitive ’”tying agreement” in which one party attempts to limit the other party’s freedom of action (i.e “tie their hands”) in an different action. Classic examples a copy machine manufacturer requiring a purchaser to only use the manufacturer’s brand of copy paper related supplies. The copier manufacturer wants the customer’s freedom of action relating to the purchase and use of the copier restricted for it’s benefit.
I don’t recall that this issue has ever been raised in this sort of case, and I don’t understand how why the issue was not the critical issue in this case. Nor do I understand why the complainants did not simple stop accepting AMEX based transactions. I have been an AMEX cardholder for over 40 years and frequently encounter the situation of a merchant who does not accept it because of the high “swipe fees”.
Unfortunately this is just the most recent example of where the weak anti-trust enforcement by the FTC and DOJ and the courts has favored those companies that use anti-competitive tactics to gain market share, and this opinion will encourage that behavior to continue.
From another reader:
There are many ways to look at the decision taken by SCOTUS with regards to the decision to protect AMEX.
Retailers speak with forked tongue on the disclosure of costs. I haven’t recently read what % of revenue Walmart receives that is used to pay the Walton family dividends. Nor, how much Target Board members are paid for about 10 days / year worth of work. (Trust me – we’d all like to get that deal; read Board decks, vote whatever the CEO wants and be accountable for absolutely nothing.. I digress.) Or, how much money Publix pays the Jenkins family (whom charge high rates) for real estate it leases to operate their stores. Or, how much some retailers make from bogus deductions from their suppliers, including paying invoices late. Retailers love talking about how much they pay for theft from their stores but rarely disclose how much of that is employee vs. consumer theft. My point is this: $97B is a lot, but retailers themselves benefit from credit card loyalty schemes.
AMEX is perfectly OK to charge more for their offer. It wasn’t long ago they lost their exclusive relationship with Costco; it hurt AMEX far more than Costco by all published reports. This decision by SCOTUS may well drive all retailers to only accepting one card. If that occurs, which I think it will, the AMEX victory will have been a very hollow one. With their own cards, they can then cut their own shopper credit deals, much like the retailers in S America are doing.
I’ve been an AMEX card holder since the mid 80’s (signed up while in College just to build up my credit rating). For a while, they were a good value; I could get into every airline lounge when I travelled on business. As those perks have evaporated, so has what I pay AMEX. I’ve never paid rack rate for their Plat card; they fold like a cheap Jos A Banks suit every year when I tell them to cut my membership price or redeem my points then I leave. I’m ready every year for this discussion and I’m really hopeful that one year they say “not this year” so I can try out another card. Their offer is just “so-so” these days, in my opinion. I’m good with AMEX charging more – its their right – just as it is for Publix to charge more for the same product than Target (or any other retailer).
Outside the US, AMEX isn’t as widely used because retailers actively discourage or simply won’t accept AMEX cards. In fact, some retailers in Europe / Africa are moving to offer lower prices for cash payments, just as the petro retailers do in US now.
My view: If retailers are really serious that the $97B is causing them financial harm, that they can’t “sell more” without paying this fee, simply accept cash / EBT / check payments. Or, accept only their own card. It’s all better than moving supplier payment terms to 90 days, which really limits innovation…
From MNB reader Andy Casey:
The obvious choice for retailers is just don’t take Amex; seems to work ok for Costco.
And from MNB reader Robert M. Fawcett:
You nailed that one, terms are a legal issue, don’t think this shake down will work too well. This is really going to upset everyone.
And from another reader:
I’m not a legal scholar either, but unless I’m mistaken, retailers are not forced to accept Amex as a form of payment. They are free to enter into a contract with Amex, which stipulates they won’t favor other forms over them. They are also free to say ‘no thank you’, and risk that they may lose loyal Amex users. The fact that most retailers don’t walk away says they see a benefit in accepting Amex, at the terms they have agreed to.
And another:
The good news is that retailers can still chose whether or not they want to accept AMEX cards. There are many places that choose not to accept “The Card” and that is still a good thing. Costco has converted many of us.
And still another:
Costco solved this matter long before the courts decided to chime in. Maybe Wall Mart Kroger Target HomeDepot and others are thinking about why they choose to pay Amex more than Visa for the same service.
The other big story yesterday was about how Kroger has caused consternation in the manufacturer community with a letter informing them it is changing its payment terms, moving to a net 90 day payment program standardized across the store. It also is working with Citibank to charge a financing fee to suppliers who want to be paid more quickly.
The changes are of particular concern to the produce industry, where there is a belief that the new terms could violate the federal Perishable Agricultural Commodities Act (PACA, which requires that fresh vendors be paid within 30 days.
I commented:
I have the impression that at least in some cases, there will be suppliers who will be willing to pay the financing fee in order to get paid sooner, and then will deduct that money from whatever promotional allowances they were planning to offer Kroger.
Ninety days sounds like an awfully long time … and probably damned near intolerable for small companies that need to get paid to survive. They shouldn’t have to take a cut in order to get paid sooner.
This may seem like a smart idea from an accounting point of view, but I also think it potentially creates a scenario in which small, innovative companies are not going to want to do business with Kroger, which could deny them a level of innovation that every business needs. It’s pretty hard to be taken seriously when talking to folks about trust and collaboration when you simultaneously have your hands in the other company’s pocket and are threatening its existence.
Which this could do.
Lots of email on this one.
MNB reader Gary Breissinger wrote:
This latest unilateral move by Kroger to dictate vendor payment terms shouldn’t really surprise anyone. It’s just another tactic in a continuing effort to transfer operating expenses from retailers to manufacturers. It’s another example of their “heads I win, tails you lose” mentality when dealing with vendors. Small suppliers are faced with an existential threat . However, large suppliers and the GMA need to categorically reject this demand...and be willing to withhold shipments to make their point. Bullying is a hot topic in our contemporary society...and what Kroger is attempting to do is nothing short of financial bullying. They need to be sent an unmistakable message that bullying wont be tolerated.
From another reader:
Yikes, 90 day terms, in produce (Meat and Deli/ Bakery) that’s 10- 15 turns before the supply chain gets paid, forget the small suppliers this is not sustainable buy any size supplier!
It’s another sad day at The Kroger Company for everyone associated with their business but the accounting department. You couldn’t have said it better, a smart idea from an accounting point of view, which is where all the present Kroger ideas have been hatched. Kroger accounting has now alienated every one that touches there business, just walk the stores and observe so called in stock conditions and associate attitudes. Thanks to accounting, the store associated don’t care, the store management doesn’t care, the division management is disengaged, the service providers don’t care and now the suppliers. The accounting department has hijacked a 140 year old American icon and in the end forgot about the customer!
I will close with a line I heard many years ago, loyalty only goes up…Kroger is losing that!
This may sound bitter, it’s not but it is observant!
Well, maybe a little bitter…
From MNB reader Tom Robbins:
Bet they won’t get away with that when their landlords, Utility vendors, and insurance carriers are are brought into the conversation.
Maybe I’ll go to my neighborhood Kroger and tell them I’ll pay them for my purchases in 90 days. Can’t believe this one passed muster with their CEO.
From another reader:
I don't like it either KC, it is a very long time, especially from a company doing upwards or 120 billion a year.
While I have nothing but respect for Kroger, this doesn't put them in a good light.
And another:
Unquestionably, Kroger standardizing terms at 90 days is a “lose-lose” deal for business. First, the large, multi-category suppliers are not going to accept these terms without a fight. Walmart found this out a few years back when Greg Foran, as incoming Walmart USA President, tried to implement several cash infusion tactics, including charging for warehouse slots and longer invoice payment terms. The major CPG’s largely balked (refused) the payment lengthening but did provide Walmart funds in the other areas, taking it out of hip pocket reserve funds. The smaller, innovative CPG’s, having no leverage, had to agree to these terms, particularly as a condition of being launched within Walmart stores. Cash flow is the major need of these innovation-led businesses. And, let’s not forget these innovative companies are the one’s hiring the talented individuals in our industry who are being made redundant by the large CPG’s.
Second, if there’s any success by Kroger to lengthen their payables, then Walmart and every other retailer is going to follow suit and demand same. (Robinson Patman, anyone?...) We’ll only know this in the course of 18 months or so if this initiative is successful. The timing is good from one sense, in that large CPG suppliers can now add this new cost with their freight cost challenges and pass it along now. Small suppliers cannot. Also, for the suppliers who don’t own their production / supply chain, then more upfront payments are likely to be asked for to reduce the risk of payment default.
By and large, longer retailer invoice payments is a dis-incentive for innovation suppliers. I’m amazed that every retailer Chief Merchant isn’t reviewing this with their CFO’s.
The US retail industry does have the lowest invoice dating terms, based on a study I worked on about a decade ago. Its not unusual, looking at retailers based outside USA, to see 60-day dating on some pretty fast turning / low margin categories. Maybe the answer lies in selling on consignment or scan-based trading (where retailers have good inventory tracking processes and employee theft is low). “Selling more” is the answer, not buying disadvantaging suppliers with longer terms.
I have a couple of additional thoughts on this.
One, it seems to me that Kroger may have forgotten that it depends on a large coalition of suppliers to make it successful … it takes a lot of people rowing in the same direction … and that it should want its suppliers to be successful because they work with Kroger, not despite the fact that they work with Kroger.
Two, if I were running things at any of Kroger’s competitors (which, let’s face it, probably wouldn’t be a very good idea for lots of reasons), I’d resist the urge to follow suit. Instead, I’d make a point - loud and proud - that we are not going to 90 day terms, and that we want to create a climate in which our suppliers (especially the small, innovative suppliers most hurt by the Kroger move) are as happy as we’re trying to make our customers. I’d say that our goal is to reward and celebrate supplier innovation, not impose terms that hamper it.
And finally, on an issue that continues to bubble up, one MNB reader wrote:
On the Sarah Sanders debate. First I deplore her beliefs and I ABSOLUTELY deplore her employer.
And while I say that, I think the people refusing Sarah Sanders service did a great injustice to their cause…they basically said we agree with the right to refuse service…and that (IMHO) is poor strategic move on their part.
I was completely against the Supreme Court’s ruling that businesses can refuse service to people if the act would be against their religious beliefs. My feelings are that any business that benefits from public funded streets, police, fire, water, street lights, public access parking or electric services is compelled to serve the public that has funded those services. Even though the services are being paid for by the business, the public / community structure makes that possible. That meaning if a couple you disagree with want you to make a cake for them that will have no generally accepted abhorrent content or pornographic content the business should not be allowed to refuse service. The business is engaging in the community simply by having and using utilities and protective services. Why should a business be allowed to selective engage in the greater community and choose to receive services if they are not willing to participate in the (previously) constitutionally mandated right to not be denied equal treatment based on race, religion, political persuasion, disability et al and therefore sexual persuasion…
In the end though I think it’s sad Red Hen did it the way they did because by perpetuating the divisiveness it really only makes things worse. They would have scored more points by saying we at Red Hen think your administration and its policies are hateful and un Christian but because we disagree with refusing people service based on their beliefs we will serve you…just as our side should be served by those who agree with your folks.
Another MNB reader wrote:
I found this quote on Twitter, And found it fitting:
It’s encouraging that Sarah Huckabee Sanders was judged not by the color of her skin, but by the content of her character.
To be clear, I think the Red Hen folks handled this in about as dignified and respectful manner as possible, considering that they were basically refusing her service. And I think it has to be noted that the refusal to serve was the result of a democratic vote by the restaurant’s employees - among whom are immigrants and members of the LGBTQ community - who feel not just disrespected by the Trump administration, but actually targeted by it. It was a visceral reaction to what they view as tangible bias and discrimination, and I feel a little unqualified to judge it.
But I agree with you that it just fuels all the toxicity out there. There are two points of view on this. One is that one of the two sides has to be the first to say, “enough.” No more insults, no more demonization, no more disrespect. It doesn’t matter which side goes first, because it will raise the level of discourse rather than diminish it, and the public will reward whoever takes the high road. We accede to the better angels of our natures.
There is a line from Robert Bolt’s “A Man For All Seasons” that sums this up:
If we lived in a state where virtue was profitable, common sense would make us saintly. But since we see that abhorrence, anger, pride, and stupidity commonly profit far beyond charity, modesty, justice, and thought, perhaps we must stand fast a little - even at the risk of being heroes…
The other point of view is that we live in a world where turning the other cheek almost never is rewarded (at least not in this life), and that you don’t win by bringing a knife to a gunfight.
I prefer the first option. What worries me - deeply - is that the second option is the more accurate world view, even if it leads us to a dystopian place.
One of my favorite classes in college was Ethics, which essentially was about the quest by societies and individuals for the “should.” It seems to me that there are a lot of folks out there who opt for the “can,” and not the “should.” And I am reminded of the line from Albert Camus:
”A man without ethics is a wild beast loosed upon the world.”
Lots of wild beasts out there at the moment. And better angels sometimes seem in short supply.
One MNB reader thought I was being harsh:
I’ve got to disagree with you here: nothing about that picture is ‘a disgrace.’ To me, it looks like a clean, neatly organized display of stocked, decent looking, well labeled produce. Sure, it’s next to candles, but it’s not getting me down (unless the candles are creating a Yankee Candle store-like environment, where the scents are all fighting and it gives you instant allergies and a headache). It’s even next to what seems to be a clean, neat carriage corral, and we know how gross those can sometimes be.
Additionally, I’ll mention that last week I was at Target for more Brita filters and decided to swing by the grocery section to see if it’s as bad as you’ve led me to believe. My observations were that I was almost the only person in those aisles (3PM on a Friday) whereas the rest of the store was seeing normal traffic, the dried goods seemed to be well stocked, and the freezer cases were more empty than they were full (however I appreciated the motion-sensing lights that turned on inside them upon my approach).
That said, the produce area was a solid A: weirdly I couldn’t find a tomato anywhere, but they had avocados on a good sale that were not veritable rocks, I was able to get plain store-brand no sugar added yogurt, cucumbers and peppers, salad greens, and even the only type of eggs I will buy (Nellie’s certified free range). That last part was a very pleasant surprise, as was the price. Sure it’s an overall mixed result, and it’s not the same as a dedicated grocery store, but I’ll definitely be swinging by that section anytime I find myself in Target just to fill in the gaps.
One of us is grading on a curve. I’m just no sure which one.
MNB reader Todd Ruberg wrote:
Your Target display picture is all too common and one wonders if this is a self fulfilling prophesy of being “Penny wise…pound foolish” and the continual cuts to in store labor…the belief that all merchandising ideas can come from a corporate planogram and in store execution is robotic follow thru only.
Here is some simple napkin math…..what if they added a Merchandising specialist to that store? Let’s say that cost them $100K a year, or roughly $2000 a week. At 25% margins, to pay that out they’d need to create incremental $8000 sales per week, or about $1100 a day. Could a store with that kind of traffic generate that type of sales increase if merchandised better, with an eye to local tastes and trends?
There are great local retailers (New Seasons, Market of Choice) that aren’t scrimping as much on labor and are merchandised excellently without out of stock problems like Target.
Another MNB reader wrote:
Somebody's head should be on the chopping block for this display, especially considering the size of Target. Can't they attract better talent for fresh foods? Or beg Kroger to take it over?
Yesterday we reported that the US Supreme Court ruled 5-4 that American Express was within its legal right to include in its contracts a stipulation that retailers cannot encourage customers to use other, less expensive forms of payment.
I commented that I did not understand any of the reasoning behind the majority’s argument (though conceding that I’m not a lawyer), and added:
Retailers ought to be able to be transparent about the factors that go into the prices that shoppers pay. To prevent that kind of transparency protects one class, and victimizes the consumer … which strikes me as being a shame. I don’t get it. But then again, I didn’t go to law school … and I’m used to disagreeing with the some of the rulings made by this SCOTUS.
MNB reader Dr. James M. Kenderdine responded:
I did not go to Law School either, however, in my opinion this is a clear example of an anti-competitive ’”tying agreement” in which one party attempts to limit the other party’s freedom of action (i.e “tie their hands”) in an different action. Classic examples a copy machine manufacturer requiring a purchaser to only use the manufacturer’s brand of copy paper related supplies. The copier manufacturer wants the customer’s freedom of action relating to the purchase and use of the copier restricted for it’s benefit.
I don’t recall that this issue has ever been raised in this sort of case, and I don’t understand how why the issue was not the critical issue in this case. Nor do I understand why the complainants did not simple stop accepting AMEX based transactions. I have been an AMEX cardholder for over 40 years and frequently encounter the situation of a merchant who does not accept it because of the high “swipe fees”.
Unfortunately this is just the most recent example of where the weak anti-trust enforcement by the FTC and DOJ and the courts has favored those companies that use anti-competitive tactics to gain market share, and this opinion will encourage that behavior to continue.
From another reader:
There are many ways to look at the decision taken by SCOTUS with regards to the decision to protect AMEX.
Retailers speak with forked tongue on the disclosure of costs. I haven’t recently read what % of revenue Walmart receives that is used to pay the Walton family dividends. Nor, how much Target Board members are paid for about 10 days / year worth of work. (Trust me – we’d all like to get that deal; read Board decks, vote whatever the CEO wants and be accountable for absolutely nothing.. I digress.) Or, how much money Publix pays the Jenkins family (whom charge high rates) for real estate it leases to operate their stores. Or, how much some retailers make from bogus deductions from their suppliers, including paying invoices late. Retailers love talking about how much they pay for theft from their stores but rarely disclose how much of that is employee vs. consumer theft. My point is this: $97B is a lot, but retailers themselves benefit from credit card loyalty schemes.
AMEX is perfectly OK to charge more for their offer. It wasn’t long ago they lost their exclusive relationship with Costco; it hurt AMEX far more than Costco by all published reports. This decision by SCOTUS may well drive all retailers to only accepting one card. If that occurs, which I think it will, the AMEX victory will have been a very hollow one. With their own cards, they can then cut their own shopper credit deals, much like the retailers in S America are doing.
I’ve been an AMEX card holder since the mid 80’s (signed up while in College just to build up my credit rating). For a while, they were a good value; I could get into every airline lounge when I travelled on business. As those perks have evaporated, so has what I pay AMEX. I’ve never paid rack rate for their Plat card; they fold like a cheap Jos A Banks suit every year when I tell them to cut my membership price or redeem my points then I leave. I’m ready every year for this discussion and I’m really hopeful that one year they say “not this year” so I can try out another card. Their offer is just “so-so” these days, in my opinion. I’m good with AMEX charging more – its their right – just as it is for Publix to charge more for the same product than Target (or any other retailer).
Outside the US, AMEX isn’t as widely used because retailers actively discourage or simply won’t accept AMEX cards. In fact, some retailers in Europe / Africa are moving to offer lower prices for cash payments, just as the petro retailers do in US now.
My view: If retailers are really serious that the $97B is causing them financial harm, that they can’t “sell more” without paying this fee, simply accept cash / EBT / check payments. Or, accept only their own card. It’s all better than moving supplier payment terms to 90 days, which really limits innovation…
From MNB reader Andy Casey:
The obvious choice for retailers is just don’t take Amex; seems to work ok for Costco.
And from MNB reader Robert M. Fawcett:
You nailed that one, terms are a legal issue, don’t think this shake down will work too well. This is really going to upset everyone.
And from another reader:
I’m not a legal scholar either, but unless I’m mistaken, retailers are not forced to accept Amex as a form of payment. They are free to enter into a contract with Amex, which stipulates they won’t favor other forms over them. They are also free to say ‘no thank you’, and risk that they may lose loyal Amex users. The fact that most retailers don’t walk away says they see a benefit in accepting Amex, at the terms they have agreed to.
And another:
The good news is that retailers can still chose whether or not they want to accept AMEX cards. There are many places that choose not to accept “The Card” and that is still a good thing. Costco has converted many of us.
And still another:
Costco solved this matter long before the courts decided to chime in. Maybe Wall Mart Kroger Target HomeDepot and others are thinking about why they choose to pay Amex more than Visa for the same service.
The other big story yesterday was about how Kroger has caused consternation in the manufacturer community with a letter informing them it is changing its payment terms, moving to a net 90 day payment program standardized across the store. It also is working with Citibank to charge a financing fee to suppliers who want to be paid more quickly.
The changes are of particular concern to the produce industry, where there is a belief that the new terms could violate the federal Perishable Agricultural Commodities Act (PACA, which requires that fresh vendors be paid within 30 days.
I commented:
I have the impression that at least in some cases, there will be suppliers who will be willing to pay the financing fee in order to get paid sooner, and then will deduct that money from whatever promotional allowances they were planning to offer Kroger.
Ninety days sounds like an awfully long time … and probably damned near intolerable for small companies that need to get paid to survive. They shouldn’t have to take a cut in order to get paid sooner.
This may seem like a smart idea from an accounting point of view, but I also think it potentially creates a scenario in which small, innovative companies are not going to want to do business with Kroger, which could deny them a level of innovation that every business needs. It’s pretty hard to be taken seriously when talking to folks about trust and collaboration when you simultaneously have your hands in the other company’s pocket and are threatening its existence.
Which this could do.
Lots of email on this one.
MNB reader Gary Breissinger wrote:
This latest unilateral move by Kroger to dictate vendor payment terms shouldn’t really surprise anyone. It’s just another tactic in a continuing effort to transfer operating expenses from retailers to manufacturers. It’s another example of their “heads I win, tails you lose” mentality when dealing with vendors. Small suppliers are faced with an existential threat . However, large suppliers and the GMA need to categorically reject this demand...and be willing to withhold shipments to make their point. Bullying is a hot topic in our contemporary society...and what Kroger is attempting to do is nothing short of financial bullying. They need to be sent an unmistakable message that bullying wont be tolerated.
From another reader:
Yikes, 90 day terms, in produce (Meat and Deli/ Bakery) that’s 10- 15 turns before the supply chain gets paid, forget the small suppliers this is not sustainable buy any size supplier!
It’s another sad day at The Kroger Company for everyone associated with their business but the accounting department. You couldn’t have said it better, a smart idea from an accounting point of view, which is where all the present Kroger ideas have been hatched. Kroger accounting has now alienated every one that touches there business, just walk the stores and observe so called in stock conditions and associate attitudes. Thanks to accounting, the store associated don’t care, the store management doesn’t care, the division management is disengaged, the service providers don’t care and now the suppliers. The accounting department has hijacked a 140 year old American icon and in the end forgot about the customer!
I will close with a line I heard many years ago, loyalty only goes up…Kroger is losing that!
This may sound bitter, it’s not but it is observant!
Well, maybe a little bitter…
From MNB reader Tom Robbins:
Bet they won’t get away with that when their landlords, Utility vendors, and insurance carriers are are brought into the conversation.
Maybe I’ll go to my neighborhood Kroger and tell them I’ll pay them for my purchases in 90 days. Can’t believe this one passed muster with their CEO.
From another reader:
I don't like it either KC, it is a very long time, especially from a company doing upwards or 120 billion a year.
While I have nothing but respect for Kroger, this doesn't put them in a good light.
And another:
Unquestionably, Kroger standardizing terms at 90 days is a “lose-lose” deal for business. First, the large, multi-category suppliers are not going to accept these terms without a fight. Walmart found this out a few years back when Greg Foran, as incoming Walmart USA President, tried to implement several cash infusion tactics, including charging for warehouse slots and longer invoice payment terms. The major CPG’s largely balked (refused) the payment lengthening but did provide Walmart funds in the other areas, taking it out of hip pocket reserve funds. The smaller, innovative CPG’s, having no leverage, had to agree to these terms, particularly as a condition of being launched within Walmart stores. Cash flow is the major need of these innovation-led businesses. And, let’s not forget these innovative companies are the one’s hiring the talented individuals in our industry who are being made redundant by the large CPG’s.
Second, if there’s any success by Kroger to lengthen their payables, then Walmart and every other retailer is going to follow suit and demand same. (Robinson Patman, anyone?...) We’ll only know this in the course of 18 months or so if this initiative is successful. The timing is good from one sense, in that large CPG suppliers can now add this new cost with their freight cost challenges and pass it along now. Small suppliers cannot. Also, for the suppliers who don’t own their production / supply chain, then more upfront payments are likely to be asked for to reduce the risk of payment default.
By and large, longer retailer invoice payments is a dis-incentive for innovation suppliers. I’m amazed that every retailer Chief Merchant isn’t reviewing this with their CFO’s.
The US retail industry does have the lowest invoice dating terms, based on a study I worked on about a decade ago. Its not unusual, looking at retailers based outside USA, to see 60-day dating on some pretty fast turning / low margin categories. Maybe the answer lies in selling on consignment or scan-based trading (where retailers have good inventory tracking processes and employee theft is low). “Selling more” is the answer, not buying disadvantaging suppliers with longer terms.
I have a couple of additional thoughts on this.
One, it seems to me that Kroger may have forgotten that it depends on a large coalition of suppliers to make it successful … it takes a lot of people rowing in the same direction … and that it should want its suppliers to be successful because they work with Kroger, not despite the fact that they work with Kroger.
Two, if I were running things at any of Kroger’s competitors (which, let’s face it, probably wouldn’t be a very good idea for lots of reasons), I’d resist the urge to follow suit. Instead, I’d make a point - loud and proud - that we are not going to 90 day terms, and that we want to create a climate in which our suppliers (especially the small, innovative suppliers most hurt by the Kroger move) are as happy as we’re trying to make our customers. I’d say that our goal is to reward and celebrate supplier innovation, not impose terms that hamper it.
And finally, on an issue that continues to bubble up, one MNB reader wrote:
On the Sarah Sanders debate. First I deplore her beliefs and I ABSOLUTELY deplore her employer.
And while I say that, I think the people refusing Sarah Sanders service did a great injustice to their cause…they basically said we agree with the right to refuse service…and that (IMHO) is poor strategic move on their part.
I was completely against the Supreme Court’s ruling that businesses can refuse service to people if the act would be against their religious beliefs. My feelings are that any business that benefits from public funded streets, police, fire, water, street lights, public access parking or electric services is compelled to serve the public that has funded those services. Even though the services are being paid for by the business, the public / community structure makes that possible. That meaning if a couple you disagree with want you to make a cake for them that will have no generally accepted abhorrent content or pornographic content the business should not be allowed to refuse service. The business is engaging in the community simply by having and using utilities and protective services. Why should a business be allowed to selective engage in the greater community and choose to receive services if they are not willing to participate in the (previously) constitutionally mandated right to not be denied equal treatment based on race, religion, political persuasion, disability et al and therefore sexual persuasion…
In the end though I think it’s sad Red Hen did it the way they did because by perpetuating the divisiveness it really only makes things worse. They would have scored more points by saying we at Red Hen think your administration and its policies are hateful and un Christian but because we disagree with refusing people service based on their beliefs we will serve you…just as our side should be served by those who agree with your folks.
Another MNB reader wrote:
I found this quote on Twitter, And found it fitting:
It’s encouraging that Sarah Huckabee Sanders was judged not by the color of her skin, but by the content of her character.
To be clear, I think the Red Hen folks handled this in about as dignified and respectful manner as possible, considering that they were basically refusing her service. And I think it has to be noted that the refusal to serve was the result of a democratic vote by the restaurant’s employees - among whom are immigrants and members of the LGBTQ community - who feel not just disrespected by the Trump administration, but actually targeted by it. It was a visceral reaction to what they view as tangible bias and discrimination, and I feel a little unqualified to judge it.
But I agree with you that it just fuels all the toxicity out there. There are two points of view on this. One is that one of the two sides has to be the first to say, “enough.” No more insults, no more demonization, no more disrespect. It doesn’t matter which side goes first, because it will raise the level of discourse rather than diminish it, and the public will reward whoever takes the high road. We accede to the better angels of our natures.
There is a line from Robert Bolt’s “A Man For All Seasons” that sums this up:
If we lived in a state where virtue was profitable, common sense would make us saintly. But since we see that abhorrence, anger, pride, and stupidity commonly profit far beyond charity, modesty, justice, and thought, perhaps we must stand fast a little - even at the risk of being heroes…
The other point of view is that we live in a world where turning the other cheek almost never is rewarded (at least not in this life), and that you don’t win by bringing a knife to a gunfight.
I prefer the first option. What worries me - deeply - is that the second option is the more accurate world view, even if it leads us to a dystopian place.
One of my favorite classes in college was Ethics, which essentially was about the quest by societies and individuals for the “should.” It seems to me that there are a lot of folks out there who opt for the “can,” and not the “should.” And I am reminded of the line from Albert Camus:
”A man without ethics is a wild beast loosed upon the world.”
Lots of wild beasts out there at the moment. And better angels sometimes seem in short supply.
- KC's View:
