business news in context, analysis with attitude

On the subject of the Amazon-FTC legal battle, one MNB reader wrote:

If I was the retail industry and individual grocers, I would be watching this closely.  On the surface, this looks like the FTC is taking its flashlight into Amazon’s dingy basement and shining a light into the dirty corners of retail practices.  But guess what they will find…most of today’s grocers huddled in those corners.  Only reason Amazon has come to light is because they have automated many of those practices and have done a better job of leveraging them than their competition.  Hiding in those corners amongst the pricing practices, you should expect to find battles for market monies, slotting fees, etc. along with numerous spreadsheets calculating how to generate “excess profits” at the expense of the suppliers and customers!  Better be careful what you wish for!

This is similar to something I keep saying - that Amazon is doing what a lot of retailers do, except it is bigger and better and faster.

Another MNB reader wrote:

It seems to me that FTC wants to punish Amazon’s 21st century business based on 20th and 19th century rules.  Amazon uses programs, procedures, analytics, and algorithms that the regulators don’t understand.  Besides, if their customers didn’t like their business practices or prices, they would cancel their subscriptions and shop elsewhere.  People like Amazon because it is relevant to their 21st century lives.

One of the things referenced in the FTC complaint was 'Project Nessie," which the Wall Street Journal later reported was an algorithm used "to test how much it could raise prices in a way that competitors would follow … The algorithm helped Amazon improve its profit on items across shopping categories, and because of the power the company has in e-commerce, led competitors to raise their prices and charge customers more, according to people familiar with the allegations in the complaint. In instances where competitors didn’t raise their prices to Amazon’s level, the algorithm - which is no longer in use - automatically returned the item to its normal price point."

I commented, in part:

I think it is the smart retailer that figures out how to maximize sales and profits without alienating customers or giving the competition a window in which they can be successful.  They're called price checks, and I would imagine that in the old days retailers would alternately use calculators or fly by the seat of their pants.  Now they have algorithms to do it.  Are we going to make them illegal?

"Project Nessie" doesn't strike me as some sort of monstrous concoction, but rather the natural, inevitable, effective and efficient evolution of a practice in which all retailers have engaged.

Maybe there's an illegal component of which we are unaware.  But if I'm reading this stuff right, I don't yet see it.

One MNB reader responded:

I totally agree with your take regarding Project Nessie.  As you said, these used to be known as “price checks” and retailers routinely performed them on competitors in their market.  They were done via ad checks and store visits, not algorithms, but the premise and the actions taken were the same.  I can’t begin to remember how many times retailers complained to me about competitors being in their stores to check prices.  Same game, with different players and technology.

And, this note from MNB reader Craig Espelien:

What is old is new again…

When Walmart began to invade Texas (aging myself now…), HEB found that by avoiding direct price competition, Walmart was amenable to making money (meaning they would rarely initiate price competition). HEB found that consumers were willing to absorb a ~5% premium to shop with HEB rather than Walmart (and thus take advantage of HEB’s strength in perishables, variety and service) and Walmart was comfortable with this price differential. The work HEB did also showed that having an amazing merchandising plan with multiple “must have” seasonal items displayed at all times would leverage the traffic advantage HEB had (and almost every other grocery retailer has) to compete better and make Walmart a little more irrelevant.

This strategic pricing analysis is reminiscent of what Project Nessie is apparently doing. Compete is a verb - even if you are the biggest, baddest, meanest you-know-what in the valley.

An Amazon spokesperson said that Project Nessie "ran for a few years on a subset of products, but didn’t work as intended, so we scrapped it several years ago."  Which prompted one MNB reader to write:

They should have called the project "Treadstone."

Boom!  Extra credit for the movie reference.

We had a story the other day about how Albertsons doesn't just have the new Covid vaccines available, but also is giving recipients a coupon eligible for 10 percent off their next grocery purchase up to $200, and access to a free digital vaccine record.

I commented, in part:

Good for Albertsons.  As befits a company that operates pharmacies, it is expressing confidence in the science of vaccines and the scientists who develop and approve them.  This is also smart business on a number of levels, not least of which that if its customers and employees are vaccinated against these various maladies, they are less likely to spread the disease, which will keep employees on the front lines and customers coming in to make purchases.

One MNB reader responded:

By now people have made up their minds about Covid vaccine.  They've either in or not. It's the same with flu shot for years. People's opinions. I like many when I was younger never got the flu nor the shot. And it worked, for me.

I simply can't jeopardize myself today. I may have had great immunity before but now I can't count on that being there. So I vaccine up+.

From another reader:

I received both my Covid and Flu shots this morning at a local Safeway/Albertsons.

They gave me 2 10% off coupons!

The receipt also showed what the "Cash" price was for each of them. Ouch.

Thank God for Medicare.


MNB reader Amy O'Hara wrote:

Publix has been giving a $10 gift card when you get a flu vaccine for years....why is it a thing for Albertson's?

Fair point.

However, another MNB reader wrote:

I would have to disagree with your view a little bit. The data on vaccinations was conflicting and inconclusive or at the very least, incomplete. Same could be said with masks.

There haven’t been headlines about retailers offering discounts for flu shots either or for other issues that are similar. Maybe we could offer discounts for sanitizing your hands when you enter the store. That spreads more disease than anything else.

It just seems like this has been made political, like a lot of other issues, and it’s being pushed on both sides with some discrimination involved. There’s a stigma attached to it one way or another and we don’t all agree.

That’s ok but it seems a bit skewed to one side to offer discounts for this vaccination specifically and not for other things. Makes me question if Albertsons is pushing this due to their stance on the issue or if it makes them look good socially to a certain group or groups.

I don't think that's true.  I think that without vaccinations, a lot more people would've died or gotten seriously ill.

But I've sort of given up on trying to convince people of that.  I trust the science and am going to behave in a way that I think is responsible both in terms of my own health and the health of people with whom I associate.

C'est la vie., the location intelligence firm, is out with a new study this week that it says shows that certain regional chains "have seen consistent growth in H1 2023 and are well-positioned to continue their strong performance in H2 and beyond."  One of them was identified as "ShopRite & Price Rite … both owned by Wakefern and capture significant market share in the Northeast."

One MNB reader responded:

I don’t know where these folks got their information, but it is very misleading to say Shop Rite and Price Rite “are owned by Wakefern Food Corp.”. It may be true for Price Rite, but the vast majority of Shop Rite stores are owned by the members of the Wakefern Co Op.

You're right, and while I was just quoting the report, I should've caught that.

Mea culpa, mea culpa, mea maxima culpa.

Following up on our piece about a Wall Street Journal story about how Starbucks CEO Laxman Narasimhan is trying to reduce the distance between the company's Seattle headquarters and its stores, which are spread out for thousands of miles all over the world, one MNB reader wrote:

Starbucks is facing similar issues as all retailers.  How to shorten the distance from HQ to store level.  This has always been a problem with chain retailers.  Look at the example of DG store manager that had only 100 hrs allocated for her to run a store.  When I was running a supermarket, many moons ago, we were only allocated so many “man hrs.” to run the store which meant things didn’t get done or the salaried employees had to put in more time.  This disconnect bled into other aspects as well correct inventory, shelf management, customer service, even cleanliness.   Never once did a “suit” jump into the trenches and work the stores.  That, for Mr. Narasihman, is the best way to begin the process of connection.  When boss’s roll up their sleeves, the employees listen and respect a whole lot better. How’s the adage go, Don’t do what I say to do, do what I myself would do.  I wish him the best in this chosen direction.

On another subject, MNB reader Matt Hautau wrote:

I don’t know if you’ve covered this yet, but I was in my local Target here in Albuquerque and they have converted the entire HBC aisles so that the product is behind anti-theft doors.  In order to even touch a product (read the label, etc) much less buy it you need to press a button and wait for an attendant to come assist you.  And they aren’t staffing associates in the aisles to help shoppers … you have to wait for someone to appear in your aisle.  We ended up being helped by one of their online shoppers (who was visibly annoyed with how this change has affected his work process) and he had to unlock four separate doors in order to get the items we were there to buy.  Did I mention that the customer isn’t allowed to touch the product when the doors are open?  The associate needs to hand it to you.

Clearly this is in response to a spike in theft, but it makes these areas of the store virtually un-shoppable and it’s unbelievably frustrating.  After only one time dealing w/ this new experience my wife and I agreed that we simply won’t purchase those items from Target anymore.  We’ll likely move those items to our Amazon cart.

While I empathize with the shrink issue, I can’t believe this is their solution to this problem – to drive away the shoppers who want to buy their product.

All excellent points.

We took note the other day of a New York Times story about the development of new fruit and vegetable plants that are being developed - some via gene editing technology - to compensate for the challenges of climate change.

I commented:

There's been a lot of conversation over the years about the propriety and impact of genetic modification of food.  But perhaps the state of the planet is such that it will be required if we're going ton continue to grow certain foods.

Which prompted MNB reader Carl Jorgensen to write:

I may seem like a one-note band, but I have to once again challenge the notion that genetic engineering is a viable solution for a resilient food system. The monocultural (reliance on just a few crops) GMO cropping system, through its reliance on synthetic pesticides and fertilizers, has accelerated the degradation of our soil, water and biodiversity, and now it's going to save us from climate change? Far more likely is that the other approach you mention, "mining the vast global collections of seeds that have been conserved for centuries" will be a more sustainable solution. 

Carl knows more about this stuff than anyone else I know, so I bow to his greater expertise.

We cited a Wall Street Journal report the other day about how "a test by Walgreens of technology that replaced some cooler doors with digital screens that play ads has ended in acrimony.

"The digital screens’ vendor, Cooler Screens, is suing the pharmacy chain, saying that Walgreens obstructed an agreed-upon nationwide rollout of the internet-connected doors and demanded their removal from stores, according to court documents.

"Walgreens, meanwhile, says the technology from Cooler Screens didn’t work. The retailer said it ended its agreement with the vendor in February, according to the court documents."

I pointed out that Walgreens' real problem was that the revenue stream on which it was counting turned into a trickle, and commented:

That said, these screens were annoying - visual noise that detracted from the product and did nothing to improve the shopping experience.  They were a perfect example of how companies can be so focused on c creating new sources of revenue that they ignore what makes the experience better for shoppers.  (I worry that the momentum behind retail media networks could lead retailers to make the same mistake if their priorities are focused on ad dollars and not on creating relational experiences that connect them to shoppers in meaningful ways.)

Somebody should've sued both Walgreens and Cooler Screens just for being irritating.

One MNB reader chimed in:

The Walgreen's ad program for freezer doors never made sense on it's face. It seemed another case of marketing putting revenue before customers.  Trying something new has some merit but agreeing to roll it out chainwide without testing in the field seems close to malfeasance. 

Retailers are constantly approached by advertising firms. Decades ago, and before the digital age, a grocer I worked for was approached by a company that wanted to install wheel stops throughout the grocer parking lot on which the advertiser would place ad material. The company initially thought it was found money until an astute in-house legal counsel pointed out that a couple of trips and falls by customers in the parking lot over the wheel stops would wipe out any gain from the ads. In this instance common sense prevailed.

We cited an Associated Press report that Costco is consistently selling out the one-ounce gold bars that it has been marketing via its website, and I commented:

I think what we're seeing here is the foundation for a defense that will be made for Sen. Robert Menendez (D-New Jersey), who recently was indicted on corruption charges after federal investigators found $480,000 in cash and more than $100,000 worth of gold bars at his home.

Menendez is going to refer everyone to his Costco membership and say that the gold bars weren't bribes, but rather savvy purchases made at his local membership warehouse.

It is, of course, a defense that will only seem credible if he also has a basement full of 170-ounce jugs of laundry detergent.  Which he probably doesn't.  Though, when you think about it, that much detergent might be useful for whatever other laundering activities in which he may be engaged.

MNB user Doug Larsen responded:

First of all, loved your comment(s) on Senator Menendez regarding the gold bars found in his house.  Is amazing to me how behavior that would never be tolerated in the private business world seems to be ok in Congress and sometimes actually encouraged!  Second of all, did not know that Costco was selling gold bars.  I cant figure out why one would pay over market to do this but somehow this has to be a statement about the world we live in today.  About once a quarter, I wonder out loud what getting out of the US would be like?  Costa Rica?  Spain? 

I hear good things about Panama.  Just saying.

From another reader:

Great comments on Senator Menendez.

Savvy, Satirical,  Snarky and funny as it is sad.

Keep up the good work. 

Are you kidding?  With praise like that, my work here is done.

From yesterday's MNB:

"The Wall Street Journal this morning reports that 'big food companies and investors are watching as Ozempic and other similar weight-loss drugs flow to millions of people, upending America’s diet industry and raising new questions about how consumers will eat.'

Here's the concern:  People who take drugs such as Ozempic could 'cut their daily calorie consumption by as much as 30% … for a person on a 2,000-calorie diet, that could mean eliminating a one-ounce bag of salted potato chips, a bottle of soda and more each day'."

I commented:

The question that immediately occurs to me is whether this represents a long-term sea change in how people deal with weight issues, or is it just a fad that could recede over time.  Or, perhaps more likely, be seen as a more risky approach to losing weight because of issues that emerge over time.

I'll be honest.  I've always fought with my weight, and it is a tougher battle the older I get.  The idea of a magic medicine that could address the issue sounds wonderful, but I worry both about the long-term health implications and about the possibility that I won't enjoy food as much as I do.

For people who eat to live, this isn't as much a choice.   But for people like me to live to eat, it is much harder.

MNB reader Fred Horowitz responded:

Wait until there is a fight on Capital Hill to take the drug from the “elites” to Medicare and Medicaid!

Great.  Something else for them to get stupid about.  (Thought a fight in Congress would actually require the House of Representatives to be operating, which may not happen anytime soon.)

We had a piece yesterday about how one mark of a successful mall seems to be if it has both an Apple Store and a Cheesecake Factory.

I understand the Apple Store.  But, I commented:

I have no explanation for this.  My feeling always has been that the Cheesecake Factory's menu is way too big to be anything other than mediocre at everything.  But I suppose for some folks, the plethora of choices is reassuring.

MNB reader Sam Pew responded:

Anyone who uses “plethora” to explain a food restaurant’s menu spends way to much time eating out. Just so you know, I am jealous of your obvious and well established eating habits. Good on you my food loving brother!!

I make no excuses or apologies.  None of us should.

And finally, prognosticating about the MLB playoffs, I wrote:

There's usually one Wild Card team that makes a run deep into the playoffs, and I have no idea which one it'll be.  I know I'm rooting for a seven-game Orioles-Dodgers World Series, and that the Dodgers are triumphant in the end;  but I also know that the road the World Series almost certainly goes through Atlanta, and they scare me.

Prompting this email:

As a diehard Braves fan I hope the playoffs run through Atlanta all the way through the series.  But knowing the Braves playoffs history, this season has NLDS loss to the Phillies written all over it.  Hope I’m wrong!

We'll see.

Go Dodgers.