business news in context, analysis with attitude

On the subject of how Starbucks and its former CEO, Howard Schultz, handled unionization movements within the company, MNB reader Rich Heiland wrote:

Back when I was in my first general manager's job at a newspaper in 1978 I went to a day-long seminar on how to keep unions out of your business. That may sound like some kind of "anti-union" event but it wasn't. It was very enlightening. I remember the presenter saying "Unions almost always come in to fill a void left by management." He followed by noting that while wages dominate most discussions of union and management, polls of workers who unionized listed money fifth or sixth on their list of complaints. Outranking it? "Broken vending machines." "No break facilities." "Lack of communication." "No future." In other words, things that indicated management had no respect for labor, nor any idea what conditions were like on the floor.

That was the most eye-opening day of my management career as I look back on it and shifted my entire perspective. I managed several properties and never had a union. But, I always paid wages that were competitive, never started anyone at minimum wage (even if it was only a nickel above), made sure bathrooms, break areas were clean. On the sly and against newspaper chain policy, I started allowing people to slip away for an hour or so as long as we were covered to go to a kid's concert or teacher meeting or, whatever. Guess what? I don't think anyone ever abused it. Maybe Howard needs to go a seminar like the one I did, which while titled "keeping union out of your workplace" in the end suggested doing that simply by acting as a decent human being.

On the subject of next week's opening of a new Wegmans store in Manhattan's Greenwich Village, one MNB reader wrote:

I assume their assortment, merchandising and experience will be broader than Duane Reade so I am betting on Wegmans.

A reasonable bet, I think.

Another MNB reader wrote:

I think Wegmans will do well in Manhattan.  My daughter living in West Village is thrilled! She shops at Whole Foods, because shockingly prices are better at Whole Foods than many other Manhattan options.

Warning to Wegman’s…..Don’t jam every end cap with your Wegman’s private label.  New Yorkers love their national brands, so don’t expect them to start spreading the news about the W brand any time soon.

I mentioned that the new Wegmans is in a space formerly occupied by a Kmart and, before that, a John Wanamaker department store; I commented:

"It is interesting that Wegmans is taking over a space formerly occupied by two retailers that found themselves out of fashion, out of relevance, and eventually out of business.  (Okay, technically Kmart is not out of business.  But it might as well be.)"

MNB reader Carl Henninger wrote:

One sentence in this article piqued my interest … is Kmart really not out of business? Turns out there are two remaining stores; one on Long Island and one in Miami. I remember the day that it was announced that Kmart and Sears were merging and thinking that this was the beginning of the end for Kmart.


Yesterday we took note of a Boston Globe has a piece in which it asks the question, does it necessary follow that if you can buy a 55-inch television on Amazon  for $249, that Amazon is necessarily good for consumers?

It is a question, I suggested, that certainly complicates any case that will be made by the Federal Trade Commission (FTC) in its antitrust action against Amazon.

The Globe posed the question to Burt Flickinger, managing director of Strategic Resources Group:

"His conclusion: Prime Days aside, Amazon has not used the power of its low-cost business model to consistently offer the best prices to consumers, especially when it comes to food and groceries.

"For example, even though Amazon purchased upscale grocer Whole Foods Market in 2017, the chain has not meaningfully lowered its prices as many people have hoped, he said.

I commented, in part:

I agree with Burt Flickinger that Amazon's approach to Whole Foods has been at odds with its low-price image, but I'm not entirely sure that this is wrong or even deceptive.  We may have expected an Amazon-owned Whole Foods to lower prices, but did Amazon actually promise that?  (It does offer selective deals to Prime members, but they are very limited, generally underwhelming and not very well marketed.)  Plus, is there anything wrong with a retailer operating different kinds of formats with different pricing policies?  In fact, couldn't it be argued that this is a smart way to come to market?

I think that a conversation about antitrust policy in the US is long overdue - the nature of competition has changed enormously in the past three decades, but the laws have not kept up.  

Scott Galloway made a comment on "Pivot" the other day that resonated with me.  He basically said that Amazon may have done nothing illegal, nothing wrong - but that it still may be good for America to break the company up so that smaller companies get needed oxygen to survive.  To me, that's a compelling argument worth consideration:  Is Amazon so big that even without doing anything wrong or illegal, it takes up so much space that smaller companies cannot survive or even get started?

By the way, could one make the same argument about what the top of the supermarket food chain will look like if Kroger is allowed to merge with Albertsons - that the combined company, along with Walmart and Costco, are soaking up all the competitive oxygen in the room, inhibiting grown and innovation by other companies that would be good for the economy in the long run?

One MNB reader wrote:

Look forward to reading more about Amazon and whether or not they are good for consumers.  I do understand that I may pay more for something at Amazon, but I also understand that with gas at $4 something a gallon in AZ, my “landed cost of something” is a whole lot higher if I have to get in the car and drive 5-10 miles to get it.

With respect to Whole Foods, my analogy is Nordstrom; I bought a lot of clothes at Nordstrom over the years.  Not because they were cheap but because the quality was good and the service was outstanding if I needed something altered.  The question is “Is Whole Foods perceived as providing value for the dollars spent?”  If not, they will go out of business.  But, not every business wants to go head to head with Walmart on price, nor should they be required or expected to.

Another MNB reader wrote:

The hypothesis that the government should have the authority to break up a company simply because it is big…and successful in a free market …is frightening.

Punishing successful companies in the hopes of allowing less effective, inefficient operations to be more successful is counter productive.

This seems to be another example of big government wading in to pick “winners” and losers” and manipulate market share to create “equal outcomes”.

And there are many examples that demonstrate that government has made more bad bets than good ones in this regard.

Fair argument.  If Amazon isn't doing anything wrong or illegal, government probably shouldn't be able to break the company up, even if the conclusion is that the company is inhibiting innovation and economic growth by other companies owing to its pure size.  (I'm assuming antitrust law does not allow this.)

But the same rationale may not apply to how the FTC responds to the Kroger and Albertsons deal.  They want something - and if the FTC concludes that a merged company will be so big that it will have way too much market power, to the extent that it will inhibit innovation and economic growth by other companies, maybe it ought to block the merger.

It seems entirely reasonable to me that the FTC may not be able to break Amazon up, but will be able to stop Kroger and Albertsons from merging.