Pundit’s Mailbag — Wal-Mart Dilemma: Add Labor or Reduce Complexity?
Jim Prevor’s Perishable Pundit, September 26, 2013
We already published a piece — Pundit’s Mailbag — Wal-Mart’s Empty Case And TV Commercial. Were We Being Unfair?— in response to our article, A Wal-Mart Example — What Is The Produce Industry To Do When Its Showroom Isn’t Executing Well? This letter brings a different approach to the issue:
Except, of course, Wal-Mart does lead the pack in produce sales. It sells more produce than anyone on the planet.
What Harris-Teeter does is interesting, but maybe not that relevant. After all, for several years Harris-Teeter was moving to more upscale and urban areas and away from its rural, middle-market stores.
The recent Kroger acquisition of Harris-Teeter was, in part, specifically motivated by Harris-Teeter’s excellent reputation in fresh. What Kroger would like to do, of course, is learn something from Harris-Teeter about fresh foods that it didn’t know and that it can execute in its other stores. Supposedly Kroger’s acquisition of Fred Meyer Inc., the supercenter chain in the northwest, gave Kroger experience in running larger format stores that it used in developing its Marketplace concept.
Yet this type of learning is difficult to do, especially if the goal is to learn things that are easily scaleable across the whole chain. Indeed for a value-oriented chain such as Wal-Mart, one of the biggest challenges is to decide what NOT to do. There are so many things that are fun and interesting, things that create excitement, even things that boost sales — but each one adds cost and complexity to the operation, increases the risk that execution will be poor and that the higher cost basis will make it difficult to profitably offer low prices.
Think about why McDonald’s doesn’t sell hot dogs. It is not because they wouldn’t sell. Almost certainly if McDonald’s sold hot dogs, it would sell more than anyone else in the world. But the company has carefully assessed the matter and determined that the additional sales it could realize by offering hot dogs would not be worth the additional complexity of carrying another protein and another bun.
When we ran the piece A Wal-Mart Example — What Is The Produce Industry To Do When Its Showroom Isn’t Executing Well? that featured the photo of an almost barren secondary banana display we spied in a particular Wal-Mart store, and when we ran the piece Pundit’s Mailbag — Wal-Mart’s Empty Case And TV Commercial. Were We Being Unfair? in response to a letter criticizing us for running that piece, most seemed to leap to the conclusion that what Wal-Mart ought to do is staff up to keep those displays full. That might be the solution. There might also be more efficient staff allocation or staff-checking mechanisms.
Much as night watchmen have long had to insert keys in machines to prove they were making their rounds, staff could be given the job in Wal-Mart to somehow punch in that they have checked the secondary banana display on a certain schedule.
Of course, one could also cogently argue that the lesson of that forlorn banana display is that Wal-Mart has over-reached. It added too much complexity to the operation and can’t consistently scale that approach with satisfactory results. Or, to put it another way, Wal-Mart should not have displays it can’t consistently execute well. So, perhaps, Wal-Mart should only have a primary banana display so as to focus available labor on fewer tasks that are more efficiently located.
Obviously, the produce industry would like to see the produce department of every Wal-Mart look like that of Harris-Teeter, but with that high service approach comes a need for more labor, more management, more space, more shrink, more of a lot of things, and that tends to create higher prices. Higher prices would depress sales. So, perhaps, the produce industry needs to be careful what it wishes for. It just might get it.