MESSAGE FROM THE MULE SKINNER

gelsonMESSAGE FROM THE MULE SKINNER

https://www.youtube.com/watch?v=xWGAdzn5_KU

The above clip is from the movie Little Big Man when General Custer gets some advice from a low level “mule skinner” before the battle of Little Big Horn.

Have you ever had a boss?  Did you ever feel you were smarter than them?  If not, you can stop reading.

It reminded me of when I was working for Roundy’s in the early 1990s.  We had enjoyed tremendous success in Milwaukee.  Our major competitors were much larger companies – Fleming and A&P.  Both were lame horses with no wherewithal to compete and both eventually filed for bankruptcy.   Roundy’s was an average at best retailer but we looked really good compared to Fleming and A&P.  One day Roundy’s decided since they were so good, why not expand into Michigan.  One of the senior executives told me we would be profitable despite the lower sales projections I had prepared. He thought Meijer was vulnerable and not that good.  We could price match them.  He pulled out the floor plan.  I noticed right away there was no bottle recycle/redemption area.  Since 1978 the “Michigan Beverage Container Act” has been in force.  I then asked him if he knew that Michigan had mandatory price marking and was the extra labor factored in.  Did he know culturally in Western Michigan that “if you ain’t Dutch, you ain’t much?” He said “(expletive) you Livingston” and quickly left my office, grand opening was delayed, and the stores failed in short period of time.   

We can all name examples like this all day long such as Tesco’s Fresh & Easy chain that opened on the west coast, Target expanding throughout Canada, Tops expansion into Ohio, Delhaize opening a chain of Bottom Dollar stores, Food Lion expanding into Texas and Oklahoma, Marsh trying to open a store in the Chicago suburbs, etc.  Haggen’s trying to open 146 stores on the west coast in one shot would be a good example however it appears there were actually sinister intentions of failing on purpose.  Probably 95% of us rolled our eyes and knew these were huge mistakes being made.  Down deep we all knew someone was afraid to tell the king he had no clothes on. One time a few years ago a large supermarket wholesaler/retailer decided to open a Hispanic store in Chicago.  The demographics said it was the right format.  But they opened a Mexican store in a Puerto Rican neighborhood.

My advice on expanding is to never leap frog into market that is not adjacent to your existing market.  If you are a successful retailer, don’t expect going into a new market, even with weak competitors, will produce good results early on.   It takes time to gain name recognition.  An example would be Heinen’s jump from Cleveland to Chicago.  Time will tell.  There is always a learning curve.  When you acquire an existing store, expect a 15% decline in sales right off the top.  Too often we have seen grocers heading in the wrong direction.  Their GPS says “make a u-turn as soon as possible.”  Like many of us, we think we know better and keep heading in the wrong direction.  Get trusted advice from as many experts as possible.  Never make excuses such as the weather, deflation, Easter fell in the wrong quarter, gas prices, unemployment, or Food Stamp reductions.  That’s just being in denial.  Especially when there are other grocers succeeding despite those conditions.  In the grocery business the economy is always good all the time for good retailers.  Be realistic.  If you are doing well and succeeding is it because you are really that good or is it because your competition simply is weak?  I have been somewhat successful wagering on greyhound races at Southland Greyhound Park in West Memphis, Arkansas.  But not so good at the Florida tracks.  Its the competition.  West Memphis is low income uneducated bettors.  Florida is well educated, wealthier, retired bettors.