REASONS GROCERY EXECUTIVES MAKE STUPID MISTAKES

You would think that mature executives who make high six and seven figure salaries would not make serious blunders that are obvious to ordinary people.  But they do it all the time.  Why?  Some of them you can find in the Bible from the book of Proverbs to the Seven Deadly Sins.  They are human beings often driven by their emotions and mental state.  One shortcoming I have rarely seen in a supermarket executive is laziness.  Very hard to sloth your way the top.

  1. Fear – Imagine you are in charge of store development for Food Lion, Winn Dixie or some other underwhelming chain.  Obviously the worst thing to  do is build more ineffectual stores.  But your job is to find new locations.  So you do because if you don’t you are out of a job.  It ends badly and unemployment is inevitable.  In wholesale we often see distressed suppliers take on distressed retailers as customers.  The CEO was hired to grow the business.  This buys time and makes for a good press release.  Super Valu supplying Marsh is a good example. 
  2. Greed – I’ve seen too many real estate execs and CEOs end up being a landlord. Anytime a chain opens in a location with poor ingress/egress, poor parking, poor visibility and signs a 20 year above market lease you can be assured someone is on the take. If you have ever wondered why mediocre grocers are obviously overpaying for everything from real estate to inventory?  Are they really that dumb?  Perhaps, must most likely its being done on purpose.
  3. Ego – Their ego needs stroking. I had developer come to me desperate to get a former employer to sign a lease in a blighted neighborhood.  I told him the CEO is a smart guy and he knows it doesn’t make sense.  But the CEO had a real weakness for schmoozing with mayors, minority leaders, athletes, and politicians.  “Bring the mayor of the city to the meeting”.  Make sure there are visions of the CEO and the mayor having their picture in the paper and being on TV.  He won’t be able to get this off his mind and it will take priority over good judgment.
  4. Lust – Just to make sure no one tried to talk the CEO out of it, the VP of Development had his weaknesses as well. I told the developer to bring a female model as a visual prop.  Just have her sit there and laugh at their jokes.  It worked.  Just like a 13 year old boy showing off on his skateboard in front of the girls, the immature executive mimics the same behavior in a business setting.   Another time we had a CEO who was infatuated with a young lower level female engineering employee.  He pulled some strings so she could go on  company sponsored cruise.  He wasn’t going to take advantage of her, he just wanted her there and wanted to make her feel important by use of his authority.  Once it became obvious why she was summoned to go on the cruise, she resigned and a life was disrupted.
  5. Wrath/Revenge – I’ve seen a CEO overreact and commit to opening stores near locations of a competitor that had insulted him. If you are going to do that just buy an option on the nearby property.  It creates the same anxiety at a fraction of the cost. Other times a wholesaler CEO will offer a prospective retail customer a too-good-to-be-true supply agreement in order to steal a customer from his previous employer.
  6. Pride – A need to expand and build stores in order to impress others. One time a company opened a store in a small vacation area because it is where the CEO has a summer home and he wanted to impress his friends and neighbors.  It failed.  Another retailer opened a store in the neighborhood where his ex-girlfriend lived.  Will give him credit, it worked.
  7. False sense of self-worth and overconfidence. Like when Haggen’s a sixteen store chain decides to buy 146 Albertsons stores.  Or Tesco thinking they should open a chain of a few hundred Fresh & Easy stores.  Food Lion rapidly expanding in to Texas and Oklahoma.  Target expanding into Canada. They failed because none of them were very good retailers but they sure thought they were.  Fools always rush in overconfident.
  8. Hiring too many “Yes men”. One time a CEO asked to have our demographic software prepare reports by quarter mile grids.  He said it was easily done at his previous company.  We couldn’t get the software to do what he wanted nor could the high priced consultants we brought in to show us.  So I called the person in charge of this function at his previous company to ask how they did it.  I was told they just faked it, rather than tell the CEO it couldn’t be done.  He wouldn’t know the difference.  I let someone higher up explain that to the CEO.
  9. Assuming other CEOs know something you don’t.  I did a market study for a location near a blighted vacant shopping mall in a high crime area.  Naturally the sales projections came out poorly.  However Menard’s, a major home improvement chain did commit to opening.  “Menard’s must know something you don’t” he said to me.  So he opened a supermarket which now sits dark and empty. Amazon recently made a bid for Whole Foods.  Whether this is a good idea or not,  I don’t know. What will most likely happen is some CEO someplace will overreact thinking  Amazon knows something he doesn’t and will go out and buy some mediocre natural/organic grocer without having the first clue what they want to achieve.  You see these games played all the time at small horse tracks.  Someone makes a large win wager on the worst horse in race to put fear and confusion in the minds of amateur bettors   Then cancel their bet and wager on the horse they like now that it has better odds while the dumb money is wagered on the long shot.

Anytime there is a major miscalculation by high level grocery executives it was most likely due to a weakness that was purposely exploited.  Back in the 1990s I went through a divorce.  I was curious to just how good my ex-wife’s attorney was.  So I followed her from case to case, observing her conduct in court.  This really paid off because I learned she was a smoker and desperately needed a cigarette after about an hour.  During negotiations just prior to the trial, we would keep her tied up, stalling, and biding our time.  After a couple of hours she was ready to agree to anything like a prisoner being tortured.  I would estimate that move saved me about $80,000.  The attorney showed up 20 minutes late for court, disheveled, and smelling like an ashtray.  When it comes to supermarket executives my experience has been that personality disorders lead to more mistakes than chemical addictions.  Either way, when the stakes are high, believe me, someone is watching and calculating their move.