Has Wal-Mart figured out how to do same day delivery? The Wall Street Journal seems to think so — at least within their Mexican operations (Mexico Delivers for Wal-Mart, Feb 20).
Has Wal-Mart really figured this all out? I have my doubts. (more…)
I love self-service checkout, but it is again under attack. Here in Chicago, Jewel-Osco (one of the major local supermarket chains) is pulling self-service checkout lanes from some of its stores (Jewel scrapping self-checkout at some stores, Chicago Tribune, Sep 25). Their stated goal is to “reconnect personally with all of its customers.” Now the Wall Street Journal is piling on with an article declaring that computers just aren’t up for the job of letting people buy green beans (Humans 1, Robots 0, Oct 6).
The human supermarket checker is superior to the self-checkout machine in almost every way. The human is faster. The human has a more pleasing, less buggy interface. The human doesn’t expect me to remember or look up codes for produce, she bags my groceries, and unlike the machine, she isn’t on hair-trigger alert for any sign that I might be trying to steal toilet paper. Best of all, the human does all the work while I’m allowed to stand there and stupidly stare at my phone, which is my natural state of being. …
In a recent research paper called “Dancing With Robots,” the economists Frank Levy and Richard Murnane point out that computers replace human workers only when machines meet two key conditions. First, the information necessary to carry out the task must be put in a form that computers can understand, and second, the job must be routine enough that it can be expressed in a series of rules.
Supermarket checkout machines meet the second of these conditions, but they fail on the first. They lack proper information to do the job a human would do. To put it another way: They can’t tell shiitakes from Shinola. Instead of identifying your produce, the machine asks you, the customer, to type in a code for every leafy green in your cart. Many times you’ll have to look up the code in an on-screen directory. If a human checker asked you to remind him what that bunch of the oblong yellow fruit in your basket was, you’d ask to see his boss.
Let’s take this in two parts. First, if people prefer a conventional check out experience because that allows them to zone out then I have to wonder how Jewel’s plan to reconnect with its customers is going to work. I remember as a kid my mom having what seemed like endless conversations with cashiers. Of course, we were in a relatively small town and most of the women (they were virtually all woman) working the registers had either gone to high school with my mom or had a sibling who did. Now we live in a more class divided society. I suspect that none of the cashiers at my local Jewel are actually from the neighborhood or that the store’s staffing policies actually build in time for cashiers and customers to catch up on how their respective in-laws are doing.
But what of the claim that the information needed to run checkouts cannot be simply encoded for computers? (more…)
Way back in the early days of this blog, Gady had a post about queuing innovations at Hannaford Supermarkets, a regional chain of markets serving the Northeast. One of things Gady mentioned was that they were experimenting with having a single line for those waiting to checkout. Having now visited Hannaford’s relatively new store in West Lebanon, NH, I can show you what that looks like:
As Gad’s original post notes, a single checkout line is not a completely new idea for supermarkets. Indeed, Wholefoods’ Columbus Circle store has gotten all sorts of press for its single queue system. I would argue that this is a little bit different. At Wholefoods, a single queue is as much about packing many, many registers into a tight space as it is about efficiently moving customers through. That’s not really true in West Lebanon; this is pretty much your standard, large, suburban American grocery store. In West Leb, a single queue is — as the signs suggest — all about reducing customer waiting times.
So what is it worth to reduce the use of bags at your local grocery store? OK, so for one store, it may not be worth too much, but if you have over 1,000 stores like Supervalu does, saving a few bags here and there can be real money. Thus the chain has instituted a “rigorous” program to reduce the number of bags used (At Supervalu, Cost Cuts Are in the Bag, Wall St Journal, Mar 23).
The new rules are part of a training program that Supervalu Inc. believes will save it millions of dollars a year by putting more items in each bag or skipping the bag altogether. Plastic bags cost about two cents apiece and paper bags cost five. The Eden Prairie, Minn., operator of Albertsons, Acme Markets and Jewel-Osco stores uses more than 1.5 billion plastic and paper bags a year at about 1,100 stores, not counting its Save-A-Lot discount stores, where customers bring or pay for their own bags. …
Some of the Supervalu guidelines reinforce familiar bagging rules, such as starting the packing at the corners and moving from the outside in. But others break with common practices: No double-bagging. No bags for large items or items with handles, like one-gallon orange-juice containers. Never ask, “Paper or plastic?”—just use plastic bags. The rules can be broken, but only on request. …
The chain averages three to five items a bag, whether the bag is paper or plastic, and sells about 10 billion items annually. Since mid-2009, it has boosted its average items per bag about 5%, saving $4 million to $6 million annually even as prices for plastic bags have climbed, Mr. Siemienas says.
It’s Thanksgiving so it is time to revisit the question of why heritage birds cost so much more than your standard supermarket bird. This year’s lesson in turkey economics comes from The Atlantic with a post by Bill Niman and Nicolette Hahn Niman of Niman Ranch fame (Heritage Turkeys: Worth the Cost?, Nov 18). Like good locavores, they emphasize that the industrial methods of factory farms result in birds that are in a sense under-priced. Yes, they are cheap on the supermarket shelf, but that doesn’t reflect the full cost they impose on the environment.
But the reason heritage cost so much is largely operational. (more…)
What is it worth to have visibility in a supply chain? When the consequence of screw ups can be catastrophic and deadly (think pharmaceuticals), it is worth tracking everything from raw materials through to consumption. So why are agricultural products any different? If anything, contaminated spinach or eggs can affect more people than any one prescription drug problem. Why then not trace produce and farm products the same way drug makers follow their products?
The Los Angeles Times reports that a number of tech firms are working with large growers to make such detailed tracking possible (Amid mounting safety concerns, technology helps track food from farm to table, Oct 3).
In general, such trace-back systems work in a way that’s similar to how Federal Express tracks its packages. On the farm, animals and crop sections are given a “smart” label with a unique identifying number. The label is then attached to a bin, crate or container used for transport. Workers then can use a hand-held computer or smart phone to scan the labels and record key information, such as date and time, location, workplace temperature and which truck hauled the food away. The information is usually uploaded to a central online database, where it is stored and can be accessed via the Web. Each time the food moves or is handled by someone new, the data can be updated and recorded.
At one point or another, we have mentioned nearly every major food retailer in the US. One that has thus far escaped mention is Trader Joe’s. According to an article in Fortune, that’s how the company likes it (Inside the secret world of Trader Joe’s, Aug 23). The company is privately held and generally prefers not to talk about itself. I guess that makes writing an article on the firm a little harder than usual. The story that emerges, however, is pretty interesting. It depicts a firm that has tied its operations very closely to its strategy.
For those unfamiliar with Trader Joe’s, here is how Stephen Dubner (the New York Time’s resident Freakeconomist) put it:
[T]he world is divided into three sets of people.
1. Those who have never been to a Trader Joe’s, and perhaps have never heard of it.
2. Those who love Trader Joe’s more than they love their own families.
3. Those who love Trader Joe’s more than they love their own families and are incensed that there isn’t one nearby.
So Trader Joe’s is more than just a grocery store. It is something special that inspires loyalty. What is interesting about that is that as grocery stores go, it is pretty limited. As the article notes, a typical family cannot do all its shopping here even if wanted to. Being a loyal Trader Joe’s shopper means having to go to some other store as well. The question then is how does the firm offer enough value to justify coming in on a regular basis? First, somewhat counterintuitively, it limits its selection:
Trader Joe’s has a deliberately scaled-down strategy: It is opening just five more locations this year. The company selects relatively small stores with a carefully curated selection of items. (Typical grocery stores can carry 50,000 stock-keeping units, or SKUs; Trader Joe’s sells about 4,000 SKUs, and about 80% of the stock bears the Trader Joe’s brand.) The result: Its stores sell an estimated $1,750 in merchandise per square foot, more than double Whole Foods’. The company has no debt and funds all growth from its own coffers.
If you have been reading this blog for a while, you might have concluded that we have a thing for grocery stores. In some ways it’s an occupational hazard. It is a low-margin, high-volume business that touches millions of people. Consequently, it is a setting where even small operational innovations have big payoffs. Thus an article on Ocado in the current Economist caught my eye (Keep on trucking, Jul 15). Ocado, for those who missed Gady’s earlier post on the firm, is a British online grocer that is on the verge of going public. They have built a honking huge automated warehouse outside of London that features 10 miles of conveyor belts (according to the article) and sells as much as 25 supermarkets do. Unlike 25 brick-and-mortar stores, however, Ocado doesn’t yet make money.
Online grocers that lose money are about as unusual as Cubs’ seasons that disappoint. What makes the article interesting are some of the numbers it gives about why they lose money:
Grocers, on the other hand, sell perishable products that have to be kept frozen or cool and that must also be delivered at specific times. To make matters worse, online grocery shoppers tend to want their food delivered at the beginning or end of the week, leading to a crush of orders.
All this is expensive. Some analysts reckon it costs £20-25 to deliver groceries to a British house. In large parts of America, where population densities are lower, it would be much costlier. And although customers currently bear the expense of going to stores themselves, they are reluctant to pay for their shopping to be brought to them instead. Nielsen, a research firm, found that the two most common reasons Americans gave for not buying groceries online were delivery costs and the desire not to have to wait for a delivery.