A popular and polarizing topic that you likely have heard about if you pay attention to politics is the debate on raising the national minimum wage to one that could be considered a living wage. We have already seen some of our nation's biggest cities implement their own laws to raise their minimum wage to numbers as high as $15/hour. Watching these cities, like Chicago and Seattle, has given the rest of us the opportunity to sit back and watch what happens.
A recent article by the Washington Post gave us some insight into what Seattle has found so far. There were 2 observations made in the article:
There is some buzz around this article, because it seems to support the conservative position that said that this type of thing would happen as the decision to implement the higher wage was being considered. However, as there are many supporters of this argument, there are an equal amount of people who disagree. The argument against the findings in this study that was published in the Washington Post are that:
Did our teenagers suddenly grow up and acquire responsibilities that suggest that they live on their own?
Let me start by saying that I started working when I was 15 years old. I must also say that I personally have never had a minimum wage job. My part time work as a younger person consisted of working at a flea market, working in a grocery store, and working at a nursing home. I will use the grocery store job as an example. Many of us have worked in the grocery type of environment, and we all know that there are many positions in a store that start at minimum wage. I chose to pursue working in a department that paid a higher rate. The meat and seafood departments are where I landed. These particular departments paid a higher rate due to the nature of the work that they required. From day one I was disassembling and cleaning equipment like slicers, meat grinders, band saws, and dozens of sharp knives. I would steam shrimp and crabs for customers, and I would operate meat wrappers with moving parts and hot plates.
Each of the responsibilities in the meat and seafood departments required a level of carefulness that may go beyond the task of bagging groceries or pushing carts. As a result the pay was higher. This point brings me to another question.
Would there be any incentive for me to work in a position with more responsibility if I could make the same pay as a bagger?
That is how the minimum wage topic relates within one store, but changing minimum wage laws would have a broader impact on the overall job market. Jobs with more responsibility become less appealing when the pay gap becomes smaller, unless of course the job with more responsibility also receives an increase in pay.
So do we all get raises when the minimum wage goes up?
The short answer is, "No." We are not getting raises (at least in proportion to the percentage that the proposed minimum wage increase would be). Businesses operate on budgets, and wages are a big piece of any budget. Businesses are working to become more efficient, and in many part time scenarios labor hours are a big focus for saving money. Raising wages to such higher levels has the potential bust any budget.
So where does it stop?
The minimum wage was implemented in 1938, and the wage was $0.25/hour, equal to about $3.80/hour in today's value of money. A $15/hour minimum wage would mean that slowly over time the program has more than quadrupled in size. How much more of a burden can business bare? A better question may be, how can we force a business to not have a choice?
If you work in the food industry then the chances are high that you have heard the buzz around the acquisition of Whole Foods by the larger than life online retailer, Amazon. Yes, it was announced on Friday 6/16/17 that Amazon purchased Whole Foods for $13.7 billion. This is what seems to be the biggest move yet towards Amazon becoming a major player in the Grocery business, and many retailers are wondering what this means for the industry and for themselves. There is much speculation, but this is what we know so far:
Let me start with a brief story from my own experience. Many of you may have had a similar experience while in business school, so you may be able to relate. It all started in the capstone course of my business education. The class was called, "Business Management Simulation." Little did I know, this course would go on to teach me a valuable lesson. As college students, we were assigned teams, and each team was put in charge of their own car companies. We were given the task of running our companies to compete with the other teams that were in the vehicle industry.
My team's company was particularly small. Our revenue was tiny in comparison to the other companies. From the beginning I analyzed our company and our products and looked for opportunities. It was clear to me that the Family Car market was the biggest space in the industry, and we only had about 3% of the market share. I knew that if we were going to compete and be number one we had to grow that segment of our business. We had a family car in our product line, but it was a higher end model that appealed to the more affluent families which were small in number. To sell more family cars I looked to the number 1 team whose market share was more than 10 times what ours was. To compete I knew that we had to mimic the most successful team's top seller. As a group we made four fairly aggressive decisions right out of the gate:
We continued to market and continued to expand our capacity to keep up with demand. As the semester went on we needed to tweak details of each of our products to stay competitive. We continued to invest in new technologies and Research and Development to bring our costs down and increase margins. The end result of the experiment was that our team had far outperformed all of the other teams in revenue and net income. Our stock price had broken the $100 price point that no other team had reached, and we felt like geniuses.
So how does this relate to Amazon and trying to compete? This story illustrates 2 major points. To compete and be successful, fast and massive action is needed. Our simple plan was to take what was successful in our industry and apply it to our business, and we did not hesitate. We are seeing a combining of two spaces, the online world and the physical marketplace. Many grocery retailers have the physical space covered, but where they lack is in their online presence. Each of the big players have dabbled with their own apps and websites , but they are far from the level of performance for which the "new" online customer is looking. Amazon has positioned itself to be dangerously close to becoming the solution for which these online customers have been looking.
Here is how I see the next steps should be to compete in this online world. Your app / website needs to have an online shopping feature. Arguably, most grocery retailers do not have this feature, and it is a major step to implement (remember, massive action). Since there are so many products in the store, there needs to be a user friendly experience that allows the consumer to filter the items by department, brand , sale items, etc.; and there needs to be a search function to help the customer find what they want. Your technology should remember what your customer buys, so when they log in next time they will be able to choose their items more quickly. With this online shopping feature, a quick and accurate inventory tracking feature is crucial. If a customer comes to pick up their order only to find out that one or more of their items are out of stock, the customer will be very disappointed. Inventory tracking will help the customer pick something else while online when an item is out of stock, therefore not surprising the customer when they get to the store.
Another element that Amazon brought to the table is speed. So this package of online convenience and speedy delivery/pick up is all tied together with an annual membership package. What is stopping you from having your own membership fee to offer the same services. We have seen the consumer respond positively to this model, and it is time for us to rise to this level. Think about it, customers signing up to be a member of your online grocery store. This not only creates loyalty to your company, but it also creates a revenue stream to help pay for these services that you are implementing. To execute this properly, there needs to be dedicated personnel at store level to operate this program. Whether it is in store pick up or neighborhood delivery (I think you should pursue both) there needs to be a team putting the order together in real time. Too often there is just one person assigned to online orders, and that person must make this responsibility fit into their normal daily work. This results in late or missed orders and very unhappy customers. The online trend is a big one and should be treated as such. Retailers should be working towards 1-2 hour pick up windows and same day or one day delivery windows.
By taking the massive action that is needed to do this right, retailers can be like my team in college, sitting back and watching their competitors complain as you take market share from them. Today's customer, and the up and coming generations, have seen the convenience that online shopping can offer; and those who can help bring this phenomenon to the grocery world are poised to gain those customers in droves. One thing that we discovered at the end of the Business Management Simulation class was that our quick and decisive action made it so those who tried to follow had an expensive path ahead of them. Our team was the only team to introduce the energy efficient vehicle; because we got into it early and continued to develop our product to the point where when people noticed our success and tried to jump in, we were too far along to try and catch up. Aim to go big!