Market Basket wasn't alone when it comes to bad management

What are the other supermarket chains really doing with their newfound customers?


Published:

The Market Basket saga is finally over, but there’s still a lot we can learn from it.  The mistakes aren’t limited to Market Basket.  Many of their competitors experienced a customer windfall and took advantage of it.

If you’re ever lucky enough to be flooded with your competitors’ customers, you want to do everything you can to make sure they have a pleasant experience. When your competitor recovers, you want to keep some of their customers.

That’s Business 101, but it’s not what’s happening. Many of these competitors are raising their prices. No doubt they’ll see a dramatic increase in revenue for a while, but what will they do for an encore?

Raising prices doesn’t just take advantage of the Market Basket people; it takes advantage of the competitor’s regular customers as well. With Market Basket essentially shut down, these regular customers experience more crowded stores and much longer checkout lines. Some of these shelves weren’t much better stocked than Market Basket’s.

Local news media throughout the region carried almost daily stories on the crisis, effectively providing what is an awful lot of free advertising for Market Basket and its business model. You’d have to be living in a cave not to have heard it’s a more desirable place to shop.

Additionally, Market Basket uses many local suppliers, most of which are now struggling to sell their produce to other customers before it spoils. Yet many of these chains have their purchasing functions elsewhere and aren’t taking advantage of this sudden availability of produce and other merchandise to fill the sudden uptake in demand. If they did, they might actually be able to be competitive with Market Basket.

What do you think is going to happen to those competitors if Market Basket recovers? They certainly won’t retain the Market Basket customers, and they’ll lose an awful lot of their own. Unfortunately, many competitors will never understand or admit to themselves the cause was their taking advantage of the situation. They will pay dearly for their short-term windfalls.

What’s really discouraging is that each of these chains was originally founded and built by people who understood how to satisfy customers and build a business. Now they seem to be run by people who just don’t have a clue. They seem to have the malaise that afflicted Market Basket the last few months.

Uglier every day

Even so, now that a deal has been reached, Market Basket may have a lot of debt with which to contend. If so, it will squeeze profit margins, perhaps making their famously low prices a thing of the past. Employee bonuses may be dramatically affected as well.  These months of not making money have to be accommodated in some way.  It’s not a pretty picture and it got uglier every day.

An employee stock ownership plan could be a solution, but it would require Market Basket to relinquish the benefits of private ownership. Even so, the employees have demonstrated their loyalty far beyond what anyone would have thought possible. Giving them an ownership stake could raise much-needed cash while also being considered an employee benefit. It could ease the pain of the lower bonuses they might have to accept for a while and be the most expeditious way to retire that debt.

I feel sorry for the co-CEOs. Why were there two when everyone else has one? How will they ever get new jobs? Presiding over the demise of a 71-store chain is not the sort of thing anyone wants to put on their resumes.

Felicia Thornton and James Gooch may have had no idea what they were walking into, but that would get little consideration from potential employers. They may not even have had any latitude running the company, getting all their direction from the board.

It’s hard to imagine how there could be any winners (besides the lawyers) in this game.

Your company may not be family-owned or feuding, but how many of the behaviors described above sound familiar? Customers, employees and suppliers do not seem to matter to the folks calling the shots at Market Basket right now. Blatantly ignoring these caused a gigantic drop in their revenues, often estimated at 95 percent.

It’s hard keeping all stakeholders in mind when making decisions, but we ignore them at our peril.

Ronald J. Bourque, a consultant and speaker from Windham, has had engagements throughout the United States, Europe and Asia. He can be reached at 603-898-1871 or RonBourque3@gmail.com.


 

NHBR Poll