Where Did They Go Wrong? A Shopko Story

So my wife works at the distribution center for a nationwide chain called Shopko. They have recently filed for bankruptcy of over 100 of their stores. While I’m not claiming to know the fix, the cause, or anything else; I will give my 2 cents on this closing.

So Shopko has a pretty long history, started in the 60’s and public in 1991. They should have savings, and able to adjust when market trends change. With a nationwide presence I believe they could have tackled online shopping in a similar way to Walmart.

In the same vein as online shopping, online advertisement. We get paper ads in our mailbox constantly, WHY!? The junk mail wastes space, cost Shopko more than digital and are rarely even opened. Shopko could advertise video games to gamers, super easy. They could advertise pharmacy services to anyone over 40, incredibly easy. They could start creating ad campaigns that WORK. It’s also easy to track.

Ok we spent $20,000 advertising 65″ TVs to men ages 25 – 55 all of January. Targeting football fans, of course. We sold 1300 TVs for an average price of $700 they cost $380 each.

Analysis.
Cost:
380 * 1300 = 494,000 inventory
20,000 advertising
Total costs: $514,000

Gross Income:
1300 * 700 = 910,000

Net Income:
910,000 – 514,000 = 396,000

Sure this example is simplified but it’s tried and true. Don’t believe me? Amazon. The big ‘A’ word of online retail uses constant advertising. The more a company uses it the better the profiles they build on each customer and how to advertise to them.

Turnover Hurts

Also cleaner store. I think this was a point of not hiring enough people as it seemed the stores were always lacking, and always hiring which means turnover. Turnover is expensive if every week you spend time training a new person that is a week of wages, lost. If you have 200 stores and hire a new person every two weeks in all of those stores and it takes 1 week to train. Let’s math!

Number of stores * every other week * 40 hours * 8 dollars an hour.
200*(52/2)*40*8 = 1,664,000 That’s a quick 1.66 million gone. I bet with some better benefits and wages this number will come down.

let’s run the numbers and see what it looks like when they have only one new hire a month.

200*12*40*8 = 768,000 save about half if you can keep people without raising wages. This is through benefits and culture.
200*12*40*9 = 864,000 save a straight 800K at 9 bucks an hour. That’s a significant amount IF people stay.
200*12*40*10 = 960,000 save just over 700K with a $10 hourly wage I suspect this is a sweet spot.
200*12*40*15 = 1,440,000 even paying employees $15 an hour could save Shopko 224k a year!

All these numbers are speculation and of course different laws, taxes, and regulations will changes the outcome of these. Although I’m a firm believer that getting people in and retaining them would have been a much better plan for Shopko.

This is just comparing the turnover rate and not actual hours worked but hours lost, I don’t know large retail corporation labor structure but I think it would have benefited actually beating minimum wages.

My Final Two Cents

This is just my thoughts from the outside looking in. I don’t know their real numbers but I used numbers as closely as I could find. Hopefully Shopko can pull through before March, I know we are bummed the store is leaving our neighborhood.

Thanks for tuning in!

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