Bigger Isn’t Always Better

Headline: Some Bartell customers say goodbye after changes by Rite Aid (Seattle Times, August 11, 2021).

Background: Rite Aid bought 131-year-old Seattle institution Bartell Drugs earlier this year and according to this article it’s been a disaster. Why? Here are the top reasons mentioned (and following those reasons are some comments from my friend Brian Quint who a few years ago sold his third-generation business, Aqua Quip, to Leslie’s, the nations largest pool supply company). Remember, these are things mentioned in the article and are not confirmed.

Culture – the article mentioned the culture around customer service and employees has changed from “we’re local and friendly” to “we’re corporate.” Employee turnover, long hold times on the phone, prescription delays, and more.

Poor transition planning – apparently a rushed effort to assimilate Bartell’s into Rite Aid, including a new back-office system. 

Labor shortages – as mentioned, high turnover. To be fair, on September 21, 2021 the Wall Street Journal had a business section frontpage article about how CVS is short 25,000 employees and Walgreens is in the same predicament.

Service – a perfect example is reportedly a Renton store had a backlog of over 700 prescriptions. Enough said.

Customer reaction – One customer said, in an article ending quote, “I want to stick with them. The whole reason I was going there is because they weren’t Rite Aid.”

When I talked to Brian, I made sure we didn’t discuss the allegations in the Times article as we have no proof they’re accurate (but probably are). Here are some transition tips from Brian when selling to a larger (much larger) firm.

Shelf life – (spoken like a true retailer) make as few changes as possible with your team. Because like it or not, change is taken as a negative, especially with a family business. He worked on consistency and stability. One year before changing the 401k plan and three years for the payroll service.

No rapid changes – they didn’t change products (supported by the buyer), the stores look the same, same POS system, same ordering, and all the same to the customers (I know, I’m one).

Communication – any absence of information means assumptions, negative assumptions. Be specific as well as communicate consistently, with clarity, and offer collaboration. The temperature of the culture went down from 10 to 9+ the first year to 7 after almost 3 years. One reason was limited corporate communication to the employees.

HR – the scourge of many businesses, especially larger firms. After almost three years HR is taking over. This means short staffing, HR review of all pay raises and hiring, and therefore everything is strictly formulated (see above on culture and communication).

Sometimes a large-firm or private equity buyer is the only or best option for an owner option. I don’t recall too many business sellers who say they wanted their employees to not keep their jobs. But that’s up to the buyer. Individual and small-business-owner buyers know they are buying the people more than anything. Large organizations just can’t help themselves and often blow it with the employees.

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