New Jersey Sues Rite Aid
Most large retailers have to deal with disgruntled customers and the occasional bad press but Rite Aid is facing a much more serious situation in New Jersey.
The state’s Attorney General and Division of Consumer Affairs has filed a suit against the chain alleging 42 of its 159 New Jersey stores sold expired products, including non-prescription drugs, infant formula and baby food. It is also charged with selling product at higher prices than marked on store shelves.
Attorney General Stuart Rabner said in a released statement, “It is unconscionable that a store would sell expired merchandise – especially infant formula, baby food and nonprescription medications – to unsuspecting consumers who rely on these products for the care and welfare of their loved ones. The behavior of these stores is even more egregious because they had previously agreed not to engage in any such violations and cease and desist from selling expired products.”
A spokesperson for Rite Aid, Jody Cook, said the company has ordered stores to remove any outdated merchandise immediately.
“We have always had policies in place to not have outdated products on our shelves,” said Ms. Cook. “We’re retraining all our stores on all our policies on these matters.”
Discussion Question: How does Rite Aid proceed considering the amount of press attention it has received over this story in the New Jersey, Philadelphia
and New York areas?
Just to clarify, the FDA does not require expiration dates. It is a voluntary practice. The catch is, if manufacturers provide an expiration date, it must be supported with scientific evidence. Commonly, products such as non-prescription drugs retain their potency for months and even years past their expiration dates. While this doesn’t let Rite Aid off the hook for pure stupidity and perhaps intentional fraud, it doesn’t necessarily point toward indifference to their customers’ well-being.
Going forward, Rite Aid needs to take the high road and introduce customer programs for “Guaranteed Freshness” and “Price Patrol.” The freshness message can be communicated in a number of ways, including signs showing shoppers how and where to find expiration dates on their purchases. Price Patrol, an old idea, employs customer help to make sure shelf prices agree with scanner prices by offering rewards for finding discrepancies. Some chains have even recruited a group of housewives, named them the Price Patrol, and put them in ads. There’s nothing new under the sun.
How Rite Aid should proceed is the question and there are two parts to the answer. Internally, clearly, this shows weak execution of company processes. In retail, execution is critical AND the lack of execution can undermine the value of the brand. The best retailers focus more time on execution of plans and processes than in the development of those plans. Management, from the CEO to the Store Managers need to look at themselves and what they are focused on versus what the customer expects from the brand. Again, poor execution has negative effects on the brand integrity and, culturally, Rite Aid needs to drive that message throughout the organization.
This leads to the second part of the answer. Because this has gotten such a large amount of press, Rite Aid may suffer customer backlash and purchase reticence. Customers do not easily forget issues regarding unsafe products, or out of date product. Their initial reaction is to feel suspect that the company is putting profit ahead of their well being. Out of date aspirin is one thing, but out of date baby formula appeals to mom’s sense of child safety.
Rite Aid is going to need to send continued positive messages to the consumer in multiple media channels. In order to make it visible and viable to the consumer, they are going to need to back it up at the store level. I would not be surprised to see a new campaign with some type of guarantee of in-date merchandise at the stores. They would need to execute the campaign appropriately at the store level and make sure the customers know about it.
Of course, if they take the Ostrich principle approach and hide their heads in the sand hoping the problem will blow over, there will be customer attrition to the competition. You can be sure that Walgreens is coming up with some sort of guarantee to capitalize on Rite Aid’s misfortune and build brand equity with the consumer.
It is sad to hear that any retailer could be this careless, and even worse if it is found that some level of planning was behind this negligence, as was suggested in earlier comments. Let’s hope not. Incidents such as these cause great dissatisfaction and distrust of retail, something the entire industry can do without.
Managing the quality and safety of supply chain inventory has always been an important function for distributors and their suppliers. Consumers expect the efforts to be made and have generally walked away from under-performing outlets.
Several things make this function even more critical today. Food safety is top of mind due to recent E. coli problems and abundant media extrapolations about the possibility of terrorists in the food chain. More and more products are being marketed with open-code dates versus the closed-coded technique. Fewer arms and legs are available to perform the in store work.
One thing seems clear – consumers have made a connection between food safety and the expiration code. As manufacturers grapple with how to manage this perception closer to reality, they should be sensitive to one of the basics of marketing 101 – perception becomes reality when it affects behavior.
So, the new reality is sitting on the store shelves, waiting for someone to find it. Retailers will take the flack when consumers find neglected inventory because the popular perception is that retailers are supposed to manage this part of the supply chain. We in the business know how close this is to reality, but it really doesn’t matter to consumers or their public advocates. Especially during election years.
Smart retailers have realized that they need to develop new in-store procedures or refresh dusty SOPs. Its not like they can’t reclaim the investment. $2.05 billion was spent on unsaleable food and HBC products last year. But someone has to pull it off the shelf first.
80% or better of these problems occur due to poorly trained or supervised staff. Every first year manufacturer’s rep is taught to check stock rotation when making retail calls. I cannot tell you how many thousands of dollars are wasted every year when stock is not rotated properly and has to be sent to Mexico or Puerto Rico for sale. Rite Aid apparently is like most retailers in that they are just interested in stocking shelves and new product is always placed in front of older product. A little training and a huge law suit will fix this problem.
Nearly all large retailers must deal with these issues from time to time. Consumers realize that sometimes things fall through the cracks. What most likely happened was that Rite Aid did not grease the correct palms of government officials and their competitors did. Locally I’ve seen fired supermarket middle managers end up working for government regulatory agencies and using their new position to get back at their old company. They use their inside experience and know what, when, and where to find mistakes. Maybe that’s a good thing. That doesn’t excuse Rite Aid from selling expired merchandise. However I think it happens at just about all large retailers to some extent, but not intentionally. It’s Rite Aid this week and next week it will be some other company getting the bad press.
Many retailing problems have procedural solutions. What procedures does Rite-Aid use to self-inspect its inventory? Is there any time set aside for this on a regular basis?