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From The MNB Archives
Thursday, May 03, 2012
Notes and comment from the Content Guy...
DALLAS -- Here are six things that I learned at the session I did yesterday at FMI, entitled “From Amazon to Zipcar: Innovations from the E-Revolution,” featuring Tom Furphy, formerly of Amazon.com (where he developed the CPG business and Amazon Fresh) and currently CEO of Consumer Equity Partners.
• One of the things that Amazon is able to do, and that other retailers must do in order to be competitive, is take advantage of what is called “Big Data.” This means that instead of just tracking transactions, marketers can now - using internet technology - track all of the drivers that lead up to a transaction. Just tracking sales is not enough.
Thing of this another way. It used to be said that only 50 percent of marketing is effective, but the problem is that nobody knows which 50 percent. These days, you can actually figure it out.
• There is no inherent reason why retailers cannot develop subscription/automatic replenishment services along the lines of Amazon’s Subscribe and Save. One does not have to have the tens of thousands of items in the system that Amazon does, but one can look at transaction data and figure out what best customers are buying and then offer a way to provide on a scheduled basis the products they buy regularly. (Think 40 pound bags of dog food, laundry detergent, paper towels, toilet paper, etc...) It is a way of locking them into your store, rewarding their loyalty, and showing loyalty to them.
• People should stop worrying about “showrooming.” (Easier said than done. See our story below about how Target has decided to stop selling the Kindle because of people coming in, looking at the Kindle and then ordering it from Amazon.) But if people who come into a store are more interested in looking at their mobile devices to check for competitive prices online than they are in looking around the store, then it means the retailer has not done a very good job of creating a compelling shopping environment. “Showrooming” is a fact of life ... you have to deal with it.
• While Walmart’s new “Pay By Cash” initiative - allowing people to order products online, go to the physical store to pay with cash, and then have the items shipped to their homes - got a lot of attention recently because it seemed aimed at people without banking relationships (and credit/debit cards), the reality is that Amazon has been offering this service in Japan for seven years, with people able to pay by cash at convenience stores nationwide. So, if Amazon wanted to do it here, all it would need is a partner...and it already has a relationship with 7-Eleven, testing pickup lockers.
• If the trends launched by Amazon continue, and more center store sales migrate to the internet, then this means that the so-called “big stock up trip” could be a thing of the past. Which means that retailers that count on these trips for much of their volume are going to have to find another way to generate sales and profits.
Retailers who think that the collection of state sales taxes will bring Amazon down to earth are mistaken. The fact is, in states where Amazon already is collecting sales taxes, there seems to be little evidence that it has a negative impact on sales.
This just scratches the surface of the conversation that Tom Furphy and I had yesterday. (It is hard to take notes and simultaneously hold a discussion and field audience questions via email.) So here’s the good news...
You can hear the entire session by ordering the audio from FMI. Or, as soon as we can pull it together, we’ll be offering a kind of “best of” series of video clips from the session here on MNB, sponsored by MyWebGrocer. So stay tuned...
by Kevin Coupe
We talk a lot here on MNB about transparency. But sometimes, enough is enough.
Did you see the story about how the National Zoo recently endeavored to impregnate its 13-year-old panda,Butterstick, via artificial insemination? Not only did they perform the procedure, but they live Tweeted about it, step by step ... as the story says, “the National Zoo very literally threw open a process that was until now only known through after-the-fact accounting by the media.” They even revealed that in preforming the insemination, they used so-called “vintage sperm” that dates back to 2005. (Thank goodness they did not go into detail about how they obtained said sperm.)
All I could think was, poor Butterstick. Not only is it denied any sense of romance - it was tough to find a male panda, not to mention arrange a romantic weekend away somewhere in the mountains of Virginia or the beaches of Delaware - but the whole process gets laid out there for all the world to see and experience. Live.
Maybe romance really is dead…
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Internet Retailer reports that a new study by Deloitte Consulting suggests that while most e-tailers in North America have done a good job developing search functions for their sites, they “still have work to do when it comes to more advanced or emerging functions, such as mobile commerce.
According to the story, “Deloitte concluded that e-retailers have reached maturity in their delivery of search and select features, and in site performance, where 80% of the evaluated retailers had quick page load times and overall good performance ... Top e-retailers, however, still have room to improve the mobile shopping and personalized experiences they provide consumers. Deloitte says e-retailers’ capabilities in mobile commerce showed gains from the analysis the firm performed a year ago, but not all e-retailers are developing their mobile capabilities at the same rate.”
Ipsos is out with a new study about private brand penetration in the US, reaching three basic conclusions:
“Each year since 2009, the majority of global consumers have perceived store brands to be the same as or better than national brands on all attributes.”
“From 2009 to 2010, store brands slipped in all areas – with no indications of improvement in 2011 for value, convenience, meeting needs, being good for the family, and being requested by the family.”
“From 2010 to 2011, store brands gained ground in consumers’ minds in the areas where national brands tended to be strongest: quality, innovativeness, uniqueness and packaging.”
While the conclusions are a mixed bag - with store brands doing well on some fronts and slipping in others, Gill Aitchison, President, Ipsos Marketing, Global Shopper & Retail Research, says that it remains clear that “national brands must now battle store brands on all fronts – it’s not just a value game anymore. National brands must vehemently protect their image for providing higher-quality and more innovative products than store brands. With retailers focusing more on the product development and marketing of store brands, national brands are going to need to work even harder to differentiate their brands with breakthrough innovations, more standout packaging and true product superiority. Bringing in the voice of the consumer, digging for deeper consumer insights, and leveraging leading-edge marketing techniques will be instrumental to winning over the shopper at the critical moment of point of purchase in order to win the ongoing battle against store brands.”
They’re not going away. They’re only going to get better. And if retailers are smart, they are going to continue to invest in creating private brands that will reflect positively on their companies and build connections with their shoppers.
BizTimes.com reports that Meijer Inc. plans to build one of its supercenters in Franklin, Wisconsin, and also is “considering plans to build stores in Oak Creek, Grafton, Pewaukee and New Berlin” as part of a move into the Milwaukee market.
According to the story, Meijer may find Milwaukee enticing because Roundy’s has moved away from a discount image, and it sees a competitive opening.
• Interesting take by CBS This Morning on the Walmart Mexico bribery scandal, with Jack Welch, the former CEO of General Electric, and Suzie Welch addressing the ways in which Walmart seems to have covered up the bribery scandal when it came to light a number of years ago.
"Companies, because of experience with whistle blowers, have a strong inclination to shut every whistleblower down because they've heard it before, they think the person is damaged goods and that is what appears to have happened at Walmart," Suzy Welch said. "We think the Walmart story is just a wake-up call to any company that has a whistleblower come forward. Of course, you've got the gut instinct to write the whistleblower off, to shut them down, to ignore them, but don't do it."
Jack Welch added, "Don't investigate (the claims) with the same people. You've got to have a compliant system that absolutely looks at every one of these claims with vigor. I mean, look at the Secret Service issue; they're investigating themselves again. It's a crazy system where people are investigating themselves."
The comments come in reaction to the New York Times piece of more than a week ago that provided an inside look at Walmart’s Mexico division, suggesting that its fast growth over the past decade was fueled by bribes, and that top management was more concerned with details not being revealed and investigations not being allowed to move forward than it was with stopping the systematic corruption and adhering to US law that forbids American companies from bribing foreign officials. Both Duke and Scott, among other senior executives, were implicated in the story and identified as both knowing about and covering up the bribery.
• USA Today reports that as federal prosecutors look into Walmart’s practices and examine its books, it seems most likely that Walmart will forge a settlement with the government rather than risk a trial:
“Records of Foreign Corrupt Practices Act cases show publicly traded companies are leery about going to trial against the government ... From 1991 to 2010, each of the dozens of publicly traded companies criminally accused under the law has reached a settlement that enabled it to pay a fine and avoid trial, said Richard Cassin, an attorney who's the creator and principal author of the FCPA blog ... By settling, companies sidestep negative publicity and avoid the long odds of prevailing at trial because of a legal doctrine that makes them responsible for the actions of their employees. Moreover, Cassin said deferred prosecution or non-prosecution agreements with the government often enable companies to have the case record closed, provided they cooperate with federal prosecutors.”
I talked to a lot of people about this story while at FMI this week, and the general feeling seems to be that this is likely to have an enormous impact on Walmart’s management structure (and maybe even that of other companies now headed by executives implicated in the scandal). Jail terms are not seen as out of the question.
Here’s the thing. The bribery may not be the biggest problem. It may be how the books were cooked so the bribery was not identified.
Remember, they got Al Capone for tax evasion.
Crain’s Chicago Business reports that at the Sears annual meeting this week, chairman Edward Lampert and CEO Louis D’Ambrosio made the case for why the company will be able to avoid the fate of Borders and other failed retailers, “counting on technological innovation, operational belt-tightening and an improvement in basic retail execution to return the struggling retailer to consistent profitability.”
The executives said that a key to their strategy is the integration of the company’s physical, mobile and online operations, and “will connect its customer experience in stores, online, in customers' homes via its service and delivery segment and on the phone via its call center.”
“We believe customers operate in many different worlds simultaneously,” said D'Ambrosio.
Sears also has a rewards program that “allows members to earn and spend points across Sears, Kmart and Lands’ End merchandise, return items without receipts and create ‘shopping lists’ much like Amazon wish lists.” The program also “allows the company to mine valuable customer data and dig deeper into their shopping habits,” the story says.
"We're moving from an era of guessing to one of knowing," said Lampert.
I think the scariest thing about the article is the passage that reads...
"This myth was perpetuated that we don't invest" in stores, Mr. Lampert said. "What's fair is that we haven't spent a lot of money on stores," but he said that's because of a lack of good ideas about how to spend the money there.
It isn’t like Lampert is a new owner; he bought the damned company years ago, and ought to have some idea - or people with some idea - about what to do with the stores.
It is hard for me to imagine that these guys have the kind of imagination and vision to make Sears a viable and relevant retailer again. Maybe I’m wrong - it isn’t like there ever is a reason for me to shop at Sears. But the company just seems to lack any sense of vision.
The Wall Street Journal reports that Amazon.com has gotten the Hollywood bug, and is “soliciting scripts to produce its own comedy and children's TV series.
“The online-retailing giant on Wednesday said anyone could send the company a proposal and pilot script for a series. If selected, Amazon would produce the show itself and then distribute it through its online-video service ... Under Amazon's plan, a person or people who submitted a winning idea for a comedy or children's series would receive $55,000 as well as royalties, holding down potential costs compared with Hollywood-style production budgets.”
This interesting because it reflects a broader trend, with companies that used to be purely in the business of delivering other people’s content - such as Netflix, Google and Hulu - developing their own original programming as a way of creating for themselves differential advantages that will serve them in the long run. It also is similar to what Amazon has done in the publishing business, not just selling other publishers’ books but also getting into the publishing business itself. It is a great lesson for any marketer ...
Wonder if they’d be interested in my black comedy about the heartbreak of slotting allowances and failure fees in the supermarket industry?
...with brief, occasional, italicized and sometimes gratuitous commentary...
• The Washington Post reports that “more than a year after President Obama signed a landmark food-safety bill, the key provisions are hung up at a unit of the White House that is in charge of reviewing proposed policy changes.
“The delay at the Office of Management and Budget baffles consumer advocates and industry groups, which joined forces to lobby for passage of the legislation and press for its funding. The united front by this unusual alliance — and the president’s enthusiastic endorsement of the legislation in the past — makes the hold-up especially puzzling.” However, the story says, “OMB officials say the duration of this review is not unusual given the complexity of the regulations.”
• The Post story notes that the law “empowers the Food and Drug Administration to prevent food-borne illnesses instead of simply reacting to them. Its provisions require produce farmers, food-processing facilities and animal-food plants to adopt strategies that would help them spot and combat food-safety hazards. It also mandates that food imported into this country meet the same safety standards as food produced domestically.”
• Greenpeace has released its 2012 Carting Away the Oceans (CATO) report, which evaluates and ranks supermarkets on their sustainable seafood policies. This year’s report reveals the dramatic leaps in rank made by industry leaders, as well as the continued unsustainability of what it calls “the bottom-feeders.”
Greenpeace says that its “CATO report has evaluated supermarket sustainability since 2008, and up until this year no retailer had earned a green rating. This year, for the first time, the CATO report features two retailers--Safeway and Whole Foods--that have earned green ratings, vaulting them to the top of the list ... Of the twenty featured supermarkets, Harris Teeter, Aldi, and Delhaize also showed significant movement toward sustainability. Publix and Winn-Dixie (now owned by BI-LO) continue to rank at the bottom, as they have in each year the CATO report has been released.”
• In the UK, the Guardian reports that “Waitrose has launched a ‘never knowingly undersold’-style pledge to match the price of branded groceries on the shelves of the market leader Tesco as it looks to win over budget-conscious shoppers.”
According to the story, “The squeeze on living standards in the financial crisis has made shoppers increasingly promiscuous, as they hunt down the lowest prices and money-off vouchers. Higher food and fuel prices also mean industry sales volumes are falling, forcing the big supermarket chains to fight tooth and nail to hang on to their customers.”
I love the Brits. In the US, we’d just say “always low prices.” But there, they say “never knowingly undersold.” Classic Britspeak...
• The New York Times reports that Target has decided to stop selling the Amazon Kindle, saying that it appeared that consumers largely were coming to its stores, examining the Kindle, and then ordering it online from Amazon.
According to the story, “Target dropping the Kindle, of course, won’t stop Amazon shoppers from checking out other products at Target, but analysts said it would send a message to Amazon about Target’s alliances. Target, for example, will continue to carry Apple’s iPad, Ms. Snyder said, and it is testing expanded displays of Apple products. Target will also sell other e-readers and accessories, from Barnes & Noble’s Nook to rather obscure ones like the Aluratek Libre.”
...will return next week.
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"He’s refreshingly real and authentic…it’s more of a conversation than a presentation ... He uses everyday customer experiences to think about food retailing and the possibilities ... Many times he was reaffirming where we were headed, occasionally he pointed out something we hadn’t thought about and in at least one moment, we knew we had a lot of work to do ... " - Beth Newlands Campbell, President, Food Lion
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