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Tuesday, July 29, 2014

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Sansolo Speaks: Lessons from the New World

by Michael Sansolo

It’s a number that never found its way into a single page of an eight-part report stretching hundreds of pages. Yet in many ways it may offer up the most insight on the world of change…

As regular readers of MNB know, I am research director of the Coca-Cola Retailing Research Council of North America, which just concluded a four-year study of social media. In the course of the eight-part report we examined countless angles on the world of social media from the very basics of what it is through the approaches businesses need take.

I’d like to think a lot of what the report contains (and you can download it for free here) is pretty significant. However, council member Jerry Golub of Price Chopper Supermarkets in upstate New York recently added one amazing finding.

Golub determined that only one member of the council was younger than any member of the consultant team we hired to do the study. In fact, that one council member was younger than exactly one person we worked with at the Integer Group.

And that matters. As Golub said, social media is a topic that required the wisdom of the younger generation. Keep in mind that social media, as we know it, is only 10 years old.

That means for most leading executives the incredible force that is Facebook or Twitter has only recently been part of their world. For many it is only something that came to the fore in the past four or five years and certainly isn’t part of the skill set any CEO developed in his or her rise to the top.

For younger staffers though, it’s been part of their world through college and into their first jobs. They are growing with it. There were countless times during our Council meetings when the personal experiences of our consultant team - whether their number of “friends” or activity on various sites - would take our breath away.

Golub’s point was dead on: in a new world, age and experience matter, but don’t outweigh everything.

Another telling example of this was offered up on "The Daily Show with Jon Stewart" a few weeks back, when correspondent Jessica Williams did a typically sardonic expose on the challenges African-American women have with their hair. The report was tied to a recent change in military standards that a number of black female service members say would make their life and hair impossible.

Now be honest: do you really understand this issue? Unless you happen to be a black woman, the answer is probably no. I know I never had a clue about this until a few years ago when an African-American co-worker detailed for me the painful process of getting braids sewn into her hair. My hair may have all kinds of on-going problems, but nothing compared to what she told me.

We live in such a complex world we simply can’t know everything, which annoys us. There was a time a top executive could have an amazing range of knowledge of the challenges facing all levels of the company. Not any longer.

Today there are constant technological advances that none of us can possibly track. And the increasing diversity of our society and our workplace means there is a growing list of issues that we simply cannot personally understand.

Our circle of advisors has to get broader, or our knowledge base will almost certainly get smaller.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Tuesday Morning Eye-Opener: Smartphones, Smarter Customers

A new report from Strategy Analytics says that there will be 2.5 billion smartphone users on the planet by the end of next year, or just shy of 35 percent of the world's population.

It was just in 2012 that the number passed one billion.

The reason for the fast growth? According to the analysis, it is because technology companies are producing more low-end smartphones that are accessible to lower income users.

But what this also means is that more people than ever - and the number clearly is growing - have access to mobile computing power that allows them to do far more than just make phone calls and send text messages. They will be able to research products and services, make price comparisons, and will, inevitably, continue to shift the balance of power away from retailers and manufacturers.

Their eyes will be more open than ever. Business needs to keep up.

Editorial continues after a word from our sponsor...

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Now back to regularly scheduled editorial...

Dollar Tree To Buy Family Dollar For $8.5 Billion

Dollar Tree yesterday announced that it will acquire Family Dollar for $8.9 billion, a move that, when it is completed, will create the biggest dollar store chain in the country, with some 13,000 locations in the US and Canada and $18 billion in annual revenue. The acquisition, the New York Times writes, will leave Dollar Tree "better equipped to take on the market leader, Dollar General - and perhaps more important, Walmart Stores."

The Times notes that "getting bigger may also help the pair pull together their buying power, negotiating bigger discounts from suppliers while finding ways to cut costs. The two companies expect to save $300 million in annual costs by the third year after closing. That could prove especially important if Walmart continues to introduce more small-format stores to complement its traditional supercenter locations."

However, the Times also reports that there is some speculation that the deal could instigate a bidding war, with at least a possibility that Dollar General or another company could make a higher bid for Family Dollar.

The Wall Street Journal reports that "dollar stores have been expanding rapidly even as other segments of the industry scale back. The three top dollar-store chains have together added nearly 10,000 stores over the past decade. They now operate a combined 24,000 locations and have projected adding at least another 1,000 stores this year.

"Dollar stores have posed a competitive threat to other discount retailers. Trips to dollar stores have risen since the financial crisis, with 53% of U.S. shoppers in 2013 saying they went to one in the past month, up from 48% in 2007, according to the consultancy Kantar Retail. Meanwhile, the percentage of U.S. shoppers visiting a Wal-Mart at least once a month fell to 65% in 2013 from 69% in 2007. Some 39% of shoppers made monthly visits to Target in 2013, down from 43% in 2007."

"This is a transformational opportunity," Bob Sasser, Dollar Tree's CEO, said in a prepared statement. "Throughout our history, we have strived continuously to evolve and improve our business. This acquisition, which enhances our footprint and diversifies our company, will enable us to build on that progression, and importantly, positions Dollar Tree for accelerated growth." Sasser is expected to run the combined companies

Reports are that the combined company will continue to operate under both the Dollar Tree and Family Dollar banners, though it possible that, depending on locations, some Dollar Stores could be converted to the Family Dollar name, and vice-versa. Antitrust regulators also could require the closing or sale of some locations.

The acquisition is projected to close by the end of the year, unless a competing offer changes the companies' plans.

KC's View: Hard to imagine that this is over. Competition being what it is, it just seems likely that someone else is going to step in with a higher bid, which will extend the process and certainly make the sale price for Family Dollar higher.

Clearly, there remains a lot of juice in this category, and it will be interesting to see how Walmart's new management regime responds to what is going on here.

Editorial continues after a word from our sponsor...

Corporate Drumbeat

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Now back to regularly scheduled editorial...

Meijer Gives Its Fashion Offerings A Makeover

The Detroit News reports that Meijer, the Michigan-based supercenter chain, is looking to make a fashion statement and "has invested in a major makeover and restyling of its apparel and hired two outside consultants. It is redesigning stores and implementing a multi-media campaign that includes the publication of seasonal Look Books and the purchase of ads in national fashion magazines as it works to spread word of Meijer Style — not unlike competitor Target, which has been a destination for women who want to be fashionable on a budget."

According to the story, "Meijer is pushing the affordable style message — and its crocheted dresses, faux ostrich skin handbags and other fashion trends — through a variety of channels and doing things it’s never done before. Its multiple-issue advertisements in Marie Claire, Harper’s Bazaar, InStyle, Cosmopolitan and Elle are a first. Meijer also launched a Meijer Style website, and fashion bloggers from in and outside of Michigan regularly weigh in about Meijer’s remade clothing image.

"To build social media, a Meijer Style Pinterest board is up as are Instagram and Twitter accounts, and more wall space is being devoted to Meijer Style on the retailer’s Facebook page."

KC's View: If you're going to do something like this,. it strikes me that a) you have to be all in, and b) you have to be patient. Establishing the kind of fashion reputation that Meijer seems to be looking for is not an easy matter, and there's a lot of persuasion that has to take place before it'll become the fashion choice for a lot of retailers. I'm not saying it cannot be done, just that it is not an overnight process.

Editorial continues after a word from our sponsor...

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Now back to regularly scheduled editorial...

Amazon Turns To Bricks-and-Mortar Stores To Ignite Fire Phone Sales

The Wall Street Journal reports that Amazon this week "will begin selling its new Fire smartphone at AT&T stores without the fanfare of releases from rivals Apple or Samsung Electronics — there are no velvet ropes outside stores of the exclusive carrier for die-hard fans. And reviewers haven’t been especially kind, knocking the handset for a lineup of features that don’t seem yet to elevate it to a must-buy.

"But because the Fire is designed to make shopping on Amazon.com even easier, it doesn’t have to be a home run for it to be a winner. Customers who use the device, which comes with a year of Prime unlimited shipping free, will be feeding new, valuable data back to Amazon that can help the company tailor merchandise recommendations to all of its users."

KC's View: I'm not saying I disagree with it, but isn't it interesting how we all seem to use different metrics when analyzing Amazon than we might use when evaluating some of its more traditional competition? The Fire has been rated by many as too expensive and not particularly consumer-friendly, and yet this analysis suggests that this is okay, because the feeding of valuable data trumps everything else.

I think Amazon's embracing of various devices that essentially facilitate the buying experience is a very interesting approach, but I also think that the company would be in a better position to make this case of the Fire had been a "wow." Which it seems not to be, not by a long shot.

Editorial continues after a word from our sponsor...

Industry Drumbeat

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Now back to regularly scheduled editorial...

Worth Watching: Inside TargetExpress

We had a story the other day about how Target is testing a new small store format with a 20,000 square foot TargetExpress store that has opened in Minneapolis's Dinkytown neighborhood, and another one that is planned for the Highland Park section of St. Paul.

Well, if you're interested in seeing what the store looks like…just click on the video at left. The store manager, Karl Anderson, is offering a store tour…

Editorial continues after a word from our sponsor...

Corporate Drumbeat

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Now back to regularly scheduled editorial...

E-conomy Beat

Reuters reports that Amazon plans to open five new warehouses in India, doubling its capacity from the two facilities it currently operates. According to the story, the expansion "will allow Amazon to extend its same-day and next-day delivery services" in Delhi, Chennai, Jaipur, Ahmedabad and on the outskirts of Gurgaon.

FastNewsBeat

• The Huffington Post reports on an initiative by French retailer Intermarché to sell "ugly" fruits and vegetables - products that are unsightly, even though their taste is perfectly acceptable - in its stores.

The story says that Intermarché "intercepts undesirable fruit and veg from suppliers … selling it in their stores - either in natural form or in soups and juices - at a heavily discounted price."

Beyond the sales, the program addresses a specific cultural issue - 40 percent of fruits and vegetables are wasted because of the way they look, adding up to 300 million tons of food waste each year.


• The Jewish Chronicle reports that British retailer Tesco has pledged to "no longer sell products originating from the West Bank, starting this September."

However, while the pledge may sound overtly political, Tesco says it is not politically motivated, and in fact was just a response to questions raised by some customers. Furthermore, the story says, "The only West Bank product currently stocked were dates - packaged in the territories but grown in Israel."

Executive Suite

• Peter S. Swinburn, president/CEO of Molson Coors, has announced that he will retire at the end of the year, according to a story from the Associated Press. He will be succeeded by Mark R. Hunter, who currently serves as CEO and president of Molson Coors Europe.

Editorial continues after a word from our sponsor...

Industry Drumbeat

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Now back to regularly scheduled editorial...

RIP

• Bennett A. Robinson, who founded and then served for 15 years as executive director of a non-profit organization for independent grocers in California called Raise The Bar, has passed away after a brief illness. He was 60.

Your Views: Amazon And Walmart

Got the following email from a reader about Amazon's current profit troubles:

You can cut the “Amazon arrogance” with a knife. But, they are right more than they are wrong.

The digital content play is similar to what Netflix is doing with "House of Cards" and "Orange is the New Black." They want to provide something exclusive to their network so people will go to Amazon for their video. And, imagine the cross sell and product placement and opportunity for advertising they will have if eye balls start going to Amazon for their entertainment. You think one-click shopping was good; imagine if you saw a gadget in a movie, wanted it and click a button to order it. Cool, yes. Spooky too. But as you’ve indicated, anyone with privacy concerns using Amazon long since gave up that right.

It is a brave new disruptive world.

But, for those who care about their Amazon investment, even at a 50 P/E the share price would only be $50 … a huge fall from today’s $320/share. Amazon market capitalization is $148B indicating very high investor expectations.  Investor optimism keeps Amazon’s P/E at 506. Wal-Mart, by contrast, is 16.

You’ll continue to have a lot to write about as relates to Amazon.





And, from another reader, an email about Walmart's recent executive changes:

It's been very interesting to me to read all the comment about the recent change of the US CEO at Walmart. I've read all the credit that the exiting CEO has been given for things like introducing the $ 4.00 prescription program, adding variety and assortment back into the stores.

Well I'm not sure that I quite see it this way. First, he cut labor, was the one who wanted to do away with the door greeters, and then cut hours thru out the store. Yes, it was his idea to introduce the prescription program, but in doing so Walmart had to raise OTC prices to offset the loss that they took by doing so... As for adding assortment back that their former Vice Chairman removed, well  let's be honest, between the huge outcry from the customers, the huge loss in sales and a LOT of help and advice from former associates, he was able to put back what was taken, and many would suggest added back to much, thus the huge rise in store inventories. His downfall was in my opinion, that once he put back what had been broken, he did not have the ability to move the company forward.

The two executives that I'm still watching are the CMMO and the CMO. One has come in and has tried to make the company look like a HEB, while the other has grown the company marketing team to record highs and spent a ton of money in ad's and other marketing adventures, while gaining little market share in major markets such as Dallas, Texas.

So I'm thrilled to see a new person with  grasp of retail take over the US side of the business, I'm only sorry to see him get sure a poor and skeptical reception.

PWS 29