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    Published on: January 7, 2003

    The subject of self-checkout systems always generates a lot of debate here on MNB, enough so that when National Public Radio (NPR) wanted to do a piece about the subject, they reviewed all the MNB archives and then called us up to talk about it.

    To listen to the segment, go to:

    In response to that piece, we got an email from MNB user Jack Allen:

    “My view is that for many, shoppers want to take control and some enjoy the technology. But I can't help but think that for many automatic check stands succeed because service checkouts fail to provide consumers with what they want and need. It would be interesting to see some really creative brainstorming on how to humanize the process.

    “I like the NYC Whole Foods process of having customers line up to take the next checker. Borders in Orlando does this; and airlines (not champions at servicing customers) take this approach. Now then, the question becomes, what imaginative activities/experiences are possible for persons in line in a food store? Ideas: Sampling, info on food preparation, reading material, for elders a chance to get off their feet. And what store design features are possible?

    “Over 20 years ago in Chicago Greek Town, Linda and I and friends waited in line in the biting winter wind to get into the Parthenon restaurant. I will never forget a waiter passing through the line with glasses of Ouzo, to help deal with the wait. I have long forgotten what I ate that night or what I paid; and most restaurant experiences have greatly forgettable experiences. But I will never forget that gesture of taking the sting out of least pleasing aspect of dining out.”

    Most of us have memories like that, which stand out (unfortunately) because they seem to be exceptions to the normal course of being a shopper.

    We wrote yesterday that Burger King Corp. is now selling its Whopper hamburger for 99 cents, with the promotion scheduled to end on January 20, in effort to shore up the company’s declining market share. Our comment was that while “we’d only choose a Whopper to eat if the other options were egg salad and brussel sprouts, from a marketing point of view, continuing this price war just drives down prices, margins and turns what should be differentiated products into commodities.”

    One MNB user wrote:

    “What ever happened to BK’s claim-to-fame “Flame-Broiled” as opposed to fried burgers? Wasn’t that what made them distinctive from all the rest years ago?”

    Exactly. The core value that made the chain different has been lost in the scramble to commoditize the food and the experience. Which strikes us as nuts.

    MNB user Jane Larson questioned our comparisons:

    “Hoo boy, you're just looking for it, aren't you? The inevitable backlash from the Egg Board and the Brussel Sprout Coalition? Why don't you just take on apple pie while you're at it? Next thing you know, you'll be picking on McDonald's and...

    ...uh, never mind.”

    Hey, we take on the big boys -- the egg folks, the brussel sprout lobby, PETA. Bring ‘em on…

    We reported yesterday that outbreaks of a potentially fatal form of salmonella in the Southeast US are on the rise, linked to consumption of raw and undercooked eggs. Federal health officials say they are puzzled by the increase, and have suggested there should be expanded education and regulatory efforts to prevent the spread of the bacteria.

    One MNB user responded:

    “I wonder how many of those eggs were from un-caged, organically fed birds? My guess, NONE!”

    On the subject of how businesses can position and reorganize themselves to cope with a changed marketing environment and a tough economy, Steve Grossman, a member of the MNB community, wrote:

    “I think we are going to end up with three types of retailers per industry, all giving value to the customer.

    “One will be low price--private label or closeout stuff with vary little customer support---low labor operation.

    “Middle price stores with selection and minimal customer support .

    “High end retailers or specialty stores that pamper the customer and they are willing to pay for it.”

    We reported last week that Wal-Mart is persisting with a plan to build a store in Dallas despite neighborhood objections…and is doing so by replacing a supercenter with a Neighborhood Market and then renting space to other retailing entities.

    An MNB user wrote:

    “I just had a similar conversation this weekend regarding a WM that went into Flin Flon, Manitoba, and the small business people complaining and/or concerned about how it will close businesses and potentially bankrupt the town other than the mine there…

    “What everyone fails to acknowledge, PARTICULARLY the small towns, is that the city council and other elected or residing officials not only approved their entry, but also the building permits, selling of the land to them and the likes...

    “If people are so concerned now, where were their concerns on the front end?”

    We reported yesterday that Sara Lee Corp. is developing a chain of Inner Self lingerie stores that will be designed to appeal to mainstream women who find the imagery suggested by Victoria’s Secret to be off-putting. Inner Self will offer a New Age, “spa-like environment” with soft music, calming colors and complimentary hand massages.

    We found this interesting because it suggests a couple of things about the mainstream female customer that more retailers ought to be thinking about -- the desire to be pampered, and irritation at a supermodel culture. It seemed to us that there is an enormous fertile ground here for retailers to exploit.

    MNB user Jennie Jones wrote:

    “As an employee of the Sara Lee Corporation and the Vice President of Executive Women, I am very proud of my company for recognizing that there is a need for a different image for women, both as consumers and as business women. NEW was founded to attract, retain and advance women within the retail, convenience store and grocery industries. This is a great step forward in retailing.”

    Another MNB user added:

    “Intentional or unintentional... "there is an enormous fertile ground here
    for retailers to exploit"...??

    “The culture has been exploiting women (that fertile ground) for a long time. Maybe The Inner Self thing is about non-exploitation.”

    Exactly. Maybe we should have chosen our words more wisely.

    Finally, one member of the MNB community wrote in after reading our Sports Desk recap of the weekend’s NFL scores:

    “Not that it's terribly important, but there was also a pretty big COLLEGE football game this weekend that failed to make it into the sports desk update. It's been 34 years since folks in Columbus had a national championship to celebrate - and a pretty exciting game to get us there to boot.”

    We plead guilty to ignoring college football…and will try to do better next year. (Maybe we need to get a member of the MNB community to volunteer to contribute an edited list of college football scores next fall…)
    KC's View:

    Published on: January 7, 2003

    • PriceSmart, Inc. reported that its December 2002 net sales increased 6 percent to $84.8 million, from $79.7 million a year earlier. Total first quarter revenues rose 15 percent to $169.4 million from $147.5 million, as first quarter net income grew 42 percent to $1.6 million from $1.1 million.

    KC's View:

    Published on: January 7, 2003

    The People for the Ethical Treatment of Animals (PETA) has launched a global boycott of KFC, according to The New York Times, as it seeks “improvement in the lives and deaths of 700 million chickens who become the chain's fried meals every year.”

    The NYT notes that while PETA has launched boycotts before, successfully winning concessions from fast food chains such as McDonald’s and Wendy’s, this is the first time it has gone global with its efforts.

    And, it is going after KFC at a time when many fast food companies are suffering from declining sales, making them even more vulnerable to image and financial attack.

    KFC has responded to the boycott with a prepared statement saying that it “is committed to the well being and humane treatment of chickens and we require all of our suppliers to follow welfare guidelines developed by us with leading experts on our Animal Welfare Advisory Council.”
    KC's View:
    Let’s face it. PETA may say it is looking for humane treatment of animals that are to be slaughtered for food, but it really doesn’t want them to be slaughtered at all. We don’t object to humanitarian objectives, or to animal rights as a concept.

    What we do object to is a fringe, radical group that attempts to demonize people and companies as it pursues its own agenda.

    Published on: January 7, 2003

    Fortune’s annual list of the “100 Best Places To Work,” released yesterday, includes a number of well-known food retailers including Wegman’s (#10), Stew Leonard’s (#30), Whole Foods (#32), Starbucks (#47), Ukrop's Super Markets (#71), and Publix (#87).

    Other industry-related companies on the list, which examines a variety of different criteria in determining the quality of the work environment, include JM Smucker (#8), Pfizer (#21), SC Johnson (#29), Merck (#31), Procter & Gamble (#46), Valassis was #56, and Kimberly-Clark (#69).

    Topping the list for the second year in a row were Edward Jones at the number one position, and The Container Store at number two.

    Wegman’s position on the list showed remarkable improvement this year, moving from #68 in 2002 to the #10 slot.

    Last year, Stew Leonard’s was #22, Whole Foods was #48, Starbucks was #58, Ukrop’s was #76 and Publix was #83.

    Notably, Wal-Mart, which ranked #94 last year, fell off the 2003 compilation.
    KC's View:

    Published on: January 7, 2003

    There’s been some discussion among members of the MNB community in recent days about how economic news is reported, making a piece in The Washington Post on the subject particularly interesting. The Post notes that there has been a steady drumbeat of bad economic news of late, with constant reminders from the media that the holiday shopping season was likely to be a tough one for retailers.

    “Consider this fact,” writes the Post’s Paul Farhi. “Total retail sales in the United States have increased every month, with one exception, for the past 11 years, according to the U.S. Commerce Department's seasonally adjusted data. That's 130 months of rising sales (compared to the same month a year earlier) vs. one month of declining sales (October). I'll give 130-1 odds that December was yet another ‘up’ month.”

    The Post continues, “What these stories rarely note is that consumer spending typically is pretty stable, even in a recession. Thanks to population growth and inflation, personal consumption tends to rise even when the economy is just treading water. When a recession hits, it's not because Wal-Mart had a lousy Christmas; it's usually because of a decline in business investment and profits, and a deterioration of the trade balance.

    “These reports from shopping's front lines may tell us something about how an individual chain is performing -- Wal-Mart is down, Kmart is up -- but they don't say much of anything about the economy at large, or about consumer behavior.”
    KC's View:
    Fair enough.

    And in the interest of keeping the “good news” coming, there was a report yesterday that companies said they would cut 92,900 positions in December, down 41 percent from 157,508 job cuts that took place in November. On an annual basis, this means there were cumulative cuts of 1.46 million jobs in 2002, down 25 percent from a record 1.96 million in 2001.

    So there.

    Published on: January 7, 2003

    Time reports on how Wal-Mart plans to continue the enormous sales growth pattern that it has established over the past few years.

    “Wal-Mart is mounting an audacious expansion that could double its sales within just five years, to $480 billion,” Times reports. “Some of that growth will come in new markets abroad, where 1,200 stores in nine countries already account for about 16% of the chain's total sales. But even more growth will be won as the chain insinuates itself into more U.S. neighborhoods and invades more product categories.”

    For example:

    • The company’s goal is to have a 30 percent market share in every category it sells or occupies.

    • It plans to expand over the next five years from 3,400 U.S. locations, with roughly half of the them in the south, to 5,000 stores nationwide.

    • The company wants to centralize power and control by designing and manufacturing many of the products it sells.

    • Using a program called “Store of the Community,” Wal-Mart plans to get into the advanced data mining business, forecasting and replenishing on a “micro scale,” creating subtle differences between stores that will allow them to better serve local consumers.

    “I'm not trying to be flippant,” Wal-Mart CEO Lee Scott tells Time. “But simply put, our long-term strategy is to be where we're not.”
    KC's View:
    Excellent piece, worth reading, though quite possibly nightmare-inducing if you happen to compete with Wal-Mart. (And these days, who doesn’t?)

    Most intriguing to us is the notion that as Wal-Mart centralizes power and control, it also looks to create more unique shopping experiences in its stores. That’s a tough challenge…though there’s no reason, based on history, that Wal-Mart can’t accomplish it.

    Published on: January 7, 2003

    In the UK, rumors are rampant that Wal-Mart’s Asda Group has discussed a possible takeover of Safeway Plc with the government’s Office of Fair Trading.

    Safeway has been identified as a likely takeover target because of its largely ineffectual moves to compete with Tesco and Asda, and because its stock price is depressed.

    Some local experts believe that the government wouldn’t allow such an acquisition because Asda’s strong recent performance wouldn’t allow it to argue that it needs to buy Safeway in order to compete with Tesco. But others believe that such a deal is just a matter of time.
    KC's View:
    We’ll believe almost anything, and this one sounds persuasive.

    Published on: January 7, 2003

    Rumors circulating in Chicago suggest that all or most of Safeway’s Dominick’s units there will be sold by mid-February -- and that the probably buyer will be Ahold USA.
    KC's View:

    This rumor was relayed to us from some usually reliable sources who admitted that they weren’t sure whether it is idle speculation or just wishful thinking.

    A lot of industry insiders have suggested that Ahold would be an ideal candidate to buy the company, except for the fact that its recent financial performance has been less than sterling, leading to the possibility that it might not have enough cash to complete the deal. In addition, Ahold CEO Cees van der Hoeven has said that the company will focus on its core businesses and is unlikely to make any major acquisitions in the near future.

    On the other hand, it could be that Ahold might look at Dominick’s as a great opportunity to expand its US empire, and do so at a good price because Safeway’s performance there has devalued the company. You don’t get much more “core” than that.

    Besides, as reported in Breaking News above, the company is expected to report a nine percent increase in its annual sales today.

    It’s hard to tell. But if these rumors are spreading in the Windy City, it’s our job to keep you informed.

    Published on: January 7, 2003 reports that the final tallies for 2002 e-commerce showed strong increases in the sector, especially during the fourth quarter holiday season, when online sales reached $17.4 billion, a 40 percent increase over the same period a year earlier.

    The first, second and third quarters were up 23 percent, 32 percent and 37 percent, respectively, with 2002 as a whole generating close to $48 billion in online sales, a 34 percent increase over 2001.

    One of the most remarkable statistics generated by BizRate was the fact that women accounted for 60 percent of online sales volume. Five years ago, they represented just 39 percent -- suggesting that women are just dominating the e-shopping sector, but probably propelling it into being a mainstream channel.
    KC's View:
    Sure, e-commerce isn’t likely to take over the world like many predicted just a few short years ago. But it certainly is a factor, and a growing one.

    As it becomes a mainstream alternative in other shopping venues, e-grocery is certain to follow. Slower, perhaps, because the logistical requirements are different and consumer desires more varied. But it’ll be a factor, and brick-and-mortar retailers will ignore the trend at the risk of being marginalized and outflanked.

    Published on: January 7, 2003

    A new Consumer Pre*View study from ACNielsen suggests half of all heads of household are too tired to put much time or effort into cooking dinner, and two-thirds are looking for faster ways to accomplish basic household chores.

    Implicit in these results is the notion that manufacturers and retailers able to help these exhausted consumers create for themselves a differential advantage that will have resonance in the marketplace.

    Our own Phil Lempert, who serves as spokesperson for the ACNielsen Consumer Pre*View service, said, “Several CPG manufacturers are successfully serving today’s time-starved consumer. However, many retailers are still trying to figure out how to do so. The challenge of providing a freshly prepared great-tasting meal at a reasonable price and with a maximum of convenience has yet to be solved. For those who come up with a good solution, there’s tremendous upside potential. I don’t see consumers slowing down anytime soon, and meal preparation is a key area where consumers are looking to save time.”
    KC's View:
    All we could think of when reading these findings was that great scene in “Blazing Saddles” when Lilly von Schtupp (the fabulous Madeline Kahn) sings, “I’m tired…Tired of playing the game…Ain't it a cwying shame…
    I'm so tired.”

    Though she wasn’t singing about housework, this song could be the anthem for an exhausted baby boomer generation.

    We have to admit that we read these results with a certain sense of shame. We’re hardly the first generation of people to be exhausted by responsibilities. It’s just that previous generations didn’t whine about it; they weren’t even asked if they were tired. It was a fact of life.

    That’s not to suggest that this isn’t a legitimate business opportunity or that this isn’t a very real cultural phenomenon. It’s just that we think that sometimes as a generation we ought to shut up, suck it up, and do what needs to be done.

    Then again, that could be the caffeine speaking...

    Published on: January 7, 2003

    • Ahold Posts Sales Gains For 2002. Ahold announced this morning 2002 sales of $75.7 billion (US), up 9.2 percent from a year ago. Ahold's US Foodservice division posted a 43.5 percent increase in sales, while its US retail operations were up 13.2 percent; same-store sales were up 4.8 percent.

      "Sales slowed in the course of the year as a consequence of further deteriorating economic circumstances. However, we are encouraged by the fact that we strengthened our position in most markets," Ahold President and CEO Cees van der Hoeven said.

    • Aldi plans to enter Oklahoma City market. Local press reports say that Aldi, the limited-assortment-grocery chain, plans to open four stores in Oklahoma City by the end of the year, putting it into direct competition with Wal-Mart supercenters and Neighborhood Markets, as well as Albertsons.

      Aldi currently operates 578 stores in 21 states, stretching from Kansas to the east coast.

    • Auchan To Pull Out Of US. Auchan, the French retailer that came to the US with high hopes but ended up only operating two Texas stores that weren’t making it any money, has decided to sell the stores. The company hopes to complete the sale by the end of March.

      The move is part of an overall decision by Auchan to get out of the Americas; it also recently announced it would sell its five units in Mexico and concentrate its efforts on European and Asian markets.

    • German government plans to relax sale regulations. reports that the German government plans to allow retailers to hold sales at any time of the year. Existing laws say that discounts are only permitted during specific summer and winter periods, and only on specific items -- except when companies celebrate anniversaries every 25 years.

    KC's View:
    This last piece of news should be welcomed by Wal-Mart, which has struggled in Germany like it has struggled nowhere else.