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    Published on: September 1, 2004

    Is technology playing a more pervasive and persuasive role in the supermarket experience? Perhaps so – since the national business media seem to be paying more attention to the trend.

    BusinessWeek reports on how retailers are embracing a wide range of technologies that “are often the only way to keep costs down while offering customers a better shopping experience.” From information kiosks to blood pressure monitors, handheld scanners for customers to special scales in the produce department – the rollout of these technologies suggest that the “shopping experience might soon have little resemblance to anything you experience today.”

    In addition to driving down costs in the long run, these technologies also are in many cases designed to appeal to a population increasingly at ease with these kinds of solutions, as well as baby boomers with what are termed “declining capabilities.” In other words, technologies that make everyone’s lives easier and more productive.

    Meanwhile, the Wall Street Journal reports on the growing use of biometric technology by retailers, allowing consumers to use their fingers to identify themselves and link to checking and credit card accounts.

    In the supermarket industry, retailers such as Kroger and Piggly Wiggly are using it to varying extents, and reporting gradual consumer use. But in an initiative that could jump-start broader acceptance for the technology, Morgan Stanley’s Discover credit card has formed a partnership with biometric company Pay By Touch, which is likely to lead to a greater number of stores offering it as an option.

    According to WSJ, both Visa and MasterCard are looking at how to integrate biometrics into their strategies, while American Express currently has no such plans.
    KC's View:
    There is an interesting turn of phrase in the WSJ piece, but we’re not sure if it is deliberate or accidental on the part of the writer:

      As interest in this technology grows, so does concern about consumer privacy. Companies that offer this finger-identification payment method say they don't plan to share this information with others.

    “Don’t plan”?

    Speaking as a consumer, we think that retailers and technology providers have to do a whole lot better than that. We want an ironclad guarantee that you won’t share our information or our fingerprints with anyone – and that includes the government.

    As for the technological advances cited by BusinessWeek, annoyed though we may be by the notion of “baby boomers with declining capabilities,” we think that retailers should embrace any and all options that make the shopping experience better and more productive. The key, though, is not to use technology as a crutch, and to make sure that it is implemented in an intelligent, strategic way. It can never be technology for technology’s sake.

    Thomas Edison once said, “What man's mind can create, man's character can control.”

    We have to control the technology, not let the technology control us.

    Published on: September 1, 2004

    The Conference Board reported that its consumer confidence index dropped from 105.7 in July to 98.2 in August, a greater drop than most economists had predicted. It was the first time in four months that the confidence index has declined.

    In addition, the Conference Board’s “present situation index” fell to 100.7 from 106.4, while the “expectations index” fell to 96.6 from 105.3.

    Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement, “The level of consumer optimism has fallen off and caution has returned. Until the job market and pace of hiring picks up, this cautious attitude will prevail.”

    Consumers who said jobs were hard to get during August was 25.8 percent, a slight change from July’s 25.7 percent, though the number of consumers who said jobs are plentiful decreased to 18.1 percent from 19.7 percent.

    At the same time, the Commerce Department reports that personal consumer spending grew 0.8 percent in July, recovering from a 0.2 percent decline in June – suggesting that consumers’ economic concerns could be easing. Consumer spending accounts for about two-thirds of economic activity.
    KC's View:
    Go figure.

    Someone once said that “an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.”

    Published on: September 1, 2004

    • The US Census Bureau reports that during the second quarter of 2004, e-commerce generated $15.65 billion worth of sales, just 1.7 percent of the nation’s total $919 billion in retail sales for the period but more than 23 percent higher than the e-commerce dollar figure from the second quarter of 2003.

    KC's View:
    Less than two percent doesn’t sound like a heckuva lot, especially when you consider than six or seven years ago there were folks out there predicting that e-commerce would account for 15 or 20 percent of total sales. But don’t forget that e-commerce is just 10 years old, hard as that is to believe. And its growth rates continue to be extremely strong – who among us wouldn’t settle for a 23 percent growth rate?

    Published on: September 1, 2004

    The New York City Health Department reports that more than 40 percent of the city’s public school students are overweight, and almost 25 percent of them are obese.

    The study was published in the American Journal of Public Health, and MSNBC reports that the results were similar to those found in rural Arkansas. The numbers are worse than those posted by the federal government just four years ago, when it suggested that 15 percent of all US children were obese.

    The poor health of so many children hardly is irreversible, however. The Journal suggests that simple changes – like more physical education classes and drinking water instead of soda – would go a long way to solving the problem.
    KC's View:

    Published on: September 1, 2004

    UK retailer Marks & Spencer reportedly is considering changing its longtime return policy, possibly imposing time limits and conditions for returns made by consumers.

    At present, Marks & Spencer customers can make returns anytime they want, with no time limits. However, reports are that the company’s new CEO, Stuart Rose, is reviewing every area of the business, and the return policy is included in the list.
    KC's View:
    Review away. If Marks & Spencer changes such a culturally central part of its history and philosophy, it’ll give customers just one more reason to go elsewhere.

    On the other hand, maybe it doesn’t matter. After all, the customers all seem to be going elsewhere anyway…

    Published on: September 1, 2004

    • Albertsons posted second quarter net income of $104 million, compared to earnings of $162 million during the same period a year ago. The decline was attributed to economic malaise in some markets, as well as fallout from the four-month Southern California strike/lockout.

      Sales for the quarter were $10.2 billion, up from $9 billion a year ago.

    KC's View:

    Published on: September 1, 2004

    • The Food Marketing Institute (FMI) has promoted Jeanne von Zastrow to be senior director, field services, serving as FMI’s primary liaison between the organization’s leadership and the food industry in the Western half of the country, as well as developing and facilitating FMI’s Natural Foods and Next Generation share groups.

      von Zastrow, an 18-year veteran of FMI, reports to Jeff Rumachik, group director, field services.

    KC's View:

    Published on: September 1, 2004

    We had a piece yesterday about the high failure rate of new product introductions prompted a number of emails.

    MNB user Rob Culin wrote:

    Let me suggest an alternative point of view on "failed" new products. Having a continuing stream of new product ideas is healthy for the industry and consumers - even if the vast majority don't grow above $10 million in revenue. It's what allows new companies to test ideas and hopefully establish a market niche. It's what keeps us from being limited to a handful of monolithic companies that manage only mega-brands and mega-products. Additionally, the free flow of new products is what provides the incredible choice we have today as consumers.

    Looking for a comparable industry? How about apparel? Food is becoming more and more like fashion, where products come and go, and only a few stay around for several seasons. Yes, you can buy Levis and t-shirts year after year, but the bulk of fashion items are designed to be fast in and fast out.

    Perhaps the greater challenge for the industry is to learn to introduce and profit from a new product that will never sell more than $10 million, and finds only a small consumer niche, or lasts only a season. There are lessons to be learned from outside our industry.

    Another member of the MNB community wrote:

    While the proliferation of “me-too” products might explain a good proportion of the 90% failure rate, it is by no means the only factor. A more critical factor may be the inability of public companies to be able to take a long term perspective when launching brands, due to Wall Street pressures.

    Too many new products are being thrown into the market place with limited promotional resources and an incredibly short window of opportunity for success – simply because the company cannot afford to invest the necessary $’s. The big media budgets that Kraft, Coke or PepsiCo can put behind a product launch are the exception, not the rule.

    For many companies attempting to launch new products, it is therefore safer and less expensive to try to improve on an existing product than it is to be truly innovative. I’ve worked on many new product launches in my career, and the most innovative and exciting products (by far) required greater resources, patience and an appetite for risk on the part of the company. It never surprises me, then, that the threat of one bad earnings quarter for the company can have the whole promo budget pulled off the table.

    Final point: the retailers also play a role in new product failure. The timeframe for “thumbs up vs. thumbs down” is shorter than it’s ever been, and it’s harder than ever to build a market for a brand. You pay the slotting, run the first few promotions, then take a massive return when the product fails to set the world on fire…

    We also posed the question yesterday whether there were any other industries that accepted as routine a 10 percent success rate. To which one MNB user responded:

    Thanks for another day of interesting reading. Here are a few instances in which a 10% success rate is good:

    -Music industry in terms of artists or albums becoming hits
    -Television industry in terms of successful shows
    -Winning a lottery or the jackpot at a casino
    -Surviving a sky dive with your parachute not opening
    -Ralph Nader's showing in the upcoming elections
    -Cubs or Red Sox World Series winning a millennium.

    Wish we’d written that…

    MNB user Tim Davis wrote:

    The only other profession I can think of where a 10% success rate is good enough to keep your job is New England weather forecaster.

    Another funny line. We thought we were doing the jokes here…

    We also had a story yesterday about a study being done about the most courteous retailers, which were identified as Wal-Mart, Target, Home Depot and Lowes – with the least courteous employees being at Nordstrom, Costco, and Wal-Mart’s Sam’s Club division. We noted that this was the opposite of our experience, and got some email in response…

    One MNB user wrote:

    I also have not had this experience. There are great companies like Nordstrom, Scheels Sporting Goods, Hy-Vee Food Stores, Wegmans and Minyards who have some of the best employees around!

    Another MNB user added:

    I can't believe that Wal-Mart topped the list of most courteous. That is far from my experience. In the Albany, NY area, the wheels have some off the proverbial courtesy wagon in the Wal-Mart stores that I enter—without exception. It is the primary reason I prefer to go elsewhere. In my humble opinion, the yellow smiley faces are inverted and they have nowhere to go but up.

    MNB user Gary Howell wrote:

    You hit the "nail on the head" with your comments when you experience just the opposite. Costco is one on the best and friendliest stores that I shop. Also this store always looks good! I agree with the hit and miss at Wal-Mart and Home Depot.

    Another MNB user wrote:

    Can't agree with you more. I find this research quite the opposite of what I've experienced.

    On the subject of Wal-Mart’s sudden backing off of Chicago building plans, one MNB user wrote:

    Seems like what the city of Chicago is doing to Wal-Mart is nothing more than extortion. Basically they are saying is to pay the employees more than they are worth or you don't get to build. Even thought they ordinances apply to all big box stores, it still basically singling out Wal-Mart. Why? Because Wal-Mart is the only chain willing to open in the ghetto. No other chain is willing to even consider it.

    In response to yesterday’s essay on supermarket relevance, MNB user Jem Welsh wrote:

    I enjoyed your essay on supermarket and the relevance. One thing I thought while reading it is that stores were once an anchor in the community, particularly in the rural areas and now seem to only be a part of the frenzied world of shopping and errands. A place to rush in and try to rush out, which is not easy considering the shortage of front end staff in all stores I visit. The perception of community is important for stores and we are losing that fast. Example: you used to be able to talk to your butcher about meats. Now, you can't find one unless you are waiting at a busy service case. And it seems the stores always put the least experienced person on the case, so it is hard to be educated by them.

    The produce manager, now seldom seen, used to help with selections and people were not afraid to approach them for help in selecting the best pieces. Now, as your readers testified last week, people can't pick out the freshest or best tasting selections and they get no help. In our community of old, we knew the butcher and produce person by name. They were our food experts. Now, they are not presenting their foods or craft; planagrams have taken over and POP is now handling the talking points.

    We all grew up knowing the head cashier because she talked to us and knew us by name. Now, we just worry that more than one lane will be open, even though there are fifteen checkouts up front.

    Supermarkets have to change with the times, but it seems the one consistent element to their success (from the operator's standpoint) is the variable expense of labor. Perhaps a way to regain relevance is to consider service as a measure of the changing times. Sure, with modern technology we have been able to cut our labor costs, but at what cost to the customer's perception? Here in Southern California, the staff in a store are only seen as union-loyal, customer-phobic, undereducated about their jobs and way overpaid. Where is the community feeling that would keep a shopper from considering shopping at a supermarket? It is gone...replaced by someone moping about their hours or more interested in talking to a staff member than addressing the customer's = needs.

    To regain relevance, perhaps stores should look to current events with an eye to opportunity. With nutrition at the forefront of supermarket relevance, is it so hard to imagine the department heads having some education and presentation skills in this area?

    I am a nutritionist and one of my most successful strategies with my clients is a store tour. I explain foods to them and discuss everything from serving sizes to functional foods. My clients walk out of the store with a better idea of what to buy and usually they all have an order of $100.00 - $250.00. When asking a supermarket manager for permission to provide this service, I get mixed responses. One manager rejected my request outright, saying I would pose a distraction for his employees! Another rejected my request, saying customers would be more interested in what I had to say than purchasing the specials! But, conversely, a smart operator enthusiastically embraced my request, with a caveat: could she and her customer service manager accompany me during the walk-through? They both asked good questions during the walk-through and asked me if I would mind conducting departmental seminars for their (non-union) staff. Guess which store I am now taking my clients? My services bolster their weekly volume by roughly $1500 weekly. Anyone remember when that volume gain would be considered important?

    Supermarket relevance is changing and operators need to take a strong look at their priorities. Subtle merchandising skills are not enough any more. Passive pricing and displaying techniques no longer insure a good customer. Customers are becoming more educated, are exposed to way more information about foods and can recognize poor service as more than no longer taking the sacks of grub to the car. To be relevant in today's food shopping experience, price and perception are important, but service is still a key component I think. What services are utilized in this century will define the community market winners. You can't buy loyalty with only a card and a roller program. Everybody knows that game and will bypass it in favor of "everyday Low prices." Differentiating to become relevant means more innovation than that.

    "Low fat, low carb" confuses everyone, it is true. With the new USDA recommendations, it is only going to be more confusing. Stores cannot be all things to all people, but low maintenance and no service to customers sends a clear signal. If stores want to be more relevant in my opinion, they need to regain the image in their customer's eyes as the community gathering place for foods. Give me an interesting, informative and knowledgeable staff and I will enjoy my shopping experience. And come back, loyalty card or none. A microbrewery in the magazines section wouldn't hurt, either.

    Now you’re speaking our language…

    And another MNB user wrote:

    I have been waiting to weigh in on the Wal-Mart issue and today's column finally presented me with the opportunity. When the first Super center opened in Appleton WI, I shopped there and was "wowed" by the huge selection and entertained by the" talking cash register" / self check out. However, after several attempts to eat the "case ready" pre packaged beef, including the $17.00 per pound tenderloin I gave up in disgust. At that point it was Wal-Mart that became irrelevant ! I have heard the same opinion from others who feel the same way about the meat but continue to shop for there for all the other things they need due to, you guessed it LOW PRICES.

    Thanks in large part to my daily dose of MNB, I now consider myself an educated consumer AND I now boycott Wal-Mart. Is that Kevin's fault ???? Absolutely not! They lost my business because of poor quality, they lost my support in the community because of labor and land use issues. They have no one to blame but themselves !

    Glad we’re not to blame…
    KC's View: