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    Published on: September 3, 2004

    The Wall Street Journal reports that a new Forrester Research study suggests that multi-channel shoppers – people who shop in brick-and-mortar stores, online, and using mail-order catalogs – spend four times as much money as single-channel shoppers.

    In addition, people who use two channels generally spend two or three times as much as single channel shoppers.

    The research bolsters the argument that rather than cannibalizing sales, an online presence actually gives retailers the opportunity to generate incremental sales dollars.
    KC's View:
    We’ve talked to a lot of people about this, and the overwhelming anecdotal evidence we’ve heard is that supermarkets that develop and market an Internet presence are able to generate incremental sales and be more competitive in a tough marketplace. It has to be done right, it has to be done creatively, you have to have a real commitment to it, and you have to be patient. But we believe.

    Published on: September 3, 2004

    BusinessWeek has an interesting evaluation of the value of organic foods, attempting to ascertain whether they are worth the higher prices that consumers often have to pay for them.

    With shoppers “willing to plunk down 10%, 20%, sometimes even 100% more, organic food sales hit $10 billion in 2003, up from $178 million in 1980,” the magazine reports. “Responding to the growing demand, mainstream grocers are stocking more organic produce, milk, baby food, and meats, while healthy-food chains such as Whole Foods have opened dozens of stores in the past five years.”

    But the central question remains: is organic food worth the expense?

    BusinessWeek writes: “Research has yet to prove an adverse health effect from consuming the low levels of pesticides commonly found in U.S. food. But for the most vulnerable groups -- children and pregnant women -- going organic whenever possible for fruits and vegetables that carry the heaviest pesticide load makes sense. For organic meat, poultry, eggs, and milk, the direct health benefit is less clear.”
    KC's View:
    The story suggests, and we agree, that for many people the decision to purchase organic foods may be as much political as nutritional. That’s not to denigrate the rationale, but just to suggest that choices sometimes can be multi-layered.

    The question is how – or even whether - retailers can appeal to consumers’ political instincts, whatever they happen to be.

    Published on: September 3, 2004

    Retail Forward’s just-released Index of Future Spending reports that shoppers are slowing down their purchasing behavior, an attitude likely to persist into September. The survey suggests that still-elevated gas prices, rising interest rates, a “sideways stock market” and tentative job prospects are having an impact on consumer behavior.

    What the survey describes as “down market households” (with annual incomes below $22,500) reportedly are feeling the concerns the most, with “up market households” (making more than $75,000 a year) feeling it the least.

    The study also suggests that while consumers may be getting used to erratic gas prices, but that “higher interest rates are making some consumers think twice about making purchases they can't pay for right away.”
    KC's View:

    Published on: September 3, 2004

    The Atlanta Journal-Constitution reports that Coca-Cola Co. plans to rename Diet Sprite as Diet Sprite Zero, not changing the taste while giving the brand a makeover that it hopes will give the three-decade-old brand a boost and make it seem more contemporary.

    The company has tried different variations within the Sprite brand, launching Sprite Remix as an additional flavor. And, it has used the Sprite Zero name in selected global markets.

    "While Diet Sprite was doing well, we saw an opportunity to make it perform even better," Melissa Fahs, a senior brand manager for Coca-Cola North America, told the Journal-Constitution.
    KC's View:
    Hate to take issue with our friends at Coca-Cola, but we’re not exactly sure how this works out if they’re not going to change the flavor somehow. But we know a lot less than they do, so we’ll see.

    Published on: September 3, 2004

    • As expected, Starbucks Corp has announced that it will raise its prices at some point before the end of the year, blaming higher costs for milk and other ingredients.

      The Wall Street Journal reports that analysts believe that the increase is likely to raise prices between four and five percent; its last increase, in August 2000, was between two and three percent.

      Starbucks competitors are split on their response. Caribou Coffee says it has no plans to raise prices, while Diedrich Coffee says it will follow Starbucks’ lead.

    • Kmart Holding Corp. announced yesterday that it has a firm agreement to sell 45 stores to Sears for $524 million, which is a reduction of a June deal to sell 54 stores to Sears. Another six stores may be sold for as much as $65 million, depending on whether certain conditions are met.

      Kmart has recently been disposing of real estate, selling off stores to both Home Depot and Kohl’s.

    • The Boston Globe reports that Target Corp. has agreed to pay $1 million, settling a class action lawsuit that charged it with violating item pricing laws. The Globe notes that similar agreements over the past 24 months have resulted in “retailers more than $8 million in fees and millions more in compliance measures.”

    • reports this morning that Costco “has confirmed that it is considering entering the Australian market, but has stated that it is at least a year away from opening its first outlet.” Costco reportedly might consider going into Australia via a joint venture.

      There have been some reports that Costco already has a Sydney location, and is actively looking for other sites there and in Melbourne.

    • Speculation continues in the UK that Sainsbury could be acquired by Target Corp., despite the fact that both sides deny that any such likelihood exists. Philip Green, who recently made an unsuccessful attempt to acquire Marks & Spencer, also has been mentioned as a possible Sainsbury suitor – but he denies the possibility.

    • According to the Promotion Marketing Association (PMA) Coupon Council, manufacturers offered more than $250 billion in coupons in 2003, resulting in $3 billion in consumer savings. Total coupon spending by marketers was slightly up, from $6.8 billion to $7 billion. In addition, the average face value of manufacturers' coupons increased 4.9 percent to 85 cents. And, 73 percent of the time coupons were distributed in freestanding inserts.

    KC's View:

    Published on: September 3, 2004

    • Wal-Mart is launching an online store, working with Microsoft’s Windows Media Player and selling downloads for 88 cents per song. It isn’t exclusive, though – Wal-Mart is only of several selling music downloads on Microsoft’s Digital media Mall.

      The goal is to directly compete with Apple Computer’s iTunes music service.

    KC's View:
    Wal-Mart and Microsoft? Now there's a combination with real 'evil empire' possibilities...

    Published on: September 3, 2004

    • Wal-Mart reported that its total sales for the four weeks ended August 27 rose 8.8 percent to $21.2 billion, from $19.49 billion in the same period a year earlier. For the month of August, same-store sales were up 0.5 percent, Sam’s Club sales were up four percent (and its same-store sales were up 2.7 percent), and Wal-Mart division sales were up seven percent (with its same store sales up 0.1 percent).

    • Target Corp. reported that August total sales were $3.44 billion, up 8.4 percent from a year earlier. Same-store sales were up 1.8 percent, higher than both the company and analysts had expected.

    • BJ's Wholesale Club reported that August sales rose 8.3 percent to $534 million, up from $493.2 million during the same period last year. Same-store sales were up 4.5 percent.

      Year-to-date, BJ's Wholesale reported a same-store sales increase of 7.2 percent, as total sales rose 11.8 percent to $3.98 billion from $3.57 billion a year ago.

    • Family Dollar Stores reported that its August total sales were $406.1 million, up 8.6 percent from the prior year. Same-store sales, however, dropped 0.1 percent during August.

    • Walgreens’ August sales totaled $3.2 billion, up 14.6 percent from last year’s $2.8 billion. Same-store sales rose 9.7 percent during the period.

    • Longs Drug Stores Corporation reported preliminary August total sales of $342.9 million, a 2.2% increase over sales of $335.5 million in the comparable period a year ago. Same–store sales were up 1.3 percent.

      Preliminary year-to-date total sales were $2.65 billion, 4.1% higher than the $2.55 billion reported in the comparable period last year. Same-store sales for the six months were up 2.3 percent.

    KC's View:

    Published on: September 3, 2004

    Herbert H. Haft', who was the founder of Crown Books and Dart Drug as well as one of the most influential discount retailers in the country, died Wednesday at the age of 84.
    KC's View:

    Published on: September 3, 2004

    We wrote the other day that the possibility that UK retailer Marks & Spencer would modify its long-held no-restrictions policy on returns was a “dumb idea,” because it violated a cultural component central to its identity.

    Well, not everyone agreed.

    MNB user Bill Webb – who happens to be a senior lecturer in retail management at the London College of Fashion, so he knows what he’s talking about – disagreed.

    This is far from a dumb idea. Customers will still have 6 MONTHS to return merchandise. Surely this is long enough? One of our PhD students has been researching "de-shopping" and there is lots of evidence that the unscrupulous and selfish actions of a small number of customers is harming the ability of retailers to provide competitive value for the majority and good returns for their shareholders. It is high time the "no-limits, no quibble" refund policy was reviewed, and this is a sign that the new management are finally getting a grip of the business.

    But another MNB user thought we had a point:

    Seems to me that tradition is a big component of UK retailers and I wonder if the PR hit that will most certainly result from a change in their policy is greater than any up-tic in revenue the change may bring? If the chain was serious about improving their bottom line, the focus should be placed on merchandising.

    We’ll see. We could be wrong…but occasionally, we get things right.

    One MNB user wrote in about the increased use of biometrics:

    A key area of concern for anyone would have to be the security of corporate data. It is common knowledge, or at least it ought to be, that most companies are not secure and many have been “hacked”.

    About two years ago I remember reading that US consumer identities, complete with credit cards, social security numbers, etc. were available on the streets in Eastern Europe in batches of a thousand, and that the primary restraint on computer identity theft was the lack of sufficient numbers of sophisticated criminals.

    So imagine that your credit card gets hacked – it’s expensive to re-establish your unique identity, and a major hassle. But ultimately, you are replacing a plastic card. What happens when they get your digital thumbprint? Are you going to hack off your thumb and replace it?

    The sheer portability of digital information makes security a key area. No one should be comfortable here, especially since the fine print says they can’t be held responsible or sued for damages if a company loses control of your private information.

    We’ve had a number of stories about technology recently, some of them focusing on concepts that proponents say will make stores and customers more productive and save money for all. In our commentary, we have pointed to the importance of making sure that technology is a tool not a strategy…and noted that not all retailers take this approach.

    MNB user Ted File wrote:

    Is technology just another cost that will sooner or later be passed on to the consumer? That is not a cost saving to anyone....long nor short term.

    And MNB user Glen Terbeek wrote:

    So often, technology is incrementally implemented to automate the current processes and business model, and not to reengineer the shopping experience.

    Privacy typically becomes an issue only when the consumers don't see any real (what's in if for me?) incremental value to the technology. Meanwhile, the technology advantage is shifting to the shopper; they are learning how to use it and what to expect from it.

    But look where the industry spends all of their technology mind share and maybe dollars. RFID, CPFR, data sync, exchanges,....

    If the economic, business, and technology model truly work for the shopper first, there would be much more emphasis on demand side technologies today than there is on supply side technologies. In fact, the supply side will be significantly rationalized, very different from what is being automated on today. However, that means the industry can't make money on buying anymore; they will have to make money on creating a competitive shopping experience.

    That means management will need to think like shoppers, not like distributors.

    MNB user Jeff W. Totten wrote:

    I love the comment, "technologies that make everyone's lives easier and more productive." Albertsons has recently put in self-checkouts and Winn-Dixie has had it longer, here in Hammond. I've used both, and am leery of both. My wife will not use the self-scanners if she has produce. The systems also seem to have problems with the bagging area, taking coupons, and the use of community cards (where a portion of my grocery bill is donated to my church, in my case). In fact, at Winn-Dixie, it's a real irritant. If I want to use my community card along with the Winn-Dixie loyalty card, I have to scan groceries, then go to a live person to have him/her scan my cards and run my debit card. So much for making my life easier!

    MNB user Thomas Murphy chimed in:

    You are right, it should never be technology for technology sake. But in the greatest portion of grocery companies, there is an underinvestment in technology. This is causing a greater gap between those who can meet consumer demands with reasonably competitive prices and those who cannot.

    I submit that a number of mid-size regionals have fallen so far behind the curve on technology, and is some cases on remodeled and new store assets, that they could never afford to catch up to the market. This is a tough position to defend from when Wal-Mart or other value players come to town!

    We wrote the other day about the growth in e-commerce numbers, but MNB user David Porter cautioned us not to lose perspective:

    That 23 percent growth rate is really more of a shift…US Department of Commerce data shows that e-retail growth is being offset by a decline in conventional mail-order, and that consumer direct retail in total is remaining relatively unchanged at about 3.6% of total US retail.

    Yeah, but think of all the money on stamps that is being saved.

    We wrote the other day that “someone once said that ‘an economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today.’”

    MNB user Alan Binder responded:

    The author of the quote you cited is Lawrence Peter, who also said, "America is a country that doesn't know where it is going but is determined to set a speed record getting there."

    Sounds like this also applies to the 'technology run amok' thesis of your commentary...

    Just a thought.

    On the subject of childhood obesity, one MNB user wrote:

    How about mandatory physical education in all elementary schools, some kids actually walking to school, less time in front of the TV and the computer, balanced diets at school cafeterias (have you ever looked at what is in a tatertot?) and parents taking at least some responsibility for their children’s health!

    And MNB user Bob Richardson chimed in:

    Ironic or not?

    For the last 15 to 20 years school districts have been cutting back on physical education classes/standards and home economics classes (not just theory on nutrition but how to purchase, cook and serve). The joy of recreation and good, healthy food is getting limited exposure to our children. When you think of the fast paced world of single parents and double income families something has to give. Schools do not take the place of good parenting but reinforcing a healthy lifestyle is surely within their capabilities.

    We had a discussion earlier this week about new product introductions, to which MNB user Philip Herr wanted to contribute:

    I have read with interest the discussion of why so many products fail. And there are additional marketing reasons to contribute. In researching the success or failure of new product introductions, we have learned that line extension advertising can support the parent brand (up to a point) while the opposite is seldom true. So shifting support from the parent to the line extension makes good economic sense for the marketer. Thus the proclivity to line extend. Of course, if the product doesn't offer anything beyond a flavor variant, it won't stay for long.

    And then there is the role of the retailer. Because of slotting fees the retailer has no skin in this particular game. the risk has shifted to the marketer. In fact, failures are just fine. It opens up real estate for the next new introduction and more slotting fees....

    If supermarkets were once again merchants -- thinking about what to serve up to their clients, sifting, choosing and surprising them -- fulfilling their role of true intermediary, then we wouldn't have 45,000 SKU's and befuddled customers.

    Columnist Steven Pearlstein wrote earlier this week in the Washington Post that urban markets like Washington, DC, may prove to be extremely challenging to Wal-Mart because it will force more complex organizational issues on the country. To which one MNB user responded:

    Reads like Pearlstein thinks, as I guess most DC insiders do, that the world revolves around what's best for, what works in, etc., in Washington is to be the model for the rest of the world.

    Not so Steven!

    There's hundreds of locations around the USA whose citizens would still like to have a Supercenter, even a lowly store w/o groceries, that's closer than the one they use now. As long as that's feasible, not being able to put a store in the Southside of Chicago, the Southeast section of DC, or the Bronx, or any similar areas in any big city, Wal-Mart still has a lot of running room, IMHO.

    I'm not looking for Wal-Mart to stop, or even significantly slow down their building pace any time soon.

    MNB user Bob Reynolds chimed in:

    Let's get it very clear:

    • Wal-Mart does not create new jobs -- It moves them around and usually downscales wages and benefits.
    • Wal-Mart does not create new retail sales -- It moves them around from less efficient operators to its own format.
    • Wal-Mart usually does create an alternative and very attractively priced shopping environment that a lot of consumers love.
    Pearlstein gets it mostly right. The Wal-Mart business expansion model has a lot more trouble working in areas of high priced real estate and highly organized and well paid workers than on cheap land and in low wage areas.

    Are they smart enough to figure out hoe to modify the expansion model to make it work in the North and the West? I am sure we will find out.

    We had a story yesterday about how some single-serve packages contain more product than advertised, which raises questions about the calorie and fat content listed on labels.

    One MNB user commented:

    Maybe manufacturers are automatically "super-sizing", knowing that if most consumers actually saw the quantity a single-serving consists of, consumers would be complaining about getting cheated or short-changed. Regarding your comment about mfr's giving away free food--make no mistake, consumers are paying for it.

    MNB user David Metz wrote:

    Being new to the packaging of product I have found that the fines for having less then the amount stated on the packaging could relate to hefty fines. so the packers / co-packers add a bit more to resolve any issues of under packing and fines.

    We keep getting email about Safeway CEO Steve Burd and his relationship with company employees. One MNB user wrote:

    Steve Burd is so out of touch with his employees (and) the public…

    The company would not be failing if he knew what the public wanted he'd be offering it them.

    I see a man that is so driven to get what he wants now that he has forgotten how it was.

    He is more focused on getting concessions from employees (and) he has done nothing to generate new business. He claims they won is Southern California but those stores due to the strike have lost business and the customers are not returning, his idea of repairing it, is to close stores.

    Why not attempt to bring back those customers?

    In Chicago, it seems that Safeway is losing business as a way to wring concessions from the employees, the division isn't profitable, the employees have to make up for the loss.

    I see a man that believes the way to run a business is to take away from the employees rather than to entice customers to shop there.

    We had a story this week reporting on a study saying that CEOs who outsourced jobs outside the US seemed to get better raises than CEOs who did not.

    One MNB user thought this was a good thing:

    The CEOs should get a raise if they are outsourcing to save money and improve profits. Some of the money they save by outsourcing can be used to create new jobs.

    And another MNB user responded:

    Is it possible, perhaps, that the outsourcing companies were more profitable than the others—which translates into higher pay for their CEOs?

    You almost make it sound like they were REWARDED for their nefarious activities rather than their results.

    We didn’t say that. We were just reporting the study.

    It seems to go without saying that companies that outsource generally are more profitable, and that their CEOs would be rewarded for that. The question is what impact outsourcing is having on the US economy, and on the quality of life for the American middle-class - questions that need to be answered.

    What does it profit a man, if he shall gain the whole world but lose his own soul? (Mark 8:36).

    We had a piece yesterday about the City of Philadelphia considering wiring the entire city for wireless Internet access.

    MNB user Brendan Haslam responded:

    This (wireless networks that cover the entire city boundary) sounds like a great idea, one for every major city in the country would be good. With that being said, it doesn’t seem to be an idea that would come from the Philadelphia government, one that seems to shy from progressive movements or action.

    We recently saw to it that a world-renowned skateboard area (LOVE PARK) was designated “unskateboardish.” We put our new stadiums as far away from the downtown area or as far against the suburban border as possible, unlike the cool ballparks situated in or near the center cities of Pittsburgh, Baltimore, Detroit, & Milwaukee. Over the last 20-30 years, we have seen unprecedented people move out of the city to the suburbs, we’ve watched factories shut down without replacement plans, and we continually have city school issues.

    Even though I would love for all people to have unlimited access to the internet in the city of Philadelphia, I would think from my experience of living in the city, that it’s not a good idea. We could use that money to attract more residents, clean the city more regularly to get people to live or visit more often(having wireless networks would get buried head to head with clean cities if you polled people probably), and/or BUY TEXTBOOKS FOR KIDS IN THE INNER CITY SCHOOLS!!!

    Having a wireless network that covers the city?????? Seems like a long-term plan to draw people to the city, allow ‘low-income’ residents to access the internet when apparently they don’t right now, and create some good PR for the city. While this is a good idea, a progressive one at that, the amount of money it would take to make it happen represents some of the shortfalls the education system are facing. Not to mention the upkeep: 1.5 Million a year? I’m sure that figure will stay stable, or they won’t bungle it like they bungled the water company.

    And another MNB user observed:

    Wow...suddenly some of those SciFi pics I love seem just a little more plausible! Helllooooo Matrix!

    And finally, MNB user Georganne Bender had a comment about one of our stories:

    I love Phil Lempert's Food Allergy Buddy card! Making some servers understand that if they put a certain ingredient in my food they will be calling 911 is a scary thing. This is not a good thing when you travel as much as I do. Many servers don't listen at all, and some only half listen, later realize what they've done, and have to run back to my table to grab my plate, hoping I haven't touched it yet. Mon Ami Gabi at Paris Las Vegas actually completes a form, on hot pink paper no less, that follows my order every step of the way. Dining out would be a whole lot easier if all restaurants had that level of customer concern.

    Thank Phil for his great idea, it will help a lot of people.

    Consider him told.
    KC's View:

    Published on: September 3, 2004

    Monday is Labor Day here in the US, a national holiday on which we celebrate/mourn the de facto end of summer. MNB will be taking the day off, but we’ll be back in business Tuesday morning with all-new stories, commentary and attitude to spare.

    (We won’t be relaxing, though. Monday is the day we drop the eldest Content Kid off at college…a seminal event in the Coupe household. Can we possibly be that old?)

    Have a good weekend. Sláinte!!
    KC's View: