retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: February 3, 2005

    The Atlanta Journal-Constitution reports that a new study by IHL Consulting says that while consumers scanned $70 billion worth of self-serve transactions in 2003, that amount will nearly quintuple to $330 billion by 2007.

    Today, according to the paper, self-scanning has become an almost expected part of the shopping experience. Home Depot estimates that 39 percent of all its transactions go through self-scan checkouts. Kroger in Atlanta says that 40 percent of its transactions there are going through self-checkout.

    In the near future, consumers will find self-scanning options at myriad places – hotels (Hyatt will follow Hilton into this arena), convenience stores, fast food outlets, even the post office.
    KC's View:
    Here’s the line from the Atlanta Journal-Constitution that bothers us:

      “Where modern consumerism is concerned, human interaction is becoming passé…the store of the future might allow customers to collect what they need, walk to their cars and check out automatically — all without taking out their wallets or talking to a soul.”

    We’ve always worried about this. Especially in a time when stores are looking for any and all differential advantages to help them compete effectively, we have long been concerned that abandoning all human interaction actually plays against this. Stores ought to be trying to hire better people and more of them…establishing human connections whenever and wherever possible.

    That said, we have to admit that we use self-checkout at every opportunity. At Home Depot (where most of the people are useless anyway). At the airport (where kiosks can be lifesavers when you’re running late these days). Recently at a hotel (where we used one the other day to circumvent a long line at reception). And at supermarkets in our area that offer the option (though the stores we use the most – Stew Leonard’s, Trader Joe’s, and Costco – don’t have it).

    So we’re coming around on this one…though we continue to believe that while it makes sense for retailers to speed things up when they can, most stores should be putting a greater emphasis on their people. Maybe they shouldn’t be at checkout. Maybe they should be in aisles, telling people about the products on the shelves. Maybe they could be at an Apple Store-style Genius Bar, offering advice and counsel.

    But we remain convinced that the depersonalization of the retailing experience is a negative trend that, maybe, has very little to do with self-scanning.

    Published on: February 3, 2005

    The Seattle Post-Intelligencer reports as wine becomes a more regular part of American life, boxed wines will inevitable become more available and higher in quality.

    “According to industry data, the category of premium 3-liter boxed wines (the 5-liter and larger boxes still are used only for the jug-style wines) has grown by 29 percent over last year while dollar sales have increased more than 60 percent,” the paper reports. “The Scholle Corp., maker of virtually every boxed-wine container used in the United States, plans to sell 3 to 4 million units this year. Not bad for a category that simply didn't exist here two years ago.”

    The paper writes: “In Australia, the subject is no longer even news. More than 50 percent of all wine consumed in that country is from boxes and has been for years. In Sweden, it's more than 60 percent and the wine-snooty United Kingdom is fast approaching those numbers. Even (gasp!) the French have embraced the concept.

    “When -- inevitably -- it is fully accepted here, the box revolution will dramatically change the way we buy and drink our wine. Wine will be less expensive, more accessible and less mysterious and consumption is sure to go up as it has elsewhere. This could well be the great democratization of wine that so many of us have been waiting for. It certainly will be a boon to the industry.”
    KC's View:
    Not so fast.

    While we certainly are thrilled with the democratization of wine and the expanded enjoyment of it by US consumers, we think that losing the mystery is not completely a good idea. We feel about this the same way that some Catholics believe that the church went into decline when they stopped saying mass in Latin and started doing it in English…when the mystery vanished, so did some of the attraction. (Others would argue that the Catholic Church has far greater problems than what language is used at mass…but that probably is a discussion that this former altar boy should have in another venue.)

    We have long felt that one of the most romantic sounds in the world is the sound of a cork being removed from a wine bottle. Hate to lose that.

    Now, there’s another paragraph from the newspaper story that we would bring your attention to:

      “In southern France, locals can buy their wines en vrac -- in glass -- at the neighborhood winery. They help themselves to tastes from several different tanks, each marked with contents and price. After making a choice, customers fill whatever containers they brought with them with a hose that looks exactly like the ones we use to pump gas into our cars. This is wine at its primal best, no fuss, accessible and inexpensive. For many Europeans, wine is a staple at the table, like bread.”

    The paper suggests that this is somehow synonymous with the concept of boxed wines, which we don’t think is accurate. It strikes us as a completely different experience…and the industry should be careful about drawing too many parallels.

    Published on: February 3, 2005

    Amazon.com has unveiled a new program that will offer customers the opportunity to pay $79 a year, for which they then will receive “free” two-day shipping on more than a million of the items that it sells, with the option of upgrading to overnight shipping for $3.99 per order.

    In a letter to Amazon users authored by CEO Jeff Bezos and posted on the site, he noted that the company normally charges $9.48 for two-day shipping for a book and $16.48 for overnight. This new program, dubbed “Amazon Prime,” essentially is a loyalty program that is designed to make it less expensive for frequent users of the online retailer.

    Amazon already offers free shipping for orders over $25, but it usually takes five-to-nine days to get those orders.

    Bezos said that he expected the new program to be ‘expensive” for the company in the short-term, but that he hoped it would help build greater and more frequent usage that would serve Amazon in the long run.
    KC's View:
    It’s interesting that some are calling this “free shipping,” when it actually is anything but.

    Still, this is a very good idea, we think, because it locks many of us Amazon users into continued and frequent usage of the online retailer. If it works, and we suspect it will, Bezos will have yet another feather in his cap.

    Here’s what we really find admirable. Bezos accepts the fact that this could have a negative short-term effect on the company, but looks to the long-term for ultimate validation.

    That’s rare.

    Published on: February 3, 2005

    The Wall Street Journal reports that the Massachusetts Secretary of the Commonwealth, William F. Galvin, has decided to launch an investigation onto the Procter & Gamble acquisition of Gillette Co., expressing concerns about the propriety of a cash payment scheduled to be paid by P&G to Gillette CEO James M. Kilts when the deal closes.

    Kilts is scheduled to get a check for $12.6 million, plus stock in P&G and the option to buy more at a reduced price.

    Gillette has been asked by the state to provide records and minutes of meetings leading up to the decision to accept the P&G offer. Massachusetts state law requires companies to put the interests of shareholders ahead of the interests of company officers, and Galvin said he wanted to make sure that the "fiduciary duty that all the officers had to shareholders in general was fulfilled."

    Part of the concern in Massachusetts is that the acquisition of Gillette, a local company, will result in the loss of a number of jobs. P&G has already said it plans to cut costs by eliminating four percent of the two companies’ combined workforce.
    KC's View:
    The Boston Globe asks very good questions.

    Gillette, a local company, gets acquired. There is the possibility that six thousand people there could lose their jobs. And the CEO walks away with more than $12 million.

    Who is this good for, exactly?

    We’re not saying that the acquisition is a bad idea.

    But in 2005, these are the kinds of questions that top executives and boards have to answer. Because in 2005 corporate America, the honorable CEO sometimes seems to be an endangered species.

    The other interesting wrinkle…we’ve read several places that Kilts will be the most desirable CEO candidate in America once the acquisition is concluded. So this likely won’t be the last big check he’ll be cashing.

    Published on: February 3, 2005


    • The 10th U.S. Circuit Court of Appeals has ruled that a federal judge who ruled in 1999 that Wal-Mart had violated the law by not paying overtime to a number of its pharmacists had acted precipitously and needed to reconsider the evidence.

      A new hearing has been ordered by the appeals court, which did not comment on the merits of the case.

      The pharmacists had maintained that because Wal-Mart changed their hours and salary so much, they in fact were hourly employees and deserving of overtime. Wal-Mart argued that it was operating within the letter of Department of Labor regulations.

      If Wal-Mart loses the case, which has been classified as a class action, some estimates have suggested that it could cost the company as much as $140 million.


    • Retail Forward analyst Sandy Skrovan told an audio forum that Wal-Mart plans to add gas stations to every store that can handle one, which will make it an even greater competitor to the mainstream c-store business.

      “Wal-Mart will be even more successful by 2010 than it is today,” she said. “It took Wal-Mart 42 years to get as big as it is today, but it will take only five years to double its current size.”

    KC's View:

    Published on: February 3, 2005


    • Costco said that its total January sales increased seven percent to $3.67 billion. US same-store sales were up three percent, and international same-store sales were up 12 percent.


    • Starbucks reported January net revenues of $452 million, an increase of 23 percent from $368 million for the same four-week period in fiscal 2004. Same-store sales at company-owned stores were up seven percent.

      Year-to-date, revenues stand at $2 billion, up 24 percent from the $1.6 billion generated during the same period a year ago.


    • Amazon.com reported net income of $346.7 million in the quarter ended Dec. 31, compared to $73.2 million during the same period a year ago. Fourth-quarter revenue was $2.54 billion, up 31 percent from $1.95 billion in the year-earlier period.


    • CVS reported that fourth quarter sales were up 20% to $8.92 billion from $7.45 billion, a jump in part attributed to the company’s acquisition of half the Eckerd drug chain. Same store sales were up 4.4 percent.

      Net income for the quarter rose to $295.6 million, compared with $263.4 million a year earlier.


    • PepsiCo reported this morning that its fourth quarter net income rose to $985 million, from $914 million during the same period a year ago. Revenue rose 9 percent to $8.8 billion from $8.1 billion as overall volume grew six percent.

    KC's View:

    Published on: February 3, 2005


    • Thriftway supermarkets in Washington State says that its stores are seeing thousands of transactions each month being conducted using biometric technology, using a fingerprint to identify themselves and choose the method of payment. First planned for a two-month trial, the system now is a regular part of the stores’ payment options.

    KC's View:

    Published on: February 3, 2005


    • As predicted by MNB more than a week ago, Carrefour CEO Daniel Bernard is expected to resign from the company today. Joël Saveuse, the executive in charge of Europe for the French retailer, also is expected to resign.

      MNB reported last week that Luc Vandevelde, the former chairman of Marks & Spencer, would be appointed as the non-executive chairman of Carrefour, the French retailer. Vandevelde has been on the Carrefour board since 2003, and previously was president/COO/chairman of Promodes from 1995-2000, which subsequently merged with Carrefour.

      However, MNB also noted that when Vandevelde left Marks & Spencer, he was criticized for not devoting enough time to the retailer, which has been in competitive trouble both before and since his departure.

    KC's View:

    Published on: February 3, 2005

    Industry issues, initiatives and challenges can look vastly different, depending on your perspective. This year, at Western Michigan University’s annual Food Marketing Conference, one of the sessions will endeavor to engage both industry leaders and university students in an examination of the critical challenges facing the business – in essence, talking about the issues and problems that most people don’t want to talk about. The goal will be to bridge the generational divide, stimulate fresh thinking, and expose each side’s preconceptions and misconceptions.

    Among the industry leaders who have already agreed to appear – Michael Sansolo, senior v.p. at the Food Marketing Institute (FMI). And moderating the session – leading the participants through the minefield of industry issues – will be Kevin Coupe, “Content Guy” at MorningNewsBeat.com

    But here’s where you come in: We want to know what issues you think ought to be discussed, what usually unmentionable topics not only ought to be mentioned, but examined…even at the risk of political incorrectness.

    Let us know via email: kc@morningnewsbeat.com .

    For more information about this session and the WMU Food Marketing Conference, which is celebrating its 40th anniversary this year, go to:

    http://www.hcob.wmich.edu/fmk/
    KC's View:

    Published on: February 3, 2005

    Continuing discussion of whether or not – and under what circumstances – a retailer should be divulging frequent shopper information (a subject raised when police used Safeway’s database to gather evidence) in an arson case).

    One MNB user wrote:

    Once a company chooses to purchase loyalty, and a consumer chooses to sell it, there are two paths for the ensuing result. One, the company wants to validate the consumer is part of the 'club' in order to receive some benefit; e.g., discounts. For this one, all the company needs to know is the person making a purchase is authorized to receive the benefit – no identification other than an approved token (card, number, etc.) is required. In this case privacy is not an issue since the customer doesn't have to reveal any personal information other than an interest in joining the program. This program is easy to set up with simple protocols, but it doesn't deliver the primary benefit the company seeks.

    In the second path, the company is not concerned with validity, but rather with sales. Here the company desires a contact list they can 'pitch' deals to, regardless of the loyalty of the consumer. Obviously identity is important here to separate the contact from the unwashed masses. In this situation, which is how the vast majority of loyalty programs work, privacy should be a big deal, even in the face of legal conflicts. In the old days of the Republic there was 'innocent until proven guilty' which put all the weight of proof on the accuser to actively seek facts supporting their case. My concern about the porosity of databases now is the accused is more and more in the position of having to prove innocence as a result of details about their life being handed to anyone interested in fishing around for a case.

    It may seem odd, but I am willing to be very loyal to any company that will deliver a benefit but really has no interest in knowing who I am. Isn't my business sufficient for them without opening my life to scrutiny?


    It isn’t specific to this discussion, but we’re fascinated by the phrase “purchase loyalty.” You can’t purchase loyalty. We’re not even sure, in the final analysis, that you can earn a customer’s loyalty. What you can do, we think, is demonstrate to the customer that you are loyal to him or her…and trust that this continued loyalty will result in the habitual use of your store.

    Now, when it comes to the use of the data…our honest reaction, if we found out that a store was giving out shopping data to any organization – governmental, law enforcement, or private – would be negative. That doesn’t mean we have something to hide…but it does mean that our business is our business.

    Granted, there would be times when a subpoena might be used to get the data. And in a time when reporters are being sent to jail if they don’t divulge their confidential sources, it probably would be tough for a store to argue confidentiality. But we’d want to know that the store at least tried to protect its information, that it advocated for the customer in such a matter.

    Another MNB user wrote:

    Let’s see…all the local chains have program cards except one. Therefore if I am a criminal I will go to the one that doesn’t have a card program, I obviously don’t want law enforcement having access to my information. If a customer gets mugged in the parking lot, do they have cause against the retailer? After all, the retailer by not having a card program made it more likely that criminals would shop at their store. Welcome to America.

    MNB user Brad Zemcik wrote:

    I think a clarification is needed here. The only reason we have "loyalty cards" is to take advantage of the reduced shelf price. I venture to guess that most "loyalty card" users do the same.

    It is a shame that retailers are using manufacturer promotional monies, intended to reduce the shelf price for EVERY shopper, card or not, and turned it into a "loyalty card" issue.

    In Southern California the "used to be" big chains are nothing more than big convenience stores anymore and this has been amplified since the strike last year. Most people I speak with now price shop, not loyalty shop.

    Retailers are reaping huge profits on promoted items because they get the deal price whether or not it goes for the feature price to a "loyalty shopper" or a regular price to a shopper without a loyalty card.

    Since there is no loyalty from the chains to their shoppers, "loyalty card" holders or not, how can they expect "loyalty" in return?

    Wouldn't it be novel if retailer passed on manufacturers price reductions to ALL shoppers. Will history repeat itself?


    Another MNB user wrote:

    In the age of technology, you would think a smart individual would realize that this information can be accessed by law enforcement agencies. If they can access your pager, cell phone, "fast pass" toll plaza information in addition to credit card, email, home telephone, etc. why not your loyalty card? Do we hold these other companies in contempt for releasing of personal information when the data they provide leads to an arrest? It's not like we don't know this information isn't being stored in databases. Let's face it folks, big brother is watching and the more hi-tech we get, the easier it is for him to do so.

    We accept the notion that because of technology’s role in the way we live, our lives are more an open book than ever before. But that doesn’t mean that we shouldn’t do our best to carve out niches of privacy where possible.

    Otherwise, you end up living as a number in a society without privacy called The Village.

    Another MNB user wrote:

    Have we moved so far left in this country as to have reached the point of defending the "right" of someone to commit a crime anonymously? If someone buys enough fertilizer to make a bomb to blow up a building and that is traceable through whatever means, that is what should happen. Whoever cooperates with the police should have done so.

    However, I do not want my loyalty information sold or given to another company to allow them to "harass" me with advertising through the mail or via email. Some customers may be willing to allow this. I am not.

    Police and the FBI should have different, more sweeping power than people trying to make money off of information.


    The phrase “sweeping power” makes us nervous. Very nervous. Because once you go down that road, sometimes what ends up being swept away are people’s rights.

    By the way, when did the preservation of individual privacy rights become a priority of the left?




    We also got a number of emails in response to yesterday’s essay about values in retailing.

    MNB user Kerley LeBoeuf wrote:

    Too many business leaders get confused among mission, vision and values.

    _ Mission is why the organization exists – should be short and sweet.
    _ Vision is what the organization aspires to be – shorter and sweeter.
    _ Values are the basis for our decisions – only need a few and “focus on the long term” must be one.

    Values are where some business leaders trip and fall. Too many leaders make decisions based on earnings per share or other short-term needs or trends – instead of relying on their core values to guide judgments. Values lead to proactive – not reactionary behaviors.


    MNB user Paul Schlossberg wrote:

    There are companies walking the talk. HEB's Central Market is one...a place we loved to shop (when we lived in Dallas). Ditto for Whole Foods. As customers, we felt like they really valued our business. Every employee interaction we ever had was positive, even when we had a problem or complaint about a purchase. Costco is another example where we have always (100% of the time) been satisfied as customers. They handle problems in very positive ways.

    In retail these days there is no middle. Wal-Mart is the clear leader in the low-price and low-service segment. For more high-end service and higher prices, there are specialized retail stores (many mentioned frequently and with positive references in MNB). Call it mass versus class marketing if you will.

    Is it seen as "values" by the customer? Or is it the expectations created by delivering on those values?

    Those selling to us must create expectations for shoppers. We walk in and shop with those expectations. The experience reinforces or changes those expectations (for better or worse). If we are not expecting much, the price should be low. If we are expecting a lot, the price will probably be high(er). Failing to meet those expectations will cause brands (retailers, restaurants, manufacturers and services) to lose customer loyalty.





    And, we got a number of emails about the proposal down in Texas to have children’s body mass index included on report cards as a way of combating childhood obesity…which is similar to a proposal made in New York.

    One MNB user wrote:

    Who was that diet and fitness lady whose catch phrase was "Stop the insanity!"? That certainly applies here. There are school districts in this country that are eliminating physical education programs due to budget constraints, but watch out! They can always find the funds to administer yet another level of bureaucratic BS. Schools should stick to what they can barely do in the first place: educate our kids (and that should include physical education). You need to know if your kids are fat? Have a look at them when they're planted in front of their Play Station.

    We wrote yesterday that “it is worth noting that these kinds of initiatives are taking place in both blue states and red states...cutting across some of the kinds of demographic divides that often separate them.”

    To which one MNB user responded:

    Actually, the issue is pretty specific to a single demographic. The Texas legislator and the New York legislator who introduced these bills are both on the leadership board of the National Hispanic Caucus of State Legislators. President and Vice President respectively. Which is in no way suggesting some sort of conspiracy theory. Just pointing out that these ideas are not being independently generated.

    Yet another member of the MNB community wrote:

    This is perhaps the most ridiculous idea I have heard lately. I cannot imagine a better way to make kids feel even worse about their weight. Not to mention the increase in anorexia/bulimia we will see from girls at an even earlier age. It is absolutely unfair to place a child's weight on their grade card and then compare it to other children's in their age/class. All children develop at different levels at different ages. If you have a very tall person in the 5th grade, they may weigh just as much as a shorter but overweight child, yet feel just as bad. I happen to be a tall, thin woman and have always felt the need to hide my weight because it is higher than average, although I do not look overweight. Because I'm just a bigger person, I've always been sensitive about my weight number, not the actual weight. And it certainly didn't take putting it in a percentile on my grade card to do it.

    We do not place people's weights/BMI on their performance assessments. We do not compare the teachers' weights to their peers. Why should we subject our children to it?


    Another MNB user wrote:

    These kinds of programs disturb me. What is the purpose of measuring the child's height, weight, and BMI? Is this something that is going to be "nice to know" or will there be actionable results taken? Who is going to determine which children are overweight and what measures will be taken? Who will follow up to ensure the corrective measures are being followed? Isn't this the job of the family pediatrician? I fear this will simply become another way to stigmatize children who do not fit someone's definition of being in shape. The psychological damage could far outweigh (pun intended) the physical risks. What's the next step, instead of sending it home on the report card they make the children wear a big yellow F on their lapel for being fat like Hester Pryne? Just another example of people not being responsible for themselves.

    MNB user Anna Bliss wrote:

    After reading MNB off and on for awhile now (and enjoying it quite a bit), I find that it is time for me to add my two cents to the discussion...

    As a one-time pudgy kid (I still bear ill-will towards retailers who branded their larger girls' clothes with phrases like "Pretty Plus" while boys just got to be "Husky"), I worry a lot about the sorts of initiatives being proposed like those in Texas. While I think they may be well intentioned, they don't seem to address two things: the first being kids like I was who ate the same foods (and perhaps even fewer sweets) as my friends and played kickball and jump rope and hopscotch as much as my peers, but was still heavier than they were. I slimmed down without dieting or drastic measures simply by hitting puberty. I was just a big kid - and I think if I had been forced to diet at the
    age of 7 or 8, it would only have lead to a bad relationship for life with food and lower self esteem than I already had because of my larger size.

    Second, these initiatives also don't say what, if anything, they are going to do along with sending home this weight information to talk with parents about helping their children make healthy food choices. I'm guessing the kids with a larger body mass index that are that way because they get fed Twinkies, french fries and soda for dinner rather than broccoli, baked chicken and milk aren't likely to have parents that will do much about changing their child's diet because of a school report card. Maybe a few will, but a lot won't.

    It seems like all this will do is provide playground bullies another piece of ammunition for teasing other kids - and what playground or kid needs that?


    And yet another MNB user wrote:

    Often kid will mimic their parents. Good, bad or different. Our kids don’t need the pressure but would benefit from parents that take them out and show them how to enjoy exercise instead. If it’s made into a job sooner or later they will resent it and probably stop doing it. It might be interesting to note that the parents may need a report card on their own general health as well.




    Regarding ongoing mad cow concerns, MNB user Andy Casey wrote:

    Here is my favorite part: "USDA maintains that the fact that the mad cow cases have been found speaks to the effectiveness of Canada‚s detection procedures." Since we haven't found any in the U.S. what does that say about our detection procedures?

    Could we be looking in all the wrong places?




    And, in response our story about the liberal leave policies offered by Wal-Mart’s Asda Group in the UK, one MNB user wrote:

    The irony, of course, to this wonderful leave policy package offered by Asda is that the firm's parent is Wal-Mart, a company chastised, sued and demonized in part for its employee policies (or non-policies as some would say). I've never worked at or dealt with Wal-Mart, so I cannot speak for how accurate these reports are. Nonetheless, there are certainly MANY of them. Maybe Wal-Mart has the right idea with Asda, which is to seemingly distance itself from the company's own programs. Then again, maybe if Wal-Mart were to do the cutting-edge things Asda has done, people would view Wal-Mart with a much less critical eye.
    KC's View: