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: January 30, 2008

    In recent weeks, there have been stories here on MNB and elsewhere about how Wegmans, and then Andronico’s, decided to stop selling tobacco products in their stores. Their decisions were made, according to all reports, based on ownerships’ feelings that tobacco sales were inconsistent with the stores’ broader brand equity and health/wellness orientations.

    It has been brought to MNB’s attention that ShopRite Supermarkets of Cherry Hill, New Jersey, actually made the same decision last August when it acquired three former Stop & Shop Supermarkets last year.

    According to sources, the decision was made for business reasons – tobacco was seen as a declining category with low profit margins. Add to that the fact that fewer people smoke than in the past, and it reportedly was an easy decision for ShopRite to make….and one that we’re told the company has not regretted.

    KC's View:
    Just because it was a business decision rather than a “moral” decision doesn’t make it any less important or impressive. And as has been said here before, the list of retailers making this decision is expected to grow.

    Published on: January 30, 2008

    The front-page story on this morning’s Wall Street Journal: a story about the next big food trend - ice chewing.

    “Ice isn't just for chilling drinks anymore, or for packing fish and treating sprains,” the Journal writes. “It's a hot snack. Some Sonic Drive-In franchises sell it in cups and in bags to go. Ice-machine makers are competing to make the best chewable ice, with names like Chewblet, Nugget Ice and Pearl Ice. One manufacturer calls the ice loving South the ‘Chew Belt.’

    “Generally, more ice is sold during the summer, but people who compulsively chew ice do so whether it's hot or cold outside. One Sonic in Texas sold 13 10-pound bags, at $1.49 apiece, in one week this month.

    “Sales of machines that make easier-to-chew ice jumped about 23%, to 16,673 units in 2006 from 2003, according to data from the Air-Conditioning and Refrigeration Institute. Some ice chewers, including country-music star Vince Gill, have had the machines installed in their homes.”

    KC's View:
    Just when I think I’ve seen everything, stories like this pop up.

    Ice. Go figure.

    Published on: January 30, 2008

    The BBC reports that beginning this autumn, Tesco will no longer accept personal checks in its UK stores.

    The announcement comes after a similar announcement by Asda, Marks & Spencer, and Sainsbury, according to the BBC.

    Older customers who use checks will be counseled about their other payment options.

    KC's View:
    While I haven't written a check at the supermarket in years, I have to wonder about the wisdom of eliminating them as a payment option.

    Granted, they may be inconvenient for the retailer. But if customers want to use them, it seems to me that retailers ought to take them. It won’t be long before they are obsolete, at which point the retailers won’t even have to make an announcement.

    Published on: January 30, 2008

    • Wal-Mart announced yesterday that it is lowering prices on thousands of items by between 10 and 30 percent, as well as offering no interest payments for 18 months on purchases of $250 or more made on its Wal-Mart credit card.

    The company framed the price cuts as being its own “economic stimulus package,” coming even as the federal government negotiates and debates a federal approach to the worsening economy.

    “We all know economic times are tough so our plan is to help with added savings throughout the year, focusing especially on what people want, when they need it,” said John Fleming, Wal-Mart’s chief merchandising officer, in a prepared statement. “Shoppers are depending on us to deliver the best price so they can stick to their plans, no matter what the economy throws at us. We won’t let them down.”

    The price cuts cover food and nonfood products.

    • The New York Times this morning reports that “in a major revamping of its sluggish clothing business, Wal-Mart Stores will shut two divisions at its headquarters in Arkansas, eliminate dozens of positions and move dozens more to New York City.

    “This will be the first time in years that Wal-Mart, a company renowned for growth, has laid off a significant number of workers at its headquarters.

    “The overhaul, which has not been made public, is intended to revive one of the weakest departments in Wal-Mart’s 5,000 stores: men’s, women’s and children’s apparel, a $30 billion business for the retailer.”

    The move is seen as a complete reversal of the company’s previously announced strategy, which was keyed to more upscale brands and collections. Instead, Wal-Mart is now embracing basic items like t-shirts, with a more overt focus on value.

    KC's View:

    Published on: January 30, 2008

    Expect salmon shortages this year. The San Francisco Chronicle reports that “the Central Valley fall run of chinook salmon apparently has collapsed, portending sharp fishing restrictions and rising prices for consumers while providing further evidence that the state's water demands are causing widespread ecological damage.

    “The bad news for commercial and sport fishermen and the salmon-consuming public surfaced Tuesday when a fisheries-management group warned that the numbers of the bay's biggest wild salmon run had plummeted to near record lows.”

    KC's View:
    Next thing you know, they’ll be predicting a shortage of Emeril’s Essence. Then I’m really in trouble…

    Published on: January 30, 2008

    • The Financial Times reports that Amazon is launching a streamlined version of its site that is specially designed for mobile phone users, “enabling registered customers to buy online using their existing credit card or bank accounts. It includes features from the company's regular website, including customer reviews and product images.”

    FT notes that this is seen as “a significant advance for the development of US wireless commerce and marketing.”

    KC's View:
    A point constantly made here on MNB, most recently by Michael Sansolo is his column yesterday, is that retailers need to start working now to create systems and services that appeal to the next generation of consumers, who will be the center of the marketing bulls eye before you know it.

    That’s exactly what Amazon is doing here. Competing retailers should take note.

    Published on: January 30, 2008

    Interesting piece in the Wall Street Journal this morning about Sears Holdings Corp. and how its CEO, Edward S. Lampert, is acknowledging the serious trouble that the retailer is in, is conceding that his approach to rejuvenating the retailer has not worked, and, remarkably, is “bristling” at the lack of faith that investors and analysts are showing in the company.

    “He complains that Wall Street analysts have swung between two extremes, from praising the company a few months ago to savaging it now,” the Journal writes. “Analysts have said Mr. Lampert has invested too little in upkeep of stores and that he hasn't made the major changes required to turn around the company. In the past three quarters, profits at the retailer have declined on a year-to-year basis despite new marketing, online and sales initiatives.

    "’What we're trying to do is not for the faint of heart,’ Mr. Lampert says. ‘This is a big challenge. We're trying to build a great company.’ He says he understands investors' doubts about turning the business around, because both Sears and Kmart have struggled for years to increase sales. But the criticism hurts efforts to keep existing employees and attract new ones, he says.”

    Sears’ CEO, Aylwin B. Lewis, has been ousted, and Lampert is engineering an organizational restructuring that is designed to both stimulate innovative decision-making throughout the organization and create a “transformational” retail environment. But while Lampert – who has much of his personal wealth tied up in Sears – originally envisioned that this would be a five year effort, now he says it will take longer.

    KC's View:
    Much longer, I’d guess.

    I actually sort of feel bad for Lampert, who has been regularly referred to here in this space as “Fast Eddie,” mostly because he reminded me of the Paul Newman character in “The Hustler” the “The Color of Money.” At one point, noting that he was taking on a marketing role with the company, I noted that this was unlikely to succeed because he knows more about hedge funds than hedge clippers…and unfortunately for Sears, it seems that this was one of the rare times that I actually was right.

    One source close to the company told me over the weekend that it has been frustrating for Lampert that he has not been able to create an employee-friendly culture at Sears and its Kmart operations, and that at one point he bemoaned the fact that he pays people as well as Starbucks but has been unable to create the same sort of culture within the company.

    Well, as has been noted here before, you can't just create culture. You have to seed it and nurture it and pay constant attention to it. And it is very hard to grow culture on land that primarily is concrete. Culture is a matter of corporate DNA, and just cutting checks isn’t the only way to create it.

    Finally, I have to say that it is amusing to read that Lampert is frustrated with the fickle nature of stock analysts. Isn’t that sort of where hedge funds like Lampert’s live?

    Published on: January 30, 2008

    USA Today reports that Wal-Mart has signed a deal with the Disney Channel that will result in the retailer creating a marketing campaign around the popular TV series “Hannah Montana.” Wal-Mart says that it wants to be an “affordable” alternative for licensed merchandise, which in this case will include food, clothing and accessories.

    According to USA Today, “The series stars Miley Cyrus, 15, daughter of country crooner Billy Ray Cyrus. She plays normal teen Miley Stewart, who has a secret life as pop star Hannah Montana. Hannah is cool enough to resonate with girls, while alter-ego Miley is sweet enough to reassure parents.”

    KC's View:
    I know my daughter watches “Hannah Montana,” but I knew virtually nothing about the series until reading this story. (I figured it was on the Disney Channel, so how much did I have to worry.)

    This much I do know – that if Wal-Mart really wants to generate customer traffic, all it has to do is sell “Hannah Montana” concert tickets, which apparently are so hot that parents were donating kidneys to get them.

    One other thing. The folks at Wal-Mart are to be commended for being attuned to such pop culture goings-on, and for using them to their own marketing advantage. It’s one sure way to maintain relevance.

    (Good thing that Wal-Mart was negotiating with the producers of “Hannah Montana,” and not the people producing “Zoey 101,” which would have created some image problems…)

    Published on: January 30, 2008

    • The Flint Journal reports that Kroger will begin selling E85 fuel today. E85 is described by the Journal as “an alternative fuel that is a blend of 85 percent ethanol, which is made most often from corn, and 15 percent gasoline - currently sells for about $2.55 per gallon, about 30-40 cents a gallon cheaper than regular unleaded fuel.” However, E85 can only be used in flex-fuel vehicles.

    • Associated Wholesale Grocers reportedly will acquire four Dillon stores, in Kansas and Missouri, from Kroger. The deal is expectedly to close next month.

    At the same time, there are published reports that Dillon may acquire five Homeland stores owned by AWG in Wichita, Kansas.

    • The Seattle Times reports that Costco has lost a legal battle over the role of liquor distributors in Washington State, as the 9th U.S. Circuit Court of Appeals has ruled that the state’s liquor board “can ban distributors from offering high-volume discounts and variations in prices to different retailers. It also upheld rules requiring distributors to make deliveries to each store rather than a retailer's central warehouse.”

    Costco previously had won a legal fight to overturn the state’s rules, but the appeals court overturned that ruling. The retailer still has the option to appeal the new ruling with either the 9th U.S. Circuit or the US Supreme Court.

    • Federal antitrust regulators reportedly have approved the $2.6 billion acquisition of Kraft Foods’ Post cereals business by Ralcorp Holdings.

    • The Chicago Tribune reports that Supervalu’s Jewel-Osco plans to move its headquarters to a more modern facility in Itasca, Illinois, from Melrose Park, where it's been based for 53 years.

    KC's View:

    Published on: January 30, 2008

    • Natural foods retailer Earth Fare has hired Jack Murphy, a co-founder of Fresh Fields, to be its new CEO/president. The move comes after the resignation last week of Earth fare CEO Michael Cianciarulo.

    • Gristedes Foods announced yesterday that Renee Flores has been appointed chief of the chain’s Security / Asset Protection Department.

    Flores most recently was director of loss prevention at Gap Inc. / Old Navy stores. Prior to that, she was director of asset protection for the Food Emporium chain of supermarkets.

    KC's View:
    I’m sure Renee Flores is terrific.

    But if Gristedes’ management had waited just 24 hours, they would have had a real shot at Rudy Giuliani.

    Published on: January 30, 2008

    MNB user Andy Casey had some thoughts about Michael Sansolo’s column, “FaceBook, Dick Clark & You”:

    What you say is true, although to me the chasm seems far greater than the rock and roll analogy you use. The real key is how fast life is changing as the technology continues to morph, and what appears to happening is that the time between generations is collapsing. For centuries, children's lives were little changed from their parents and even their grandparents because the world changed so slowly. With the industrial revolution, change began to happen more quickly and experiences began to differ markedly from one generation to the next. Today, technology drives change so quickly that even siblings born only a few years apart may have such different experiences they are truly in different generations.

    Being connected all the time changes the way people relate to the world and each other in ways having implications for everything from privacy to branding to communication. Time to market becomes ever more critical because if you spend six months trying to understand FaceBook and develop a strategy for that, many will have moved on.

    MNB user Tom Drummond wrote:

    I would have never believed what I just read, but the truth be told that our generation ‘Y’ does communicate just as you stated. I employ youth in my business, and found out a year ago that I can no longer communicate via e-mail unless I give them a heads-up via texting that they have an important e-mail waiting for them. E-mail is just too slow …. And texting is the only way I can possibly reach my people unless I want to call each and every one of them. And, a phone call to their cell will not guarantee that they will remember anything that I told them. I also realize as you mentioned that this is just the generation gap of today, and your analogy to The Stones is ‘right on!’

    Responding to criticism from an MNB user about how Supervalu has handled its Sunflower Markets concept, made in the light of the decision this week to close the format, one MNB user wrote:

    I’m a former Albertson’s employee who accepted a position with Supervalu last year. Although I understand the frustrations the person who was involved with Sunflower markets (and former Supervalu employee), I also realize enormity and scale that Supervalu acquired from the countries’ third largest grocery retailer (taking Wal-Mart out of the equation).

    Supervalu made a conscious and financial decision to acquire Albertson’s better performing assets, and subsequently assumed the good and bad from this organization.

    Albertsons had/has A LOT of VERY smart people who built a solid retailer, and a company that focused on serving customers first – something the Mr. Joe Albertsons always emphasized. Unfortunately, recent missteps and bad management (at Albertsons) led to the destruction of those core principles.

    Supervalu’s new business model has dramatically changed, and when you’re a 80/20 company (80% wholesale, 20% retail) and you flip that equation, your strategy needs to focus on leveraging the scales and infrastructure that reflect this new model. Wall Street really doesn’t care about cool, little things that a company is doing (unless it’s profitable); Wall Street cares about ID sales, growth projections and forward earnings. Underperforming assets must be reduced and strategies for growth must be executed (with measurable results).

    I think Mr. Noddle is doing a FANTASTIC job steering this behemoth, and I believe he and his Management team are taking the proper steps to build a highly successful enterprise, and making it a great place to work, shop and invest!

    Another MNB user had a different take:

    I live in the Columbus market and shopped the Sunflower stores on occasion. They were doomed from the start as few consumers knew who they were and what they were about. Supervalu opened the doors and did very little real advertising other than spotty ROP and a tiny bit of radio that ironically was running Sunday morning following the closing announcement in Saturday’s paper. In addition it didn’t help that all three stores in the Columbus market were merchandised very differently, with what appeared to be no real direction on fresh nor organic in their latest Dublin opening (placing fresh baked goods in white bags in piles on tables is but one example of what the heck were they thinking).

    I described Sunflower to my neighbors as the “poor mans Whole Foods” , unfortunately they failed to create the buzz necessary with their core audience. The shame is this platform could’ve worked given the proper leadership and focus on basic merchandising and consumer engagement.

    On the issue of price vs. selection, and which is more important to consumers, one MNB user wrote:

    I have had the opportunity at my place of business to actually walk through one of my stores as well as my competitor’s, with several customers. During those walks one thing was clear. Although my produce dept. was better from the quality standpoint, it wasn't better from the selection standpoint of my competitor. I asked the customers on more than one occasion that question.

    Example: A display of limes at my competitor had several off condition limes in the center of the display. I asked if that impacted their purchasing decision and they stated that because there was such a large selection that it really didn't matter. The competitor had over 200 limes on display (my store may have had 50 quality limes). We walked to the wet vegetable section and there was slime coming off the shelving unit above the romaine lettuce. Again I asked the question and again I got the same answer. I had clean shelves at my facility with half the selection and the customers felt the display was "picked over." I put an action plan in place in that store. Double the selection on the top 20% of items driving 80% of my sales. Currently the dept. is trending ahead of last year’s sales.

    Many people get confused between selection and variety. The individual who commented about 1000 types of peanut butter appears to be one of the confused ones. Selection is the actual amount of a variety or type that is on display in a store. I believe that the study that was done was referring to that aspect of selection and I believe the study is right on in most instances. In some of my stores it wouldn't matter, but to my target customers it does. "Trust Me."

    More MNB users weigh in on the wind energy debate.

    MNB user Pete Marotta wrote:

    I am all for windmills. They can contribute to our energy solution. I also believe that all new homes constructed in the Southwest and sunbelt should be requited to have solar powered attic fans and even solar electric systems. Adding even a conventionally powered attic exhaust fan should be required in all new homes in the US as this simple $50 fan will save millions in dollars in home cooling costs.

    On windmills, out here in the Altamont Pass area of California, we have one of the largest wind farms in the country. Unfortunately, we cannot expand the number and are actually reducing number the windmills because of lawsuits by liberal environment groups. They say thousands of Raptors and other birds are being killed by windmills. Now, we face a situation where we are gridlocked. We have a source of clean power, but birds are being killed. Also here in California, we have other liberal groups advocating for the destruction of the Hetch Hetchy Dam. The Hetch Hetchy Dam = provides electricity to San Francisco to power their famous street and Cable car systems, and it also provides clean water to millions of people. Destruction of the dam would result in a deficit in water and electricity supplies in a state already critical of both.

    This is the problem I have with some environment groups, they refuse to make compromises and judgments based in the real world.

    They would rather we burn up fossil fuels and Natural gas supplies to make electricity instead of windmills and Hydro power, because they do not like the execution of those power sources. It’s a Faustian bargain and we have to make in to continue economic growth.

    Another MNB user wrote:

    On the subject of windmills………just saw a news story last night about new architectural designs that can be used in any setting. They showed a mock up drawing of these art inspired models in an urban setting and they were quite attractive and smaller than the conventional designs we are familiar with today.

    But not so fast, says another MNB user:

    While we’d all like to use the wind, it is not practical in many areas. The typical well-insulated facility using some of the best energy- saving technology is still going to use upwards of 100,000 KWH/mo. One turbine with a total wingspan of 18’ in east-central Illinois is estimated to produce about 700 watts up to 1900 watts on sustained basis (that is less than 2 KWH). For perspective, a microwave oven or a hand-held hair dryer are rated at 1500 watts.

    The cost is about $15,000 and the savings are less than $500 per year; so you’re talking a 30-year payback. That’s blight on the capital budget.

    I have to be honest. I have no idea what any of this means. When it comes to electricity, I know the difference between 60 watt and 100 watt light bulbs, and that’s about it.

    But it sounds impressive.

    Finally, the email of the day comes from MNB user John Quinn, who had a thought about yesterday’s piece about so-called “love foods”:

    Oysters are not a good aphrodisiac. I ate a dozen of them once and only 6 worked!!!

    KC's View:

    Published on: January 30, 2008

    Forget Sunday’s Super Bowl.

    The New York Mets announced yesterday that they have completed a trade for Minnesota Twins pitcher Johan Santana, contingent only on the Mets being able to negotiate a contract extension with the pitching phenom.

    Pitchers and catchers report in less than a month. Yippee!

    KC's View: