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    Published on: April 15, 2008

    The Wall Street Journal reports this morning that UK retailer Tesco is reporting that for the just completed 2008 fiscal year, total sales were up 11 percent and net profit was up 12 percent, and said that its US Fresh & Easy stores are growing strongly…though MarketWatch notes that Tesco expects to lose $200 million (US) on the nascent chain in its first year of operation.

    According to the MarketWatch story, Tesco is “saying the response of customers has exceeded expectations and that sales densities are higher than the U.S. supermarket average. Its best stores exceed sales of $20 per square foot per week. It's still planning to open 150 stores this year and it's planning to expand its Riverside distribution center and kitchen operation.”

    Tesco also said that for the first five weeks of the 2009 fiscal year, total sales were up 13 percent, which it noted runs against expectations that a slowdown in consumer spending might negatively affect its sales.

    "We begin the new financial year confidently - with a good start in the U.K., excellent progress in our established international markets and promising early performance from our investments in future growth, particularly in the United States, China and Turkey," said Tesco CEO Terry Leahy, who also told Reuters, "Customers are more likely to look for value and value is one of the strengths for Tesco. We are a company for all seasons.”

    Regarding Fresh & Easy, Leahy tells MarketWatch, “They're performing ahead of budget, and more importantly - as far as the customer is concerned - they love it … To some extent, people have got vested interests and so they want to see it fail. And I suppose the press are keenly interested in it, and are keen to rush to conclusion. But any seasoned observer will know that it takes time, and you wait for the company to report progress on a half-yearly basis.”

    KC's View:
    There is no question that even for Tesco, losing $200 million this year on Fresh & Easy isn’t the best scenario…but some sort of substantial loss was inevitable.

    At the risk of repeating myself on this issue, the most important stores Tesco will open in the US will be the next ones…because these are the stores that will tell us what the company has learned and how it is applying that knowledge.

    And I certainly agree with Leahy on one point – that rush to judgment simply doesn’t make sense…not when you are dealing with a retailer the size and scope of Tesco.

    Beyond this, I refer you to Sansolo Speaks, below…in which Michael Sansolo draws an excellent metaphor that applies to Fresh & Easy.

    Published on: April 15, 2008

    by Michael Sansolo

    All the discussions about Tesco and the less than stellar start of Fresh & Easy got me thinking...about sports. As you might have gathered from these columns, I like sports. I watch them, I play them and I get injured doing them all the time.

    And I get inspired. Because in so many ways, sports reminds us of triumph, of perseverance, of the importance of practice and the wonder of rising to the moment. Sports gives me the opportunity to have the Mets tear my heart out three months before the Giants put it back in place.

    And while I know it doesn’t matter, I care.

    So, someone please tell me what is going in the swimming pool. I don’t know if you have noticed this, but records for swim racing are falling constantly. It’s to the point that it’s impossible not to notice. While I’m not a swimming fan, this strikes me as rather remarkable news. After all, if there is one sport that should be pure in how records can compare from one era to another, it should be swimming.

    However, that could not be more wrong. The folks at Speedo, who gave us the bathing suits we never want to see our neighbors wearing at the beach, have done something remarkable. They have developed a racing suit called the LZR Racer that, as best I can tell, turns humans into dolphins. Suddenly, no record is safe.

    Now let’s be honest. We don’t really care about swimming here at MorningNewsBeat. We care about business. But the metaphor of the LZR suit is just too good to pass up.

    Because if I were a swimmer I imagine there are three reactions to an LZR-suited competitor.

    1. Laugh it off. After all, I have to believe it looks silly and therefore deserves a laugh.
    2. Claim it’s an unfair advantage after I get beaten soundly.
    3. Buy an LZR suit.

    The truth is that while the world usually moves forward in small steps, occasionally we get an LZR moment. It happens when a competitor figures out something that no one else even considered. Just look outside at the nearest Wal-Mart, Whole Foods, Trader Joe’s, Costco, Starbucks or Jamba Juice. Or look at the people next to you wearing I-Pod ear buds or Crocs or Under Armor…and remember when those companies were all really small.

    In every one of those cases (and many more that I’m not naming here) someone figured out something big. It might have been a gamble on shoppers buying stuff a new way. It might have been a new approach to an old product or service. Or it might have been a dedication to issues that others didn’t have. But with focus and dedication, all of these companies built powerhouses. And even though the mighty stumble from time to time, the changes they wrought won’t disappear anytime soon.

    If we could, we’d all like to have a LZR moment. We’d love to find that incredible breakthrough that makes us unassailable if even for a second.

    But I have to believe the story of the LZR is much more pedestrian than that. I can’t imagine how many minuscule improvements Speedo made on the way to the LZR. Or how many models they tried that didn’t work. Yet, they didn’t give up and the LZR was born.

    Leo McGarry, a character on the television series “The West Wing,” once said something like, “in the history of everything that works, there was a time when it didn’t.”

    So ask yourself, will Fresh & Easy become the latest European casualty in North America or will it yet create a transformative shopping experience?

    Keep your eye on the pool.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .


    KC's View:

    Published on: April 15, 2008

    The Fort Worth Business Press reports on a trend that seems to be evolving in the Dallas-Fort Worth market: Consumers “are turning to specialty grocery stores to fulfill a portion of their shopping needs and that could mean more niche grocery stores for the area.”

    In essence, more consumers are deciding that for certain purchases, they will go to HEB’s Central Market, Whole Foods, Minyard’s Carnival Foods, or Sprouts Farmers Market, and then will use more traditional mainstream grocers for, well, more traditional mainstream purchases. It is a matter of assigning value to specific categories.

    At the same time, according to the story, there are some new players: “In July 2007, a drive-thru grocery store called Fresh Lane joined the slew of new specialty grocers cropping up. Brent Sheed, CEO of Fresh Lane LLC, said the theory behind the 900 square-foot location is to offer customers grocery staple items such as milk, bread and eggs without having to get out of their vehicles.

    “Three Fresh Lane stores are currently operating in the Dallas/Fort Worth market – the flagship store in Saginaw and two Lewisville sites. A Keller location is slated to open this fall and Sheed said he is currently scouting several Fort Worth locations.”

    KC's View:
    It may be that for the first time in a long time, a growing number of consumers are going to have more time than money…and they will be looking for new options and establishing new shopping patterns.

    Published on: April 15, 2008

    The St Louis Post-Dispatch reports on the hot new trend in the brewing business – “extreme beers.”

    “Like genius, extreme beers defy easy classification,” the paper writes, “but you know them when you see them: barley wines ranging above 10 percent alcohol by volume, ultra-hopped ales and wood-aged beers — the traditional turf of wine and whiskey. Although ‘extreme’ beers often have been linked to strong alcohol content, brewers say the label also applies to offbeat ingredients and zany brewing and aging processes.

    “Extreme beers can raise credibility and boost a little brewery's cachet among serious craft beer drinkers, those hard-to-impress folks who can casually discuss a brew's ‘balance,’ ‘gravity’ and ‘hoppiness.’ But to see the beers as sales-boosters would miss the main point, brewers say. Mostly, the creative beers are just fun to make, offering the chance to heed their creative Muse.”

    KC's View:
    There is a lot to be said for heeding one’s creative Muse, and encouraging other people to do the same. For one thing, it makes going to work a lot more fun for everybody.

    And while these extreme beers may not be designed to be big sales boosters, I suspect that the creative urges and the liquid results probably are responsible, even if indirectly, for products that capture the consumer’s imagination.

    This is, in essence, the same point that Michael Sansolo makes this morning – you have to keep working and creating and developing and trying…and eventually something clicks.

    However, I feel compelled at this moment to admit a personal character flaw. As much as I love beer – and I do love beer – I don’t particularly like beer that tastes like wine or whiskey. Not sure why, but there it is. My confession is complete. Mea culpa.

    Published on: April 15, 2008

    USA Today reports on what appears to be the first innovation to come out of the new MyStarbucksIdea.com site created by the company to field consumer ideas and give them a place to offer compliments or complaints.

    It is something called a “splash stick,” described as “plastic plugs for sip holes with tops in the shape of the Starbucks siren” that are designed to stop coffee from spurting from sip holes. The sticks should be showing up in Starbucks stores this week, and the company is urging consumers to keep and reuse them as a way of cutting down on waste.

    The company also says that more than 200,000 ideas and votes have been cast by consumers on the site in the month since it was unveiled.

    KC's View:
    Go figure. Splash sticks.

    That was one I never would have thought of, because I didn’t see the need. Shows what happens when you listen to your customers.

    Published on: April 15, 2008

    Media Post’s Marketing Daily reports that Wal-Mart’s Internet business is preparing to unveil new services later this year that are designed to get online shoppers more engaged with its website – and “engagement,” it seems, is the key metric that the company is seeking.

    Walmart.com CMO Cathy Halligan tells Marketing Daily that while 75 percent of the retailer’s brick and mortar shoppers also go online, too few of them are going to its website, apparently because they are not satisfied with the “engagement” options available to them there.

    Engagement, Marketing Daily writes, “gives retailers the means to monitor more closely what consumers say about the brands they sell, so employees can quickly respond. For Walmart.com, it switches success metrics solely from transactions to engagement, as more information about consumer preferences comes through blogs, wikis, social network sites and videos.” And while the company did create a system last year that allows shoppers to dialog online about purchases they’ve made at Wal-Mart, this is seen as just the first step in a much more sophisticated strategy.

    "We are evolving with our customers to enhance our experience online by including more direct levels of engagement," Halligan says. ""We are evolving with our customers. Our customer community is a fortunate asset that we can learn from."

    KC's View:
    Welcome to the new world, where just making sales isn’t enough.

    The questions that every retailer ought to be asking himself or herself are these:

    Do we have a Chief Engagement Officer? Do our big thinkers even know what engagement is? And what are our strategy and tactics for dealing with this new reality?

    And finally, make this assumption – that if you’re not working on engagement strategies, your chief competition is.

    Published on: April 15, 2008

    Crain’s Chicago Business reports that “already gunning for Starbucks, McDonald's Corp. now is targeting 7-Eleven. The burger chain is urging store owners in the Western United States to slash prices on large soft drinks to $1 this summer to win customers from convenience store chains.”

    The story notes that in doing so, McDonald’s seems to be taking the long-term view, since soft drinks tend to be among its most profitable items. “The strategy carries risk,” Crain’s writes. “Discounting beverages could boost sales, but store owners probably would see profits drop when the price of 32-ounce drinks at many restaurants is cut in half. And rivals could respond by cutting their own prices.”

    One likely outcome, especially if 7-Eleven and other c-stores respond – a soft drink war.
    KC's View:
    The real war is for share of stomach…and almost everybody is a combatant.

    What’s your weapon?

    Published on: April 15, 2008

    Wal-Mart has announced the appointment of Dr. Stephan Fanderl as president of
    Wal-Mart Emerging Markets – East, charged with exploring retail business opportunities in Russia and neighboring markets.

    Fanderl comes to Wal-Mart from the Rewe Group, a prominent German retailer and travel company, where he was a member of the board and head of Hypermarkets and Supermarkets for Rewe Germany.

    "We are exceptionally pleased to have Stephan Fanderl join Wal-Mart Stores," said Mike Duke, Wal-Mart’s vice chairman. "He has outstanding managerial skills and has successfully developed Rewe's business in Germany and eight Eastern European countries."

    KC's View:
    Do we cast Alan Arkin as Stephan Fanderl or as Mike Duke?

    Published on: April 15, 2008

    • A new online grocer has hit the ground running - eOrganicGrocery.com, which says it “offers a full line of organic products including baby food, cheese, coffee, cereal, chips, cookies, fruit, jelly, milk, tea and pasta.”

    Possibly fueled by enthusiasm born out of a partnership with Amazon.com, Michael Pisciteli, President & CEO of Piscitelli Holdings Group, owner of eOrgranicGrocery.com, says that he is aiming “to have at least 1% market share of all online organic sales.”

    KC's View:
    Of course, he didn’t say how long it will take…but we wish him good luck anyway.

    Published on: April 15, 2008

    • Published reports say that Tesco has opened its first convenience store – using the Tesco Express banner – in Shanghai, China. The company reportedly has at least four more c-stores on the drawing board to be opened in the Shanghai market during the current fiscal year.
    KC's View:

    Published on: April 15, 2008

    • The International Business Times reports that the US Food and Drug Administration has traced more than two dozen cases of salmonella infections in 14 states to Malt O Meal cereal sold both under the Malt O Meal label as well as under private labels including Acme, Giant, Hannaford, Jewel and Pathmark. Reports say this is the same strain of salmonella that caused hundreds of illnesses ten years ago, and that also was related to Malt O Meal cereal.
    KC's View:

    Published on: April 15, 2008

    • GMDC announced the hiring of Jane Colvard – the former manager of education at the American Numismatic Association – as its Manager, Member Services, with responsibilities that include growing GMDC’s membership and conference attendance, including creating programs to recruit new members and retain existing members.

    KC's View:

    Published on: April 15, 2008

    • Walgreen Co. announced that its second quarter profits were up five percent to $685.9 million, from $651.9 million during the same period a year ago. Q2 sales rose 11 percent to $15.39 billion, from $13.93 billion. Same-store sales were up 4.7 percent

    KC's View:

    Published on: April 15, 2008

    …will return.
    KC's View: