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    Published on: May 16, 2008

    The Financial Times reports this morning that when Wal-Mart opens the first of its Marketside small store formats later this year in the Phoenix area, the focus will be on "a passion for fresh and delicious food” and “the highest level of customer service."

    Meanwhile, Safeway has opened the first of its take on the small store format – The Market – in Long Beach, California. The unit is reported to have strong presence in fresh and prepared foods, which some products based on items developed for its Citrine stand-alone restaurant concept. The Market is in a former Vons store, and still carries the Vons name in small print, a move that the company believes will give it both credibility and recognizability.

    According to the story, the new stores will be quite a departure for Wal-Mart. "The world's largest retailer - best-known for sprawling superstores with minimal service levels - says that its planned 15,000 sq ft Marketside neighborhood stores will be 'dedicated to helping our customers answer the question, What's for dinner?' The retailer is also planning to prepare and serve food in the stores themselves, a new direction for Wal-Mart that mirrors the approach of more upmarket retailers such as Whole Foods Market. The stores will include a kitchen, food counters, and seating for up to nine people, according to planning documents."

    Also according to the FT story, "The Marketside format is a third of the size of most of Wal-Mart's 134 Neighborhood Market supermarkets, and less than a tenth of the size of most of its more than 3,400 superstores. The stores will be trading under a logo depicting a pile of stylised vegetables and fruits, with the Marketside name in green and a small blue star providing the only branding reference to Wal-Mart."

    The new format allows Wal-Mart to expand its presence in markets without the political issues that have challenged its supercenters in some areas, and it also allows the company to compete head-on with Tesco, which has been opening small-forma Fresh & Easy Neighborhood Markets in Southern California, Arizona and Nevada.

    KC's View:
    This is going to be a pitched and fascinating battle, because you just know that Wal-Mart and Safeway are going to do something very interesting…neither can afford to let Tesco get a secure foothold in the US, and now – when Tesco at least appears to some to be vulnerable – is precisely the time to deliver a crushing blow.

    Published on: May 16, 2008

    reports that a hearing yesterday before the US House of Representatives Judiciary Committee antitrust task force has retailer organizations accusing Visa and MasterCard of charging excessive interchange fees on electronic transactions, and pushing for passage of legislation called the Credit Card Fair Fee Act that would require Visa and MasterCard to negotiate fees and submit to any disputes to a pane of judges.

    The credit card companies countered that they do actually negotiate fees, and the charged that the retailers prefer litigation and legislation to negotiation.

    According to the CNN piece, "The dispute has intensified as plastic has become the preferred payment method. A majority of transactions are now done electronically, Texas Rep. Lamar Smith said, up from roughly 20 percent 10 years ago. That number will reach 70 percent in three years, he added.

    "The interchange fee, which Visa says averages about 1.6 percent, differs depending on the merchant and type of card. The fees are set by Visa and MasterCard but are collected by the merchant's bank as part of a larger charge for processing the transaction. The credit card companies say they don't receive revenue from the fees."

    Among those testifying before the committee, Tom Robinson, president of San Jose, California-based Robinson Oil Corporation, speaking on behalf of the National Association of Convenience Stores (NACS), linked high interchange fees to high gas prices. "If you are concerned about prices at the pump you need to be concerned about interchange fees,” he said.

    “The impact on my industry is incredible,” said Robinson, noting that convenience stores paid $7.6 billion in credit card fees in 2007, a figure more than double industry profits of $3.4 billion. “Every time you buy gasoline I ask you to remember this – the station you are buying it from is paying more than twice as much money in fees than it is making – and every time gas prices go up the card fees go right up with them,” he said. “These fees have simply taken over our industry.”

    “This law simply gives retailers the right to negotiate reasonable fees with credit card companies, a fundamental practice in the American free enterprise system,” said John J. Motley, III, the Food Marketing Institute (FMI) senior vice present of government and public affairs. “As it stands now, they set the fees in secret, and the cost to merchants and, ultimately, to consumers is skyrocketing.”

    "If consumers knew how much they are actually paying for credit cards, most would say they aren’t worth the price,” National Retail Federation (NRF) Senior Vice President and General Counsel Mallory Duncan told the hearing. “U.S. consumers are paying an outrageously high annual fee that most don’t even know about, and the price is going up dramatically every year … There is no transparency and no negotiation under the current system. This legislation would bring about true competition among the banks that issue credit cards, giving retailers the opportunity to negotiate terms on behalf of themselves and their customers that reflect the actual cost of the services provided.”

    According to CNN, "The Government Accountability Office issued a report Thursday that the card companies and banks said bolstered their argument. The GAO found that federal agencies, such as Amtrak and the Post Office, have reported higher levels of customer satisfaction since accepting credit and debit cards and that government agencies have been able to negotiate lower interchange fees.

    "The report also found mixed results from an effort by Australian regulators to cap interchange fees in 2003. Merchants have benefited from lower fees, the report said, but there's no evidence they have passed that benefit to consumers by lowering prices. Banks that issue cards, meanwhile, have reduced rewards and increased consumer fees, the GAO said."

    FMI notes that the "Credit Card Fair Fee Act enjoys strong bipartisan support. Judiciary Committee Chairman John Conyers (D-MI) introduced the bill in March with Utah Republican Rep. Chris Cannon. All together, 32 members of the U.S. House of Representatives — 18 Democrats and 14 Republicans — have signed on to the bill."

    KC's View:
    Beyond the fact that I have no sympathy for credit card companies, it is the lack of transparency that really offends me. They set the rates in secret, and nobody is allowed to explain to shoppers in detailed form what the rates mean and ho they affect prices.

    At the very least, the government should insist on complete transparency. And hopefully the hearings this week are a way of advancing the legislation in a significant way.

    Published on: May 16, 2008

    Ahold-owned Stop & Shop and Giant Food announced yesterday that they are lowering prices "on thousands of items in their health and beauty care departments, reducing prices on everything from shampoo to hand soap, aspirin to cotton swabs, from toothpaste to vitamins."

    These new price reductions extend the company’s ongoing “Low Prices Every Day” campaign, which has lowered prices in other categories, including produce, dairy, cookies and crackers, salad dressings, condiments, frozen foods, cereal, pet foods, paper goods, and baby care products.

    KC's View:
    I have to admit that I have been dubious about this campaign from its inception, simply because I wasn't sure that Stop & Shop and Giant could compete effectively on price with the likes of Wal-Mart and Costco; I worried that they were getting into a game that ultimately they could not win, and weren't leaving themselves other strategic messages to communicate to the consumer.

    While I still think that in some ways the two chains would be better off finding other ways to compete than on price, the current economic situation suggests that maybe Stop & Shop and Giant could find themselves in the right place. What I haven't seen are any market share figures that suggest that either chain has improved its situation in terms of shopper activity…and that is the final arbiter of success in this case.

    Published on: May 16, 2008

    The Atlanta Journal-Constitution reports that while there have been reports that the growth of in-store medical clinics has stalled in some areas, not so in Atlanta, where there are more than 50 such facilities in operation, and Publix plans to its clinic count from nine to 18 this year.

    Michael Howe, CEO of industry leader MinuteClinic, tells the paper that the city's demographics are perfect for the concept – it has plenty of families with children, people who are time-constrained, and people who tend t face long commute times – and who need clinics that are close to home and open at more convenient hours than doctors' offices.

    KC's View:
    The concept may have stalled a bit, but I still think the essential format makes a lot of sense and goes a long way toward addressing some of the issues that people have with the nation's health care infrastructure.

    Published on: May 16, 2008

    Weis Markets has introduced a new Pennsylvania Proud Choice Angus Beef program, which is supplied by Angus producers throughout the Commonwealth of Pennsylvania. According to the company, it is "the nation's first locally raised beef program offered by a supermarket chain and it is also the first branded Pennsylvania Angus program."

    "Buying local is one of the hottest trends in food today but it's been a hot trend for us since 1912," said Norman S. Rich, Weis CEO. "Pennsylvania has a vibrant agricultural economy known for its quality. Last year alone, we purchased more than 19 million pounds of produce from local Pennsylvania producers. Our Pennsylvania Proud Choice Angus Beef is the logical extension of our commitment to buying and selling Pennsylvania's best products. We are proud to be the first supermarket company in the country to offer a local beef program."

    KC's View:

    Published on: May 16, 2008

    • Wal-Mart Stores, Inc. announced that it has been named one of the "Best Companies for Asian Pacific Americans" by Asian Enterprise magazine, the largest Asian-American small business-focused publication in the country.

    "Our commitment to serving the Asian and Pacific-Islander American community is rooted in our belief that diversity is a business imperative, as well as the right thing to do," said Esther Silver-Parker, senior vice president, diversity relations for Wal-Mart Stores, Inc. "From our internal supplier diversity initiatives to our external community partnerships; we continue to look for ways to broaden our efforts to support the APIA community."

    KC's View:

    Published on: May 16, 2008

    • The Wall Street Journal reports that McDonald's "dollar menu" may be looking at a price increase, as the rising cost of ingredients may force the company to adjust prices upward. However, there remain concerns that "the $1.09 menu" just doesn't have the same ring to it…

    KC's View:

    Published on: May 16, 2008

    • Del Monte Foods announced that it has hired William D. Pearce, the former chief marketing officer at Taco Bell, to be its new senior vice president/chief marketing officer, effective immediately.

    The position is a new one at Del Monte.

    KC's View:
    Hope Pearce has a better run of luck at Del Monte than at Taco Bell, where rat infestations and E. coli issues had the challenge even the best marketer's moxie.

    Published on: May 16, 2008

    …will return.
    KC's View:

    Published on: May 16, 2008

    Not sure if this is global warming, but there are signs that the end of the world may be at hand.

    I spent yesterday in Portland, Oregon, where the weather was sunny and in the eighties. Today, I'm in Seattle, and the temperatures are expected to hit 90, and the sun to shine brightly in the Pacific Northwest sky. (On the news last night, amazingly, there was a story about all the people worried about the negative impact of such a gorgeous day.)

    Back home in Connecticut, the weather has been generally lousy. I just checked the weather report, and for the next four of five days it is supposed to rain pretty consistently and never get out of the sixties. In other words, we're going to have Seattle weather.

    Just another reason, I think, to move MorningNewsBeat World Headquarters to the Pacific Northwest, which I've always thought of as God's Country. It is just spectacular here, and I fall more in love with the region every time I visit.

    There was a story recently on MNB about how Hannaford Bros. was saving money by shipping employees getting certain kinds of surgeries to Singapore, where the procedures could be done effectively at a fraction of the cost. Nobody was being forced to go; it was just an option being offered by the retailer, which like every other business is looking to save money on health care costs.

    Well, in this context it was fascinating for me to read a piece in the May 2008 Fast Company that looked at how hospitals in Bangkok have developed an international reputation for excellence and high levels of patient care, and have become a destination for Americans "fleeing a system that is by far the most expensive in the world and growing more so by the hour, with diminishing returns in quality of care."

    Fascinating piece, and I suggest you pick it up. At the very least, it suggests some of the possibilities that may exist out there, and of a different way of looking at the system.

    While in Portland, I found myself sitting at the bar of a brand new brewpub (funny how this stuff just happens to me) called Deschutes. The company has been around for about 20 years, but this is a brand new location for them, and it is a wonderful place – big and open and with enormous glass walls that connect it with the surrounding community in the Pearl District. The beer and food are terrific – I had pulled pork sandwich for dinner washed down by a couple of a Cider Cone Red Ales, which had a rich, malty taste.

    Great pub. If you're in Portland, I highly recommend it.

    Reuter Health has an interesting story, saying that "a drink or two a day may make for stronger bones … but more than two drinks each day appears to increase the fracture risk." And the story said, "People who had one half to one drink daily had a significantly lower risk of hip fractures than abstainers, but people who consumed more than a couple of drinks daily were 39 percent more likely to fracture a hip than were the abstainers, the researchers found.

    "They also found that compared with abstainers, moderate drinkers appeared to have a higher bone density, and that this relationship was linear. However, there was not enough evidence to determine the impact of alcohol on bone density in moderate drinkers compared with heavy drinkers."

    However, buried down in the story is the following information. It isn’t just that too much alcohol may weaken the bones. It also is that too much alcohol makes you fall down more, which quite naturally makes you more susceptible to fractures.

    And they needed how many scientists and researchers to come to this conclusion?

    I did something last weekend that I don't often do. I went to a "comic book movie." Most of the time I avoid these because I'm just getting too old for them, but "Ironman" got such positive reviews that I wanted to see what the fuss was about. I can report that while it does not reach the sustained excellence of "Batman Begins," it is pretty good, sustained by terrific performances by Robert Downey Jr. and Jeff Bridges, who invest a level of belief in their characters that is unusual for such flicks. It sort of falls apart at the end, but in general it is worth seeing.

    And if you like "comic book movies," it'll sustain you until "The Dark Knight," the newest Batman movie, opens on July 18.

    I have three wines to recommend to you this week, all of which I loved:

    • the 2005 Wall Cellars Cabernet Sauvignon from California's Napa Valley;

    • 2007 Charteau Peyrassol, Cotes de Provence from France;

    • and the 2005 Basket Case Syrah from Washington State.

    This latter wine, by the way, was recommended by Morgan – my favorite bartender in the country, who works at one of my favorite restaurants, Etta's Seafood, near Seattle's Pike Place Market.

    There's nothing like flying 3,000 miles, dumping my stuff in a hotel room, walking a few blocks to Etta's, and hear my name called out as I walk through the door.

    It's sort of like being Norm in "Cheers."

    Well, that's it for this week. Have a good weekend, and I'll see you Monday.

    KC's View: