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: May 22, 2008

    Now available on iTunes…

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las



    Hi, I'm Kevin Coupe, and this is MorningNewsBeat Radio, brought to you by Webstop, your first stop for retail website design services.

    Last Friday evening, while waiting to meet a friend to attend the Mariners game out in Seattle, I decided to stop by one of my favorite bars and restaurants, Etta's Seafood, for a quick beer. Well, it was a fortuitous beer, since I had a chance to glance through a couple of newspapers…and found two stories that illustrated how retailers can effectively compete in tough marketplaces.

    In the Seattle Post-Intelligencer there was a story about the new Kress IGA store scheduled to open in downtown Seattle. The store is being designed to cater to three different kinds of customers - passers-by, busy workers and nearby residents, "with 40 percent of its floor space devoted to prepared foods, including self-serve hot-food tables, a salad bar, a made-to-order sandwich counter and a taqueria … To expand its service area, the IGA also will use small vehicles to make deliveries as far as the waterfront, Capitol Hill, Pioneer Square and the base of Queen Anne Hill."

    And one of the points made in the article is that the owners are working hard to connect with regional suppliers in order to have a product selection that not only covers all the traditional bases, but also is as unique as possible. That should give the IGA the kind of differential advantage necessary to be successful, though it should be noted that it also could find itself in competition with the nearby Pike Place Market. But the good news is that the neighborhoods seems to be fairly teeming with foodies…so there ought to be a ready-made customer base for a smart and unique supermarket.

    The other story wasn't about a food retailer, but rather was about Nordstrom and how the upscale department store chain is coping with the current economic downturn. The story noted that Nordstrom is doing a number of things to keep traffic and transactions up, like advancing the sale date for women's clothing and shoes and developing a program that allows people to order online and pick up at a local Nordstrom brick-and-mortar store.

    What caught my attention was the reference to how regular Nordstrom customers are getting phone calls from their regular salespeople telling them about new products that had come in that they might find to be appealing.

    On the one hand, this sort of sounds intrusive. But on the other hand, if my local store called me to tell me that, say, the first shipment of heirloom tomatoes was in, or that a new brand of pasta had arrived, or that a new Syrah or Pinot Noir from the Pacific Northwest was in stock…well, I think I’d respond to that favorably, especially since those are all products in which I am interested. (Call me about a new brand of cat food, however, and you’re only going to make me more ornery than I usually am. I hate cats. Which I know is going to annoy a whole lot of you, but what can I say.) And it doesn’t have to be a phone call. It could be a well-timed email. The point is that it would be relevant.

    Not only is there nothing wrong with figuring out what products and categories your best customers have an interest in and then reaching out to them, but that strikes me as the essence of smart retailing. There will, of course, be people who will say that it is too much for a supermarket to do, that they have other priorities, that they can't afford to take such an approach. I would argue, however, that in a tough competitive environment you can't afford not to use such strategies and tactics to connect with your shoppers.

    Differentiated products. Engagement with the shopper. It doesn’t sound like it is all that difficult, but these are facets of retailing that are, in fact, far too rare.

    So let's do something about it. Now.

    For MorningNewsBeat Radio, I'm Kevin Coupe.

    KC's View:

    Published on: May 22, 2008

    BrandWeek has an interview with Procter & Gamble's vice president of sustainability, Len Sauers, about how the company's green philosophy lines up with consumer priorities. Excerpts:

    • "Consumer research has shown that there is a very small niche of consumers (~5 10%), who are willing to accept some trade-off (e.g. higher cost, lesser performance) in order to purchase a product that claims environmental benefits. The vast majority of consumers (~50-75%) feel environmental issues are important, but are not willing to accept such trade-offs. However they will choose a product that claims environmental benefits if it meets all their other needs: performance, value, cost, etc. The rest of consumers seem indifferent to these issues at this time. It is hard to judge how these numbers will change into the future. They have remained relatively constant over the past couple of years, even with increased public attention paid to these issues."

    • "P&G believes we can make the greatest contribution to environmental sustainability by developing 'sustainable innovation products.' These are products for which there has been a meaningful improvement in the environmental profile of the product relative to current products, but for which there are no trade-offs. The consumer gets it all—all the performance and value she expects and an ability to be environmentally sustainable. In this way, we are able to bring sustainability to the mainstream consumer."

    • "Wal-Mart's approach of minimizing nonvalue added packaging, while demanding the same level of package performance, is very consistent with P&G's 'No Trade-Offs' approach to packaging sustainability. Overall, the costs have been relatively neutral; in fact, there have been several instances where we have both reduced costs and provided a more sustainable package to the consumer."

    KC's View:
    I have no doubt that Sauers is right about the fact that most consumers are unwilling to trade off higher cost or reduced performance for products with environmental benefits. And while nobody ever has gotten rich by going against consumer priorities, I would suggest that American consumers had better wake up. Because the ultimate cost of environmentally unfriendly products will be the health of the planet…

    Published on: May 22, 2008

    The University of Michigan's quarterly American Customer Satisfaction Index (ACSI) is out this week, and even in the midst of a recession-like economic decline the index registered its first gain in a year. It wasn't a big increase, but it could have been worse.

    The index was up 0.4 percent to 75.2 on ACSI’s 100-point scale.

    According to a statement released by the school, "the improvement in ACSI may boost consumer spending and jumpstart the economy, but conditions are much different than they were the last time a reversal in ACSI signaled recovery from the economic downturn in 2000 and 2001, primarily because consumers’ ability to spend is more limited today."

    Highlights from the report:

    • "Customer satisfaction with airlines drops to its lowest point since 2001, falling for a third year in a row. Faced with the soaring cost of jet fuel, airlines are raising ticket prices, overbooking flights, and charging extra fees for checking more than one bag and for 'premium' seats."

    • "The hotel industry ties an all-time high after improving 6% to 75," with "quality" hotels doing better on the scale than price-driven chains.

    • "Traditional local and long distance service is up 4% to 73, reaching its highest score since 1999 … Customer satisfaction with wireless telephone service stays at an all-time high for the second consecutive year at 68, with Verizon Wireless topping the industry at 72 … AT&T Mobility (formerly Cingular) registers the biggest gain, improving 4% to 71. AT&T was the first wireless company to let customers use phones from any manufacturer, and it is also the only company to offer Apple’s iPhone."

    • "The fast food restaurant industry improves 1% to 78, its highest score ever, while the full-service restaurants drop 1% to 80."

    “Households are under pressure from falling housing prices, tight credit, and rising food and fuel costs, making it more difficult for satisfied consumers to spend more even if they want to,” said Claes Fornell, founder of the ACSI scale. “The smart move for companies in this economic environment is to make sure they keep the customers they have by shoring up their customer relationships.”

    KC's View:
    That last sentence is worth repeating:

    “The smart move for companies in this economic environment is to make sure they keep the customers they have by shoring up their customer relationships.”

    By the way, customer satisfaction with airlines is likely to drop even more with the decision by American Airlines to charge even for the first checked bag. Though I have to admit, as a frequent flyer, that I have no real problem with that. With the cost of oil getting up near a gazillion dollars a barrel, the airlines have to do something…and having them go bankrupt doesn't seem like a good option.

    As for the other segments rated by ACSI, I can say from personal experience that I am extremely satisfied with my iPhone and AT&T service (though this may have more to do with Apple than AT&T), I'm satisfied enough with the hotels I stay in, and with the exception of Burgerville in the Pacific Northwest, I've never been satisfied with a fast food experience.

    So maybe I'm not exactly typical.

    Published on: May 22, 2008

    The Wall Street Journal reports that "as consumers cut back on spending, grocery-store data and analyst research have begun to indicate that private-label products are gaining market share in the packaged-food industry. Inroads by private label goods -- which are cheaper store-named or generic products -- are generally a cause for concern for branded consumer product companies, because they eat into their sales and brand positions."
    KC's View:
    No big surprise here. I'd expect that every time there has been an economic downturn or recession, private label products have benefitted, which has given them greater credibility and a stronger base of consumer acceptance when the economy rebounds. And while CPG companies may not see this as a positive trend, retailers looking for differential advantages can use strong private label products as a way to distinguish themselves.

    Published on: May 22, 2008

    The Associated Press this morning reports that the version of the 2008 Farm Bill that was vetoed by President Bush this week was, in fact, not the version of the bill that was passed overwhelmingly by Congress…which means that both the House of Representatives and Senate will have to pass the bill yet again and end it to the White House, where it will be vetoed yet again. At that point, the bill will go back to Congress, where an override of the president's veto is considered to be certain.

    The problem, according to reports, is a printing error – the version vetoed by President Bush was missing 34 pages, which means that an override would have been unconstitutional.

    AP notes that "about two-thirds of the bill would pay for nutrition programs such as food stamps, about $40 billion is for farm subsidies and additional $30 billion would go to farmers to idle their land and to other environmental programs." The farm bill also requires that meat and other fresh foods carry country of origin labels.

    KC's View:
    Our tax dollars at work.

    Published on: May 22, 2008

    Jimmy Buffett, the singer-songwriter who has developed an enormous business with "beach music" that speaks to wanderlust souls and the thirst for margaritas, sunshine, a sailboat and a stiff breeze, has decided that his newest DVD, "Scenes You Know By Heart," will only be available at Wal-Mart and Sam's Club stores, as well as on Walmart.com.

    The only exceptions to the decision: Buffett's own websites, MailboatRecords.com and Margaritaville.com, also will sell the DVD, which is a visual version of his popular "Songs You Know By Heart" CD. The DVD is due out on June 3.

    Buffett is just the latest artist to strike such a deal with Wal-Mart, with Garth Brooks and The Eagles also having done so in recent years.

    In addition to concerts and albums, Buffett also owns retail stores, bars, and restaurants, and has licensed his brand for tequila, beer, frozen foods and a new line of chips and salsas.

    KC's View:
    Interesting decision to give Wal-Mart and exclusive, since Buffett seems to subscribe to Carl Hiaasen's view of Florida – that it has been pretty much ruined by strip malls and conglomerates. But while there almost certainly are economic advantages to this decision, maybe it also reflects how far Wal-Mart has come in terms of rehabbing its reputation.

    Published on: May 22, 2008

    A report jointly issued by the National Association of Chain Drug Stores (NACDS) and the Food Marketing Institute (FMI) says that "an economic impact study of the Deficit Reduction Act (DRA) of 2005 finds that 11,105 pharmacies across the country could close due to reductions in the Medicaid reimbursement rate, well below their cost to fill prescriptions. These pharmacies generate more than 300,000 jobs and $31.1 billion throughout the nation’s economy."

    And, the report says, "To the extent that pharmacy closures simply redirect patients to other pharmacies, the net impacts would be smaller. However, this offers little hope to pharmacies in rural areas and urban neighborhoods with large Medicaid populations since these areas would be unlikely to sustain their businesses and maintain pharmacy access. The loss of pharmacies for these Medicaid participants would adversely affect their health, according to NACDS and FMI."

    KC's View:
    In this case, I'm going to turn the space over to MNB user Jerry Sheldon, who responded to this report by sending me the following email, suggesting that maybe concerns are misplaced:

    "NACDS and FMI need to do a study on how many chain drug stores Wal-Mart is going to close, because they have the potential to close more pharmacies that Medicaid. From a perfect example, we're not big fans of Wal-Mart, but I'm starting to change my feel and I wouldn't mind shopping at them now due to their new prescription program. I take Fosamax for osteoporosis. It used to cost $70 a month for the branded version. I can now get a three-month supply of the generic for $24 dollars. Sign me up. My wife goes to drop off the prescription, during the middle of the day and talks about the line being 15 deep for pick up after lunch. CVS and Walgreens better bring their A-game because someone else has theirs on. Wal-Mart's not bemoaning Medicare, they're doing something about high drug prices and consumers are responding."

    Published on: May 22, 2008

    Food Lion is scheduled today to unveil what it calls "the nation’s first grocery store to incorporate two ozone-friendly product refrigeration systems. Both systems reduce by more then 60 percent the amount of refrigerants needed to keep products cool or frozen.

    During the event in Portsmouth, Virginia, Food Lion is scheduled to demonstrate the refrigeration system features. Food Lion uses generators to help ease the demand experienced by local utilities during peak operations, such as on extremely hot days when commercial and residential air conditioners are running at their highest capacities.

    Also during the event, Food Lion will announce that its 725th store has earned the rigorous and prestigious ENERGY STAR designation for superior energy performance and management. The ENERGY STAR label helps consumers recognize stores that meet U.S. EPA standards for energy efficiency. Food Lion notes that it owns more than half of the country’s roughly 1,300 ENERGY STAR labeled grocery stores. The 725th ENERGY STAR store is located in Chesapeake, Va. Food Lion is working to earn more than 100 ENERGY STAR labels this year in order to bring its total number of ENERGY STAR stores to 800.

    KC's View:

    Published on: May 22, 2008

    • The Boston Globe reports that Ahold-owned Stop & Shop announced that shoppers who use their loyalty cards and spend a minimum of $200 will get a coupon good for 10 percent off their next order. The promotion is being keyed to the arrival of government-issued economic stimulus checks.

    “We know our customers have difficult choices to make during these tough economic times,” said Jose Alvarez, Stop & Shop's president/CEO, in a prepared statement. “When families take advantage of our tax rebate discount program, coupled with our new lower prices, they can count on receiving significant savings at the cash register.”

    • The US Court of Appeals for the District of Columbia Circuit has ruled that the united States government discriminates against blind people by printing paper money that makes it virtually impossible for them to tell one bill from another. The ruling supports an earlier decision by a lower court that said the government needs to redesign its paper money, possibly by using different sized bills for different denominations, or using raised markings.

    The ruling could be appealed to the US Supreme Court. Redesigning US currency could take years, experts say.

    • The Washington Post reports this morning on how, "motivated by the triple threat of bad publicity, tougher regulation and costly lawsuits, some of the country's biggest food companies have curtailed child-targeted advertising of certain high-calorie products." In addition, they are changing the way they make certain products, coming up with baked version of fried favorites, or reducing sodium and fat content.

    However, the Post notes that critics say that the industry has to do more because of a still-rising national obesity rate; others say that the change in how the food industry operates has been "epochal," though that more progress needs to be made if the industry is to avoid further government intervention and regulation.
    KC's View:

    Published on: May 22, 2008

    • The Grocery Manufacturers Association (GMA) has named Michelle Marcoot, the former Senior Director of Member Services at the Corporate Executive Board, as GMA's new Director of Supply Chain.

    At the same time, of Jeanne Iglesias, who has led the activities of GMA’s logistics, information technology, DSD and supply chain vanguard committees, has been promoted to Senior Director of Supply Chain and Technology.
    KC's View:

    Published on: May 22, 2008

    • BJ's Wholesale Club said that its first quarter profit was up 26 percent to $17.2 million, from $13.7 million during the same period a year ago. Net sales, which exclude membership fee revenue, rose 12.3 percent to $2.26 billion, with same-store sales that were up 9.6 percent. Membership fees and other revenue rose to $47.5 million from $46.9 million.

    • Longs Drug Stores said that its first quarter profit was $23.6 million, up from $13 million during the same period a year ago. Q1 sales were $1.4 billion, up from $1.3 billion a year ago.
    KC's View:

    Published on: May 22, 2008

    Responding to yesterday's piece about pasture-raised animals that result in better meats, MNB user Ben Ball wrote:

    I have to chuckle every time our society rediscovers the virtues of doing something the way it was done seven ‘improvements’ back. Our not-so-agri-aware society forgets that we considered grain feeding a way to get rid of the “wild” taste in pasture fed beef and to add the desirable characteristics of more marbling and meat per steer. Or that pasteurization was originally embraced as a way to eliminate “unpleasantries” from raw milk – like the taste when the cows had gotten into some wild onions in the pasture. Yuck! And as for the health benefits – well, duh! There is a reason that venison and bison have less fat and cholesterol per pound than skinless chicken or salmon. If you really want to eat healthy meat, break out your bow and head to the woods this fall!

    And MNB user Bruce Christiansen had some thoughts…and a request:

    With all of these food-related stories these days, it would be very helpful for your readers (including me) to get a more complete treatise on how “typical” food actually is raised and gets to market, and then host a well-rounded discussion on the merits and facts.

    As an example: I’m no expert but I grew up in and continue to live in a region that still has a vibrant agricultural segment. Here’s how most (but not all) of the cattle that I am aware of are handled: They are born, fed by their mothers for a short time, are weaned from their mother, and then graze in pastureland and/or BLM/Forest Service land for the spring and summer. In the late fall, when the grass stops growing and the weather starts to get nasty they are brought home to holding pens to be fed over the winter. That cycle continues until they are ready for market, when they are returned to a feedlot for “finishing” and receive a higher protein diet to allow them to “bulk up” (that’s what we consumers like to see), then slaughtered.

    So here’s the question: are these pasture fed? Feedlot raised? How does one label them? The same questions apply to grain crops that are adapted both with assistance from humans and natural selection to do things like improve yields per acre, be more disease resistant, one variety to make better bread, another to make better cakes, a third to make better pasta, etc. etc. Are these genetically modified because they’ve been selected for the characteristics we consumers desire?

    Someone with a lot more knowledge than me can better respond, but yours seems like a good forum for us readers to get more information (but NOT more stories from the media) about these important issues.





    Got a number of emails responding to yesterday's brief comments about Sen. Edward Kennedy (D-Massachusetts) in the wake of the diagnosis that he has a malignant brain tumor.

    MNB user Mike Parker wrote:

    I know where I was when JFK was assassinated. You may be too young to know. The Kennedy family gave us hope for a better future. I never agreed with their social policies but I have always wanted a champion of the underdog. With Teddy’s demise, I feel a great sense of loss for a champion for the poor, the underprivileged and the undereducated. We need a new liberal hero, perhaps Obama will be our new Kennedy.

    Not so young, I'm afraid. I was in 4th grade...Sts. John & Paul School...we got sent home early from school...I woke up my mom from her nap to tell her the news...and she yelled at me for telling a terrible lie. I remember it well.

    I noted yesterday that I vividly remember Kennedy's concession speech at the 1980 Democratic convention, which led MNB user Robert J. Wheaton to write:

    His concession speech, oratory, cadence, style, etc., magnificent.

    In my opinion, nothing however compares to the eulogy he delivered for his brother, Bobby. Many years after, I still don't understand how brother Ted was able to deliver the way he did.

    In part:

    ".....This is the way he lived. My brother need not be idealized, or enlarged in death beyond what he was in life, to be remembered simply as a good and decent man, who saw wrong and tried to right it, saw suffering and tried to heal it, saw war and tried to stop it.

    Those of us who loved him and who take him to his rest today, pray that what he was to us and what he wished for others will some day come to pass for all the world.

    As he said many times, in many parts of this nation, to those he touched and who sought to touch him:

    "Some men see things as they are and say why. I dream things that never were and say why not."

    Amen.


    Most politicians never give a single speech worth remembering. Kennedy gave at least two. And, I'd guess, there will be at least one more in the next six months.
    KC's View: