retail news in context, analysis with attitude

Published on: September 25, 2008

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Hi, I’m Kevin Coupe, and this is MorningNewsBeat Radio, brought to you by Webstop, experts in the art of retail website design.

The situation I am about to describe is specific to one retailer. But think to yourself if it is happening, or if similar things could happen, in your company.

I went down to the local CVS the other day to pick up one or two things for my daughter, who was suffering from a cold and sore throat. I found them fairly quickly and then went up to the checkout counter.

Do you have your CVS card, they asked, just as they always do.

No, I said, but I do have my phone number. I like the idea that at CVS, unlike a lot of other retailers, you don't actually have to have the card or key fob with you. Give them your phone number, and they can access your frequent shopper account.

So I gave them the number, and they rang up the two items, which I then placed in the canvas bag that I’d carried with me into the store.

Here’s where the system broke down, in my humble opinion. The register then spewed out a receipt that was easily three feet long. I’m looking at it now, and most of the receipt is dedicated to coupon offers for products that I have little or no use for.

Now, beyond the fact that the offers were irrelevant, think about the colossal waste of paper…specially if everybody buying stuff at CVS in a given day is getting the same kind of receipt. (This hasn’t just happened once by the way … it has happened numerous times, but this time it just got on my nerves. Besides, I was looking for something to rant about on MorningNewsBeat Radio.)

And the thing is, CVS has a frequent shopper program. They’re tracking my purchases…and if they had any sense, they’d simply use the program to apply relevant and useful discounts without all that wasted paper. They could even do what they do in the Apple Store and ask if I’d like the receipt emailed to me…which I’d opt for in a second because it would allow me to use technology to better track my own purchases.

But no, that’s not what CVS is doing. And I wonder how many other retailers are making the same kinds of mistakes.

My suspicion is that the people who developed CVS’s frequent shopper program simply aren’t talking to the people who run its couponing and marketing programs…and if they are talking, they aren’t chatting about the right things. And somehow the marketing people and technology people aren’t putting their heads together to see where both efficiencies and advances can be made that will be good for both the customer and the company. (I wonder how much money would be saved if CVS sent a decent percentage of its receipts to customers via email. Betcha it is more than just a few bucks.)

Furthermore, my suspicion is that in the scenario just described, the company is thinking tactically, not strategically. Nobody is connecting the dots…and once again, I raise the point:

How many other retailers are making the same kinds of mistakes?

For MorningNewsBeat Radio, I’m Kevin Coupe.

Published on: September 25, 2008

The Financial Times reports that Walmart has added a broad representation of the grocery category to its website, though it is not yet selling these items as a part of its e-commerce offering, and suggests that this is “an apparent indication of its future online ambitions.”

According to the story, “The retailer has begun listing tens of thousands of items ranging from prepared salads and cooked shrimp to dog food and lipstick on its site, which is the second busiest US retail website after Amazon.” FT notes that Walmart already is the largest US grocery retailer, with a 20 percent market share in the US.

“None of the items is currently available for online delivery. Instead they are linked to a ‘search in store’ feature launched by Wal-Mart last year. The site also provides nutritional information on the listed food products … it has so far avoided the potentially costly business of online home delivery of perishable groceries.”

FT also notes that “Wal-Mart’s online grocery efforts have so far been restricted to its discount division, Sam’s Club, where groceries are covered by its ‘click and pull’ service, which allows customers to pre-order goods for pick-up at its stores. Sam’s Club also uses parcel service to deliver a small selection of drinks and snacks aimed at office customers. Wal-Mart’s more than 2,500 supercenters also currently operate a ‘site to store’ feature that allows goods ordered online to be picked up at its stores.”

Published on: September 25, 2008

The New York Times this morning reports that a Manhattan grocery store, Eli’s fine food warehouse, has begun adding a 1.8 percent surcharge on every purchase, saying that the fee is there compensate for increased energy costs.

The city says that the surcharge is legal as long as it is properly posted – which it is, with a large sign at the front end.

Eli Zabar, the owner of the store, says he is making a point. “I could have easily just raised prices in the store — which we do all the time anyway,” he tells the Times. “But I’m making a statement here. This is to make my customers aware of the differences of running a food business, as opposed to any other kind of business. The infrastructure that powers a supermarket is huge — the perishability, yada yada yada. The ice that keeps the fish fresh. It takes a lot of energy to roast coffee … It’s a very arbitrary number. One point eight percent doesn’t begin to cover all the energy costs that have increased over the past three years. I purposely picked that as a controversial number to begin the dialogue.”

Of course, to this point the dialogue has consisted mostly of customer complaints. But, according to Zabar, it’s a start.

Published on: September 25, 2008

Brand Week reports that ”fair trade” marketing has become the new “green marketing,” with more and more of these products finding room on the nation’s supermarket shelves. Fair trade is defined as when “farmers in such locations as Ghana or Costa Rica work in safe labor conditions, use environmentally friendly practices and are paid at least a minimum floor price for their crop. These family farmers may also belong to a co-op that democratically decides how to invest their profits in building schools, health clinics or developing better business and sustainability practices.”

The story says that “so far this year, 284 Fair Trade Certified products - typically coffee, tea, herbs, cocoa and chocolate, fruit, sugar, rice, spices and even cut flowers – were launched in the U.S. compared with 130 last year and 17 in 2003, according Mintel, Chicago.”

Retail sales of Fair Trade Certified coffee alone grew tenfold between 2001 and 2006 to $730 million, according to TransFair USA, which regulates the designation.

However, the always reliable Lynn Dornblaser of Mintel tells Brand Week that to this point, major manufacturers are not making a big deal out of the fair trade designation, and that it “is for small companies in big ways and big companies in small ways.”

Published on: September 25, 2008

USA Today reports this morning that a botanical disease called “citrus greening,” which has a long history of devastating crops, has been identified in Florida and is threatening California.

According to the story, “The disease has spread to all of Florida's citrus-growing counties. Neither insecticides nor removal of infected trees has been able to stop it. A tree can be infected for years before yellowing leaves make it apparent, so the infection can spread to the rest of the grove long before the grower knows there's a problem.

“The threat got worse when psyllids were found in California. Florida grows 71% of U.S. citrus; California grows 27%. Most of Florida's crop is for juice. Most of California's is fresh fruit. The total market was worth $2.7 billion in 2005-2006, according to the Department of Agriculture.

“The threat is most severe in Florida and California, but it isn't limited to those states. The disease has been detected in Louisiana. The psyllid has been seen in Texas, Georgia, Mississippi, South Carolina, Guam and Puerto Rico.”

Published on: September 25, 2008

USA Today reports this morning that White Rabbit Creamy Candies, a Chinese candy product frequently sold in the US, contains dangerous levels of melamine, a poisonous industrial chemical that can artificially inflate the protein levels of products to which it is added.

The findings come from the New Zealand Food Safety Authority. The US Food and Drug Administration (FDA) reportedly is sampling and testing these candies and other Chinese products containing Chinese dairy ingredients. China’s dairy industry has been devastated by revelations that the country’s tainted milk supply has sickened more than 50,000 infants and killed at least three children.

Published on: September 25, 2008

• The Birmingham Business Journal reports that Publix Super Markets “opened its first Alabama store south of Montgomery last week, after more than 10 years in the state’s grocery market. The supermarket chain opened a 54,000-square-foot store in Orange Beach and plans to open another in nearby Fairhope next year.”

The Journal notes that Publix is opening 45 new stores this year in Alabama, Florida, Georgia, South Carolina and Tennessee, 30 of which have already opened.

• The Irish Examiner reports that Musgrave, which already owns the Supervalu brand in Ireland, is one of the companies competing to acquire Superquinn from Select Retail Holdings (SRH), which itself acquired the legendary Irish retailer three years ago. However, the paper suggests that despite the claims by SRH that it has no interest in selling the company – though it is willing to listen to offers – Musgrave is competing with several British retailers pursuing Superquinn.

Published on: September 25, 2008

• Two changes at the Food Marketing Institute (FMI) were announced yesterday, part of what appear to be more sweeping changes at the trade association related to the impending retirement of CEO Tim Hammonds.

Brian Tully, the organization’s senior vice president who has run the annual convention, has resigned to pursue other opportunities.

Another senior vice president, Karen Brown, who has run FMI’s communications operation, is retiring effective January 1, 2009.

Michael Sansolo resigned from his senior vice president’s position at FMI more than a year ago. (He joined MNB as a contributing columnist, and works with MNB Content Guy Kevin Coupe on a number of initiatives. So in our view, it was a step up.)

A search committee reportedly is nearing the end of the process that will name a replacement for Hammonds, who remains in his position pending the naming of a successor.

Published on: September 25, 2008

Responding to Tuesday’s column from Michael Sansolo about the battle for stomach share, which should favor supermarkets in the current economic climate (he suggested that supermarkets can do a better job with pizza than almost anyone else), and my commentary that the industry has dropped the ball by not being more aggressive about marketing to the idea that people should be eating more family dinners at home, one MNB user wrote:

Convenience is how restaurants have grown to such a large share of dinner or the past 25 years. For Supermarkets to truly “play to win” in the prepared meals or meals prepared at home versus QSR, Pizza Delivery and Carry outs, and the moderate restaurants they must not only win the monetary decision (make products at home) but should offer some convenience as well with ready to eat meals. Why not have a call-in number for advance ready to eat meal orders and a separate check out in the prepared foods area to avoid the long lines at the front of the store? How about employing a couple high school kids to deliver those orders?

Another MNB user wrote:

I think that stores are not just dropping ball on helping people eat at home.

But they could even incorporate healthy eating at the same time.

When people get off work they are in a hurry to get home. Have no idea what they want to eat. So they just get what they are used to.

The store could have healthy ideas with flyers as people walk in. Have them a list of items which can be cooked and amount of time it would take.

“30 Minute Meals” with Rachael Ray has been a hit.

Wonder why.

No wonder here.

MNB user Clay Dockery wrote:

I have long questioned why our industry doesn't challenge some of the preconceived notions that have obviously changed over time. Take as an example, fast food. Think about the time in which the term was coined by hamburger outlets. If you wanted to cook a hamburger at home, you needed to by the beef, shape it into patties, season and cook. The lettuce and tomatoes had to be washed, shredded and sliced. Many 50's moms even deep-fried their own french fries!

Now we can buy meat that is either preshaped or in some instances precooked. Lettuce comes in a prewashed bag. Fries? Frozen to baked in minutes. And all of the above issues don't even take into consideration the preparation speed that can come from the microwave!

Yet, we still refer to the dining away from home industry as "fast food" or the mid tier restaurants as "quick serve". When time is the commodity that people feel they have the least to spare, why on earth do we still allow the perception of speed to be owned by an industry based on the functional value of a kitchen from the '50s or '60s?

All excellent points. Attention should be paid.

MNB user Craig Espelien wrote:

Michael is dead on – I used to create programs for a major retailer that exactly fit this mold – enticing the consumer to eat at home again. As the old saying goes, what goes around comes around. The key difference today is that consumers fail to see “convenience” as attached to buying a pizza at the supermarket – and seem to be willing to pay a 100% premium for getting that pizza delivered.

Where I see the supermarkets as failing is that they choose not to appeal to the emotional state of the consumer (except for, as you mentioned Walmart’s new campaign and perhaps the Trader Joe’s “experience” and a few other selected retails) but rather focus on price. Advertising remains too much about item/price and not enough about the story we need to tell. The retailers today seem too worried about the grocer across the street or across town than about providing a great experience and an overall value (the $312 savings for a frozen pizza is a great example).

As long as all retailers try and sell the same products for roughly the same price – they will continue to be commodities – and then Walmart wins.

Differentiation of product, differentiation of experience and a celebration of the consumer and what they could be can be the answer – but most retailers are not even sure of the question.

Agreed. Completely.

Another MNB user chimed in:

I doubt than anybody can disagree with the economic and social value of eating at home. There seems to be one problem... many American homemakers don’t know how to cook. Home economics was dropped from even the most affluent high schools a decade ago ( didn’t help with SAT scores). And many teens didn’t have parents around to show them the difference between a tablespoon and teaspoon. Since the expectation was of ever increasing affluence, nobody saw a need to learn how to cook with lots of prepared meal choices for the city dwelling twentysomethings. While the pizza analogy is a good one, you still need to know how to turn on an oven, make sure it is on bake not broil, have a pizza pan, and know what to do to make sure the pizza doesn’t stick to the pan.

It would seem that the food industry would be well served to push some sort of “cooking for dummies” type of program. It would have to be done in bite-sized increments and with the media of choice like Facebook. Lacking that, we could end up with a lot of frustrated one-time cooks who wonder why their pizza is black and not brown like the one from the pizzeria.

And MNB user Richard Lewis wrote:

Yes, true, but the thing is, when we order in pizza we do it not because we are mistaken about the value-proposition and nutritional content and need to be educated. We know it sucks. We do it:

(a) because we are lazy and we don't want to cook and we don't even want
to go shopping for ready meals.

(b) because the service exists.

In other words, the only drivers are convenience and suggestion. When buying supermarket food approaches this level of convenience then we'll be comparing like with like. Because if it came down to a choice between calling Bob's Generic Pizza Takeaway and Supermarket X Premium Private Label Pizza Direct, I know which I'd ring. Sadly, that service does not exist today. But perhaps today's idle thought is tomorrow's successful franchise business ...

But why limit it to pizzas? Everyone's ordering in pizza because that's what's on offer. What if supermarkets started offering deliveries on their deli counter prepared foods? ...

I'll tell you: in certain parts of town on Friday nights you'd be hearing, "Shall we just download a movie and order in some falafel and carrot salad?"

(You read it here first…)

I said that the “Family Meal Day” initiative that tries to get families to have one more family dinner a year was a joke because it doesn’t go far enough…that more that the family dinners each wee ought to be the centerpiece of promotions and marketing efforts engineered both by individual chains and the industry as a whole.

One MNB user responded:

"One day at a time" is not a joke; but a symbol, a step in the right direction, and a line in the sand. I think they're correct in their approach … one day becomes 2 becomes 7 becomes 365. Now we're cooking with gas, baby!

I understand. I just believe in setting the bar high.

And MNB fave Glen Terbeek wrote:

It is amazing to me that I never see a supermarket commercials on the food network channel. If people are moving back to cooking at home, I would think this would be a natural. As example, I could envision a Rachael Ray category in the store, with all of the ingredients pulled together in one spot along with the receipts for several of the 30-minute meals she features on her show. It would be promoted through commercials featuring the category on the network.

Is it because we don't have a category manager for meal solutions? Or is it because we can't get the manufacturers to work together with trade dollars to support such a concept?

Good questions.