retail news in context, analysis with attitude

Published on: December 5, 2008

Business Week reports that Safeway has informed analysts and investors that “it will aggressively cut costs, lower prices and focus on improving its financial position in 2009 … Safeway leaders said the focus on value, such a heavy emphasis on its store brands and strategic promotions, is essential for success as consumers limit spending amid tough times.

“The company plans to dial back capital investments, which have been heavy in recent years as it updated many of its stores. Company leaders said that within the year they also will take other measures to reduce costs such as controlling spending on energy through strategic arrangements.”

CEO Steve Burd told an annual investor meeting yesterday, “We are a very strong player in a very weak economy, and we think that creates a very strong opportunity to take (market share).”

Published on: December 5, 2008

The Business Courier of Cincinnati reports that Procter & Gamble has invested $7.5 million to acquire a one percent stake in Ocado, the British online grocery retailer.

According to the story, P&G will get access to information about the online shopping habits of millions of British household as it looks to find out “how to better connect with consumers, to improve its communications and to strengthen its many brand Web sites, such as Pampers.com or Olay.com.”

A P&G spokesperson describes Ocado as a “fertile testing ground” for new ideas and experiments.

Published on: December 5, 2008

The Detroit Free Press reports that a coalition of labor organizations called Change To Win has launched an advocacy campaign called ‘Cure CVS” in which it is calling for the nation’s largest drugstore chain to improve its presence in urban markets.

The group claims that CVS treats urban areas “with fewer 24-hour stores, more unsanitary conditions and higher prices than its competitors.”

According to the Free Press, “The report came the same day that New York Attorney General Andrew Cuomo announced he was suing CVS for its unwillingness to address problems with outdated medicines and baby formula, a problem he said dated to 2006.”

CVS responded to the urban markets charge by saying that it would look at the issues, but it denied any systemic bias against urban areas. In addition, the company charges that the coalition is using the campaign as a unionization tool that has nothing to do with providing better stores to certain neighborhoods.

Published on: December 5, 2008

A story in Forbes reports on a meeting that Starbucks CEO Howard Schultz had with New York stock analysts in which he assured them that “the company will emerge from an environment in which consumers are no longer as willing to spend on small luxuries like $4 lattes as a stronger, leaner and more socially conscious company,” and that the company will “be a stronger company for having gone through it.”

However, Schultz also said that in key to the company’s survival is a commitment not to abandon its core values and become a discount-driven brand.

"This is not the time, after 30-plus years, after building one of the most recognized brands in the world, to throw the baby out with the bath water," he said, adding, "We are not a fast-food operator … We are not a discount business."

The story notes that in addition to facing the economic woes that are afflicting so many retailers and consumers, Starbucks also is facing off against lower-cost competitors such as McDonald’s and Dunkin’ Donuts, which are using lower priced lattes as a way of driving incremental sales.

In addition to closing under-performing stores and trimming labor costs, the story notes, “Starbucks is also attempting to brand itself as a more socially conscious company through initiatives like donating money from sales of holiday drinks to the Global Fund to help raise funds for and awareness of AIDS in Africa.”

Published on: December 5, 2008

• BJ’s Wholesale Club said that its November sales increased 5.2 percent to $783.2 million from $744.4 million in the same month last year, on same-store sales that were up 4.1 percent.

Year-to-date, BJ's said its totaled sales were up13.7 percent to $8.08 billion, while same-store sales grew 11.4 percent.

• Target Corp. said that its November sales were down 6.1 percent to $5.6 billion, on same-store sales that were down 10.4 percent.

• Drugstore chain Rite Aid reports that its November sales dropped two percent to $2.48 billion, on same-store sales that were essentially flat. Q3 sales were down 90.9 percent to $6.44 billion, on same-store sales that were up 1.4 percent.

Published on: December 5, 2008

• Rite Aid announced that it has hired Ken Martindale, the former co-president and chief merchandising/marketing officer for Pathmark, to be its new senior executive vice president for merchandising, marketing and logistics.

Published on: December 5, 2008

We’ve gotten a number of emails about the Black Friday stampede death and the subsequent lawsuit filed this week against Walmart and others.

MNB user John Hall wrote:

The lawsuit for this unfortunate death was predictable as is the fact that many stores will boost up their security or change procedures. It will be interesting to see to what extent stores will change. I only hope that in an effort to eliminate possible lawsuits that they will not go to the opposite extreme and set themselves up for the same results: having injuries or death due to overzealous security. Remember the Hell’s Angels as security at a Rolling Stones concert?

Another MNB user wrote:

I worked at Wal-Mart for 12 years. I worked every single Black Friday. One year I was injured while a customer tried to rip a FURBIE from my hands as we tossed them out to a crowd. He was arrested, and prosecuted for attacking me, his defense was that his son would just "die" if he didn't get this toy. What kind of values are we teaching our children when material items have become more valuable than human life. This poor man, his biggest mistake was going to work that morning. This is truly a tragedy.




Lots of comments about the much-debated proposed bailout of the Big Three US automakers.

One MNB user wrote:

Hey, can I start a company, and have no risks too?? What a deal!

I heard a phrase that concerns me deeply. If we bailout any private company, no matter the size and potential impact, we are "privatizing the profits and socializing the losses". Sounds great on paper, doesn't it?

We are not a socialist country, we grew to our superpower status in less than 200 years by allowing individuals to use their potential and talents, chose to take risks, and built commerce and industry by that individualistic spirit that permeates our great land. Since MNB focuses on grocery, I would point to the obvious, and that happen to be companies you refer to as examples often, and that touch many of your readers' lives: Wegmans, Starbucks, Apple, Microsoft, Kroger, Whole Foods, etc…

I am concerned - very concerned - if we reverse this by bailing out ANY company, we will ultimately destroy this country as we know it.

The problem with this argument, of course, is that we’ve already bailed out a bunch of financial services companies. The question – and I don't know the answer to this – is why the car companies are being treated with so much more hostility when they are asking for much less money.

MNB user Cheri A. Dolan wrote:

If there are programs to be developed to “encourage green” employment and growth – then develop a grant or subsidy with cities that encourages and supports the change over of taxicabs to hybrids now. The Big 3 – could be the preferred suppliers and the government could give immediate tax/incentives & reduced pricing to anyone changing over to a hybrid for this use. The feds could subsidize this and grant through the cities and their licensing – a benefit back to the city, the cab owner and ultimately all of us.

All equates to jobs, better environment & helping the Big 3.

It sounds like a good idea. Of course, it would require an actual national energy policy that offered a cohesive and contextual approach to a serious problem.

Another MNB user wrote:

I continue to fail to understand why our government would entertain bailing out the auto industry. Below is the text of an email that I sent to my two Senators and my lame duck Congressman, who, interestingly enough, has had his government email already shut down by the government, yet remains in office until Jan. 21st…

"I am writing to urge you not to support the use of any public funds to bail out the auto industry. While I understand that the industry employs millions of people and has economic impacts across the country and in our state , Chapter 11 was established for this purpose. The U.S. auto industry has consistently failed to adapt to the changing consumer and economy. Recent evidence of this failure to adapt is their over-reliance
on large SUVs and trucks, while continuing litigation to fight increased mpg standards as oil costs skyrocketed and consumer demand shifted away from SUVs to more fuel-efficient vehicles. Additionally, the industry is bootstrapped by expensive labor and pension contracts that have resulted in average hourly wages that are nearly twice that of its foreign competitors' U.S. based auto-manufacturing plants. Chapter 11 is the best option to ensure that the industry makes the radical changes necessary to survive in
the current economic reality, by leveling the playing field for all stakeholders in the industry, and forcing tough cuts and sustainable change. Providing any funds to the industry absent a total restructuring is merely pouring good money after bad, and is a waste of the U.S. taxpayers hard earned dollars."

If our Congressional representatives do not hear from us, the U.S. taxpayers who will be footing this bill, along with the banking industry bailout, their votes will be influenced by those from whom they hear. In my state, we gambled on both the future and the past, legalizing slots to support the harness racing industry (yes, the harness racing industry)! If companies and industries find themselves in such dire straits that they
need a bailout, it is generally a combination of failing to be relevant to their consumer and mismanagement. And that is what Chapter 11 is for, not our tax dollars.




Respond to yesterday MNB Radio commentary about gambling on the future and not the past, MNB user Glen Syvertsen wrote:

It would seem to me that retailers and malls would be well positioned to offer charging stations and switching stations in their parking lots. Customers could charge their cars while they shop giving the store an incremental dollar and mitigating any potential drop in income from those store brand gas stations that have become so popular. If one nationwide chain added charging stations then concerns about where to recharge on long trips would be over and electric car users would plan long trips to go from store to store…genius! The same logic would apply to hotel, motel and restaurant chains. I have a feeling that Detroit’s worries over the availability of charging stations are overblown.

I would be willing to bet real money that Walmart already has a master plan for how it is going to have such chargers in its parking lots. It is ready to go…and is just waiting for the right moment.

I guarantee it.

And I loved this email:

After reading your story about the electric cars and the battery stations located in northern California and the subsequent gamble of 'positioning' for future technologies…..It made me start thinking….

It seems to me to make even greater coincidence that the "Star Fleet Academy" from the Star Trek movies was based in San Francisco. Fiction becoming reality? Was Gene Rodenberry actually a time traveler that brought us a glimpse of the future and portrayed it in a fictional series?

Hmmm..

I love it when the Trekkers write in. Live long and prosper.




One MNB user had some thoughts about my comments about coupon usage, and that in 2008 there is no excuse for dog owners to get cat food coupons:

In your MNB radio broadcast you commented …..”Sometimes in our businesses, we have to look to the future and place a bet on where we think things are going…and invest in the infrastructure necessary for us to be in the right place with the right technology at the right time”. Coupons are a fact of life in retail, but the old-fashioned coupon delivery systems are in dire need of a new approach. Just like you said, companies should not be providing a dog food coupon to a cat owner. In other words, retailers should know who their customers are and market to them on a 1:1 basis.

Loyalty programs need to expand beyond being coupon delivery systems. In this era of green and sustainability, technology is now available for customers to no longer have to print a coupon to get the anticipated savings. This may not be viable for manufacturer coupons but certainly could work for a store specific one. How many coupons that are distributed through traditional means end up in the garbage? Why not have the potential coupon attached to the customer’s record when he swipes his loyalty card? Have you ever cut out or printed a coupon, went to make a purchase and then realized you forgot the coupon? Did you leave the item behind or purchase it anyway? Do the retailers get feedback on what coupons worked with what customers? If retailers really want coupons to drive revenue, and or provide value to their customers, it is time to rethink how they are distributed and redeemed.

MNB user Gary Loehr chimed in:

While I agree with you in principle, it is not as easy as you might think. The largest retailer in the world does not have a frequent shopper card, nor do they have the Catalina system. Companies that provide self reported lists only represent those who respond to their surveys. The rest of the world of targeting is largely indexes projected to neighborhoods based on the “birds of a feather” theory of targeted marketing. Don’t forget many people want their privacy. They don’t want marketers and retailers to know everything about their lives. While I agree that there is a lot of room for improvement in targeting coupons and promotions in general, data sources will need to improve before a dog person will never get a cat coupon.




And, on another subject, MNB user Geoff Harper wrote:

Every time I hear that a company (like Hannaford, whom I respect) is offering voluntary severance packages, I wonder what the people who leave were doing, and how the work continues to get done. Now the reminder that the National Retail Federation coined the term "Cyber Monday" because people returned to work and shopped from their desks. I guess that answers the question!

Not sure that is entirely fair. It implies that people who are going through a voluntary severance are not hard workers, and that people who go on Amazon or other e-commerce sites from their offices aren’t smart, innovative and highly engaged employees.

We live in a new world, where even people of excellence have employment issues, and where multitasking employees are able to order some Christmas presents while getting all of their work done.




Finally, I commented the other day that it doesn’t really matter how you define the word “recession” – it seems clear to me and a lot of consumers that no matter how you measure it, we’re in one.

Nice thought out response, Kevin. From everything that I've read a recession has an exact definition of 2 consecutive quarters of negative growth in GDP. Though things may "feel" like a recession technically, and by definition we are not in one until the 2 consecutive quarter mark is hit. Your response is kind of like holding a 12 oz. can of Coke in your hand and saying, "Don't care how you measure it. This is one cup of soda."

Not only are you wrong, your blissful ignorance fuels consumer hysteria that the sky is falling.

Well, if I’m going to be ignorant, I’d just as soon be blissful about it. There’s nothing worse than a bitter, miserable ignoramus.

I’m flattered that you think I have the kind of juice that fuels consumer hysteria. But you are missing the point…if for no other reason that consumer hysteria doesn’t need much fueling these days. (Though I might argue with the word “hysteria,” which doesn’t seem accurate. There seems to be a lot of concern and worry, but not too much hysteria. Not yet, anyway.)

Consumers have realized that we’ve been in a recessionary environment for months, and it seems to me that while legislators and economists have debated technical definitions, they managed to ignore the real and serious problems that we face. And I wonder to what extent some retailers and manufacturers convinced themselves that this was just a temporary dip in the economy, instead of the more serious circumstance in which we find ourselves.

Published on: December 5, 2008

One of my favorite products during the past few years was the at-home DNA testing kit that allows people to fill out a questionnaire, swab the inside of their cheeks, and then have their DNA analyzed to find out what diseases or conditions they might be predisposed to get. This strikes me as a smart use of technology, as well as a great tool for the food industry – stores can actually help people choose foods that are appropriate for their genetic conditions. Lunds and Byerly’s were doing this a couple of years ago…and I thought it was very savvy.

I am less impressed, however, with the way similar technology is being used by another company. Here’s how the New York Times reported it:

“In health-conscious, sports-oriented Boulder, Atlas Sports Genetics is playing into the obsessions of parents by offering a $149 test that aims to predict a child’s natural athletic strengths. The process is simple. Swab inside the child’s cheek and along the gums to collect DNA and return it to a lab for analysis of ACTN3, one gene among more than 20,000 in the human genome.

“The test’s goal is to determine whether a person would be best at speed and power sports like sprinting or football, or endurance sports like distance running, or a combination of the two. A 2003 study discovered the link between ACTN3 and those athletic abilities.

“In this era of genetic testing, DNA is being analyzed to determine predispositions to disease, but experts raise serious questions about marketing it as a first step in finding a child’s sports niche, which some parents consider the road to a college scholarship or a career as a professional athlete.”

Now, there is some debate in scientific circles as to the accuracy of this test, but that doesn’t seem to be stopping parents from plopping down their $149 – even in recessionary times, that seems to be a small price to pay to find out whether there might be an athletic scholarship in their futures.

It is when I read stories like these that I begin to think that I am hopelessly old-fashioned. My kids have gotten involved with athletics – or chosen not to get involved – based on whether they wanted to, or enjoyed it. Not based on my dreams for athletic scholarships, nor on my desire to live out my own fantasies through my kids.

This isn’t a matter of science run amok as much as it is a story about parents who have completely lost touch with any sense of reasonable priorities; I’m sure that the entrepreneurs at Atlas Sports Genetics figured that they would have a ready and gullible customer base for their product.

This may seem radical, but here’s my suggestion for parents who are desperate for their kids to get college scholarships. Take away the kids’ cell phones and iPods and videogames and assorted other distractions, and make sure they study more.

One other thought. Parents who make their kids take this test better put some extra money aside. Because if they start to put pressure on their kids to get that athletic scholarship, with the added pressure of knowing that their kids are genetically capable of getting one, they’re going to end up spending a lot of money on psychiatrists and psychologists.

Because a lot of these kids are going to be very screwed up. Almost as screwed up as their parents.




When it comes to matters of science, I was intrigued to read the Wall Street Journal story the other day about declining brain function in aging baby boomers, and how it is creating greater problems than ever in a modern, multi-tasking culture.

“As scientists document the normal brain changes at fault, they are highlighting a growing conflict between the push-me-pull-you demands of modern multitasking and our waning powers of concentration,” the Journal wrote. “By one estimate, the average office worker is interrupted every three minutes. Indeed, our inability to ignore irrelevant intrusions as we grow older may arise from a basic breakdown of internal brain communications involving memory, attention span and mental focus starting in middle age, researchers have discovered.”

The problem is that even though scientists can understand this, there isn’t much they can do about it: “Our brains normally shrink as we age -- a man's faster than a woman's -- affecting regions associated with learning and memory. Many genes linked to brain function in the prefrontal cortex also become less active, affecting how deftly we can orchestrate thoughts and actions.” What can we do? “To keep mentally fit, a generation of aging gym rats has embraced the cognitive calisthenics of computerized brain exercises. Not all mental gymnastics or herbal supplements work as advertised, but proper diet, cardiovascular exercise and formal education do stave off mental decline, according to new research.”

The Journal concludes that “by the time we reach age 65 or more, one fourth of us may be wrestling with a failing memory and other mild cognitive problems.”

I was going to comment on this, but for the life of me I can't remember what I was going to say…




I hope you had a good Thanksgiving. In the Coupe household, we had the best Thanksgiving that we can remember…even better than last year, which until last week ranked as the best ever.

Once again, we went as a family to Chicago to visit our eldest son, David, who is finishing up his senior year at Columbia College there. (These plans were made and paid for before the economy went into the toilet. Thank goodness for Priceline.)

(Brief commercial announcement here. David is an aspiring actor and writer, and is looking for work. If you have anything you think might be appropriate for a handsome, talented young man with charm to spare, I’m happy to have him call you.)

But I digress…

There is nothing like going away with your family for Thanksgiving, I’ve discovered. First of all, we eat out. Which means steak for everyone (since nobody likes turkey very much), and nobody has to do the dishes. And it means quality time with no distractions, which as the kinds get older becomes harder and harder to come by. (Well, some distractions…but the good kind that Chicago has to offer. What a terrific city…and we even looked at some loft apartments on the off-chance that someday we decide to move MNB World Headquarters there…)

Maybe I’m just getting old and sentimental, but for the second year in a row, it was nice to be reminded how much I treasure these people.




Three wines to recommend this week, all tasted at the always dependable and delightful Bin 36 in Chicago:

• 2007 Sauvignon Blanc/Pinot Gris bland from California’s Vision Cellars, which was perfect with an appetizer of hummus with tomato and garlic.

• 2006 Cinsault/Cabernet/Syrah blend from Massaya Classic, a winery in Lebanon. This was wonderfully lush…and I’d never had a wine from Lebanon nor the grape Cinsault before, so it was a learning experience.

• 2006 Shiraz from Australia’s Wishing Tree vineyard, which is full bodied, spicy, and really, really good.




That’s it for this week. Have a great weekend, and I’ll see you Monday.

Sláinte!!