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    Published on: April 21, 2009

    by Michael Sansolo

    Traveling around the country as I do, I sometimes get to encounter the most wonderful people. I can add Tom Glynn to that list.

    Mr. Glynn, a man deep in his 80s, visited with me after a recent speech and gave me a few minutes I won’t soon forget. He shared with me memories of his long life including a fabulous tale about World War II. Mr. Glynn was one of the first American troops to reach Guadalcanal in the War against the Japanese. His story reminded me of how miraculous it was that the US won that war.

    On Guadalcanal Mr. Glynn learned some hard lessons about the lack of preparation for war. The early soldiers in WWII had weapons perfect for fighting World War I. His company was trained in the desert, useless training in the tropical south Pacific. In the hot, humid climate uniforms actually disintegrated, communications systems failed repeatedly and the food rations were a horror. Worst of all, the US troops had no understanding of the army they were fighting and had to learn quickly to adapt.

    In short, they were the typical army; fighting the last war rather than the one they faced.

    Seems to me it’s a pretty good lesson to remember in the current economic storm. If history has taught us anything it is that competitive response to changing economic conditions is usually shockingly different than the norm. That’s probably the reason why the supermarket itself was born in the Great Depression or why Walmart was able to explode into the food industry so successfully during the recession of the early 1990s.

    The question is, what’s next? The truth, and this is something shocking to write in a column is: I have no earthly idea. I don’t think I’m alone.

    Yesterday I visited a store I thought would be the answer and walked away stunned in disappointment. The store is Walmart’s new Marketside format and honestly I expected this column to detail how the guys in Bentonville had managed to right every wrong we’ve witnessed at Tesco’s Fresh & Easy. I say the following in full knowledge that everyone at Walmart has forgotten more about retail than I will ever know. But here it goes:

    Marketside isn’t ready for prime time.

    Sure, the store is nicely done. The presentation of perishables blows Fresh & Easy away. Shelving is interesting, employees (the four or five present) are engaging and the décor is pleasing. The product mix is significantly larger than Fresh & Easy, which gives the store a level of completeness and one-stop shopping appeal. And that’s where the praise ends. Beyond that, well, I’m stunned.

    There are simple issues that cry out for attention. For instance, the pricing is pretty good on many key items. But there is nothing in the window signage that would suggest this fact. Of course, there is nothing in the outdoor signage that would suggest that Marketside actually sells food. A shopper has to get really close to figure that out.

    There’s also nothing to indicate a tie to Walmart—a company that spends countless ad dollars reinforcing a reputation for “always low prices.” Why not? It seems to me a great opportunity exists for cross-merchandising of “Marketside” products in all Walmart stores in much the way Publix cleverly features its Greenwise natural brand in all of its stores. Instead it makes you wonder if Walmart is hiding from Marketside somehow.

    It’s hard for the story to get worse, but it does. Granted a Monday afternoon visit to two stores tells you almost nothing, except for this: In one store, an employee confided in me that the better Marketside was down the road. Sadly, I had just come from that other store first, where I was one of two “shoppers.” And a deliveryman in that store told me his main job is pulling expired product.

    It got me thinking of the metaphor of fighting the last war and a recent shocking news story out of Washington. Defense Secretary Robert Gates proposed cutting the budget for the F-22 fighter for a simple reason. Though it is a great plane, the military has yet to use it for a single mission in Iraq or Afghanistan. In short, it’s a plane for the Cold War.

    Maybe there is something worse than fighting the last war and that is fighting the wrong war. It seems almost impossible that Tesco and Walmart, two of the world’s greatest retailers, would be doing that in Arizona.

    But the impossible frequently happens.

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

    KC's View:

    Published on: April 21, 2009

    A new study published in the Journal of Consumer Research and referenced by the New York Times suggests that when retailers offer free products to consumers as a way of getting them to buy other items (as in, “buy one, get one free”), they diminish the perceived value of both the free item and the one for which they were actually charging money.

    “When you resume selling it individually, they say, ‘Wasn’t this that item that you had to sell something else with, to get me to buy it? It must be pretty bad,’ ” Michael Kamins, one of the paper’s authors, tells the Times.

    KC's View:
    While it is a somewhat harder argument to make in the middle of a recession, there always has been a position among some in the supermarket business that the reliance on low price as a way of communicating value can be somewhat shortsighted. Stores can hurt themselves if their consistent message to shoppers is that cheaper is better and cheapest is best.

    Sadly, this often is not the case. Cheapest may be all one can afford at certain times, but it rarely is the best. Especially in the area of food, where the difference between really good and dreadfully mediocre often can be explained by a little imagination and innovation - and not just cost – the industry too often has focused on value at the expense of values.

    Which is a shame, because it shortchanges both retailers and shoppers.

    Published on: April 21, 2009

    Want to know why Amazon.com continues to thrive? Check out excerpts from CEO Jeff Bezos’ annual letter to shareholders:

    • “In this turbulent global economy, our fundamental approach remains the same. Stay heads down, focused on the long term and obsessed over customers. Long-term thinking levers our existing abilities and lets us do new things we couldn't otherwise contemplate. It supports the failure and iteration required for invention, and it frees us to pioneer in unexplored spaces. Seek instant gratification – or the elusive promise of it – and chances are you'll find a crowd there ahead of you. Long-term orientation interacts well with customer obsession. If we can identify a customer need and if we can further develop conviction that that need is meaningful and durable, our approach permits us to work patiently for multiple years to deliver a solution.”

    • “In our retail business, we have strong conviction that customers value low prices, vast selection, and fast, convenient delivery and that these needs will remain stable over time. It is difficult for us to imagine that ten years from now, customers will want higher prices, less selection, or slower delivery. Our belief in the durability of these pillars is what gives us the confidence required to invest in strengthening them. We know that the energy we put in now will continue to pay dividends well into the future.

    “Our pricing objective is to earn customer trust, not to optimize short-term profit dollars. We take it as an article of faith that pricing in this manner is the best way to grow our aggregate profit dollars over the long term. We may make less per item, but by consistently earning trust we will sell many more items.”

    • “The customer-experience path we've chosen requires us to have an efficient cost structure. The good news for shareowners is that we see much opportunity for improvement in that regard. Everywhere we look (and we all look), we find what experienced Japanese manufacturers would call ‘muda’ or waste. I find this incredibly energizing. I see it as potential – years and years of variable and fixed productivity gains and more efficient, higher velocity, more flexible capital expenditures.”

    KC's View:
    Words to live and work by.

    Published on: April 21, 2009

    Over at RochesterHomepage.com, there is a report about the new shopping carts introduced by Wegmans at its Pittsford, NY, store, when two of its previous shopping cart vendors went out of business.

    The upside of the new carts? The three-tiered carts seem to ride smoother, are made from brown metal instead of chrome, have cup holders and germ-repellant handles, can fit two children in the seat and have compartments in which shoppers can separate items.

    The downside? They’re bigger – 1,000 cubic inches bigger – and that’s causing some people to accidentally hit each other as they navigate the store. One customer said it is like driving a minivan after only driving a normal car.

    KC's View:
    Wegmans probably is smart to test this out in one store before rolling it out to others…though to be honest, how much bigger than a normal cart can they be if they still fit through the checkout lanes?

    I saw a picture of the new carts, and I like them. Not that this matters a bit.

    Published on: April 21, 2009

    Advertising Age has a largely laudatory story about how Domino’s handled the crisis it faced last week when two employees in one of its North Carolina stores uploaded video to YouTube.com that showed one of them sticking cheese up his nose and then putting it on a sandwich sold to a customer (though the employees denied that they’d actually sold the sandwich after they were fired and charged with committing a felony). According to the story, Domino’s “will be given credit for an effective, if somewhat sluggish, response. And the resulting public-relations crisis can be a valuable learning experience for marketers of every stripe.”

    Ad Age suggests that Domino’s biggest mistake was to believe that it would be able to contain the story and therefore prevent more people from knowing about it…but that the 24 hour delay between the time it found out about it and the time it got aggressive allowed close a million people to watch it online.

    Once Domino’s got moving, it produced a video featuring Patrick Doyle, president of Domino's USA, in which he said, “We sincerely apologize for this incident. We thank members of the online community who quickly alerted us and allowed us to take immediate action. Although the individuals in question claim it's a hoax, we are taking this incredibly seriously."

    Ad Age writes that Doyle said in the video “that the store where the videos were shot has been shut down and sanitized. The company, he says, is also conducting a wholesale review of hiring practices ‘to make sure that people like this don't make it into our stores’.”

    It made matters worse, the paper writes, when it became known that one of the perpetrators was a registered sex offender.

    Ad Age reports, “Richard Levick, president of PR firm Levick Strategic Communications, said he'd give Domino's an F for the first 24 hours and an A or an A+ for everything thereafter. ‘After the first 24 hours, they were largely textbook,’ he said. ‘They started a Twitter account, separated themselves from the villains, shut down the store, apologized, went to their demographic, went to YouTube -- I think all of that is great. People can take their stabs if they want, on every nuance of what Domino's has done, but after the first 24 hours, it's largely textbook’.”

    KC's View:
    Maybe…but somehow it is hard to imagine ordering a Domino’s pizza without thinking of this story. And more importantly, as noted in this space last week, it seems to have opened a conversation among consumers about who and what we really can trust…which is a troubling discussion if you work in an industry dependent on shopper trust.

    BTW…MNB user Vic Hansen had a good line about this in an email he sent me yesterday: “My main take out would be that you don’t just have to do the right thing. In an online world, you have to do it yesterday.”

    Exactly.

    Published on: April 21, 2009

    The Washington Post reports this morning that “President Obama will meet directly with credit card executives this week and plans to tell them to support strict measures that curb lending abuses or face the wrath of angry consumers and a determined Congress, according to banking industry officials.

    “The heads of the credit card divisions at 14 major banks are set to meet with the president and his top economic officials at the White House on Thursday, administration aides confirmed yesterday. They are bracing for a warning that the president will join the chorus of condemnation if they resist efforts to protect their credit card customers from unfair practices.”

    The Post says that a new bill to be introduced this week by Sen. Christopher Dodd (D-Connecticut) “includes capping over-limit fees at one per billing period, allowing no interest charges on fees and no fees to make a payment. The legislation also would prevent companies from raising interest rates at any time for any reason and limit aggressive marketing by card issuers aimed at borrowers under 21.”

    KC's View:
    Considering how much time and effort has been put into fighting the credit card companies, I assume that organizations like the Food Marketing Institute (FMI) will be supporting Obama on this issue.

    Published on: April 21, 2009

    Whole Foods announced yesterday that “it is the first national retailer to offer Forest Stewardship Council (FSC)-certified paper bags at its checkout counters beginning in May.

    FSC is described as “an international nonprofit that promotes the responsible management of the world's forests, offers the most comprehensive standard for certification of forest products. FSC-certified paper can originate from post-consumer recycled fiber or from forests certified according to the FSC's rigorous forest management standards. The FSC's independently verified chain-of-custody system requires paper producers to track their certified fiber throughout the production and distribution process. Because of its high standards and independence from the timber industry, the FSC is considered by environmental organizations around the world to be the gold standard for forest product certification.”

    Whole Foods has been at the forefront of the reusable bag movement, having banned the use of plastic bags in its stores a year ago. While it continues to promote and sell a range of reusable bags, the use of the FSC-certified bags is said to virtually eliminate the bags' impact on forests.

    KC's View:

    Published on: April 21, 2009

    The Wall Street Journal reports this morning that faced with cash-strapped consumers who are changing their shopping patterns, CPG companies are working overtime to find news ways to attract and keep their customers:

    • Kraft Foods created the iFood application for the iPhone, which allows people to create shopping lists based on recipes.

    • Campbell Soup is creating sophisticated recipes that use its products and that imitate restaurant offerings.

    In addition, a number of companies are introducing discount programs to lure shoppers.

    Denise Morrison, Campbell's president of North America soup, sauces and beverages, tells the Journal that the company is girding for "a long-term shift" in consumer attitudes, not a temporary adjustment. "More than ever, understanding what consumers are going through will inform our strategy."

    KC's View:

    Published on: April 21, 2009

    The Wall Street Journal reports that Kellogg’s has settled a case in which the Federal Trade Commission (FTC) charged that it was making misleading claims when it said that eating Frosted Mini-Wheats was clinically proven to increase children's attentiveness by nearly 20%.

    Terms of the settlement were not disclosed. Kellogg’s did not have to admit any guilt as a result of the agreement.
    KC's View:

    Published on: April 21, 2009

    • Interesting piece in the Times of London about Walmart’s environmental initiatives: “By 2025 it wants to eliminate all waste by reducing, recycling or reusing everything that comes into its 4,100 American stores. For Asda, its British operation, the target is 2010.”

    However, despite all the strides made by Walmart, its critics remain steadfast in their skepticism. Eric Bull of Walmart Watch, for example, tells the Times, “Walmart’s customers drive to these huge stores to buy goods that have been shipped from China in leaky ships – it’s not a green business … I’m not saying what they are doing isn’t good, but we should be clear about exactly what Walmart does get the credit for.”

    Walmart remains convinced that it has been very clear about its motivations – that a green approach to business is good for the bottom line.

    Agence France Presse reports that Walmart’s plans to restructure its Chinese business and eliminate some positions in an effort to bolster profitability have been blocked – by Chinese labor unions.

    China, ironically, is the only one of Walmart’s markets where it allows labor unions to operate…and it only did so under pressure from the Chinese government.

    Dow Jones reports that Walmart’s former president/CEO, David Glass, has decided not to seek re-election to the company’s board of directors when his term ends this June.

    Glass joined Walmart in 1976, and became president/CEO in 1988, stepping down from that role in 2000. He has been on the board since 1977.

    KC's View:

    Published on: April 21, 2009

    Responding to numbers mentioned in yesterday’s MNB about how “an estimated 76 million US residents getting sick from food every year, with 325,000 sick enough to go to the hospital and 5,000 dying from food poisoning,” one MNB user wrote:

    I realize that food poisoning is serious and no one wants to see even one person let alone 5000 die for any preventable cause. However, 306,000,000 Americans X 3 meals X 365 days not including snacking or any other eating opportunity and the percentages are incredibly small to die or even get sick from food poisoning. I recently suffered from a bout of food poisoning from a salad at an airport (probably) so I am not insensitive to the issue. However, we are trapped, as we must all eat.

    Would we not be much better off if we spent more time, money and energy on changing the “food pyramid” and by truly educating people on the effects of those burgers whose “taste virtues” you (among so many others) extol so often. There is not enough money in this country to eliminate food poisoning and finding it faster will not save nearly as many lives as changing how we eat – we will never get it perfect and yes we should try but perhaps the industry and the government could do more by focusing on diet – better yet both – but who is going to vote for less profitable junk food and more taxes to provide the perfect system?


    Don't pick on cheeseburgers…you’ll take them away from me when you pry them from my cold, dead fingers.

    Another MNB user wrote:

    It seems to stretch credulity that 25% of the population is getting sick from food. That suggests that about every four years, there is a near certainty that you are going to get sick from food.

    One has to wonder when using anecdotal information: was it the actual food, the consumer’s handling of the food at home, improper handling in a foodservice establishment, or as simple as not washing your hands or a short-lived bug? Food poisoning is usually a medical diagnosis, after various lab tests. “Have you ever had a spell of diarrhea or nausea?” The surveyors ask, then conclude it is “food poisoning”. Maybe it was, maybe it wasn’t.

    It seems everyone has an agenda--- cigarettes are harmless or the scourge; seatbelts save lives or 5,000 people died from being trapped in a burning car and so it goes.

    We have to blame someone---just because I didn’t wash my hands, or I left something on the countertop too long; setting up a new regime to pump more preservatives into foods doesn’t seem to be the right approach.


    You’re certainly right about the fact that a large percentage of food safety problems occur after the consumer takes possession of the food…but both retailers and manufacturers need to take some ownership of even this part of the problem because the simple fact is that no matter why the food safety issue occurs, consumers are going to blame them.




    MNB had a story yesterday about how Stew Leonard’s is catering both to people’s aspirations and their economic concerns by creating pocketbook-friendly packaging, which led one MNB user to offer:

    The club stores have been doing this for the last three years, they call it "right-sizing" or "smart-sizing". This is a very strange concept to a dedicated club store buyer, they only know one way to move a product and that is to increase the size. However, the club buyers have started to see the light, at least on the foods side. They have taken the old 66.6oz Heinz ketchup bottle and right-sized it to three 44oz bottles. Another item is Pam Spray, 2/12oz to 2/8oz. The unfortunate part of this is that it goes against the six rights of merchandising. Packaging is being added and that in turn adds to the cost of the item, you need to sell more items to make up for the loss of margin dollars and sales through the register. I have not seen this happen when compared to the larger 66.6oz size. Sure, it may be more convenient for the consumer so decide who you want to be, a grocery store or a club store.




    Regarding ongoing criticism of Tesco’s US-based Fresh & Easy format, which is behind projections in terms of profitability and expansion, one MNB user wrote:

    You are right, Kevin. The format Tesco created is entirely too sterile. Their concept I felt was very good – in that respect they did their homework. For a large conventional store which they are accustomed to building and merchandising, EDLP and low overhead is fine, but for a small store that relies upon uniqueness to convey a message, they have made a mistake.

    I don’t think what they’ve done is beyond repair, but to date the Tesco people here are not good listeners. In looking at some of the successful, high-volume operators in this sector they always make the interior shell of the store their stage, and the merchandise the actors. They create good theatre and a fun experience for the shopper.

    Merchandising is extremely important and teaching through signing and demonstrations helps the shopper appreciate the experience more and want to return again. I’m certainly not an expert, but I know that I don’t get the same feeling at all when I go into Fresh & Easy, compared to going into Trader Joes, Whole Foods, or even Costco.

    I hope they do start to listen and really take a close look at those that have been successful. Some of the products I’ve tried have been very good. The pricing is good, but the experience is very dull, which must be repaired in order for this concept to succeed. I would hate to see them label this venture a failure, especially with their wherewithal to have a major impact upon the retail scene.

    Kevin, I think you’ve been right on with Fresh and Easy.


    Thanks. (If I offer enough opinions, I’ve got to be right occasionally. Right?)



    On the subject of Safeway’s approach to health care costs, one MNB user thinks I’m pretty much wrong:

    I agree with you that all people must be responsible for their own health and held accountable for their lifestyle choices that expose them to health risks.

    But to call Safeway CEO Steve Burd and Safeway pioneers in the area of health care is absurd. What Burd and Safeway are doing is limiting their exposure to risk. They are simply moving the chairs around on the deck of the Titanic. Their savings (no premium increases) on health care premiums are not coming from employee changed behavior…it comes from reduction of benefits, increased co-pays and deductibles plus reduced dental benefits. I spent four years in the strategic planning department in one of the largest BlueCross BlueShield companies in the US…during that time I identified benefits usage to determine which ones we could reduce or delete without people noticing…and we made deals with companies like Safeway to manage their risk. It was about the company not the insured.





    On the subject of increased interchange fees for the use of credit cards, MNB user Mark Boyer wrote:

    When shopping at supermarkets I will almost always use a debit/credit card to pay. When the cashier asks me, "Debit or credit?" I always ask them back, "Which is better for you?" And they don't know.

    I seem to recall that one had less onerous charges than the other, but it escapes me which is which. Assuming that one was better, why don't supermarkets train every cashier to know the answer that best serves the retailer? And ultimately the consumer?


    My understanding is that debit cards have the lower charges. Which is why I try to always use them at the supermarket.





    Reacting to our mention yesterday of a New York Times interview with Nell Minow, co-founder of the Corporate Library, a provider of corporate governance research, in which she discussed the art and science of managing people, MNB user Anne Evanoff wrote:

    Really enjoyed this piece. Passed it on to my managers to read. Inspirational and affirming at the same time. For those of us that ended up in retail management and wonder how we got here, she writes a great description of the ongoing curiosity that you need in this field. Thanks.

    My pleasure.

    KC's View: