retail news in context, analysis with attitude

Published on: April 23, 2009

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

There’s nothing like hitting the road when you want to take the temperature of the US food retailing business. Over the last few weeks, that’s sort of been my life. As I’ve mentioned here before, I’ve been working on a video project that will be shown at the CIES World Food Business Summit in New York this June. Our goal is to transport the retailer and manufacturer delegates beyond the conference hall in midtown Manhattan and give them a taste of innovative food retailing elsewhere in the US. The theme of the Summit is “Ingredients for Success,” and we’ll be identifying some of these ingredients in a series of videos.

In the past two weeks alone, my crew and I have had the opportunity to visit one of Safeway’s newest Lifestyle stores, near Denver; take a look at an unusual IGA urban store in Seattle; spend some time in Walmart Supercenter # 1 in Rogers, Arkansas; and go to New Orleans for the first time since Hurricane Katrina almost destroyed that city and visit one of three new Save-A-Lot stores opened there in a neighborhood that once was under five feet of water.

These are just some of the stores we’ve visited on our journey, and the only frustration has been that while we’ve profiled some dozen retailers, I could easily have identified another 12 or 24 or 36 that I would have liked to include.

There are times that I can get a little cynical about the state of food retailing, especially when it comes to certain issues like food safety or transparency…but it is hard to be too cynical when you get a chance to see stores, chat with retailers, and watch customers.

Here are three lessons that I take from my recent travels. (There are a lot more, but I’m saving those for the video.)

1) In pretty much every store we visited, at some level the retailer was able to communicate value to the shopper while still imparting a sense of the values behind the store. That is incredibly important, it seems to me, because it allows the retailer to be viable beyond the moment and to develop a narrative that will work even when the recession is over, whenever it is over.

2) At the risk of sounding jingoistic, this is a wonderful country. I’ve seen a lot of it over the past four or five weeks – in addition to doing this video project I’ve had another one that I’ve been working on, and also have been giving a few speeches. And while I’ll admit to being a little worn out at the moment, I never get tired of visiting areas of this country that I’ve never been to before, and revisiting familiar places. Sure, it is the food and the beer and the wine…but it also is the people in the stores that we saw, and the pleasure so many of them seem to take in their work. Again, cynicism can sometimes make us forget that people generally define themselves, to a greater or lesser degree, by the work they do. They want to enjoy it, they want to make a contribution, and sure, they want to be rewarded for their efforts. Sounds pretty reasonable to me.

3) Finally – and I say this as someone who speaks and writes for a living – one important lesson of which I have been reminded is the importance of a continuing education. We stop learning, we stop growing. We stop growing, we stop being useful…to anyone. I’m lucky…I have a job that requires me to keep learning…but this trip has reminded me of the importance of keeping my eyes open and to listen to the answers when I ask questions.

Which brings me to a last point about this leg of my travels. As I record this, I am preparing to spend some time with a class at Cornell University. They want me to talk, but my experience has been that students tend to teach me a lot more than I teach them, and I expect today to be no different. Which is, by the way, why I recommend that if you don't spend some time with college students on a regular basis, you should reach out to your alma mater or your local college or university. The time you spend on campus will pay benefits, in spades. Believe me.

My time in the classroom will be the best part of the day…at least until the class is over and I head to the airport and get back on a plane. There are places to go, people to meet, things to do…and lessons to learn.

For MorningNewsBeat Radio, I’m Kevin Coupe.

Published on: April 23, 2009

The National Retail Federation (NRF) and the Retail Industry Leaders Association (RILA) have announced that their respective executive committees have unanimously agreed in principle to merge them into a single trade association representing retail interests in the nation's capital.

According to the joint statement released by the associations, the new structure “will provide enhanced value to both RILA and NRF's members and help to ensure that the retail industry speaks with one voice to advance the industry and its more than 15 million workers.”

The new association has not yet been given a name, but is expected to provide both a stronger lobbying voice in Washington, DC, as well as compelling educational services to their membership.

The associations said that “completion of the merger requires that both NRF and RILA submit to a thorough due diligence process … Both associations' boards of directors must recommend the merger, and both memberships must approve it.”

The merger is expected to be completed by this summer.

In related news, NRF CEO Tracy Mullin announced that she would retire from the organization she has served for more than 30 years at the end of 2009. The announcement said that Mullin told the NRF board of her plans last year, but thought that it was appropriate to make her decision public at this time.

Published on: April 23, 2009

Call it a sign of the times.

The Washington Post reports that Google is saying that in 2008, online searches for coupons outstripped….er, exceeded…searches for Britney Spears.

Published on: April 23, 2009

Advertising Age has a story saying that while the recession has been given much of the credit for the growth of private brands, a study by NPD Group suggests that the expanding acceptance of own-label products in fact precedes the current economic downturn.

The study says that:

• Private brands are equally accepted by households across all demographic groups.

• Own label accounts for 30 percent of all the food (not including beverages) consumed in the US.

• And that 97 percent of US households buy private brands at least occasionally.

However, the study also notes that private brands only account for about 20 percent of dollar sales, which is seen as a confirmation of their discount positioning.

Published on: April 23, 2009

• Let the sun shine in…

Walmart announced yesterday that it plans to put solar panels on between 10 and 20 of its California stores and distribution centers during the coming year and a half, which could as much as double the solar power footprint that it has at the moment.

The solar arrays are being built in partnership with BP Solar, and is in line with the company’s stated desire to eventually depend 100 percent on renewable energy. The company’s existing solar panels provide between 20 and 30 percent of the location’s power needs.

Published on: April 23, 2009

Five chains operating pharmacies in New York State have agreed – under pressure from NY Attorney General; Andrew Cuomo – to provide prescription instructions in five languages other than English: Spanish, Chinese, Italian, Russian and French.

In addition, the chains – Walmart, Costco, Target, Duane Reade and A&P – have agreed to provide access to oral assistance in more than 150 languages. A similar agreement was reached last year between Cuomo’s office and both CVS and Rite Aid.

The goal of the agreement is to insure than non-English speakers and immigrants are not discriminated against.

Published on: April 23, 2009

The Financial Times reports on new research from The Nielsen Company that suggests that “US consumers increasingly believe the economic slump has almost bottomed, with more people expecting a recovery within the next year than six months ago … Nielsen, which has just completed its twice-yearly global consumer confidence index, said 19 per cent of US consumers now expected their country will be out of an economic recession within the next 12 months, compared with 18 per cent when the group completed its last survey in October.”

While an increase of one percentage point is hardly a seismic shift, James Russo, vice-president of global consumer insights at Nielsen, tells FT that it is “pretty significant.” However, consumers still are not increasing their shopping trips nor their spending, and Nielsen suggests that long-term changes to people’s shopping habits could be taking place.

The Nielsen study looked at consumer confidence on a global scale, and found that India and China have the most optimistic consumers, while Russia’s shoppers are the most pessimistic.

Published on: April 23, 2009

The Sacramento Business Journal reports that Tesco’s Fresh & Easy division in the US won’t open any of its planned stores in Northern California, a decision that comes on the heels of the company’s announcement that Fresh & Easy lost $200 million last year.

Tesco had announced 24 stores for Northern California, some of which are already under constructions.

Published on: April 23, 2009

The Food Marketing Institute (FMI) announced today nine finalists in FMI’s 10th annual Store Manager Awards competition.

One grand prize winner, to be announced at FMI’s upcoming Future Connect conference, will be chosen from each of three categories by size of the company: Category A (1-49 stores); Category B (50-199 stores); and Category C (200 or more stores). The list of finalists:

Category A:
• Bob Gillick, store director at a ShopRite Supermarket in Yonkers, NY.
• Emily Hoff, store manager at the Valley View IGA Plus store in Sidney, MT.
• Blake Meek, store manager at a Lawrence Bros. IGA Supermarket in Roswell, NM.

Category B:
• Cheryl Blanchard, store manager at a Price Chopper Supermarket in Delhi, NY.
• Paul DiBari, store manager at a Brookshire’s store in Athens, TX.
• Henry Falcon, store manager at the Sweetbay Supermarket in Plant City, FL.

Category C:
• Jeff Barricks, store manager at a Safeway store in Corvallis, OR.
• Denny Hartogh, store director at a Hy-Vee store in Dubuque, IA.
• Randy Sentachi, store manager of a Save Mart store in San Francisco, CA.

The finalists were selected based on their ability to develop programs that create positive growth and customer satisfaction in their stores during the past 12 to 18 months.

Published on: April 23, 2009

• Nice piece in the Wall Street Journal this morning about Publix Super Markets, which it describes as forging ahead even during an economic slowdown that has been particularly tough on its home state of Florida – “staying at full staffing levels and lowering prices” in the belief that this will allow it to build market share in tough times.

"Publix is always at its best when the economy is at its worst," Burt Flickinger, managing director for Strategic Resource Group, tells the Journal. "Competitors are now cutting back or contracting, and that's when Publix sees the most opportunities for expansion."

Published on: April 23, 2009

• McDonald’s announced that its first quarter net income was $979.5 million, up from $946.1 million during the same period a year ago. Q1 total sales were $5.08 billion, down from last year's $5.6 billion. , on global same-store sales that were up 4.3 percent and US same-store sales that were up 4.7 percent.

Published on: April 23, 2009

• The Board of Governors for GS1 US, Inc., announced it has elected Robert W. Carpenter as the not-for-profit organization’s new chief executive officer, effective May 10. GS1 US, one of 108 country-based affiliates of GS1, a global standards organization, helps businesses adopt and implement standards-based, global supply-chain solutions.
Miguel Lopera, who has been serving as the CEO of GS1 US since 2004 while simultaneously serving as CEO of Brussels-based GS1, will dedicate his focus to the global role.

Carpenter comes to GS1 US from ARAMARK Corporation, where he was senior vice president of Business and Strategic Development for ARAMARK International.

Published on: April 23, 2009

Responding to our coverage of small store development by Walmart and Tesco in the US, and their less than exceptional results, one MNB user wrote:

Perhaps Walmart’s interest in their version of this format is more to help encourage Tesco to spend big money and to have them focus on the US issue, thus allowing Asda a chance to gain some ground in the UK ??

Ask yourself:

1) if WM really was serious then why not keeping pushing the neighborhood market format more?

2) Beside C-stores (which WM tried and failed), how many " fresh" formats have worked out there on any mass scale?

3) Especially in these economic times what would you invest in this format anyway?

Got to wonder if Tesco and WM have ever heard of ALDI ??? Give both another 18-24 months and you'll see them out of this format.

Seems like a lot of money to spend just to keep Tesco distracted. Besides, I think that companies like Trader Joe’s have proven that there is a market for the small-store, quality-driven format…but it is a tough nut to crack, and it takes time and money to do so.

As Jean-Luc Picard once said, “Things are impossible until they’re not.”

Regarding Tesco’s Fresh & Easy stores, one MNB user wrote:

Tesco’s biggest problem is that it is forgettable. Maybe not by us, but by every consumer in America.

I think this may be an overstatement. Fresh & Easy actually has a cadre of dedicated and enthusiastic fans…but it has been unable to expand on that relatively small base. But to say that “every consumer” feels that way would be a bit of hyperbole.

In my commentary yesterday, I wrote:

I continue to believe that Tesco will figure this out…but I’ll be a lot more confident when the retailer announces that it plans to use some version of its UK loyalty marketing program in the US. That kind of targeted marketing might be a real differential advantage here, and I keep wondering why any company would go into battle only using a percentage of its available ammunition.

Which prompted one MNB user to write:

I think you will find that Dunnhumby's deal with Kroger may prevent this.

Maybe.

If so, that could end up being Tesco’s fatal mistake here. You don't go into battle without your best weapon, it seems to me...

Michael Sansolo had a column earlier this week about Walmart’s Marketside small-store test, which led one MNB user to write:

Thanks for your insightful and accurate assessment of Wal-Mart's Marketside concept and its competitiveness against Fresh & Easy. The "battle of small formats" in Phoenix is in fact the right war in the wrong place. Marketside should be an urban format, serving communities that don't have ready access to a SuperCenter. In the Phoenix suburbs you don't have to travel more than a mile to find a full-size grocery store or SuperCenter. The struggles that Marketside and Fresh & Easy are having are largely due to their choices in real estate and market strategy. What do these merchants offer to Phoenix residents that they cannot easily find elsewhere? Put those small stores in Manhattan or downtown Chicago and see what happens (granted the unit economics would suffer for the high real estate cost.) With Wal-Mart's ability to deliver the right product mix at every day low prices, urban residents would flock to these stores to stock up.

One thing you can count on from Wal-Mart these days: they are very smart people and they'll eventually figure it out. Marketside versus Fresh & Easy reminds me of IBM PC versus Commodore 64. "First in" doesn't guarantee market leadership. Walmart doesn't blaze trails, they pave them.

The “IBM vs. Commodore 64” metaphor is interesting, since I don’t think either of them is in the computer business anymore. Me, I’d rather be Apple – may not be the biggest, but almost always the thought leader.

One MNB user was less than enchanted with Michael’s analysis:

From those of us who will be in competition with the new Wal-Mart format, thanks a lot for giving them thousands of dollars of free consultation on how to improve.

Sometimes we do it for free. Sometimes we charge. But we’re always available, and sometimes we do weddings, funerals and bar mitzvahs.




On the subject of proposed NY legislation that would prevent any store containing a pharmacy from selling tobacco products, one MNB user wrote:

Random bans are unfair, but in this case the key is that they are tied to a license. Businesses licensed to sell alcohol follow regulations limiting the sale of their product. Grocery stores and restaurants follow health regulations to protect their consumers. Why is it any different that an entity which is licensed to provide medicine for healing not sell items that kill you?

I’m not for or against the restriction itself; it is up to the specific licensing authority to factor in the fiscal and health ramifications of the sale of tobacco and act as their constituents see fit. My point is that it seems well within the right of the licensing authority to make this restriction. Participating in a licensed activity subjects a business to reasonable restrictions. Not selling cancer inducing products seems like a reasonable restriction to entities licensed to provide health and wellness.

My heart agrees with you. My head worries that sometimes government should just let the market take care of itself.




One of our stories the other day, about a new shopping cart being tested by Wegmans, made mention of germ-repellant handles….which led one MNB user to wonder:

What makes a handle germ-repellant? They should make everything out of whatever that material is, like say toilet seats. And if the handles do repel germs, where do they go? Just some things that make me go, hmm? (Whatever happened to Arsenio Hall?)