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    Published on: June 24, 2009

    Ad Week reports that Interpublic Group has completed new research showing that “the recession is having a far greater impact on consumer spending habits than previous downturns, and that some behavior patterns, as well as brand perceptions, will be permanently changed … 75 percent of consumers have altered their purchasing behavior over the past year, in some cases trading down and in others making wholesale lifestyle changes.”

    The reason for the greater permanence? The Internet. According to the story, “Consumers have turned more than ever to the Web to seek more information about brands -- from how to stretch household budgets to product reviews-and they're not turning back.”

    The report states: “"Consumers are spending more time researching products and gathering opinions from other people before purchasing. As a result, people are thinking more deeply about products, raising huge opportunities for brands to develop and strengthen their relationship with consumers."

    Interestingly, USA Today has a story this morning about the impact of the recession on the Millennial generation, or Gen Y, which ranges from people in their 20s to those still in grade school.

    According to the story, a new study by JWT suggests that 60 percent of the people surveyed in this age group “feel their generation is being dealt an unfair blow because of the recession. But some see opportunity, as well. For example, 44% say they might be able to afford a house now that home prices have plummeted; 25% say that if they have trouble finding a job, they'll just start their own business.”
    KC's View:
    It seems to me that while there is a lot of debate about how the recession is going to shape people’s attitudes and lives, one of the things that is largely being ignored is that the recession may be empowering people to do a better job of shaping their own lives – albeit under somewhat more modest circumstances than they might have just a few years ago.

    The empowered consumer may be scary to a lot of retailers and manufacturers, but in fact this can be very good for business – at least, for the businesses that embrace an ongoing conversation with the people who patronize their stores. Sure, consumers are going to be more demanding and more informed, and this raises the bar for business. But when you clear the bar, the connection between store and shopper has the potential to be far more profound and, dare we say it, loyal in both directions.

    And that’s good for business.

    Except, of course, the businesses that don't get it.

    BTW…this sense of empowerment should extend to how people behave while in the educational system, and how they behave as citizens. Which is why educators and governments also have a choice – they can embrace this new reality, nor deny it.

    But they deny it as the risk of irrelevance.

    Published on: June 24, 2009

    Business Week reports on a new online marketplace called Alice.com that debuted yesterday that is described as “a platform for consumer-product makers to bypass traditional retailers and go directly to shoppers.”

    At present, the site reportedly offers 7,000 SKUs – almost all household items, with relatively few food products - from 55 manufacturers that include Procter & Gamble, Colgate-Palmolive, and Clorox.

    According to the Business Week story, “Instead of buying the goods from manufacturers, marking up the price to make a profit, and then selling them—the traditional retail model—Alice makes no money on the sale of the goods. The manufacturer sets the price, while Alice handles fulfillment and customer service, passing along those costs, which are about 35% of the selling price, to the manufacturer. Shipping is free, and the company pledges to offer low prices that are competitive with discount retailers like Walmart … To get around the issue that it's tough to make money by selling one tube of toothpaste at a time—a lesson e-commerce pioneers painfully learned—shoppers at Alice.com are required to purchase at least six items before checking out. In beta testing, the average purchase on Alice.com came to around $50 from 11 items.”

    According to the company’s website, “The Alice co-founders, Brian Wiegand and Mark McGuire, have a spent their careers building customer-focused companies. Their formula is simple: use the web to disrupt existing business models and shift more power to end consumers. With a strong team in place, Alice is ready to shift the power back to you one trash bag, toothpaste tube and pack of diapers at a time.”

    In fact, Business Week notes, Wiegand and McGuire are “serial entrepreneurs” who “sold their last endeavor, online ad business Jellyfish, to Microsoft (MSFT) for a reported $50 million in 2007.

    While there is no dearth of competition from online retailers such as Amazon.com and Drugstore.com, not to mention the dozens of retailers that are affiliated with the MyWebGrocer system, experts seem to feel that the success of Alice.com is almost completely dependent on manufacturers’ willingness to engage with the system.
    KC's View:
    The key, I would agree, will be manufacturers’ interest in bypassing traditional retailers. This interest could increase as retailers get more focused on private brands; they’ll never abandon national brands altogether, but this could signify a tougher struggle in the balance of power between retailers and suppliers.

    Published on: June 24, 2009

    The Wall Street Journal reports that “the recession-driven shift to eating at home more often is giving new life to grocery stores' most basic offerings, and upending a multiyear strategy of using coffee bars, fancy bakeries and exotic products to attract shoppers … Kroger, Stop & Shop, Publix and other big food chains tried for years to make themselves into a one-stop destination by revamping their store perimeters to include floral shops, prepared meals and other offerings. But the recession has refocused them on the staples sold in center aisles.

    “These chains are aggressively pushing private-label versions of canned vegetables, breakfast cereals and whole-wheat bread, draping center shelves with coupons and price comparisons, and bundling ingredients for homemade meals.”
    KC's View:
    What we may start to see – or at least should see - is retailers bringing the same kind of innovative thinking to center store that they have used in perimeter fresh food departments. Because you can't just stock it and sell…the center store has to speak about your store brand in the same way that fresh food departments do.

    Published on: June 24, 2009

    USA Today reports this morning that the US Food and Drug Administration (FDA) to this point has no idea how E. coli, a bacteria sometimes found in raw hamburger, made its way into Nestlé Toll House refrigerated cookie dough.

    But the FDA plans to remain in the Virginia plant that manufactured the dough until it figures it out.

    The product has been pulled from US store shelves and the plant has been shut down. Seventy people reportedly have been sickened by the dough, but nobody has died.
    KC's View:

    Published on: June 24, 2009

    In Northeastern Oklahoma, the 15-store Reasor’s will open its newest 80,000 square foot unit today in the city of Jenks, which company president/CEO Jeff Reasor says “combines old-fashioned customer service with state-of-the-art technologies to bring you a new kind of shopping experience.”

    According to the company, “the food service area is unrivaled by any grocer in the region. Individual salad, sandwich, coffee, olive and sushi bars offer an array of fresh, delicious items guaranteed to tantalize your taste buds. Special features include banquet and meeting space, a coffee bar, and a deli restaurant … Health- and environmentally conscious consumers will appreciate the large, whole and natural foods area as well as the fresh fish market. Reasor’s has employed a seafood merchant from Seattle to provide expert insight into new trends of freshness and sustainability.”

    The new store is the third expansion and location for Reasor’s in Jenks.
    KC's View:
    It seems like all you read about these days are companies that cutting and laying off. Reasor’s may be a small company and this, in the scheme of things, may be a small story. But it is worth noting if for no other reason than it reflects a spirit of optimism.

    Published on: June 24, 2009

    The Taylor Nelson Sofres World Panel reports that Tesco’s UK market share continued to slip, down in the most recent quarter to 30.8 percent from 30.9 percent during the same period a year ago.

    Walmart-owned Asda Group saw its market share grow to 16.8 percent from 16.6 percent during the same period of time. Sainsbury’s market share also grew during the quarter, to 16.1 percent from 15.8 percent a year ago. And William Morrison Supermarkets had market share growth to 11.6 percent from 11.3 percent.
    KC's View:
    There’s been plenty of debate in the UK about whether the government there needed to aggressively legislate the markets so that companies like Tesco did not accumulate too much market share. The evidence would seem to suggest that competition and gravity have done what the government hasn’t done. The retailers have all gotten better, and this has to be perceived as good for consumers.

    Published on: June 24, 2009

    Dow Jones reports that Walmart plans to spend the equivalent of $800 million (US) in Brazil this year, believing that the investment will position it well for an economic recovery that is expected to occur later this year.
    KC's View:

    Published on: June 24, 2009

    • The Brattleboro Reformer reports that the US Department of Agriculture (USDA) has signed a new equivalency agreement with Canada’s Food Inspection Agency that “allows certified organic products from either country to be sold on the other side of the border with the organic label.”

    The agreement, said to be the first such deal in the organic business, is designed t smooth trade and heighten sales on both sides of the border.
    KC's View:

    Published on: June 24, 2009

    • Kroger Co. said yesterday that its first quarter earnings were up 13 percent to $435.1 million, from $386 million a year earlier. Net sales decreased 1.5% to $22.8 billion on sharply lower gasoline prices, on same-store sales that were up 3.1 percent.
    KC's View:

    Published on: June 24, 2009

    I was urged yesterday by an MNB user to get off my high horse and change my opinion about reusable bags, since recycling of plastic bags is a better option.

    I replied that riding a high horse is what I do for a living and that while recycling is always a good option, creating no waste is a better alternative.

    One MNB user actually agreed with me:

    What a lovely thought! Let's NOT try to reduce the amount of plastics we put in the city of Spokane's incinerators so we can all breath the toxins this progressive town puts out. Give me a break! If this reader is getting tired of hearing opinions that champion holding the earth, the environment and health above his poor woes of having to contend with his using reusable bags, well, might I suggest he stop reading those bag related paragraphs and wash his reusable bags a bit less often. He is wasting water and wasting period. Aristotle prodded on matters of ethics and morals, claiming he saw his duty to be "the gadfly on the horses back". Keep up the gadfly work, Kevin. We need a voice of reason to waft over the drone of me, me, me, me!

    Lot of animal metaphors working there – apparently I’m a gadfly on a high horse.

    Works for me.




    We had a story yesterday about how the National Advertising Division (NAD) of the Council of Better Business Bureaus has asked Walmart to stop running TV commercials claiming that shoppers can save $700 a year by shopping at its stores.

    The NAD says that the commercial – which no longer is running – makes an overly broad claim that is not supported in every market. Walmart disagrees, though it said it would take the NAD recommendation into account when crafting future commercials.

    The complaint against Walmart originally was brought by HE Butt.

    One MNB user wrote:

    HEB and Walmart are in a pretty fierce pricing battle, so it would be natural for HEB to dispute WMT's savings claims.

    But another MNB user wrote:

    It is interesting that H.E. Butt Grocery Company filed a complaint against Walmart for their advertising claims. I have watched HEB operate over the last 25 years in the most aggressive and predatory manner of any retailer in the 40 years I have been associated with the retail industry.

    HEB has literally put dozens and dozens of smaller or weaker competitors out of business with incredible predatory pricing strategy aimed at specific competitors. Why someone has not called them out on this over the years is incomprehensible.

    For HEB to file a formal complaint like this is the most bizarre action for a company that I would think would not want anyone to look closely at how they operate. Watch what they do not what they say!


    Still another MNB user had some thoughts about price-driven advertising in general:

    In Columbus, OH when I go to the local Kroger store there are two carts full of groceries - one displays the total cost at Krogers, the other the total cost at Giant Eagle. Of course the cost at Kroger is significantly lower. When I go to the local Giant Eagle store there are two carts of groceries - one displays the total cost at Giant Eagle, the other the total cost at Krogers. Of course the cost at Giant Eagle is significantly lower. Anyone with half a brain knows that these stores are cherry picking items to make sure they are the "winner". I am sure this shopping basket comparison trick goes on all over the country. "Let he who is without sin cast the first stone." [P.S. I doubt that any make the cart comparison to a local Walmart.]




    Regarding Kodak’s decision to stop making Kodachrome film, MNB user Jim Swoboda wrote:

    A sad day indeed.

    Not sad because Kodachrome is going away, but because Kodak still faces becoming obsolete as well. The digital camera is often attributed to have been invented in a Kodak lab in 1975. Yet, who made it mainstream? Not Kodak. Why? Because the forces of status quo were to strong and those in charge of the film business likely squashed this new, threatening technology. The question is was Kodak in the film business to produce images/memories, or were they in the images/memories business and the media was not important, only enabling their customer to do what they desired, to capture images/memories? I suspect had the latter half of the question been explored, we would have hundreds of millions of old Kodak digital cameras laying around just like the old "Brownies" as those too were made obsolete by new innovations, albeit film versions.

    How many other companies have missed this kind of change is astounding. The entire music industry risked irrelevance because they believed they sold CD's and LP's, not music. Hence, a young man with a computer almost put them under with Napster because music could be distributed in a new, cost effective way.

    It's also is possible that is why the Detroit 3 are at the point of irrelevance. They appear to be in love with the internal combustion engine and cannot see any other way. Even when the new ways are within their own domains, the power of the status quo quickly buries or burdens them in ways they can not escape to become the next great idea. It takes an outsider without the baggage of the past. Just visit Telsamotors.com and perhaps see a glimpse of the not to distant futures.

    History is there to learn from. Too bad too few do.





    I bemoaned the fact that CLEAR, the company begun as a way of creating a system of registered travelers that would make it easier to get through airport security lines, reportedly has gone out of business.

    My comment:

    As one of those 165,000 CLEAR members, I can tell you that in the airports where the system was in place, it was worth every penny. And it strikes me as a real shame that the government not only didn’t get comfortable with CLEAR-like systems, but didn’t embrace the concept and find ways to make it work – especially for the business travelers who are on the road constantly.

    Maybe we can blame the failure on bureaucracy, and maybe on the economy. But ultimately it strikes me as a failure of imagination, a failure to embrace innovation. And that’s a failure that can be found in too many organizations.


    One MNB user cautioned:

    Be open to the fact that maybe they had a great concept founded in creativity and innovation but they failed in their execution of the business plan…if so the concept will be back championed by another company.

    Just because a company has a great idea…doesn’t mean they will execute effectively or efficiently…don’t be so quick to place blame for failure on bureaucracy or the economy or the lack of imagination and failure to embrace innovation (to whomever you were referring). Course, it wouldn’t surprise me if government bureaucracy killed this concept…


    That would be my bet.

    MNB user Rick Rector wrote:

    As another of the 165,000, I couldn't agree more. Clear was a good example of a private business doing something the government should have done, but didn't have the imagination to think of. Now we frequent travelers will be back in the regular lines, which always seem to be full of people who've never been through an airport security line before. Bummer!

    One MNB user wrote:

    As a member of Clear I am extremely disappointed to see the news today. I have long maintained we are no safer with the TSA than the previous contractors. We have only succeeded in increasing the cost of security with more government employees. Over staffed and under performing. To find out they are part of the problem and not part of the solution comes as no surprise. My frustration is increased when I realize I just renewed a couple of months ago.




    On another subject, an MNB user wrote:

    Last week, you commented on Stewart and Colbert and the changes in viewership by ages. I commented about my own age helping to raise that median age. I decided to ask one of my fellow workers about his personal TV viewing habits since he is part of that ‘younger generation’. His first comment was that he said: “I don’t own a television”. This lead to a series of questions and understanding his personal behaviors. What I came to learn was that everything he watched, ranging from news to movies and sitcoms, was all available online. He had no need for a television to watch this media and preferred to spend his money on a stronger and faster computer than to have a fancy plasma HD television.

    It was the kind of insights that you continue to discuss on the MNB but rarely seem to fit into my own personal behavior that I had to hear about from another generation. I feel like I am getting old.

    Pretty soon, no one will remember Howdy Doody and Buffalo Bob or replacing tubes in your TV on Saturday mornings to watch them.

    What is this world coming to?


    It continues to spin, that’s all. Nothing to fear. Lots to celebrate. The glass is half-full, my friend. Not half empty.




    We continue to get email about our story saying that Reader’s Digest, a mainstay for decades on supermarket front end magazine racks, is facing difficulties in the print media business by reducing its frequency to 10 times a year from 12, and reducing its rate base from eight million to 5.5 million over an 18-month period. The company says it will compensate for the moves by rolling out a global web platform.

    My comment, basically, was that Reader’s Digest larger issue would seem to be that it is a magazine written for old people…and I’m not sure how it stays relevant for the next generation of readers/consumers.

    One MNB user wrote:

    I’m not ready to trade my bathroom magazine rack for a Kindle just yet.

    Even my much younger sister Amy chimed in:

    I just read "Your Views" and have to tell you - I subscribe to RD. Why? Two reasons - it brings back great memories from when I was a kid and it's perfect for reading in the tub.

    That’s almost more information than I need to have.
    KC's View: