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    Published on: September 24, 2009

    Now available on iTunes…

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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, experts in the art of retail website design.

    Regular readers of MorningNewsBeat know that over the years, I have spoken enthusiastically of Amazon.com and its various products and services – including its entry into the grocery business. I buy a lot of groceries via Amazon’s website, and have heard some very good things about its Amazon Fresh offering in Seattle, which, by the way, has now been expanded so it covers pretty much the entire city, delivering both fresh foods and packaged goods in Amazon’s own trucks. (See story below.)

    However, today I’d like to talk about a mistake that I think Amazon is making…a mistake that other companies should be careful not to duplicate.

    One of my favorite features on Amazon’s website is its Subscribe & Save service, which allows me to place a standing order for a number of products, such as shampoo and laundry detergent. It amounts to automatic replenishment at the consumer level – I know how much we go through in our household, and I know that once a quarter I’m going to get a case delivered so that there is no chance we will run out. (I’ve chosen the once-a-quarter frequency, by the way…there are other options, depending on a shopper’s particular needs.) In exchange for them getting this standard order, I get discounts both for having placed the order on Amazon and for being part of Subscribe & Save…plus I get free shipping…and the final price is lower than any I could get elsewhere. And you can't beat the convenience.

    As for Amazon’s part, it gets a highly loyal and completely locked in customer. It is highly unlikely that I’m going to shop anywhere else for any of these products, or that I’m going to try a competing product, and I’m sure that they get manufacturers to provide allowances based on provable and definable loyalty.

    Except that in two cases in recent weeks, I’ve gotten an email from Amazon saying that they don't have my Subscribe & Save products in stock, and that I’ll have to wait another three months for the automatic replenishment that suddenly isn’t so automatic.

    Now, I’m not sure what’s going on at Amazon, but this is a serious mistake. They’ve opened the door for me to try another online service for the same products, which I did with Alice.com. (I was happy with the ordering and fulfillment service at Alice.com, but wish they had an auto replenishment feature.) They even opened the door for me to use a – gasp! - brick-and-mortar store for these products. And, they’ve opened a window for me to try competing brands, which undermines the whole value proposition from the manufacturer’s point of view. (I was shocked, by the way, that they didn’t even try to offer me equivalent products…which would have kept me from looking beyond Amazon’s website. But they didn’t, and I did.)

    Could it be that Amazon is having out-of-stock problems? Or that manufacturers are less committed to the program? Or that its vaunted merchandising systems aren’t what they used to be? Or that someone at Amazon headquarters simply isn’t paying attention? Or could it be some combination of all these things?

    I’m not sure. But what I do know is that Amazon, which usually doesn’t miss a trick when it comes to identifying consumer preferences and buying habits and then doing everything possible to lock in shoppers for the long-term, blew it. They goofed.

    Amazon isn’t in any imminent danger of losing me as a customer – I’ve been shopping on its site since March of 1997…so I have a long-term investment in the brand. But as a consumer and highly loyal customer, I’m not pleased.

    From a business point of view, I believe that automatic replenishment down to the consumer level is a great idea that hasn’t been employed nearly enough by retailers. But it only is great idea if you deliver on the promise.

    Amazon didn’t. It is a good lesson for every retailer and manufacturer.
    KC's View:

    Published on: September 24, 2009

    There were reports yesterday that Christian Haub, chairman of the Great Atlantic & Pacific Tea Co. (A&P), had given an interview to a European magazine saying that Tengelmann Group, the family-controlled company that owns more than a third of the supermarket retailer, was considering a sale of A&P as a way of maximizing its own profitability.

    But before the day was out, A&P was out with a statement saying that Haub’s comments were taken out of context:: “Mr. Haub is very excited about the recent partnership Tengelmann entered into with Yucaipa investing $175 million into A&P to further enhance value for the Company. He is looking forward to creating more opportunity for the Company by concentrating on the strategic optimization initiatives recently announced.

    “This strategy and the current operations is the priority for Christian and the Executive Management Team and the potential sale of the business was only discussed as one of many possible longer-term alternatives which are a reality to any business.”
    KC's View:
    The denial seems entirely credible to me. First of all, it’s a lousy time to try to sell anything. And I suspect that they want to give CEO Eric Claus and his team more time to turn around a company that has had more than its share of issues in recent years.

    Published on: September 24, 2009

    Brand Week reports on a new study from Information Resources Inc. (IRI) saying that “private label unit share has grown to 22.8 percent (up 1.2 points) in the past 12 months. Dollar share has grown 0.7 points to 17.6 percent.”

    According to the story, “Store brands were most strongly represented in the grocery channel, with a 25.6 percent unit share, followed by Walmart, where they have a 23 percent unit share. Supercenters (22.7 percent) Club stores (17.7 percent), drug stores (17.6 percent) and dollar stores (16.8) followed. But between 2008 and 2009 every channel saw private labels expand both their dollar and unit share.

    “Private labels have seen significant growth in categories like shortening and oil, tomato products and ice cream/sherbet between the years 2006-2009. However, in categories where national brands are dominant, such as weight control products, cat food and margarine, store brands have seen their shares drop.”
    KC's View:
    Two comments here.

    One, retailers need to avoid complacency in this area. If they want to continue to grow private brands, they have to be aggressive about marketing and ambitious about product development.

    Two, retailers need to think of private brands as part of a broader strategy that focuses on creating a brand identity for their stores, which can translate into equity that will, if nurtured sufficiently, create a differential advantage for stores.

    Published on: September 24, 2009

    The Phoenix Business Journal reports that a group has been formed in the Phoenix market called Friends of Bashas’, which is advocating the economic importance of keeping the locally owned chain viable.

    Since its inception, the Journal writes, “the group has worked with local companies to sponsor newspaper, billboard and in-theater advertisements about supporting the local grocery chain.”

    Bashas’ filed for bankruptcy several months ago, and has been in the process of laying off people and closing stores as a way of regaining economic stability for the chain.
    KC's View:
    Wearing t-shirts and buttons that say ‘I support Bashas’” is all well and good. But it also is important to actually shop there.

    Published on: September 24, 2009

    The Washington Post reports that environmental groups are targeting US toilet paper companies for being overly obsessed with softness, saying that the softer the paper the less environmentally friendly it is. According to the story, “Each sheet is a web of wood fibers, and fibers from old trees are longer, which produces a smoother and more supple web. Fibers made from recycled paper -- in this case magazines, newspapers or computer printouts -- are shorter. The web often is rougher.” And so, people are less likely to buy toilet paper made from recycled fibers.

    The Post notes that “toilet paper is far from being the biggest threat to the world's forests: together with facial tissue, it accounts for 5 percent of the U.S. forest -products industry, according to industry figures.”

    Still, toilet paper manufacturers are caught in the middle – while they say they want to be more environmentally conscious, they also say that consumers still want the soft stuff.

    And there’s the rub.
    KC's View:

    Published on: September 24, 2009

    • Amazon.com announced yesterday that it will expand its Amazon Fresh business – which delivers fresh foods and packaged goods on Amazon’s own trucks – to the entire Seattle metropolitan area. Until now, the service has been limited to 49 zip codes in the city.

    Doug Herrington, vp of consumables, said yesterday that the company has a lot of confidence in the service’s economics.
    KC's View:
    It’ll be interesting to see when Amazon decides it has enough confidence in the economics to expand to another market. Clearly, they’re in ho hurry – the priority is to get it done right as opposed to getting it done fast. (Amazon Fresh started in 2007, and has slowly been rolled out in Amazon’s home market.)

    Published on: September 24, 2009

    • Walmart announced yesterday that its Sam’s Club division will begin offering free technical support for members with consumer electronics issues – even if they did not buy the products at a Sam’s Club.

    Sam’s also reportedly will offer home delivery for fees starting at $50, and installation services beginning at $89.
    KC's View:

    Published on: September 24, 2009

    • The Denver Business Journal reports that the US Equal Opportunity Employment Commission (EEOC) has filed a lawsuit against Kroger-owned Dillon Companies, alleging that its King Soopers chain discriminated against a courtesy clerk with a severe learning disability. The suit charges that the 11-year employee was harassed by supervisors and managers and then provoked into behavior that got him terminated.

    “Unfortunately, individuals with learning disabilities continue to be the object of harassment by those who would like to replay the sophomoric pranks of schoolyard bullies,” EEOC Regional Attorney Mary Jo O’Neill said in a news release. “Lawsuits such as this one will remind employers that employees with disabilities must be treated with the same dignity and respect as other valuable members of the work force.”

    • The Denver Post reports that there has been a change in leadership in Local 7 of the United Food and Commercial Workers (UFCW) there, with the long-serving president, Ernie Duran Jr., replaced by Kim Cordova, a former union representative.

    Duran had been charged with nepotism, installing his son and daughter in high-paying positions in the union.

    The move comes even as labor-management relations remain tenuous in the Denver market, where there are concerns that employees at the three major chains – Safeway, King Soopers and Albertsons – could wither strike or be locked out if the most recent contract offers are rejected.
    KC's View:

    Published on: September 24, 2009

    • General Mills said yesterday that its first quarter sales grew one percent to $3.52 billion, led by 6 percent growth in U.S. retail net sales.
    KC's View:

    Published on: September 24, 2009

    • Rite Aid Corp. announced that it has promoted Robert I. Thompson, senior vice president of pharmacy operations, to be the company’s new executive vice president, pharmacy.

    In addition, Bill Wolfe, formerly group vice president for managed care and government affairs, has been promoted to senior vice president, managed care and government affairs.
    KC's View:

    Published on: September 24, 2009

    MNB took note yesterday of a US Food and Drug Administration (FDA) ban of the sale of flavored cigarettes, a move that the New York Times wrote is “intended to end the sale of tobacco products with chocolate, vanilla, clove and other flavorings that lure children and teenagers into smoking. The agency will study regulating menthol products and hinted that it might soon take action against the far larger market of flavored small cigars and cigarillos.” The ban takes place under new legislation that gives the FDA the ability to regulate the tobacco industry.

    In my commentary, I noted that an MNB user had sent me the story with a note suggesting that this is “the new Prohibition,” and that I should be happy because it just what I wanted.

    And I wrote: This isn’t Prohibition. This is trying to save the lives of the some 3,600 children and teenagers who start smoking every day, more than a thousand of whom then become daily smokers. But you’re right. I am happy. Because of we can save some of these lives, it’s been a good day.

    And it amazes me that anyone other than a tobacco company executive might feel differently.


    Well, the emails rolled in…

    One MNB user wrote:

    That is the most stupid opinion in the world even though it is shared by so many. I’m really getting tired of not saying so as to just blow it off as really idiotic. I think more of us should start calling idiots, “Idiots” when it applies so clearly as in this case.

    Kevin, Why not ban hang gliding, sky diving and small-prop plane flying? I wonder how many lives you and your little “do-gooders” will save then. Boy that will really make you feel important. Then you could say, “See, look at what my great idea did for all you idiots. Hey wait, you morons should put me in charge of more stuff for smart people”.

    Congrats on being the chosen one, selected to be there as our personal guide through all of our lives and prevent us from killing ourselves so recklessly all the time.

    Here’s an idea. MIND YOUR OWN (expletive) BUSINESS!!!!

    If I want to smoke cotton candy cigarettes and kill myself eventually, that’s my right to do so.

    And no, don’t worry; I won’t need your Obama Care to patch me up either, thank you. I’ll happily make my own bed and sleep in it.

    DARE YOU TO POST!


    You lose.

    Though I would have posted it even if you hadn’t dared me. Just like I’m going to post pretty much all the critical emails I got.

    MNB user Gregg Knorn wrote:

    I'm not a tobacco company executive or even a smoker. What I am is a freedom loving American. All this ruling does is further illustrate how big government is intruding into our lives. What's next, banning peach flavored vodka or root beer schnapps because the flavor appeals to kids?

    Everyone knows cigarettes are bad for you. Making them flavored doesn't change that fact. It's hypocritical of the FDA to ban flavored cigarettes but not regular cigarettes. You said yourself that, "3,600 children and teenagers...start smoking every day." They're starting with unflavored cigarettes so obviously flavor isn't the contributing factor in whether or not a kids starts smoking. Ban fatty foods, ban cigarettes, government forces you to wear a seatbelt or a motorcycle helmet, soon the government will want to ban alcohol again. Then we'll all be healthy, boring, robots. I'd prefer to have choice in the matter.


    Several emails used a quote from Martin Niemöller, the anti-Nazi theologian, in their messages, just as this MNB user did:

    ”First they came for the communists, and I did not speak out—because I was not a communist;
    Then they came for the socialists, and I did not speak out—because I was not a socialist;
    Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist;
    Then they came for the Jews, and I did not speak out—because I was not a Jew;
    Then they came for me—and there was no one left to speak out for me.”


    The original Prohibition started out with saving lives and promoting general health. I hope you're still around when it comes full circle and the lives cost by alcohol is the rallying cry once again.


    Another MNB user wrote:

    Interesting you would say that " it amazes you that anyone other than a tobacco company executive might feel differently". I know you do work with NACS and as such should know that there is really not a C-store model out there today that exists profitably without the cigarette and tobacco categories in their stores. NACS and its members have a vested interest in the health of the category and while many chains have strived to find the category that can replace the profitability derived by cigarettes and tobacco, none have found a 30% of inside sales replacement.

    I don't usually take the time to respond to comments but I think it is important to point out there are many in the wholesale and retail supply chain outside of "tobacco company executives" that feel the government (local, state and federal) is overreaching in it's tax policies, smoking bans and the banning of products. There are many in the anti-tobacco movement that are pushing for prohibition and whether you agree with your reader or not, it is by definition, prohibition.

    Food and beverage companies are just beginning to feel the threat of the nannyism and the nannies that exist solely to have their nose in someone else's business. These nannyists have honed their skills on the tobacco industry and they are looking for new avenues to harvest money and line their pockets.


    MNB user Scott J. Proch wrote:

    I'm happy, too, KC. But not totally overjoyed yet. This administration still needs to:

    1. Illegalize flavored potato chips (because they're bad for you and teenager like them)
    2. Illegalize wine coolers, flavored vodka, Bailey's Irish Cream etc. (because they're bad for you and teenagers like them)
    3. Illegalize flavored pop (because they're bad for you and kids like them)
    4. Illegalize fast cars (because they could lead to driving fast and teenager like them)

    You get the idea.


    Another MNB user wrote:

    I used to be in the tobacco business. Last year Congress drafted legislation to ban all flavored cigarettes saying that it made the product too attractive to minors. Fair enough. But then a certain segment of legislators "realized" that this would mean the end of menthol cigarettes. You may be unaware that black people consume menthol cigarettes at a nearly 3 to 1 rate compared to non-black. The legislation died. But then the FDA was given control over regulating tobacco. The FDA has now banned flavored cigarettes with the exception of menthol. Black people vote. Kids don't.

    Maybe there is a connection, maybe not. I am not trying to sound racially biased. I do want you to know that this does sound a bit like Val Kilmer's portrayal of Doc in Tombstone... But which line to pick? "My hypocrisy only goes so far!" or "My hypocrisy knows no bounds!"...


    MNB user Jim Donegan wrote:

    My son is quitting cigarettes by using clove cigarettes as a “step-down” interim step to eliminate the tobacco cravings but keep him occupied and away from real cigarettes. There are other uses for clove cigarettes than turning people on to tobacco. And he didn’t start with flavored or clove cigarettes. The timing of this decision is unfortunate.

    Not everyone was critical of the ban, however.

    One MNB user wrote:

    I see no problem with this or banning flavored cigars. I actually quit selling flavored cigarettes, cigars and cigarette papers in the store. I was astonished at the amount of under age kids that had people of age buying these for them. I was told that it wasn’t to smoke; it was to cut open and fill with crack cocaine. It also made you aware of who was doing drugs, who not to hire because of what they bought etc. One more reason that I don’t miss retail.

    MNB user Rosanne Sparks wrote:

    Hopefully the rest will follow. My mother started smoking as a young teen, and while there wasn’t the allure of a flavor, there was some allure. She died 12 years ago at the age of 63 of lung cancer. It’s a good day if a few more packs don’t get into the hands of a teen.

    And still another MNB user wrote:

    I could not agree with you more on this one, Kevin.

    I lost a son at a relatively young age as a result of lung cancer. He had quit cigarettes a few years earlier but obviously too late. Problem is most smokers feel invincible and think, well that person might be a statistic but not me. There is no doubt in my mind that smoking contributed to his death. If lives are saved because laws are enacted it will save families from a lot grief.

    Anybody that has lost a loved one as a result of smoking will certainly agree.


    Yet another MNB user wrote:

    I agree with your correspondent - this is Prohibition - which was also inspired by self-righteous social engineers, who sought to improve health and productivity by banning substances they didn't like.

    If - as you seem to think - the ends justify the means, then we should simply ban soft drinks outright as lacking any health benefit, and causing tooth decay and obesity.

    Your supermarket and soft drink sponsors will be happy to fund that campaign, I'm sure.


    I actually don’t write a lot about the tobacco industry, in part because I have no objectivity. I’ve made this point numerous times over the last eight years on MNB, but because we get 75-100 new subscribers each week, it’s possible that some of you aren’t aware of it.

    In fact, I make no pretense at objectivity. Even though it means that sometimes I might annoy occasional clients and potential sponsors.

    Perhaps the best gift my mother gave her grandchildren was the opportunity to watch her die eleven years ago of cancer. She was in her mid-sixties, and had finally quit smoking after more than three decades of being addicted and many attempts at kicking the habit. The cancer spread from her lungs to her brain and pretty much everywhere else, and while she fought for four years – my mother was a tough broad – it finally claimed her. It wasn't pretty. Best I know, none of my kids ever have smoked, and I suspect they never will. The memory is burned into their brains.

    I do not hold anyone other than her responsible for her death. Behavior has consequences. But I do know that there is ample proof that cigarettes are engineered to addict and kill people. Unlike sugary soft drinks, or beer, or wine, or fast cars, or pretty much any other comparison you care to make. Which is why they should be treated differently. And why any company that tries to entice kids into thinking that somehow smoking is cool or harmless ought to be stopped. That’s not prohibition. That’s common sense.

    And by the way, we have plenty of laws designed to protect kids. It’s why they can’t drive until a certain age and cannot drink alcohol until a certain age. It’s why we say they have to stay in school until they reach a certain age, and cannot get married before a certain age. They’re not even supposed to buy cigarettes until a certain age.

    That’s not a violation of civil liberties. That’s common sense.

    However, you are all welcome to your opinions, and you are even encouraged to air them here on MNB. (You don't even have to dare me to post it. I post lots of emails that I disagree with, even the ones that call me an idiot and a moron. Which may actually make me an idiot and a moron, but what the hell.)
    KC's View: