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    Published on: October 19, 2009

    The Financial Times reports that Walmart has decided to put new emphasis on its Neighborhood Market format, “recruiting a new team of managers and buyers that will focus exclusively on the smaller stores, which, with just more than 150 locations, currently represent only a fraction of Walmart’s total US sales. It is also recruiting managers to develop staff training and store planning and performance systems that will ‘meet the unique needs of all small formats’,” which would include both the Neighborhood Market and the even smaller Marketside format that it started testing in Arizona earlier this year.

    While the Neighborhood Market format was opened more than a decade ago, it has never grown to the extent that many expected, with insiders saying that it was because the return on investment (ROI) for the concept simply was not sufficient, especially in comparison to the supercenter format. However, a number of circumstances may have created an environment in which it makes sense for the world’s biggest retailer to start thinking small.

    For one thing, there remain a number of communities big and small that have resisted Walmart’s desire to expand, and the Neighborhood Market format could break down some of those barriers. For another, as FT notes, while “Walmart’s low price model has made it one of the leading beneficiaries of the current frugal mood of US shoppers ... it has been slowing its rate of US store expansion, as cannibalization of its existing store network started to reduce the return on invested capital on new stores;” a Neighborhood Market expansion could serve as a new engine for growth.

    At the same time, since the industry at large seems to be embracing the small store, with retailers that include Tesco and Safeway opening their own versions, it makes sense for Walmart to ramp up its commitment to this area of the business.
    KC's View:
    This makes perfect sense, especially in the context of all the ramping up that Walmart seems to be doing right the hardball competition with Amazon on best-sellers that we reported on last week.

    I keep thinking that one of the things that Walmart is likely to do is develop stores - under the Neighborhood Market banner, the Marketside name, or some other brand - that will be specifically designed to provide a range of choices, including healthy foods, to inner city areas poorly served by the mainstream grocery industry. It would be a PR bonanza, and potentially a great source of sales.

    They’re going to make this work.

    Published on: October 19, 2009 reports on a speech given by Whole Foods chairman/CEO John Mackey last week to the Tulane Business Forum in New Orleans, in which he said that corporations need to do a better job communicating about the benefits of capitalism, which he essentially said had a bad band image.

    Some excerpts:

    • "Capitalism and corporations are not well-loved around the world. The free market is blamed for the problems we're in. I don't believe that capitalism is at fault for the struggles we have today."

    • "The best way to maximize profits is paradoxically not to aim for them. Profits come about by not thinking about them over the long term ... I always thought Whole Foods' deepest purpose was service.”

    Mackey argued that corporations need to show both more restraint - by limiting executive compensation to reasonable levels - and more attention to the positive power of the brand, and demonstrate a “deeper purpose” than just generating profit.
    KC's View:
    It is, in fact, an excellent point. Capitalism has been given a bad rep by people who were greedy and self centered. There are plenty of positive stories to tell about capitalism, but unfortunately they get lost in all the nonsense about people and companies behaving badly.

    Published on: October 19, 2009 has a report about Amazon Fresh, the grocery delivery service that the e-tailer has been testing for more than two years in Seattle, using a local distribution center and 20 trucks to ferry fresh and packaged foods to 49 zip codes all over the city.

    Doug Herrington, Amazon’s vice president of consumables, continues to describe the program as a “pilot,” and says that they are “working to see if we can figure out how to make the economics work. It’s a financially difficult business.”

    According to the site, while Amazon knows the upside potential of the grocery business is huge, it “also is well-versed in the pitfalls of grocery delivery, having watched two of its dot-com era investments, and (later acquired by Webvan) flame out in the dot-com bust. (Herrington, the Amazon executive overseeing Amazon Fresh, worked for Webvan.)
    KC's View:
    We’ll know when they’ve made the economics work when they announce they’re expanding beyond Seattle. The guess here is San Francisco or Los Angeles. And it probably is a good bet that it happens before the end of 2010.

    Published on: October 19, 2009

    Tesco CEO Sir Terry Leahy is interviewed by the Telegraph, and he makes some interesting observations about a number of issues, including:

    Recession: “We are past the low point. The banking system is stabilising. The real economy, therefore, and it's ability to finance itself is stabilising. Consumer confidence is picking up and things are getting gradually better and, I think, will continue to get better. [The recovery] will be slow and steady."

    On entering new markets: “We always take our time to research and get the feel of the a place. That may explain why Tesco's has been successful. We allow enough time to adapt to the local culture because retailing still is very local."

    Ten Years From Now: “We will be much more international. We will be in more countries. We will be a bigger business in services like telecommunications, digital industries and banking. Most of all we will do our business around our customers using Clubcard."
    KC's View:
    This is curious on a number of levels, not the least of which that Tesco’s reputation for exacting research has been battered a little bit by the fact that its Fresh & Easy stores on the US west coast, despite supposedly copious research, didn’t exactly hit a bulls eye out of the box.

    The other thing that is striking is the reference to the Clubcard being pervasive in its international businesses. The Clubcard isn’t being used by Tesco in the US. Yet.

    Published on: October 19, 2009 reports that the Florida Department of Environmental Protection posted a draft proposal on its web site last week for a ban on all disposable plastic bags after July 1, 2015, with a phased in series of bag taxes between now and then. However, it pulled the draft off the site within 48 hours, saying that it was just a “working document,” not a fleshed out proposal.

    Rick McAllister, president of the Florida Retail Federation, tells the site that he was surprised by the draft proposal, since his organization has been working with the department to come up with ways to cut down on litter without an outright ban. He says that there are concerns among retailers that “if shoppers have to bring their own reusable cloth bags to carry anything they buy ... that’s likely to cut down on some spur-of-the-moment buying sprees. With a recession going on, ‘we don’t need any new taxes; we don’t need any restrictions on consumer spending’.”
    KC's View:

    Published on: October 19, 2009

    Advertising Age reports that in Spain, Carrefour has joined the environmental movement with a new ad campaign that targets the use of plastic bags by saying, in no uncertain terms, that they are the equivalent of...well, human excrement.

    Actually, that’s not precisely the uncertain term that the commercials use. They use, shall we say, a more colloquial expression. But you get the point.

    The story concedes that this is a somewhat unexpected tone, but in keeping with where Spain seems to be going: “Carrefour is heading down a path that will soon become the only choice for stores and supermarkets. Last year, the Spanish government approved the Plan Nacional Integrado de Residuos, or National Integrated Plan of Waste Materials, a set of rules aimed to restrict and eventually ban the use of plastic bags by 2015. Spain is the third-largest consumer of plastic bags in Europe. Spaniards uses an average of 238 bags per year and supermarkets are a big provider. Only 10% of the bags are recycled.”
    KC's View:

    Published on: October 19, 2009

    • The San Jose Mercury News reports that Raley’s has recalled 1,120 cartons of Del Monte cantaloupe sold from its Northern California and nevada stores, saying that routine testing showed that there were traces of salmonella in some of the melons.

    • The Tampa Tribune reports on the continuing price wars in that market, prompted by Sweetbay Supermarket’s recent claims of being cheaper than Publix:

    “Our online Market Basket database (of a 30-item shopping basket) tells the story: Sweetbay is cheaper by $8.94 this week. Sweetbay, in fact, has been cheaper than Publix in five of the six weeks we've been doing the survey. Still, this week, Walmart is the low-cost leader again at $64.01, followed by Sweetbay at $71.72, Target $72.45, Winn-Dixie $79.47 and Publix $80.66.”

    • ConAgra Foods announced last week that it plans to cut the sodium in its manufactured foods by 20 percent over the next five years, an approach that it hopes will make its brand resonate better with health-minded shoppers.

    Crain’s Chicago Business reports that Kraft Foods is negotiating to sell its Maxwell house coffee business to Sara Lee Corp., a move that the story suggests would allow Kraft to increase its initial $16 billion bid for Cadbury. Maxwell House is likely to fetch in the $3 billion range, the story suggests.
    KC's View:

    Published on: October 19, 2009

    The Arizona Daily Star reports on an innovative display at a Tucson Safeway - there is a big display of ping-pong balls next to the beer coolers.

    Add in some college students and you have everything you need to play beer pong.

    Meanwhile, in Wisconsin, WQOW-TV News reports that a local Marketplace Foods got an unusual customer last week - a 125-pound bear that walked in the front door and eventually found its way to the beer cooler.

    No damage was caused, and after the customers were evacuated the bear was tranquilized and removed.
    KC's View:
    See, if the Marketplace had stocked ping pong balls next to the beer, the bear would have tranquilized itself.

    Published on: October 19, 2009

    ...will return.
    KC's View:

    Published on: October 19, 2009

    In the MLB League Championship Series...

    The NY Yankees beat the California Angeles 4-1 on Friday night and 4-3 on Saturday night, to take a 2-0 lead in the best-of-seven American League series.

    The Los Angeles Dodgers beat the Philadelphia Phillies 2-1 on Friday night, and then the Phillies came back with an 11-0 defeat of the Dodgers on Sunday night, giving the Phillies a 2-1 lead in the best-of-seven series.

    In Week Six of the National Football League:

    Buffalo 16
    NY Jets 13

    Tennessee 0
    New England 59

    Arizona 27
    Seattle 3

    Philadelphia 9
    Oakland 13

    St. Louis 20
    Jacksonville 23

    Kanas City 14
    Washington 6

    Carolina 28
    Tampa Bay 21

    Cleveland 14
    Pittsburgh 27

    NY Giants 27
    New Orleans 48

    Baltimore 31
    Minnesota 33

    Detroit 0
    Green Bay 26

    Houston 28
    Cincinnati 17

    Chicago 14
    Atlanta 21
    KC's View: