retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: November 17, 2009

    by Michael Sansolo

    At the Retalix Synergy event in Dallas last week, retiring CEO Barry Shaked shared a remarkable story. Shaked explained how he got his big breakthrough in the early 1990s when he made a deal with Tesco. What was so remarkable about the story though was also so simple: Tesco offered to pay Retalix to run a pilot, when the start-up Israeli company was willing to do that project for free.

    Shaked said at first he thought the Tesco people were silly, but then realized their genius. Tesco paid him to make sure Shaked and Retalix could both complete the pilot and stay in business. Getting the work for free might have wrecked the company and in that case the pilot would have been for naught.

    Now think about that for a moment. Imagine a retailer paying a supplier for a service that could have been provided for free and a supplier understanding the genius and point of such a move.

    That is what we call a real win-win-win. Tesco won, Retalix won and the partnership won, producing improved use of technology and data for the British retailer, which at the time was not exactly the giant we all know today. Sadly, a win-win-win is still a rare event.

    (Full disclosure: I was a guest speaker at the Retalix event.)

    Increasingly, we hear of anything but win-win these days. Trade relations that have long been somewhat peaceful (or at least relatively quiet) seem to be getting strained again by pricing pressures and increasing movement to private label - the two hallmarks of the Great Recession. Relations are being further strained by the continued emphasis on fresh products as the retail point of differentiation, while center store focus lags.

    Suppliers talk about the pressure on them for new levels of support and lack of appreciation for products and promotions. Retailers talk about the lack of support and appreciation for their new store strategies and competitive efforts.

    There is a line the very beginning of the wonderful Lord of the Rings trilogy. It explains how history became legend then myth as the history was forgotten. Is it possible the same is happening in trade relations?

    It was less than 20 years ago, in the wake of a mild recession, that trade relations frayed beyond control. With alternative formats - then Walmart’s first supercenters and Costco’s club stores - growing sales, retailers began questioning the prices and products supplied those stores. It was then that retailers learned of the great logistic and economic advantages held by those formats and launched the now historic and frequently forgotten Efficient Consumer Response (ECR)movement.

    The goal was replacing a mindset of contention and win-lose with cooperation and win-win. Clearly there is a ton of work remaining.

    The question is have we learned anything through these years. Have we learned to appreciate the efforts, the challenges and conundrums faced by trading partners? Have we learned to understand the many nuanced ways that companies go to market and the flexibility that requires in building an effective supply chain? Have we learned to work together to solve problems that could not possible be solved by either side independently?

    Have we learned that together we can be stronger than on our own or must we fight all the same battles over and over again? Most importantly, have we learned the lesson Tesco imparted on Retalix years ago, that by respecting and nurturing trading partners we can actually emerge stronger for the effort?

    In short, have we learned that the alternative to win-win is usually lose-lose, not win-lose? If not, it may be time to repeat history.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .
    KC's View:

    Published on: November 17, 2009

    Interesting piece in the American Banker with a unique take on Walmart’s professed desire to get into the US financial services business: “In retrospect, not getting a bank charter two years ago may have been one of the best things to happen to Wal-Mart Stores Inc.'s financial services agenda.

    “At the very least, the nation's largest retailer has been spared much of the reputational damage - and increasing regulatory scrutiny - buffeting most banks and nonbank financial companies this year ... By not having a bank charter, Wal-Mart has also avoided much of the discussion in Washington around nonbank banks, the separation of banking and commerce, and what the fate of industrial loan companies should be under proposed regulatory reforms.”

    And, the publication writes: “Financial products and services are a relatively small part of Wal-Mart's offerings. But even without a bank charter, Wal-Mart has spent the past few years building itself into a significant competitor to traditional financial services institutions, especially with products aimed at the growing market of underbanked and low-income consumers who are largely underserved by the banking industry.”

    Walmart has made several attempts to get into the banking business, with its first stated priority the reduction of credit and debit card processing fees. But resistance in regulatory circles, largely fueled by lobbyists and traditional financial services companies that did not want to compete with Walmart, forced the retailer to back down.

    The Banker notes, “Wal-Mart says it has put prepaid cards in the wallets of 2 million customers, and its decision to cut pricing on those cards was seen as a serious stimulant to the small but rapidly growing prepaid industry. The retailer, which rents some in-store space to branches of partner banks, has also long offered money-transfer and check-cashing services in some stores through its MoneyCenters, and in August it started offering walk-in bill payments at its more than 3,500 U.S. stores - a branch network that would be the envy of many traditional banking companies. And in September Wal-Mart said it would start to pay its 1.4 million employees through payroll cards instead of paper checks, if they did not have direct deposit.”
    KC's View:
    I understand that there may be some negatives about allowing the world’s largest retailer to have a prominent role in the nation’s banking system. But let’s face it. You just know that Walmart would never have allowed its financial services business to fall into the kind of disarray that many of the nation’s banks clearly have descended to. (Easiest question of the week...Who would you trust more: Mike Duke or Bernie Madoff?)

    Now, it sounds like new Obama administration regulations being proposed will further prohibit Walmart for getting too deep into the banking biz (assuming, of course, that anything ever gets passed in Washington). But maybe the Bentonville Behemoth will be better off for this in the long run.

    Published on: November 17, 2009

    The Washington Post this morning reports in a page-one story that almost 50 million US citizens - including one out of every four children - had periods during the past year when they went hungry.

    According to the story, “The data show that dependable access to adequate food has especially deteriorated among families with children. In 2008, nearly 17 million children, or 22.5 percent, lived in households in which food at times was scarce -- 4 million children more than the year before. And the number of youngsters who sometimes were outright hungry rose from nearly 700,000 to almost 1.1 million.

    “Among Americans of all ages, more than 16 percent -- or 49 million people -- sometimes ran short of nutritious food, compared with about 12 percent the year before. The deterioration in access to food during 2008 among both children and adults far eclipses that of any other single year in the report's history.”

    The Post writes that “the nation's economic crisis has catapulted the number of Americans who lack enough food to the highest level since the government has been keeping track ... The magnitude of the increase in food shortages -- and, in some cases, outright hunger -- identified in the report startled even the nation's leading anti-poverty advocates, who have grown accustomed to longer lines lately at food banks and soup kitchens. The findings also intensify pressure on the White House to fulfill a pledge to stamp out childhood hunger made by President Obama, who called the report ‘unsettling’.”

    Agriculture Secretary Tom Vilsack told a press conference yesterday that the hunger numbers can be directly traced to the nation’s rising unemployment and under-employment rate, and he suggested that the 2009 hunger statistics could yet be revised upwards.
    KC's View:
    “Unsettling” hardly covers it. Not sure how we can have a sophisticated and contextual discussion about issues like health care and economic policy in an era when the world’s biggest superpower cannot even feed its own population.

    Published on: November 17, 2009

    The University of Michigan is out with its quarterly American Customer Satisfaction Index (ACSI), reporting that the index lost 0.1% for the third quarter, bringing the Index to a score of 76.0 on a 100-point scale. Still, the report says, the index “has improved since the depths of the recession and stands 1.3% higher than it was a year ago. Despite the slight drop in ACSI, many companies are improving their customer relationships: gainers lead decliners 45% to 39%, with 16% unchanged.”

    Some relevant excerpts from the report:

    • “Customer satisfaction with food companies is unchanged at 83. Top-performer Heinz (unchanged at 89) leads the industry for a tenth straight year, with cereal maker Quaker Oats (unchanged at 87) and chocolate makers Hershey (+2% to 87) and Mars (+1% to 87) close behind. Buyer satisfaction with Heinz ketchup and the many other food products that the company manufactures ties luxury automakers Lexus and Cadillac for the highest score across all categories covered by ACSI.”

    • “Nestle also improves (+2% to 85), boosting satisfaction with manufacturers of sweets overall to an all-time high of 86 ... At the other end of the spectrum, ConAgra falls 7% to the bottom of the industry, matching the biggest drop ever for any company in the food category and reaching an all-time low of 78. ConAgra raised prices on its popular Banquet frozen dinners line and cut costs in other areas that have had a negative impact on satisfaction.”

    • “Beer drinker satisfaction is at an all-time high, rising 1.2% to 84, perhaps following the same pattern as chocolate and sweets. Anheuser-Busch leads the way (+4% to 85), driven by increased sales of popular low-priced and newer products like Natural Light, Busch, Bud Light Lime and Golden Wheat. Parent company InBev has made a number of changes in business strategy over the past year that appear to be paying off. Results for Miller (+1% to 83) and Coors (-2% to 81) brands are mixed. Coors in particular is composed of more higher-priced brands compared with Anheuser-Busch and may be feeling the effects of consumers seeking better value for money.”

    • “There is no change in the industry score for personal care & cleaning products, which remains at a record high of 85 for a third straight year. Clorox improves 1% to 88, tying its all-time high score and marking the thirteenth straight year it has been at least tied for the top spot. A total of 88% of Clorox products are either the No. 1 or No. 2 sellers in their categories. Clorox is followed closely by Unilever (unchanged at 87) with Procter & Gamble and Dial next at 85 (unchanged) and 84 (-1%), respectively. Colgate-Palmolive drops sharply after a big improvement in 2008, falling this year 5% to 83. Colgate appears to have a pattern of rolling out many new products with competitive pricing in one year, only to scale back and increase price the next.”
    KC's View:

    Published on: November 17, 2009

    Costco said yesterday that because of a pricing dispute, it will no longer cary Coca-Cola products in its more than 500 stores in the US and abroad. Further details of the argument were not disclosed.

    Coke said yesterday that negotiations are continuing with Costco, and that it wants to proceed “in a spirit of fairness.”
    KC's View:
    These spats occur from time to time, and then they get resolved. They are only interesting because these sorts of arguments don’t generally become public.

    Published on: November 17, 2009

    • The Denver Post reports that unionized employees of Safeway and Kroger-owned King Soopers in Colorado are voting this week on what the two chains have said is their last, best offer - and if they reject it, the region could face a grocery strike.

    Negotiations have been taking place for more than seven months.

    • The Washington Business Journal reports that Safeway and CVS Caremark “have announced a partnership with D.C. to provide reusable bags to the city as part of a campaign to get residents to stop using disposable plastic and paper bags.”

    Washington, DC, consumers will be facing a five-cent disposable bag fee starting January 1, 2010, but before the law takes effect, “the D.C. Department of the Environment will distribute at least 122,000 free, reusable bags to D.C. residents. The city is producing 100,000 beige and blue bags with the slogan ‘Skip the Bag, Save the River’ printed on them. CVS is producing 12,000 similar bags with the chain’s logo on the flip side while Safeway will produce 10,000 bags of unknown design. The city is planning an advertising campaign to promote the reusable bags, which it will finance using the fees it collects.”

    • The Great Atlantic & Pacific Tea Co. (A&P) said yesterday that it will extend the digital coupon program used at its SuperFresh, Waldbaum’s and The Food Emporium banners to its Pathmark chain, allowing club card customers to “select from the variety of premium products they want most, save the coupons to their account and go shopping,” with savings automatically deducted at checkout.
    KC's View:

    Published on: November 17, 2009

    • Brookshire Grocery Co. said yesterday that John Penn, the company’s senor vice president of Brookshire Food Store operations, has been named senior vice president of retail projects. In addition, Pete Leung, senior vice president of Super 1 Foods operations, will now become senor vice president of Brookshire Food Store operations.
    KC's View:

    Published on: November 17, 2009

    Edward Woodward, who moved from movies like Breaker Morant to the popular eighties television series The Equalizer and, later in his career, to the popular British comedy Hot Fuzz, died yesterday at age 79.
    KC's View:
    Loved The Equalizer...especially as his character, Robert McCall, motored around NYC in that black Jaguar, delivering vigilante justice.

    Published on: November 17, 2009

    ....will return.
    KC's View:

    Published on: November 17, 2009

    In Monday Night Football action, the Baltimore Ravens blanked the hapless Cleveland Browns 16-0.
    KC's View: