retail news in context, analysis with attitude

Published on: December 15, 2009

by Michael Sansolo

With apologies to Leo Tolstoy, I’d argue that the current economic realities can best be stated by paraphrasing the opening of Anna Karenina. That is: all economic good times are alike; each downturn is unhappy in its own way.

In economic good times the industry has essentially traveled the same path, adding services, products, tastes and quality. Glory, sales and profits abound even in the face of pitched competitions. Downturns are much more complex.

After all, this is an industry born of the Great Depression, when Michael Cullen’s prototype self-service supermarket changed the way Americans shopped. Recent history is exactly the same. The relatively short recession of 1990 gave rise to the emergence of alternative formats such as Walmart and Costco among others; invasions that in many ways packed the same competitive punch of the original supermarket. The relatively short downturn in 2000-01 saw a vast increase in extreme value formats such as the dollar stores, Save A Lot and Aldi.

So the questions we all have to wrestle with as 2009 ends concern what’s changing now. Without question, the current economic downturn goes way beyond anything we’ve seen in generations. While unemployment levels were higher in the early 1980s (not to discount the misery of the current times) and while inflation was far worse in the 1970s, most every other measure of today’s economic woe is unmatched since the Great Depression. And despite the economic data marking the official end of the downturn, worrisome signs remain abundant.

For this industry the questions all surround the letter c: Customers, Competition and Costs.

With customers we have to ponder both the depth and longevity of this new frugality. If this trend has staying power, the appeal of adding value, service and taste might be muted once the economy actually does recover. It’s easy to assume that the trend will disappear once good times return, but stay mindful of how long consumer behavior was scarred by the Great Depression. The big question may be how consumers will blend frugality with indulgence once the economy rebounds and how the industry deciphers and serves these new needs.

With competition we have to wonder what change might be the long-lasting mark of this downturn. It’s very easy to recall the early 1990s when Walmart’s first supermarkets (remember Hypermart USA?) were dismissed lightly. Even though Walmart grew at light speed, it wasn’t instantly apparent how strong it would become. There’s no way of telling what format is emerging or evolving today that might play a stunningly large role in the future.

With costs we have to question pretty much everything. Tough times put a premium on doing more with less and finding ways to squeeze even greater efficiency out of an already efficient system. Again, the past holds lessons. In the early 1990s the industry proudly touted its record of efficiency only to discover that virtually everything it was doing could be done better. It’s essential to question everything, to consider everything and to search everywhere for improvements.

But most of all, it comes down to the simple question of what are you doing? Since this downturn began in mid-2008, what changes have you made, what elements of the status quo have you overturned, and what questioned have you asked inside your organization, of your trading partners and beyond?

If somehow you haven’t asked the hard questions or made the hard decisions, use history as your guide. Consider all of those who stood firm with the status quo during the Great Depression or the downturns of 1990 or 2001 and ask if those companies survived? In many cases, the answer is no.

The odds are that we will be talking about the impact of this Great Recession for years to come. Unless you are asking questions today, you might not be part of that conversation tomorrow.

Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: December 15, 2009

The Wall Street Journal this morning weighs in on the continuing slugfest between Amazon.com and Walmart.com, as the latter is using the 2009 holiday season to aim “at what it sees as Amazon's Achilles' heel: the costs and delays of shipping online purchases to buyers.

“Customers who buy some of the more than 1.5 million products on Walmart.com can have them shipped free to a local Wal-Mart, where new service desks at the front of some stores make it easier for shoppers to retrieve their stuff. On the outskirts of Chicago, it is testing a radical new concept: a drive-through window, similar to those found at pharmacies and fast-food restaurants, where shoppers can pick up their Internet orders ... Of course, store pickup of Internet purchases is not a totally new concept—consumer electronics retailers helped pioneer store pickups of online orders at the start of this decade and other companies have been offering it for years. But Wal-Mart and other old-school retailers are sharply increasing efforts to link stores and Web sales as a broad shift to Internet shopping is gaining momentum in the bad economy.

“While e-commerce represents less than 5% of American retail spending, merchants are finding that even technologically unsophisticated consumers start their shopping on computers or mobile phones, perusing product reviews and price comparison Web sites.”

In addition, the Journal writes that “Wal-Mart is learning to exploit the long tail of Internet retailing by offering thousands of items online which it does not stock in its enormous superstores. This fall it began allowing some third-party sellers to sell their wares on Walmart.com in exchange for a cut of the revenues, a business model that Amazon helped pioneer.”

Published on: December 15, 2009

Sol Price, who pioneered the membership warehouse club store with the creation of the Price Club chain in 1976, died yesterday at age 93.

Before Price Club, Price created Fed-Mart, a shopping club chain in Southern California that he sold to a German company in 1975. Price Club merged with Costco (which was co-founded in 1983 by his former employee, Jim Sinegal) in 1993.

More recently, Sol Price worked with his son, Robert Price, to develop PriceSmart, which operates membership club stores in Latin America and the Caribbean.

Published on: December 15, 2009

The Times of London reports that Walmart-owned Asda Group in the UK plans to increase the number of products that it sources through its parent company, believing that this tactic will allow it to lower prices and undercut competitors.

According to the story, “Asda’s category directors will meet their US and other international counterparts next month to finalise common sourcing arrangements. Each director has access to Wal-Mart’s global procurement operations. Nearly all of Asda’s directly sourced non-food products are currently bought alongside Wal-Mart, amounting to about 40 per cent of its non food sales.”

The Times notes that Walmart is trying to find the right balance in its global sourcing programs - it wants to give its international divisions enough autonomy so that they are sensitive to local needs and yet take advantage of its enormous buying power.

One other interesting note from the story. For years, Asda has featured signs marking the fact that the company is part of the Walmart family; now those signs are being taken down because they are believed to be confusing to shoppers.

Published on: December 15, 2009

The St. Cloud Times reports that Coborn’s has acquired two independently owned Cub Food stores in that Minnesota community, and will rebrand them as Cash Wise Foods.

Terms of the deal were not disclosed.

The acquisition will bring the number of Cash Wise locations operated by Coborn’s to nine.

Published on: December 15, 2009

BrandWeek reports that some 200 7-Eleven stores in Southern California are testing a new mobile service that allows people to send text messages -in English and Spanish - and receive free beverages such as soft drinks, Slurpees and and coffee.

The goal of the test is to see how effective the retailer can be in communicating to customers - especially those who are part of the Millennial generation - and generating specific responses.

Published on: December 15, 2009

There’s nothing like ambitious goals. And according to the New York Times, that’s what Procter & Gamble’s new CEO, Robert A. McDonald, has laid out for the company, saying that he wants P&G to add more than a half million customers every day for the next five years.

Achieving this will mean broadening P&G’s already considerable influence in smaller and less developed countries; the company does 32 percent of its total sales in such places, but it needs to drive that number to closer to 50 percent...which is what rivals such as Unilever and Colgate do. It won’t be easy - one analyst says the battle among these companies will be akin to a “knife fight,” though the Times ays P&G execs think there is plenty of business out there for everyone.

But it will require P&G to deal not just with logistical issues, but cultural divides - such as selling diapers in laces where infants simply don’t wear them.

Published on: December 15, 2009

The Nielsen Company and Catalina Marketing Corporation have announced the formation of Nielsen Catalina Ventures, which they say will “create the next generation of precision media solutions and return on investment (ROI) measurement tools to allow consumer packaged goods (CPG) and media companies to more effectively link the marketing exposures consumers see with what products they actually buy.

“The 50-50% joint venture will integrate information from Nielsen’s industry-leading TV, Internet and household purchase panels, with purchase data from more than 50 million shoppers from a cross-section of retailers in Catalina Marketing’s network ... This unprecedented level of insight will help marketers shape their marketing and media campaigns for a greater return on investment.”

According to the announcement, the joint venture will be a separate legal entity based in Cincinnati, Ohio, with both Nielsen and Catalina Marketing contributing data, talent and other resources. Mike Nazzaro, a former Nielsen executive, P&G executive and entrepreneur, has been named to serve as CEO of the business.

Published on: December 15, 2009

• The Food Marketing Institute (FMI) yesterday announced that its Marketechnics Show will not occur as a stand-alone event, and instead will be “featured as a critical component of FMI 2010. In fact, this year's programming recognizes the fact that technology is now fully integrated into industry business and is represented in that way throughout FMI 2010’s education path and exhibits.”

• The Financial Times reports that Kraft CEO Irene Rosenfeld plans to “remain disciplined” in her quest to acquire Cadbury, which has spurned her company’s offer as “derisory.”

According to the story, Rosenfeld said, “We have heard nothing from Cadbury that surprises us. Cadbury’s defence document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies.”

• Target Corp. has conceded that it accidentally advertised soy milk as organic when it was not, and assured the US Department of Agriculture (USDA) that it would change its procedures to make sure that such a mistake does not occur again.

Published on: December 15, 2009

• Arden Group, parent company of Gelson’s Markets, announced that Laura Neumann, its senior director of financial reporting and compliance, has been named CFO.

Published on: December 15, 2009

Got the following email from an MNB user who wanted to weigh in on the eat local/globalization discussion:

Everyday that I work in this industry I just marvel at the wonderful food system we have developed that can move fresh food all over the world, bringing to me varieties from remote locales and giving me the opportunity to “visit” countries without ever leaving home.  I am all for eating local and I do.  I eat local strawberries when they are in season.  Our local sweet corn is so good it is a meal in itself when in season.  But when they are not, I am thankful to be able to enjoy fresh foods like strawberries any time I wish.  In Minnesota, there is only ice and snow locally grown from December to March.

I choose to celebrate the industry I work in for the all wonderful foods we bring to people around the world.  I plan to buy some seedless grapes from Chile, Triple Crème Brie from France and wash them down with a glass of Oregon Pinot.  None of which is locally grown.  Salute!




On the subject of the investigation into Monsanto’s dominance of the genetic engineering business, MNB user Janet Delear wrote:

I repeat, for what feels like the millionth time:

Just TELL consumers if there are GMOs in the product, fruit, vegetable, or packaged. Just TELL us if the product has been irradiated.

And let the free market choose.

I predict the majority of consumers will choose non GMO and non irradiated if given the choice. If not, I want to have the option to make an informed choice regardless.

Agreed. Transparency is always better than not.




Regarding the importance of newspapers, MNB user J. Schindler wrote:

In my view the key benefit to our society of a good local newspaper is the in depth investigative reporting that among other things helps hold government accountable. For example, The Columbus (Ohio) Dispatch does a great job of covering, actually uncovering, things our city, county and state government officials and agencies would no doubt prefer that we not know.  That alone is worth the cost of my subscription.  Somehow I don't think that content available only electronically would have as much impact without the headlines visible on the corner newspaper racks.

My only point is this.

There is an entire generation that has no idea what a newspaper rack is. Journalism - and commerce, for that matter, have to adjust to what they want and how they want it. Not the other way around.




I apologized yesterday for a previous comment about the Tiger Woods story...

I had commented that it seemed inevitable that sponsors would begin moving away from the golfer, and wrote:

And it is going to happen because some CEO’s wife is going to look at him across the breakfast table and say, “You’re not still doing business with him, are you?” Or because some CEO is going to be walking through O’Hare Airport, see all the billboards featuring Woods espousing a specific approach to life, and hear people snickering all around him.

My apology:

I’m a moron. And my head ought to be on a pike for part of that statement.

After all, it isn’t just men who sit in CEO offices. In fact, one of Woods’ sponsors in Gatorade, which is owned by PepsiCo, which has Indra Nooyi as CEO.

I live with two smart, independent women, who take great exception to my original statement. And I got a number of emails from MNB readers who used a variety of adjectives to describe what I said.

Mea culpa, mea culpa, mea maxima culpa.

MNB user Gary Loehr responded:

You also implied that a CEO wouldn’t know right from wrong, unless his wife pointed it out to him over breakfast.  Given the events of the past 14 months, I’m not sure I would disagree with that assumption.

Such cynicism...




Finally, last week I did a radio commentary about my experience listening to Playboy Radio, suggesting that a call-in show illustrated a broader problem with business. The show, I said, seemed to exist primarily to a) reassure them that they were good guys, b) reassure them that their women needed to be more understanding and adaptable, and c) give them advice about how to, shall we say, spice up their relationships.

The broader issue, I wrote: “How often do we look for advice or counsel only from people who will tell us what we want to hear, or will reinforce our own opinions? How often do we avoid making the tough call, the trenchant observation, the critical remark, because it is easier to get along than to challenge the way things are done? How often do we let sacred cows live longer than we should, ignoring Mark Twain’s comment that ‘sacred cows make the best hamburger’?”

I also noted that Playboy Radio is, shall we say, an acquired taste...and had to turn it off and focus on “what the Mets need to do in order to actually be competitive in 2010, which was almost as distressing as listening to Playboy Radio.”

Well, I got an email from a gentleman named Farrell Hirsch, who wrote:

As the guy who runs Playboy Radio, I’ve read your article and my comment is as follows...

What the Mets need to do to be competitive in 2010 irrelevant.   They need to take a step back and give a year away -- look for 2011 when Ike Davis can play first, Ruben Tejada can play second, and Fernando Martinez can start at a corner.   They should forget a Holliday and Bay and Hudson and Molina and stockpile pitching.

Y’know, I like this guy. He has a sense of humor, and he’s unapologetic about his job...which what he has to be.

I’m only disappointed because I was hoping to get invited to appear on Playboy Radio and sit in with Tiffany Granath, who hosts the talk show I was listening to. Sort of a point-counterpoint thing. Pus, I figured I could sell some books...

Ah, well...

Published on: December 15, 2009

In Monday Night Football, the San Francisco 49ers upset the Arizona Cardinals, defeating them 24-9.