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    Published on: February 4, 2010

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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.

    By now, you’d think that companies would be smart enough to know that you shouldn’t give new customers a better deal than old customers, since it is pretty much accepted fact that it is cheaper and easier to retain a shopper than it is to attract a new one.

    But no...some companies keep on doing the same old dumb stuff. The question you need to ask yourself is...do I work for one of those companies? And am I falling into old mistakes that I ought to know better than commit?

    I ran into just such a company the other day when I got my cable bill, and it was $30 higher than the previous month. Now, I pay more than $200 a month to my cable company, because I also have Internet and phone as part of my service. But I hadn’t done anything during the previous month to cause an increase, so I called the cable company.

    The guy I spoke to said that my promotion had run out - apparently the promotion that I got when I added phone and internet to the package. Okay, I said. How do I get a new promotion?

    You can’t, he said. Promotions are only for new customers.

    I launched into my “it is cheaper and easier to retain a shopper than it is to attract a new one” speech, but he wasn’t backing down. However, he also could tell that I wasn’t backing down, so he said he would switch me to the Retention Department.

    Which he did. Except that the woman there answered, ”Disconnection Department.”

    I started to laugh, and when she asked me why, I told her that I had been told that I’d be speaking to the Retention Department. She said that they are the same thing, and I said, “Trust me on this. Retention Department sounds better.”

    The discussion about my rates started all over again, with me asking for the same treatment as a new customer and her saying that I was only allowed to be a new customer once.

    So I decided to get tougher. I told her that if this were the case, I was perfectly happy to be a first time customer elsewhere, with Fios or Direct TV or one of the other many options available to me. And that I would be happy to move from service to service, always being a new customer, always getting the cheapest price. Because that was what she was encouraging me to do.

    “No, I’m not,” she said.

    “Yes, you are,” I said. “I’ve been a Cablevision customer for 26 years, and you are telling me that you want to give a better deal to someone who has never done business with you before. That’s essentially telling me to go elsewhere.”

    This, apparently, got her to think differently about the problem...and while it took her about 10 minutes, she finally came back with a better deal. Instead of my monthly bill going up $30, it instead was going to go down $10.

    Bingo!

    Now, the woman did caution me that this was only a 12-month promotion. To which I replied, “So guess what conversation you and I are going to have next February?”

    To her credit, she laughed. And said, “I can’t wait.”

    She may even have meant it.

    We’ve all been through this kind of nonsense, but it is worth pointing out that people and companies still make the same dumb mistakes, probably because they’ve been doing so for so long that it has become a habit. A bad habit.

    Look at your business model. And think about this carefully. How are you nurturing existing customers? How are you telling them, every day if necessary, that they are the most important component of your business? And how are you letting them know that there is absolutely no reason to try the competition?

    Because if you are not doing this, you may be essentially telling them to get lost.

    Which isn’t a smart thing to do.

    For MNB Radio, I’m Kevin Coupe.
    KC's View:

    Published on: February 4, 2010

    Walmart announced yesterday that it is laying off 300 employees at its Bentonville, Arkansas, headquarters, the final piece of what the company says has been a year-long restructuring effort that has trimmed almost 14,000 positions throughout the company.

    In a memo to employees, CEO Mike Duke wrote, “Last fall, we laid out three strategic priorities to deliver even more value for both customers and shareholders: growth, leverage and returns ... Each move has been designed to help us become more global, take advantage of our scale, and move our business even closer to the customer ... With this last major strategic piece in place, we are beginning our new fiscal year with every part of our business focused on being even more responsive to our customers.”

    The cuts came in a variety of departments, including human resources, information systems, and legal affairs.
    KC's View:
    It is a pretty good bet that you’ll never find the words “fat,” “happy”and “Walmart” in the same sentence.

    Unless, of course, it is a sentence like the one I just wrote, which makes the point that Walmart never is going to be accused of being fat and happy.

    Published on: February 4, 2010

    The Washington Post reports that “a bipartisan group of lawmakers and cabinet members” went to the White House this week to meet with Michelle Obama, “to help firm up plans for her national campaign against childhood obesity. The meeting signaled the first lady's intent to be involved not just in talking about the problem, but in crafting specific solutions. She wants to get families, schools, businesses, nonprofits and government working together on the issue.”

    According to the story, “Revising federal child nutrition programs, including school lunches, will be a big part the initiative, she said, offering ‘an opportunity to impact more than 30 millions kids.’

    “The first lady plans to release specifics of her ‘ground-up’ plan to fight child obesity next week, including steps to encourage schools to promote healthy eating, increase physical activity for kids, improve families' access to healthy foods and give parents better information about healthy choices.”
    KC's View:
    The problem, of course, is that money is tight, President Obama has called for a freeze on discretionary federal spending, and what the government is going to have to do is find a way to use existing funds in a smarter way.

    That’s not necessarily a bad thing.

    One line from the story is absolutely right, by the way. Families, schools, businesses, nonprofits and government all have to work together on the issue, and stop pointing fingers at the other guys.

    Published on: February 4, 2010

    The Arizona Republic reports that the Phoenix City Council has voted to impose a two percent sales tax on food items that include on milk, meat, vegetables and other edibles, the first time since the early eighties that such products have been taxable within the city limits.

    According to the story, the tax is designed to “generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Food purchased with food stamps will not be taxed.

    “The extra tax revenue means Phoenix will have more money in its coffers to help close a $241 million general-fund budget deficit through June 2011. Last week, budget officials proposed cutting $140 million in services. Other special funds for things like transit also could get money.”

    The story also notes that “Phoenix shoppers who buy paper towels, toothpaste and other non-food items at a grocery store already pay an 8.3 percent sales tax, 2 percent of which goes to the city ... After Tuesday's vote, Mesa and Surprise are the only Valley cities that do not tax food items, though Surprise is eyeing a 1 percent food tax.”

    The new food tax is not designed to be permanent - it will expire in five years.
    KC's View:
    To be fair, the vote wasn’t unanimous. And there are still folks on the City Council who are pushing for public hearings on the subject, hoping they can get a re-vote if there is enough public hysteria in the streets in Phoenix.

    Which there will be. Because nobody wants to pay more taxes. Though if my house is burning down, extra taxes that pay to keep fire houses open and firefighters employed might seem like a decent investment.

    (This will probably lead to a plethora of emails accusing me of being a typical pro-tax liberal member of the media elite. All I am saying here is that given a choice, I’m against my house burning down.)

    Published on: February 4, 2010

    The Chattanoogan reports that as Bi-Lo looks to emerge from bankruptcy by mid-April, it plans to close or sell seven of its 214 stores, saying that they were no longer productive and needed to be shed in order for the company to become more efficient.

    At the same time, CEO Michael Byars tells the Charlotte Observer that he hopes the company’s strategy will be buoyed by “a new loyalty card program that gives shoppers a discount on gas, along with groceries. The more they spend at Bi-Lo, the bigger the reduction. Locally, 37 BP stations are participating.

    “Tying the lure of cheaper gas to grocery spending is an approach that several other traditional grocery chains across the country have tried in recent years, including Winston-Salem-based Lowes Foods.

    “But in rolling out its Fuelperks program to more than 30 area stores, Bi-Lo - which ranks fourth in the Charlotte market, by sales - is bringing the concept to the region on a much larger scale. It arrives at a time when, because of the economy, midrange chains are working more than ever to give shoppers a reason to choose them over discount stores and other mainstream grocers.”
    KC's View:

    Published on: February 4, 2010

    Marion Nestle, professor of nutrition and food studies at New York University and author of “Safe Food – The Politics of Food Safety,” told a Washington, DC, food safety conference yesterday that it is unfair for the food industry to attempt to foist blame for the burgeoning safety problems onto consumers.

    The comments were delivered at the annual food safety conference sponsored by The Consumer Goods Forum (the entity created when the organization formerly known as CIES merged with the Global Commerce Initiative (GCI) and the Global CEO Forum). Nestle told the audience that while consumer education about cooking and food storage should improve, to focus on consumers as the weak link in the supply chain was to ignore the fact that most of the recent outbreaks of food borne illness in the US came from pre-cooked, fresh or ready-to-eat products. “It’s not the consumer’s fault,” she said. “They need safe food to begin with.”
    KC's View:

    Published on: February 4, 2010

    Reuters reports that Costco plans to invest $940 million (US) in Taiwan, with a plan to build a new distribution center and stores there.

    Costco currently operates six membership clubs on Taiwan.

    Bloomberg reports that Starbucks has signed 10 deals that are designed to expand its Seattle’s Best Coffee franchises in the western and midwestern US. Many of these locations are said to be smaller, kiosk-sized cafes, with Starbucks depending on its smaller brand for growth after a time during which it was criticized for opening too many of its flagship stores too fast.

    • The Salt Lake Tribune reports that Kroger-owned Smith’s Food and Drugs has opened its first Smith’s Express convenience store in Utah, and plans to open a second one later this month.
    KC's View:

    Published on: February 4, 2010

    • Costco Wholesale says that its January sales rose 10 percent to $5.62 billion, on US same-store sales that were flat, and international same-store sales that were up nine percent.

    • Spartan Stores reports that its third quarter sales were $786.9 million compared with $781.9 million in the same period last year; operating earnings for the quarter were $13.7 million compared with last year’s third-quarter record $17.9 million, which the company said was the result of lower comparable store sales volume and fixed cost leverage, lower fuel and retail margins, and a non-cash store closure charge.

    Third-quarter retail net sales increased 15.5 percent to $443.4 million from $384.0 million in the same period last year, on same-store sales that were down six percent. Third-quarter retail operating earnings were $1.9 million compared with $6.8 million in the prior year period.

    • Walgreen Co. reports that its January sales grew 2.7 percent to $5.36 billion from $5.22 billion, on same-store sales that were down 1.1 percent.
    KC's View:

    Published on: February 4, 2010

    Yesterday, MNB took note that Jon Stewart made some jokes at the expense of the National Grocers Association (NGA) and its upcoming convention’s keynote speaker - former President George W. Bush - on his show Monday night.

    MNB provided a link to the show on Hulu.com, but we got a number of emails from Canadian readers saying that they can’t access Hulu. (I assume that this means that nobody outside the US can access it, but we only got email from north of the border.)

    So, in response to their requests for an alternate link, here is where you can watch Monday’s edition of “The Daily Show with Jon Stewart”:

    Click here.
    KC's View:
    The references to NGA and President Bush are about nine minutes in, but you might as well watch the whole show...which continues to be, along with “The Colbert Report,” simply the funniest, savviest program on television.

    Published on: February 4, 2010

    MNB reported yesterday on how Supervalu CEO Craig Herkert seems to betting on the Save-A-Lot format as the company’s strategic savior....and in Chicago, will be building new Save-A-Lot units and taking some focus away from its Jewel operation.

    I commented:

    the question that occurs to me is whether it is more expensive to re-train Jewel customers to be Save-A-Lot shoppers, or to reorient Jewel’s focus to be more price competitive and with less selection.

    I don’t know the answer to this. It may be that the changes that would have to be made at Jewel in order to fulfill Herkert’s vision would be so dramatic that people wouldn’t think of it as Jewel anymore...and so Supervalu might as well focus on a different banner. But it also makes me wonder whether Jewel’s connection to its shoppers is so tenuous that in the end, it really doesn’t matter.

    Think about it. For a while, Jewel was broadening its selection to appeal to more shoppers. Then, it edited its selection to appeal to more value-oriented shoppers. Then, it started talking a lot about lowering prices, but got smacked around in the local media (and by some of its suppliers) for doing more talking than actual lowering. At the same time, the company brings in a Walmart veteran to run the company, and he has to blame Supervalu’s current travails on moves made by the previous administration in much the same way that the Obama White House blames the Bushies. And of course Herkert is focused on low prices because we are, after all, in a recession...but on the other hand, if all you have is a hammer, isn’t every problem going to look like a nail?

    So this is where Supervalu finds itself. When you think about it, the company has every possible arrow in its quiver....stores like Save-A-Lot for value shoppers, Bristol Farms for the high end, and lots of formats for the middle. And yet the quiver doesn’t seem nearly full enough at the moment...and it is hard to tell whether the company is acting tactically or strategically.


    One MNB user responded:

    Watch out. This is a reminder of Fleming ... “let’s not focus on core business.”

    Beware of outsider CEOs. This could be dangerous and lose a lot of their business before it fails.


    Another MMNB user wrote:

    If Jewel continues to reduce selection, I may be one of those shoppers who cross the IL/WI border bi-weekly or at least monthly to shop Woodman’s.  Though the produce leaves something to be desired,  I can find all my center store favorite brands (and then some) in one store at a reasonable price.

    MNB user Ron Lunde wrote:

    Jewel has a Chicago problem ... it is the market leader ... but WalMart, Meijer, Target, Dominick's, Independents and ethnic markets, and don't forget Whole Foods for the upscale, surround them.

    The city of Chicago is losing population and Jewel probably has all the best real estate in the city. The collar counties are growing, but the other guys are buying sites too. There are plenty of 'big footprint' stores in the Chicago market.

    In Chicago proper, Jewel now has 35 stores, Aldi 37. If you look at the maps, Aldi is generally well positioned to intercept Jewel customers, often within around 1.5 miles between two Jewels.

    In the overall Chicago market, Jewel has approx 180 stores, Dominick's 80 and Aldi 157.

    It looks like the average Aldi does around $5 million per year out of approx. 17,000 sq. ft. Jewel does around $30 million out of approx. 65,000 sq ft ... approx. a 6 to 1 revenue ratio. (Jewel has remodeled a number of stores to something over 100,000 sq. ft. adding all the bells and whistles with high touch, high labor departments and increased variety.)

    Aldi carries around 1,400 items. Jewel and Dominick's probably in the 40 to 60 thousand range. As you pointed out, Aldi's prices are somewhere in the range of 35 to 40% below branded prices.

    So it appears as though SuperValu is faced with interesting problems. Will Save-A-Lot bring incremental sales or cannibalize Jewel even further? Can SuperValu out Aldi, Aldi?

    But very important ... how do you fix Jewel? This is a tremendous brand, capital investment and delivers a lot of top line revenue. SVU has a new CMO in Julie Dexter Berg. She is well known for her work in measuring brand health and recommending fixes. She is not from the industry and is a marketing professional. She could be the most valuable hire SuperValu has made and her  and fresh view may save Jewel and properly position Save-A-Lot. That's the big win potential.





    On the subject of Stop & Shop playing hardball with the unions in Connecticut, one MNB user wrote:

    Stop and Shop has done a good job keeping Walmart Superstores away from the large population areas near Hartford and New York. Their high prices reflect the lack of serious competition. But Walmart seems to be stepping up the pace... putting more food in their D 1 stores and no doubt planning a few Superstores.  I’m sure that Stop and Shop realizes that you can’t compete against Walmart with 1960’s style union contracts. So it makes sense for them to prepare for the coming of the Gang from Bentonville by stripping down their costs to the bare minimum.




    Regarding the fun that Jon Stewart had at the expense of NGA on “The Daily Show,” one MNB user who described herself as “a 40-year career woman in the food industry” wrote:

    Great show! Thanks for linking it.

    I have a difficult time not laughing at the NGA, an institution of old, fat white guys.


    Well, speaking as a semi-old, semi-fat white guy...it is important that we all be able to laugh at ourselves.
    KC's View: