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    Published on: March 1, 2010

    Bloomberg reports that US Representative Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, says that it is not on his agenda this year to pass legislation that would regulate interchange fees associated with the swiping of credit and debit cards.

    According to the story, it appears that Frank is accepting the conclusions of a report by the Government Accountability Office (GAO) that while merchants would benefit from lower swipe fees, consumers might not see the same benefits and could “face higher card-use costs if issuers raised other fees or interest rates to compensate.”

    Bloomberg notes that “merchants including Wal-Mart Stores Inc. and Target Corp. have asked Congress to reduce the fees, which generated an estimated $48 billion in 2008, according to the National Retail Federation. Payment networks Visa Inc. and MasterCard Inc., which set the rates, and banks that collect the fees have said the system helps merchants by guaranteeing payment and simplifying record-keeping.”
    KC's View:
    It sounds almost as if Congress wants to protect the merchants from themselves...

    It has long been argued here that if reduced interchange fees did not result in lower consumer prices, then retailers would essentially be shooting themselves in the foot, losing a great deal of credibility with shoppers. It also has been argued here that this is unlikely to happen, because certain highly price-driven retailers would use the reduction to lower prices and be extremely visible about it, and in fact market forces likely would compel the competition to do the same.

    On the other hand, I guess Congress is unwilling to do anything that might be perceived as not in the consumer’s best interests...since the consumer is the voter. But I’m not sure I agree with the conclusion.

    Published on: March 1, 2010

    The Washington Post has a piece about how Walmart is pushing its China suppliers to be more environmentally friendly:

    “Wal-Mart has more than 10,000 suppliers in China. In addition, about a million farmers supply produce to the company's 281 stores in China. If Wal-Mart were a sovereign nation, it would be China's fifth or sixth largest export market. So the company hopes that small measures taken by all suppliers start to add up. Its 200 biggest suppliers in China have already trimmed 5 percent of their energy use.

    “In the past, environmental concerns have taken a back seat to growth in China and to costs for Wal-Mart. And China and Wal-Mart have come under sharp criticism for conditions in factories. Yet pollution now threatens China's growth; as a result, awareness about climate change and energy security has spread in China. Likewise, as consumers grow more environmentally aware, Wal-Mart's executives have responded.”

    In the end, some experts say, Walmart’s emphasis on environmental issues and the guidelines it sets could be more important than what the Chinese government does, because the suppliers with which it deals are more likely to respond to economic pressures from the world’s biggest retailer than they are to government fines and threats.

    The Post notes that not everybody is buying into Walmart’s portrayal of itself as an environmental watchdog, and and that many still regard the company’s emphasis on low price as a chief driver of substandard conditions, whether it comes to the environment or labor issues.

    But Walmart responds that it is doing the best it can under difficult circumstances, and that regulating the Chinese manufacturing community is a daunting and near-impossible task.

    Interestingly, the San Francisco Chronicle has a piece about Elizabeth Sturcken, who it identifies as the “go-to person” in Walmart’s green initiatives ... but who works as managing director of corporate partnerships for the Environmental Defense Fund (EDF), which is working with Walmart as the company seeks to eliminate 20 million tons of carbon emissions by 2015.

    “EDF's collaboration with an oft-vilified corporation hasn't always sat well with others in the environmental community,” the Chronicle writes, but Sturcken says that “the capacity to create change with them is phenomenal.” She also says that EDF takes no money from Walmart because “it is cleaner that way.”
    KC's View:
    The public relations department at Walmart appears to be working overtime...with good results. (This is not a slam. Companies need to tell their story and do so in a compelling way, and I respect good PR people who know how to create a narrative. Which is precisely what Walmart is doing.)

    We can choose to be cynical about Walmart’s efforts in this area, or we can choose to see the company as one that is embracing its environmental responsibilities in a way that allows it also to deliver value to both shoppers and shareholders. There are different definitions of “green,” and Walmart seems to be embracing all of them.

    Is it a perfect company? No. Does it make mistakes? Yes.

    But as someone from the EDF says in the Chronicle piece, “it gets harder and harder to hate Walmart.”

    Must be confusing for a lot of people...

    Published on: March 1, 2010

    The New York Times has an interesting tidbit, quoting from a soon-to-be-published article in the Journal of Consumer Research about people’s supermarket spending habits:

    “The authors approached 175 people entering grocery stores, asking them what items they planned to buy and how much they planned to spend. The average shopper could name items totaling $41.11, but reported a total budget for the trip of $58.46, a near-perfect prediction of spending. That leaves $17.35 that was mentally committed to the shopping trip but not put aside for any particular item.”

    The study concludes that when these shoppers walked down every aisle of the store, they tended to use up all or most of the reserve...but when they only visited aisles that had the products they were looking for, they walked away with money in their pockets.

    Karen M. Stilley, a postdoctoral fellow at the University of Pittsburgh who helped write the study, says: “It’s kind of crazy that there are people walking into the store, expecting to spend money, and the store is leaving it on the table.”
    KC's View:
    I hate to be the one to challenge an assertion by a postdoctoral fellow, especially since I have but a modest B.A., but...

    Depending on the store, this actually could be a good thing. Imagine a shopper walking into a store with money to spend, but also in a situation where times are tough. The shopper buys what is needed, but discovers - yippee! - that the items actually cost less than expected ... and so, departs the store feeling good about the experience and determined to return to the same store next time food is needed.

    Maybe I’m wrong, but this doesn’t sound like a bad thing. For many stores, this actually seems like it would be the point.

    Sure, getting people to want more stuff and then to buy it is one of the goals of retailing. But especially in the food business, where a positive experience can turn into a lifetime of weekly shopping, that cannot be the only goal.

    Besides ... this study looked at only 175 people. It’s also possible that a different 175 people in different stores could have behaved in a different manner.

    But maybe postdoctoral fellows don’t think this way...

    Published on: March 1, 2010

    The Arizona Republic reports that Bashas’ management “sent a letter to its employees Friday reaffirming its intent to remain locally owned in the face of an unsolicited purchase offer by Albertsons LLC. The letter from also said there is no hostility between the companies and that Bashas' officials are not meeting with Albertsons or anyone else behind closed doors to discuss a sale.”

    Bashas’ filed for bankruptcy protection last summer and has filed a reorganization plan with the courts that would pay off its $300 million in debt. The bankruptcy court is scheduled to rule on the plan in early April.
    KC's View:

    Published on: March 1, 2010

    The Columbus Dispatch reports that Kroger has laid off 93 part-time pharmacists in its 126-store Columbus division, saying that increased competition and a tough economy made the move necessary.

    The company also said the pharmacists are not eligible for severance pay because there is the possibility they could be called back to work.
    KC's View:

    Published on: March 1, 2010

    The Boston Herald reports that negotiators representing some 40,000 unionized employees for at Ahold-owned Stop & Shop are making progress in their contract negotiations, but remain “far apart” on wages.

    A spokesman for the United Food and Commercial Workers (UFCW) said that the company had offered to increase pension and health care benefits. Both sides confirmed that the negotiations will continue this week.
    KC's View:

    Published on: March 1, 2010

    Crain’s Chicago Business reports that McDonald’s is testing the sale of oatmeal in Baltimore and Washington, DC, locations, following in the footsteps of both Starbucks and Jamba Juice, which have found a measure of success with the hot breakfast cereal.

    Starbucks, of course, copied McDonald’s several years ago when it got into the hot breakfast sandwich business. And McDonald’s has been launching McCafe installations to take away some of Starbucks’ coffee business.

    McDonald’s says it has not yet decided whether to roll out its oatmeal program nationwide.
    KC's View:
    What, they can’t do something original...like cream of wheat?

    Of the ones I’ve tried, the Jamba Juice version is the best.

    But I still don’t understand why anybody who is not on the road traveling would even consider buying oatmeal in a fast food joint. Oatmeal is one of the easiest and least expensive products to make at home...and one can only imagine how much money people would save over a year’s time if they did it there rather than at a fast feeder. (Sounds sort of like a Walmart commercial...)

    Published on: March 1, 2010

    The Wall Street Journal reports that PepsiCo-owned Gatorade has decided to end its sponsorship deal with embattled golfer Tiger Woods.

    "We no longer see a role for Tiger in our marketing efforts and have ended our relationship," Gatorade said in a statement. The company had previously decided to end its production and marketing of a new sports drink named after Woods.

    Woods has been embroiled in a scandal related to multiple marital infidelities and has left the pro golf tour seeking rehabilitation and treatment. However, his travails have provided much fodder for tabloids, cable TV news and late night comics, creating image problems for some of the companies with which he did business.

    The Journal writes that “Gatorade becomes the third sponsor to sever its ties to Mr. Woods following revelations of his extramarital affairs, dealing a blow to his multimillion-dollar endorsement business. Global consulting firm Accenture PLC and telecom company AT&T Inc. also ended their sponsorships.”

    However, Gatorade also said Friday that it would continue its partnership with the Tiger Woods Foundation, a nonprofit that funds the Tiger Woods Learning Center in Anaheim, Calif.
    KC's View:

    Published on: March 1, 2010

    In a development close to our hearts at MNB, it was announced over the weekend that our own Michael Sansolo will be taking over the duties of research director for the Coca-Cola Retailing Research Council, replacing Bill Bishop, who is stepping down after three decades in the role.

    Michael will be facilitating the group's meetings and working to produce all of the upcoming research reports.

    But, fear not, MNB fans. This is only a part-time gig. Michael will still be part of our community, contributing columns on a weekly basis. And, he’ll continue to give speeches around the world and support our book, “The Big Picture: Essential Business lessons from the Movies” (available now at Amazon.com).
    KC's View:

    Published on: March 1, 2010

    • The Danbury News Times reports that Wakefern Food Corp., the New Jersey-based retail cooperative that bought 11 Shaw’s stores in Connecticut, picked up two new members to operate three of them.

    According to the story, “Joseph Family Markets LLC will operate the old Shaw's in Canton and West Hartford, and Miller Farms Family Markets will operate the Enfield Shaw's.”

    • In western New York, the Post-Standard reports that Penn Traffic Co. - just acquired by Tops Markets - lost $10.5 million in January prior to the deal closing, creating issues that could force Tops to close more than the four stores that it has said it will shutter.

    Tops bought Penn Traffic's store assets for more than $85 million after the company entered its third bankruptcy last November.

    • In Texas, the American-Statesman reports that Whole Foods has “kicked off its annual fundraising drive to benefit its microlending foundation, which has loaned millions of dollars, a few at a time, to people in developing countries around the world.

    “One of the natural foods grocer's most distinctive initiatives, the Whole Planet Foundation supports organizations that make small loans to people in poor countries, helping them to start or expand home-based businesses. Based on the concept of microloans, the foundation has distributed more than $10.6 million to programs in 18 countries since its debut in 2005.”

    Whole Foods says that the average loan is $185 - which does not sound like a lot of money, but can have an enormous impact around the world. More than 330,000 people have been assisted by the microlending program, the company says.

    • CKE Restaurants, parent company to the Carl’s Jr. and Hardee chains, reportedly will be acquired by the Thomas H. Lee Partners private equity group for almost $1 billion, including the assumption of $309 million in debt. The deal is expected to close in the second quarter of 2010.

    • The Dallas Morning News reports that Pizza Hut seems to have turned around its lagging fortunes with a “$10 for any pizza” deal that began as a limited time offer but actually has no end-date. Company officials tell the paper that the fourth quarter of 2009 and the first quarter of 2010 have been “much stronger,” and that they consider it a “substantial recovery” from the chain’s previous problems.
    KC's View:

    Published on: March 1, 2010

    • Starbucks announced that Bernard Acoca, formerly senior director-digital marketing for Pizza Hut, will join the company as VP-US marketing.
    KC's View:

    Published on: March 1, 2010

    In a comment about Target’s marketing efforts against Walmart, I wrote:

    To be honest - and this is based on limited exposure, because I can’t go everywhere - I do not think that there is the kind of marked difference between Target’s best stores and Walmart’s best stores that Target seems to believe there is. I could be wrong about this...but that is my impression.

    One MNB user responded:

    I believe I am definitely biased towards Target because I can’t stand the low lighting, limited selection, and dirty Wal-Mart stores. Have you been to the remodeled Target stores with
    produce? The stores are actually stocked with easy to shop merchandise, have friendly service (good luck trying to find a knowledgeable WM employee), and deal tags are apparent on the shelf. I have even stopped buying basics like dog food at Wal-Mart; they no longer carry my brand. So much for win-show-place…  


    As I said, I haven’t been to every store. But you should try visiting some of the newer Walmart Supercenters, which can be excellent.

    Another MNB user chimed in:

    I shop both stores and would agree that the difference between experiences isn’t enough for me to change the fact that Wal-Mart gets the majority of my business. Target’s grocery department has less selection and higher prices. I checked, hoping for that experience differential when shopping. Target does have better clothes selection for the teen to twenty group, but not for the baby boomer (at least in my opinion). Target has disappointed me more than Wal-Mart, maybe because I am expecting a different experience when I visit Target than Wal-Mart.

    MNB user Randy Friedlander wrote:

    Target certainly has the scale to follow in Walmart's footsteps in driving down procurement and supply chain costs.  To some extent their prices are at par with Walmart.  However, Target has established a loyal customer following on the basis of selection, style, service and shopping experience.  (Few retailers besides Nordstrom are better at customer returns than Target.)  In order to go toe to toe with Walmart, some of that will be sacrificed in the name of cost reduction.  I don't see Target ever succeeding at trying to outdo Walmart; those folks in Bentonville are focused and relentless.  Your readers will certainly remember when Circuit City laid off its most experienced floor personnel to save money, because they were trying to offer consumers the "Walmart price" on electronics.  While Circuit City had other problems, that move was hastened their demise.  Consumers left CC in frustration over poor (or no) customer service and made their purchases at Walmart or Best Buy.  To quote the English rock band XTC, "Don't change your focus in the hopes of getting one."

    MNB user Ray Harrison wrote:

    I agree with you on Targets lack of effective price messaging.  However, in the stores that I have visited, there is indeed a marked difference in the quality of merchandise, the merchandising strategy and the overall customer experience.

    MNB user Tim O’Connor wrote:

    I think the issue is more fundamental for Target. They think of themselves as upscale and therefore
         Don’t appeal to everyone especially those on a careful budget.

         Their assortment decisions in food ignore the basics – lots of value-added products but no basic ingredients (eg flavored rice but little of the plain old bags of rice).

         The recent club pack event was a disaster in terms of inventory and stocking impact on the rest of the store.

    They have such strong merchandising rules on faced out shelves but many holes in core goods that they filled with other products, killing shop-ability and usefulness of shelf tags - something they used to be good at.

    5)      They are incredible marketers, incredible centrally controlled merchants, but need to learn more balance at the store level.


    In other words, they have some work to do...
    KC's View:

    Published on: March 1, 2010

    The 2010 Winter Olympics ended last night with the US winning the medal count with 37 (9 gold, 15 silver, 13 bronze), followed by Germany (10/13/7) and Canada (14/7/5). The biggest game of the day - Canada’s defeat of the US in the men’s hockey final, which it won in overtime 3-2.
    KC's View:
    o be honest, I didn’t watch much of the Olympics...but have to admit that I found myself captivated for about three hours on Friday afternoon, sitting in a Seattle pub with two friends, drinking beer and watching the finals in women’s curling between Sweden and Canada. I know nothing about curling, but I found it fascinating (though I’m also told that it was probably better because the sound was off, the NBC announcers could not be heard, and commentary was provided by one of my friends, who actually knows a little about the sport).