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    Published on: March 9, 2010

    by Michael Sansolo


    Rightly or wrongly I think we can find lessons in better business behavior in virtually everything around us if only we are willing to take a really contrary view to what seems so obvious. Even the US mail.

    Last week MorningNewsBeat’s usual robust discussions included the proposal to eliminate one day’s mail delivery each week. Having stood in epic lines many times in my local Post Office, I could easily understand most of the responses on MNB that indicted the postal service and its employees. But I’d also argue that if we looked in a different direction, we could see how the struggles of the Post Office could be ours someday soon.

    The postal service has a big, incredibly obvious problem. It’s called e-mail. In a very, very short amount of time the world of communication moved dramatically to our computers and mobile devices and the mail simply doesn’t seem to matter that much anymore. E-mail and the Internet now take care of the personal stuff, plus bills, payments, magazine, advertisements and more.

    So while my mother wistfully remembers a time when mail was delivered more than once a day in the offices of New York City, my kids think mail comes all day long - to their electronic devices. Likewise, my father remembers a time when newspapers came out in multiple editions throughout the day and my kids get their news when they want it, how they want it. That’s the world of the Internet.

    The question isn’t whether newspapers are better or worse today or whether the staff in the Post Office seems decidedly disinterested at times. The real focus should be on learning from the changes those industries and others seemed to miss.

    I would argue that in many ways newspapers today are better than ever. If you looked back on the newspapers of just 20 years ago you’d find them written in a less engaging style and completely devoid of the color photos and tables you find everywhere. Likewise, the Postal Service has evolved. It offers more services and products and, like it or not, does an incredible job of moving mail around the country. As Kevin and I found with shipments of our books, a relatively inexpensive service called Media Mail gets a book from coast to coast in days.

    One has to imagine that in both those industries leaders thought long and hard about how to become better than ever at virtually everything they did. Costs were attacked, supply chains made more efficient and innovations were tried in every possible way. Yet with each passing day, newspapers and the mail become increasingly less relevant to the younger population.

    Now many may argue that there’s no parallel to supermarkets because newspapers, the mail, recording companies, movies and others merely distribute information, which the Internet really can do better and faster. Food products are tangible and therefore must be moved location to location until the day we have Star Trek replicator machines to send food right to our printers.

    I’d agree, but also would argue that we need to think of the experience of those dying industries and question how we are approaching the next generation of shoppers. And then I’d get worried. Too many supermarkets are still designed on essentially the same model that was geared to my mom with her twice- daily mail and my dad with his morning and afternoon newspapers.

    When looking at today’s younger generations, the question isn’t whether they’ll shop differently; it should be how their preferences will change and how fast these changes will take place. And if all our efforts are simply based on making today’s model more efficient, we could be heading for the same fate as daily mail.

    As always, there’s a great movie line for this. It comes from a speech by Danny DeVito as a corporate raider in Other People’s Money. Explaining why a beloved family-owned factory needs to be shut down, DeVito says:

    ”At one time there must have been dozens of companies making buggy whips. And I’ll bet the last company around made the best damn buggy whip you ever saw.”

    So true and it’s the fate we want to avoid at all costs.


    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 .
    KC's View:
    I have an answer for one of the questions raised by Michael. He says that we need to ask ourselves how the next generation’s shopping preferences will change and how fast these changes will take place.

    The answer is simple. Their preferences will change more than you think they will, and faster than you expect them to.

    Published on: March 9, 2010

    Two interesting stories about Walmart in the news...

    Bloomberg reports that Walmart, which had been in a strategy of SKU optimization designed to reduce the number of products in its aisles in a way that would emphasize top sellers and private brands at the expense of secondary and tertiary brands, “is bringing back some products it had removed from shelves last year as shoppers turn to competitors for a wider selection of merchandise.”

    According to the story, Walmart is meeting with suppliers to reinstate certain brands that it has decided the loss of which was affecting sales and customer traffic. Analysts say that Walmart cut too deep when it was making changes, and even Walmart concedes that the process of SKU optimization is “evolutionary,” and that some products are being returned to the aisles (while denying that store traffic is an issue).

    At the same time, Advertising Age reports that “Walmart is increasingly finding itself caught in the middle between higher-end retailers and value players and, at least in recent quarters, is losing share to both. That has some suppliers and market watchers wondering if Bentonville's strategies -- which have included a bigger focus on margin expansion, culling assortments and promotional display space, and increasingly playing marketers off against one another in category reviews -- are flawed.

    Much of the competitive threat to Bentonville, Ark.-based Walmart has little to do with affluent shoppers that ‘discovered’ it during the downturn abandoning the bargain retailer when the economy recovers. Rather, it's more about burgeoning threats from multiple rivals to Walmart's core positioning as a low-price leader. Despite its hard-hitting ‘Save money. Live better’ ad campaign and recent ads claiming Walmart can save shoppers $55 a week compared to supermarkets, Target recently beat Walmart in a nationwide head-to-head price comparison, and a recent survey by WSL Strategic Retail showed that three-quarters of dollar-store shoppers believe those stores are cheaper than Walmart.”

    The always estimable Burt Flickinger, principal of consulting firm Strategic Resource Group who is in the midst of a nationwide pricing study of Walmart vs. competitors, tells Ad Age that Walmart increasingly is “losing out in pricing battles to conventional supermarket operators in addition to dollar stores, hard discounters, clubs and Target, particularly on key beverage items -- such as milk and soft drinks -- whose prices consumers watch most closely. ‘It's the competition much more than the economy,’ he said.”

    And here’s an interesting sentence from the story that may surprise some Walmart watchers: “Supplier executives say that Walmart is still pressing for savings harder than ever, but less often passing the full savings on to consumers.”
    KC's View:
    Yikes!

    A few reactions here, if I may...

    One, this stuff happens. Walmart always has struck me as a restless company, and sometimes restless companies can overstep here and there. It isn’t good, but it is better to be restless than stagnant or complacent.

    Two, Walmart is very good at shifting tactics and even strategies when necessary. The important part of these stories, it seems to me, isn’t that Walmart has lost its way, but that it is making changes based on the data.

    Three, I would be more concerned about the allegation that Walmart is increasing its margins, not passing along savings to shoppers. That kind of cultural corruption - and at Walmart, I don’t think it is an understatement to call it that - can be insidious. It suggests one is managing more for Wall Street than Main Street...which is usually not a good idea.

    Published on: March 9, 2010

    The Philadelphia Inquirer reports that Judith A. Spires, president of Supervalu-owned Acme Markets there, has announced her resignation and will leave the company on Friday.

    She will be replaced on an interim basis by Pete Van Helden, executive vice president of retail operations for Supervalu, while a search for a permanent successor is conducted.

    The Inquirer notes that Spires began her supermarket career as a checkout clerk for Acme 40 years ago in southern New Jersey and that her father was an Acme bread truck driver, Her resignation, the paper writes, “comes amid speculation about the Acme chain’s future. Its publicly traded parent corporation, Supervalu is carrying $8 billion in debt, and recently announced that it is selling some of its supermarket holdings in Connecticut and, before that, in Utah.

    “Supervalu said last week that it had no immediate plans to sell Acme. Industry observers have wondered aloud whether Acme would be the next to be sold, or whether Supervalu instead planned to invest millions into its Acme chain to fight the competition. Shop Rite, Giant, Wegmans and Wal-Mart have helped cut into Acme’s lead in market share in the region.”
    KC's View:
    The betting here is that Spires decided to leave because she wasn’t on board with whatever Supervalu has planned for Acme. In addition, we are hearing that pretty much everything is on the table at Supervalu, where management is trying to figure out what the future looks like. So draw your own conclusions about the motivations behind Spires’ resignation...

    Published on: March 9, 2010

    The New York Times reports that Nestlé plans to bring its Jenny Craig diet business to Europe this month, starting in France and then rolling out to the UK and then other major European markets. Further expansion is planned that will bring Jenny Craig to India and China.

    The expansion of the Jenny Craig business to Europe is predicated on the fact that obesity is becoming a global problem; the Times reports that “according to the World Health Organization, 2.3 billion people will be overweight in 2015, up from 1.6 billion in 2005. The organization also predicts that in 2015, 700 million people will be obese, up from 400 million in 2005.”

    Jenny Craig also has been an increasingly profitable business for Nestlé. The company does not break out specifics, but Nestlé Nutrition, which manages the business, saw its business last year increase by almost three percent to $9.3 billion, or more than nine percent of Nestlé’s global revenue.

    Part of the challenge for Nestlé will be competition - Weight Watchers and Slim Fast already are doing business in Europe. in addition, Nestlé may find that its approach - Jenny Craig is a system predicated on fee-based evaluations and coaching, as well as the cost of prepackaged meals - out of synch with European food tastes and priorities.
    KC's View:
    Mireille Guiliano, author of “French Women Don’t Get Fat,” must be chuckling about this...probably as she sips her champagne and snacks on small portions of caviar, croissants and pate.

    I have a lifetime of experience with weight issues, but remain somewhat cynical about programmed approaches to losing pounds - I’ve personally always found that if I hit the gym three days a week, jog four miles three days a week, cut back on my alcohol consumption, don’t eat seconds, eliminate ice cream (for me, the real killer), and keep to my rule about not eating dessert and meals where I’ve had beer or wine, then things pretty much work themselves out. My few experiences with organized programs have been unhappy, mostly because when you fall off the wagon - and most people eventually do, because programs get boring - you hit the ground hard.

    That said, this probably is a good business move for Nestlé, for all the same reasons that I am cynical about them. I suspect that as the obesity problem gets worse elsewhere in the world, there also will be another way in which people imitate Americans - they will be searching for the instant cure, the magic bullet, that will solve their problems.

    Me, I’ve always found that the best solution can be found in six words.

    “Eat less. Eat smart. Move more.”

    Published on: March 9, 2010

    Kroger’s Southwest Division said that it is giving fresh emphasis to its “Low Prices Plus More” promotion that is designed to reaffirm its commitment to low prices in addition to “value-added services and exceptional stores that are stocked with a tremendous variety of national and store-brand items ... On any given day, more than 10,000 yellow tags are lined along the shelves that indicate deeper cost savings for customers at the 209 stores in the Kroger Southwest Division. Last year, Kroger invested an additional $28 million to reduce prices in its meat, produce, and beauty and health departments to save shoppers money on hundreds of popular items. Looking ahead, Kroger will continue to monitor market prices on a daily basis to stay competitive.”

    Also part of the announcement: “The Kroger Southwest Division will continue the trend of allocating capital to build new Kroger Marketplace and Kroger Signature stores in underserved communities. Kroger will also remodel existing locations to keep them fresh and innovative using the latest environmentally-friendly building methods and materials. In 2010, the Kroger Southwest Division will create new job opportunities in Texas and Louisiana through the opening of two new stores, seven fuel centers and 22 remodels. Currently the Division employs 26,000 associates.”
    KC's View:
    This may be a reflection of what people refer to as “the new normal.” Companies grow and evolve, but continue to emphasize low prices as a nod to consumers’ continuing concerns about where the economy is going. Seems to me that it is critically important not to remain stagnant and not to have just one song to sing...because when you do that, you are easily out-maneuvered by the competition.

    Published on: March 9, 2010

    • There is a story in the New York Times about how restaurants in many areas have gotten used to patrons blogging about the food they are eating, taking pictures of their meals to be posted on Facebook and other social networking sites, in essence providing instant reviews of the gastronomic experiences they are having and getting a fair amount of exposure.

    Enough exposure, in fact, that some restaurants have embraced the trend and are reaching out to these bloggers with press releases and special offers...hoping that they can, to some extent, shape or at least influence the coverage.
    KC's View:
    If this can happen to restaurants, it can happen to any retailer - a person can be in your meat or produce department, passing judgement on quality of the hamburger or fresh fruit, and having an influence on other shoppers.

    You have no choice but to engage.

    Now, to be clear....these bloggers may not have the same standards as the restaurant critic for the Times, but that may not matter. Their reviews may actually be more influential because they reflect a new kind of citizen journalism. (We can argue about whether this is good or bad, but it doesn’t matter. It just is.)

    I repeat.

    You have no choice but to engage.

    Published on: March 9, 2010

    The Boston Globe reports that employees at Supervalu-owned Shaw’s Supermarkets have begun selective picketing of the company’s stores in Boston and New Hampshire, one day after more than 300 workers at one of the company’s fresh foods distribution centers went out on strike.

    The company said it was disappointed the workers rejected a “fair and reasonable contract offer” that it called its “last, best and final offer.” It would not disclose contingency plans.

    The union said that the “reasonable” offer included a cut in pay for some employees, and that it would remain on strike “for as long as it takes” to get a fair agreement.
    KC's View:

    Published on: March 9, 2010

    • The Wall Street Journal reports that Walmart “has reached settlements with environmental groups over greenhouse-gas emissions associated with its operations, allowing planned expansions at three of its California stores to proceed. Under agreements the company reached with the Center for Biological Diversity and the Coalition for Environmental Integrity, Wal-Mart will install three rooftop solar facilities and conserve energy by including energy-efficient designs and equipment in two stores it plans to remodel and expand in Perris and Yucca Valley, Calif. The company also agreed to take a close look at its refrigeration systems at those stores and overhaul them if necessary.”
    KC's View:

    Published on: March 9, 2010

    • Financial Supermarkets Inc., the bank/credit union consulting company specializing in the design, development, and management of in-store banking centers, announced that it has been acquired by Oregon-based Market Contractors Ltd., described as “a nationally recognized general contracting firm...with 32 years of highly diversified experience and a client base specializing in financial services, retail, and healthcare industries.” Terms of the deal were not disclosed.
    KC's View:

    Published on: March 9, 2010

    ...will return.
    KC's View: