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: April 26, 2010

    MNB user Jim Donald passed along a piece from Bloomberg Business Week by Richard Tedlow, a professor at Harvard Business School, in which he talks about Toyota’s problems but makes points that every business thought leader needs to consider. Some excerpts:

    • “In 2005, Toyota recalled more vehicles in the U.S. than it sold. Worldwide, nearly 1.5 million Toyota vehicles were recalled the following year. Why was there not a spate of articles about Toyota no longer being the company people thought it was? Outsiders writing about Toyota fell victim to what John Kenneth Galbraith many years ago called the conventional wisdom. We all saw Toyota through the prism of its supposed manufacturing superiority, a prism that distorted reality. When the accelerator recalls were followed by Prius recalls over faulty brakes, the jig should have been up. But to this day I know people who do not plan to take recalled Toyotas back to the dealer. They are still in denial.”

    • “Toyota's top people were in denial, just as the public was. By denial, I mean that they stopped being honest with one another. And they stopped being honest with themselves. If Toyota's products were as fatally flawed as they were, that would be too awful to be true. Therefore, the awful truth was brushed away. I've seen this happen in so many companies that I was compelled to write a book about it.

    “There's a highly valuable lesson for all businesspeople in the tragedy at Toyota: If denial can destroy the reputation of a company that was once so admired, it can destroy the reputation of your company, too.”

    Tedlow also raises questions that he says companies need to ask themselves in order to avoid Toyota's fate. Among them:

    • “What happens to the bearer of bad news? Does your company shoot the messenger rather than heed the message? There are indications that this may have been the case at Toyota.”

    • “Do the real issues of the day only come up in the hallways after meetings are finished?”

    • “Would you rather be conventionally wrong or unconventionally right? Toyota's top people chose the former.”
    KC's View:
    This is an excellent piece, thought provoking in all the right ways. you can read the whole thing by clicking here.

    The headlines are filled with examples of companies that have made decisions for all the wrong reasons. Decisions that may have made them money in the short-term, but are now costing these same companies their reputations and perhaps even their futures.

    It certainly resonates here. The whole issue of denial is the subject of the first chapter in our book, “THE BIG PICTURE: Essential Business lessons from the Movies.” I won’t give away the whole thing, but essentially the chapter deals with denial, three guys and a shark. (You didn’t think I’d miss an opportunity to plug the book, did you?)

    “THE BIG PICTURE: Essential Business Lessons From The Movies,” by Michael Sansolo and Kevin Coupe, is available by clicking here .

    Published on: April 26, 2010

    The Wall Street Journal reports that there is “a rising tide of legal and regulatory actions aimed at products pitched as "environmentally friendly," as consumers and the Federal Trade Commission have begun challenging whether such claims live up to their billing.

    “Companies stand accused of, among other things, adding self-designed labels that imply their products have won some third-party seal of approval; touting products as ‘biodegradable’ when there is little chance they would actually decompose in a landfill; and labeling rayon fabric - created from tree cellulose processed with a chemical that releases hazardous air pollutants - as made of bamboo, which is merely substituted for the wood fiber.

    “This backlash comes at a time when research shows consumers are willing to pay more for goods that save energy, pollute less or are made from natural materials, and businesses say eco-friendly products are potentially big money-makers.”
    KC's View:
    Companies that promote products as “green” when they do not qualify for such a description are making a stupid mistake. They hurt the green effort overall, and they damage their own credibility. In a transparent global marketing environment, such misguided efforts may haunt them for a long time to come.

    Published on: April 26, 2010

    Internet Retailer reports that Walmart-owned Asda Group in the UK has introduced a new “Order Online, Collect InStore” service that covers 97 percent of the country, “enabling customers to receive goods ordered online at the local store or at their home.”

    There are some 1,100 vans used by Asda to deliver merchandise from more than 160 stores, according to the story. And, the story says, “Growth over the next half decade will come, in large part, from extending the online reach of Asda and its affiliated brands, the retailer says. One area where the retailer hopes to expand its online sales is through, its e-commerce site for men’s, women’s and children’s apparel. Asda hopes that 10% of George sales come through the site by 2013. The retailer did not detail the current level of sales.”
    KC's View:
    The show that has not yet dropped here in the US - but inevitably will - is Walmart’s move to sell groceries online, probably for in-store pickup (at least in the beginning). It has the stores, it has the technology, and it has the infrastructure. And, I’m convinced, it has the ambition.

    If you are a food retailer, you ought to be working as if this is a certainty, not just a likelihood. Von Clausewitz wasn’t talking about retailing, but he might have been when he said that one should prepare for what the enemy can do, not what you think the enemy might do.

    Published on: April 26, 2010

    The San Francisco Chronicle reports that the California Supreme Court has “agreed to decide whether a city can ban plastic bags at retail stores without studying the environmental effects of the increased use of paper.

    “The court's unanimous vote to review a case from Manhattan Beach (Los Angeles County) will not affect San Francisco, which enacted the nation's first citywide ban on nonbiodegradable plastic bags at supermarkets and chain drugstores in 2007. But the ruling will affect other cities considering such measures, including Oakland. The city passed an ordinance similar to San Francisco's in 2007 but dropped it after a judge blocked its enforcement in response to a lawsuit by the plastic bag industry.”
    KC's View:
    At issue here, in essence, is the nature of scientific and/or environmental accuracy. Environmental activists say that disposable plastic bags contribute to considerable ocean pollution, while the plastic bag industry maintains that increased use of paper bags comes with its own environmental implications.

    Seems to me that evaluating environmental implications ought to be a basic requirement before passing environmental regulations...but we all know that this kind of due diligence isn’t always in the cards for some governmental institutions. Though from my point of view, the whole thing gets solved if people would just bring their own canvas bags. I’m not nuts about legislation that requires reusable bags, but one would hope that people could be nudged in this direction.

    Published on: April 26, 2010

    New York’s Price Chopper Supermarkets announced the following promotions:

    • Jerel T. Golub has been promoted to President and Chief Operating Officer (COO), reporting to Neil Golub. Jerry has been Executive Vice President and COO since February 2008, and prior to that, he served as Senior Vice President of Sales and Merchandising and Vice President of Marketing, as well as a number of other positions in both Merchandising and Finance during his twenty-seven year career.

    • Joe Kelley has been promoted to Executive Vice President, reporting to Jerry Golub. He has served as Vice President, Sales and Merchandising since February 2008 and has held many other positions in the Stores, Operations and Merchandising including Vice President, Merchandising and Vice President, Perishables.

    • David Golub, has been promoted to Vice President of Administration, reporting to Jerry Golub. David has served as Vice President, Store Operations since May 2006. Prior to that, he served as a Regional Vice President, Zone Director, Private Label Category Manager, Produce/GM Specialist and Store Manager.

    • Russell Zwanka has been promoted to Vice President, Sales, Merchandising and Marketing, reporting to Joe Kelley. Zwanka most recently served as Vice President of Merchandising. Before joining Price Chopper, he was Executive Vice President, Procurement and Marketing at the Northwest Company.

    • Mike Davidson has been promoted to Vice President, Operations, reporting to Joe Kelley. Mike most recently served as Regional Vice President, Operations. Before joining Price Chopper, he was Vice President, Operations with Marsh Supermarkets and Vice President, Operations and Merchandising with Tops Markets.

    • Mark Chandler has been promoted to Vice President, Supply Chain, reporting to Jerry Golub. He will assume responsibility for the Distribution/Transportation area. Mark joined Price Chopper in 2005. Prior to that, he was the CPG Industry Director for Kurt Salmon Associates.

    • Bob Doyle has been promoted to Vice President, Distribution, reporting to Mark Chandler. Bob joined the company in 1976 and has held various positions in Store Operations, Human Resources, Transportation and most recently served as Vice President, Warehousing.

    As part of the company’ succession plan, Neil Golub will continue to serve as chairman and CEO.
    KC's View:
    Congrats to all.

    Published on: April 26, 2010

    Crain’s New York Business reports that Walmart is looking at a Brooklyn location - the Gateway II shopping center neat Jamaica Bay - as a possible location for its first store within the city limits.

    "We know that New Yorkers want to shop and work at Walmart, and as a result, we continue to evaluate potential opportunities here," Walmart exec Steven Restivo told Crain's. "New Yorkers want quality jobs and affordable groceries, and it remains our goal to be part of the solution."

    The company has been turned back in previous efforts to open stores in Staten Island and Queens, and former CEO Lee Scott famously once said that the New York City wasn’t “worth the effort.”

    • The New York Times reports that as Walmart pushes for permission to open a second store in Chicago, it is expanding the ranks of its lobbying team there, hiring a former aide to Mayor Richard Daley as well as the brother of Cook County Sheriff Thomas J. Dart.
    KC's View:

    Published on: April 26, 2010

    The Winnipeg Free Press reports that “Walmart has yet to crash the Winnipeg market with its grocery-store concept but shoppers around town are already feeling its impact.

    “Last week, Canada Safeway stores cut their prices on thousands of items across all departments -- dubbed their ‘everyday low prices program’ -- a move designed to win over price-conscious consumers as well as protect current market share.”

    According to the story, Canada Safeway spokesman John Graham tells the paper that “Canada Safeway's strategy has incorporated Walmart and other competitors as well as the economic downturn. The amount of discounting varies across products but the move is permanent.”
    KC's View:
    This ought to be SOP for every retailer. Even if you are not competing with Walmart, pretend there is one down the street.

    Published on: April 26, 2010

    Advertising Age reports that after “more than a year of consumer research and agency brainstorming,” McDonald’s plans to stay with its “I’m Lovin’ It” campaign, albeit an updated version that, according to CMO Mary Dillon, is more authentic, more saturated in consumer insights and emotion, and within "a framework that gives us a consistent point of view about our brand."’

    The story notes that “‘I'm Lovin' It’ is now the company's most successful and longest-running campaign, surpassing the iconic ‘You deserve a break today,’ and ‘Food, Folks and Fun,’ both in longevity and sales gains.”
    KC's View:
    One of the things that Dillon says is that McDonald’s is “making sure that we build both brand equity and drive sales with every piece of advertising."

    That’s extremely important - building both brand equity and sales. The question that I would pose to many food retailers is whether they put the same dual emphasis on their marketing efforts.

    Published on: April 26, 2010

    • The Business Courier of Cincinnati reports that “a plea by Cincinnati Mayor Mark Mallory and other City Council members to keep the Kroger grocery store in Roselawn open for a few more months fell on deaf ears,” as the retailer has announced that the store will close on April 25 because it is unprofitable.

    The city had maintained that the closure will negatively affect low-income residents.

    • The Great Atlantic & Pacific Tea Co. (A&P announced that it is lowering prices on more than 400 generic prescription drugs to $3.99 for up to a 30-day supply that are sold by its A&P, SuperFresh and Waldbaum's stores.

    • The Los Angeles Times reports that CKE Restaurants Inc., parent company to the Carl’s Jr. hamburger chain, will be acquired by an affiliate of the private equity group Apollo Management for about $694 million.

    Bloomberg reports that “Honest Tea, partly owned by Coca- Cola Co., may increase sales by at least 70 percent within a year as it becomes available throughout the U.S., said Seth Goldman, the tea maker’s co-founder and president ... Honest Tea sold about 5 million cases last year, for revenue of $47 million.”

    “You’ve got a ship leaving the port, now you’ve got a turbo-charged engine,” Goldman said of the national distribution.

    • The Hollywood Reporter says that singer/songwriter Carly Simon has filed an amended complaint against Starbucks, in essence appealing last week’s judge’s decision to throw out her complaint.

    Simon had sued the coffee company for unspecified damages related to the failure of her last CD, “This Kind Of Love,” in 2008. The album was produced by Starbucks’ Hear Music division, which had turned albums by artists such as Ray Charles into hits. However, shortly after Simon signed her deal with Hear Music, the company reduced its involvement in the music business as it dealt with the erosion of its core business because of economic challenges created by the recession; Simon’s suit charged that not only did the company not pay her an agreed-upon advance, but Starbucks didn’t even initially stock the CD at all of its stores and when it finally did, it was at a discount price that Simon says stigmatized the album.
    KC's View:

    Published on: April 26, 2010

    On Friday, we took note of an Arizona Republic report that six Pro’s Ranch Market stores in the Phoenix area had to let go some 300 employees this week after they were found by the US Immigration and Customs Enforcement agency to be working illegally in the US. According to the story, the employees are able to appeal the decision but cannot work during the process. A Pro’s Ranch Market spokesperson said that the former employees apparently used forged documents to get their jobs, and that the company had complied with all laws and requirements. However, the Republic notes that the retailer could face fines in the case.

    My comment:

    Tough times for Pro’s Ranch Markets, which now has to replace 300 employees and deal with the perception that it was giving American jobs to illegal workers in a state where immigration is, to say the least, a hot button issue.

    It is important, of course, that the federal government enforces immigration laws. I am more troubled by the state legislation now on the Arizona governor’s desk that would require local law enforcement officials to determine whether people are legal or illegal based on suspicions; I’ve seen people on TV saying that cops are perfectly capable of deciding whether to ask for documentation based on how a person looks, whether it is how they comb their hair, or what kinds of shoes they are wearing. (Really?)

    This strikes me as a disaster waiting to happen. It won’t be long before the wrong person gets arrested, and a lawsuit gets filed against the police, and issues of racism and abuse bring a simmering issue to a full boil. And it won’t be pretty.

    One MNB user responded:

    I commend Pro’s for making the very tough decision to release 300 undocumented workers. Not trying to hide the issue but bringing it out front and dealing with it according to the law is a demonstration of their integrity. The fact that they tried to help those workers with immigration information and a gift card demonstrates just how much they care about their employees regardless of their immigration status.

    Regarding the pending legislation regarding illegal aliens in Arizona, the law does not “require” but “allows” police to ask for proof of citizenship. Certainly this discretion has the potential to be abused and that will have to be managed carefully. The other side of the coin is represented here in California where police are not even allowed to ask the question.

    You are correct that the primary responsibility for this issue is the federal government’s. Until we effectively enforce the federal laws, we will have states and municipalities attempting to interpret for themselves how to best handle the situation.

    From another MNB user:

    Then it is time for the Federal Government to step up to the plate and enforce our laws. If the federal government were doing there job the states would not have to. It is just shows the frustration that the states and its legal citizens are having with our government. Filling the 300 jobs that are now open with unemployed legal members of our society will help everyone.

    The bottom line is that it is time to get the problem fixed.

    Still another MNB user offered:

    Kevin,  I've run a Military Commissary, been a retail operator and manager at all levels and my last stint was a Police Officer (retired but still auxiliary).  I have dealt with the illegal immigrant worker both as a consumer and as a police officer.  Most are hard working and just trying to support their families back home.  About 1/3 or so are here to rob the others and are deeply involved in gangs, drugs and other crimes.  We (the local police) have had our hands tied by the Federal Government because all the of the last three Presidents wanted the illegals here and Congress followed the program. 

    Three years ago, when the economy was booming we couldn't afford to deport 1/2 of them.  There wouldn't be enough "legals" to take all the jobs, but now we have a different story.  High unemployment and we still couldn't fill half  the jobs as many "legals" wouldn't do them.  Better to collect than work "those"  jobs.   The present administration and majority in Congress still won't act to remove them and want eventually to offer amnesty and bring them into the fold.  What ever happened to our legal process of immigration?  We were a nation of Laws.  No so anymore as long as we allow the illegal immigrants to remain and allow about 1/3 to leech off the rest of us.  So my hats off to Arizona and any other state that enforces the law.  Remember that they are killing Americans who live along the border and get in there way when they run the drugs and the workers across the border.  Remember almost anyone can enter our country without being noticed.  It would be nice to be able to move freely around the world but we do have people who do not like our country...

    And, from yet another MNB user:

    If the federal government would have enforced the illegal immigration laws from the start these issues would not  have to be addressed by the State governments.  The feds have allowed illegal’s to come into the US unabated for years resulting in tremendous financial drains for the country, states and cities which have taken services away from the tax paying citizens.  Time to correct the mistakes and send these illegal’s back and put our own citizens to work in these jobs.  So you step on a few toes during the process, the end point is they entered our country illegally and no matter what they have done in this country are still illegal and have violated our laws.  Show me any other country in the world that would put up with what we have going on in this country with illegal’s.  Our judicial system still goes after old cases where laws have been violated so what is the difference between going after our own citizens or illegal’s?  They used forged documents which are hard to detect so Pro Ranch should not be prosecuted but commended for firing them.

    The illegal’s knew they were using forged/illegal documents since they had to pay someone for them so I don’t feel sorry for them and neither should anyone else.  Send them all back no matter what country they are originally from.  From what was on TV several years ago there may be up to 1 million illegal Irish in New York so they should go back as well. Illegals are illegals.

    Another MNB user wrote:

    I agree with you that the proposed Arizona law is a disaster waiting to happen.  It appears to me that the legislation results from frustration that they are alone in dealing with immigration.  And it appears they are right.  The “Feds” swoop in to identify 300 illegal immigrants.  Three hundred!  Where was this resource at hiring time?   I realize that I most likely don’t have all the facts here.  However, I do believe a lack of results and decisions as a country is causing the attempt at laws.

    Another MNB user wrote:

    Regarding crack down in Arizona on profiling of illegal immigrants, let’s next train cops to detect the following:

    • People that look Muslin that are likely terrorists.
    • White people that look like Timothy McVeigh that appear to be looking for a building to blow up.
    • Italians that look like they are probably Mafioso.
    • Irish people that don’t look Catholic.
    • Suspicious people that attend ethnic food fairs.
    • Independents that can’t choose a political party.
    • A Democrat in South Carolina.

    May I see your papers, please?

    I’m not sure that anyone would argue that the federal government has done a good job of dealing with immigration issues. But I’m also reasonable sure that the Arizona response does not make sense - just as any local response to a national issue is bound to create problems. With any luck, the federal government will be prompted by the Arizona bill to act on immigration reform...though the problem is that the responses by the two parties will no doubt be calibrated to appeal to their different political constituencies rather than craft a reasoned, reasonable solution.

    I remain troubled by the idea that individual police officers in Arizona are now empowered to stop people and ask for proof of citizenship. Last time I was in Arizona, I didn’t carry any with me. I know someone who has a swarthy complexion who is going there this week...and I’m betting that he won’t have proof of citizenship with him.

    “Do you have your papers?” is a question that they asked in a different time, in a different place. Today it is an effort in Arizona to identify Mexicans who have illegally crossed the border, but I am a firm believer in the slippery slope. I fear we’re on one now.
    KC's View: