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: July 12, 2010

    The answer, apparently, is Walmart.

    Reuters reports that “officials from BP Plc and Wal-Mart Stores met on Friday to study using the retail giant's technology to help clean up the Gulf oil spill, retired Coast Guard Admiral Thad Allen said.” According to the story, the two companies discussed how “Wal-Mart's know-how could be used to help track the private boats -- called vessels of opportunity -- involved in skimming and cleaning up oil in the Gulf of Mexico.

    Said Allen, "What we're trying to do is get a command and control system for all those skimming vessels that are out there. We're looking to see if the technology that Wal-Mart use to track their trailers and track their trucks might be used to help us track skimmers and the vessels of opportunity."
    KC's View:
    Go figure. I first saw this story and I immediately started checking to see whether it was a hoax.

    But it isn’t. Once again, Walmart may have things figured out that go way beyond how to get cheap goods into big boxes. If this works, the public relations value - not to mention the environmental significance - could be enormous.

    Incidentally, I’m not sure whether you saw it last night on CMT, but the free Jimmy Buffett concert on the beach at Gulf Shores, Alabama, was remarkable. There were a reported 35,000 people in attendance, and Buffett was never in better form, with a wonderful rendition of “When The Coast Is Clear” that resonated because of changed lyrics. Also, when he sang “Margaritaville,” the phrase, “all of those tourists covered with oil” had a slightly different ring to it, and he brought the crowd to a roar when he changed one line to say, “It’s all BP’s fault!”

    Let Walmart handle the logistics. Jimmy Buffett will be the morale officer, and nobody does it better.

    Published on: July 12, 2010

    There is a fascinating piece in DBusiness, the Detroit business journal, entitled “Polyester Palace,” looking at the “dysfunction” and “hubris” that led to Kmart’s downfall as a national retailing force.

    Among the stories included in the piece:

    • How, in the early 1980s, Kmart essentially gave Sam Walton the run of its Michigan headquarters, believing that his Arkansas-based company would never be a threat. What he learned there, the story suggests, help him turn Walmart into a retailing and logistical powerhouse.

    • How the company had no idea why certain products were being sold for specific prices...and when scanning technology pointed out some enormous holes in its pricing mechanisms, it took years for changes to be implemented.

    • And how the company completely dropped the ball on its supercenter strategy, despite the best efforts of people like Gene Hoffman, the former Supervalu and Kroger executive, and Dave Marsico, who ran the company’s supercenter division and ended up running into a buzz saw of interference.

    The piece is worth reading in its entirety, by clicking here.
    KC's View:
    One suggestion. Don’t read the piece just for the pleasure (or pain) of seeing how Kmart screwed up. When you read the piece, see if there are mistakes that Kmart made that are being replicated in your company.

    I’m willing to bet that there will be more than a few people who will experience some degree of recognition.

    Published on: July 12, 2010

    There are several stories in the press about how as the recession winds down - if, indeed, the recession is winding down - people’s buying habits have changed.

    USA Today writes that “Americans are dipping their toes back into the luxury pool - but with a mindset that's been smacked down and radically reshaped by the recession, the lure of new technologies and emerging lifestyle twists that are often as much personal as cultural.”

    The paper suggests that for many consumers, the new normal doesn’t mean quantity as much as quality, and that “the new luxury is about investing in a lifestyle experience that not only can help improve health but also escalate the experience of such mundane acts as baking a pizza at home.” Which is why some folks won’t buy expensive luxury cars or jewelry, but will spend money on an outdoor artisan pizza oven; they are looking for a deeper connection with their purchases that goes beyond status.

    The word “value” is seen as being important, both in terms of trying to get good prices on items but also in terms of buying products seen as having enduring benefit and importance. The biggest purveyor of such products - Apple.

    (Interestingly, some marketers selling items that have nothing to do with electronics or computers see Apple as a competitor, since people spending money on Apple products may not have money leftover to spend elsewhere.)

    • And the Washington Post had a piece about how Americans may be wired to spend, despite recent behavior shifts. Here’s how the Post framed the issue:

    “We'd all like to think the Great Recession has taught us a lesson about the dangers of overspending. New terms have entered the popular lexicon: ‘deleveraging’ (a fancy word for paying off debt) and "the new frugality." More than two-thirds of those interviewed for the Thrivent Financial/Kiplinger Survey of Family Finances said they had grown more frugal in the past year.

    “Americans seem to have become disciples of thrift, but we must ask whether the conversion will stick. The gut says no.

    “Perhaps we'll be more financially responsible and cautious about debt. A recent TransUnion study showed that the average debt per credit card holder was $5,165, down from $5,776 a year ago (though a chunk of that probably represents bad debts charged off by card issuers). Also down: late payments and serious delinquencies on credit cards. The savings rate, once flirting with zero, recently inched up to 3 to 4 percent.

    “This new frugality probably reflects a desire to bring finances back to an even keel rather than a sea change in behavior.

    “In their heart of hearts, Americans seem born to spend. Even after a severe recession and, thus far, a fragile recovery, spending picked up in recent months. It's as if consumers are looking for a reason to hit the mall ... And you cannot ignore consumers' hate-love relationship with credit cards -- hate the fees and high interest rates but love the convenience. Credit standards may be tighter, but credit card solicitations are up.”
    KC's View:
    Expect a lot of stories like this in the coming months, as people try to figure out what the next consumer trend will look like.

    I still think the most telling barometer of how people feel about the economy can be seen in the lines and crowds you see almost all the time in Apple Stores.

    Published on: July 12, 2010

    Interesting piece in Marketing Daily the other day about the challenges of marketing to Muslims, who, while they represent a $200 million market, often are lumped into the category of “undesirable” because of the Islamic extremists who are hostile to western lifestyles.

    While some companies - such as Best Buy - have reached out to the Muslim community by mentioning Muslim holidays in their ads, and even by using Muslim-appearing men and women in commercials, Lisa Mabe of Hewar Social Communications, tells Marketing Daily that “marketing to such a diverse group can be tricky ... While many are recent immigrants and of Middle Eastern descent, others are natives of cities like Washington, D.C.; Dearborn, Mich.; Houston; Los Angeles; Columbus, Ohio; and Boston; many are African-Americans. Some are religious and traditional, others are secular.

    “And a Muslim's decision-making process is often different. Research shows that Muslims are less influenced by price and value when compared to other American consumer groups, and are also keener on brand names. Their shopping behavior is more gender specific; over one-third of Muslim men say their wives buy their clothes, compared with just 18% of the general population.”
    KC's View:
    The problem is that too many think that Muslims and Islamic extremists are the same thing. Which is, of course, nonsense.

    Published on: July 12, 2010

    Challenger, Gray & Christmas, the outplacement firm, is out with a new study saying that June 2010 was the fifth month in a row during which more than 100 CEOs in the US either stepped down or lost their jobs.

    The good news - at least if you are a CEO - is that June was not as bad for the nation’s CEOs as May; 107 CEOs departed their jobs in June, as opposed to 125 in May. The bad news is that the pace of CEO turnover is up 11 percent from a year ago. Through the first six month of the year, a total of 673 CEO changes were announced, compared to 607 during the same period last year.

    According to the report, “Through the first half of 2010, resignation has been the most commonly reason for departure, cited by 201 outgoing CEOs. That is up from 152 at this point last year. Another 112 CEOs have stepped down, which typically indicates that the CEO remains with the company in some capacity; usually as a director or chairman of the board. The second most common reason for departure was retirement, which was cited by 190 exiting CEOs in the first six months of the year, compared to 108 retirements in the first half of 2009.”
    KC's View:
    I heard a guy recently say in a speech at the Consumer Goods Forum (CGF) Summit that the current lifespan for a North American CEO is 15 months, in part because they are forced to make short-term tactical decisions that are focused on the balance sheet, not posterity. That sounded low to me...but maybe not, based on this study.

    Nothing sustainable about an environment that compels CEOs to make short-term tactic decisions.

    Published on: July 12, 2010

    This is not the kind of story that MNB normally takes note of, but since it refers to a company long viewed in these space with some skepticism, we’re going to make an exception...

    The Wall Street Journal reports that “Standard & Poor's Ratings Services downgraded its junk ratings on Great Atlantic & Pacific Tea Co. Inc. to highly speculative territory, citing the supermarket chain's refinancing risk.

    “S&P lowered its rating one notch to CCC+, seven steps below investment grade. The rating outlook is developing.


    “The rating agency said it is worried the highly leveraged company's liquidity may not be enough in the next year if its operating performance does not improve. As of Feb. 27, A&P had about $3.5 billion of adjusted debt.”
    KC's View:
    Sales are down. Losses are up. The stock price is down 62 percent this year.

    You have to wonder when the dam is going to break, and when the people trying to hold back the flood waters of disaster at A&P won’t be able to do so anymore. You have to wonder when the company is going to get sold, though who would buy it for anything other than a fire sale price at this point?

    Something’s gotta give. Because at this point, it is like a dead company walking.

    Published on: July 12, 2010

    Struggling retailer Blockbuster has hired a chief restructuring officer to help it avoid bankruptcy.

    According to Reuters, Jeffery Stegenga, of the turnaround firm Alvarez & Marsal, has been brought on board to help both with its current precarious financial situation as well as to aid with long term strategy and growth.

    Meanwhile, the Wall Street Journal reports that Blockbuster CEO James Keyes has gotten a new contract that, even though the company was so low on cash that it recently skipped a debt payment, will maintain his $750,000 annual salary and pay him a bigger bonus next year - $650,000 - than this year’s $400,000 bonus, no matter what happens to the company. Depending on whether he meets certain performance goals, Keyes could get a bonus of more than $2 million.
    KC's View:
    My first reaction to this story was that this is nice work if you can get it. I’d be willing to drive a company into the ground for half that much.

    My second reaction was that it could be unusual for companies to be giving raises to CEOs while at the same time hiring a chief restructuring officer.

    It is possible, I suppose, that Keyes deserves the money. Maybe the company would be in much worse shape without him leadership, and maybe he’s actually performed miracles during his tenure. I’ve known a few miracle workers in my day, and they’re worth every penny they get.

    But Blockbuster is a public company. Hard to imagine that shareholders will feel too good about this turn of events. But ultimately the more important question is not whether Keyes and the board are out of touch with the shareholders, but whether Blockbuster is out of touch with current entertainment market realities.

    Published on: July 12, 2010

    USA Today reports that Wendy’s has begun marketing a new line of salads and new breakfast items that it describes as having “real ingredients,” as the fast feeder looks to appeal to people it thinks are “foodies.”
    KC's View:
    As opposed to the old stuff, which isn’t made up of real ingredients. Fake food - that seems to be as good a description of most fast food as any.

    BTW...I don’t think that it is just “foodies” who like real food. I just think it is anyone who thinks that lowest common denominator products are just that...and therefore worth avoiding whenever possible.

    Published on: July 12, 2010

    • The New York Daily News reports on how Sen. Charles Schumer (D-New York) is calling for a Federal Trade Commission (FTC) investigation into the marketing practices used by the manufacturers of products called Jooce and Four Loco - described as “caffeinated fruit-flavored malt liquor drinks that sell for just $2” and that “look like innocent cans of grape soda and orange punch (but) come with a jittery, boozy kick.”

    "The manufacturers are deliberately trying to get young people to drink," Schumer said yesterday.

    According to the story, “Schumer also asked the Food and Drug Administration to speed up its November 2009 probe that questioned the safety of mixing the malt liquor, which has three times the alcohol as beer, with caffeine levels matching a cup of coffee.”

    • Consumers Union, the nonprofit publisher of Consumer Reports, released new poll data showing that 80 percent of Americans want Congress to immediately give the U.S. Food and Drug Administration (FDA) the power to recall food when it poses a danger to health and safety. FDA food safety reform legislation that would give FDA that power, as well as require it to inspect all high-risk food processors at least once a year, passed the House of Representatives a year ago but still awaits Senate action.
    KC's View:

    Published on: July 12, 2010

    • Haggen Inc. announced that Harrison Lewis, the company’s VP of information technology, has been promoted to be its chief information officer.
    KC's View:

    Published on: July 12, 2010

    MNB had a story last week about the decision by Red Lobster restaurants to begin farm raising its own lobsters. I drew a comparison to an old Fiesta store in Texas that used to grow its own produce in an in-store hydroponic garden, and suggested that this was the epitome of local.

    MNB user Rosemary Fifield disagreed:

    Farm-raised lobsters the epitome of local? Local does not mean "raised by the corporation." People want local because they see the value of maintaining rural landscapes, supporting the people who grow our food, knowing the people who grow our food, and influencing the people who grow our food. A bunch of lobsters raised in captivity in Florida is not local. It's just another example of corporate greed trying to control or cut out the grower/farmer/fisherman to increase its own profits. Aquaculture has threatened wild salmon populations, polluted the oceans, destroyed mangrove forests, spread disease and parasites, and produced food and oceans contaminated with antibiotics and filth. Just another reason to avoid Red Lobster and Darden Restaurants. What other restaurants do they own?

    But MNB user Richard Evans had a different perspective:

    We've been aqua farming the lobster's tiny cousin, the crawfish, down here in Louisiana  for many years with great success.

    I'm sure many of the techniques for doing so would cross over.

    For instance, they are fed with a protein meal made from rendered waste products of processing such as shells and gutted remains. There is even specialized harvesting equipment which has been developed for the business.

    It has become an industry with world wide reach. .

    They even grow them in rice fields which are flooded much of the time thus providing a duel use for the land.

    This sounds like an excellent move on the part of Darden.


    Am I unreasonable to think that there ought to be room for both kinds of lobsters, both farmed and wild? As long as the things are labeled accurately, it seems to me that they ought to be able to co-exist. But maybe that’s too much to ask for.

    BTW...the story noted that the lobsters being raised would be clawless European lobsters, which I’d never heard of. Thanks to all the MNB users who sent me pictures of the clawless variety, saying that they are meaty and delicious. Consider me a little better educated today than yesterday.




    We had a lot of discussion last week about an SKU rationalization effort that Supervalu reportedly is imposing on its Jewel stores in Chicago, which comes under the name “SHE - Simplify Her Experience.” The goal is to increase profits by eliminating some brands and increasing private label items.

    One MNB user wrote:

    RE:  Simplify Her Experience - I don't think they used good judgement on the name of their program.  Seems a bit condescending to offer to help the helpless Little Lady wade through that difficult shopping thicket.  Overtones are that "she" can't think on her own. 

    What neanderthal thought up that one?

    And what reaction would a such a campaign get if it were advertised to the public? 

    Anger.





    On another subject, from MNB user Chris Hoyt:

    Thanks for the heads-up on the L.A.Times' article about the possibility of the USDA setting standards for Olive Oil purity (and, consequently, marketing claims!). Importers abuse this all the time but because they are so small, it's not worth going after any one individual company -- and they know it. It's a widespread abuse & ought to be stopped.

    Separately, you are so right about California Olive Oil -- they win on all important aspects -- purity, taste & freshness.

    We have been reading MNB since it started (I believe in 2001 or thereabouts) and look forward to it every morning -- great work! Again, thanks!


    My pleasure.

    And another MNB user wrote:

    At last!  That anything can legally be labeled one thing and be another is just outrageous.  This is way overdue.  Next should be the mango papaya juices that are predominantly  grape/apple  with a splash of the title juice.  Very misleading and a classic example of our industry's inability to police itself and do the "voluntary" appropriate thing.  Gee, why do you suppose we have labels?  Oh, yeah,  it's the pretty pictures.




    More reaction to the signing of legislation by California Gov. Arnold Schwarzenegger requiring that eggs sold in California come from hens that are not crammed into cages. The law requires all eggs sold in the state as of Jan. 1, 2015, to come from hens able to stand up, fully extend their limbs, lie down and fully extend their wings without touching each other or the sides of cages. The legislation was supported by the Humane Society of the United States.

    One MNB user wrote:

    In reading some of your readers' negative responses to California's new legislation that seeks to improve the living conditions of egg-laying hens, I was reminded of very similar defenses of sweatshops: "it's anti-business, will raise the costs of products and drive production elsewhere."  Are these same readers supportive of sweatshops (which certainly make it easier to turn a profit), or do they just think that because chickens are animals, we should be allowed to do anything we want to them?

    But another MNB user wrote:

    It seems remarkable that the CA legislature, while presiding over a “failed state” tottering on the edge of bankruptcy, spends any time at all that is not completely focused on correcting the fiscal and employment problems---but instead, worries about an issue that is surely not in the top 1000 of importance.  Illinois doing the same, broke, way underfunded pensions is raising state employee’s pay and has increased the cost of speeding tickets (30 mph over limit) all the way up to $1,500 and up to 5 years in jail.




    Got a number of differing emails about our reference to a New York Times story about Walmart spending more than a million dollars to fight the imposition of a $7,000 fine by the federal Occupational Safety and Health Administration (OSHA) that was related to the trampling death of a part-time employee on the day after Thanksgiving in 2008. According to the Times, Walmart appears to be arguing “that the government is improperly trying to define ‘crowd trampling’ as an occupational hazard that retailers must take action to prevent.”

    MNB user David Bernstein wrote:

    You go to a bar, you drink too much, you get behind the wheel and someone dies. Guess what – the law says the bar is at fault for serving you too much.  I applaud OSHA’s fines, and cannot believe Walmart essentially does not want to be on the hook for maintaining a safe shopping environment.  Is that really the message you want to send your customers?

    I mean, their prices might be “to die for,” but this is taking it too far (sorry, I couldn’t help it).


    But another MNB user wrote:

    Sounds to me like a culling of the herd.  Those who put themselves at the front of the line just to buy something on sale are missing something in the intelligence department.  Stupid is as stupid does!

    This last email strikes me as a little cold. After all, it wasn’t a shopper who died - it was a temporary employee.

    The people who trampled that poor guy have moral culpability, and I wouldn’t have minded if they’d been charged with assault. But “culling of the herd”? Give me a break.

    Another MNB user wrote:

    Couldn't agree with the big 'W' more on this one.  I know it's naïve to think federal agencies are here to enforce only laws already on the books, but this one is overstepping the bounds of reasonability.  Controlling how customers will react to certain promotions is way beyond the reach of what can be expected of any retailer.  How would they put together a law (assuming they need one) to cover this?  Too many variables and probably all costly to both implement and enforce.

    Let's not lose sight of the bigger issue.  What were these customers thinking?  Was it important enough to spoil their kids or themselves for Christmas to get caught up in this kind of destructive behavior?  As long as there is this type of human behavior, bars on the doors before 5 am won't be enough.

    I for one applaud Walmart for fighting that OSHA violation charge.  All too often businesses cave in, not because they did anything wrong, but because it is the most cost efficient way of bringing the matter to closure.    Often I tell clients that once a federal agency makes up their mind, they refuse to be swayed by the facts.  The report that Walmart's stand has "mystified and even angered some federal officials" also points out a real risk that going forward Walmart may face retaliation in the form of stricter enforcement of real OSHA requirements.  The government may begin to exercise their discretion in such areas in a punitive manner when it comes to Walmart.  It is unfortunate that our government works that way, but it is just human nature.





    On the subject of retailers who have decided to bypass using FSI’s in newspapers and switching to direct mail, one MNB user wrote:

    I just HAD to write in in response to the issue of grocery stores sending ad circulars in the mail. Where I live local residents receive just such a bundle of ads each week and I absolutely HATE it! I loathe, despise, can’t find words strong enough to describe how much I dislike this mailing.

    Each and every Sunday I look forward to reading the sales circulars that come with the newspaper so it’s not that I object to the circulars themselves. I also receive several (my husband would say too many) catalogs in the mail which I enjoy leafing through so it’s not an objection to “junk” mail either.

    What the issue is, precisely, is that even though these circulars are no longer in the newspaper they are still printed on that same flimsy paper at the same newspaper friendly size making them oversize for my mailbox. They end up getting folded by the mailman and sometimes stuffed in there all balled up like they were ready for a trash can free throw. This ultimately results in the bundle getting torn when being removed from the mailbox by myself and all my neighbors. This ad bundle takes up a lot of mailbox room too so if you have several items of actual mail in the box you have to rip it to get everything out. It looks like someone threw a party by the mail station on the days they are delivered from all the “confetti” on the ground left by me and everyone else!

    Also, I know I’m not the only one who hates these because our development installed a garbage can by the mail station and on the days this ad bundle arrives it is filled to the brim with them so no one has to even take them into the house.


    But MNB user J. Schindler wrote:

    For at least the past 40 years, here in Columbus, OH the local weekly grocery ads have been delivered in "The Bag" dropped on our doorstep every weekend by "independent contractors".  That bag has the circulars for two of the three major grocery chains - Kroger and Meijer, plus occasional other retailers.   Because Giant Eagle has a different ad schedule (Thursday to Wednesday) they have always used a "marriage mail" company that uses the U.S. Post office to deliver their circular.  As postal rates rise I would not be surprised to see the "marriage mail" company shift to delivery using such independent contractors.




    We had a great email from MNB user Jim Swoboda last week that compared CPG attitudes toward product innovation to those of Apple. Which led MNB user Jim Donegan to write:

    Mr. Swoboda’s analogy of Apple vs. CPG companies excludes the concept of slotting fees on a national basis that retailers will charge companies to “switch out” their items annually.  If you ran a P&L for a CPG company you wouldn’t do that.  Apple doesn’t pay slotting to the marketplace.

    In some ways, you make his point. Slotting allowances are a corruptive influence on the system in a wide variety of ways.




    I noted last week that the post card is becoming an obsolete form of communication, replaced by photos sent via email or posted on Facebook or other social media sites. Which led MNB user Brian Fox to write:

    The demise of the post card? There’s nothing like sending post cards to all your friends with the everlasting “Having a wunnerful time! Wish u were here!” message from every exotic locale and destination we get to visit while they sit at home doin nuttin! Oh yeah, unlike Facebook, et al, post cards get read and stuck on the fridge to bring a smile again and again!

    Oh yeah… just wait ‘til your grandkids get ‘em from Grampa from all over the world and get to take them to show and tell! Post cards are love in their eyes! Not as good as Skype for staying in touch but our 5 & 7 year old granddaughters have an album of them and can tell you imaginative tales about the jungles in Cuba, the Puerto Vallarta seahorse, Alaskan Kodiak bear encounters, walking the Golden Gate bridge, and on and on.

    One last point….. they’re usually the only “Good news piece” in my mailbox as all the rest seem to be bills from the dinosaurs who do not yet offer an e-bill or online option.


    All good and legitimate reasons for the postcard to survive. But while grandparents may enjoy sending them, I suspect their grandchildren will opt for other communications methods. (You probably also think that your grandkids like those Super 8 movies you keep showing them...)

    KC's View:

    Published on: July 12, 2010

    • Spain defeated The Netherlands 1-0 in overtime yesterday to win the 2010 World Cup final. Neither team had ever won the World Cup before, and Spain became the first team to do after having lost the first game of the tournament.

    • This may not mean a lot to some folks, but for the millions of people who have attended baseball games at Yankee Stadium over the past half-century, it is worth noting that Bob Sheppard, who served as the public address announced at the Stadium for 57 years, died yesterday at age 99.

    Sheppard was known for his distinctive baritone and perfect elocution - and for those of us who grew up watching Yankee games, his voice was part of the soundtrack of our lives.
    KC's View: