retail news in context, analysis with attitude

Published on: September 16, 2010

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Hi, I’m Kevin Coupe, and this is MNB Radio, available on iTunes and brought to you this week by Webstop, experts in the art of retail website design.

There is an excellent column in the current Forbes by Inder Sidhu, senior vice president of strategy and planning at Cisco, about how Amazon.com “stands poised to take advantage of key transitions in book publishing, business computing, content distribution and more. It's an enviable position to which only Apple, Google and a handful of other companies can even aspire.”

Sidhu writes that this is an unexpected position for Amazon to be in, considering that just 15 years ago, the company seemed to be under attack from all sides, with everyone from Walmart to Barnes & Noble trying to knock it off its retailing perch, and analysts almost daily saying that the company wouldn’t, couldn’t survive.

Well, I wish I’d bought stock back then. Hell, I wish I’d bought stock a year ago since, as Sidhu writes, its shares are up more than 50 percent this year, outperforming both Apple and Google.

But here is the key, as framed by Sidhu:

“In market after market, Amazon has proven that it can disrupt established players with technology innovation and then solidify its gains with sustained improvements. And with the help of business partners, it can amplify those gains.”

In so many ways, Amazon has become a winner because it has consistently and persistently challenged conventional wisdom, and succeeded where most people thought it would fail.

We’ve spoken about this before on MNB, but it is always worth repeating: in a hotly competitive marketplace, the ability to disrupt the opposition with innovative products and services is a lot more effective than “me, too” offerings that do not inspire. There are a lot of things - from effective nutritional labeling to cooking schools to a robust e-commerce business - that you may not need to have, because the store across the street or down the block doesn’t have them. But that’s a lousy, and very low, place to put the bar.

It may not be reasonable to expect a store to “wow” the consumer in every aisle and with every endcap. It may not be rational to expect manufacturers to knock the consumer’s socks off with every product offering. But that’s gotta be the goal.

It’s what separates leaders from managers. It’s what separates transformative shopping experiences from conventional ones.

There is a slogan they use for New York Lottery: “You can’t win if you don’t play.”

Well, these days in retailing, “playing” is a deadly serious business. if you are not a player - and by that, I mean someone who prizes innovative concepts, the non-traditional solution, the outside-the-box thinker - then you have no reasonable expectation to survive.

None.

For MNB Radio, I’m Kevin Coupe.

Published on: September 16, 2010

The following is not just a reflection of technological advances, but generational shifts to which all marketers must pay close attention.

The Wall Street Journal reports that “Rick Richter, the former head of kids' books at CBS Corp.'s Simon & Schuster, is launching a new media house that specializes in interactive digital children's books, including classics such as ‘The Velveteen Rabbit.’ His company, Ruckus Media Group LLC, will make its debut with a line of children's books delivered via software applications that make use of color, video and touch screen capabilities.

“The titles, priced at $3.99 each, will initially be sold via Apple Inc.'s App Store but will be available later this year for a variety of tablet devices.”

Sure, this underlines the point that e-books have become a pervasive influence on the publishing business. But it also puts the spotlight on a different reality - how comfortable little kids have become with technologies that seemed until a few years ago like they belonged on Star Trek, but now have become commonplace.

Think about that. You’ve got a five-year-old who can pick up an iPad and know intuitively how it works and probably how to make it do things that some of us did not know were possible. Do you really think that they will be satisfied with their parents’ retailing experiences?

Hell, they’re not even going to be satisfied with the web sites that their parents find to be hard to navigate.

Here’s another indication of this new reality.

The Los Angeles Times reports on a Pew Internet Project study saying that close to 25 percent of Americans are now using cellphone applications, and that some 75 percent are using functions such as texting and picture taking on a regular basis.

And two more facts:

• Twenty percent of people under the age of 30 have downloaded a cellphone application in the past week.

• Apple's App Store has 250,000 apps, and Google's Android platform has 80,000. And the numbers are growing almost daily.

The feeling here is that retailers need to start integrating this kind of advanced thinking into their marketing and merchandising strategies now. It doesn’t mean that stores have to change overnight, but it does mean that retailers out to have people on staff trying to imagine what the future looks like and how stores will change to meet it.

And that’s my Thursday Eye-Opener.

- Kevin Coupe

Published on: September 16, 2010

The Houston Chronicle reports that a newly renovated Sam’s Club in Shenandoah, Texas, reflects a new approach by the membership club chain - selling more prepared meals, imported cheeses, Angus beef, and other foods designed to make the store more relevant to shoppers.

The store also features “wider aisles and lower shelves to offer a more expansive view of the store,” the story says, and expanded diaper and baby food sections.

The renovation is part of a broader effort by Walmart to remodel 150 of the company’s 600 Sam’s Club units, or about 25 percent of the fleet, to make them more competitive with Costco.

Published on: September 16, 2010

Reuters has a piece about Amazon.com’s Subscribe-and-Save service, which offers steep discounts and free shipping on bulk items that customers put on an automatic replenishment schedule - putting the company in a position to effectively compete with the likes of Costco and Sam’s Club “in a bid to tap into a new wave of repeat customers.”

According to the story: “When Amazon launched its Subscribe & Save program in 2007, 2,000 items were available for purchase in the service, where users get a 15 percent discount, free two-day shipping and an extra discount on their first order. Three years later it offers more than 25,000 items -- about 30 percent of the products on its website. Although Amazon says the service appeals to everyone, and is especially popular with moms, analysts see the young urban customer as more viable long-term. As spending from the baby boomer generation begins to wane, a new wave of consumers brought up on the Internet will choose how to best stock up on bulk goods for their families.”

Published on: September 16, 2010

The Pittsburgh Post Gazette reports that Giant Eagle is using a new advertising campaign, featuring both real staff and customers, and a new slogan as part of its effort to “use every tool in its cart to fend off retailers with discount niches or specialties such as natural foods.”

The new slogan is, "That's my Giant Eagle Advantage."

It replaces "Make every day taste better,” which itself replaced the longtime slogan, "It takes a giant to make life simple.”

Published on: September 16, 2010

Crain’s Chicago Business reports that the Physicians Committee for Responsible Medicine is launching a city-by-city campaign looking for legislators to impose a ban on all new fast food restaurants. The group started in Washington, DC, and is moving next to Chicago, using television commercials to paint fast feeders - especially McDonald’s - as merchants of death.

According to the story, “The spot shows a dead man laying on a gurney with a half-eaten burger in one hand and a grieving woman at his side. As the camera pans around and stops at the man's feet, the Golden Arches logo appears with the line, ‘I was lovin' it,’ in an twist on the chain's tagline. A voiceover states, ‘high cholesterol, high blood pressure, heart attacks. Tonight, make it vegetarian’.”

Also on the target map for the campaign: Miami, Memphis, Houston, Detroit and Los Angeles.

It was Los Angeles, as it happens, where city officials voted for a temporary ban on the opening of fast food restaurants in the poor South LA neighborhood, where there was an outsized obesity rate. While there has been no concrete evidence of a huge impact on

Published on: September 16, 2010

In the UK, the Daily Mail profiles Philip Clarke, who has been running Tesco’s international business and soon will succeed Sir Terry Leahy as the company’s CEO.

“On paper, Clarke, who began stacking shelves at the supermarket chain when he was 14, certainly looks a dead ringer for Sir Terry,” the paper reports. “Both are Liverpudlian, both have worked their entire career at Tesco, both are in their 50s and they even live just yards apart.

“But Clarke cuts a very different figure during a briefing on the firm’s Asian plans at the weekend. In personality and approach, he’s poles apart from the redoubtable but guarded figure who has led the group since 1997.

“Where Leahy was instrumental in creating a pre-eminent position in British retailing, his affable and outgoing successor makes it plain that his reign will be judged by its success in turning Asia into a new homeland for Tesco.” Indeed, the choice of Clarke as Leahy’s successor underlines the importance of Asia to Tesco’s future.

In the piece, Clarke says that he has no doubt that Tesco’s China operations will become profitable during his tenure, and that he plans to spend at least a third of his time outside the UK, working to make Tesco’s standardized approach to back room operations synch up with the individualized needs of various global marketplaces.

Published on: September 16, 2010

• USA Today reports that Walmart’s new US CEO, Bill Simon, told an analyst conference this week that the company will be looking to expand selection and focus on everyday low prices, with less focus on promotions. And, he said, because Americans remain economically challenged because of the recession, Walmart expects that the focus during the upcoming holiday shopping season will be on practical gifts.

"So for all you adults, you should plan for socks and underwear,” Simon said.

Published on: September 16, 2010

Planet Retail is out with its first “Private Labelling in North America: Fertile Ground for Growth” report, saying that private label sales by the continent’s top 30 grocers - including Walmart, Kroger and Aldi - are set to increase 40 percent to $209 billion (US) by 2014, and account for 24.1 percent of total grocery sales.

The report goes on: “Dominating the top position in Planet Retail’s rankings is Walmart whose private label grocery business is larger than Kroger and Costco’s private label sales combined. While it’s no surprise that Walmart tends to dominate most categories, in grocery it has traditionally been the national brands that featured heavily on Walmart’s shelves ... A key player on the ranking is Aldi which, although placed 19th in terms of overall sales, holds the prestigious 3rd place in terms of private label sales. The retailer, which includes the Aldi and Trader Joe’s banners, places a much stronger emphasis on private label than its peers, leaving national brands to make up just 15% of sales. As a result of aggressive expansion plans, Planet Retail predicts that by 2014 Aldi will generate $15 billion in private label sales, approximately the size of H-E-B’s entire business today.”

In order, the top ten private label retailers are: Walmart, Kroger, Aldi, Costco, Safeway, Loblaw, Supervalu, Publix and Ahold.

“Looking to the future, the effects of SKU rationalisation and the emergence of new discount formats will continue to breed private label growth in North America,” says Natalie Berg, Planet Retail’s Grocery Research Director. “Increased competition from private labels will require genuine innovation from brand manufacturers.”

Published on: September 16, 2010

• The Los Angeles Times reports that “discount chain 99 Cents Only Stores Inc. has been fined $409,490 by the Environmental Protection Agency for selling illegal unregistered or mislabeled pesticides in three household products, the federal agency said Wednesday. The City of Commerce-based retailer continued to sell the items even after being notified of the violations, the agency said. The fine is the largest contested penalty ever handed down.”

• Bloomberg reports that “Wal-Mart Stores Inc., Target Corp. and Costco Wholesale Corp. must face a federal lawsuit accusing them of selling milk mislabeled as organic, a U.S. appeals court ruled. A three-judge panel of the St. Louis-based court today revived consumer litigation against those and other retailers and the Aurora Dairy Corp. in Boulder, Colorado, which produced the milk they sold under store-branded labels. The decision overrules a trial judge who dismissed the claims ... The consumers seek unspecified compensatory damages for having allegedly bought ‘organic’ milk that wasn’t authentically organic, together with statutory and punitive awards.”

• The Boston Globe this morning reports that “three egg producers in Maine that supply many New England grocery stores are under scrutiny by congressional investigators because of their ties to Austin “Jack’’ DeCoster, whose Iowa farm was at the center of the recent egg recall.

“The House Committee on Energy and Commerce has requested that DeCoster turn over inspection records and documents related to any allegations of egg contamination, or violations of health, safety, environmental, or animal cruelty laws at Dorothy Egg Farms, Mountain Hollow Farms, and Quality Egg of New England. Together, the three Maine farms provide about 100 million cartons of eggs a year to grocery stores throughout the region ... Many supermarket chains in the region have long assured nervous consumers that their eggs do not come from DeCoster farms, which have a history of labor and environmental violations. But by stocking eggs from Dorothy Egg, Mountain Hollow, and Quality Egg farms, the grocery stores have — wittingly or not — sold eggs produced by businesses with ties to the DeCoster empire.”

Published on: September 16, 2010

• Edwin Newman, the longtime NBC News correspondent who also wrote bestsellers about language, “Strictly Speaking” and “A Civil Tongue,” has passed away in Oxford, England. He was 91.

Published on: September 16, 2010

Got the following email from MNB user Paul Schlossberg about the future of vending, an area in which he is expert:

My own thinking about vending and onsite foodservice is that "Vending is at risk of being obsolete. It is an analog solution in a digital world." Any company in any business faces that same dilemma: How do we evolve to meet the changing needs of the markets and customers we serve? For these channels, we call it the Vending Store of the Future.

And, to show you that there are already game-changing innovations out there, we've seen vending stores without any vending machines. There are three systems we are aware of today. The concept driving this revolution is a self-service and self-checkout convenience store. It is an un-staffed store. The technologies are based on self-scanning checkout using either RFID tags or bar codes. This is a big idea. Less capital to invest to deploy the "store." The selection offered is much broader than what can be done with vending machines. The store is much easier and less expensive to operate and service (to re-stock and maintain). There are sophisticated security monitoring capabilities built in to the systems. Deployments are being done in colleges, hospitals and workplaces. This is, or can be, the company cafeteria of the future.

We have seen the future in vending and onsite foodservice. One solution will be new interactive vending machines. Another solution will be vending stores without any vending machines.

Other channels will have to find their own versions of the store of the future. The solutions must be relevant to shoppers served in those environments. That will be even more important when dealing with younger shoppers - Gen Y. They are not like their parents. What satisfied their parents might just turn off Gen Y. We use eight criteria to define what younger shoppers expect. How many of those specific issues are we delivering on target with what Gen Y wants?

It's too late to deny that the future means change. Not in vending. Not in any other retail channel. There will costs attached to these changes. Companies will deal with dramatic discomfort while making changes to their current solutions - the legacy stores and systems they're operating now.

On the same subject, MNB user Cleve Young wrote:

Reading about the geek fest vending machines got me to thinking about information display in general. This goes along with some presentations I saw at a recent food vendor exhibit. How long till we start to see in-store/in-aisle screens which a customer waves the label and a menagerie of product info comes up. This will include not just basic nutritional info, but also Country of Origin for ingredients (one of your favorites), manufacturer info, packaging specifics (promoting that neat biodegradable bag), recipes where the product can be used, available coupons, beer/wine pairings (another of your favorites), and so much more. We already have products which can be scanned with phone apps to give some info, but why limit that advantage to only those who have their smart phone handy and those little bitty screens? Seems like an tremendous opportunity for some savvy forward-thinking retailers willing to form informational bonds with their customers.

I agree. “Label size” is almost an obsolete concept.

MNB user Deborah J. Maestu wrote:

The bigger question regarding these next gen vending machines - you start using your ATM/Debit/Credit Card and all of a sudden the vending machines have a lot of access to your identity.  Can vending machines start storing information about your purchases?
Can same company machines start sharing information across vendor networks, and use this information to make suggestions to your regarding your purchases?

Can we start using the technology to work for us? Say, we're not supposed to eat chocolate, but those baked chips fit our current diet plan.  We could sign onto a vendor network and have certain purchases blocked?
 
Somehow this all leads back to Skynet.




We also got a lot of email regarding the MSNBC report that Starbucks has decided to back off its previous decision to eliminate the small, 12-ounce “tall” size from its drive-through menus, after an outcry from consumers objecting to the move. The coffee retailer had said that it made the move merely to simplify the drive-through menus and that the “tall” coffees were still available, but critics said that the retailer was trying to get people to spend more money and consume more coffee.

My comment:

What’s really amazing about this is that people got so outraged. I’ll actually buy the simplification argument, but isn’t it every retailer’s job to try to get people to spend more money? I read all the stories...and I even wrote a couple of them...but I can’t help wondering why people don’t have better things to do with their time.

MNB user Carla Baughman wrote:

I would disagree. My first thought when I read this story was that Starbucks was trying to push people to the higher-priced Grande and Venti sizes. Most consumers don’t realize that the short is still available, it’s just not on the menu.

Another MNB user wrote:

It was Starbucks plan to shift consumers from tall to other bigger sizes. They tried to put a simplification angle to market the idea  and thank god you were the only one who fell for that argument. Good to see consumers’ voices heard.

Another MNB user wrote:

Gee KC this doesn’t sound like you. You’re always proactive about doing what’s right for the customer. I happen to buy tall coffee but I would complain I just would go thru the drive thru.

I guess my problem is that the notion of ordering the smallest size of anything is completely foreign to me, so the whole discussion seemed irrelevant.

Another MNB user wrote:

What would better for all and help them selling even more coffee is to review their caffeine levels which are the highest of any brand on the market. While the morning jolt may seem good it effects many and those who it doesn’t only need one cup to keep them higher that the eyeballs on a giraffe all day.

Again, as someone who drinks about six cups of coffee before 9 am each day, just to get MNB out, I have no understanding of this argument.




On another subject, an MNB user wrote:

Just to add one more Draconian example to the SuperValu practice of having certain incumbents re-interview for their current jobs every year: the retailer I worked for in the late '80s and early '90s once considered adopting a somewhat similar HR policy which, as I recall, came to be referred to as a "reverse Dutch auction".  Under this theory, which thankfully was never actually implemented, potentially all corporate office positions would be "put up for bids", with a stated set of minimum requirements an applicant would need to possess in order to bid.  Once those stated requirements were met, anyone was free to "bid a salary" for the job in question, and the company was then free to select, for example, the lowest bidder if it so desired.  It was a playing field where there could potentially be any number of "sellers" (applicants) for any given position, but just one "buyer" (the employer), so the expected result from the company's standpoint was that applicants would increasingly "cut their price" (salary demands) so as to hopefully win the auction; this talent acquisition plan was spun to the employee base as a much-needed means to control overhead costs.  Morale was not good....

On the other hand, business at the local Kino’s must have cooking, what with all those folks printing out their resumes...