retail news in context, analysis with attitude

Published on: October 6, 2010

CNBC reported yesterday that Apple’s iPad - which sold three million units in the first 80 days it was on the market, and currently is selling about 4.5 million units per quarter, in fairly short order has become “the most quickly adopted non-phone electronic product,” selling at a faster rate than the DVD player or even the iPhone.

“At this current rate, the iPad will pass gaming hardware and the cellular phone to become the 4th biggest consumer electronics category with estimated sales of more than $9 billion in the U.S. next year ... TVs, smart phones and notebook PCs are the current three largest categories.”

Think about that for a second. The iPad is selling at a faster rate than the DVD player, which became an almost ubiquitous appliance in the American household.

Now, this isn’t to suggest that every American soon will be in possession of an iPad. The thing about DVD players is that they were made by a lot of different companies and sold by a lot of different retailers, which helped the technology’s penetration. That’s currently not the case with the iPad...though it appears that this is changing (and even Walmart may stock it one of these days). And CNBC also makes the point that Apple’s competitors need to come up with their version of the iPad, which will drive even greater penetration for iPad-style technology. This is inevitable, in much the same way that Google’s Android phone has presented a serious challenge to the iPhone’s supremacy.

The question is, how will retailers and manufacturers take advantage of this trend? How will they make the technology work for them, by working for consumers? And are enough retailers engaged in active discussions about what this technology means for their businesses?

This conversation has to take place. Not next year. Not next month. Not next week.

Today.

And that’s my Wednesday Eye-Opener.

- Kevin Coupe

Published on: October 6, 2010

The Wall Street Journal reports that Tesco, the world’s third bigger retailer after Walmart and Carrefour, has “sent a strong signal that it plans to push ahead with its struggling effort to crack the elusive U.S. market with its Fresh & Easy chain,” which, as the paper says, has “been problematic since its 2007 launch in the Western U.S. - an ill-timed move that found Tesco trying to enter an important market just as the brewing global financial crisis was about to explode.”

According to the story, Tesco’s incoming CEO, Phillip Clarke, who will succeed the retiring Sir Terry Leahy next year, says that he does not to conduct a strategic review of the business because the division is moving toward profitability.

The Journal writes that “Tesco said it expects its three-year-old U.S. Fresh & Easy chain to become profitable by the 2012-13 fiscal year - the first hard profit target that the retail giant has set for the U.S. since the recession challenged its operations there. The company expects to have 400 stores in the U.S. by then, up from 159 as of Aug. 28 ... That means leaving the areas of Arizona, Nevada and inland California, where the economic downturn has proven particularly severe, emptying out new housing developments.

“Tesco said Tuesday that in November it would ‘mothball’ 13 stores in those areas - six in Nevada, six in Arizona, and one in inland California - by boarding them up or subletting them, with a plan to reopen them in four to five years once the economy there recovers.

“Tesco will focus its efforts primarily in California, with plans to open 19 new stores in the U.S. in the next six months, or about one store every two weeks. After those stores open, Tesco plans to jump-start the rollout, moving to open about one store per week thereafter, Mr. Leahy said.”

Published on: October 6, 2010

by Kate McMahon

British teen Rebecca Javeleau certainly wishes she had heeded that advice before using Facebook to invite 15 friends to her 15th birthday party tomorrow in the small town of Hertfordshire. Ditto a New York-area Price Chopper customer service rep named Ameerah (but more on that later).

When Rebecca first posted her invitation, she forgot to mark the event “private.” And within hours the “open party” went viral on the internet, and the number of attendees jumped to 21,000. The story made international news.

Her mum, and the authorities in Hertfordshire (population 30,000), were not pleased. Rebecca’s computer was taken away and the festivities were cancelled. Even still, there’s chatter all over Facebook among those who plan to show up and party outside her flat tomorrow, where they will be greeted by the local police.

While this is yet another cautionary tale parents will share with their kids, it is also one that adults should take note of in their personal and professional lives. And one that retailers, marketers and service providers should heed as social networking sites are becoming the front line of customer service dialogue and company image.

Which leads us back to the Twitter exchange between a Price Chopper employee and a disgruntled customer, who tweeted “Every time I go to PriceChopperNY I realize why they r not Wegmans” and continued to criticize the store.

The Price Chopper employee reacted (or shall we say, over-reacted) by contacting the customer’s employers, labeling the individual as destructive and negative and suggesting that disciplinary action be taken.

The customer also happened to be a personal friend of social media guru and Syracuse University professor Anthony J. Rotolo, who made the spat public on his blog, which was then reported by the Syracuse Post Standard and other news sites such as MNB. He called it “a teaching moment.”

The spirited dialogue on the blog touched on the new reality that companies need to embrace social networking, which is instantaneous and stays public, for better or worse, and educate themselves and their employees on how to best utilize it.

In his blog, Rotolo wrote: “Millions of Twitter users worldwide understand that the ability to express personal opinions about a brand or product is one of the most powerful aspects of social media. These conversations and the information they provide are some of the biggest reasons why companies are launching their own Twitter accounts. The goal is to establish a relationship with customers that is based on trust, to learn from customer opinions (positive and negative) and realize that not every individual will be converted to your viewpoint.”

Interestingly, Rotolo’s blog also allowed for Heidi Reale, the Director of Consumer Insights for Price Chopper, to respond through a series of posts, report on the company’s investigation of the incident, and issue an apology. The dialogue played out in real time on the internet, and I think this gave Price Chopper the opportunity to step up and handle a PR tempest swiftly and honestly, to its credit.

Ameerah, the customer service rep in the center of the storm, apologized online as well.

Reale noted that while she wished her department had the opportunity to investigate the complaint before it went “social” – “we understand and embrace that the world has changed and companies have to expect that everything which is done by them or on their behalf (with or without company consent) is public.”

Well said. I’m sure Rebecca Javelelau’s mum would agree.

Comments? Send me an email at kate@morningnewsbeat.com .

Published on: October 6, 2010

The Wall Street Journal this morning has a story about how a number of retailers are using a cooperative program called ShopRunner to help them develop a competitive response to Amazon.com’s “Prime” shipping option.

According to the story, “the retailers are mimicking Amazon by dangling a $79 loyalty program that offers unlimited two-day shipping. But in this case it's across all of the participants' online stores, whether it's Babies 'R' Us, Pet Smart, Dick's Sporting Goods, GNC or a host of others. One-upping Amazon, ShopRunner will offer free returns.

“Membership in such program acts as golden handcuffs: After prepaying for shipping, members become valuable repeat customers, in order to get the most out of the fee ... Retailers' willingness to work together under ShopRunner illustrates how seriously they take the threat from Amazon, whose customer base has grown at the expense of traditional retailers as shoppers migrate to the Web.”

ShopRunner serves as a kind of clearing house for logistical and bookkeeping issues, while the individual retailers handle their own shipping - though the retailers have to live up to certain standards in order to be part of the consortium.

The story notes that Amazon accounts for eight percent of the US e-tailing market.

Published on: October 6, 2010

The Wall Street Journal has an interesting piece about the importance of preserving and nurturing brand equity by protecting a company’s reputation.

“To a large extent,” the Journal writes, “many companies are defined by their reputations. A good reputation and a strong brand allow companies to stand out in crowded markets ... Reputational risk is therefore one of the most potent dangers that any company faces. It is also, unfortunately, one of the most elusive. While it is relatively easy to talk about reputation risk in the abstract, it is far harder to protect against it in practice. A recent survey conducted by Airmic, the association for insurance and risk managers, frames the conundrum well. Of those who took part in the poll, 80% claimed that reputational risk is their top concern. However, only 43% believed that they have formal and well-managed plans in place to tackle it.

“The problem is clear: It is easy to identify and measure the impact of the damage wrought to a reputation after a crisis. But it is far more difficult to predict when and – more importantly – how a reputation might be tarnished in the future.”

Published on: October 6, 2010

• Forbes reports on how Walmart “is teaming with Humana, the second largest provider of Medicare benefits in the U.S., to offer a program to Medicare beneficiaries that will make drug coverage available through Wal-Mart’s network of low-cost pharmacies.

“The price for the coverage to be introduced this week is a low $14.80 per month – a full fifty percent less than the average premium cost for similar programs in 2010 ... They are gambling that their lower prices will boost business for both participants and make up in volume what they lose in margin.”

Published on: October 6, 2010

The Fresno Bee has a story about how supermarket competition in California’s Central Valley is ramping up, with traditional stores facing new competition from the likes of Walmart and Target.

There already has been some fallout, with Save Mart closing two stores in Fresno County because of competition and a tough economy.

According to the story, “In the Valley, traditional grocery stores such as Vons, Save Mart and independents already compete with Hispanic-grocery stores like Vallarta, discounters like Foods Co., warehouse clubs like Costco, and specialty grocers like Whole Foods. Even drugstores are increasingly selling food ... The Valley already has a few big-box stores with expanded food options, including Walmart Supercenters, a Target Greatland in Visalia and a SuperTarget in Tulare. Some of the traditional Targets also have sizable food sections. But the remodels coming in the next year or so will expand that even further. The stores will sell fresh produce and fresh baked goods delivered daily, and offer 40% more food than a regular store, according to Target officials.”

Published on: October 6, 2010

In Waterbury, Connecticut, there was a story in the Republican American reporting on how “Big Y Foods Inc., which recently agreed to acquire seven A&P Supermarkets in Connecticut, will open four hiring centers on Monday to fill full- and part-time positions at the stores.”

Published on: October 6, 2010

Challenger, Gray & Christmas is out with an analysis of September jobs numbers, reporting that “the pace of downsizing remained virtually unchanged in September as employers announced plans to cut 37,151 jobs during the month; a seven percent increase from the 34,768 job cuts reported in August.

“The September figure is the second lowest of the year and comes on the heels of the lowest monthly job-cut total since June 2000 (17,241).”

The report went on, “Overall, employers have announced 411,272 job cuts so far this year. That is 64 percent fewer than the 1,136,908 cuts announced by this point in 2009. The twelve-month moving average has now dropped to 46,866, the lowest since November 2000, when it stood at 43,744.”

Published on: October 6, 2010

The Produce for Better Health Foundation (PBH) is out with a new study saying that “new data shows that mothers have steadily found it easier to get their families to eat fruits and vegetables when eating out over the past two years, particularly at fast-food establishments.

“In 2010, mothers reported it easy to eat fruit (25 percent) and vegetables (17 percent) at a fast-food establishment, up significantly from the 19 percent who reported it easy to eat fruit and 8 percent reporting that it was easy to eat vegetables in 2008. Thirty seven percent of moms reported it easy to get their families to eat fruit at restaurants generally, vs. 29 percent in 2008. Moms' reported ease in getting vegetables at restaurants declined, however, from 45 percent to 43 percent between 2008 and 2010.”

Thew report also says that “only 8.8 percent of all menu items include fruit, and only 3 percent of overall fruit consumption comes from restaurants. Regarding vegetables, 44.8 percent of all menu items include at least one vegetable (excluding chips and fries), and 15 percent of all vegetable consumption (excluding chips & fries) is consumed in restaurants. Together, only 11 percent of fruits and vegetables are consumed at restaurants, representing 72 cups per person per year.”

Published on: October 6, 2010

• Bloomberg reports that is speculation ion the public markets that three food industry companies - Safeway, Clorox and ConAgra - could be targeted by private equity firms.

According to the story, the speculation takes place in the wake of a report that “Sara Lee Corp. held talks in recent months with Apollo Global Management LLC that failed to result in a deal. The specter of buyouts returning has prompted analysts and traders to dust off computer spreadsheets that seek to identify potential targets, allowing credit-swap investors to hedge against losses or find alternatives to buying shares to profit from mergers and acquisitions.”


• The South Florida Business Journal reports that Winn-Dixie has opened its South Miami store, which it says “exemplifies the company’s overall effort to offer customers an enhanced shopping experience, comprising an emphasis on service, upgraded departments and expanded features” such as expanded fresh foods departments, Hispanic offerings, natural, organic and gluten-free items.

Oklahoma-based Homeland Stores announced that it is adopting the Guiding Stars nutritional labeling program in its 72 units, which uses a proprietary algorithm to analyze every product in the store and then assign one, two or three stars to products that are good, better and best for you.

Guiding Stars was begun by Delhaize’s Hannaford Bros. chain, has been extended to its Food Lion and Sweetbay operations, and currently can be found in more than 1,500 stores nationwide.


• ChicagoBreakingBusiness.com reports that “San Francisco’s planning commission has recommended a full vote on a partial ban on toy sales with children’s meals at fast food restaurants. The proposed legislation would make it illegal for toys to be given alongside kids’ meals that didn’t meet certain criteria.

The city’s board will take a full vote that could result in legislation in a few weeks.”

Published on: October 6, 2010

I continue to get email weighing in on the debate about genetically modified food (prompted by the FDA’s consideration of GM salmon as being fit for human consumption).

One MNB user wrote:

I read your piece on GM crops and animals and was a little surprised that you are so pro science on this one. The first response that you posted does a great job of summarizing many of my concerns by someone that appears to have a lot more facts than I do.

If you have not watched "Food Inc." I strongly recommend that you do. There are references in this posting that may have come from the movie. While it's a little disturbing how much of our food supply is corn based and how much of the corn is GM, the most disturbing things I learned about in the movie is how Monsanto uses their team of lawyers to basically force their technology on almost everyone and how much pesticide is being used on our food supply.

You seem to be OK with GM food as long as it's labelled (I've read that 70% of what we eat has some GM components in it so pretty soon food = GM). Your olive oil story shows how labeling has it's shortcomings. I think it's relatively easy to see if GM food is safe to eat compared to the huge task of determining the long term affect of these changes on the ecosystem. Humans have caused problems all over the world by simply transporting animals from one place to another, intentionally or not, because the new animals destroy the balance that existed before their introduction. New Zealand is a great example. Many flightless birds evolved there because they had no predators. Add some cats, dogs and other small predators and now humans are trying to protect the birds that cannot fly away from these new predators.

Just imagine if a fish that grows twice as fast is it's non-GM cousin gets into the wild and it is able to reproduce. I suspect that it will dominate the natural species very quickly and drive it to extinction and maybe it will eat twice as fast to grow twice as fast and wipe out it's own food source.

This may become very clear in the near future. I read that the genetic changes that Monsanto made to the corn to make it resistant to Roundup have started showing up in some weeds. Funny how nature works, those kinky plants. If that is true then who will Monsanto sue when the weeds start taking over the corn fields?

I completely agree that we are screwing with complex systems that we know very little about and that are very difficult to model. Letting corporations that can barely see beyond the end of the next quarter make these decisions is a recipe for disaster. Plus your argument for using the tools we discover with science also justifies atomic weapons and many other things that are less complex than the environment. It's the unintended consequences that worry me. Sure, we stopped WWII but made the world a whole lot more complicated.

I thought I was saying that if it can be demonstrated that GM salmon was safe to eat, it makes sense to make it available...as long as it is labeled as such. I didn’t know I was justifying atomic weapons...

Another MNB user wrote:

I was surprised by your apparent acceptance of GM foods as long as they are labeled as such (at least that is how I read what was written).  Everything I've read and learned over the past few years about health focuses on modifying what we are putting in our bodies (quality and quantity).  I certainly understand that you need to be careful to not alienate sponsors/subscribers, but you do need to see "Food, Inc." ... If it is only half true, it is really scary.

Trusting corporations to do the right thing (or to be prepared if something unexpected happens) is what got us in trouble in the Gulf of Mexico (BP anyone?).  I guess the real problem is that most of your readers work for (or run) organizations that are slowly killing us (and that is their mission: sell more Twinkies!).  I am saying this only in partial jest.  And I don't begrudge you for making a nice living.  But really, most consumers are idiots (so are most voters, I fear).  To think that they will have the ability to comprehend the complex issues surrounding GM foods is unrealistic.  And to think that we'll get the truth from the manufacturers is even more laughable.

I’m sensing a pattern here...

And another MNB user chimed in:

IMHO, in regards to GM anything… the more appropriate quote of the Ian Malcolm character from the movie Jurassic Park might be.. “Yeah, but your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should.”

All points worth thinking about.

I would hardly describe myself as intransigent on this issue. I don’t think that my opinions are being formed by who my readers and/or sponsors are, but rather by a concern that the salmon not be rejected by a kind of knee-jerk anti-science attitude. But perhaps I am giving the FDA too much credit ... maybe there is little chance that in this political environment any sort of logical conclusion can be reached. And maybe I’ve been thinking of genetic engineering as being done by scientists, when it is really being driven by accountants and marketers.

As I said, worth thinking about.




Reacting to A&P’s decision to stop paying its rent on leases it owns in the Detroit area, I suggested that this is yet another indication that A&P is a “dead company walking.”

Which led one MNB user to write:

I have truly enjoyed following your writing for years and have never once commented, but I'm concerned that you seem to have developed a default tone lately when it comes to A&P.  With every piece of news you curate,  it's another "See? What did I tell you?" opportunity.  Look back over your recent mentions. Certainly much of the news hasn't been good--but in terms of your editorial position, It seems you've already written the obituary and now you're just waiting to prove yourself correct.  In the past, you've never struck me as that kind of (content) guy.

I know this is your "view," not journalism per se, but with this platform you've created, comes the responsibility to at least "do no evil" --and since you've no doubt got financial analysts, employees and suppliers as part of your audience, I think you may have stepped over that line.

Think about it...

Detroit?  Seriously?

Do you think there's much of an opportunity to sublease stores and warehouses in that vibrant and growing DMA? Now or next year?  Or the next ten years?

How about you and me get us a great management team, go in there and launch a new grocery chain, right now?  Or expand an existing one using secondary, failed locations?  Think we could rustle up some VC funding on that?  Shall we mortgage the house?

Are you in?

Probably not.

Yes, people need to eat in Detroit and a great store concept can always succeed and the auto industry is in a healthy rebound, but you get my point.

It would occur to me that they have been paying on these dark leases for three years--that's got to be millions of dollars per year.

If a company that is clearly in a turn around has to make tough decisions, that's money that could be better spent against initiatives that contribute to a better customer experience in neighborhoods where there is a reasonable opportunity for a return on investment.   Millions of dollars that must be driven into better pricing, better products, better facilities.

In the interest of full disclosure, my organization does some work with A&P.  My View:   The management team is finally doing what probably should have been done two years when the economy was really, really in a bad way.  Of course hindsight is 20-20, but it wouldn't have even a blip on your or anyone else's radar to walk from these leases then.  Since that didn't happen, the new team is going about making this a viable, relevant brand by making some difficult choices.  But it isn't necessarily a cascade into oblivion.  You live in the Northeast.  You owe it to your readers to go walk a couple of the new stores that have opened in just the last few months.  Journalists should resist the temptation to do all their reporting from behind their computer screens, don't you think?  The new stores absolutely rival the very best from their primary competition in those neighborhoods. When you walk those facilities and talk to those customers, you definitely don't sense "dead company walking."  The pricing is rationalized, the assortment is better; stores are cleaner;  there's an enhanced private label program; customers are rating the store better on important attributes.  There's lots of positive stories and a great team working 24/7 to turn this thing around.  Doesn't feel like anyone is throwing in the towel to me.

I've always been a glass half full guy Kevin, but I'm starting to believe there is a real possibility that we will look back and see that this was A&P's finest hour.   And you know how much we Americans love come from behind stories.  Obviously your experience tells you that things are headed a certain way, based on what you see. But what if they aren't?   Wouldn't you hate to miss that?!

For the record, I do occasionally get into A&P stores. I get out from behind my computer screen as often as I can.

Could I be wrong about A&P? Sure. I actually hope I am wrong. I’ve eaten crow before, and I’ll eat it again.

I continue to believe that eventually, A&P will be sold to some company looking to either expand an existing presence in the northeast, or get a presence where it does not have one.

This does mean that I have no respect for the people who work at A&P. Far from it. But I think they’ve dug themselves a hole that is almost impossible to get out of, that the brand name has very little equity left.




Responding to Michael Sansolo’s piece yesterday about the management techniques of Buck Showalter of the Baltimore Orioles, MNB user Ernie Monschein wrote:

Good article and I agree on Showalter. He has proven leadership skills and knows how to set up the proper conditions and environment for players to motivate themselves. The simple lesson is, it’s not just about qualifications and talent, Chemistry, motivation and morale are also essential ingredients to team success both in sports and business. Showalter set the right conditions for success in the right situation. He listened, set expectations, communicated clearly and rewarded good performance with playing time. So often these basic tenets are neglected when times get tough and the “you’re lucky to have a job” syndrome again rears its ugly head. Buck knows fear only works as a motivator in the short run – it’s not a practical way to build a powerful and dynamic organization. Needless to say, the same is true in business where this same mistake gets repeated again and again.

I will be curious to see how Buck’s approach works with the Orioles’ investment shy owner, Peter Angelos. That will be a true test.




MNB yesterday took note of a USA Today report that Frito-Lay is planning to “quietly” stop using a biodegradable Sun Chips bag that it launched to “great fanfare” 18 months ago, but that was widely criticized because it was so noisy.

According to the story, “The company is returning them to their former bags that can't be recycled — but won't wake the neighbors — while it works frantically to come up with a new, quieter eco-friendly bag.”

One MNB user responded:

Really? People care about the noise over the greater good of the bag’s eco friendly ways? People have way too much time on their hands and care more about blogging and social networking complaints, getting an unwanted voice out in my opinion. It’s pathetic.

Another MNB user wrote:

So, we want to be socially responsible and "save the planet," just so long as it doesn't make it too difficult for us to hear the television. Got it.




We reported yesterday about a Brand Keys annual survey of top 50 branded loyalty leaders, and notes that retailers make up 16 percent of the list - with Walmart coming in at number three, exceeded only by the Apple iPhone and Samsung cell phones (#1 and #2 respectively for the second consecutive year).

Amazon.com came in at number seven, with Target at number 26, Sam’s Club at number 29, and BJ’s at number 42.

I commented, in part:

No matter how they quantify and qualify these kinds of surveys and studies, the results are subjective and reflect the biases and priorities of the organizations conducting them. Wasn’t it just a few weeks ago that we had a global branding survey that didn’t even mention Walmart in the top 100?

What I think is more important than ever is for retailers to exploit their own brand potential, both in terms of the products they carry and the image and services that they present to the consuming public. It isn’t enough to simply market other people’s brands.

The good news is that more than ever, retailers get this.

I also think, however, that people who do not believe that Walmart is a powerful global brand may be kidding themselves.

One MNB user responded:

I was curious a few years back about why the various “Brand Rating” lists included some brands and not others and had the rating of brands in different positions. I researched approximately six of the top read “brand rating” services. What I found was very interesting. Each of these ranking companies develop their own list of “brand equity requirements” and weight them based on their “brand attribute importance perspective.” (These are the subjective issues to which you refer.) They then gather all the available company data to answer their “brand equity requirements” and rank the brands based on their findings. (this is the objective portion of the process.)

In no case does any individual “Brand Ranking” service identify strong brands, they only identify brands that rank high on their perceived definition of what A STRONG BRAND should be. Their definition may or may not be correct, but when they release the list, they fail to describe the “underlying qualifications” of their definition,  leaving many industry experts scratching their heads and saying, “WTH.”

So, in essence, I just said what you said in your response, “No matter how they quantify and qualify these kinds of surveys and studies, the results are subjective and reflect the biases and priorities of the organizations conducting them. Wasn’t it just a few weeks ago that we had a global branding survey that didn’t even mention Walmart in the top 100?” But, I thought I would add the findings of my hours of research into these companies. Lesson Learned: Just because it is written, and scientific, doesn’t make it true…lessons we can take with us when we read “scientific findings” about GM products…HFCS…rBST…etc.  The truth may not be what is written, even though it is cloaked in the art of science.

MNB user Chuck Burns wrote:

Kmart didn't believe Wal-Mart would ever become more than a small southern regional retailer either.

MNB user Garry E. Adams wrote:

I think how you define “brand” is why there is such a discrepancy in the rankings.  I do not consider Walmart a brand.  They are certainly the #1 retailer.   I consider Coke, Apple, Microsoft, Starbucks, Harley Davidson, etc… brands because they make something a little unique within their markets.

Walmart doesn’t really make anything.   They just do a great job of making a lot of things available at a great price.

I didn’t know that “making things” was the requirement for being a recognizable brand with consumer equity.




And, responding to the coverage of FTC attempts to tamp down on the claims being made by the manufacturers of POM Wonderful pomegranate juice, one MNB user offered:

This is a product I started using about 3 years ago when I was diagnosed with Atrial Fibrillation (A-FIB). Since using the product my general health has improved greatly. Without going into detail, for me, this product helped like nothing else I had tried short of surgery. It also helped my friends with similar conditions every time it was recommended and tried. The government can say what they want. For me and my friends...it works...so we will continue on.

As for sex life, personally great, but already had high marks in that area.

To hell with the FTC. Pass the Pom.