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    Published on: October 14, 2010

    Walmart revealed at an investors meeting yesterday that it plans to jump-start its 2012 growth plans by opening between 30 and 40 small format and medium format stores, many of them in urban markets that to this point it has been unable to penetrate.

    The medium-sized stores will be along the lines of the Neighborhood Market format that Walmart has been toying with for years; the smaller urban stores will be modeled on bodega stores that the company has used to great success in Latin America.

    According to the Bloomberg story, Bill Simon, the new CEO of Walmart’s US stores division, told the meeting that the company sees a “true need” for units smaller than its supercenters, and that “after years of development we are now prepared to accelerate growth” of smaller stores. Simon said that he foresees hundreds of such stores being built in the long term.

    However, coverage of the investors meeting suggests that the true need for small stores may reside at Walmart headquarters, where there are concerns that its stores have not been able to capitalize on the recession to the extent that might have been anticipated. As the Financial Times writes, “The push for new customers comes after five quarters of comparable sales declines at its US stores.”

    Bloomberg writes that “adding urban markets may help the retailer add about $80 billion in sales, or about 20 percent of last year’s revenue, according to Neil Currie, an analyst at UBS Securities LLC in Stamford, Connecticut.

    The Wall Street Journal characterizes the Walmart moves as “an effort to push back against the dollar chains and other competitors nibbling at its customers.

    “The prospect of Wal-Mart stores dotting America's biggest cities would change the urban landscape and the profile of the world's largest retailer, known for its blocky suburban edifices stocked with low-cost goods. The new stores, roughly a quarter to a third the size of a supercenter, largely will sell groceries.”

    MarketWatch reports that the company projects that capital spending will stay fairly steady: “Wal-Mart said it now expects capital spending for the fiscal year to range from $13 billion to $14 billion while fiscal 2012 capital spending is projected at $13.5 billion to $14.5 billion.”

    Among the cities being targeted by Walmart for expansion are Chicago and New York - both of which have had traditional resistance - often fueled by unions and community activists, but sometimes by competitors - to the world’s biggest retailer and its big box stores. Some of that resistance is crumbling, however, with Chicago agreeing to allow Walmart to build stores and New York Mayor Michael Bloomberg saying he has no problem with Walmart coming to town.
    KC's View:
    There are at least some rumblings out there in the investment community about how Mike Duke’s continued occupation of the CEO office at Walmart might be dependent on this strategy working. I have no idea of things are that serious, but I don’t think that the company can spend a lot of time putting this strategy into place...and there already have been reports about teams of real estate experts fanning out around the country to land competitive locations that could change the face of Walmart.

    Published on: October 14, 2010

    Without realizing it, and without much warning, retailers all over America may now be serving as showrooms for Amazon.com.

    According to a Cnet story, Amazon has just unveiled an updated free iPhone app, which “contains a bar code scanner in its search screen. As with bar code scanners in other mobile apps, Amazon Mobile uses your iPhone's camera to take in a product's zebra-striped bar code. Amazon's servers then find a match, and after you select the item, you can sign in to your account to purchase the product on the spot.”

    In other words, if the consumer is in virtually any store that carries any product sold by Amazon - and that covers a lot of territory - they can comparison shop ... and if Amazon offers a better price (which it often does) or the convenience of home delivery, the shopper can instantly order online using the application.

    Writes Cnet, “Amazon's iPhone app isn't the first to match bar codes to items in a database, of course, and shopping comparison apps have existed for a couple of years. However, Amazon's addition will be an effective way to convert bar code scanning into concrete sales with the touch of a finger.”

    Yet another way in which retailers in a wide variety of segments are competing with Amazon ... even if they don’t realize it.

    This story comes at the same time as TechCrunch reports that a UK grocery shopping comparison site, MySupermarket, that “lets its users compare prices of single items, and more importantly, entire carts, when ordering online in four leading UK supermarket chains,” now is averaging one million monthly users.

    Glen Terbeek, who was envisioning such developments decades ago when he was running Smart Store for Andersen Consulting in Chicago, makes the point that developments like those at Amazon and My Supermarket demonstrate how “the internet is driving pricing down to the lowest common denominator.  It will be difficult for retailers to compete on price in the future.  And it raises the question as to what value does a retailer create in getting the shoppers what they want.”

    Bingo.

    And that’s our Thursday Eye-Opener.

    - Kevin Coupe
    KC's View:

    Published on: October 14, 2010

    Now available on iTunes…

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

    http://www.morningnewsbeat.com/Radio/Radio_Listen_S.las



    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.

    Okay, you can stop now.

    Over the past couple of weeks, after I mentioned on MNB that I have no real problem with genetically modified food as long as it passes muster at the FDA and it properly and accurately labeled, I have been deluged with email. There have been hundreds of notes from folks who seem to believe that it is critically important to convince me that too little is known about GM foods to make them safe for human consumption, that neither the FDA nor the companies manufacturing GM foods are to be trusted, and that the presence of genetically modified organisms in too many foods already - without benefit of labeling - is actually sort of scary.

    Like I said before, you can stop now. I think I’m on your side. Or at least leery enough, based on the information I’ve been hit with, to think twice about GM food in the future.

    I’m not sure if it is the insistence by the powers that be that GM foods should not labeled.

    Maybe it is because you all make a very persuasive case about simply not knowing enough, and you’ve cast legitimate doubt on those who would quickly introduce it into our food supply.

    There are enough people out there who think this is really about profit, not about feeding the world, that I began to rethink my position.

    To be sure, I don’t understand the science. I was trusting - a little too much, according to some people - the government and private enterprise to do the right thing...which is a little surprising, since I’m usually a lot more cynical about these issues, and don’t trust easily.

    I’m going to try to keep an open mind on the subject...and I don’t think I’m going to be evangelizing one way or another just yet...but I’m also going to be a little less accepting of the notion that GM foods solve more problems than they create.

    Maybe labeling isn’t enough.

    To be fair, I would point out to those on the other side of this argument that I don’t believe I’ve been scared into this opinion by wild-eyed radicals who are anti-science. Indeed, one of the most impassioned and well-thought-out emails I got on the subject was from my brother, who happens to be a chemical engineer and is hardly anti-science.

    In the end, I think I have been most persuaded by two things.

    One, I get the sense that the people trying to convince me that we don’t yet know enough about GM food to declare it completely safe are people with whom I share similar feelings about the importance of good food to the mind, the body and the soul...people who live to eat as opposed to eat to live.

    Two, there is that line from Jurassic Park: “Your scientists were so preoccupied with whether or not they could, they didn't stop to think if they should.”

    Having said all this, of course, I suspect that the subject hardly is closed...

    For MNB Radio, I’m Kevin Coupe.
    KC's View:

    Published on: October 14, 2010

    The Wall Street Journal reports that many of the nation’s supermarket chains - including Kroger, Safeway and Supervalu - “are pumping more money into advertising to fend off competition from mass discounters, drug stores and even dollar stores.”

    The problem is that the advertising and promotional expenses are cutting into profit margins, and so even if they result in higher customer traffic and higher sales, profits could prove to be disappointing in the short-term.

    The long-term goal is to create sustainable customer loyalty that will serve them well when prosperity returns.
    KC's View:
    Of course, the supermarket chains are not operating in a vacuum...and the non-traditional competition are likely to ramp up their advertising and promotions as well in order to build market shares and protect their investments in various food categories.

    If there is a potential problem here, it is that all these ads and promotions will be focusing on price ... and retailers may spend less time focusing on the other things that they need to do in order to have a differential advantage. Sure, they have to be sharp on price...but on an increasingly level playing field, it is critical to clearly define the other attributes that will give them differential advantages in the marketplace.

    Published on: October 14, 2010

    In the UK, the Guardian reports that “Tesco will take centuries to meet its pledge to label all of its 70,000 products with their carbon footprints at its current slow rate of progress. Figures show the supermarket chain is labelling items at a rate of just 125 a year, as data published today showed spending on products carrying the carbon reduction logo is set to top a record £ 2 billion a year.

    “The Carbon Trust said the sales figure will be reached when the label appears on the supermarket's own-brand pasta next month, three years after the logo launched.”

    According to the Guardian, Tesco said in a statement: “We have exceeded our target of measuring the full carbon footprint of 500 different products. Over 100 own-brand products are now labelled in our stores. We'll expand this to include more products this year. By the end of this financial year [April 2011], we hope to have labelled 500 products and footprinted 1,000."

    But, the Guardian writes, “that leaves a significant shortfall on the pledge to label all 70,000 products, which at the current rate will not be achieved for centuries.”
    KC's View:
    I know that such labeling programs are complicated to implement, but somehow “centuries” seems a little long. If you’re going to talk the talk, you’d better walk the walk.

    Published on: October 14, 2010

    The Wall Street Journal reports that Starbucks, saying that it wants to stress quality over quantity, is telling its baristas “to stop making multiple drinks at the same time and focus instead on no more than two drinks at a time - starting a second one while finishing the first ... Baristas are also supposed to steam milk for each drink rather than steaming an entire pitcher to be used for several beverages. Other instructions include rinsing pitchers after each use; staying at the espresso bar instead of moving around; and using only one espresso machine instead of two, according to the documents.

    “Starbucks says the changes - which it expects to roll out nationwide and across Canada by next month - are part of its ongoing effort to make stores operate more efficiently. But some baristas worry it will create longer lines.”
    KC's View:
    I can see it now...

    Riots at Starbucks all over town. Film at 11.

    I could be wrong about this, but I suspect that this is one of those initiatives that may sound better at headquarters than it plays in the stores. (A common mistake that takes place in a lot of companies.)

    And again, maybe I’m wrong, but couldn’t the same goal be served by simply raising staff levels in the stores? Of course, that would be a hard cost against the bottom line...and just slowing things down may not have as quantifiable a cost. Until people go elsewhere for a cup of coffee because speed is an issue.

    Published on: October 14, 2010

    Ad Week reports that the Green Gauge Global survey from GfK Roper Consulting says that 71 percent of respondents say that they believe “it is important that companies take environmentally responsible actions,” but that 66 percent say that “the environmentally friendly alternatives for many of the products I use are too expensive.”
    KC's View:
    First of all, saying that too many green alternatives cost more money than traditional products seems like a statement of the obvious.

    But isn’t there an old saying about how “they’re only principles if they cost you something...”

    If I recall correctly “cost” wasn’t being used in the context of money. But the point is the same.

    Published on: October 14, 2010

    • The Minneapolis / St. Paul Business Journal reports that Supervalu’s Save-A-Lot division plans to spend $24 million to build a 325,000 square foot distribution center in Lexington, North Carolina. The facility, according to the story, “is meant to support Save-A-Lot’s growth in North Carolina and surrounding states. Save-A-Lot already has 17 stores in the Tar Heel State. It plans to open another eight this year, as well as six in South Carolina.

    “The chain presently has 1,200 stores in 39 states; it plans to double that number over the next five years.”

    • The Associated Press reports that Procter & Gamble CEO Bob McDonald told a shareholders meeting this week that “ P&G added 200 million users of such brands as Pampers diapers and Olay skin cream last year, for 4.2 billion globally,” which he said puts the company on-track for its goal of having a total of five billion consumers in five years.

    • The Wall Street Journal reports that an ad battle is expected to break out between the companies in the single-serve coffee business, with Nestle’s Nespresso and Kraft’s Tassimo both looking to gain traction in the burgeoning category that currently is used by just seven percent of US households.

    The potential is a big one: The Journal notes that 60 percent of coffee machines are sold during the end-of-year holiday season, “though companies make most of their profits selling the containers or ‘pods’ that hold the coffee.”
    KC's View:

    Published on: October 14, 2010

    • Supervalu announced yesterday that Mark Anderson, president of the Midwest/Southeast region, is retiring after 30 years with the company.

    Bill Chew, currently executive vice president of the Midwest/Southeast region, is being promoted to the position of president of the region, reporting to Janel Haugarth, Supervalu’s executive vice president & president/COO Supply Chain Services.
    KC's View:

    Published on: October 14, 2010

    We’ve had a couple of stories the last few days about the changing nature of the American consumer, with singles and what might be called non-traditional families representing a growing segment to which retailers can cater, if they so choose. I said in my commentary that I found some of the numbers to be surprising, but not distressing, and that these shifts probably represent a considerable opportunity for companies that choose to embrace it.

    To which one MNB user responded:

    Why not distressing?  Are you trying to be PC?

    We are all affected by these growing trends.  And ultimately, we are all paying the price, as a society and through tax dollars.

    Social scientists have found that children growing up in single-parent families are disadvantaged in other ways when compared to a two-biological-parent families. Many of these problems are directly related to the poor economic condition of single-parent families, not just to parenting style. These children are at risk for the following:

    • lower levels of educational achievement
    • twice as likely to drop out of school
    • more likely to become teen parents
    • more conflict with their parent(s)
    • less supervised by adults
    • more likely to become truants
    • more frequently abuse drugs and alcohol
    • more high-risk sexual behavior
    • more likely to join a gang
    • twice as likely to go to jail
    • four times as likely to need help for emotional and behavioral problems
    • more likely to participate in violent crime
    • more likely to commit suicide
    twice as likely to get divorced in adulthood


    I wonder.

    I think some of what you describe may be true. But I also think some of it could represent a kind of wishful thinking on the part of some folks who find the whole notion of alternative lifestyles to be personally distasteful for whatever reason.

    I know gay couples who I think would be terrific parents, if they had the opportunity. I know heterosexual couples who have several children, but who have no business being parents. And while single parenthood is probably not the ideal situation for all sorts of logistical reasons, I’d rather have one loving parent than two narcissistic parents.

    This is why I’m not distressed. The simple reality of 21st century America - like it or not - is that the shape of our families and the faces of our parents are changing. Beyond whatever religious or moral issues this might raise for some folks, it remains a marketing opportunity for people and companies who seize upon it.

    As for being politically correct....I don’t think so.

    Political correctness is relative...and I think that some of what I say is politically incorrect for some segments of the business communities about which I write.
    KC's View: