retail news in context, analysis with attitude

Published on: November 16, 2010

by Michael Sansolo

It’s hard to know when and where these trends begin, but suddenly the unseen parts of business are getting a lot of love. Consider the following:

First, UPS now runs ads all about the company’s logistics, including a rewritten song extolling the virtues of the unseen work of its supply chain. Then, about a week ago, The New York Times ran an article about Apple’s money management practices. That’s right, nothing about cool technologies or Steve Job’s choice in black turtlenecks. Instead the article details how Apple manages accounts payable and receivable to create an additional source of funding for research and development on all those cool new products.

Next thing we’ll hear that Justin Bieber and Katy Perry are writing songs about distribution centers and Paris Hilton is hanging out with the IT staff. After all, what could be cooler than the supply chain?

The truth is the unseen parts of industry are really never the cool stuff. No shopper selects an iPad because of Apple’s money management strategies. They don’t select a single product in a supermarket based on whether it was direct-store delivered or sent through the warehouse. They really don’t know about logistics and they don’t care.

But they do care that the products they want are in stock and that prices are sharp. The simple truth is that cost cutting in the backroom can lead to better deals at the front end.

I got two stark reminders of this on the road recently. First, I had the wonderful opportunity to see Don Dufek, a retired Kroger executive and one of the chief drivers of the industry-wide Efficient Consumer Response (ECR) movement in the 1990s. Dufek, who might know more about the industry than anyone else you can find, says he believes there have been three key revolutionary changes in the industry’s history. The first was the invention of the shopping cart, which altered the shopping trip itself. The second was the Universal Product Code that enabled scanning and the birth of the data revolution.

And the third was ECR and its sharp focus on inefficiency and wasteful practices. ECR wasn’t sexy, but, as Dufek says, every company that took the effort seriously is among the winners in today’s competitive marketplace. Those who ignored it have struggled or disappeared.

The depth to which Dufek is right was on display this week at PLMA’s annual convention near O’Hare airport in Chicago. Private label may be hot for a host of customer focused reasons, but supply chain issues aren’t forgotten. In fact, PLMA last year launched an Innovation Hall designed to focus attention on all the support systems needed in private label, whether they are technological, data driven or simply about thought leadership.

PLMA’s show is dominated by the increasingly sophisticated sights, tastes and smells of food. It features an extensive array of non-foods showing the ever broadening reach of private label.

But it’s hard to ignore that growing emphasis on the unseen part of the business and the growing sophistication of systems to help private label vendors find all the efficiency and effectiveness pursued by national brands.

At a time of tough competition, ignoring the backroom is a sure strategy for losing.


Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: November 16, 2010

CNBC had an interesting story the other day about how along with all of the other repercussions of the recession, the average size of the American home is shrinking, and is likely to continue to do so.

According to the story, “The median home size in America was near 2,300 square feet at the peak of the market in 2007, with many McMansions topping 10,000. Today, the median home size has dropped to about 2,100 square feet and more than one-third of Americans say their ideal home size is actually under 2,000 square feet, according to a survey by real-estate site Trulia.”

Among the changes taking place in modern home design: Formal living rooms and dining rooms, and even media rooms, game rooms and libraries are out, replaced by multi-purpose “great rooms” that allow for various uses. The emphasis is on energy efficiency and ease of maintenance, with architects using design tricks to create the illusion of spaciousness.

One other interesting trend is the creation of rooms within these houses that can be used as living suites for aging parents.

The simple fact is that these residential design trends will have an impact on how people shop for food, and what foods they shop for. If houses are smaller, they may have less room for the big packs that have been standard purchases for many suburban families. Indeed, the trend toward smaller stores may coalesce in people’s minds with the trend toward smaller houses. And, the equipment that is included in these new kitchens will reflect new priorities, which in turn will affect the products and services of which people avail themselves at the local supermarket.

Now, you never know if these kinds of trends are long-term, or just momentary; Americans are exceptionally good at forgetting recent history, and it isn’t hard to imagine that when prosperity returns, a lot of people could forget the lessons of the recent recession.

But it certainly deems like changes are afoot. Retailers need to be focused on them in a macro sense, so that they can make changes in a micro sense that will make them more competitive in the long run.

And that’s my Tuesday Eye-Opener.

- Kevin Coupe

Published on: November 16, 2010

The Los Angeles Times reports on a new National Retail Federation (NRF) survey indicating that during the upcoming end-of-year holiday season, Americans will be moving away from their traditional use of credit cards and instead will be using debit cards and - gasp! - cash.

According to the story, the survey “found that 43% of holiday shoppers will rely on debit cards as their primary form of payment and 25.7% will mainly use cash, both slight increases over last year.

“Roughly a quarter (27.6%) of shoppers plan to charge most of their gifts. That's the lowest reliance on credit cards since 2002, the retail trade group said, when just 26.8% of consumers said credit cards would be their main form of payment for the holidays.

“The percentage of shoppers who say credit cards are their No. 1 choice has fallen every year since 2007, likely a reflection of constrained spending habits because of the recession.”

Published on: November 16, 2010

The New York Times this morning reports that the US Food and Drug Administration (FDA) is expected this week to weigh in on the subject of pre-mixed alcohol-and-caffeine drinks such as Four Loko, which have received a lot of bad publicity in recent days after young people got seriously ill or even died after consuming them.

A number of states have already banned the drinks, and the FDA is likely to issue some sort of opinion as soon as tomorrow.

According to the Times, “The agency declined to say what it would do, but several food safety lawyers who once worked for it said a likely option was to use warning letters to inform manufacturers that the drinks were adulterated and, therefore, not safe ... Although there is little research on the effects of mixing caffeine and alcohol, several studies have suggested that people get more intoxicated and engage in riskier behavior when they drink the combination beverages than when they drink alcohol alone. Caffeine masks the effects of alcohol, doctors say, tricking users into believing they can keep drinking well past the point of drunkenness.”

The story goes on, “Phusion Projects, which makes Four Loko, has said that drinking premixed alcohol and caffeine is no different from drinking a few glasses of wine with dinner and having coffee afterward. But Dr. Mary Claire O’Brien, a professor of emergency medicine at Wake Forest University, warned the F.D.A. last year that the combination was dangerous. Dr. O’Brien said that ingesting both substances at the same time had a much more potent effect than either one by itself.”

Published on: November 16, 2010

Winn-Dixie said yesterday that because of recent revelations that some of its reusable shopping bags may contain small amounts of lead, it is withdrawing its bags and will give a full refund to any customer who returns them to its stores.

“All available research indicates these bags are safe for their intended customer use,” said Robin Miller, Winn-Dixie’s director of media and public relations. “There is a need, however, to look at this from a long-term environmental perspective to determine if the potential exists that these bags cannot be disposed of safely. For this reason, we feel it’s better to stop selling them now.”

Published on: November 16, 2010

In a front page story this morning, the New York Times reports that Apple is expected today that it has come to terms with the Beatles and will shortly begin offering the entire catalogue produced by the best-selling group of all time on iTunes.

The deal will mean that people for the first time will be able to download Beatles music to their iPods, as opposed to buying the albums on CDs.

According to the story, Apple co-founder and CEO Steve Jobs “has tried to make a deal with EMI and the Beatles many times before, but negotiations have always broken down, usually accompanied by a flurry of online rumors, accusations and conspiracy theories. Further complicating the relationship between the parties, Apple Corps, the Beatles’ company, and Apple, the computer company, had been embroiled for decades over trademark disputes.

“In the past, Paul McCartney has said that a deal for Beatles’ downloads would have to be approved by all the band members or their heirs.”

On iTunes yesterday, the main page featured a graphic that said “Tomorrow is just another day. That you’ll never forget. Check back here tomorrow for an exciting announcement from iTunes.”

The announcement is scheduled for 10 am EST.

Published on: November 16, 2010

The Food Marketing Institute (FMI) yesterday sent a letter to all members of the US House of Representatives, currently meeting in a lame duck session, urging them to pass the Healthy, Hunger-Free Kids Act of 2010.

The letter, from Jennifer Hatcher, FMI Senior Vice President of Government Relations, read as follows:

On behalf of our nation’s supermarkets and the families we feed, the Food Marketing Institute strongly supports S. 3307, the Healthy, Hunger-Free Kids Act of 2010, and we encourage the House to take up and pass this critical legislation during the lame duck Congress.

The Healthy Hunger-Free Kids Act contains important policy changes that lay the groundwork for the modernization of the Women, Infants, and Children (WIC) program. FMI strongly supports transition of the WIC program to electronic benefits transfer (EBT), away from paper coupons. This change will greatly benefit WIC participants, increase efficiency in the program, and reduce costs of administering the program.

The Healthy, Hunger-Free Kids Act of 2010, S. 3307, helps create efficiencies in the transition to WIC EBT by requiring technical standards and business operating rules for WIC so that there aren’t hundreds of different EBT systems across the nation, which would be costly and time prohibitive.

FMI strongly encourages you to support passage of the Healthy, Hunger-Free Kids Act of 2010, S. 3307, with these critical policy changes that will help keep costs low in the system and help our industry ensure WIC-eligible mothers continue to have a pleasant experience when they shop in our stores.

Published on: November 16, 2010

The Modesto Bee reports that Save Mart Supermarkets is reopening one of its old Save Mart units as a Maxx Value Foods store, described as “a blended version of a traditional grocery store focused on bargain-priced products that cater to west Modesto's ethnically diverse, lower-income population.

“It will offer about one-third as many products as traditional Save Mart stores. There will not be an employee-staffed delicatessen, bakery, meat or seafood counter. Only prepackaged foods will be sold in those departments.”

Published on: November 16, 2010

• The Hill reports that “almost a year to the day after a unanimous committee vote, a long-stalled bill to promote food safety is poised for Senate passage within a week.” It is anticipated that once the Senate passes the bill, which “would prompt more regular processing plant inspections and greater government authority in food-recall cases,” it will be signed by President Barack Obama.

• The Chicago Tribune reports on how Whole Foods plans to roll out its new humane meat-rating system nationwide next year.

“If the six-step, color-coded labeling system works as planned, it could allow American consumers at many supermarket chains unprecedented levels of specificity when it comes to choosing meat to match their principles,” the Tribune writes. “Developed by the Global Animal Partnership, a nonprofit group made up of farmers, scientists, retailers, sustainability experts and animal welfare advocates, the rating system aims to address growing consumer concerns over the way animals are raised for food ... Its six-step approach establishes baseline standards for all meat sold in the store, while offering producers an opportunity to achieve higher ratings as their animal welfare standards improve based on the program's benchmarks.”

According to the story, “Whole Foods says that about 1,000 farms have been or are going through third-party GAP auditing, and a few hundred are awaiting the process. Most are small, regional producers, but they also include big, national names like Pennsylvania-based chicken producer Bell & Evans and Niman Ranch pork producers, which are still in the auditing process.”

Published on: November 16, 2010

Yesterday, in my “Sports Desk” piece, I wrote:

“...in Dallas on Saturday night, Manny Pacquiao delivered a good old fashioned butt-whipping to Antonio Margarito, winning the title in the 154-pound weight class - the eight different weight class in which has won a title.”

However, it was pointed out to me that the match actually took place at Cowboys Stadium in Arlington, Texas ... a place that one MNB user described this way:

“I grew up in Arlington, and we're very proud of that stadium! If you get a chance by the way, you should definitely go. Just walking in is sensory overload. It is unlike any other venue I have ever been in, and it took me hours just to pick my bottom jaw up off of the floor the first time I went!”

Of course, I’m sure that the Cowboys’ performance much of this season has been a little jaw-dropping as well.

Published on: November 16, 2010

MNB user Richard Sokolnicki sent the following email:

Your "eye-opener" about eliminating white pages delivery is an ancient subject. I'm still yawning! I think that it really just boils down to governmental approvals for the most part. Trials for a videotex white pages were done in France 30 years ago and rolled out by 1982 as something called Minitel. It included a free terminal (primitive as it was) that could also be used for limited online purchases, reservations and even bulletin board "chat." This was well before the sophistication of the browser and the WWW, but it addressed the basic white pages issue. I'm not positive, but I think the system may still be in limited use. So - I would think that those involved should have been thinking of this "eventuality" decades ago - not "now."

And yet, here in the US, the debate goes on. Which as much an eye-opener as anything.

My point yesterday, perhaps inartfully written, was this.

Institutions like the phone book and the US Postal Service are simply not in synch with how people behave in 2010, with how people get information and communicate with each other. They have a choice - make radical changes in their business models and embrace the future, or put band-aids on the problems and face growing irrelevance.

Got another email about the Postal Service:

I find this completely unacceptable, a business that lost 8.5 billion dollars and nothing will change. Talk about belt tightening in Washington DC is just that... talk. If we cannot do the right thing, cut delivery days and cut postal workers, how are we ever going to address a growing deficit? Oh wait, I know the answer, raise taxes, it is the easy way out for politicians.




Along the same lines, an MNB user wrote:

I disagree with your reader that suggested the answer to our budget woes was: “We need to increase taxes, reduce entitlements and cut defense spending to solve the problem.”

The first thing that all of the elected officials need to focus on is to REDUCE SPENDING. We have a spending problem, people! You can’t continue to raise taxes in hoping to solve these problems. The politicians will just spend more! It’s our money, and when you can show me how any of the politicians on either side of the aisle can spend my money better than I can, then I’ll sign up for more taxes. Until then, send them less, and hope that the Tea Party representatives stir the pot and make a lot of people uncomfortable with the status quo!!

I am not an economist, but it has been my impression that if we are going to have any sort of significant impact on the nation’s deficit, it will require both cutting spending and increasing revenues. Which, of course, will require both sides of the political aisle to be willing to compromise. Republicans, who philosophically hate tax increases, may have to swallow some. Democrats, who resist spending cuts that will affect services, will have to accept spending cuts. And there will have to be shared sacrifice, a willingness to do a little old-fashioned horse trading, and a refusal to demonize other people for holding different opinions.




We had a story yesterday about how some retailers are planning to be open on Thanksgiving, and I agreed with the Reuters line that it it “is the latest in a creeping commercialism of Thanksgiving, once strictly a holiday for family gatherings...”

One MNB user wrote:

Nobody's forcing shoppers into these stores kicking and screaming.  What is the problem with making the opportunity to shop on Thanksgiving available to those who choose to take advantage of it?

No problem. They’re certainly within their rights.

But that doesn’t mean it isn’t creeping commercialism.




Lots more letters on the Amazon controversy - the online retailer was discovered to be selling a book defending pedophilia, and after initial resistance, the company decided to stop selling it.

One MNB user wrote:

Okay, so I don't mind saying that Amazon absolutely did the right thing. This type of book is in a category all by itself.  Where do you draw the line?  Right there.

The unfortunate part of this story is that they can't provide me with a list of deliveries of the publication within a 50 mile radius of my house.

Another MNB user wrote:

C'mon people! Books that promote despicable behavior like this and "establish a code of conduct" for it should not be sold by any decent company. Doing so is just wrong. Some call it censorship. Common sense is more like it. I guess people that defend the right for this to be sold would also support similar books promoting serial rapists and murderers.

For too many people, books are the only things with spines.

Another MNB user wrote:

Kudos to Amazon for finally exhibiting a shred of ethical behavior by stopping their selling of a book promoting pedophilia.  Its a shame it took outside pressure to get Amazon to reach their decision.  It is never censorship for a company to exhibit good corporate governance and conduct itself in a manner that promotes its brand name and customer goodwill.  Walmart decides to not sell product based upon content everyday.

It is censorship when a government gets involved.

Still another MNB user chimed in:

On the Amazon censorship issue, what happened to letting a company proprietor decide what they want to sell based on their corporate/personal values and letting the free market decide on whether or not to buy? Seems like a pretty good model that has worked well for a few years!

And MNB user Larry Lyons wrote:

Your position of “drawing the line” when the primary subject of a book or article promotes an illegal activity is SPOT–ON!

Have we completely lost our collective common sense?

I fail to understand why we’re even debating such things.

Let’s envision an entirely new book section…the Illegal Hobby section…Bank Robbery for Dummies, Car Jacking for Fun and Profit, YOU TOO can be a Pimp! Free Speech? Give me a break!!!

I have to say that I am sympathetic to Amazon in this case. On the one hand, the company wants to be the globe’s biggest bookstore, selling everything to everybody, unfettered by physical walls and powered by a sense of ideological and philosophical freedom.

But then, something like this happens ... and suddenly ideological and philosophical freedom are seen to have consequences, and we see that there is a dark side to being unfettered.

And then, when Amazon does what most people would describe as the right thing, it runs the risk that a wide variety of special interest groups will object to other things that it sells, or enables to be sold, and start calling for those things to be delisted from its site. Which forces it to make vales decisions on a case by case basis, which is pretty much precisely the situation it wanted to avoid.

On the other hand, I make the argument all the time that we cannot just think as marketers and salesmen or even pundits and philosophers, but also must think as parents and responsible adults.

It’s a tough one. I feel for Amazon as it tries to make its way through this minefield of ideas and commerce.

Published on: November 16, 2010

In Monday Night Football action... the Philadelphia Eagles beat the Washington Redskins 59-28 ... even as the humbled Redskins gave the recently benched Donovan McNabb a $78 million, five-year contract extension.