retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: November 23, 2010

    by Michael Sansolo

    For many MNB readers, Monday’s sports update had a glaring omission. Kevin forgot to mention Jimmie Johnson winning his fifth consecutive NASCAR championship. It’s a moment we shouldn’t let pass too quickly because in many ways, Johnson and NASCAR provide better business lessons than nearly any other sport.

    I’ll be honest: I’m not a big NASCAR fan. While I’ve watched races and can name more than a few drivers and teams, I don’t come close to exhibiting any of the passion the sport inspires in its followers. My awareness is largely based on two incidents.

    First, I was flying out of Florida in early 2001 immediately after Dale Earnhardt’s fatal accident at Daytona and I was stunned at the level of grief I saw from his fans. The connection these spectators had to man they never met convinced me that something about NASCAR was special beyond belief. It still amazes me.

    The second was when I stumbled into a news story about the amazing Jimmie Johnson suffering a bizarre injury while celebrating his first championship. Apparently, Johnson was riding on the roof of a golf cart and a man who easily controls a car at 200 mph fell off and broke his arm. Because I love irony, I immediately started following Johnson.

    But the lesson of his championships provides an excellent discussion for business people. People who know NASCAR far better than me say there are three key aspects to a winning season and they are in order of importance: car, crew and then driver. It’s a wonderful metaphor.

    Johnson would obviously be nothing without the car, must as any business must have the basics down to compete. The car has to be fast and tuned to the track in NASCAR, just as in business the basics of location, facility and logistics must be sound. Without those, you simply cannot compete.

    The crew is more complex. In auto racing, the team performs a mind-numbing set of tasks in just a few seconds to make certain the car is back on the track as quickly and as capably as possible. More than a few races are lost in the pit area where the crew works. Johnson actually encountered a number of crew issues this year and at one point swapped crews with his teammate Jeff Gordon.

    In so many ways, it’s just like the teams many of us lead. Those teams need the same understanding of purpose that Johnson’s crew has, the same cohesion and the same chemistry to make them successful. A big part of that is the leadership of the crew chief, much as it is with middle managers who have to make sure everyone stays on task and focused. Just as in NASCAR, a lot of competitive battles in retail can be lost in the back room with sloppiness or inattentiveness to the customer. There is no small or unimportant job in either the crew or the retail team.

    Johnson may get the glory and it’s heavily deserved because he too has an enormously challenging job. His ability to win year after year is testament to his skill as a driver and a competitor in a sport where so many things must go right to win even once, no less dominate for five years of nearly weekly racing. Say what you will about racing vs. other sports, the bottom line is that Johnson’s life is at stake every time he gets behind the wheel.

    But without those other components in place, Johnson wouldn’t sit at the top of the pyramid. Without the necessary elements of the car or without the strong leadership of the team, it’s virtually impossible to think he would have won one race let alone five championships. It’s a model of synergy that anyone from a chief executive officer to a small team leader should appreciate.

    Simply put, the whole can only be more than the sum of the parts when they all work together.

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

    KC's View:

    Published on: November 23, 2010

    He said he was going to do it, and now details are beginning to come to light.

    Rupert Murdoch said earlier this year that he planned to create and finance an online-only newspaper that would, conceivably, help to rescue an industry that has a business model that often seems moribund at best. (It is not for nothing that former Washington Post columnist Tony Kornheiser now refers to his former place of employment as the “Wall Street Post,” clearly believing that it is an institution that has lost its way.)

    According to David Carr of the New York Times, “Murdoch is currently leading the charge to build The Daily, an iPad-centered newspaper under construction in the News Corporation’s Manhattan offices that is scheduled to appear at the beginning of next year.

    “With an investment of $30 million and a staff of around 100, The Daily will be the first of a kind — a ‘newspaper’ with rich media and photography built especially for the iPad.”

    Carr reports that while The Daily will take advantage of text and video content generated by some of Murdoch’s other properties - such as the Wall Street Journal, Fox News, Fox Sports, and the New York Post - most of the content will be original, with designated staff responsible for creating this new business.

    One of the advantages of an iPad-centric newspaper - as opposed to an old fashioned newspaper website, like all of them have - seems to be that people may be less resistant to the notion of paying for content there. We’re used to many applications costing something, and if The Daily can tap into that mindset, it may have a chance to create a new economic model.

    The eye-opening approach here has to be seen in Murdoch’s willingness to gamble on a new business model, to accept the notion that the old way of doing business is becoming obsolete. It makes no sense to fight the last war; opportunities can only be found when one looks to the future (though one always has to be careful not to go a bridge too far).

    This is the same kind of mindset that retailers, especially, need to bring to their businesses. They always have to be looking to the future, anticipating where the customer is going to be, planning for how shopping habits may change, and creating strategies and tactics that will appeal to the next generation of shoppers while simultaneously giving them the ability to change direction when circumstances warrant.

    The challenges facing The Daily will be many. After all, as successful as the iPad has been, it likely will not provide enough readers all on its own to make it a profitable venture. And it isn’t hard to imagine that it could have something of an identity crisis - fans of Fox Sports and regular readers of the Journal may not identify with the creative and political impulses that drive Fox News and the New York Post. And finally, national newspapers aren’t easy to make work; sure, USA Today has been successful, but those of us who loved The National, Frank Deford’s 1990 attempt to create a national sports daily newspaper, remember its quick and ignominious end.

    But you only make progress by stepping forward.

    And that’s my Tuesday Eye-Opener.

    - Kevin Coupe
    KC's View:

    Published on: November 23, 2010

    The Wall Street Journal reports that “for over two decades, Americans bought big, bought more and stocked up, confident that bulk shopping, often on credit, provided the best value for their money. But the long recession - with its high unemployment, plummeting home values and depleted savings accounts - altered the way many people think about the future. Manufacturers and retailers report that people are buying less, more frequently, and are determined to keep cash on hand ... Executives peddling wares from canned goods to cashmere say the shift in consumption habits is prompting them to change how they produce, package, price and deliver their goods.

    The impact is measurable.

    “The new shopping behavior is having a big effect on club stores, the ultimate pantry-filling destinations, which offer low prices but require bulk purchases,” the Journal writes. “Some, including Costco Wholesale Corp. and BJ's, have reported increased shopping-trip frequency and decreased transaction sizes. To adjust, some discounters are rethinking their businesses.

    “BJ's, based in Natick, Mass., began courting new customers two years ago to expand its membership, including smaller households and empty-nesters. It began shrinking its package sizes, in part to lure shoppers more interested in weekly purchases than monthly stock-ups. Now, the chain of 191 stores sells cartons of 18 eggs, instead of only five-dozen egg packages. It offers two containers of margarine of nearly two pounds each instead of only five-pound buckets.

    “The margarine change alone resulted in 46% more members who bought margarine, the company says. BJ's credits the shift to smaller package sizes with driving an increase in membership fees of 6% in the quarter ended Oct. 30.

    ‘This concept that club stores are only for the stock-up visit—I don't think that's true anymore,’ says Bruce Graham, BJ's senior vice president of food.”
    KC's View:
    I guess my question is at what point club stores stop delivering on their promise and central value proposition if this trend continues. That’s sort of a broader issue - how to businesses adapt to changing consumer needs and still hold onto their brand equity if their reason for being no longer is a compelling argument to consumers.

    Published on: November 23, 2010

    A new survey by The Nielsen Company shows that nearly 1 in 5 Americans will shop on Black Friday - the day after Thanksgiving, the traditional beginning of the end-of-year holiday shopping season - and more than half (61 percent) plan to spend $100 - $500, while 11 percent plan to spend more than $500 and 25 percent plan to spend less than $100.

    Other results from the survey:

    • Of the 19 percent of Americans planning to shop Black Friday, 10 percent will be shopping Black Friday for the first time.

    • Nearly 60 percent of those shopping Black Friday will be armed with a shopping list.

    • More than three-quarters (76 percent) tell Nielsen they will be shopping at department stores on Black Friday, while 55 percent will shop at supercenters/mass merchandiser stores and 52 percent will shop at electronics stores. Other Black Friday shopping locations include: toy stores (35 percent), online (23 percent), and dollar stores (22 percent).

    Nielsen predicts flat spending for the holiday season, with online retailers experiencing the biggest surge. The company forecasts a strong season for technology products and gift cards with a slight uptick in discretionary items such as jewelry and DVDs.

    “This holiday season isn’t all about the basics,” says James Russo, Nielsen’s vice president, Global Consumer Insights. “It’s about retailers understanding consumers’ new definition of value — ‘I want what I want but at the best price’ — as they go after share of wallet.”
    KC's View:

    Published on: November 23, 2010

    • The Financial Times reports that at a recent Economist-sponsored conference in London, outgoing Tesco CEO Sir Terry Leahy said that his company “was one of the last UK grocers to go abroad because it had thought hard about how to compete.”

    Leahy said, “We didn’t want to export what made us strong in our home market. From the outset we didn’t have an imperial outlook.” He said that the key to the company’s growth has been strong local partnerships, which has made its expansion a series of comfortable fits - and compared the strategy to Carrefour’s, which led to the company entering too many markets too fast.
    KC's View:
    What’s interesting about this statement is that Tesco didn’t seem to bring the same approach to the United States that it did to China ... because the Fresh & Easy fit has been anything but comfortable.

    Published on: November 23, 2010

    Reuters Health has a story about a new study from University College London suggesting that “school-age children whose mothers tightly control their diets may be prone to overeating, while those with moms who pressure them to eat tend to be fussy about food.”

    According to the story, “The findings, published in the Journal of the American Dietetic Association, do not necessarily mean that parents' mealtime strategies cause their children to overeat or become picky eaters. In fact, the researchers say, it's likely that parents who pressure or restrict are often reacting to their children's eating habits.”

    Reuters Health goes on, “In general, experts recommend that parents try to get their kids interested in healthy foods from an early age -- by having them, for example, help with shopping and preparing meals. With young children who are fussy eaters, the American Dietetic Association suggests regularly offering them colorful foods, and making the eating environment pleasant but without any mealtime distractions like TV.

    “A number of studies have also suggested the importance of parents acting as dietary role models: If parents regularly eat their fruits and vegetables, kids may be more willing to do it too.”
    KC's View:
    It is this last paragraph that strikes me as most important. More than anything else, much as they might hate to admit it, kids do mimic their parents’ behavior.

    If we as parents don’t eat a lot of crap, get a decent amount of exercise, allow ourselves to indulge from time to time without getting nuts about it, try not to make our kids too crazy, and treat food not just as fuel, but as an important part of a fully lived life, then it is likely that our kids may feel the same way. Not a sure thing, but a better shot.

    And here’s the other thing. we have to have patience. Because, it seems to me, the act of growing up is similar to the act of marinating (to use a food metaphor).

    Published on: November 23, 2010

    At a time when the US Federal Trade Commission (FTC) has been raising questions about the medical benefits of pomegranate juice, charging that the company that manufactures Pom Wonderful has been “making false and unsubstantiated claims about the power of their pomegranate elixir,” Israeli researchers are saying that pomegranate juice may have benefits for kidney patients on dialysis.

    According to the story, “They found that such patients who gulped a few cups of the tart liquid every week lowered their chances of infections, the second-leading killer of the more than 350,000 Americans on dialysis.”
    KC's View:

    Published on: November 23, 2010

    Reuters reports that “PepsiCo Inc plans to introduce a lower-calorie line extension of its Gatorade sports drink next year to appeal to a wider audience.
    The new line, to be called ‘G Series Fit,’ will be launched nationwide in April 2011 at major retailers, a Gatorade spokeswoman confirmed on Friday.”

    • GMDC, the non-profit trade association that represents large and small retailers, wholesalers and consumer product goods manufacturers, joined several industry associations, including the Consumer Healthcare Products Association, the National Association of Chain Drug Stores and the National Grocers Association, last Friday when they called upon the U.S. Congress to reverse a provision within the Patient Protection and Affordable Care Act. The provision, also known as the Cough and Cold Tax, prevents consumers from using flexible spending accounts (FSAs) to purchase over-the-counter (OTC) medicines without a prescription, and is scheduled to go into effect on January 1, 2011.

    “The new FSA restrictions will add additional confusion, expense and eliminate a benefit many consumers have come to depend upon to cost-effectively purchase medicines they need,” stated Dave McConnell, President and CEO of GMDC. “Consumers depend on OTC medicines as a first line of defense for their families’ healthcare needs, and retail stores are in the business of providing remedies in an accessible, consumer-friendly way. Eliminating OTCs from FSA eligibility is counterproductive from the overall goal of healthcare reform.”
    KC's View:

    Published on: November 23, 2010

    • Irish retailer Superquinn announced that Andrew Street, most recently the CEO of Dunnes Stores, will replace Simon Burke as the chain’s new CEO. He succeeds Simon Burke, who becomes Superquinn’s non-executive chairman.
    • Linda M. Doherty, President and Chief Executive Officer of the New Jersey Food Council (NJFC), was elected Chair of the Food Industry Association Executives (FIAE) during their Annual Convention at the TradeWinds Island Resorts on St. Pete Beach, Florida on November 12, 2010. Dan Shaul, State Director of the Missouri Grocers Association, was elected as Secretary/Treasurer. Joe Williams, Vice President of the Texas Retailers Association, was elected Vice Chairman and Brandon Scholz, President and CEO, of the Wisconsin Grocers Association, will serve as Immediate Past Chairman.
    KC's View:

    Published on: November 23, 2010

    Reacting to my criticism of Blockbuster as being mired in irrelevance as the company launches a new nationwide ad campaign to tell people that it is still breathing, one MNB user wrote:

    I am one of those movie fans who likes to have a tangible copy of my favorite flicks. I read books the same way; I’m way more likely to go check something out at the library or take a trip to the book store than read it on a Kindle or iPad. I know, for a 40-year-old, I’m old. With our local Blockbuster a 30-second trip up to the corner, we’re there at least once a week, perusing the aisles – searching out older films, not just new releases. Our family will definitely miss the sense of community – of talking face-to-face with the employees who have always been welcoming and friendly – if our location shutters up.

    Not to be overly cynical, but I wonder how many people would describe their local Blockbuster employees as being “welcoming and friendly”?

    Some reaction to yesterday’s story about a small artisanal cheesemaker who is in conflict with the US Food and Drug Administration (FDA) over food safety regulations, which some say are too onerous for small businesses.

    One MNB user wrote:

    Consider this story as apocryphal.

    A major multinational food company buys a small cheese company (in France) and finds that the factory  does not meet its standards of hygienic operations. They make a significant investment in new, hygiene oriented business processes and equipment – all shiny stainless steel and so on.

    Sales start to decline and market research reveals that people think it doesn’t taste as good as it used to so the lab has to artificially inject the key bacteria back into the process.

    Apocryphal? I’ll bet...

    MNB user Paul Arbuthnot wrote:

    Estrella Cheese's position: it's small business against big government. This sidesteps the fact pathogenic outbreaks can be controlled and that a company's small size actually allows for greater vigilance and fewer problems; fewer personnel levels to reach and teach, smaller plant space to monitor. Dozens of artisan cheese makers make wonderful and safe cheese. Some consumers argue for their right to make their own choices, ignoring that an outbreak is an event shared by more than the manufacturer and its consumers. Society is asked to share the costs (medical expense, legal proceedings, etc.) and that doesn't seem fair.

    One another subject, one MNB user wrote:

    Good for Giant in holding the line on solicitors harassing their patrons.  I shop at Publix and am harassed multiple times a week at the front door by people soliciting for every charity known to man. It’s an obstacle course to get through them and makes me want to shop somewhere else. I already donate a great deal to charity, and I am tired of people standing in my way and pressuring me to give more to their cause of the week.  I don’t need Publix to help them. I already have the Democrats for that.  By the way, that’s what I tell them when the block my path:  “Sorry, the Democrats already donate for me.”

    MNB user Geoff Harper had a thought about another subject:

    Ran across this one and thought it germane to your newsletter:

    “Venturing out of your comfort zone may be dangerous, yet you do it anyway because our ability to grow is directly proportional to an ability to entertain the uncomfortable.” --Twyla Tharp, Choreographer

    And, joining in the discussion about public policy, the roles of government, the duties of citizenship, the effectiveness of taxation, and the need for greater civil discourse in the public arena...

    Yesterday, an MNB user suggested a war tax that would pay for current conflicts and make it clear to citizens what wars actually cost. Which led MNB user Jack Ericsson to write:

    If I recall correctly, the first US Income Tax was a war tax. It was instituted during the Civil War.

    In 1862, in order to support the Civil War effort, Congress enacted the nation's first income tax law. The Act of 1862 established the office of Commissioner of Internal Revenue. The Commissioner was given the power to assess, levy, and collect taxes, and the right to enforce the tax laws through seizure of property and income and through prosecution. The powers and authority remain very much the same today.

    So you want to add a second war tax. Our Government is good at adding taxes. However our Government rarely, if ever, eliminates them. Even taxes with finite dates always find ways to be extended. I anticipate the same would happen with a second war tax.

    On the other hand, if we are fighting wars but not paying for them, don’t you think Americans should at least be made aware of this disconnect.

    I suggested yesterday that the Tea Party, even if you disagree with some of their claims and tactics and marvel at the degree to which crazies seem to get traction, needs to be taken seriously because its members raise important points. Which led one MNB user to write:

    During mid-term elections, the TEA Party mantra was that we pay too much in taxes and we have too much wasteful spending.  They provided little concrete examples of the wasteful spending except the notion that we should eliminate earmarks. 

    Here is a breakdown of the 2010 Federal budget distribution;

    Social Security: 19.63%
    Department of Defense: 18.74%
    Unemployment/Welfare/Other mandatory spending:  16.13%
    Medicare: 12.79%
    Medicaid and other staid aid for youth healthcare: 8.19%
    Interest on National Dept: 4.63%

    That totals 80.11% of Federal spending.  The remaining 20% is split among more than 25 departments with none receiving funds totaling more than 2.25% of the Federal Budget.  There was no entry for earmarks which represent less than four-tenths of one percent of Federal spending.

    The TEA Part message did not involve cutting into the 80% (I’m sure they wanted to cut into the interest, but without getting into the other 75%, that is unlikely).  Good luck trying to cut Medicare.  TEA Party ads crucified candidates on both sides of the aisle for votes which “cut” Medicare spending when those votes actually increased spending, just at rates below current trend lines. No mention of cutting Social Security or Unemployment benefits.  Defense cuts in the age of terrorism?  I didn’t see that on anyone’s agenda. 

    I marginalize TEA Partiers because they have provided no information on how they plan to make cuts in 80% of the Federal Budget yet run on a platform of cutting taxes.  In business that would be like running on a platform of reducing revenue and trying to make money by looking at 20% of the budget of where no individual piece makes up more than 2.25% of spending.

    While I may not agree with the likes of Paul Ryan (R-WI) who floated some Social Security privatization ideas or President Obama who wants to rescind the tax cuts for those making more than $250,000 per year, at least they are focused on cuts that might make an impact or increasing revenue.  The TEA Party does neither and that is why they should be marginalized.

    You essentially make an argument that I think is hard to argue with - that people do not know what things cost, but they do know how to pontificate. It is the Jed Bartlet argument: It is easy to offer slogans in the form of ten word answers, but it is hard to come up with the next ten words, the ones that deliver specifically on the slogan.

    On another, but related subject, one MNB user wrote:

    I know your column isn't intended to cover tax policy but the FMI/NGA item hit a nerve.

    "The Food Marketing Institute (FMI) and National Grocers Association (NGA) said last week that they are “calling on the U.S. Congress to repeal the requirement that prevents consumers from using their flexible spending accounts (FSAs) to purchase over-the-counter (OTC) medicines without a prescription. This provision, enacted into law as part of the Patient Protection and Affordable Care Act, removes over-the-counter (OTC) medications from the list of eligible medical expenses for reimbursement by FSAs and Health Savings Accounts (HSAs), effective January 1, 2011 ... The nation’s grocery stores request that Congress act before adjournment to reverse the provisions of the Patient Protection and Affordable Care Act and help the estimated 35 million working Americans who rely on voluntary contributions of pre-tax dollars to FSAs to help meet their basic health care needs, including the purchase of safe, affordable OTC medicines.”

    In 1986, as a tradeoff for the lower Reagan tax rates, medical expense deductions were limited.  Thereafter only medical insurance and medical expenses that exceeded 7.5% of adjusted gross income were deductible.  Furthermore, OTC medicines never were allowed as part of that deduction. Then a few years later Congress changed the law to allow employer provided medical and dental insurance premiums, even the part paid by the employee, to be pretax, and not even subject to the payroll (FICA/Medicare) tax.  Thereafter, Congress added the HSA and FSA provisions that enable certain people to use pretax money for their deductible and other medical expenses not covered by insurance and this was more recently expanded to include OTC medicines. OTC medicines had never before (and still do not) qualify as deductible medical expenses for ordinary folks.

    The bottom line is that certain taxpayers are able to use pretax money for all of their medical insurance and expenses.  When I had a regular job that amounted to about a 50% savings.  However, many others only get a deduction if they itemize, and then only to the extent that such expenses exceed 7.5% of their adjusted gross income.  

    I do not have any strong opinion in regard to whether medical insurance premiums and expenses should be pretax.  But I do have a strong opinion that the rules should be the same for everyone.

    Responding to a survey reported about on MNB yesterday that addressed some of the reasons that Walmart has been facing same-store sales declines in the US, one MNB user wrote:

    A quick message from a Walmart associate…The sampling size of the survey was 1,800.  Walmart serves over 100,000,000 customers per week so I’m skeptical this survey is a good representation of the majority of consumers.

    Agreed. I should have mentioned the survey size.

    That said, the conclusions seemed logical, and the sales declines are undeniable.
    KC's View:

    Published on: November 23, 2010

    In Monday Night Football action, the San Diego Chargers defeated the Denver Broncos 35-14.
    KC's View: