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    Published on: January 6, 2011

    by Kevin Coupe

    This morning brings another lesson in how the habits of the American buying public are changing, and how business must be on the alert to these shifts, or risk becoming irrelevant.

    The Wall Street Journal reports that “for the ninth time in 10 years, U.S. album sales declined in 2010, even as paid downloads of individual songs stalled.

    “American music buyers purchased 326.2 million CDs and digital album downloads during the 52 weeks that ended Jan. 2, according to data released Wednesday by Nielsen Co.'s SoundScan. That represents a 12.8% decline from the 2009 level, and a new low point since 1993, when SoundScan began compiling the data.”

    However, single song downloads also took a hit, growing just one percent last year - though higher prices allowed for the first time by Apple’s iTunes ($1.29, instead of the previously mandated 99 cents) may have made up for the decline in demand. But while higher prices may compensate for lowered demand, the music industry has to face the possibility that it has crossed some sort of Rubicon, and that things may never be the same again.

    It is, in fact, the same thing to which every retail must remain on alert. Rubicons rarely announce themselves...and often are crossed before one even knows it.

    And that’s our Thursday Eye-Opener.
    KC's View:

    Published on: January 6, 2011

    BJ’s Wholesale Club announced yesterday that it will close five stores that it described as “underperforming” - three in Atlanta, one in Florida and one in North Carolina - and will restructure its home and field operations, creating eventual savings that it said would be “invested in new clubs, remodels, and information technology, all of which are vital to our competitiveness, future growth and profitability.”

    The closures are expected to eliminate some 500 jobs throughout the company, including more than 60 at its Natick, Massachusetts, headquarters.

    BJ’s also announced that it has named Robert W. Eddy (currently, Senior Vice President, Director of Finance) to the position of Executive Vice President and Chief Financial Officer; and Cornel Catuna (currently, Senior Vice President of Field Operations) to Executive Vice President of Club Operations.

    The company also announced the retirement of Frank Forward, Executive Vice President and Chief Financial Officer since 1997, and Thomas F. Gallagher, Executive Vice President of Club Operations since 2007. The company said that “Forward’s retirement is part of a planned transition underway since 2007; and Gallagher is retiring for health reasons. Forward, who has been with BJ’s since its founding in 1984, will continue to advise and counsel senior management as a consultant.”
    KC's View:
    The general speculation seems to be that BJ’s management is cleaning up the deadwood and positioning itself for a sale, with current management hoping to convince new ownership that it can make the tough decisions necessary to make the company viable and sustainable. All of which seems logical ... and the expectation here is that we’ll be hearing more big news from BJ’s in the near future.

    The question that needs to be asked is why BJ’s has not been as successful as Costco and Sam’s as navigating the recessionary waters. It is interesting to note that as BJ’s restructures, Sam’s is announcing a new health-oriented initiative and Costco is saying its December same-store sales were up six percent.

    BJ’s management may be good at bailing out a sinking ship ... but new ownership may want to ask why the ship hit the iceberg to begin with. (Okay, this metaphor may overstate the company’s problems a bit...but you get my point.)

    Published on: January 6, 2011

    Drug Store News reports that Walmart-owned Sam’s Club said yesterday that “it is offering its business, advantage and plus members tools to help them achieve their health goals, including free monthly, in-club health screenings and access to a new health management benefit, The Prevention Plan, from U.S. Preventive Medicine.

    The Prevention Plan will cost members $99 a year, and “involves an online health assessment and at-home blood test to identify potential health issues for which a personalized plan is developed to address risks. Personal health coaching, ongoing support, a variety of tools and a plan-wide health challenge are provided through The Prevention Plan to keep members motivated to maintain a healthy lifestyle.”
    KC's View:
    Love it. It is appropriate for Sam’s business customers ... and a good message to send in terms of connecting food and health.

    Published on: January 6, 2011

    The New York Times reports that “(Product) Red, the effort to fight AIDS in Africa, is teaming up with its first alcoholic beverage partner, which also happens to be its first marketer partner from Australia” - Penfolds.

    According to the story, “Fifteen percent of the proceeds from the sales in North America of two Penfolds wines, Thomas Hyland and Koonunga Hill, will be donated to the Global Fund to Fight AIDS, Tuberculosis and Malaria, the company and the (Red) organization are to announce this week. (Red) donates the money it receives to the Global Fund.”

    Other marketers with which (Red) is teamed up include Gap, American Express, Apple, Converse and Nike, and Starbucks.
    KC's View:

    Published on: January 6, 2011

    The Boston Herald reports that Supervalu-owned Shaw’s Supermarkets plans to close five stores in Massachusetts and Rhode Island, no later than mid-February, a move that will leave the company with 169 Shaw’s and Star Markets.

    While the company is not saying how many people will be laid off as a result of the moves, the paper estimates that it will be about 500.

    “The decision comes from our striving to ensure the success of all our stores,” said spokesman Steve Sylven. “Given the competitive markets that we’re operating in right now and really the difficult environment, unfortunately it becomes necessary to close those stores that aren’t profitable.”
    KC's View:
    The rumor mill will say that perhaps this is Supervalu getting Shaw’s ready for sale by cleaning away dead wood ... in the same manner of BJ’s Wholesale Club.

    That speculation certainly would seem to have the ring of truth about it. The question is what the over-under is on when Supervalu announces it has sold the company, either whole or piecemeal.

    Published on: January 6, 2011

    The Philadelphia Inquirer reports that Supervalu-owned Acme Markets “will close five unprofitable Philadelphia-area stores by the end of February, three in South Jersey and two in Pennsylvania - locations union officials said were hurt by Wegmans and other competing chains.”

    According to the story, “In recent years, Acme, one of the region's oldest supermarket chains, has struggled to reinvent itself as competitors have arrived with stores that sell groceries in new ways. On the higher end, for example, are Whole Foods and Wegmans, with stores popular among gourmands; on the other end are Shop Rite, Walmart and Target, which lure more cost-conscious customers with aggressively low prices.”
    KC's View:
    Must be something in the New Year’s air...

    Published on: January 6, 2011

    In Southern California, the Press-Enterprise reports that Supervalu-owned Albertsons is closing four stores - in Riverside, Sun City, Granada Hills and Pomona.

    "Albertsons strives to ensure the success of all its stores, however, it is occasionally necessary to close those that are not meeting company goals in today's competitive and difficult economic environment," the company said in a release.
    KC's View:
    Okay, well that’s got to be it for Supervalu’s New Year’s housecleaning. Right?

    Published on: January 6, 2011

    The Chicago Sun Times reports that Supervalu-owned Jewel-Osco “will pay $3.2 million to settle a federal discrimination lawsuit, the U.S. Equal Employment Opportunity Commission said Wednesday.

    “The commission had alleged the supermarket chain had a policy and practice of firing employees with disabilities at the end of medical leaves of absence. The commission alleged that about 1,000 employees allegedly had been terminated under this policy since 2003.”

    Jewel-Osco said it was settling the lawsuit to avoid litigation costs, but continued to deny the allegations.
    KC's View:
    It seems like Supervalu is making an awful lot of moves this week to get rid of unprofitable stores and settle other nagging issues. Is this just part of some sort of New Year’s resolution devised by CEO Craig Herkert ... or is something else going on that could mark bigger changes for the company?

    I’m just askin’...

    Published on: January 6, 2011

    • The Financial Times reports that in the current (and seemingly permanent) UK price war, Walmart-owned Asda Group has strengthened its guarantee, saying that “f the price of an item at Asda isn’t at least 10 percent lower than that charged by rivals, it will refund the difference through a voucher for future purchases.”

    Advertising Age reports that “Walmart's green-positioned Love, Earth jewelry line has gotten a black eye from an expose in the Broward/Palm Beach County New Times, which says precious metals for its products are mined using cyanide and with Bolivian workers making as little as $35 monthly. But Walmart says a third-party auditor couldn't substantiate allegations in the article.

    “The Love, Earth jewelry collection is one outgrowth of Walmart's extensive and well-publicized sustainability drive.”
    KC's View:

    Published on: January 6, 2011

    The Seattle Times reports that Starbucks Corp. is updating its logo, with the most noticeable changer being that the words “Starbucks Coffee” have been completely eliminated.

    According to the story, “The new wordless logo...is better suited to the company's expansion beyond coffee into a wider array of business lines and into more international markets.”

    "What is really important here is an evolutionary refinement of the logo, which is a mirror image of the strategy," said Howard Schultz, CEO of Starbucks. "This is not just, let's wake up one day and change our logo."

    The company apparently also felt that it was well enough known after four decades in business that it did not need to use its name in the logo.

    The new all-green logo, according to the Times, “is the fourth version of Starbucks' logo since the company's beginnings as a small coffee, tea and spice shop in Seattle in 1971. The first update came in 1987, taking the original bare breasted siren in brown to a more stylized - and modest - version in green as the company began to expand. The image was further refined in the 1990s as the company went public and its growth soared.”
    KC's View:
    If Starbucks wants to reposition itself as a CPG company, and not just as a coffee company, that’s fine. Companies have to grow, or they die.

    But it wasn’t that long ago that Howard Schultz wanted to position Starbucks as a “lifestyle company,” not just a coffee company, as it invested in books and music and movies. That didn’t turn out the way he intended.

    Starbucks can have grand CPG ambitions, but if it takes its eye off the core business, those ambitions could go up in flames. The coffee better be good, the shops better be clean, the employees better be helpful ... or all the ambition in the world won’t compensate for crushed consumer expectations. (And paying lip service to the stores is not the same thing as paying attention to the core business.)

    I would suggest that unlike the recent, aborted attempt by Gap to update its logo, this is more about Starbucks soul.

    Published on: January 6, 2011

    • The Seattle Post-Intelligencer reports on a new comScore report saying that “consumers spent a total of $32.6 billion online over the holidays ... An all-time high, it was up 12 percent from last year.”
    KC's View:

    Published on: January 6, 2011

    • The New York Times this morning reports that “Pepsi Refresh, the online fund-raising contest with a $20 million giveaway for charitable causes and nonprofit groups, is again receiving complaints that its results are being manipulated. A few nonprofit groups say that recent winners have used a mysterious service to propel themselves into the winning ranks, and complain that the practice breaks Pepsi’s ban on proxy voting and on votes from international locations ... In a statement, Pepsi said it was committed to maintaining the integrity of the contest, and that it deployed a variety of proprietary methods to identify fraudulent votes and remove them from the system.”
    KC's View:

    Published on: January 6, 2011

    • The Jacksonville Business Journal reports that Winn-Dixie announced that Laurence Appel senior vice president of retail operations, will replace Frank Eckstein, “who is retiring but will continue to serve in an advisory capacity until the end of fiscal year 2011. Appel has served as general counsel, corporate secretary and senior vice president of human resources since joining the Jacksonville-based grocer in 2002.”

    According to the story, “Appel will be succeeded as general counsel by Timothy Williams, who joined Winn-Dixie in 2003 and formerly served as assistant general counsel.

    “Dan Portnoy, senior vice president and chief merchandising and marketing officer, has resigned from the company. His duties will be divided by Group Vice President of Marketing Mary Kellmanson; Group Vice President, Non Perishables, Pricing and Corporate Brands Matt Gutermuth; Group Vice President of Perishables James Smits; and Vice President of Pharmacy John Fegan.”

    • Price Chopper Supermarkets/Golub Corporation announced today that Bev Akin, the company’s Senior Financial Systems Specialist, has been promoted to the position of Director of Financial Systems.

    The company also said that David Siegel, the Director of Grocery Merchandising, has been named Director of Corporate Brands.

    And Jason Kennedy, Price Chopper’s Manager of Continuous Improvement and Supply Chain Initiatives, has been promoted to the position of Director of Continuous Improvement & Administrative Efficiencies.
    KC's View:

    Published on: January 6, 2011

    Lots of reaction to yesterday’s piece about the growth of self checkout, and the slow but inexorable move to mobile checkout likely to take place.

    • I agree that mobile is the next step - and will/should be offered as a choice.  Shopper choice should remain the key principle.  While the store certainly saves labor with self-checkout, the store can use this as a benefit:  re-deploy labor to higher-touch, higher-service activity to differentiate their store - and also the benefit to shoppers who just want a quick trip. - Jamie LaRue

    • Visiting Finland over 13 years ago, we checked out the grocery stores and found at one store, you paid a coin to get a cart and as you entered the store you took a scanner from the display, attached it to your cart and scanned as you shopped.  When you were done, you loaded the scanner back, swiped your credit card, got a receipt and left the store, returning your cart to the corral.  I think we may have gotten our coin back.  There was a staffed checkout available, but not used often, though our relatives said they did checks on occasion, so when you checked out, you were instructed to go to the actual checkout person to be audited.  This didn’t happen often, but kept folks honest. - Jill Tolkinen


    I have been told that when a customer steps into the check out lane they are on a magic carpet ride.  What happens at the checkout dictates whether a customer will return to you store to shop again.  I personally would rather talk to a real person than deal with a machine.  I feel that the demographic that I fall into at 57 years old requires from tradition a more personal approach, but the younger generation has became accustom to communicating through text messages and e-mails with virtually no human contact.  I feel that the self checkout is definitely the wave of the future but I also feel that that jobs will disappear never to return and definitely will not be used in other locations within the retail market. - Woody Weddington

    Really? A magic carpet ride?

    • I’ve gone from hating the self checkout to embracing the self checkout… so much so, that I am annoyed if I find myself in a store that does not have a self checkout option… I used to not mind waiting in line at the register… now I can’t stand it, knowing that if I could do it myself I’d already be out of the store… - Stacy McCoy

    • I read about an experiment in the EU a year or two ago about a system that, similar to airport scanning equipment, allows a shopper and his/her cart to go thru a scanning system and the WHOLE order is computed instantly as all the bar codes are read at the same time..............Wonder what the status of that test is these days?     It's coming to your local food store one day. - An MNB user

    • One of the main reasons that I actually like self checkout is the fact that it means that I do not have to deal with the surly, really-don't-want-to-be-there, checkers.  The friendly smile and occupational intelligence are long gone (for the most part), so why even try to deal with it?  But that got me to thinking (always dangerous).  Why do we even have checkout "stations" at all?  I'm guessing that it would not be too difficult to create the "check out shopping cart".  It would solve so many problems at once.  Getting a cart would involve swiping your payment card.  You go shopping and as you put things in your basket, the purchase totals would aggregate.  Passing the threshold of the store would cause your total to be billed (wheels locking up for a declined transaction, of course).  And a small reward could be refunded when you "park" your empty cart in a collection station. Hmm... - Jeff Folloder

    And so it goes...
    KC's View:

    Published on: January 6, 2011

    Roberto Alomar, a 12-time All Star who had his best years as an infielder with the Toronto Blue Jays, Baltimore Orioles and Cleveland Indians, and Bert Blyleven, a longtime pitcher for the Minnesota Twins who was on the ballot for the 14th time, both were elected yesterday to the Baseball Hall of Fame.
    KC's View:
    More important than who was elected to the Hall is who was not. Players linked to or even suspected of steroid use did not even come close. As they should not.

    Pete Rose, banned from baseball for gambling on the game, apparently got three write-in votes. Which is three more than he should have. IMHO.