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    Published on: March 14, 2011

    by Kevin Coupe

    The Associated Press reports that as the nation’s banks try to figure out how to recoup revenue in the event of new regulations that severely limit their ability to charge debit card swipe fees, Chase Manhattan Bank is considering at least one possibility that could be onerous for retailers - limiting debit card transactions to $50 or $100 apiece.

    According to the story, “The idea is one of many being floated internally in response to a proposed regulation that would sharply limit the fees banks collect from stores whenever customers swipe their debit cards. Chase estimates the proposal could slash its revenue by $1.3 billion a year.”

    The proposed regulation by the Federal Reserve already is creating changes in the marketplace, as banks look to generate revenue from other sources. Free checking is slowly be phased out by some banks, and other banks are testing user fees that would replace swipe fees.

    Of course, the story also notes that the financial services industry “says that debit card fees help underwrite the costs of providing consumers with free or low-cost checking accounts. By limiting the fees they collect from merchants, banks warn that they'll need to pass costs onto consumers” - ignoring the fact that retailers now likely are passing those swipe fees onto consumers in the form of higher prices.

    Now, the AP suggests that “as for a cap on debit card purchases, analysts say it's unlikely any bank would risk alienating customers with such an extreme move. The bank would need to first undertake a massive education campaign to avoid sending angry customers fleeing to competitors.” But the fact that banks would even consider such a proposal is a measure of how desperate they are to protect their revenue sources.

    In the end, retailers need to make sure they are on the right side of history in this battle - and that means being advocates for the consumer. That should be the benchmark by which every decision is made - is the consumer benefitting, or is the consumer getting the short end?

    Retailers that behave with this position in mind - and that educate their shoppers about these issues and their responses - may well give themselves an important differential and competitive advantage.

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

    Published on: March 14, 2011

    The New York Times reports that over the weekend, “armed with a hefty budget for parking tickets, Peapod (planned) to roll its delivery trucks through big sections of Manhattan, and a new kind of food-delivery war will be on.”

    The Ahold-owned e-grocery pioneer, which has long served the suburbs of New York City that are home to the Stop & Shop stores that also are part of its corporate family, is expected to launch a price war in the borough as FreshDirect looks to defend its home turf. The story notes that Peapod “had stayed away from Manhattan because of the difficulty of maneuvering through traffic, finding places to park trucks and, in some buildings, hauling groceries up several flights of stairs.” But over the past few months, Peapod started circling the borough, delivering to some areas of Brooklyn and then to certain blocks on Manhattan’s Upper East Side.

    David McHugh, Peapod’s vice president and general manager, tells the Times that “Peapod had budgeted twice as much money to pay parking tickets — the scourge of grocery deliverers — in Manhattan as it had for other cities it operates in, like Boston and Washington. But he would not say how much that was. As Peg Merzbacher, Peapod’s director of marketing, put it: ‘You have to sell a lot of cans of peas to cover one parking ticket.’ She said the company would have two workers in each truck so that one could move it if a ticket agent arrived.”

    (Sources have told MNB in the past that FreshDirect spends as much as a million dollars a year on parking tickets, though the company has never confirmed that number.)

    The story also notes the big difference between the two companies - that Peapod has an integrated business model that depends on the existence of physical stores for fulfillment and marketing purposes, and FreshDirect is a “pure play,” which no relationship to a bricks-and-mortar operation.
    KC's View:
    The story seems to think - or at least quotes more people who think - that this gives FreshDirect an advantage, especially since it currently says that its average order in Manhattan is $120 and that its business is growing.

    But I’m not sure this is true. I think Peapod is a formidable competitor, and that it can afford to spend some money building market share in Manhattan; I also think that while Stop & Shop may not have any stores in Manhattan, it has a familiar brand name that Peapod can use to leverage its own advantages.

    Plus, who is to say that Stop & Shop might not develop a physical presence in Manhattan? After all, there could be a bunch of A&P stores, and even some Borders stores, coming on the real estate market, and it is entirely possible that the company could be looking to create a new urban format that could allow it to serve Manhattan with a fully integrated offering.

    (I have to believe that they are at least discussing this at Stop & Shop headquarters. After all, if companies like Walmart and Target are coming up with small-store urban formats so they can build market share, it would simply make competitive sense for Ahold to do the same.)

    Published on: March 14, 2011

    Bloomberg reports that “the Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 68.2, the lowest in five months, from 77.5 in February,” suggesting that rising fuel prices and squeezed household budgets were having a toll on consumer confidence.

    At the same time, “The survey’s gauge of current conditions, which reflects Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, fell to 83.6 from 86.9 the prior month.”

    The story goes on: “Today’s report mirrors other consumer gauges. The Bloomberg Consumer Comfort Index dropped to minus 44.5 in the week to March 6, from the prior week’s minus 39.7, which was close to the highest in almost three years. Sentiment suffered the most among respondents who lacked a full-time job or any employment and those earning less than $50,000 a year.”
    KC's View:
    And all these measurements took place before the earthquake and tsunami in Japan. One can only imagine what those events are doing to consumer confidence all over the globe.

    Published on: March 14, 2011

    The New York Times reports that Whole Foods is yet again sponsoring a film festival of environmentally themed movies, but this time, instead of running the films in churches, temples and schools, it will be using commercial theaters in both major markets (New York, Los Angeles) and smaller cities (Omaha, Kanas City).

    According to the story, “Both a Web site,, and in-store promotions will point shoppers and others toward the offerings, all of which, in the inaugural round, are documentaries with an earth-friendly message ... Proceeds will contribute to grants in amounts yet to be determined — the expected range is $5,000 to $25,000 each — for a next round of environmentally minded films.”
    KC's View:
    You have to give Whole Foods a lot of credit. The company certainly thinks outside the box in its marketing efforts, and yet it is both highly consistent and focused in organizing its various initiatives around a core message.

    Published on: March 14, 2011

    Sir Terry Leahy, the recently retired CEO of Tesco, has told a BBC interviewer that “the thing about modern supermarkets is what people like about them is also what people worry about; the benefits that I receive as a consumer, does that come at some other price for somebody else or for me as a citizen?”

    But Leahy also makes the point that Tesco is run - and largely perceived - as a force for social good.

    “One of the things I’m proudest of is you can join at any level at any age, any part of the business and you can get right to the top of the company,” he told the BBC. “And we’ve got people on our executive committee who started at the age of 16 and come right through the business and Tesco is a great engine for social mobility.

    “We take people with no qualifications, we take people from the finest universities, but it’s what you do in the organization, what kind of person you are, how hard you work, you can get right to the top.”
    KC's View:
    I have always thought that the supermarket industry has for too long ignored its ability to be an engine for social mobility; as retailers look for ways to establish their advantages, they ought to be talking about the things they bring to communities - and that includes good jobs for people who want to work and create for themselves careers in which they actually are doing good by feeding people.

    CIES (now the Consumer Goods Forum) flirted with this a few years ago, but kind of veered off on other tangents. And, while I hate to say it, Walmart has done a superb job of running commercials that speak specifically about the people it hired and the careers they are able to mold.

    But, IMHO, other retailers ought to be following this path.

    Published on: March 14, 2011

    The Wall Street Journal reports that Borders Group hopes to get out of bankruptcy protection by the end of summer, and that it is planning to close between 25 and 75 stores in addition to the 200 it already announced as being shuttered.

    A key goal for the company - being in a position to market against the end-of-year holiday selling season, which would be critical in getting the company back on its feet.

    Right now, the company is wrestling with what to do with its 25,000 square foot superstores, when less and less of that space is needed to sell actual books, which more and more are being sold online. (Games and consumer electronics are among the options being considered for the extra space.) And, Borders has to figure out its online strategy, which has paled compared to that of Amazon.
    KC's View:
    It is instructive to retailers in all venues to read the words of Borders President Mike Edwards, who says that while he has no plans to add any executive staffers, the one exception might be “to hire a senior online executive to work with”


    The fact is that Borders made a fateful decision in 2001 when it decided to outsource its online business to Amazon, only taking it back in 2008. During those seven years, when the online business was exploding, Borders was a non-player, seemingly in total denial about where the market was going and how fundamental consumer behavior was changing.

    That’s a mistake that retailers cannot afford to make, no matter what they are selling.

    Published on: March 14, 2011

    Interesting piece in the New York Times about a new marketing initiative developed by Coinstar, which has some 19,000 coin counting machines in supermarkets and other venues around the country.

    Normally, when people pour their coins into one of the company’s machines, they pay a service fee of 9.8 percent to have the company count the coins and give them a receipt that they can cash in at a checkout lane.

    “Now Coinstar — with operations throughout the United States, Canada and Britain — increasingly is teaming up with retailers, who essentially pay that service fee on behalf of consumers, who in turn agree to spend their bounty with them,” the Times writes, adding, “The latest effort by Coinstar, in pilot programs under way at both the Albertsons and Stop & Shop supermarket chains, entails a first for the company: offering no-fee gift cards at the very store where shoppers are exchanging coins.”

    For five years, Coinstar has offered no-fee gift cards underwritten by companies such as Starbucks, iTunes and Amazon. But this is the first time that the company has offered the same program to retailers that actually have the coin-counting machines in their lobbies.
    KC's View:
    While the Times does not venture down this road, this may be a way for Coinstar to get its numbers up, which could help its stock price, which most analysts seem to feel has been performing at “disappointing” levels in recent months.

    Published on: March 14, 2011

    Reuters reports that Walmart “has apologized for selling duck meat past its expiry date in a store in southwest China's Chongqing region ... A store in the Jiulongpo district was caught by a local market regulator selling smoked tea ducks using the meat.”

    Walmart reportedly will pay the victims “10 times the price of the ducks as a penalty.”
    KC's View:

    Published on: March 14, 2011

    The Consumer Goods Forum (CGF), which was scheduled to hold its annual Global Summit in Tokyo, Japan, on June 15-17, reportedly will make a decision by the end of the week as to whether it will reschedule and/or move the event to another venue.
    KC's View:
    There is almost no way that the CGF can host the 2011 event in Japan, considering the devastation taking place there right now and the uncertainty about the situation surrounding the stricken nuclear power plants.

    If they’re looking for advice, they should turn to the folks at the Food Marketing Institute (FMI), who at the last minute had to postpone their 2009 Future Connect conference for several months because of concerns about a swine flu pandemic.

    Stuff happens. At this moment, the most important thing is the situation in Japan, which seems to get worse with every hour.

    Published on: March 14, 2011

    Bloomberg reports that “in coming months, Americans will be inundated with commercials pushing everything from soy-infused chili to corn dogs,” as mainstream companies such as Kraft and Kellogg look to get behind a US Department of Agriculture (USDA) recommendation that people should get more soy in their diets.

    However, there is one complication: the “ick” factor. “While soy is an integral part of Asian diets, it has never been widely accepted by Americans even though they routinely eat it - perhaps unwittingly - in processed foods that use soy oil such as sauces, salad dressing, baked goods and snack foods,” Bloomberg writes.

    The other complication, some analysts: tell Bloomberg: Americans routinely ignore USDA recommendations.
    KC's View:

    Published on: March 14, 2011

    • Reports are that the 99 Cents Only chain has received a $1.3 billion takeover bid from the Schiffer/Gold family, which founded the company, and Leonard Green & Partners. The bid represents a 14 percent premium over the company’s closing stock price last Thursday.

    The Schiffer/Gold family already owns 33 percent of the company.

    Reuters Health writes that “soy foods and supplements probably don't help control high blood sugar, according to a new report.

    “Some clinical trials have linked soy to better blood sugar control. But for the new study, researchers combined the results of two dozen previous trials and found that overall, boosting soy intake did not appear to improve people's blood sugar levels.

    “There was some evidence of a benefit from soy foods like tofu, however, as opposed to soy supplements.”

    • The Chicago Tribune reports that “about 16 percent of dinners tonight will come from the freezer aisle, an all-time high and up from 11 percent in 1990, according to the NPD Group.”
    KC's View:

    Published on: March 14, 2011

    Got the following email from MNB user George Morrow:

    Been part of your group since before MNB, and passed it on to everyone at Walmart.

    Question, has the grocery/retail business gotten down to so few players that your articles are so many ads for Apple, Amazon etc.?  Doesn't seem to be much actual news about the industry as there used to be, could that be a sign that there are only a few retailers left and you have very little "hard" info to pass on to us???  Just wondering!!

    I appreciate both the advocacy and the question.

    First of all, there are no “ads” for Apple and Amazon. (I wish!) There are stories about both companies, with some frequency, because I think they are thought leaders that can provide inspiration and lessons for other retailers.

    In the end, that’s my goal. To inspire and provoke, using whatever raw material happens to be available on a given morning.

    There are other sites that offer minutiae ad nauseum about this initiative or that decision. Some of that is fueled by a feeling that this is what readers really want; some of it is fueled by what companies they may be selling ads or trying to sell ads to. (The word “adjacency” is one that ad salesmen love, and that most writers and editors loathe.)

    Maybe we define “hard info” differently. I think that these days, when there is a glut of “hard info,” what people really want - and need - is a place that will help them think about issues differently, will help them frame their internal and external debates in a different context. (Not to mention a site that tries to be entertaining, illuminating, literate, reasonably well-written and never catering to the lowest common denominator.)

    Sometimes I make it. Sometimes I don’t.

    Or, as Crash Davis says in Bull Durham, “This is a very simple game. You throw the ball, you catch the ball, you hit the ball. Sometimes you win, sometimes you lose, sometimes it rains.”

    But I thank you for the continuing challenge.

    On the subject of supermarkets in malls, we got the following email from Italy, where MNB user Beatrice Orlandini wrote:

    It's funny, because here in Italy we are discussing whether food stores should get OUT of malls.

    From the start we adopted the French model: shopping center/mall with food store (large hypermarket).

    But, the larger the malls are getting, the harder it is to combine the two trips.

    It's becoming quite evident that the two trips are often made by a different shopper or - we can say - by the same shopper in very different moments of his/her life.

    It's getting impossible to buy your grocery and also shop around.

    Most stores in the center don't allow you to enter with your cart.

    Entering a food store with all the items previously purchased can be a big nuisance.

    We've been discussing what the ideal solution is.

    Downsize the food store if the center is big?

    Create different itineraries within the mall for the different shoppers?

    It's maddening, if you just want to buy your groceries, to be forced to walk through the whole center in order to reach the food store.

    Westfield has a very successful center in London.

    The Waitrose store is right at the entrance and you can get in and out without having to visit the mall if you're in a hurry or not interested.

    But, the center is huge and the store is small.

    I cannot think that Westfield's great success is in any way due to Waitrose's presence (or M&S's).

    So, go ahead with food stores in malls but be very careful where you place them.

    Food stores can be a big anchor but they require extra thinking and planning. A good survey before making any move could be useful.

    Regarding Safeway’s decision to sue the city of San Francisco over a law banning tobacco sales in stores containing pharmacies, claiming that the law gives an unfair advantage to markets that don't sell prescription drugs, one MNB user wrote:

    I thought Safeway aspires to be portrayed as being a health conscience company.  This lawsuit appears to contradict their company’s ideology.  Could it be, profits are more valuable than principles?

    MNB user Mike Spindler has some thoughts about a confluence of stories last Friday concerning the ways in which the competitive landscape is shifting, led by companies such as Walmart and Amazon, in favor of various new-style business models:

    Interesting view of a combination of stories.  Nicely done.

    It is interesting to me that grocery led this whole “pickup” model thing with Lowes Foods in N.C. being the pioneer.   It is also interesting at how slow development of OGS has been in terms of the numbers of stores (traditional Bricks and Mortar stores) given the proven profitability, growth and customer attraction.  I suspect that is because of the lack of true innovation in the area since 2005-2006.  Oh, there has been some nice little mobile apps and such but no real meaningful multi-channel, customer centric developments. 

    I believe that is about to change with the combinations of some technologies, some data utilities and some labor models.   Your conclusion about grocer’s needing to play is absolutely correct.  Perhaps the developments of which I speak will give them a compelling reason.

    MNB user Anna Stewart wrote in with the following thoughts:

    If you remember I am the reader, follower, fan, whatever you want to call it, that said I would no longer subscribe because I felt you were becoming to pro-Wal Mart. I know you often say how well companies handle a complaint and that you admire that. I want to let you know I was amazed at how you handled mine. I felt you listened to my view and were completely respectful of my opinion. Thank you. That why I subscribe. Yes, I still follow you on MNB and Facebook, I find you are fair and balanced) for real.

    Thanks for always hearing me out, even when it's not positive feedback.

    And finally, thanks to all of you who wrote in about my piece regarding my days in Las Vegas with my 21-year-old son. I enjoyed hearing your stories, and I’m glad you liked sharing mine. Even though many of us only know each other through this little piece of space and time each morning, we’re all in this together ... as our similar stories make abundantly clear.
    KC's View: