business news in context, analysis with attitude

Published on: March 24, 2011

by Kevin Coupe

Content Guy’s Note: Below is a commentary on the same subject as the video piece, but it isn’t word-for-word the same. You can look at both, or either...it is up to you. I look forward to hearing from you.

Hi, I’m Kevin Coupe and this is what’s on my mind this morning...

There was a nice piece in the Boston Globe this week about so-called “Men’s Zones” that Procter & Gamble is testing in various retailers - including HEB and Target - around the country. The concept is to create male-specific aisles in stores where men can find and select grooming products especially for them - ranging from razors to hair coloring products to body washes to shampoos and deodorants.

And it isn’t just P&G that has its eye on the male market. Duane Reade, the NY drugstore chain owned by Walgreen, also is testing a Men’s Zone concept, and Unilever has rolled out a variety of men’s grooming products designed to appeal to us guys.

The thinking behind these concepts is simple - that guys like to buy stuff, while women like to shop. And therefore, the departments designed to appeal to them should be laid out differently, have a different approach to SKU rationalization, and even have a different decor package to make us guys feel at home.

But it occurs to me that this approach ought not be reserved for the HBC area of the store. The fact is that guys, because we’ve been disproportionately affected by the recession, have more time to do the food shopping these days, and are undertaking more of those responsibilities. Plus, we’re doing more of the cooking.

So maybe stores ought to think about food sections that are designed specifically for guys, with products that appeal to us - not just the way we shop, but also the way we cook and eat. They could go beyond what traditionally has been described as “meal solutions,” and be specifically developed to help guys meet new and expanding responsibilities. In fact, stores could get guys to help them design such sections - “Man Caves,” if you will - that would gives stores a differential advantage with a target demographic.

It’s just an idea ... but I think that anything stores can do to reach out to different, even non-traditional customer groups, is a good thing.

That’s what’s on my mind this Thursday morning. As always, I want to hear what’s on your mind.

Published on: March 24, 2011

by Kevin Coupe

We’ve had a lot of discussion here on MNB over the years about the difficulty of trying to cut one’s way to prosperity, and the challenge of being both efficient and effective.

In a different venue, there was a vivid illustration of how cutting, cutting, cutting can lead to less than optimal scenarios. Two airplanes, carrying a total of 165 passengers, were scheduled to land at Reagan National Airport during the early morning hours. There was just one problem - the pilots couldn’t get anyone in the control tower to respond to their requests for instructions.

According to the Washington Post, “The tower, which normally is staffed by one air-traffic controller from midnight to 6 a.m., did not respond to pilot requests for landing assistance or to phone calls from controllers elsewhere in the region, who also used a ‘shout line,’ which pipes into a loudspeaker in the tower, internal records show ... The incident...is the second time in as many years that the tower at National has gone silent, said a source familiar with tower operations who spoke on the condition of anonymity because he is not authorized to speak for the FAA. The previous time, the lone controller on duty left his swipe-card pass key behind when he stepped outside the tower’s secure door and was unable to get back in, the source said.”

The pilots were able to communicate with each other, and landed their planes safely. Government regulators are investigating.

But here’s the alarming paragraph, from the Post:

“Nationwide, errors by air traffic controllers increased by 51 percent last year. The record number of errors - locally and nationally - reflects a majority of instances in which planes came too close and some in which a potentially fatal outcome was narrowly averted.”

Close calls. Way too close for comfort.

A retail store is not an airplane, but the metaphor is worth considering. You can cut as a way of getting more efficient, but it is almost impossible to cut your way to effectiveness and productivity. Eventually, you go so deep that you can’t perform even the bare minimum required functions. And that’s too deep for comfort.

And that’s our Thursday Eye-Opener.

Published on: March 24, 2011

A new study from Aberdeen Group, sponsored by HP, suggests that “personalization of the in-store customer experience will be a key objective for retailers over the next two years,” and that “interactive solutions located throughout a store will play an increasingly important role in delivering a highly personalized sales strategy.”

If this is true, there is a sobering side to the report: that “according to 100 senior retail executives surveyed from industries such as apparel, grocery and department stores, 76 percent of retailers do not possess the technology tools or the business processes for executing web, catalog or special orders from stores. This challenge is being fueled by rising consumer expectations of rich, multimedia in-store shopping experiences.

“The research advises retailers to make customer-centric store improvements that utilize digital signage, point-of-sale systems and kiosks to further in-store product information, promotions, sales and service personalization for customers.”

Published on: March 24, 2011

Fascinating post on TechCrunch.com by Aileen Lee, a partner at the Silicon Valley venture capital firm of Kleiner Perkins Caufield & Byers, in which she talks about who is driving what she calls “the golden age of the web.”

An excerpt:

“We’re witnessing a generation of consumer web companies growing at an unprecedented rate in terms of both user adoption and revenue.

But here’s a little secret that’s gone unnoticed by most.  It’s women.  Female users are the unsung heroines behind the most engaging, fastest growing, and most valuable consumer internet and e-commerce companies.  Especially when it comes to social and shopping, women rule the Internet.

“Consider some more data. Comscore, Nielsen, MediaMetrix and Quantcast studies all show women are the driving force of the most important net trend of the decade, the social web. Comscore says women are the majority of users of social networking sites and spend 30% more time on these sites than men; mobile social network usage is 55% female according to Nielsen.

“In e-commerce, female purchasing power is also pretty clear.  Sites like Zappos (>$1 billion in revenue last year), Groupon ($760m last year), Gilt Groupe ($500m projected revenue this year), Etsy (over $300m in GMV last year), and Diapers ($300m estimated revenue last year) are all driven by a majority of female customers.  According to Gilt Groupe, women are 70% of the customer base and they drive 74% of revenue.  And 77% of Groupon’s customers are female according to their site.”

Understanding the force of women in this area is especially important if one is involved - as every retailer should be - in the social networking segment. Another excerpt:

“Women are thought to be more social, more interested in relationships and connections, better at multi-tasking.  There is also anthropological research to back this up.  Dave Morin of Path introduced me to Dunbar’s Number, proposed by the anthropologist Robin Dunbar.  The number is the theoretical limit of how many people with whom one can maintain stable relationships (thought to be 150).

“But Dunbar’s most recent research shows there are different numbers for women than men that women are able to maintain quantitatively more relationships within every ring of closeness than men.  Knowing that is an important factor if you want to build and stoke social network effects.  More female users will likely help your company grow faster.”

Published on: March 24, 2011

HealthDay News reports on a new study just presented at an American Heart Association conference suggesting that “eating breakfast cereal - especially whole grain cereal - may reduce the risk of developing high blood pressure.” The study found that “men who ate cereal at least once a week reduced their risk of high blood pressure 8 percent compared with men who ate no cereal. Consuming cereal two to six times a week lowered the risk 16 percent, and eating it seven or more times a week dropped the risk 25 percent.”

The story notes that there was no private industry funding for the study (meaning that it was not shaped by cereal companies), which began in 1982.

Published on: March 24, 2011

USA Today reports that just three months after Starbucks began accepting payments via the Starbucks Card Mobile iPhone and Blackberry applications, more than three million people have paid for their lattes and other drinks using the mobile app.

According to the story, “The Starbucks mobile payments offering is a ‘touch to pay’ system. It allows the customer to hold up the app's barcode to the in-store scanner at the register to pay using the electronic tender. The program was piloted at select stores in September 2009. After extensive testing, it was found to be the fastest way for customers to pay.”

The results were revealed at Starbucks’ annual meeting in Seattle by CEO Howard Schultz.

The story continues:

“Mobile payments is just one element of a much larger social and digital media strategy that Schultz refers to as a ‘blueprint for growth.’ This involves the brand crossing over into the consumer packaged goods (CPG) category by leveraging its digital and social properties. Schultz was eager to inform shareholders that the Starbucks brand is number one on Facebook with 29 million fans, and is also a top brand on Twitter and Foursquare.

“Schultz used Starbucks' new instant coffee brand VIA as proof of the crossover strategy. VIA generated $194 million in sales in its first year, and is now in 40 points of distribution.

“Ultimately, Schultz believes the company's CPG business will rival its retail business — and that the Starbucks Card Mobile application will connect both sides of the brand's identity through loyalty programs.”

Published on: March 24, 2011

The Wall Street Journal reports that small businesses are getting smarter about how they structure deals with social coupon companies such as Groupon.

“The small businesses that feed the ‘deal a day’ websites are getting more sophisticated in how they structure their offers, and with whom,” the Journal writes. “In the past, merchants regularly absorbed as much as 75% of a deal's cost and often saw little in the way of repeat business.

“Now, with a glut of Groupon clones competing for their attention, merchants are carefully negotiating better revenue splits and tweaking the fine print of their offerings to make deals work in their favor. That, in turn, could tighten margins in what has been a fast-growing business.

“The lure for small businesses is the amount of potential customers they can reach with little effort. Groupon, for example, operates in more than 500 markets and has over 60 million users.”

Published on: March 24, 2011

The Seattle Times reports that “two local units of the United Food and Commercial Workers union said Wednesday their members overwhelmingly agreed to join forces starting April 1.

About 1,500 meat cutters and wrappers with UFCW 81 will become part of UFCW 21, creating an organization with more than 37,000 members in Washington state encompassing the grocery, retail, health care and meat processing industries.

“UFCW 21, which already calls itself Washington state's largest private-sector union, said the merger gives it more bargaining power at a time when lawmakers elsewhere throughout the U.S. consider anti-union legislation.”

Published on: March 24, 2011

• The Wall Street Journal reports on a story by the Daily Journal saying that “Wal-Mart has issued various requests to firms in recent years that they hire and retain more women and minority lawyers, but the company recently took a more controversial step: insisting that it have a say in deciding which firm lawyers get origination credit for Wal-Mart work.

“The initiative, the Daily Journal reports, is designed to ensure that firms not only retain more minorities but also that they ensure that minorities are designated as key client contacts.

“Some firms ... are not pleased that Wal-Mart is meddling in internal decisions about who gets client credit.”

Published on: March 24, 2011

• US Secretary of Agriculture Tom Vilsack has announced $158 million in expanded funding for the Fresh Fruit and Vegetable Program (FFVP) for 2011-2012 school year, providing fresh fruits and vegetables for children throughout the school day in all 50 states, as well as the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

• USA Today reports that “a nearly 50% increase in vegetable prices that has sent shoppers reeling in the produce aisle should ease in the coming weeks as farmers send grocers more tomatoes, lettuce and other crops.

Published on: March 24, 2011

Got an interesting email regarding yesterday’s Eye-Opener from MNB user David Bernstein:

After reading your Wednesday Morning Eye-Opener, I went to Zediva.com to check it out.  The first thing I saw was "We're sorry, registration is temporarily closed while we're building more capacity.  Please join the waiting list."  Okay...so I entered my email, and the subsequent page had a similar spiel, only this time they added "We're still a new company, so please excuse us while we catch up."

Really?

I don't care how new you are, or how disruptive your business model is.  If you're asking for exponential growth, and you're not ready for it, then just stay in Beta.  Can you imagine if Netflix, Amazon, or Facebook had maxed out their capacity right when they were launching?  We would all be posting complaints about the long lines at Blockbuster and Borders...on our MySpace profiles.

I'll be very interested to see how long I have to wait before they are "caught up."

Excellent point.

And MNB user Richard Thorpe wrote in about another Eye-Opener:

The idea of original programming for NetFlix is genius. However, as a former customer who cancelled service because connecting on line did not work properly and the Netflix person who fielded my "complaint" - "request for help" could not have cared less if they tried.  Thanks to your persistent praising of Amazon I have recently started purchasing items from them. They deliver even when it is through third parties and I will go back to Amazon.  It is not just great ideas - it also delivering on the promise.

Absolutely.




Yesterday, MNB took note of a Wall Street Journal report on new bagging procedures being adopted and aggressively promoted throughout Supervalu’s various banners, “part of a training program that Supervalu Inc. believes will save it millions of dollars a year by putting more items in each bag or skipping the bag altogether. Plastic bags cost about two cents apiece and paper bags cost five. The Eden Prairie, Minn., operator of Albertsons, Acme Markets and Jewel-Osco stores uses more than 1.5 billion plastic and paper bags a year at about 1,100 stores, not counting its Save-A-Lot discount stores, where customers bring or pay for their own bags.”

According to the story, “Some of the Supervalu guidelines reinforce familiar bagging rules, such as starting the packing at the corners and moving from the outside in. But others break with common practices: No double-bagging. No bags for large items or items with handles, like one gallon orange-juice containers. Never ask, ‘Paper or plastic?; just use plastic bags. The rules can be broken, but only on request.”

I commented:

I have mixed emotions on this one.

On the one hand, I happen to believe that the little things make a difference, and that pennies saved on bagging here and there can add to up to big savings that can have an impact on the bottom line. And so on that level, Supervalu’s approach makes sense.

But there is a tone to the story - and this may be the way the Journal wrote it, and not the way Supervalu is enacting it - that suggests that Supervalu believes that what it wants and needs is more important than what its customers want and need.

The only thing that, in the long run, will help Supervalu turn around sales declines is offering a better store experience, which means different things with different formats and in different locations. And that means making the customer’s priorities their own.

One MNB user responded:

Regularly in your commentary and in the press in general, the glass seems to always be half empty with regards to Supervalu.  A simple, smart cost savings reminder regarding the use of paper/plastics bags becomes another opportunity to portray Supervalu negatively.  While I appreciate your comment regarding attention to detail (and the potential to save millions of dollars), teasing out the negative aspect of the Wall Street Journal’s report is gratuitous.  You could have added some meaningful insight by also pointing out the potential for customer satisfaction and community benefit through the potential elimination of millions of bags into the waste stream.

Gee, I wasn’t trying to be gratuitously negative. Just balanced.

Another MNB user wrote:

As someone familiar with the inner workings of Supervalu, I am not sure that this news or even the tone of the article suggests they only care about only their own wants and needs versus customers.  But it certainly does reflect three things that are absolutely true:

• A nearly complete disconnect between store operations & merchandising from any coherent understanding of the customer.

• Driven in large part by senior leadership team across functions that has limited retail experience beyond Craig Herkert.

• And in particular, marketing leadership that has never truly understood their role in understanding and shaping the customer experience.

Most of all, I read a certain desperation in this action and a continued misguided belief that you can cut your way to a solution. 

Another MNB user chimed in:

Ah, the allure of exponential savings on bags.  Every retailer has salivated over that one.  Your point about the shopping experience is spot on.  And as humble as it may seem, the bag is the bow.  If the bag is too heavy, rips, or plastic isn’t preferred by the customer – it diminishes the whole experience.   The anticipated savings are vulnerable to: a) human behavior – changing bagging habits of employees will take a Herculean effort;  b) Changing customers preferences and expectations will be just as challenging; c) it will make them look cheap, not frugal d) what’s in it for the customer?  Are they going to feel better about shopping one of their banners because of this? e)  Others in the industry have achieved cost reductions by incenting the use of canvas reusable bags (of which you are an admired advocate) and succeeded in making their customers feel good about where they shop.  One approach is cost cutting, the other is a shared investment in the planet, the environment, the neighborhood (pick your geographical reference).  One feels like something was done to you; the other as something done with you. 

This is just another measure that is symptomatic of a deeper flaw.

And, from another MNB user:

I spent 25+ years with Supervalu in a number of positions. I agree that there currently seems to be a major disconnect between management and the consumer. The little things do make a difference. Toward the end of my “run” I came to feel that I, my fellow associates and the customers that we depended on, were all reduced to a number on a P&L. I actually remember a senior executive using the word “harvest” to describe a marketing strategy to extract the maximum profit with the lowest investment of time and resources ….. the retail equivalent of strip mining.

And another MNB user wrote:

Thanks for taking the high road today on the SV bag story.  I was glad to see you didn’t resurrect the “paper vs. plastic” discussion.

Question for SV though – why not encourage shoppers to bring their OWN bags and give them a discount on the order (even 5 cents…) for a short time period?  Then, once people start doing it regularly, they can phase out the reward.  Win-Win for the environment, their bag costs, and the consumer not worrying about a bag breaking!

As you know, Lunds/Byerlys here are champions in the “BYOBag” programs – I frequently see people hauling in their green Lunds bags to shop.  Why?  Because they have signs in the parking lot, had rewards at the start of the program, and their consumers “get it”!

Got it.