retail news in context, analysis with attitude

Published on: April 13, 2011

by Kevin Coupe

It was just four years ago that the first Flip video camera - pocket-sized, easy-to-use, and relatively cheap - went on the market, trumpeted both by positive reviews and an effective marketing campaign.

As the New York Times reports, the Flip “quickly dominated the camcorder market.
The start-up sold two million ... cameras in the first two years.”

It was so successful that the founding entrepreneurs sold the Flip to Cisco Systems in 2009 for $590 million.

Yesterday, the Flip run came to an end. Cisco announced it is shutting down the Flip business, conceding that the rapid growth of the market for smart phones - which often include video cameras - made its investment a poor one and its Flip division virtually obsolete.

As the Times notes, “Even in the life cycle of the tech world, this is fast ... the rapid rise, and now demise, of Flip is ... a vivid illustration of the ferocious metabolism of the consumer marketplace and of the smartphone’s power to destroy other gadgets.”

Part of the problem seems to be that the Flip was an odd fit for Cisco, which never really committed continued innovation and marketing of the product.

There are a number of lessons here. One is about the importance of continued innovation. You can’t just make a single investment and expect it to bear fruit in perpetuity.

Another is that there is no such thing as an unassailable business model, no such thing as an unassailable advantage. Everything is assailable. Everybody is vulnerable.

And finally, there is the lesson about the speed of change. These days, as they say, it seems to be faster than a speeding bullet...

And that’s our Wednesday Eye-Opener.

Published on: April 13, 2011

Sun Capital Partners-owned Marsh Supermarkets announced that chairman/president/CEO Frank Lazaran is leaving the company after five years at the helm. An executive search has been completed, but Sun said it would not announce a successor until next month; Lazaran is scheduled to stay with the company until the end of April.

However, sources say that Joseph Kelley, executive vice president of Price Chopper Supermarkets, is a likely choice to run Marsh Supermarkets.

According to a statement released by Sun Capital, “Frank told employees that since the passing of his father this past summer he has realized a need to return to southern California in order to spend more time tending to family matters.”

Published on: April 13, 2011

Bloomberg reports that Walmart, which is recluttering its stores in a number of aisles as it looks to re-establish its credentials as the low-price leader, is decluttering its electronics departments, eliminating a number of SKUs as sales in this segment decline.

According to the story, “The reduction is a reversal of Wal-Mart’s 2009 move to allocate 21 percent more floor space to entertainment gadgets and comes after electronics contributed to a 1.8 percent decline in sales at U.S. stores open at least a year in the fourth quarter, its seventh consecutive drop.”

The announcement comes the same week as Walmart said it would add 8,500 SKUs to its stores, items that it said its shoppers missed after they were eliminated, and which led to the company’s seven consecutive quarters of same-store sales declines in its US units.

Published on: April 13, 2011

A new study by Market Force Information suggests that consumers have a “muddled” view of what private brands are, and often do not even know that they are buying an own-label item when they do so - a situation seen as “unwelcome news for national brands that must be distinguished to warrant their premium prices.”

One consistent exception seems to be Walmart’s Great Value line, which people understand is what it is.

Other findings include:

• “Consumers could identify more private-label brands if they included the store’s name.”

• “More than half of respondents reported buying private-label milk at least some of the time, while only 4% said they never buy it.”

• “On the flip side, 29% never purchase private-label cereal and 19% never purchase private-label snacks.”

• “Taste was only a factor in 7% of private-label milk purchases, yet it’s the main reason why people don’t purchase private-label snacks or cereal.”

• “Lack of trust and inferior quality were the reasons given for not buying store-brand cleaning products.”

Published on: April 13, 2011

In the UK, the Daily Mail reports that the Advertising Standards Authority(ASA) has ruled that Tesco has been guilty of misleading shoppers in which it accused Walmart-owned Asda Group of being more expensive on certain fresh foods. Tesco reportedly has apologized for the ad, calling it the result of “an internal communication error.”

The Mail notes that the long-running price wars in the UK grocery market seem to be “intensifying,” as all; the players “have launched a host of tit-for-tat price promotions and advertisements designed not only to talk up their own bargains, but also to undermine the claims of rivals.”

Published on: April 13, 2011

Forbes is out with its analysis of the nation’s fastest growing retailers:

In first place is Amazon, which has combined a user-friendly site, a broad products range, a strong customer service to create “a loyal customer base that kept sales humming through the worst economic downturn since the Great Depression.” Sales have been up 219 percent between 2006 and 2010.

In second place, Rue21: “Since coming out of bankruptcy in 2003, the apparel chain has found success selling denim and hoodies at its outlet locations, undercutting Gap and other chains on price. After opening about 200 stores in the past two years, Rue21 now operates more than 600 locations in 44 states. Sales rose 181% from 2006 to 2010.”

“In third place: Chipotle Mexican Grill, which grew sales 123% over the same four-year span by catering to time-conscious and cost-conscious consumers with consistently fresh food and a restaurant atmosphere that's a cut above the usual fast food joint.”

Published on: April 13, 2011

USA Today reports this morning that “something odd is afoot in restaurants where Americans have typically gone to gorge: healthier grub.”

According to the story, “In a nation where two of three adults are obese or overweight, restaurant chains of all kinds finally are minding their nutritional p’s and q’s. Some are being prodded by fears of restrictive legislation and continued tough talk from first lady Michelle Obama. Some are doing it out of the fear that even one nutritionally minded family member will talk the whole family out of going ... Some are responding to the hard numbers: Three in four consumers surveyed by Harris Interactive say they’d choose a lower-calorie item if taste and portion size were comparable.”

The story goes on: “This nutritional U-turn is taking place at some of the unlikeliest of eateries, including Denny’s, IHOP, Friendly’s, Sizzler and even at the nation’s biggest casual dining chain, Applebee’s, where the numbers are eye-popping. For the first two months of 2011, the top-selling entree at Applebee’s wasn’t a gloppy burger or flashy fajita plate. It was a sirloin and shrimp entree from the chain’s diet menu. This marks the first time that a low-calorie item ever ranked as the chain’s best seller for a single month — let alone two in a row.”

Published on: April 13, 2011

The New York Times reports that Kraft Foods has launched something it is calling “Operation Spark,” a concerted effort to keep a number of its products - those that are not part of its group of “power brands” such as Oreos and Planters - “from becoming ghost brands — once-prominent pantry staples that fade into obscurity through a lack of consumer interest brought on by a lack of advertising support.

According to the story, “The brands the executives hope to keep from the ghostly ranks include the Athenos line of Greek-style dips, spreads and yogurt; dairy products that are sold in the East under the Breakstone’s name and in the West as Knudsen; and Stove Top stuffing.
Those brands are getting new campaigns and other promotional support, including television commercials for Breakstone’s and Knudsen that began on Monday. The brands also all have new agencies.”

Published on: April 13, 2011

• Rite-Aid CEO John Standley has told analysts that the South Carolina test of co-branded Save-A-Lot limited assortment supermarkets and Rite-Aid drug stores has been so successful that both companies are considering a broader roll-out of the concept.

• In Houston, KTRK-Action News 13 reports that starting today, Kroger will not offer double or triple coupons, and “will only take coupons at face value.”

This is being described as “a huge blow to those who coupon because Kroger's coupon policy has been in place since 1983. Now they are looking at other stores to stretch their dollar.”

Published on: April 13, 2011

• Safeway announced the appointment of Darren Singer, formerly the Vice President of Strategic Growth at GlaxoSmithKline, to be the company's new Senior Vice President, Pharmacy, Health and Wellness.

Published on: April 13, 2011

MNB user John R. Hurguy wrote:

In Monday’s eye-opener, you suggested, “you can’t just dictate to employees, you have to earn their loyalty, you have to work hard to get them to buy in and take ownership.  In doing so, you become a leader rather than just a manager.” 

I couldn’t agree with you more.  While reading, what immediately what came to mind was my favorite leadership quote which is attributed to President Dwight D. Eisenhower, “Leadership is the art of getting someone else to do something you want done because he wants to do it.”

The Eye-Opener was about tying compensation to strategic goals, taking note of Google’s decision to tie 25% of employees’ annual bonuses to how well Google pushes out its social strategy in the coming year.

But MNB user Cal Sihilling thought this was old news:

Kevin, not sure how really eye-opening this is.  It would seem that MBO has been a compensation strategy for quite some time, in my world at least.  IMHO, the key to success is the development of the objectives so they truly align in a measurable fashion with the strategy.  I would wonder how Google is going to quantify progress relative to this bonus objective.  If not clear, they may not get the bang for the buck that they expect.

I guess I’m thinking that “objectives” and “strategic visions” are not always the same thing. Objectives may be met, but because a lot of companies operate in silos, that does not always mean that the broader vision is being achieved.



Responding to Michael Sansolo’s column about McDonald’s hiring spree, one MNB user wrote:

I started working in a family-run grocery store at the age of 12 and worked until I graduated from high school.   Upon entering college, I went to work for a large privately-held Midwestern grocery chain to pay my tuition bills.   As I completed my business degree, I interviewed with a limited number of companies on campus without success (it was during that time that the unemployment rate was as high as it is today).   The store director I was working for at the time had already given me a middle level management role and he encouraged me to stay on full-time after graduation.   I took him up on his offer and six years later I was running my own store.    I often told people that I had the luxury of running a multi-million dollar operation with dozens of employees while using someone else's money.   There is no doubt that I received an invaluable education in personnel management, marketing, merchandising, food service sanitation, fiscal management, and much more during the 26 years I spent in the business.

During the time I spent in management I frequently encouraged my student-employees to consider a career in the grocery industry.   Some of my most rewarding experiences have occurred recently as I have contacted these same former employees and heard them share stories of how their retailing work prepared them well for other work experiences they had later in life.  Many of them went on to succeed in careers both in the grocery business and elsewhere in retailing or management.    I recently visited with one former employee who now is CEO and owner of a multi-million dollar business and he attributes much of his work ethic and success to the time he spent working in the grocery business.

Later in life when I changed careers, I found that I was well prepared to do a variety of jobs based on the expertise I gained from running a grocery store and had many work opportunities from which to choose.     My retail education has also served me well in my second career. If I'd had it to do all over again, I would not have done it any differently.   I still encourage young people to investigate and pursue employment in the supermarket industry.




Tuesday’s Eye-Opener looked at a WSJ piece by Dilbert creator Scott Adams, in which he wrote about the importance of teaching entrepreneurial skills to business students. I agreed with him...though I also believe in a liberal arts education:

I actually think that some of the business students who grew up to be investment bankers and hedge funders might have had a few more compunctions about business practices that threw the nation into a financial tailspin if they’d actually paid attention to a little Shakespeare, read a little F. Scott Fitzgerald or Ernest Hemingway, or understood that there is more to life than just creating wealth.

One MNB user responded:

Excellent points on the value of a well-rounded education.  Many of our ills today have much to do with having created a society of technocrats who don't get much more than their sphere of expertise.

Another MNB user wrote:

Good points from you and Scott on curriculum. I would suggest that all students should study liberal arts, civics - ethics - art history - etc. This should be done in High School along with math and science and advanced courses should continue to be required at the University level.

If all of us had had broader educations, perhaps, perhaps we would be better able to speak to each other rather than yell.

And MNB user Philip Bradley wrote:

This article is just one more reason why I find MorningNewsBeat an incredibly stimulating experience!  Keep up the great work!  (And I agree with you that B students should probably read literature as well as study entrepreneurship!)

Published on: April 13, 2011

Note: This week, the Food Marketing Institute (FMI) offers a preview of some of the most anticipated sessions scheduled for its Future Connect conference, slated to be held May 10-13 in Dallas, Texas.

This morning, an e-interview with Gary Chartrand, Executive Chairman and former CEO of Acosta Inc., and the author of “Unreasonable Leadership.”

In Chartrand’s Future Connect session, he will focus on the need to leave risk-averseness and the status quo behind and march into the discomfort zone, remaining resolutely "unreasonable."

Chartrand will be speaking on Wednesday, May 11, from 9-10:00.

We live in a world where it seems that people are more unreasonable than ever, and that this creates an uncivil and unproductive atmosphere.  But you're defining "unreasonable leadership" differently, aren't you?  (In other words, being unreasonable is not the same as being disagreeable, right?)

Gary Chartrand: My definition of unreasonable stems from the George Bernard Shaw quote that “All progress is made by unreasonable people, because reasonable people adjust to their surroundings and unreasonable people rebel against their surroundings and produce progress.”   I have defined unreasonable leadership as a leader who has the courage and conviction to change the status quo.  To leave their comfort zone and pierce through the fear of failure, the risk taking, and lack of self confidence that holds people back from becoming what they are capable of.
 
While you speak about the importance of taking risks and being aggressive, you are not talking about being out there all on your own - in fact, you seem to spend a lot of time talking about the importance of building coalitions, which is different than consensus.  True?

Gary Chartrand: Taking risk is different than being reckless.  Building relationships with your team, understanding the facts (the data) and creating a culture of thinking and acting boldly is what produces progress.  Unreasonable leaders find the opportunity in difficulty, not the difficulty in the opportunity.

In a culture where you create unreasonable expectations, how do you also create an environment that supports the people trying to achieve them?

Gary Chartrand: Creating a culture of being all that you can be is what is needed to accomplish extraordinary results.  Not accepting mediocrity quickly becomes ingrained in the organization if you set high expectations and hold people accountable.  People will rise to the level of expectations you as the leader set.  If you set them low, that’s what you get.  If you set them high, you will get that also.  Building trusting relationships is paramount.  Rules without relationships equals rebellion.
 
You put a lot of emphasis on the importance of being willing to ask a question...that putting yourself out there is important toward achieving unreasonable goals.   Why is this so critical?

Gary Chartrand: “Never be Afraid to Ask” is one of the most important chapters in the book.  When an unreasonable leader sets a bold agenda, it most likely will take help from others to get there.  If you are afraid to ask for help , you will not succeed.  No one can accomplish bold agendas by themselves.
 
And how do you deal with failure, which, after all, can happen from time to time?

Gary Chartrand: Failure is the most important teacher we have.  Failure allows us to examine and to learn from our course of action.  The experience of failure is what propels us to succeed.  Think about how we never would have learned to walk or ride a bike without failure.  Failure should be embraced as the best learning tool we have.

How does a person become an unreasonable leader, especially if he or she has been in an organization for a long time?

Gary Chartrand: The first and most important step is to force yourself out of what is comfortable, reasonable and safe.  Force yourself to be uncomfortable.  Expose yourself to new ideas, new situations, new experiences.  People are happy when they are learning, growing, and stretching themselves.  Being comfortable and safe will not make you happy.
 
 
For registration information about Future Connect 2011, click here