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: April 18, 2011

    by Kevin Coupe

    The Association of American Publishers (AAP) says that an analysis of February 2011 book sales figures reveals that e-books generated $90 million in sales - more than any other single format (hardcovers, trade paperbacks, mass market paperbacks).

    While e-book sales still lag behind all of the physical formats combined, this is seen as yet another indication of the revolutionary change affecting book publishing and retailing, and an explanation of why companies such as Borders are in financial trouble, and sales of devices such as the Kindle and iPad are thriving.

    The other thing that AAP points to as a dramatic change is the interest in what are called “backlist books,” or those that have been in print for some time. This is the book version of the “long tail” phenomenon - with more product available more easily, people are interested in buying a broader range of products.

    It is a retail trend worth noting, and an Eye-Opener no matter what you are selling because it reflects not just a technological change, but a fundamental consumer shift.
    KC's View:

    Published on: April 18, 2011

    The Seattle Times reports that when Walgreen completes its $429 million acquisition of Drugstore.com, it plans to “maintain their separate branding, though the company also says that it “intends to enhance its multichannel product assortment and the overall customer experience by leveraging drugstore.com's websites ... The transaction is happening because Walgreens likes what we have built, and they have no intention of tampering with what is working.”

    The Times story also notes that it took a year and three offers for Walgreen to finally land Drugstore.com, which has never turned an annual profit.

    “The courtship started a year ago when New York investment bank Sonenshine Partners met with Walgreens to discuss general business-development topics, including an online strategy,” the Times reports. “ At the time, Sonenshine also had been working with drugstore.com as an adviser on its vision business.

    “Although it was neither a representative of drugstore.com nor under any instructions to discuss drugstore.com with Walgreens, Sonenshine mentioned that it could try to set up a meeting between the two companies, according to drugstore.com. Walgreens expressed an interest, and Sonenshine approached drugstore.com Chief Executive Dawn Lepore.”
    KC's View:
    It will be interesting to see how long the separate branding strategy lasts. At some point, I suspect, it will make sense to engineer some sort of connection - perhaps in the same way that Ahold has connected its various store banners with Peapod. That seems to be have been a successful model, and could work as one for Walgreen to emulate.

    Published on: April 18, 2011

    The New York Times yesterday featured an excerpt from the new book, “The Corner Office: Indispensable and Unexpected Lessons From CEOs on How to Lead and Succeed,” by Adam Bryant, based on his weekly Times column of the same name.

    In the excerpt, Bryant says that his interviews with more than 70 business leaders suggest that there are “five essentials for success — qualities that most of those CEO’s share and look for in people they hire.”

    Bryant writes, “The good news: these traits are not genetic. It’s not as if you have to be tall or left-handed. These qualities are developed through attitude, habit and discipline - factors that are within your control. They will make you stand out. They will make you a better employee, manager and leader. They will lift the trajectory of your career and speed your progress.

    “These aren’t theories. They come from decades of collective experience of top executives who have learned firsthand what it takes to succeed. From the corner office, they can watch others attempt a similar climb and notice the qualities that set people apart. These C.E.O.’s offered myriad lessons and insights on the art of managing and leading, but they all shared five qualities: Passionate curiosity. Battle-hardened confidence. Team smarts. A simple mind-set. Fearlessness.”

    More specifically...

    Passionate curiosity. “It’s this relentless questioning that leads entrepreneurs to spot new opportunities and helps managers understand the people who work for them, and how to get them to work together effectively. It is no coincidence that more than one executive uttered the same phrase when describing what, ultimately, is the CEO’s job: ‘I am a student of human nature.’

    “The CEO’s are not necessarily the smartest people in the room, but they are the best students — the letters could just as easily stand for ‘chief education officer’.”

    Battle-hardened confidence. “The best predictor of behavior is past performance, and that’s why so many chief executives interview job candidates about how they dealt with failure in the past. They want to know if somebody is the kind of person who takes ownership of challenges or starts looking for excuses ... Many CEO’s seem driven by a strong work ethic forged in adversity. As they moved up in organizations, the attitude remained the same - this is my job, and I’m going to own it. Because of that attitude, they are rewarded with more challenges and promotions.”

    Team smarts. “The most effective executives are more than team players. They understand how teams work and how to get the most out of the group. Just as some people have street smarts, others have team smarts.”

    A simple mind-set. “There is a stubborn disconnect in many companies. Most senior executives want the same thing from people who present to them: be concise, get to the point, make it simple. Yet few people can deliver the simplicity that many bosses want. Instead, they mistakenly assume that the bosses will be impressed by a long PowerPoint presentation that shows how diligently they researched a topic, or that they will win over their superiors by talking more, not less.

    “Few things seem to get CEO’s riled up more than lengthy PowerPoint presentations. It’s not the software they dislike; that’s just a tool. What irks them is the unfocused thinking that leads to an overlong slide presentation.”

    Fearlessness. “Are you comfortable being uncomfortable? Do you like situations where there’s no road map or compass? Do you start twitching when things are operating smoothly, and want to shake things up? Are you willing to make surprising career moves to learn new skills? Is discomfort your comfort zone ... With the business world in seemingly endless turmoil, maintaining the status quo - even when things appear to be working well - is only going to put you behind the competition. So when chief executives talk about executives on their staffs who are fearless, there is a reverence in their voices. They wish they could bottle it and pass it out to all their employees. They’re looking for calculated and informed risk-taking, but mostly they want people to do things - and not just what they’re told to do.”
    KC's View:
    Fascinating stuff. Thought, to be honest, I wonder how many CEO’s and other business leaders live up to their own statements.

    But I’m certainly going to read the book.

    To read the Times excerpt, click here.

    Or, to check it out on Amazon.com, click here.

    Published on: April 18, 2011

    Yesterday’s New York Times Magazine featured a long cover story asking a single question:

    Is sugar toxic?

    Some excerpts:

    • On May 26, 2009, Robert Lustig gave a lecture called “Sugar: The Bitter Truth,” which was posted on YouTube the following July. Since then, it has been viewed well over 800,000 times, gaining new viewers at a rate of about 50,000 per month, fairly remarkable numbers for a 90-minute discussion of the nuances of fructose biochemistry and human physiology ... The viral success of his lecture...has little to do with Lustig’s impressive credentials and far more with the persuasive case he makes that sugar is a ‘toxin’ or a ‘poison,’ terms he uses together 13 times through the course of the lecture, in addition to the five references to sugar as merely ‘evil.’ And by ‘sugar,’ Lustig means not only the white granulated stuff that we put in coffee and sprinkle on cereal - technically known as sucrose - but also high-fructose corn syrup, which has already become without Lustig’s help what he calls ‘the most demonized additive known to man’.”

    • “Lustig certainly doesn’t dabble in shades of gray. Sugar is not just an empty calorie, he says; its effect on us is much more insidious. ‘It’s not about the calories,’ he says. ‘It has nothing to do with the calories. It’s a poison by itself.’

    “If Lustig is right, then our excessive consumption of sugar is the primary reason that the numbers of obese and diabetic Americans have skyrocketed in the past 30 years. But his argument implies more than that. If Lustig is right, it would mean that sugar is also the likely dietary cause of several other chronic ailments widely considered to be diseases of Western lifestyles - heart disease, hypertension and many common cancers among them.”

    • “It’s one thing to suggest, as most nutritionists will, that a healthful diet includes more fruits and vegetables, and maybe less fat, red meat and salt, or less of everything. It’s entirely different to claim that one particularly cherished aspect of our diet might not just be an unhealthful indulgence but actually be toxic, that when you bake your children a birthday cake or give them lemonade on a hot summer day, you may be doing them more harm than good, despite all the love that goes with it. Suggesting that sugar might kill us is what zealots do. But Lustig, who has genuine expertise, has accumulated and synthesized a mass of evidence, which he finds compelling enough to convict sugar. His critics consider that evidence insufficient, but there’s no way to know who might be right, or what must be done to find out, without discussing it.”

    • “The Sugar Association and the Corn Refiners Association have ... portrayed the 1986 F.D.A. report as clearing sugar of nutritional crimes, but what it concluded was actually something else entirely. To be precise, the F.D.A. reviewers said that other than its contribution to calories, ‘no conclusive evidence on sugars demonstrates a hazard to the general public when sugars are consumed at the levels that are now current.‘ This is another way of saying that the evidence by no means refuted the kinds of claims that Lustig is making now and other researchers were making then, just that it wasn’t definitive or unambiguous.”

    • “What we have to keep in mind, says Walter Glinsmann, the F.D.A. administrator who was the primary author on the 1986 report and who now is an adviser to the Corn Refiners Association, is that sugar and high-fructose corn syrup might be toxic, as Lustig argues, but so might any substance if it’s consumed in ways or in quantities that are unnatural for humans. The question is always at what dose does a substance go from being harmless to harmful? How much do we have to consume before this happens?”

    To read the whole story, click here.
    KC's View:
    A troubling report, because there is no answer. But the Times article has one thing right - it is a subject that requires discussion because there are so many implications.

    Published on: April 18, 2011

    USA Today reports that “with the average price of regular gasoline now hovering near $3.80 a gallon nationally, prices at the pump are nearly a dollar higher than a year ago. For the average American who drives about about 15,000 miles a year and uses roughly 750 gallons of gas annually, that dollar increase per gallon has eaten about a $750 hole into the household budget per car.”

    Experts tell the paper that they expect the same kind of impact that accompanied the last gas price spike in 2008 to happen again, including consolidated shopping trips, adjusted or cancelled vacations, and greater use of mass transportation when and where available.
    KC's View:
    I keep wondering when the hell we are going to learn that this is a trend without end, that gas prices are going to keep going until we find and buy alternatives.

    Published on: April 18, 2011

    Business Week reports on a new study from the Translational Genomics Research Institute (TGen) suggesting that “meat and poultry sold in the United States is widely contaminated with drug-resistant strains of Staphylococcus aureus, a bacteria that can cause serious illnesses in humans ... The types of health problems linked to S. aureus range from mild skin infections to life-threatening diseases, such as pneumonia, sepsis and heart infection.”

    According to the story, “In the new nationwide study, researchers analyzed 136 samples of 80 brands of beef, chicken, pork and turkey purchased at 26 retail stores in five cities: Chicago; Flagstaff, Ariz.; Fort Lauderdale, Fla.; Los Angeles; and Washington, D.C. The results showed that 47 percent of the samples were contaminated with S. aureus, and that 52 percent of the bacteria were resistant to at least three classes of antibiotics. DNA testing suggests that the food animals themselves were the major source of contamination with S. aureus.”

    The researchers said that it still is to be determined what kind of risk this creates for consumers.

    Business Week notes that in a statement, the American Meat Institute Foundation said that the study's small sample size is "insufficient" to reach the conclusions put forth by the researchers. And the foundation said that, "while the study claims that the many of the bacteria found were antibiotic resistant, it does note that they are not heat resistant. These bacteria are destroyed through normal cooking procedures, which may account for the small percentage of foodborne illnesses linked to these bacteria."
    KC's View:

    Published on: April 18, 2011

    The New York Times reports that retailers are trying to make their mobile shopping applications more user-friendly by adding “things like voice search, one-touch checkout and simplified mobile sites.”

    Part of the problem, the story suggests, is that smart phone screens are small and keyboards are smaller, which can create problems for consumers who want to use them but are, to use a phrase, all-thumbs. But the problem is compounded by the fact that even the consumers who have trouble navigating the mobile shopping landscape seem to want and expect this functionality.
    KC's View:
    The disconnect between functionality and desire means that, as the Times writes, “retailers report that only about 2 percent of their sales are coming from mobile devices, a number well below the expectations of many e-commerce analysts.”

    I always think it is funny when I read stuff like this. It sounds like the same kind of stuff that some people were saying about Amazon during its early years - not living up to expectations, not making enough money, not a sustainable business model.

    Except that stuff takes time. Businesses don’t always grow as fast as analysts expect or predict.

    Mobile shopping is going to be an enormous factor. Guessing about percentages is beside the point. Betting against mobile shopping, however, would be short-sighted.

    Published on: April 18, 2011

    The Wall Street Journal reports that Best Buy, long a proponent of the big-box approach to electronics retailing, “plans to shrink its U.S. big-box square footage by 10% as it seeks to reassure skeptical investors that it is adapting to swift changes in store retailing and positioning itself to aggressively compete online against Amazon.com Inc.”

    According to the story, Best Buy also plans to “rapidly escalate opening smaller stores focused on smartphones. Its goal is to have a total of 600 to 800 Best Buy Mobile stores within the next five years, aiming to evolve in a world of ever-smaller, more-versatile gadgets.”

    The Journal frames the changes this way: “Retailers such as Amazon now feature even greater selections online. Music and movie disc sales have been evaporating due to digital downloads. Specialty gadgets that Best Buy once spotlighted, such as global positioning systems and digital cameras, are being usurped by the utility of smartphones. And electronics categories such as computers are becoming commoditized, with the singular exception of Apple Inc. products, which Apple sells in its own stores in addition to retailers including Best Buy.”
    KC's View:
    Essentially, Best Buy is coming to the same conclusion as Walmart and Target and Tesco, all of which realized that big box stores may not be as relevant as they have been in the past because of the changing competitive landscape that is being reshaped by Amazon. Interestingly, this is something that best Buy has been fiddling with for years; it wasn’t that long ago that Best Buy tested small stores in the Chicago area that were targeted at specific demographic groups, such as women and young men.

    This is still a work in progress. In all likelihood, as these small store formats roll out, some versions will be more successful than others, and there will be some missteps. But the movement to change the shape of brick-and-mortar retailing seems to be inevitable, because of virtual influences that cannot be denied.

    Published on: April 18, 2011

    In a fast food-driven, often lowest-common-denominator culinary world, there was a ray of hope in the New York Times the other day in the form of a story about something called the “Underground Night Market” in San Francisco.

    The Times describes the event this way:

    “At this quasi-clandestine monthly event, a tribal gathering of young chefs, vendors and their iron-stomached followers are remaking the traditional farmers market as an indie food rave. At midnight, the smell of stir-fried pork bellies was wafting through the Mission district. There was live music, liquor, bouncers, a disco ball — and a line waiting to sample hundreds of delicacies made mostly on location, among them bacon-wrapped mochi (a Japanese rice paste) and ice cream made from red beets, Guinness and chocolate cake.

    “In a sense it is civil disobedience on a paper plate.

    “The underground market seeks to encourage food entrepreneurship by helping young vendors avoid roughly $1,000 a year in fees - including those for health permits and liability insurance - required by legitimate farmers markets. Here, where the food rave - call it a crave - was born, the market organizers sidestep city health inspections by operating as a private club, requiring that participants become ‘members’ (free) and sign a disclaimer noting that food might not be prepared in a space that has been inspected.”
    KC's View:
    It is sort of ironic that this thing, which flaunts traditional regulations, exists in San Francisco, a city that seems willing to regulate almost everything.

    (Philip Kaufman seemed to sense this dichotomy back in 1978 with his fabulous remake of Invasion of the Body Snatchers, which he set in a San Francisco that seemed thick with counter-culturalism, and yet was a place where people could be replaced by drone-like pod creatures without anyone noticing. But I digress...)

    I love this line from the Times story:

    “Some see the growth of the underground markets as part of a high renaissance of awareness for a Fast Food Nation generation, with its antipathy for the industrial food machine. In the recesses of the markets, a certain self-expressive, do-it-yourself ‘craftness’ flourishes.”

    The flourishing of such an attitude - and its expansion to other cities, which the Times says is happening - is excellent news.

    Published on: April 18, 2011

    • The Los Angeles Times reports that “Wal-Mart has officially rolled out its ‘Pick Up Today’ program in all Los Angeles area and Orange County stores. Through the service, shoppers can browse the inventory of their local Wal-Mart store, purchase items online and get free same-day pickup at the store.”

    According to the story, the program “includes thousands of items across categories such as toys, home décor, hardware, electronics, household appliances and video games. By the end of June, the service will be available in about 3,600 stores nationwide.”

    • In London, the Times reports that Walmart-owned Asda Group is making management changes as a way of “paving the way for a push online and in financial services to close the gap with Tesco.”

    Asda’s new CEO, Andy Clarke, has “quietly made sweeping changes at the Wal-Mart Stores Inc. subsidiary that concentrate more power in the hands of Rick Bendel, its marketing chief, and Charles Redfield, the chief merchandising officer who arrived from Wal-Mart last year,” the newspaper said.
    KC's View:

    Published on: April 18, 2011

    The AMC movie theatre chain has announced that it is partnering with Whole Foods on its April film festival celebrating Earth Month.

    “AMC is committed to bringing quality, diverse content to our guests and the Whole Foods Market Do Something Reel Film Festival is a prime example of that,” said Robert J. Lenihan, president of programming for AMC. “It is also an example of how we intend to amplify our pledge of bringing these powerful stories found in independent films to our guests through direct partnerships with independent filmmakers and film festival participation.”
    KC's View:
    I find this particularly interesting because it speaks to AMC’s strategy of redefining itself. it no longer is good enough to just be a place that sells $10 movie tickets, $6 popcorn and $5 Twizzlers. It has to find new business models, new entertainments to promote.

    I was in an AMC Theater about two weeks ago that had what appeared to be a convenience store instead of a candy counter, and a bar called McGuffins where adults could buy alcohol. This is all very smart ...

    (What’s really smart, IMHO, is the use of “McGuffin” as the name of the bar; it is a term with cinematic resonance, and it shows a real respect for film history.)

    Published on: April 18, 2011

    • The Seattle Times reports that Costco has eight of its nine Japanese stores open in the post-earthquake/tsunami environment, and is “gearing up” to seven million bottles of water a week, eight times more than it used to sell in an average week.

    In addition, Costco is planning for higher sales of things such as toilet paper and canned meats. “Meanwhile, fears of radiation contamination has led Costco to stock shelves in Japan with fish from New Zealand and vegetables from Australia. It also had to find new suppliers for milk, yogurt and eggs,” the Times writes.

    • The Boston Globe reports that Ahold USA “plans a $4 million reinvestment in its offices at Quincy Center Plaza and will consolidate its other regional offices to this location.

    “Ahold USA, the parent company of Stop & Shop, said about $2.9 million will be earmarked for upgrades to the inside of the building and the rest of the money will be allocated for investments in IT infrastructure. About 600 people currently work in the space and another 350 positions will be relocated from other area offices.”

    USA Today reports that Subway plans to “announce plans for a significant reduction in sodium at its U.S. stores that could ultimately nudge much of the fast-food industry to follow.

    “Beginning today, sodium content in Subway’s ‘Fresh Fit’ sandwich line in the U.S. will be cut 28% vs. 2009, when Subway first began to cut salt. And sodium in its overall sandwich line will be cut by 15%, compared with the same period.”
    KC's View:

    Published on: April 18, 2011

    Got the following email from MNB user George Morrow:

    Walmart is in their current situation because they lost sight of who they are and what they are.  I sat in the Big meeting three years ago when they were going to rejuvenate their Great Value products and "renew" their business.  I looked at their new labeling and said that is what Ralphs did twenty years ago and I thought "that is not going to work.”

    I supplied them for eight years with good products in poly bags and a heck of a profit margin and was replaced by my competitor with a more expensive product in a box which did nothing but raise the retails and lower the margins and increase store inventory.  Walmart has lost sight of what got them there in the first place and they have been loading up on smart young people who have a "better way to do things" without having the experience of what gets customers into the stores,.  This is why they have taken such a hit for the last couple of years and they need to get back to what got them there.

    Kevin, I have no axe to grind, for the ten years I dealt with Walmart I was treated with respect and courtesy and totally enjoyed my dealings with them, they were, despite many bad comments, a pleasure to do business with.  I have no doubt they will fix their problems and be the juggernaut they have been but for what it is worth, I remember the vp of Kmart, in 1992, telling me that no one could beat them.  Same as I remember A&P having over 3,000 stores in the early 1970's!!!  Walmart is too smart to fail but they need to focus on what got them there not what all these young MBA's think will take them to the future.





    We had a story the other day about a Maine school district that wants to give all its kindergartners iPads, which led one MNB user to write:

    The iPad has been an invaluable learning aid for my grandson.  His development has been remarkable since picking up the iPad in K5.  His teachers identify Apps that compliment their curriculum and help to achieve the objectives set out in his Individual Development Plan.  You see he was born with Down Syndrome and with the help of a lot of great educators, therapists and technology he is at grade level in the first grade.  Incidentally, not only has he benefited cognitively the iPad has been very helpful in the development of his fine motor skills.  I think every school system needs to embrace technology for the development of our children.



    Regarding private brand growth, MNB user Deb Bullock wrote:

    I am writing re: your article about Retailers own-label. While my company does not provide private label products we certainly compete against them. My issue is with your comment about consumers not being able to distinguish between some P/L and branded items and the pricing differential. When a manufacturer chooses to produce P/L they may be changing formulation from a product they already manufacture, and even if they are the tweaks are probably not costly. Add in labels and you’re done. Costs for P/L can remain low. So who is driving the consumers to the category with media (TV/Radio), FSIs, on line coupons, blogs, PR?? Certainly not the retailers unless it’s being funded by the manufacturer. How about new product innovation? Nope, don’t see the retailers doing that either. There is a big reason for the pricing differences between P/L and branded product in many categories. Manufacturers/Marketers take all the risks, do all the research, innovate, build production facilities, and market products to consumers. This all costs money. Big difference.
    KC's View:

    Published on: April 18, 2011

    There is a wonderful story in the Boston Globe about Dave McGillivray, race director of the Boston Marathon, which will be run today, Patriot’s Day, for the 115th time.

    McGillivray, a world-class runner who has completed 125 marathons and run across the country twice, was faced with a dilemma when he became race director in 1988. How could he continue to run the marathon even while being in charge of all the logistics that are involved with the race?

    His answer: McGillivray runs the marathon course after everyone else has finished.

    As the Globe writes, “Long after the champs are crowned in laurel wreaths, after the roadblocks have been cleared and the cheering throngs have left, Dave McGillivray can be found loping through the dark toward Boylston Street, with his own motorcycle escorts, sweating through his annual tradition of being the last runner to cross the finish line of the Boston Marathon.”
    KC's View:
    You have to appreciate this - a CEO who really takes ownership, who plays, to use a familiar phrase, for the love of the game.