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    Published on: June 7, 2011

    by Michael Sansolo

    Anytime I want to think about illogical consumer behavior I think about my dog Hunter. Here’s why:

    A number of years ago, our vet told us that Hunter had a sensitive stomach and needed a special type of dog food. Needless to say, it was harder to find and more expensive than what he was eating at the time. What I never understood was why I bought special food for a beagle that seemed happiest eating used Q-Tips from garbage cans or dirty wood chips in the yard.

    Logically it was ridiculous to give a garbage eater like Hunter special food, but when it comes to the health of our pets, logic flies out the window. I’ve long known I’m not alone, but like misery, illogic loves company. I have plenty of company.

    The New York Times reported this weekend about the ongoing boom in pet products and not just the regular stuff we all know. The industry has grown throughout the recession and upscale pet products continue to proliferate. Among the items the Times found at a recent pet expo: salmon with black and white quinoa; roasted turkey with butternut squash and russet potatoes; and pan-seared duck with brown rice and blueberry compote. That’s all dog food, folks!

    The report from the pet expo contained one head-slapping moment after another—such as antioxidant products for pets or a booming marketing in natural and organic foods. Now I know the tough economy isn’t impacting everyone equally and certainly many pets (like their owners) are suffering, but something larger seems at work here.

    The truth is that consumers have a value equation for nearly every product they buy and logic rules in some areas and flies out the window in others. When things are special, shoppers find reasons to spend and enjoy more. Certainly that can’t happen with every product in every retail store, but the best of sellers - be it Whole Foods or Apple computers - know where to build those special points. Even value minded retailers can do the same, which is why operators like Dollar General or Trader Joe’s engender such incredible loyalty among their shoppers.

    The truth is that all shoppers find a reason to be illogical. But this is more than a business story today. Today’s it’s about my illogical dog.

    For countless unknown reasons, Hunter is beloved in my house. He never does chores or cleans up after himself. He sleeps for the vast majority of the day yet feels no guilt about waking up his owners at dawn with loud baying because there are squirrels in the world. Even though we rescued Hunter from a pound in 1998, saving him from an early death, and lavished him with comfort ever since, he spent most of his life prowling our yard in hopes of finding a way to escape. He has always been colorful and illogical.

    Yet Hunter is unfailingly loyal and seems to know exactly when and where his presence (and accompanying odors) are needed. He did that job brilliantly for his 13-plus years with us, helping two kids and parents navigate adolescence in the process. What’s more he’s always provided me good copy, whether for jokes or simple reminders on pets and management.

    Sadly, those days are coming to a close. Kidney disease is sapping Hunter’s energy daily and with great sadness I know that our annoying little beagle will be leaving us soon. Very soon. So it seemed fitting to remember him with one last lesson.

    Illogic seemed to fit him best.


    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: June 7, 2011

    by Kevin Coupe

    Okay. You knew that somehow we had to find a way to make a business comment on the case of Rep. Anthony Weiner (D-New York), who admitted yesterday that he has been sending - both before and after he got married - inappropriate pictures and messages to women around the country who were not his wife.

    The tearful admission - accompanied by a pledge not to resign his Congressional seat, since he said he could not see that he’d broken any legislative rules, nor violated his oath of office - came just a week after Weiner tried to suggest that his social media accounts had been hacked, and that published pictures might not be him, or might have been altered.

    There are, of course, several business lessons here.

    One is that in a 24-hour news cycle, and one in which everyone with a computer has the ability to help drive coverage of such issues, obfuscation and denial simply are not an option. You end up being found out, so you might as well admit your sins at the beginning. In this case, Weiner looks almost as bad for his feeble attempts at a cover-up as he does for his ethical and moral missteps.

    Another is that these stories don’t go away. When I was a young newspaper reporter, and I wrote stories that reflected badly on George Gerber, the elected official running the town that I covered, he generally would shrug it off and say, “Today’s newspapers stories wrap tomorrow’s fish.” That’s not the case anymore. People may have short memories, but the internet has a long memory, and virtually every misstep a person makes can be found on Google.

    Finally, it is critical to pay attention. What amazes me most about the Weiner story is that he somehow wasn’t learning from other people’s missteps and mistakes. Elected officials get caught propositioning men in men’s rooms, get caught having affairs with staffers and staffers’ wives, even get caught sending shirtless pictures of themselves and provocative propositions to people via social media, despite the fact that they were married ... and somehow Weiner didn’t look around and say to himself, “Holy Cow! I’d better delete all those pictures off my computer, shut down those accounts, and start behaving myself.” Nope. He just blundered ahead, apparently thinking himself to be bullet-proof.

    This is the new world order. It is the reality of the world in which politicians and business people operate, and there are lessons to be learned about how to act and react.

    Beyond, of course, the obvious.

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

    Published on: June 7, 2011

    The Wall Street Journal reports that even as a plethora of retailers and manufacturers talk about converting higher costs into increased prices, Dollar General plans to “forgo gross-margin growth this year to keep retail prices low in the face of higher commodity costs.” Dollar General, the writes, has the advantage of low facility and labor costs, which allow it to be more competitive on price than traditional retail venues.

    There are, the story suggests, likely repercussions from the decision.

    One is that Dollar General will be in a position to win market share.

    Another is that the move will force the competition - especially grocers - to also keep their prices low or reduce them even further, which will have an impact on their short-term profitability.
    KC's View:
    Not to be Walmart-centric about this, but how the Bentonville Behemoth reacts to this will be one of the most interesting developments. Walmart hasn’t seen any same-store sales growth in the US for two years, and it has made reinvigorating its US business a core priority - to the point where it is expanding its small-store format presence and talking big about e-commerce.

    But it seems like it is one of those rare times when Walmart is playing defense, mainly because companies like Dollar General are playing offense.

    Let the games begin.

    Published on: June 7, 2011

    The New York Times reports that the Walton family, descendants of the legendary Sam Walton, founder of Walmart, “are poised to see their stake in the $190 billion company creep above 50 percent, without much fanfare, thanks to the latest $15 billion share buyback program.”

    The story notes that “after Sam Walton died in 1992, family members retained a stake of around 38 percent from the mid-1990s to the mid-2000s. Starting in 2003, a series of big share buybacks began to push the family stake higher, to 43 percent in 2008 and now to 49 percent, according to the latest filings ... A shift from slightly less than 50 percent ownership to slightly more than 50 percent may seem of little practical consequence. But the impact is more than cosmetic. Once the threshold is crossed, for example, New York Stock Exchange rules would no longer require Wal-Mart to ensure that a majority of its directors are independent. The company says it will do that anyway.”
    KC's View:
    The next question may be whether the Walton family will be impatient with the moves being made by current management.

    At the very least, they’ve got to be hoping that the new small-store strategy will re-energize the company and start driving real sales growth, while same-store sales also start to see some movement.

    Otherwise, who knows what evil lurks in the hearts and minds of majority ownership?

    Published on: June 7, 2011

    Crain’s Chicago Business reports that Groupon “is making a move up the retail food chain with pilot program aimed at supermarkets. The online daily-deal company is partnering with Springfield, Mass.-based grocer Big Y Foods to offer Groupons for groceries. But instead of relying on paper coupons or mobile phones used with other Groupons, these customers will use their grocery-store loyalty cards.

    Groupon will send out the discounts, such as half-priced shellfish, as traditional Groupons. Customers who buy the Groupon will get the discount credited to their loyalty card when they check out.”
    KC's View:
    These are interesting things to test. But supermarket retailers should not mistake a Groupon affiliation for an e-commerce strategy. It can be a component, but it cannot be the whole thing. (I think of this because there were a few retailers some years ago that thought by affiliating themselves with Priceline’s name-your-own-price-for-groceries program was a replacement for a real internet strategy. Which it wasn’t. )

    Published on: June 7, 2011

    Online Media Daily reports that Amazon is using its $175 million investment in LivingSocial to launch a new Daily Deals program via AmazonLocal, putting it directly into competition with Groupon and Google’s new venture in the space.

    According to the story, “Subscribers to AmazonLocal will receive daily emails or have the ability to view the deals on the AmazonLocal site. They can review purchases in the ‘Your Deals’ section and redeem the voucher by presenting it to the business providing the deal. While running the promotion is free, advertisers will pay a fee or commission on deals that consumers purchase.”

    The story adds, “It's not clear whether Amazon has become the aggregator or it will ink advertising daily deal specials on its own. In small print at the bottom of the page it reads ‘Sold by LivingSocial.’ No word from Amazon media relations as to the interest LivingSocial has in the AmazonLocal site. AmazonLocal will provide daily deals on local services, products and experiences.”
    KC's View:
    As Jimmy Durante used to say, “Everybody wants to get into the act.”

    I say this, of course, while understanding that an enormous percentage of the MNB audience has no idea who Jimmy Durante is.

    Published on: June 7, 2011

    The New York Times reports that “a day after German agricultural officials identified locally grown sprouts as a possible cause of the E.coli outbreak that has killed 22 people and sickened more than 2,200, the officials said Monday that initial tests had failed to show conclusively that the bacteria originated with the sprouts ... The confusing signals mark the second time that German officials publicly identified a probable cause of the outbreak, only to pull back later. They had said earlier that cucumbers from Spain were suspected as the cause, and then said tests had ruled out that hypothesis.

    “European Union officials said Monday that the confusion in the crisis might prompt European regulators to rethink warnings on food safety.”
    KC's View:
    Sounds like a perfect time for the US Congress to de-fund last year’s food safety legislation, which was supposed to give regulators a greater ability to be vigilant about such issues here.

    Published on: June 7, 2011

    In Washington State, the Spokesman-Review reports that tests done by environmental officials on reusable shopping bags indicate that the vast majority “are within state limits for heavy metals ... The testing was done to allay consumer concerns about reusable bags. Pigments for red, orange and yellow paints can contain heavy metals.”

    Out of 31 bags that were tested, only a Sears bag liner and a Top Foods wine carrier “exceeded lead limits of 100 parts per million.” Top owner Haggen Inc. pulled the wine carrier off the market, while Sears promised to pull its bag shortly.

    According to the story, Washington is one of 19 states with a model toxics-packaging law.
    KC's View:

    Published on: June 7, 2011

    • Walgreen says that it has completed its $409 million acquisition of Drugstore.com, a move seen as a significant move to shore up its online infrastructure.
    KC's View:

    Published on: June 7, 2011

    • The Great Atlantic & Pacific Tea Company (A&P) has announced it will enter into a new supply and logistics agreement with its principal wholesale supplier, C&S Wholesale Grocers, Inc., pending approval of the U.S. Bankruptcy Court for the Southern District of New York.

    A&P says that it estimates the revised contract “will generate a run-rate of more than $50 million in annual savings, which will be realized in cash” beginning upon its emergence from Chapter 11 pursuant to a plan of reorganization. The new agreement also, A&P said, “will help the company generate cash savings in the near-term by significantly and immediately improving supply chain and operational efficiency, as well as provide the company with key service enhancements.”

    Drug Store News reports that Ahold-owned Giant of Carlisle plans to “introduce a new packaging design for nearly 2,000 products that would hit store shelves through the end of the year. The new design is based on the name and private-label product logos used by Royal Ahold’s two other U.S. banners, Stop & Shop and Giant Food of Landover, Md.,” though Giant-Carlisle says it has no plans to change its actual logo.

    Reuters reports that “Sara Lee's opening of a high-tech Kansas City meat manufacturing facility sets the stage for broad growth in its key brands and is part of a series of moves in preparation for splitting in two, company officials said on Friday. ‘We are in an investment mode,’ said Chief Executive Officer Marcel Smits. He pointed to increasing advertising spending, a series of small acquisitions, and heavy investments in plant improvements and automated technology.”:

    According to the story, “Sara Lee announced in January plans to split into two public companies, one that would focus on North American meats, and another focused on international beverage and bakery businesses. The company's North American fresh bakery business is to be sold. The split is on track for completion in early 2012, according to officials.”
    KC's View:

    Published on: June 7, 2011

    • Carin Nersesian has joined NACS as director of government relations. Most recently Nersesian served as assistant director of government affairs and communications for the Office of Public Utility Counsel in Austin, Texas. Prior to that, she served as director of legislative affairs for Associated Builders and Contractors. Nersesian also has worked in the offices of Sen. Mike DeWine (R-OH), Rep. Heather Wilson (R-NM) and Jon Porter (R-NV) and worked numerous congressional campaigns.
    KC's View:

    Published on: June 7, 2011

    ...will return.
    KC's View: