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    Published on: July 22, 2011

    by Kevin Coupe

    Not to be Apple-centric, but some stories are simply too good to resist.

    Yesterday we wrote in this space of Apple’s impressive performance in the recent fiscal quarter.

    Today, we have one from the “if you can’t beat ‘em, join ‘em” file....

    The New York Times writes:

    “Apple products have always been coveted by other electronics makers, especially Chinese manufacturers. The company’s products are so sought after that some electronic makers actually create fake replicas of iPods, iPhones and Mac computers, which are sold in electronics stores and online marketplaces.

    “Now Apple has to contend with a new genre of copycats, those who are actually replicating Apple Store retail locations and setting up shop around the world.
    The fake stores are selling real Apple products, though it’s unclear how they’re procured.”

    The most recent examples apparently are popping up in China, where they have “the same table design and product placement as authentic Apple stores. The store itself has the same wooden tables as standard Apple stores; traditional branded posters and signs cover the walls. There is also the winding staircase and concrete floors you see in real Apple stores. It’s as if Steve Jobs himself helped design the space.

    “The most amazing part of the fake stores in China have to be the employees. According to the blogger, these employees actually believe they work for Apple. They wander the store assisting customers and wear standard Apple T-shirts, which are bright blue with a clean white Apple logo across the chest.”

    Can you imagine operating a store format that was so unique and successful that someone wanted to knock it off to this extent?

    (While this may seem egregious, I have to say that this development has occurred a little late for my tastes. I was traveling to Shanghai a few years ago on business when I discovered that I’d left the power cord for my Mac Powerbook in the airport. When I got to China, I had to find a replacement ... and the process was very complicated and very expensive. It would have been a lot easier if there had been a fake Apple store around the corner...)
    KC's View:

    Published on: July 22, 2011

    The Nielsen Co. said yesterday that it has signed a cooperation agreement with Walmart that will have the world’s largest retailer providing data to Nielsen from its US stores. The announcement said that “Nielsen will be working with Walmart (including Neighborhood Market) and Sam’s Club to report their sales information and incorporate it into existing reads of the marketplace. This new base of information will have better and more accurate coverage for all participating retailers and manufacturers, providing improved insights into sales volumes, pricing, merchandising and promotions. As part of the agreement, Nielsen will be Walmart’s primary provider for information, tools and training.”

    The decision marks a reversal of a decision made more than a decade ago by Walmart to restrict access to its sales and performance data.

    According to the announcement, “The majority of U.S. food, drug, mass, convenience and dollar store retailers already provide Nielsen with sales information, and this will add to the existing market information, enabling Nielsen to provide a better, more precise view of consumer purchase activity for the benefit of the industry.”

    Advertising Age reports that “SymphonyIRI is in the process of finalizing an agreement with Wal-Mart that will provide the same level of access to the retailer's scanner data, said John McIndoe, senior VP-marketing. At the same time, he said SymphonyIRI has been named Wal-Mart's preferred supplier of shopper and consumer insights, and will be the ‘platform of choice’ to provide Walmart customer insights.

    “Wal-Mart's policy change is potentially a win for other research firms, too, such as NPD Group, which also had access to Walmart scanner data prior to the ban more than a decade ago. An NPD spokeswoman couldn't immediately be reached for comment. A Walmart spokeswoman was in a meeting and also couldn't immediately provide comment on the reason for ending the ban on industry data-sharing.
    KC's View:
    It is amazing what eight straight quarters of stagnant same store sales in the US will get you to do. Sign of weakness or sign of strength? You decide.

    What’s equally amazing are some of the whispers one hears down in Bentonville about other coming changes at Walmart. For the moment they are just whispers and just speculation ... but I must admit that they are getting louder.

    Published on: July 22, 2011

    Bloomberg reports that a study by First Data Corp. indicates that cash-strapped US consumers are bring out their credit cards to pay for basic necessities, with “dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent.”

    Credit card transactions are growing faster than debit card transactions, indicating that people - especially the unemployed and underemployed - are using their credit cards and delaying payment for such things as gasoline, food and other necessities.

    According to Bloomberg, “The figures are in synch with data from the Federal Reserve. Revolving credit, primarily credit card balances, increased by $3.37 billion to $793.1 billion in May from an almost seven-year low of $789.8 billion in April, figures from the central bank showed. The gain was equivalent to a 5.1 percent increase at an annual rate.”
    KC's View:
    A recent truism has been that one of the benefits of the recent recession has been that people were playing off their credit cards and trying to reduce their debt. Maybe it is inevitable, but it would be a shame if that trend reverses simply because of the length of the economic downturn.

    Published on: July 22, 2011

    Supervalu announced yesterday that Leon Bergmann, the company’s group vice president of Independent Sales and a former senior vice president at C&S Wholesale Grocers, has been promoted to be the new president of Supervalu’s Independent Business organization.

    Bergmann, who is succeeding the retiring Mark Anderson, will report directly to Supervalu CEO Craig Herkert.

    “We believe Leon’s strength and innovation in sales, his understanding of and passion for the independent retail business and Supervalu’s wholesale model, as well as his breadth of experience within the very competitive wholesale landscape nationwide make him ideally suited for this position,” Herkert said.
    KC's View:
    Smart move by Supervalu. One of the things I hear from time to time is that there has been some discontent within the ranks of the company’s retail customer ranks, at least in part because of how much attention the company has been paying to its retail business. Perhaps this move will have both symbolic and tangible benefits.

    Published on: July 22, 2011

    The Boston Globe reports that Walmart plans to open its first Market store - the supermarket format that has been gestating for years, and now seems to finally getting some traction - in New England when it takes over a former Circuit City location in Somerville, Massachusetts. The unit is expected to be open within a year.

    According to the piece, the new Market format is expected “to shake up the once-staid supermarket scene in New England,” along with new stores being opened by competitors as diverse as Wegmans and Aldi.
    KC's View:

    Published on: July 22, 2011

    The Food Marketing Institute (FMI) and Rodale’s Prevention magazine are out with their annual “Shopping for Health” study, indicating that “a shift in thinking” is taking place in how consumers approach healthy eating.

    Some excerpts:

    • “Lack of planning is trumping health in the decision-making process at the American dinner table, as 72% of shoppers decide what to have for dinner that day. When same day decisions for dinner are made, health (52%) falls well behind few taste (73%), quickness of preparation (60%) and craving (52%). Lack of meal planning is so pervasive that one-in-four shoppers (24%) decide what to have for dinner within one hour before eating.”

    • “What used to matter most to shoppers is which undesirable characteristics their foods were devoid of: fat, sugar, salt, calories, etc. Now, fortification and the inclusion of key health ingredients are on the rise, with fiber (44%) being the most sough-after component; whole grain (36%), protein (27%), Omega-3 (23%) and antioxidants (16%) follow.”

    • “About half of shoppers have bought cranberry juice, dark chocolate, or almonds in the past year, probably because there have been marketing campaigns and news coverage touting the health benefits of these so-called ‘superfoods,’ so dubbed because they contain large quantities of specific nutrients. Shoppers are also purchasing green tea (43%), pomegranate juice (25%), and greek yogurt (21%).”

    • “Certain health claims are also proving to be attractive to customers. When purchasing food, heart health (73%) is the top health claim on packaging that matters to consumers. More energy (71%), digestive health (66%), and improving mind health (65%) follow closely behind.”Most shoppers generally read food labels, but that share has dropped the last few years, from 71% in 2007 and 2008 to 67% in 2009 and 64% in 2010.”

    • “Three in four shoppers say they make most of their food and beverage purchase decisions before they get to the store, although they do not plan their meals that far ahead of time ... 44% use a list when shopping for healthy food most of the time.”
    KC's View:

    Published on: July 22, 2011

    In the wake of this week’s sale of Ireland’s iconic food retailer Superquinn to Musgrave, which happened shortly after Superquinn went into receivership because of mounting debt, the company’s CEO, Andrew Street, resigned from his position because of concerns about how suppliers were being treated by KPMG and the banking coalition that were supervising Superquinn’s finances.

    In an email to Superquinn staff, Street wrote, in part:

    “The receivership process that has been imposed on the business by the bank syndicate is not being conducted in a way I find acceptable.

    “This particular process has been selected by the banks concerned in order that they can secure the maximum amount of the sale proceeds for themselves.

    “This is being done at considerable cost to our suppliers. The board of Superquinn has made it clear consistently to the banks that they do not support this approach.

    “Over the last few days it has been distressing to see queues of suppliers in our reception waiting to see if they will be paid and, in many cases, being turned away empty handed by the receiver.

    “Many of them are small businesses and most of them are long-time and loyal supporters of the company. As well as the financial pain inflicted on these suppliers this policy is causing havoc to our stock resupply with inevitable sales consequences.

    “I had hoped that the banks would have the good grace and sense to use a relatively small portion of the substantial proceeds of the sale that they will receive to pay suppliers in full. They have refused to do this. A course of action which I am told by senior management in the Bank of Ireland (the lead bank in the syndicate) has been approved at the highest level in the bank executive.

    “This approach is all the more surprising because most of the suppliers affected are also customers of one or other of the syndicate banks.”

    Subsequent to the announcement of Street’s resignation, the Irish Times writes, “Superquinn directors trumped all this by going to the High Court in a bid to have an examiner appointed to the business. That action is on hold and the receivers are still in the driving seat, but if it succeeds, the banks will lose control of the process. Examinership would mean the company would get High Court protection from all creditors, secured lenders included, for up to 100 days. Such a move would not necessarily suit suppliers either, and those who are critical of the receivership are even more worried about the consequences of an examinership.

    “The sums lost by individual businesses range from at least the high six figures down to tens of thousands. One large-scale creditor, whose business has lost several hundred thousand euro, said yesterday he was aware of a number of others which have stopped supplying Superquinn.”
    KC's View:
    What a mess.

    It is a shame that things have gotten this bad, and I hope for everyone’s sake that this is able to be worked out so that people who work for Superquinn keep their jobs and suppliers are made as whole as possible.

    There was, by the way, a lovely column in the Herald by Michael O’Doherty in which he wrote, in part:

    “I FIRST met Feargal Quinn in the mid-1980s, as I was good friends with his eldest daughter and a regular visitor to his house.

    “Back then, Feargal was something of a business legend in Ireland. Having founded Superquinn in Dundalk in 1960, he built it up as a quality operation, more niche than its bigger rivals -- Dunnes and Quinnsworth -- but consciously more geared towards making shopping pleasant, rather than just cheap.

    “He introduced fresh bread, vegetables, and in-store butchers to the supermarket environment before anyone else. He insisted that his stores be a pleasant place to shop, and made Superquinn a byword for customer service.

    “Long before it became a fashionable part of management guidebooks, he would get up early, six days a week, and pound the aisles of his shops, meeting and greeting customers, listening to their comments, and acting on them.

    “Despite this intense workload, Feargal still managed to be home at six most evenings, and would make a point of sitting down with his wife, and a bottle of wine, to unwind before dinner with the family. But then in 2005, perhaps with a feeling that the good times were coming to an end -- how astute he was in that regard -- and that he had taken Superquinn as far as he could, Feargal sold the business for something around €450m.

    “Almost from that very day, the company started to go downhill.

    “Bought out by a group of businessmen and property developers, many regular shoppers noticed how the famed 'Superquinn experience' started to wane, with your average Tesco or Dunnes now boasting far more attractive and modern stores, something unthinkable 20 years ago.”


    O’Doherty goes on:

    “Hopefully Superquinn will have a brighter future, and regain some of the respect it bathed in during Feargal's reign.

    “People always say that nobody is indispensable, and that no one man is bigger than a company. Much of the time those people are right, but to those who think that rule cannot be disproven, I have two words. Feargal Quinn.”


    I would have to agree with these sentiments. Some people bring financial expertise to a business, some bring marketing moxie, and some bring merchandising savvy or some other quality. But what Feargal Quinn brought was no less than magic.

    Published on: July 22, 2011

    Bloomberg reports on the state of affairs at Walmart.com, the e-commerce site of the world’s biggest retailer, which analysts believe generates revenue of about $6 billion annually, far less than the more than $34 billion generated by Amazon.com.

    According to the piece, Walmart - spurred by stagnant same-store sales in the US that have gone on for eight quarters - no longer views online as a potential competitor that could cannibalize its physical stores, but rather as a necessary and critical component of a sustainable business model. And it is putting considerable resources behind its e-commerce business, upgrading both its look and functionality to the point where it can be competitive with Amazon.
    KC's View:
    As I’ve said here before, I’ve been told that Walmart also is designing its small store formats with the idea that eventually they could be part of a thriving network of delivery depots for products ordered online, as the Bentonville Behemoth looks to create an integrated system for the future.

    Published on: July 22, 2011

    Advertising Age reports that the National Retail Federation (NRF) is predicting that “more parents will be shopping closer to the beginning of school this year. Nearly one-third of families will begin shopping just one to two weeks before school starts, up from less than one-quarter last year. And more than 40% of shoppers will begin shopping three weeks to one month before school starts, up from 33% last year. That means, for many of those students not hitting the books until September, shopping won't kick off until early August or later.”

    No surprise about the reason: parents remain concerned about the economy, so they are waiting as long as possible to make necessary expenditures, and hoping that the later it gets, the more retailers will be likely to offer sales that will cut down on their out-of-pocket.
    KC's View:

    Published on: July 22, 2011

    • Aurora Packing Company has entered into a partnership with IdentiGEN North America to provide DNA-traceable beef for its U.S. and export customers.  Aurora Angus Beef with DNA TraceBack is being marketed to high-end restaurants and retail stores. Angus origins are verified through the animal’s unique DNA barcode, which is gathered using a food-safe sampling device at various stages of production, to quickly trace meat back to the animal of origin.

    Reuters reports that there seems to be a new beverage niche - “relaxation drinks that are designed to be the antidote to energy drinks, and that “help the body chill out by relieving muscle tension and reducing levels of cortisone, the main stress hormone ... (they) contain no alcohol but some have melatonin, a hormone that can cause drowsiness.”

    According to the story, the products, “with names like Vacation in a Bottle, Dream Water and Just Chill, while small, are growing.”

    • The Chicago Tribune reports that Dish Network, the new owner of the physical Blockbuster Video rental chain, plans to keep 1,500 locations open, closing just 200 stores that it acquired the bankrupt company out of bankruptcy earlier this year. According to the story, “Dish is using stores to promote its satellite service and has stepped up promotions and lowered prices to better compete. Blockbuster responded directly to price increases from Netflix last week with a special offer for its rival's customers.”
    KC's View:

    Published on: July 22, 2011

    More comments about potential changes in service at the US Postal Service, and my comments that it may not matter because for people under 30, the USPS offers a largely irrelevant service.

    MNB user Mark Wright wrote:

    I don't have a dog in this fight, but before we bury the USPS and send the red, white and blue trucks off to the junkyard, it might behoove us to think of the 40 million households in the US that don't have internet access and therefore don't pay their bills online or rely on email.  While most of us in your online community live in an electronic world where smartphones, laptops, tablets and streaming video are ordinary and some know the site map of Amazon.com better than they know their own neighborhoods, there is a huge community outside our little techno-bubble that still relies on the good old US Mail to move things from here to somewhere else cheaply and mostly reliably. 

    No question that the USPS has problems - work rules and labor costs, poor planning and competition among them - that need addressing, but most of the country is far, far removed from the guy who dumps his mail into the trash once a month, and whether you agree or not, there is a strong continuing business case for the US Postal Service.  If you asked the 40 million, they'd say we need to fix it, not kill it.


    That may be true today. But that number is shrinking. And I’ll tell you something else. If the entire country does not have high-speed internet access in a few years, than we’re going to have bigger problems because we’ll be behind the competitive curve to an extent that may not be repairable.

    Another MNB user wrote:

    You've made the point a couple of times that no one under the age of 30 cares if the post office goes to three day a week delivery.  I'm not sure what their opinion or any demographic opinion counts for in this discussion.  Since your blog is primarily about business, I would think you would come at the discussion from a business angle.  Areas such as how would it affect speed of business (A/P, information to Stores-many retailers still send daily mail packets to their locations, most shelf labels are delivered via mail, etc).

    I have to believe that there are faster and more efficient ways to send that information other than the US Mail ... just because it always has been done one way does not mean that it always should be.

    And just as a general matter of principle, I never look at anything from a purely business point of view. I’m always trying to think about the shopper ... and the broader, “big picture” implications of cultural trends.
    KC's View:

    Published on: July 22, 2011

    Michael Sansolo wrote a column last week about lessons that can be learned from phone hacking scandal unfolding in the UK and enveloping News Corp. and its CEO, Rupert Murdoch. Michael’s point was a good one - that if you don’t deal with your business problems and challenges, they’re almost certainly going to get worse. Problems don’t improve with age, he wrote. And I agree completely.

    Except that now we find out that Rupert Murdoch has a different sort of managerial problem. (Beyond the legal problems that he’s facing in the UK and, quite possibly, here in the US.) This week, he told a investigatory committee of the British Parliament that while he was experiencing “the most humble day of his life” and that he was the best person to clean up the mess, he was unwilling to be held responsible:

    "I do not accept ultimate responsibility,” he said. “I hold responsible the people that I trusted to run it and the people they trusted.”

    But not ultimately responsible.

    Rupert Murdoch is worth something like $7 billion a year, largely because of the sales and profits of News Corp. You’d think for that kind of money, he’d at least be willing to take “ultimate responsibility” for his company’s actions.

    But no. The sign on his desk, apparently, reads, ‘The Buck Stops There.”

    Which I think tells us everything we need to know.




    It may end up meaning nothing, but it was interesting to see the story from NBC News pointing out that in 2004, Floorgraphics - a company that competed in the in-store advertising business with News America, a division of News Corp. - reported to the FBI that its computer files had been hacked and that it had traced it back to an IP address owned by News America Marketing.

    “While never prosecuted,” NBC News reports, “the claims became a key part of a civil lawsuit that Floorgraphics filed against News America. The case was resolved six days into a 2009 trial, when News America agreed to buy Floorgraphics' assets for $29.5 million as part of an out-of-court settlement.”

    And here’s where it gets really interesting, according to the report:

    “The inquiry into Floorgraphics could pose a problem for another of Murdoch’s top newspaper executives: Paul Carlucci, the publisher of the New York Post. Carlucci also has been the longtime chairman and chief executive of News America and has been accused in three lawsuits of creating a cut-throat competitive culture at the company, including showing his employees a scene from the movie The Untouchables, in which the mobster Al Capone crushes a rival’s head with a baseball bat.”

    The statute of limitations is up on the Floorgraphics case, but the incident - and News America’s willingness to spend almost $30 million to make the case go away - seem to be factoring into the US government’s interest in seeing if the phone hacking scandal enveloping News Corp. in the UK also has any relevance here.

    Stay tuned.




    Speaking of staying tuned...

    It was the kiss of death. Last week in this space, I wrote about how terrific the TNT series “Men of a Certain Age” was. This week, the network cancelled it.

    Go figure.

    One can only hope that some other cable network will come along and pick up the series, which only seemed to be getting better.




    Yesterday, I offered six business lessons that can be learned from the Harry Potter film series. Well, it won’t surprise you to learn that I found the eighth and final film in the series, Harry Potter and the Deathly hallows, Part Two, to be a marvelous piece of work - beautifully crafted and totally involving. And I say that as someone who isn’t wild about the genre, and who has not read the books.

    The thing is, having seen all the movies, including the last one, over a three-week period, I’ve come to realize that they really weren’t about wizardry and witchcraft. They actually were about growing up, about shouldering responsibility, about the nature of friendship, and about making choices between good and evil. Sure, there were lots of special effects, and magic was the gimmick that they hung the whole thing on. But that wasn’t really what it was about.

    As I watched the final film, I could see subtle references to other fantasy films such as the Star Wars and Lord of the Rings series, films that created for modern culture a kind of common mythology to which we all could connect. There were plot twists that were unexpected, and some marvelous performances - Alan Rickman and Maggie Smith deserve special shout-outs.

    This may seem strange, but in the film’s climactic battle, I found myself thinking of High Noon, which had a particularly bleak assessment of humanity. Not so in Harry Potter, where the real magic lies not in the wands, but in the hearts and souls of the core characters of Harry, Ron and Hermione, played by Daniel Radcliffe, Rupert Grint and Emma Watson.



    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    Slainte!

    (And stay cool...)
    KC's View: