retail news in context, analysis with attitude

Published on: September 21, 2011

by Kevin Coupe

USA Today has an interesting piece on the evolving vending machine business, which is being remade by “a new generation that would rather touch screens than coins,” and that is completely comfortable with “paying by credit card, key fob and smartphone.” The idea is to create equipment that is more like an iPad than a traditional vending machine, to satisfy “an evolving world of users populated less by lunchtime factory workers and more by college students with midnight munchies.”

Among the examples cited:

• The Coca-Cole Freestyle machine that allows users to customize more than 100 different varieties and flavors.

• A Pepsi prototype “with a touch-screen that's interactive. Folks can ‘gift’ a beverage to a friend by entering the friend's name and mobile number. You can even personalize it with a short video.”

• “Kraft is testing a touch-screen machine that lets you see close-up images of the package so you can read details such as ingredients and nutritional facts. It also lets folks buy multiple snacks at a time.”

The point is that the next generation of consumers - which is rapidly becoming the current generation of consumers - expects and demands a technologically advanced solution to their needs and desires. All retailers - not just the vending machine industry - ought to be opening their eyes to this trend, and developing strategies that will open shoppers’ eyes to their products and services.

Published on: September 21, 2011

There has been much criticism of the controversial Netflix decision to split the company’s brands in two - using the Netflix name for its streaming service and inventing a new “Qwikster” brand for its DVD rental service, a move that itself followed a price increase that annoyed customers and caused up to a million subscribers to abandon the service.

Slate.com, however has a defense of the strategy - albeit a half-hearted defense, since the piece also says that the decision was “idiotic” because it essentially drew a distinction between two kinds of video usage when, in the consumers’ mind, there is no difference.

However, the piece suggests that Netflix CEO and co-founder Reed Hastings may have been reading “The Innovator’s Dilemma,” by Clayton Christensen, which in 1997 focused on “the ways that successful companies die at the hands of upstarts,” which develop disruptive technologies and business models. It is a focus to which Hastings would be sympathetic, since Netflix itself disrupted a traditional video rental model developed by Blockbuster. “Hastings is likely paranoid, then, that Netflix is vulnerable to the same kind of disruption,” Slate posits. “And that's the logic behind the mail/streaming separation. Hastings would prefer to kill his own golden goose before anyone else beats him to it.”

Slate offers the following defense:

“It could work. In ‘The Innovator's Dilemma,’ Christensen argues that the companies that are most vulnerable to disruptive technologies are those that have really good management. The problem with good managers is that they tend to listen to customers. And the problem with customers is that they don't always know what's best for them. If you were a devoted Blockbuster customer in 2001, and if Blockbuster's CEO sent you an email announcing he was closing all the company's stores and switching to a DVD-by-mail service, you would have balked. From now on you'd have to wait three days for a movie? You'd have to choose your movie on your computer—how would you do that when you didn't even have Internet service? You'd have to pay a monthly fee? What if you just watched one movie a month? All of this would have sounded like too much hassle.

“As Christensen explains, disruptive technologies usually start out as inferior substitutes, proving attractive only to a small fringe of customers. For years, the people who ran Blockbuster saw Netflix as irrelevant. It's easy to call them stupid now, but at the time they were mostly right. Blockbuster's customers considered Blockbuster better than all the alternatives; if they didn't, they wouldn't have been Blockbuster customers. And Blockbuster's managers were doing what good managers do - they were investing in the parts of the business that customers liked (opening more stores) rather than coming up with a whole new business that might alienate their current users.

“The key advantage of Netflix's new model is that it will give each side of the business —the DVD side and the streaming side—flexibility to manage its service in a way that pleases its own customers. As a combined service, any move to strengthen one side of the company over the other would have been perceived negatively by one group of customers. Netflix believes that its DVD shipments will peak in 2013; after that, as fewer and fewer people subscribe to DVDs, it's going to have to raise prices to support the physical infrastructure needed to ship out the discs. Now it will be Qwikster that will suffer the negative reaction to all future price hikes—and Netflix that will benefit from the customers getting rid of their DVD plans.”

Published on: September 21, 2011

The Chicago Sun Times reports that One Million Moms, an offshoot of the conservative American Family Association, is threatening to boycott Ben & Jerry’s because of the company’s newest flavor - “Schweddy Balls,” which is based on an old “Saturday Night Live” skit in which Alec Baldwin played a bakery owner who makes balls for Christmas, and says, “No one can resist my Schweddy balls.”

“The vulgar new flavor has turned something as innocent as ice cream into something repulsive. Not exactly what you want a child asking for at the supermarket,” reads a statement on the One Million Moms’ website.

The Sun Times writes that “Ben & Jerry’s spokesman Sean Greenwood said Tuesday the flavor has proved wildly popular, and another production run is planned for next week.”

Published on: September 21, 2011

The Wall Street Journal reports that Google “has begun making a payment tool available via mobile phones and is adding new credit card partners to the effort, moves that come as technology giants vie for a bigger presence in the payments industry.”

The new tool, called Google Wallet, was announced earlier this year and “enables users of phones with the technology installed to physically tap them at a store and complete payments through credit-card firms.”

The story notes that at the same time, eBay is expanding its PayPal service by introducing mobile functionality, while mobile technology providers such as AT&T, Verizon and T-Mobile also are wading into the mobile payment waters.

Published on: September 21, 2011

It isn’t even October, but the Wall Street Journal writes that expectations for a strong end-of-year holiday shopping season are muted at best.

According to the story, “ShopperTrak, which counts foot traffic at malls and blends it with economic data to predict trends, says in a new forecast that national retail sales will rise by just 3% during November and December, less than last year's 4.1% gain, essentially just keeping up with inflation. The International Council of Shopping Centers is also forecasting a slower 3% increase in sales for November and December.”

As a result, retailers “have been working down inventory where possible, hoping to avoid the markdowns that eat into their profit margins. The result is likely to be a tense standoff over prices at a time when persistently high unemployment and costly necessities like gasoline are sapping the enthusiasm of a broad swath of shoppers.”

The stakes are high. The Journal notes that in 2010, the end-of-year shopping season generated $453 billion - almost a fifth of the US annual total.

Published on: September 21, 2011

• The Chicago Tribune reports that Walmart plans to open its first Neighborhood Market in the Windy City today, a 27,000 square foot unit at the Presidential Towers apartment complex in the West Loop. The supermarket is part of the retailer’s broad offensive in Chicago - it opened a Walmart Express store there earlier this year, and “has announced plans for seven more stores in the city in the next two years: two supercenters, two Market stores and two Express stores.”

Published on: September 21, 2011

The Beaver County Times reports that the “Pennsylvania Liquor Control Board has shut down its year-old wine kiosk program because it says the vendor owes the state more than $800,000 to cover its losses. The automated kiosks, which the state placed in more than 100 grocery stores, were plagued by technical malfunctions and cries that they were in place because of donations by the vendor to then-Gov. Ed Rendell. They were removed from Wegman's stores in June and Wal-Mart stores in August because of the problems but remained in Giant Eagle stores until they were shut down Tuesday morning.”

Published on: September 21, 2011

Tesco’s UK website went down because of a “rare technical glitch” yesterday, Bloomberg reports, affecting both the grocery and HBC sections of the online store. Banking and clothing services were not affected.

Tesco’s online store were back up by this morning.

Tesco.com’s online grocery service in the UK has about 1.2 million customers, the company says.

Published on: September 21, 2011

The Seattle Times reports that Sur La Table, the kitchenware chain that began in Seattle almost 40 years ago in the Pike Place Market, has been acquired by Bahrain-based Investcorp. Terms of the deal were not disclosed, and the company plans to keep current management in place.

According to the story, the Behnke family and Los Angeles-based investment firm Freeman Spogli & Co., which owned Sur La Table, will retain a stake in the company.

Sur La Table now has 86 stores and even greater expansion is planned. The story notes that management believes that the company “benefits from a growing number of people who are eating more meals at home rather than in restaurants — a trend that Chief Executive Officer Jack Schwefel attributes not only to recessionary belt-tightening, but also to America's foodie movement.”

Published on: September 21, 2011

• The Cincinnati Business Courier reports that a new contract covering 1,100 Kroger employees in West Virginia and Ohio has been ratified by members of the United Food and Commercial Workers (UFCW).

• The Washington Post reports that “an outbreak of food-borne illnesses that have killed four people and sickened nearly three dozen others is linked to cantaloupe produced at a Colorado farm,” the Food and Drug Administration (FDA) has confirmed. The story says that the FDA “identified Jensen Farms, a family-owned operation that says it has grown cantaloupe for two decades, as the source of melons contaminated with a strain of Listeria, a dangerous but uncommon bacteria that thrives in cool temperatures.” It has not yet been determined how the listeria was spread.

Published on: September 21, 2011

The New York Times reports that the original Ray’s Pizza in New York City - which is distinct from the “Original Ray’s or Famous Ray’s or Original Famous Ray’s or Real Ray’s or Ray’s on Ice or any of the other cloned shops sprinkled like shredded mozzarella all over town” - is likely to close at the end of the month. “In the great pizza wars of New York City,” the Times writes, “it was respected as having been the first, standing more or less above the fray at 27 Prince Street in Little Italy, with tree limbs holding up the basement ceiling and an owner whose name wasn’t even Ray.”

The Times goes on: “The closing, long story short, follows a legal dispute among heirs with various interests in the building at 27 Prince, which includes apartments and the two sides of Ray’s: the pizzeria and an Italian restaurant, each with its separate entrance, but sharing a kitchen and the corporation name, Ray’s of Prince Street. When the Ray in Ray’s, one of the owners of the building, died in 2008, a row arose over whether the restaurant’s lease was valid and whether it should pay rent. A lawsuit was filed in 2009 and settled this year. Now Ray’s Pizza is moving out amid a lot of head-shakes and shrugs and what-are-you-gonna-do Little Italy resignation.”

The owners hope to find a new location. But it won’t be the same.

Published on: September 21, 2011

Jim Miner Sr., who grew Super One Foods from one store to 31 units, passed away Sunday after a long illness. He was 77.

Published on: September 21, 2011

...will return.