retail news in context, analysis with attitude

Published on: October 13, 2011

This commentary is available both as text and video. The two versions are similar, but not identical. Enjoy either, or both.

Hi, I’m Kevin Coupe, and this is FaceTime with the Content Guy.

Over the past week, I’ve tried not to overdo the Steve Jobs stories and allusions.  It hasn’t been easy, because there have been so many stories about him since the Apple visionary passed away, and I’ve been reading as many as I can.  But, I recognize that it is important to use these references judiciously, so you don’t get tired of them.

However, I’ve come across a video that I want to share with you because I think it has broad applicability.

The time was the late nineties, and Steve Jobs had returned to Apple after having been in exile from the company he co-founded for more than a decade.  Apple was in a shambles - through mismanagement and neglect, it seemed to be on the verge of going out of business.

And so, Steve Jobs in this video is shown standing up in front of Apple staffers, talking about the company’s new marketing efforts, and how it was important for Apple to communicate its values if it is going to cut through the clutter.  

Jobs - standing there in shorts, a t-shirt and sandals - makes the point that Apple needs not to talk about “speeds and feeds” and all sorts of other technical specifications, needs not to talk about how or why it is better than Windows.  

“What we’re about,” he says, “is not making boxes so people can get their jobs done, though we do that well.”  Apple’s core value, he says, is that “people with passion can change the world for the better,” and that Apple as a company shares that kind of passion - and it is this connection that makes Apple customers more than just users, but Apple lovers.

The campaign that Jobs is referring to, of course, is the “Think Different” campaign, which honors people who move the human race forward.

This strikes me as having broad applicability, and something that more companies ought to keep in mind.  Instead of focusing on products and product attributes and product prices, more companies ought to focus on the passions that drive them, or at least ought to drive them.

Supermarkets are a great example of how most companies don;t do this.  They focus on sales, they focus on price, they focus this gimmick and that scheme, but too few actually focus on the notion of food, and food can fuel the body and feed the soul.  There are exceptions, of course, but too few of them.

Things like the importance of the family meal - which could have both deep and broad implications for the food industry - are relegated to footnote status, one day out of the year when it gets mentioned, just another part of a cluttered promotion calendar.

Walk into most supermarkets with your eyes closed, and you wouldn’t even know they are supermarkets - they smell as antiseptic as a drug store.  Where’s the passion?  You may not think this is a big deal, but when you walk into one that does it right, you understand how important it can be.  I was recently in a PCC Market in Seattle, and the moment I walked in the front door I could smell something like chicken parmesan.  No longer was I thinking with my head ... instead, I was following my stomach, instantly hungry because it smelled so great.

Sure, price is important.  Promotions are important.  Efficiency is important.

But in the end, I believe, the death of many companies will be their constant focus on selling boxes and bags and jars for a sharp price, and not connecting with the tastes and smells that can make them category killers.

Now, more than ever, when food is a top of mind subject for many people and a source of dysfunctional thinking for many others, is when supermarkets ought to thinking and talking about the food.  The core value.  About feeding the body and fueling the soul.

If you want to see the Steve Jobs video, just click on the screen at right, and watch it.  Think of it as another way of fueling your soul.

That’s what is on my mind this Thursday morning.  As always, I want to hear what is on your mind.

Published on: October 13, 2011

Walmart said yesterday at a meeting with investment analysts that “revenue at its namesake stores in the U.S. that have been open at least a year rose three months in a row in July, August and September,” according to an Associated Press story. If the pattern holds through the end of quarter on October 28, it should mark the end of a nine-quarter string of stagnant or declining US same-store sales.

Wal-Mart had promised a quarterly increase by the end of this year, ending nine quarters of declines, and Wednesday’s news indicates it could make good on that vow in the current quarter, which ends Oct. 28.

“The progress is now visible in our business,” said Bill Simon, president of Walmart’s U.S. stores. “We have confidence in our plan.”

That plan includes cutting costs and prices across the board, as well as opening small store formats across the US and working to build online sales with offers of free shipping.

“We have had very positive momentum in the back half, especially in the U.S,” said Charles Holley, the Walmart CFO. “We have more opportunities to grow more sales in the U.S. and around the world. But we will be deliberate.”

The New York Times writes that “Mr. Simon said one reason for the turnaround was the company’s decision to restock more than 10,000 items that had been removed as part of an effort to clean up the stores and make them less cluttered. He said customers were shopping less because they didn’t see the items they wanted.”

In addition, Bloomberg reports that Walmart now plans to “focus its mergers and acquisition strategy on existing markets,” looking to expand in places where it already is operating rather than expanding into new markets.

Doug McMillon, chief executive officer of the company’s international unit, said, “First and foremost we want to build scale in the markets where we are. We like the markets that we are in and will continue to prioritize those. There are a few remaining high-growth markets we are not in, and we won’t miss an opportunity there if one presents itself.”

The story notes that Walmart currently is integrating acquisitions made in the U.K., China and Africa. Analysts say that Japan is the most likely place for Walmart to make an acquisition in the short-term.

Meanwhile, the activist group called Organization United for Respect at Walmart, (OUR Walmart), complained that nearly 100 of its members “were turned away from the front door of Walmart Stores (WMT) home office here today by Walmart security and Bentonville police as they asked to meet with Walmart CEO Mike Duke for the second time in six months. The employees are in Arkansas to offer solutions for improving the company’s ailing U.S. store operations on the same day that Wall Street analysts and investors are assembled at the company’s annual investor conference to hear from senior management about what the next year holds for Walmart.”

OUR Walmart says that it has three goals: “Respect and better schedules, wages and benefits for Walmart’s employees, success for the company, and outstanding service and value for the customer.”

Published on: October 13, 2011

Bloomberg reports that “two U.S. House lawmakers say they will introduce a bill to repeal a Federal Reserve rule capping debit-card swipe fees.

“Representatives Jason Chaffetz, a Utah Republican, and Bill Owens, a New York Democrat, plan to introduce a measure later today to repeal the rule required by the 2010 Dodd-Frank Act. The Fed on Oct. 1 implemented the rule, which limits fees that card networks charge merchants to 21 cents per transaction -- about half the average retailers have paid in the past.

“The repeal legislation ‘fixes the disastrous consequences of this bill,’ Chaffetz said today in a statement. ‘Congress must repeal this egregious provision that increases the costs of doing business on everyone’.”

The Merchants Payments Coalition responded to the proposal with what could fairly be called outrage.

“For Members of Congress today to do the bidding of the country’s biggest banks and attempt to repeal these reforms is an affront to merchants and their customers,” said Mallory Duncan, Chairman of the Merchants Payments Coalition and Senior Vice President and General Counsel of the National Retail Federation. “Repealing these reforms sends a message that anti-competitive, price-fixing behavior on the part of the country’s biggest banks is acceptable.”

Published on: October 13, 2011

The Associated Press reports that “government officials fine-tuning guidelines for marketing food to children say they won't push the food industry to get rid of colorful cartoon characters on cereal boxes any time soon,” as it looks to find forge a compromise with CPG companies that don;t want even voluntary guidelines established by the government.

According to the story, “Voluntary guidelines for industry proposed by the government this year set maximum levels of fat, sugars and sodium, among other requirements, and asked food companies not to market foods that go beyond those parameters to children ages 2 to 17. The guidelines would apply to many media venues, including ads on television, in stores and on the Internet, in an effort to stem rising child obesity levels.”

The story continues: “The food industry, backed by House Republicans who held the hearing, has aggressively lobbied against the voluntary guidelines, saying they are too broad and would limit marketing of almost all of the nation's favorite foods, including some yogurts and many children's cereals. Although the guidelines would be voluntary, food companies say they fear the government will retaliate against them if they don't go along.”

Published on: October 13, 2011

The New York Times had a story the other day about Black Box, a company that has been selling eight different varieties of wine in three liter boxes for about $20, and how it is using an unorthodox marketing scheme to build sales.

First, the wine:

• “Sales of premium boxed wines like Black Box, those in three-liter sizes that tend to cost $20 or more, rose 19 percent in 2010 from 2009, according to Nielsen. Similarly, sales for Black Box itself rose 18.2 percent in the year ending Sept. 4 from the previous year, according to the SymphonyIRI Group.

“Besides the better-than-expected quality and affordability, a selling point for boxed wine is its shelf life. Air oxidizes bottled wine and ruins it within a few days, but boxed wine comes in an airtight plastic bag attached to a spigot, meaning there is little space for air and wine stays fresh for up to four weeks.”

And now, the marketing scheme:

• A 10-year-old Boston-based company called BzzAgent uses thousands of volunteers all over the country to generate positive word of mouth for the products it represents. The volunteers get discounted or free product, but are not paid; they are asked to do things like throw wine tasting parties for friends and neighbors at which Black Box is sampled. They also are under no obligation to promote a product they don’t like.

According to the Times, “‘What we’re trying to do is get people away from their preconceptions about box wine,’ said Malcolm Faulds, senior vice president for marketing at BzzAgent, which is owned by Dunnhumby.”

Published on: October 13, 2011

• Bloomberg reports this morning that Chinese police have arrested two Walmart employees and detained 25 more in a continuing scandal that has the retailer accused of mislabeling ordinary pork as being organic.

According to the story, “In addition, seven people are confined to their homes and three have been released on bail in the case, the official Xinhua News Agency said yesterday evening, citing unidentified police in the municipality of 32 million people. The retailer has confirmed that some of its employees were detained and said it’s cooperating with the investigation.”

Published on: October 13, 2011

• Bloomberg reports that Tesco CEO Philip Clarke says that “his biggest concern is a shortage of talent rather than weakening consumer demand.”

“People are focused on what isn’t good, but I just see opportunities and I see a shortage of skill, I see a shortage of talent,” Clarke told the Institute of Grocery Distribution conference in London yesterday, suggesting that the current economic climate and eroding consumer confidence are cyclical and can be addressed through savvy management and leadership.

Published on: October 13, 2011

• Spartan Stores has announced that its “Spartan brand packaging will now include front of the packaging nutrition icons making the company one of the first retailers in the nation to do so. The new labels support the voluntary Facts Up Front nutrition labeling system designed by the Food Marketing Institute (FMI) and the Grocery Manufacturing Association (GMA).”

The front-of-package labeling uses nutrition icons to “highlight calories, saturated fat, sodium and sugar per serving, the daily value percentages for saturated fat and sodium, plus up to two icons showing "nutrients to be encouraged," such as fiber, protein, calcium and vitamins.”

• The Meredith publishing group has reached an agreement in principle to acquire “Every Day with Rachael Ray” from Reader’s Digest. Terms of the deal were not disclosed.

According to Advertising Age, “News of the deal came just hours after Reader's Digest Association said it was looking to sell the cooking title, citing limits on its agreement with Ms. Ray that prevented it from expanding the brand much beyond print.

“Meredith, however, has been doubling down on food this year. In June it bought ‘EatingWell’ magazine and introduced a food site called Recipe.com.”

• The Associated Press reports that the US Centers for Disease Control and Prevention (CDC) is now saying that “an outbreak of listeria in cantaloupe is now linked to 23 deaths in the U.S., making it the deadliest known outbreak of food-borne illness in more than 25 years ... The number of deaths has now surpassed a 1998 outbreak of listeria in processed meats that was linked to 21 deaths. A 1985 listeria outbreak in Mexican-style soft cheeses killed 52 people.”

• The Palm Beach Post reports that “Publix has recalled its fall Publix GreenWise Market magazine and plans to mail subscribers a warning in regard to a recipe incorrectly billed as ‘gluten-free.’

According to the story, “Anyone mixing a batch of ‘gluten-free’ Orange-Honey Sweet Rolls was directed to include wheat germ and yeast, some varieties of which contain gluten. People with celiac disease or a gluten intolerance must avoid the allergy-inducing protein even in the smallest amounts.”

Published on: October 13, 2011

A couple of weeks ago, in a story about Shelley Broader being named CEO of Walmart Canada, I wrote:

She’s got tons of great experience that will help her in the new post. In addition to her Delhaize experience, she also was COO at the Michael’s crafts chain (where she worked for Doug McMillon, who preceded her in moving to Walmart), and also was a senior vice president at Sam’s Club.

That was a 5 am mistake.

In fact, it was Brian Cornell who was left Michael’s for Walmart, not Doug McMillon.

I goofed. I apologize.

Published on: October 13, 2011

We got several emails about the ongoing discussion of high levels of spending by affluent people on luxury goods, and what the implication is for the larger economy, where more people than ever might be classified as “have-nots.”

MNB user Steven Ritchey wrote:

The story about luxury spending reminds me of some of what went on during the Depression era, wealthy people had lavish parties while the soup line got longer and longer.

It also reminds me of a line from Robert B. Parker’s Spenser novel “Bad Business,” when  Spenser’s CPA has audited Kinergy’s books (Kinergy is remarkably like Enron) and has discovered vast legal and ethical problems.  When Spenser asks if the Board of Directors doesn’t have to approve all of this, the CPA replied, “As far as I can tell, the board would approve mandatory pederasty if they were urged to.”

Parker did  have a way with words and I will forever miss his writing.

Another MNB user wrote:

If the affluent are the only consumers fueling the economy, it won't be enough. With 70% of our GDP driven by consumer spending, the middle class needs to be a part of the "shopping spree."  The "haves" may be feeling fine now, but the reality is that our economy is heavily reliant on both the wealthy and the disappearing middle class. High end manufacturers may be satisfied with these numbers, but none of us should be because until the less affluent start spending again, we will not be on solid economic ground.

And, from an other MNB user:

KC – I like your point regarding top executive salary increases are a kind of hoarding, given the trend in compensation disparity between executives and people on the “front lines”.

So, it’s such a wonderful thing when the affluent spend money rather the hoard their bounty and it helps to keep people working but here’s the rub. How many expensive parties are they going to throw per year? How many mansions are they going to build in their lifetime? How many yachts are they going to buy and maintain? How many private jets will one person own? How many restaurant dollars and food dollars are they going to spend, do they eat more than 2 or 3 meals a day?

Although any dollar the affluent spend helps keep people working I don’t believe there are nearly enough of them to improve our economy. Case in point being that if “trickle down” economics actually worked, it would have been happening already and we wouldn’t be in the situation we are in now. BTW, there was a little “trickle down” economics experiment in this country back in the 1890’s only it was more aptly named “Horse and Sparrow economics”. It held the exact same ideals which was ‘feed the horses more and they will leave more in the streets for the sparrows to eat’. Guess what? It didn’t work then and it hasn’t worked in the 30+ years the experiment has been tried since then. Overall the haves will always hoard more than they will ever spend and hey who could blame them? They are only human.

The reality is the affluent will never be the fuel that keeps our economy rolling down the road. It won’t be the big parties, mansions or yachts. It will be the other 95% of the population’s ability to make enough money to keep a roof over their head, food on their table and clothes on their backs. So, it’s not about $1m parties it’s about the front line people making enough to meet basic needs and maybe even being able to spend $16 to go out to a movie once in a while. And in order to do all this and thereby fuel the economy, the compensation front line people need to receive for their labor has to at least keep up with the increase in the cost of living each year.

As I said the other day, I’m not sure this is something that government can or should fix ... and I’m not sure that private industry has the stomach to do so, either. Which puts us betwixt and between.

Whatever you think about the current and admittedly disorganized and unfocused protest movement, this is the disconnect being addressed. And I suspect that the movement will get more focused as time goes on. It does not seem likely that it will disappear.

Here’s one question that perhaps they ought to be asking:

Should any company’s annual report ever have the words “layoffs” and “salary increases” within pages of each other?




Regarding Walmart’s competitive issues, one MNB user wrote:

It’s ironic in light of these operational issues that Bill Simon, CEO of Walmart Stores in the US, had served as Walmart’s COO and prior to that was a senior executive at Brinker International, one of the most respected operators of chain restaurants in the world.  No question their sense of urgency regarding same store sales has caused the culling of the workforce and heavy-handed, top-down approach to cost reduction at the store level.

I frequently shop at Walmart and I can attest to the scarcity of associates on the sales floor.  One of the elements of Sam Walton’s unprecedented success was the culture at Walmart, where store employees took great pride in “my Walmart” and wanted each guest to have a positive experience.  It’s difficult to find that spirit any more.  While in New Orleans a few weeks ago, I was shopping at Walmart for supplies for my daughter’s dorm room.  I slipped and nearly fell on a puddle of laundry detergent from a jug that some shopper had knocked off of the shelf.  I went to find a Walmart associate to report the spill  so that nobody else would slip as I did.  Mind you, this was a busy afternoon and the store was full of shoppers.  I must have walked half the floor looking for an associate and found none.  I went back to the detergent aisle to see if the puddle was still there, and it was.  Some Walmart associate had placed a “danger, wet floor” sign near the puddle and left it there.  Where is the pride, the spirit of Sam Walton? 

There’s nothing special about Walmart anymore, not the lowest prices, no friendly associates, no pleasant surprises.  Just another business run by the numbers.  We went from Lee Scott’s ingenious “Save Money, Live Better” –which galvanized the organization and created a shared sense of purpose—to today’s “We’ll match any competitors’ prices.”  Where is the vision, the leadership?  Company culture can be a powerful strategic advantage (e.g., Trader Joe's, Wegmans) or it can be an albatross around a company’s neck.

I think Mr. Sam would be gravely disappointed.

From another reader:

It’s a business model run by processes, not people. That is the problem! More people need to be monitoring the processes and their results! Then the shelves would be full of items and more importantly "items the customers want". Every retailer wants to complicate a simple business. I say follow GTCWTW. GIVE THE CUSTOMER WHAT THEY WANT!

And, another MNB user offers:

One persistent irritant associated with the Walmart shopping experience hits me before I even enter their store.

Terrible Shopping Carts! 

Good luck finding one that’s semi-clean.

Good luck finding one that has…round wheels.  Clunk, Clunk, Clunk.

I think Walmart buys the cheapest carts available, then let’s them fall apart.

And, from yet another MNB user:

Our organization is so concerned about out of stocks that we track “zero sales.”  Either through shrink or theft the system can create “phantom” inventories that prevent automated ordering.  By managing their zero sales we have been able to react more quickly to out of stocks and their true inventory levels reentered into the system to keep the machine running.  I was shocked to see how pervasive this issue really is.

These automated systems undoubtedly save many man hours but at what unintended cost?

Published on: October 13, 2011

In the American League Championship Series, the Texas Rangers scored four runs in the 11th inning to break open a 3-3 tie and defeating the Detroit Tigers 7-3. The win leaves the Rangers with a 3-1 advantage in the best-of-seven series.

And, in the National League Championship Series, the St. Louis Cardinals defeated the Milwaukee Brewers 4-3, taking a 2-1 lead in the best-of-seven series.