business news in context, analysis with attitude

Published on: November 1, 2011

by Kevin Coupe

Thanks to the MNB reader who referred me to a Wall Street Journal piece from over the weekend that I’d missed - an interview with Ira Neimark, the 90-year-old former CEO of Bergdorf Goodman. Neimark talked about lessons he learned over the course of his career, several of which I think are hugely applicable to retailers of any stripe. Among them:

“Customers are always looking for something new to make their lives a bit more exciting, no matter what age or gender, in good times or bad.” These days would certainly seem to qualify as tough times, and yet many people remain aspirational, looking for even the smallest of indulgences that can lift their spirits. For some, it is an iPhone 4S, for others it is a gourmet hamburger. But it seems clear to me that catering to the lowest common denominator is no way to generate the highest possible sales.

“Always take the opportunity to visit every business that relates to your own.” This includes competitive websites. You have no idea, for example, how many people I talk to in the supermarket business who do not know that Amazon.com is in the grocery business, have never gone on Amazon’s grocery pages, and/or have never ordered groceries from Amazon. God luck competing under those circumstances.

”There is no question, in any business, that it is imperative to know as much as possible about your present and potential customer.” Neimark says that he is an enormous proponent of an MBWA degree - Management By Walking Around.” Focus groups, he suggests, is like “kissing a girl through the screen door.”

Enough said.

Published on: November 1, 2011

The Nielsen Co. is out with a new survey saying that “92 percent of US internet consumers believe the country is still in a recession. Another almost two thirds (61%) reported doubt the economy will be out of the recession within a year.

When asked ‘how will you spend spare cash?’ one third of respondents (32%) said that they have no spare cash. Of those with spare money, 31 percent reported plans to stash it away in savings and another 28 percent said they will pay down debt.

However, there also is evidence in the report that the top earners are doing better: “Nielsen analysis indicates that affluent households ($100,000+ annual income) have exited the recession and are shopping and spending.”

“The bifurcation of U.S. shopping habits shows up in performance among retailers who appeal to more affluent shoppers, such as high-end department stores, specialty and warehouse club chains,” says Todd Hale, Nielsen’s SVP, consumer and shopper insights. “And value retailers like dollar stores, who attract affluent shoppers also, continue to post higher same-store-sales results than their peers.”

Published on: November 1, 2011

MNB has, since its beginnings, always believed that the food business ought to be more about food, that too much time is spent on operational issues (which are, of course, important) and too little time on the magical appeal that great food can offer.

With that in mind, feast your eyes and imagination on the following paragraphs from Time.com:

“For years, unless you lived on or near a reservation — or happened to be visiting the cafe at the National Museum of the American Indian — you were unlikely to be able to go out for Native American food. But now, residents of Denver, Colorado, are able to feast on Indian tacos, green chile stew, wojapi (a thick berry dessert) and more, thanks to Osage Indian Ben Jacobs and his restaurant Tocabe: an American Indian Eatery ... It's a fast-casual restaurant, where patrons order the base of their meal at the counter — there are tacos filled with bison or chicken and flavored with Native American sauces, served on frybread, stuffed frybread, a ‘medicine wheel’ of colored corn chips and nacho-style toppings, salads, ribs, and a variety of soups — and then choose from the beans, meats and six different kinds of homemade salsa.”

And, demonstrating that great art can equal great business, the story goes on:

“Less than three years after opening the restaurant, Jacobs and his business partner Matthew Chandra have already bought back the 20% share in the business they gave to the owners of their building, and are negotiating to open a second location. They have more than doubled their workforce and are still hiring. They get calls every week from people all over the country, who have heard about Tocabe's success and want advice on opening their own Native American restaurants. Business has quadrupled in the past month...”

Published on: November 1, 2011

Bloomberg reports that rising price of groceries in the US - up 6.2 percent in September, compared to the same month a year ago - is giving license to restaurants to also raise their prices. However, eateries appear to be undercutting supermarkets to some extent, with prices that were only up 2.6 percent in September compared to a year earlier.

Published on: November 1, 2011

The Minneapolis/St. Paul Business Journal reports that Supervalu plans “to shift money away from opening new Save-A-Lot stores and towards remodeling existing” conventional supermarkets.

The story notes that Supervalu had planned to open as many as 160 new save-A-Lot stores during the fiscal year that ends next february 28, but now will open between 80 and 90.

According to the Journal, CEO Craig Herkert told analysts that “the remodels would focus on improving merchandising fixtures and creating better product displays. The company also wants to improve logistics and transportation and invest in energy management projects.”

Published on: November 1, 2011

• ClickZ.com reports on how a number of corporations are creating executive social media marketing roles, which is “a testament to the rise of Facebook, Twitter, YouTube, and geo-social platforms like Foursquare.”

Among the companies coming to the conclusion that social media requires a high level of commitment - integrated into their broader operational and marketing efforts - are Walgreens, HBO, Red Roof Inn, and PepsiCo.

Adam Kmiec, who fills the position for Walgreens, describes the role this way: “For social to be successful, it needs to be able to scale and it needs to get local. If you treat Facebook and Twitter vertically, it's really tough to get that to scale. If you treat social horizontally, and think about how every store plays a role in the community of our customers, social has an angle to help customers connect with our stores...We need to think of social not as real estate but as a way to connect with customers.”

Published on: November 1, 2011

• The Wall Street Journal reports that Barnes & Noble plans to double the size of its Nook boutiques “in 40 of its most productive stores,” as the company girds for heightened competition from the new Kindle Fire, expected to ship in two weeks, as well as continuing competition from the iPad 2. The Journal also reports that Barnes & Noble also is expected “to introduce a new tablet version of its Nook” next week - though it is unknown at this point exactly what improvements it has made to the e-reader.

• Advertising Age reports that Meredith Corp. has completed the acquisition of “Every Day with Rachael Ray” from the Reader’s Digest Association, as well as concluding a 10-year agreement with Rachael Ray. Terms of the deal were not disclosed.

• Courthouse News Service reports that three leaders of the United Food and Commercial Workers (UFCW) Local 348 in New York City have been indicted on charges that they “extorted money from at least a dozen employers, laundered it and tampered with witnesses in a decade-long racketeering enterprise.” The defendants are Anthony Fazio, Anthony Fazio Jr. and John Fazio Jr.

• The Chicago Sun Times reports that 16 Walgreens stores in the Chicago area now are offering a full-time employee, equipped with an iPad, who is there is provide real-time health information so it can become a “health and daily living resource.”

“The concept is meant to create a pharmacy and health care ‘help desk’ where customers get solutions or referrals for their personal health questions,” says Colin Watts, Walgreens’ chief innovation officer.

According to the story, the health guide also “keeps patients from taking up valuable time with routine issues while expanding the pharmacist’s role beyond filling prescriptions. The pharmacist can be freed up to talk with patients one-on-one, even helping people compare Medicare Part D plans.”

• Target Corp. announced that it will open at midnight the day after Thanksgiving this year, and will stay open until 11 pm on Friday November 25. This is four hours earlier than it opened last year on so-called Black Friday, the traditional beginning of the end-of-year holiday shopping season.

Published on: November 1, 2011

• Delhaize-owned Hannaford Supermarkets announced that Rudy DiPietro, the company’s director of fresh merchandising, has been promoted to the position of vice president of retail operations for the western division, based in Schodack, New York. He succeeds Kevin Hill, who moved to the company’s Food Lion division.

Published on: November 1, 2011

• Fred Ball, the chairman of Kansas City-based Ball’s Food Stores, has passed away. He was 77, and was described in the Kansas City Kansan as being one of the city’s leading philanthropists, as well as a gentleman who was a visionary in both business and in his charitable activities. Ball received the Sidney R. Rabb Award from the Food Marketing Institute (FMI) in May of 2011, served as an FMI Board member for over 20 years, and also served as Chairman of Associated Wholesale Grocers in Kansas City for 28 years.

Published on: November 1, 2011

...will be posted on Friday this week.

Published on: November 1, 2011

Yesterday’s Eye-Opener focused on the fact that the globe now has seven billion people, and I wondered how we’re going to feed all those people.

Which led one MNB user to write:

As a general rule, most academic demographers are not of the belief that rising populations have much, if anything, to do with global hunger. Study after study has shown that famine’s root cause has been political instability and not food shortages related to population growth.

One of my favorite economists, Amartya Sen, was awarded a Nobel Prize in part by his research that proved, pretty convincingly,  that nations with functioning democracies have never been plagued by extended famine.

This is, in large part, why the article from the Daily Beast raised these exact issues regarding democratic governments. Your observation: “how these people feel about their circumstances and whether they are satisfied or discontented will be directly related to whether their stomachs are full, and whether they are able to feed their families” is no doubt an important one. The question is causality.

And I would suggest that as we have seen in all of the recent political hotspots, widespread hunger may suck, and it may cause some unrest, but none of those issues are as casually important as  an utter breakdown of civil rule, democracy, etc. The real eye opener in the story is that the problems like those we’ve seen in Iraq, Libya, Afghanistan, etc. could be magnified 500 X with a soaring population lacking civil rule. In this, Global political unrest may become the expectation,  with democracy being the exception.

The thing I love about MNB is that I learn stuff every day.




On the subject of declining consumer confidence, one MNB user wrote:

I don’t know about you, but when I opened my quarterly 401K report, showing I lost more than I contributed for the Q3, my confidence plummeted, too. A reaction to a paper loss the prior quarter. Possibly not a coincidence that general confidence is down if that’s the same news other investors just received.

MNB user Jill Hedin had a thought about a related issue:

If the gap between the have and have-nots is truly increasing, I cannot help but wonder (and this might be a very naive view; forgive my ignorance) that we might need to redefine the word affluent or address it differently. I grew up in a working to middle class family. Now I am seeing this group viewing themselves as “affluent”.

Is the “middle class” really going away or are these times of economic struggle simply causing the human race to feel differently about their status?




MNB took note yesterday of an Advertising Age report that in the UK, Kellogg Co. is dealing with the lack of sunshine during much of the year by fortifying a number of its cereals with Vitamin D, “touting the addition of the ‘sunshine nutrient’ as a way to combat rising incidents of rickets, a bone disorder caused by a lack of the vitamin ... Kellogg cited research showing a 140% increase in the number of British children under 10 admitted to the hospital with rickets in 2009 compared with 2001.”

My comment:

Call me crazy, but I think I’d be more concerned about the fact that the UK apparently has seen such a dramatically reduced level of sunshine in just eight years that it is getting people sick...

Which led one MNB user to offer:

If I had to guess, it isn’t the reduction in sunshine causing the lack of vitamin D, but the reduction in time outside in the sunshine that is causing the lack. Also from my limited research on the issue, using sunscreen to avoid dangerous UV rays also limits the production of vitamin D produced from spending time in the sun. That combination would reduce vitamin D in the diet. Sometimes it is a “Catch 22” when dealing with metabolic issues.




The other day, MNB quoted a new story that said:

“Virtually everyone is exposed to BPA. Authors of the new study found BPA in the urine of more than 97% of the 240 pregnant women studied, as well as 97% of their children.”

MNB user Elizabeth Archerd wrote:

Organic food in BPA free containers, anyone?




Regarding Walmart’s decision to move its fashion office from New York to Arkansas, one MNB user wrote:

Wal-Mart has an expansive view of the world. It is just viewing it from Arkansas! How would you like to be an employee in New York offered a chance to transfer to Arkansas? Wow ... talk about culture shock.




Last week, MNB reported that Redbox, the Coinstar-owned DVD and video game rental service with 28,000 locations nationwide, announced yesterday in an email to users that it is raising its prices 20 percent - from one dollar to $1.20 - effective Monday, October 31. The move comes some months after Netflix, the online DVD rental service, caused a small firestorm among its subscribers by raising its prices 60 percent.

The company said that one of the main reasons for the increase was “higher debit card fees that went into effect October 1.”

My comment:

After the Netflix debacle, Redbox probably figured there was no time like the present to increase prices. And the move is even easier when you can blame it on those damned politicians.

One MNB user responded:

I would feel better about this if they would tell us exactly what these fees were, and what they are now.  Transparency, or additional information, would be valuable in determining whether these claims are true.

But another MNB user responded:

Come on. Be fair. Redbox is being completely transparent here. Their costs increased. Their customers are being informed of this and the necessary price increase and now have a choice of whether to pay or pass.

And, from another MNB user:

So far, this "consumer protection law" and resulting transparency has resulted in both higher bank fees and higher prices (Redbox, for example). It's enough to make consumers nostalgic for the good old days of last year when at least we didn't realize how much all this was costing us.

In the end, I have to believe that transparency is better.




On another subject, MNB user Jim Swoboda wrote:

I read once again, with amazement, your commentary sharing the conversation on Tower Records and the comment that companies like Apple and Amazon, like to build things but only leave destruction in their wake.

What is it about innovation and progress that many in our world bemoan the fact that some businesses become obsolete.   I believe that has happened since the beginning of business.

Would you want to trade your light bulbs for oil lanterns, or candles before that, or simply torches before that!  Were any business obsoleted in this progression?

How about trading your car back in for a horse and buggy and before that, just a horse. Any buggy manufacturers obsoleted?

Then, you could trade in your pocket digital camera with 15 megapixels for a film camera, perhaps a disc camera, or maybe even an old tintype that required a 8 x 10 metal plate or bigger and 50 plus pound camera to carry around.  Any obsoleted companies or business models here?

We could go on and on listing examples like this.  It is called progress.  Those who innovate, survive and thrive, those who do not, have their day, and then fade away, sometimes with a whimper, sometimes with a bang.




Responding to my piece about the Cardinals’ World Series win, MNB user Steven Ritchey wrote:

For every winner there  has to be a loser, and many Texas Ranger fans are heartbroken at coming so close, we came within 1 strike, twice on Thursday night.  So celebrate, enjoy it, you’ve earned it, but remember, how close it came to being over in game 6 and remember that to some degree some luck was involved.

Really?

First of all, I'm a Mets fan. (I’m not celebrating anything, except the good fortune being enjoyed by my friends in St. Louis.)  Believe me, after 1986, I know about luck.  But I also know about character.

Was it luck that St. Louis kept coming back in the sixth game of the series? Or was it an unwillingness to give up, and an ability to take advantage of an opportunity when it is presented - like a fat pitch that can be hit a long, long way. And was it bad luck that the Rangers could not close the deal? Or just an inability to close the deal?

I feel bad for the Rangers - especially for Nolan Ryan, who just looked crestfallen - but to ascribe the turn of events to “luck” strikes me as disingenuous.

And MNB user Henry Stein wrote:

...and most impressive in St. Louis was the lack of rioting and the apparent civility after the 7th game win….not easy to accomplish, and yet, speaks to the fact that this baseball town not only appreciates what their team had done, but kept the celebration clean and free of strife and conflict.

Published on: November 1, 2011

• In Monday Night Football action, the Kansas City Chiefs defeated the San Diego Chargers 23-20.

• In something of a surprise announcement on Monday, Tony La Russa, manager of the World Champion St. Louis Cardinals, announced that he was retiring after 33 years as a manager, the last 16 with the Cardinals. La Russa, a likely Hall of Fame inductee, is third on the all-time win list for managers with 2,728, behind only Connie Mack (3,731) and John McGraw (2,763), and he has won three World Series titles.