retail news in context, analysis with attitude

Published on: November 21, 2011

by Kevin Coupe

It is a case of understanding that if you want to attract new customers, keep existing customers, or - in this case, perhaps most importantly - bring back old customers, sometimes what you have to do is provide a product that nobody else has.

Netflix - which has been losing customers of late because of a price increase as well as what can fairly be called a ham-fisted attempt to separate its DVD rental and online streaming businesses (which it subsequently had to abandon) - announced over the weekend that it has signed an exclusive deal to air new episodes of the cult comedy series, “Arrested Development.”

According to the announcement, new episodes will be available only to Netflix streaming subscribers in the U.S. in 2013.

“Arrested Development” ran on Fox from 2003-2006, and since its cancellation has been the subject of persistent rumors that it could come back to television or find new life as a motion picture.

This is Netflix’s second bet on an exclusive TV series as a way of giving itself a differential advantage; “House of Cards,” starring Kevin Spacey, has been announced but not yet made available to subscribers.

This is an important lesson that needs to be absorbed beyond the TV and video rental business.

Netflix knows that to grow and survive in an increasingly diverse and competitive business environment, it cannot just be a distributor of other people’s product. It needs to create its own proprietary products and services - in essence, private label.

I’ve said it before and I’ll say it again: Everybody is looking for an edge, everybody is looking for a differential advantage, everybody is looking for that disruptive product or service, everybody is looking to rewrite thew rules in their favor, and everybody is potential competition. In video. In supermarkets. In virtually every kind of retail marketing. And if there are companies out there that are not looking to do these things ... well, the odds are pretty good that in the long run, these companies are going to be the victims of the companies that do.

They’d better have their Eyes Open.

Published on: November 21, 2011

The Associated Press reports that food stamp fraud - in which retailers exchange lesser amounts of cash for food stamps, and then redeem the stamps for full value, diverting more than $300 million a year in public money into their own pockets - has resulted in close to 600 convictions and almost $200 million in fines ands restitution over the past three years.

While food stamp fraud continues to be a problem, the story says, “federal investigators, wise to the practice, are closely monitoring thousands of convenience stories and mom-and-pop groceries in a push to halt the fraud.”

The story continues: “Nationwide, 234,000 stores are authorized to accept food stamps, including 35,000 supermarkets where 85 percent of benefits are redeemed ... Last year, 931 stores nationally were dismissed from the food stamp program for trafficking and 907 others were sanctioned for lesser violations — 37 percent of the nearly 5,000 retailers being investigated. A March USDA report found more than 8 percent of the large and small stores, 210,000 in all, allowed people to cash in their benefits between 2006 and 2008.”

Published on: November 21, 2011

Bloomberg BusinessWeek reports that the US Department of Agriculture (USDA) has formally urged states not to allow Yum! Brands restaurants to accept food stamps at its Taco Bell and KFC restaurants.

“For us to be indifferent to the quality of the food is just a serious mistake,” Kevin Concannon, the Under Secretary for Food, Nutrition, and Consumer Services, tells Bloomberg. “We should promote access to healthy foods.”

The story notes that “Yum has lobbied government officials in Ohio, Pennsylvania, Florida, and Kentucky to allow its restaurants to participate in the Supplemental Nutrition Assistance Program (SNAP), which is administered by the states. The nearly five-decade-old program distributed a record $64.4 billion in the 2010 fiscal year.”

The tough economy has meant that food stamp usage is increasing: Bloomberg notes that “a record 45.8 million Americans used the program in August, up 8.1 percent from the previous year, according to the USDA.”

To be fair, “While about 85 percent of food stamps are redeemed at large grocery stores and supermarkets, in the last decade a handful of states including California, Arizona, Michigan, Rhode Island, and Florida have begun allowing people who can’t cook for themselves -- the homeless, elderly, or disabled -- to buy hot meals at authorized fast food establishments.

“Last year restaurants, including those operated by McDonald’s Corp. (MCD), Wendy’s Co., Taco Bell and KFC, collected about $21 million in food stamp redemptions. Officials from Kentucky, Ohio, Pennsylvania, and Florida say Yum is the only fast-food company that has contacted them seeking to use food stamps as payment in its restaurants.”

Published on: November 21, 2011

National Public Radio reports on new projections made by Mark Huffman, assistant professor of preventive medicine and cardiology at Northwestern University, who says that based on current growth rates, 83 percent of American men and 72 percent of American women will be overweight or obese by 2020.

“The implications go far beyond tight pants and groaning sofas,” NPR wrote. “Obesity is a big risk factor for cardiovascular disease and diabetes (and) imagining an America of overweight, unhealthy people gives public health officials the willies.”

Huffman suggests a multi-dimensional approach to the problem, that “people need help on the individual level, Huffman says, but changes are also needed that affect large groups of people, like easier access to fresh fruits and vegetables, and more physical education classes in schools.”

"It's not one versus the other,” Huffman says.

Published on: November 21, 2011

The Chicago Sun Times reports that daily deals site Living Social will announce today “a slew of bargains for the holidays that are just a couple of mouse clicks away. LivingSocial is announcing Monday that it will offer discounts from national businesses such as Verizon Wireless, Electronic Arts Inc. and the sneaker brand Sketchers USA Inc., a contrast to the local deals for spas, restaurants and weekend escapes that it’s known for.

“Such offers will give national brands access to social media-savvy customers who might not otherwise think to visit their stores. It’s also good, cheap marketing, as the deals are often widely shared on Facebook and Twitter. LivingSocial, meanwhile, gets to sign up new subscribers and take a cut from the money they spend on the coupons.

“It also gets to participate in a day-after-Thanksgiving shopping bonanza that’s normally reserved for brick-and-mortar retail stores.”

The story says that LivingSocial also plans a major push on Cyber Monday, the online shopping day that follows Thanksgiving weekend.

LivingSocial’s biggest - and bigger - competitor, Groupon, is reported not to be planning a major Black Friday / Cyber Monday push this year.

Published on: November 21, 2011

Bloomberg reports that the Indian government this week “may move a step closer ... to opening its $396 billion retail market to foreign companies including Wal-Mart Stores Inc. as it seeks to free a legislative process deadlocked for a year by corruption charges.”

India traditionally has forbidden foreign companies from majority ownership in its retail companies, forcing retailers such as Walmart, Carrefour and Tesco to establish alliances with local companies if they wanted a presence there.

Estimates are that India will be a $785 billion market by 2015.

Published on: November 21, 2011

• The Associated Press reports that McDonald’s and Target have dropped Minnesota-based Sparboe Farms as an egg supplier after the advocacy group Mercy for Animals released an undercover video that showed cases of animal cruelty - “images ... showed a worker swinging a bird around by its feet, hens packed into cramped cages, male chicks being tossed into plastic bags to suffocate and workers cutting off the tips of chick’s beaks.”

According to the story, “Sparboe produces 300 million eggs a year, in regular, liquid, frozen and dried form, and ships them to restaurants and stores across the country. The company’s Vincent, Iowa, plant had billed itself as the sole fresh egg supplier to every McDonald’s west of the Mississippi River.”

• Reuters makes an interesting though hardly surprising observation about the chains opening early on Black Friday - or even late in the day on Thanksgiving - as a way of giving themselves a leg up on the competition during the all-important beginning of the holiday shopping season. It is the stores catering to customers with the tightest budgets that are pushing the envelope in terms of early openings.

“They want to make sure they are getting consumer dollars before anyone else," says Megan Donadio of Kurt Salmon. "Retailers want to do whatever they can to make sure what consumers do spend is spent with them."

According to Reuters, “Executives and analysts alike have said the fight for shopper dollars is more intense this year in a tough job market and uncertain economy. The National Retail Federation expects retail sales to up 2.8 percent this season, below last year's 5.2 percent clip. Chains that cater to shoppers on the tightest budget stand to lose the most, analysts said.”

• Bloomberg reports that Royal Ahold will look to reverse slowing sales growth by ramping up its online business, adding c-stores and expanding in Belgium.

According to the story, “To boost sales via the Internet, the company is testing pick-up points in Europe and the U.S., so customers can order online and collect groceries at designated locations. Personalized offers sent to shoppers via iPhones and the Internet should add 1 to 2 percent to so-called identical sales growth, according to Ahold, which currently has annual online revenue of 500 million euros.”

Published on: November 21, 2011

• Lubbock, Texas-based United Supermarkets announced the appointment of Robin Hawkins as the company’s first health and wellness director. Hawkins, a registered and licensed dietitian, is said to bring “more than 12 years of health-related experience to the company.”

Published on: November 21, 2011

• John G. Smale, the former Procter & Gamble chairman/CEO who push for the acquisition of Richardson-Vicks as well as for the company’s entry into emerging markets, passed away on Saturday from complications of pulmonary fibrosis. He was 84.

Published on: November 21, 2011

In Week Eleven of the National Football League...

Cincinnati 24
Baltimore 31

Jacksonville 10
Cleveland 14

Carolina 35
Detroit 49

Tampa Bay 26
Green Bay 35

Buffalo 8
Miami 35

Oakland 27
Minnesota 21

Dallas 27
Washington 24

Arizona 7
San Francisco 23

Seattle 24
St. Louis 7

Tennessee 17
Atlanta 23

San Diego 20
Chicago 31

Philadelphia 17
NY Giants 10

Published on: November 21, 2011

Got the following email from a reader who was reacting to my rant last week about how food industry lobbyists convinced the US Senate and House of Representatives to reject a move by the Obama administration and the US Department of Agriculture (USDA) to mandate that school lunches be more nutritious by offering more fruits and vegetables and reduce the amount of starch and tomato paste included in meals.

I originally commented, in part:

First of all, I’m with Jon Stewart on this one. With all the crap going on in this country, the one thing that Congress can agree on is that pizza is a vegetable and that kids ought not be restricted in their access to french fries.

I love french fries. I love pizza. I mean, I really love them. So much so that I have to be careful about how much I consume. And I always tried to be careful about how much I fed my kids.

I realize that Congress isn’t really saying that pizza is a vegetable, but this decision has the potential of being seen in the same light as the old “ketchup is a vegetable” ruling back in the eighties.

I realize that there is an argument that dictating what kids can eat in school-served lunches could be seen as an unnecessary government intrusion, but the opposing argument is that the physical conditioning of our kids is not just a health care issue, but a national security issue. That’s a pretty compelling argument ... and I think that if we’re trying to educate our kids, it seems eminently sensible to give them healthier food and a rounded diet - which can include pizza and french fries, but with some intelligent limits.

What people really ought to be upset by is the fact that lobbyists seem to have this kind of sway in Washington. The subject may be pizza and french fries, but we’re really talking about the meat and potatoes of how Washington works. And it is sort of disgusting.

Best government money can buy.

To which Mike Schmutz replied:

I, for one, love pizza and French fries too. And I think you hit on the bigger problem at hand here. It’s no wonder that we can’t get out of a recession or build jobs or help the country become more innovative because of all the corruption in government looking for more handouts from Lobbyist. I can’t imagine a day when a story comes to light that a lobbyist gets mad at a politician because they won’t take their money to push their ideals. That guy would be my hero.

Another MNB user wrote:

I think it is funny that we tie the Obesity crisis to school lunches and if we rid the schools of bad food, our problems are solved. It can help, and very little.

If we can't get kids to eat vegetables and healthy foods at home, what makes you think they will buy a healthy lunch at school? They won't.

They will choose not to eat. They will wait until they get home and load up on the junk food that mom has in the cupboard.

Some will walk into the closest retail store by the school and buy their fix there. Have you walked into a retail store lately and see what products flood the store floor on display? Drug stores that should promote healthy, check out the displays.

We can try, but the efforts will be futile, but for a few. The big snack food companies are in existence for that reason. Its only a matter of time before even the healthiest of eaters takes a bite of the forbidden apple.

I think I’ve been reasonably consistent on this issue. I agree completely that if parents are not part of the solution, then there is no way that the obesity problem can really be addressed effectively in schools. And I feel strongly that it is not just about what our kids eat, but how much exercise they get. And, it is not just about denial ... it also much more important to help kids understand how to make intelligent choices and embrace some level of moderation.

That said, I think it simply good public policy - and I suppose that I continue to be one who believes that there is such a thing as good public policy - to feed our kids healthier food in schools.

I also think it would be good public policy to create much tougher rules about lobbying. But that’s another discussion.

Published on: November 21, 2011

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Contact Kevin Coupe at 203-662-0100, or email him at: kc@morningnewsbeat.com .