retail news in context, analysis with attitude

Published on: November 28, 2011

by Kevin Coupe

The Wall Street Journal has a story about the newest venture being financed by Yucaipa Cos., the investment group headed by billionaire Ron Burkle that has positions in companies like A&P and Barnes & Noble. Yucaipa is working with a hotel developed called the Sydell Group to develop high-end, for-profit youth hostels around the US, believing that this market is dramatically under-served.

“His new venture is launching its first hostel in Miami Beach, where it is spending about $20 million to acquire and convert an Art Deco-style South Beach hotel for a fall 2012 opening,” the Journal writes. “The hostel will offer its 350 beds for about $40 a night. That compares with about $30 a night, on average, for existing Miami hostels and about $100 a night for low-cost hotels,” not to mention being wildly less expensive than premium hotels. The story adds that “the partners say amenities - including bars, restaurants, swimming pools and stylized lobbies - will distinguish their properties from other youth hostels, although they will pale in comparison with luxury hotels.”

The Journal continues: “At a time when many operators are crowding into the luxury segment of the industry, the new venture is a bet that there is a sizable foreign and domestic youth market the major hotel companies have ignored. While youth hostels are found in most major American cities, they have never caught on as they have in Europe, where sharing rooms with strangers is much more common.

“Youth travelers are responsible for an estimated $136 billion a year, or about 18%, of world-wide international travel receipts, according to the World Tourism Organization.”

Now, I have to be honest. Much of this surprised me. I had no idea the youth hostel business was so big or had so much potential. My experience with youth hostels is 30 years old, took place mostly in Europe, and it is the smell of urine at the one in Venice that I remember most. (Though, to be fair, one of my best friends in the world has been active in the American Youth Hostel movement for years, and would maintain that most hostels are better than what I experienced.)

But what really impresses me in the ability to see a potential competitive opening where most people do not.

I’m not sure I’d stay in one of these hotels. I’m sort of past the point in my life where I want to share a room with a dozen other people. On the other hand, I think I’d rather stay in a youth hostel than an “elder hostel,” and going to see Martin Sheen in The Way did get the juices going a bit.

I’ll be interested to see how this plays out for Burkle ... and how many competitors jump into the business if he is successful.

It’ll be an Eye-Opener.

Published on: November 28, 2011

The National Retail Federation (NRF) is saying that the unofficial start of the end-of-the-year holiday shopping season over the weekend commenced with a bang, and that “traffic and spending were up both online and in stores, reaching historic highs.”

According to an NRF survey, “a record 226 million shoppers visited stores and websites over Black Friday weekend, up from 212 million last year. Digging deep into their holiday budgets, the average holiday shopper spent $398.62 this weekend, up from $365.34 last year.  Total spending reached an estimated $52.4 billion. Additionally, shoppers also checked out retailers’ deals online, spending an average of $150.53 on the web – 37.8 percent of their total weekend spending.”

At the same time, research service ShopperTrak said that in-store sales on Black Friday were up by 6.6 percent compared to a year ago to $11.4 billion.

And the Associated Press writes that “research firm comScore reported on Sunday that e-commerce spending jumped 26 percent on Black Friday, the day after Thanksgiving, compared with the same day a year ago. ComScore reported $816 million in online sales for the day, up from $648 million.”

Still, the New York Times reports this morning that “there were signs the gains might not last. Analysts said that traffic to stores seemed to slow through the weekend, suggesting that the big start to the holiday season might peter out over time. And shoppers were using credit cards in large numbers, mall owners and analysts said, signaling that consumers were willing to sacrifice savings more than last year, when they paid with cash more frequently.”

Published on: November 28, 2011

Bloomberg BusinessWeek has a piece about private brand growth, reporting that “as of mid-November, store brands accounted for 31.4 percent of the 14,400 new food and beverage items introduced in the U.S. this year, according to market researcher Packaged Facts, based on data from Datamonitor’s Product Launch Analytics. That’s double the share logged in 2010 and up from just 8.7 percent in 2009.” The story notes that “emboldened by success in the frozen food aisle and in pasta, grocers are moving into categories—salty snacks, beer, pet food—they’d previously shunned because the big brands were so entrenched.”

In order to help them “fuel sales of their in-house lines,” the story says, “retailers are recruiting veteran marketers to help out-innovate traditional packaged goods companies.”

According to Bloomberg BusinessWeek, expectations are that private brands will continue to grow - driven by retailer strategies, heightened expectations whetted by recent successes, and fueled by an economy that continues to be in malaise and customers more open than even to trying private brand products.

Published on: November 28, 2011

Fast Company has a review of the new UP wristband and smartphone app, the potential of which it was raving about earlier this year, and which MNB has picked up on several times as an example of how technology can intersect with health and fitness issues. The UP, for the uninitiated, is described as “a wristband and app (that) uses an accelerometer to track how much you're walking, exercising, or sleeping; it then uploads this data to the app, which charts all this information and also lets you log your meals.”

It sounds great ... but according to Fast Company, there are enough flaws in the implementation to sink the whole project, which is a product of the Jawbone company, which itself is backed by $120 million in venture capital funding.

There are, according to the story, some basic design problems with the UP - all of which are solvable, but which point out how technology needs to be used to make things easier and better ... instead of more complicated and cumbersome.

The biggest problem, the story suggests, is that the UP does not transmit data wirelessly to one’s smartphone; instead, it requires an actual physical hookup.

“This sounds like a trivial problem, but that one failing is ... enough to sink the whole product. Imagine if instead the wristband was constantly communicating data to your phone. In that case, you'd be checking your phone constantly to see how far you've walked, and how close you're getting to your daily activity goals. In other words, it would easily become a ritual as natural as checking your Facebook--that is, the app would become truly present in your life.”

Which is a good lesson about how to deal with apps in general.

Another major problem, Fast Company suggests, is navigational - there are simply too many ways to do the same thing, and it becomes confusing to users who are being trained on the organizational efficiency of iPad-style technology, in which the product is so intuitive as to make user manuals almost obsolete.

Published on: November 28, 2011

The Indian government last week approved regulatory reform that will open its $450 billion retail market to global retailing giants, allowing companies such as Walmart, Carrefour and Tesco to have majority ownership of chains operating in Asia’s third largest economy.

Reuters reports that these global companies “see India's retail sector as one of the last frontier markets, where a burgeoning middle-class still shops at local, family-owned merchants.” The regulatory shift is designed to “attract much needed capital from abroad and ultimately help unclog supply bottlenecks that have kept inflation stubbornly close to a double-digit clip.”

The Times of India reports that while Walmart has heralded the move as offering it a great opportunity, it seems at least possible that its stores there may not carry the Walmart banner. (This would not be unprecedented; in Japan, for example, its stores operate under the Seiyu banner, and in the UK it operates as Asda.) To this point, Walmart has had a minority stake in an Indian cash-and-carry operation with Bharti Enterprises.

However, Bloomberg BusinessWeek reports this morning that the shift is causing some significant political turmoil in India, with opposition parties attacking the ruling party’s decision, and close to half of India’s biggest cities considering local ordinances that would prevent overseas retailers from opening there.

In addition, Reuters reports that the ruling government already has started to back off some of the shift’s provisions, saying, for example, that “foreign supermarkets wanting to set up shop in India will have to source 30 percent of their produce from local, small industries.”

Published on: November 28, 2011

• Media Daily News reports that “to remind food-preparers and consumers of the correct culinary practices, the Ad Council’s ‘Food Safe Families’ campaign and Walmart Checkout TV Network are partnering to run TV spots. They emphasize the need to avoid cross-contamination, which can result in food poisoning by keeping raw meat and poultry away from ready-to-eat food.”

Published on: November 28, 2011

The Wall Street Journal reports that Staples has decided to capitalize on the popularity of “The Office” by licensing the name of Dunder Mifflin - the name of the fictional paper company in the NBC series - for a new line of copy paper.

According to the story, Staples is hoping this marketing move will help it combat what has been a rapid decline in copy paper sales.

Published on: November 28, 2011

The Food Marketing Institute (FMI) has issued the following statement today from Regulatory Counsel Erik Lieberman regarding the World Trade Organization’s Dispute Settlement Panel Report on the Country of Origin Labeling (COOL) law:

“The World Trade Organization (WTO) recognized what the supermarket industry has known all along—that COOL is a protectionist law designed to make it more costly and difficult for retailers to sell imported foods. COOL has forced the industry to spend tens millions of dollars each year on unnecessary regulatory burdens all for little or no benefit to consumers. We fully agree with the conclusion of the panel that the COOL law fails to provide information in a meaningful way.

“This year, COOL enforcement has become more burdensome than ever, making it challenging for retailers to carry imported meats, produce and seafood. Although the compliance rate for the program last year was 97 percent, this year, inspectors are demanding that more redundant records be maintained—at great cost to grocers.

“The COOL law will need to be repealed or rewritten in order for the U.S. to meet its obligations to global trading partners. We look forward to working with Congress and the U.S. Department of Agriculture to develop an alternative system; one that will provide useful information to consumers and put our nation in compliance with international trade agreements.”

Published on: November 28, 2011

• The Washington Post reports that while Starbucks CEO Howard Schultz has called for American companies and citizens to stop political donations to all parties and candidates - regardless of ideology - until the two major parties reach bipartisan agreement on stabilizing the nation’s fiscal condition, “Starbucks leadership, employees and the company’s lobbying firm have continued to contribute thousands of dollars to federal officeholders.”

In addition, “There’s no evidence the ‘withhold’ movement has had any impact on the flow of money in politics, as third-quarter donations to congressional campaigns were actually higher than during the last election cycle. In just the six weeks after the coffee guru announced his pledge with the support of dozens of other business executives, the donations continued among many of those companies, including AOL, Juniper Networks and NASDAQ.”

• The Associated Press reports this morning that an organization called the Consortium for the Barcode of Life is working with seafood suppliers and restaurants around the world to develop a standardized labeling process that will certify that seafood served is genuine, based on DNA barcoding and tracking.

According to the story, “the Barcode of Life Database so far includes more than 167,000 species.

“Mislabeling is widespread in the seafood industry and usually involves cheaper types of fish being sold as more expensive varieties. A pair of New York high school students using DNA barcoding of food stocked in their own kitchens found in a 2009 study that caviar labeled as sturgeon was actually Mississippi paddlefish.

“In a published study a year earlier, another pair of students from the high school found that one-fourth of fish samples they had collected around New York were incorrectly labeled as higher-priced fish.”

• The Seattle Times has a piece about how Haggen in reinventing itself in the Pacific Northwest, dropping the Top Foods banner from some of its stores in favor of the family name and using recommendations from the Hartman Group to develop a more consistent and differentiated brand image focused on local products, fresh foods that are unique to Haggen, and a revamped and improved private label program.

The goal is to avoid the fate of Larry’s Markets, another Pacific Northwest food retailer that went out of business, crushed in part by the weight of ambitions that could not be supported by diminishing revenues.

• National Public Radio (NPR) reports on a study published by the Journal of the American Medical Association and conducted by the Harvard School for Public Health suggesting that people who consume canned soup tend to have BPA levels in their urine as much as 12 times as high as people who ate soup that did not from a can. These levels are still within the range that the government considers safe, but researchers were surprised.

According to the story, “The study confirms that canned food is a source of BPA exposure. But it does nothing to clear up the question of whether this sort of exposure to BPA has health consequences. BPA is found in some plastic bottles and in the epoxy resins used to coat the inside of many food and beverage cans. Previous studies have shown that some BPA from can linings does get into the foods they hold.”

Published on: November 28, 2011

• The California Grocers Association (CGA) announced the hiring of Sarah Paulson Sheehy as Director, Local Government Relations, Southern California. She will be responsible for CGA’s local government advocacy and outreach for the Southern California region, and also will research and analyze ordinances and regulatory proposals, draft advocacy plans and messages and communicate with elected officials and regulatory staff, and member companies. Sheehy joins CGA after three plus years at Cerrell Associates, a Los Angeles-based lobbying and consulting firm.

Published on: November 28, 2011

• The Chicago Sun Times reports that Frederik Meijer, “who built the regional retail powerhouse Meijer Inc. while nurturing his lifelong love of the arts, died late Friday at a hospital in western Michigan. He was 91.”

• The Wall Street Journal reports that Jeno Paulucci passed away on Thanksgiving Day at age 93, describing him as “a serial entrepreneur whose many businesses created shelf-stable packaging for orange juice, manufactured beverage and food-service equipment, and worked to domesticate wild rice.” Among his best-known innovations - Jeno’s pizza rolls and Chun King chop suey.

Published on: November 28, 2011

Got the following email from MNB user Chuck Burns:

I find articles like "Projections Suggest Obesity Rates On The Rise" and hand ringing about obesity frustrating. It seems the entire Federal structure is geared towards promoting and subsidizing  corn, wheat, potatoes and soybeans. If you look at the meals that the average American eats they are weighed very heavily towards starches. The average American starts the day with a  breakfast of cereal with skim milk, toast, orange juice (sugar) and coffee with cream and sugar. A lunch of a sandwich (usually with little meat), potato chips or fries, soft drink  and some type of sugary dessert. Let’s then move to a dinner of pasta, bread and some type of dessert. Then a late night snack of cookies. And let’s not forget the fruit (modified to taste sweeter than nature intended) and soft drinks consumed through the day. You end up with a diet that is 75% sugar or starches that quickly convert to sugar.

We will not get a handle on the obesity issue until we realize that our body’s are not bomb calorimeters and that calories in/calories out is not the way to control weight. To control weight you eat to control your blood sugar which then determines your insulin and insulin/glucagon ratio. We also need to realize that there is virtually no satiety signal given to the brain when you consume sugar and starch and hence we can eat a massive platter of pasta and tomato sauce. And yet in 90 to 120 minutes our blood sugar has crashed and we are hungry again. In contrast a meal that contains mostly fat and protein promotes satiety and we will not be hungry until our next meal, if then.

I suggest reading Dr. William Davis’s new book “Wheat Belly”. Davis is a cardiologist who got tired of doing stents and decided to look for the real cause of heart disease; it is an eye opener.

Frankly I find most of what is sold as food in the average grocery store to be unfit for human consumption. I shop the perimeter with an emphasis on meat, eggs vegetables. Since the first of the year, with no exercise, I have dropped 75 pounds and have seen my blood pressure drop from 130-135/85-90 to 107-115/70-76. Heart rate has dropped from 72 to 59. Food is as powerful as most drugs – eat wisely.

I do not know how we make the changes needed to change our diet. Obviously removing farm subsidies is the first step but I cannot see that happening politically. If the recommendations for what we were to eat were taken from the hands of the USDA (whose only role seems  to be promoting the consumption of grains and corn) it would help. It will probably have to be consumer driven after they have educated themselves and divorced themselves from the governments recommendations and learned to ignore the advertisements of the food companies.




Regarding lobbying that resulted in the labeling of pizza as a vegetable, one MNB user wrote:

Our policies on healthy school lunches (paid for by tax dollars) should be no different than policies for food stamps (paid for by tax dollars). Our tax dollars should be used to provide healthy meals to our children. If we give students the option of buying pizzas and french fries instead of healthy foods in another food line, they will certainly buy the junk food; as an adult, I know I would have that temptation. Just as we don’t (ideally) give our children the option of what they want to eat for dinner in our homes, we shouldn’t do so in our schools unless the options are other nutritious, well-balanced meals. School lunches should be in the form of meals, not in the form of snacks. And the fact that school lunches are funded from our taxes, should drive what is served.

We definitely need to create much tougher rules for lobbying and we need to look to our corporations whose self-interests violate our rights for quality and health foods, medicines, etc. Take for instance the lobbyists for high fructose corn syrup. It’s known that high fructose corn syrup is unhealthy for us, but the product manufacturers and corn producers have all the strength in Washington. Politicians ignore our safety and listen to those who have the money. Not only do we need to look at government, but at corporations.




We had an email last week suggesting that there need to be more politicians who ignore lobbyists, which led one MNB user to observe:

Russ Feingold made a career out of ignoring lobbyists and working to alter campaign finance.  He was voted out of office.




Regarding a list of retailers with the best customer service that was published by NRF, MNB user John Welch wrote:

The fact that Apple is not even on the list makes me doubt the validity of the whole exercise.

Agreed.




Responding to last Wednesday’s rant in “FaceTime,” one MNB user wrote:

I agree with many of your points. I too have had it up to my eyeballs with all the BS from politicians, entertainers, retailers, business leaders, etc. It seems you can't believe anybody anymore. There is, however, one more thing that drives me nuts. If I hear/read one more time that women could do better, I think I'll lose it. It has been my experience that many of the people in positions that could make real change have achieved their status through political acumen. As such, they seem unable to think outside themselves. This, of course, prevents compromise and growth. The overinflated ego knows no bounds and can be found in women as much as men.

The video version of my rant was a little overheated, which led MNB user Gerry Buckles to write:

Not sure how that worked but you blowing off steam left me feeling relieved and relaxed. Way to go!

And MNB user Dave Ahrens wrote:

Great theatrics !

I agree with all of your frustrations but please, have a glass of wine (screw top) before your head blows off !

Thanks. I did.

(I love doing the video commentaries. They’re not always very polished, but they give me a chance to vent in an entirely different way ... and I get the impression that people like the sense of intimacy that they can convey. We’re all friends here, right?)

Published on: November 28, 2011

In Week Twelve of National Football League action...

Green Bay 27
Detroit 15

Miami 19
Dallas 20

San Francisco 6
Baltimore 16

Minnesota 14
Atlanta 24

Cleveland 20
Cincinnati 23

Carolina 27
Indianapolis 19

Houston 20
Jacksonville 13

Buffalo 24
NY Jets 28

Arizona 23
St. Louis 20

Tampa Bay 17
Tennessee 23

Chicago 20
Oakland 25

Washington 23
Seattle 17

New England 38
Philadelphia 20

Denver 16
San Diego 13

Pittsburgh 13
Kansas City 9