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    Published on: December 6, 2011

    by Michael Sansolo

    There’s an old axiom that generals always fight the last war just as economists always battle the previous recession. The problem in both cases is that the past is gone and the new challenges of the day require a completely new approach, usually one that flies in the face of past experiences.

    So, beyond hoping that some economist has finally figured out a new approach to the current economic situation, let’s consider one of the lead stories from Monday’s edition of MNB: Walmart’s developing strategy for the end of the big box era. And let’s recognize that the folks in Bentonville are doing exactly what they must by walking past the very formula that fueled one of the greatest growth stories in the history of business.

    It’s not like they haven’t done this before. It’s been only 20 years since Walmart, then just recently crowned as the largest mass merchandiser in the US, jumped into selling food. I remember the scorn that greeted that move. There were countless voices claiming that Walmart didn’t understand the challenges in selling produce, meat and all other supermarket products and therefore they were doomed to fail. The transition wasn’t easy, but I’m betting Walmart would take a repeat of that success in a heartbeat.

    Hopefully, everyone else has learned that a careful departure from your past success is critical to future growth. It’s all about changing and evolving, not willy-nilly flights into businesses that you don’t understand. (Yesterday’s MNB also had a story about the on-going struggles at Carrefour. Let’s remember that around the time Walmart jumped into food, Carrefour and other European hypermarket operators tried unsuccessfully to invade the US market. Not every experiment is a good idea.)

    Against that backdrop, I got an interesting note from my former FMI colleague Anne Marie Roerick down in Texas, where that’s state’s dominant retailer, HEB, is quietly moving into new territory. For the second straight holiday season HEB has jumped into the toy business. No, HEB hasn’t simply loaded up on seasonal specials in a grocery aisle. Instead, HEB is running three seasonal stores that are all about toys.

    “We’re always trying to innovate around retail to see what we can do that’s different and better and that better serves our customers,” HEB spokeswoman Dya Campos told the San Antonio Express-News. And Campos made it clear that the program is only growing. HEB, she said, will try “different things to make access point more convenient for our customers.” That may explain why HEB Toyland is in two malls and one outlet center this year after having just two stores last year.

    It’s easy to make a simple case why HEB’s Toyland is both a great and a bad idea. Sure it builds on a towering brand, especially in Texas, but then again, do shoppers really want to buy Legos from their favorite supermarket? Honestly, we have no way of knowing. If successful experiments brought guaranteed results we’d all be getting food from Webvan these days.

    For every really good idea there are countless in the trash heap. The only real guarantee is that you can’t sit still and look to the past because that’s not where the changes come from. Two years from now, Walmart may be back to building big box stores or HEB may be trying to move unsold toy inventory. Or both might be reaping huge gains from these gambles. That’s why you have to ask yourself where should I go next?

    One last thought on innovation and meeting changing consumer needs: We have an almost non-stop discussion at MNB about the power of new technology. Sometimes that opens up unexpected business opportunities. For example... on right now there are nearly 4,000 product suggestions for winter gloves made for iPhone users, so that people can work a touch screen while keeping their digits warm. (These gloves feature a conductive threading on the index finger and thumb.)

    No one knows what opportunity tomorrow will bring.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:
    Michael raises an interesting point that made be think about a story that I saw yesterday in International Supermarket News, which said that “the increasingly fraught battle between Tesco and its competitors will be laid bare this week when the supermarket giant unveils a fourth quarter of declining sales across its UK stores. The sinking sales among the 2,500 British supermarkets and convenience stores will no doubt cast a gloomy shadow over Tesco’s more solid performance in the expanding overseas markets.

    “The UK-based retailer has suffered more than its closest rivals in the recession, partly because it sells a greater percentage of non-food goods, at a time when shoppers are tightening their purse strings.”

    This report made me wonder that while we all are familiar with the phrase “too big to fail,” perhaps there is a modern retailing corollary - “too big to succeed.” The world’s three biggest retailers, all of which share a global vision, all are facing specific problems that are reflected in recent fiscal problems. Now, some of this no doubt can be traced to the recessionary environment that persists around much of the globe, but it strikes me as at least worth considering that perhaps these companies have overreached, or have become so big that they have become monolithic at a time when greater flexibility and nimbleness are called for.

    There are probably all sorts of counter-arguments to this, and I’m not putting this forward as a finished thought. But the news and the troubles have got me thinking.

    Published on: December 6, 2011

    by Kevin Coupe

    When it comes to political metaphors, last night Jon Stewart on “The Daily Show” had to reach no farther than the nation’s cupboards ... and, by extension, the nation’s supermarkets.

    Stewart was talking about the decision by accused adulterer and alleged sexual harasser Herman Cain to suspend his campaign for the Republican presidential nomination (by using a line from the Pokemon movie, which even for guys who believe in the power of movie metaphors and who use movie quotes at every opportunity may be a bridge too far if you are running for the nation’s highest office), and the surge in the polls by former Speaker of the House Newt Gingrich, who is suggesting in interviews that one of his appeals to voters is a sense of familiarity with his name and philosophy.

    “That’s Newt Gingrich’s pitch,” Stewart said, “‘I’m the thing that has been in your pantry forever… if you look way back in there, there’s a can of La Choy Baby Corn. You don’t remember buying it, yet you don’t remember ever being without it, and now you have no choice but to elect it president.”

    Well, we checked on the La Choy website, and while the ConAgra-owned company still sells a variety of canned Asian vegetables and crispy noodles, baby corn no longer seems to be on the menu. But the metaphor is vivid, regardless of how you feel about Gingrich - we all have stuff at the back of our cabinets that probably should have been thrown out years ago. (My daughter recently found some spices at the back of our cabinet that expired in 2008.)

    When you think about it, it suggests a possible elaboration on the old 1928 campaign slogan used by Herbert Hoover:

    A chicken in every pot, a car in every garage, and up-to-date canned goods in every larder.

    It’d be an Eye-Opener.
    KC's View:

    Published on: December 6, 2011

    The Boston Globe reports that Wegmans, which already has opened a store in Northborough, Massachusetts, and plans to open one in Burlington, Massachusetts, in 2013, now plans a third location, in Newton, Massachusetts.

    What makes this one different is that at a planned 70,000 square feet, this Wegmans is roughly half the size of the stores it usually opens these days, and is the smallest it has opened in years.

    “It is a new design for us, a new concept for us,’’ Jo Natale, a Wegmans spokeswoman, tells the Globe. “It’s a great location in a densely populated area that is close to Boston.’’

    According to the story, “The Newton store will serve as an anchor for the Chestnut Hill Square project, a complex with 160,000 square feet of shops, offices, and luxury residences that’s being built ... The shopping district along this stretch of Route 9 - which features Bloomingdale’s, The Capital Grille, The Cheesecake Factory, and The Container Store - has struggled in recent years. The Newton Wegmans will be built on the site of the former Omni Foods, which closed in 2006, six years after a fire in an adjacent office and retail complex killed five people.

    “Across the street is The Mall at Chestnut Hill, which lost some prominent tenants, including jeweler Shreve, Crump & Low and clothing store Talbots. The nearby Atrium Mall has also experienced a number of high-profile store closings, including Williams Sonoma, Abercrombie & Fitch, and Borders Books and Music. And a Macy’s department store along the shopping corridor shut down earlier this year.”
    KC's View:
    Wegmans thinks bigger than most retailers, so it isn’t really a surprise that its version of an “urban strategy” is 70,000 square feet.

    The interesting thing will be if this reflects a new strategic direction for Wegmans, and if there are other locations where such a store might be appropriate. There have to be more places where you can put a 70,000 square foot store than a 140,000 square foot model ... and as is clearly seen in this announcement, Wegmans is seen as a powerful magnet for any shopping development.

    Published on: December 6, 2011

    Columbus Business First reports that a Kroger Holiday Thank You Bonus promotion was ten times as popular in 2011 as in 2010 - which created such enormous interest that some customers expressed frustration with “long lines, depleted merchandise and overwhelmed store staff.”

    According to the story, “more than 90,000 customers crowded into seven Central Ohio Kroger Marketplace stores Thursday through Sunday to redeem their rewards,” compared to 9,000 customers who did the same thing a year ago.

    The story says that one reason for the increase in popularity was a change in the terms of the promotion. Kroger “gave a percentage off customers’ bills in the first four years of the promotion, but changed the program to a cash credit this year. Customers accumulated a $10 credit for every $100 spent between Oct. 16 and Nov. 27, capped at $200 ... Shoppers couldn’t use the credit for food or alcohol, but could redeem it for much of Kroger Marketplace’s expanded merchandise selection, including holiday items, Ohio State University merchandise, toys, furniture and home goods.”

    “We’ve gotten some complaints. We know there are some disgruntled customers,” said Jackie Siekmann, Kroger’s Central Ohio division spokeswoman, who added, “We wanted to thank our customers by giving them free stuff, but we didn’t satisfy everyone and we apologize ... We’ve run the program for five years, but this year was overwhelmingly popular, more than we predicted.”
    KC's View:
    It never is good when you over-promise and under-deliver. But when it happens, it is important to a) apologize quickly, b) figure out a way to make it up to disappointed shoppers, and c) don’t make the same mistake again.

    Published on: December 6, 2011

    The Chicago Tribune reports that Starbucks - expanding on a test that it has been running in five Seattle stores and one Portland, Oregon, store - “plans to open as many as seven stores that sell beer and wine in the Chicago area by the end of 2012 ... These stores offer savory, high-quality, small plate options like cured meats over the standard pastry case fare, and beer and wine in addition to the usual coffee and tea. Starbucks has also been experimenting with live entertainment, including music, poetry readings or theater, depending on the neighborhood.”

    "We're really trying to expand the evening daypart," Starbucks spokesman Alan Hilowitz tells the Tribune. "Customers have told us they want to be able to come in and have coffee, or a glass of wine."

    Some of the stores will be new units, while others will be remodels, the company said.
    KC's View:
    I actually like the beer and wine Starbucks stores I’ve visited in Seattle. Not sure how often they would be my first choice when looking for a little evening refreshment, but it certainly would be in the rotation.

    Published on: December 6, 2011 reports on a new study done by the Chronicle of Philanthropy on the nation’s most charitable companies.

    According to the site, “To get down to the best of the best, MainStreet looks first at the five most generous corporations – those that gave more than 5% of their 2009 profits to charity in 2010. We then round up the five biggest donors – those corporations that gave the absolute most money to philanthropic causes last year.”

    The most generous corporation in the country was Kroger, which gave 10.9 percent of its 2009 profits to charity, or $64 million.

    Second was Macy’s (8.1 percent, $41.2 million), followed by Safeway (7.5 percent, $76.5 million), Dow Chemical (7.3 percent, $34.2 million), and Morgan Stanley (5.7 percent, $55.6 million).

    Rated just in terms of dollars, Walmart gave the most money to charity ($319.5 million), followed by Goldman Sachs ($315.4 million), Wells Fargo ($219.1 million), Bank of America ($207.9 million), and Exxon Mobil ($198.7 million).
    KC's View:
    It certainly is possible to be cynical about some of these donations, especially those by oil companies and banks. But charity is charity, and all of these companies deserve considerable credit for their donations.

    Published on: December 6, 2011

    The Los Angeles Times reports on the announcement yesterday by the US Postal Service (USPS) that it will implement “a plan to save $2.1 billion a year and fend off possible bankruptcy would effectively put an end to almost all overnight delivery of first-class letters and postcards. Delivery would take at least two to three business days.

    “The postal service's decision to relax delivery standards for first-class mail follows its determination in September to close 252 mail processing plants, about half its total. Altogether, about 28,000 employees would lose their jobs.”

    A spokesman for the USPS said that it had no choice if it is to survive.

    The changes will not affect Express Mail and Priority Mail services, which cost more for guaranteed expedited delivery. Elimination of Saturday delivery remains on the table.

    According to the story, “Maine Sen. Susan Collins, the top Republican on the Senate committee that oversees the postal service, also denounced the move,” and called it one way for the USPS to “accelerate its death spiral.”
    KC's View:
    My favorite email yesterday came from MNB user Andy Casey, who read our coverage of the expected USPS cutbacks and wrote:

    Only a government agency would think that in the internet age slowing service down would be a way to compete.

    Wish I’d said that.

    Published on: December 6, 2011

    Worth reading - a story in the Los Angeles Times by columnist Michael Hiltzik about Eastman Kodak, a once-great corporation that “at this writing appears to be a shutter-click from extinction.”

    An excerpt:

    “Kodak Brownie and Instamatic cameras were once staples of family vacations and holidays — remember the ‘open me first’ Christmas ad campaigns? But it may not be long before a generation of Americans grows up without ever having laid hands on a Kodak product. That's a huge comedown for a brand that was once as globally familiar as Coca-Cola.

    “It's hard to think of a company whose onetime dominance of a market has been so thoroughly obliterated by new technology. Family snapshots? They're almost exclusively digital now, and only a tiny fraction ever get printed on paper.“Eastman Kodak engineers invented the digital camera in 1975; but now that you can point and click with a cheap cellphone, even the stand-alone digital camera is becoming an endangered species on the consumer electronics veld. The last spool of yellow-boxed Kodachrome rolled out the door of a Mexican factory in 2009. Paul Simon composed his hymn to Kodachrome in 1973, but his camera of choice, according to the lyrics, was a Nikon.”

    The complete column - which is a cautionary note to any company - can be found here. But here’s the paragraph that everybody needs to consider:

    “The circle of life in business is a natural phenomenon, the lesson of which shouldn't be overlooked by companies that seem to have cemented themselves into permanent spots at the top of the world today — including Apple, Google and Facebook. The lesson is: Nothing lasts forever.”
    KC's View:

    Published on: December 6, 2011

    • The Chicago Tribune reports that leadership decisions have been made at Kraft, which is splitting up next year.

    According to the story, “as had been widely anticipated, Kraft chairman and CEO Irene Rosenfeld, 58, will stay on as chairman of the $31 billion global snacking company, which has yet to be named. Rosenfeld has said the company may be based in Chicago.

    “Tony Vernon, 55, the president of Kraft Foods North America, will become CEO of the $17 billion North American grocery business, which will keep the Kraft Foods name. Vernon joined Kraft in 2009 following a 20-year career at Johnson & Johnson. A trusted member of Rosenfeld's circle, Vernon had been seen as a likely candidate to lead the grocery business.”
    KC's View:

    Published on: December 6, 2011

    ...will return.
    KC's View:

    Published on: December 6, 2011

    In Monday Night Football action, the San Diego Chargers defeated the Jacksonville Jaguars 38-14.
    KC's View: