retail news in context, analysis with attitude

Published on: December 21, 2011

by Kate McMahon

This is the time of year when retailers have to deal with a simple reality. Make returning products easy and pain-free, and consumers may well reward you with sustained loyalty. However, if you make returning products too easy and pain-free, and people may actually return products. Even before Christmas.

I hate to sound like the Grinch here, folks, but amid all of the hype about the 2011 holiday shopping season’s big opening weekend comes news of a distressing trend. That would be the mid-December return rate, as many of those early purchases are being turned back into stores before ever seeing a roll of wrapping paper or a spot under a festive tree.

The Associated Press last week reported on the increase in buyer’s remorse, citing second thoughts by shoppers who binged on big discounts between Black Friday and Cyber Monday, and competitors undercutting each other on the hottest items. That sweater or iPod case that was a bargain on Thanksgiving is a steal today.

The AP said return rates spiked during the recession and haven’t budged. For every dollar stores take in this holiday season, they'll have to give back 9.9 cents in returns, up from 9.8 last year, according to the National Retail Federation's survey of 110 retailers. In better economic times, that number is about 7 cents. The category showing the largest increase in returns was the always cut-throat consumer electronics sector.

Ironically, a major factor cited for the increase in returns was store policies actually making it easier and less costly for consumers to turn back both in-store and e-commerce purchases.

"Spurring more returns wasn't part of the plan," retail industry strategist Al Sambar told the AP.

And therein lies the dilemma.

Beyond the one-off impulse buy, ease in returns can make-or-break a consumer’s long-term relationship with a retailer. Zappos.com is a perfect example. In addition to great selections, Zappos is known for its generous 365-day return policy and free shipping both ways. And in turn, a devoted following of consumers whose testimonials and style reviews are very much a part of the Zappos site.

(While waiting in a long line at the Post Office recently, I saw a woman saunter past the queue to drop her Zappos return box on the counter, smiling as she said “And I don’t have to pay anything, right?” Those of us in line were not smiling.)

Sure, it is free and easy, but that ease means that the company is encouraging shoppers to order more than what they want and/or need and then return what doesn’t fit and what they don’t like. But clearly this ebb and flow is built into Zappos’ business plan, and is seen as one of its differential advantages.

Other examples of pro-consumer policies include L.L. Bean’s legendary “Guaranteed to Last” credo promising 100% satisfaction in “every way” and at “any time.” Kohl’s advertises it no-limits policy and even gives store credit for no-tag, no-receipt items, and Macy’s now allows up to 180 days to return many items.

One point on why this discussion is relevant to supermarket retailers. Most supermarkets are willing to take back for cash or credit anything that they sell, no questions asked. But very few go to the extent that Stew Leonard’s does - essentially inscribing that policy in an enormous boulder and putting it at the front door. I’ve always wondered why, when stores have such a consumer-friendly policy, they don’t make more of a point about it; it may be that the current environment, in which ease of return is so important to so many retailers, that it would serve them well to rethink their reticence.

I do think that user-friendly return policies pay off in the long run both in brick-and-mortar stores and e-commerce sites. No doubt that woman skipping past us at the Post Office line would agree.

What are your thoughts? What are your best and worst returns stories? Send me an email at kate@morningnewsbeat.com .

Published on: December 21, 2011

by Kevin Coupe

We’ve written from time to time here on MNB about the travails of the wristwatch - an item that was ubiquitous as a piece of personal technology not that long ago, but that for many people has become obsolete since they can use their smartphones to get the time and a lot more.

But the Los Angeles Times has a piece suggesting that “the watch may be making a comeback — and it will do much more than just tell time.

“As people have become equipped with smartphones, laptops and other digital devices with clocks, the importance of the wristwatch has diminished. But a bevy of smartwatches — devices that aim to alert users to text messages and phone calls, and even monitor health — are being rolled out in coming months by entrepreneurs who hope to create a 21st century relevance for a centuries-old gadget, the timepiece.”

One of the companies juicing the trend is - no surprise here - Apple, where its Nano iPod has an application that allows it to be used by many people as a wristwatch. And, the Times writes, “a small industry of Nano wristband designers emerged to take advantage of a new application for an Apple product. When Apple gave the digital music player a refresh this fall, it did not change its form - a first in the Nano's history - and it included 18 different clock faces, including Minnie and Mickey Mouse, in addition to its other features, such as photos and a built-in accelerometer for workouts.”

The new generation of smartwatches, the Times suggests, “are not designed to replace smartphones and tablets ... Rather, they are digital sieves that enable users to sift through the clutter of apps, emails, text messages and phone messages they are bombarded with every day to quickly get the info they need right away.

“They will allow users to set up caller ID alerts from specific numbers, such as those of family members. And the computer watches will let users — with a finger swipe — access things like calendars, weather updates and GPS services to help them quickly find their cars in the mall parking lot.”

What makes these efforts different from past attempts - Microsoft unveiled a kind of smartwatch program in 2004, and Dick Tracy started using a 2-Way Wrist Radio in 1946 - experts say, is that the infrastructure exists to make the technology both viable and user-friendly.

"This is not a fad,” one expert tells the Times. “We think this is a solid direction. The mobile ecosystem is exploding."

It is Eye-Opening ... and worth thinking about how every marketer will adapt to the challenges and opportunities.

Published on: December 21, 2011

There is a great piece in the New York Times about the unique, long-range strategic approach that Amazon founder Jeff Bezos has applied to his business. Here’s how writer James B. Stewart frames the story:

“In 1997, the year Amazon.com went public, its chief executive, Jeff Bezos, issued a manifesto: ‘It’s all about the long term,’ he said. He warned shareholders ‘we may make decisions and weigh tradeoffs differently than some companies’ and urged them to make sure that a long-term approach ‘is consistent with your investment policy.’ Amazon’s management and employees ‘are working to build something important, something that matters to our customers, something that we can tell our grandchildren about,’ he added.”

This approach hasn’t always been hailed on Wall Street, in part because Bezos is so willing to lose money.

“The reason Amazon is earning so little while selling so much is that it is spending so much on long-term growth,” Stewart writes. “It’s opening 17 new fulfillment centers — airport hangar-size storage and shipping facilities — this year and aggressively cutting prices. Its profit margin for the quarter was just 2.4 percent, and it said it might be zero for the fourth quarter. (By comparison, Wal-Mart’s margins are 6 percent on revenue of $440 billion.)”

Stewart goes on:

“For Amazon, long-term growth confers two major benefits: the kind of economies of scale enjoyed by Wal-Mart and eliminating or weakening competitors. The book retailer Borders has been forced out of business and a rival, Barnes & Noble, is struggling. Best Buy, the electronics retailer, reported this week that earnings plunged 29 percent, despite higher revenue and a surge of Black Friday sales, because the chain had to cut prices and offer free shipping to compete with Amazon.”

And:

“Nearly 15 years after Amazon’s public offering, it’s safe to say that Mr. Bezos and his colleagues have realized their goal of creating a company to tell their grandchildren about. But one of these days Amazon has to deliver on its promise of higher margins and profits, however long term that may turn out to be.”

Published on: December 21, 2011

The Washington Post reports that Target is facing the possibility of a national “nurse-in” at its stores, as women around the country plan to protest the treatment of a woman who was breast-feeding her baby at a Houston area store.

According to the story, “Michelle Hickman told the breast-feeding advocacy group Best for Babes that she had been Christmas shopping when her baby woke hungry. She found a remote area and tried to discreetly breast-feed, but several employees tried to discourage her, and when that didn’t work, embarrass her so that she’d stop.

“Now the Facebook page where the nurse-in is being organized has more than 3,000 members. Hundreds of them signed up this week as media picked up the story.”

Target reportedly has apologized to Hickman, and said that its national policy is that “guests who choose to breast-feed in public places in our stores should feel welcome to do so.”

Published on: December 21, 2011

• Crain’s Chicago Business reports that “as Kraft Foods Inc. prepares to split its North American grocery and international snacks businesses in 2012, the company will roll out some 70 products in the first quarter, including several new brands and expansion of product lines launched earlier this year. Among the biggest introductions, the Northfield-based company will add two lines of dinner kits, energy and ‘mocktail’ versions of its water enhancers, two brands imported from Europe and the grocery launch of its Gevalia direct-mail coffee brand.”

• Forbes reports that chains such as Starbucks, McDonald’s and Chipotle “re making efforts to go greener by sourcing natural ingredients and promoting recyclability. Such moves will increasingly have a greater impact going forward as regulations mandating sustainability are getting tougher. Moreover, these restaurants are likely to get future tax benefits as well.

“While environmentally friendly by these restaurants are unlikely to save on costs in the near term, they could pay off longer term as the input costs have soared for many restaurants. More importantly, an improved image in the eyes of the customers could be the ultimate pay off.”

• The Wall Street Journal reports that Wendy’s is about to pass Burger King to become the second largest fast food burger chain in the US, behind only McDonald’s.

According to the story, this is “the first reordering of the industry-leading trio since Wendy's was founded in 1969.”

Published on: December 21, 2011

• Retail Week reports that Tesco’s director of corporate and legal affairs, Lucy Neville-Rolfe, plans to retire from its board after 14 years with the company ... Neville-Rolfe’s role will be split into two positions, no longer on the main board. The legal element of her role is expected to be filled internally while the search has already started for the corporate affairs role.”

Published on: December 21, 2011

George Washington “G.W.” Griffin, the former chairman of Kentucky-based Laurel Grocery Co. has passed away. He was 85.

Published on: December 21, 2011

Regarding the piece the other day about Supervalu’s continuing efforts to find traction in its retail business, one MNB user wrote:

I worked for SuperValu 10 years ago.  My view was they got enamored with retail and they loved the margins and the potential bottom line profit.  A good retail operation make 3-4 times more than similar sales on the wholesale side. They owned a number of retailers (Cub, Biggs, Shop N Save, Laneco and Scotts) in different markets.  The wholesale side is traditionally low margin and they underestimated the difficulty it takes to run retail. They never had enough folks from the retail side to tell the folks on the wholesale side what it would actually take to get the business.  Cub’s (originally Consumers United for Buying) only point of differentiation was low price and Wal-Mart took that away.

From my view, “if the only tool you have is a hammer, everything looks like a nail.”

MNB user John Domino wrote:

The most telling and relevant quote in the Star Tribune article is from Professor Marcus, that “SUPERVALU’s stores fail to excite or interest customers.”  This was a problem for Albertsons before the merger and it has gotten worse in those five banners and has spread to the core SUPERVALU banners.  Both Jeff Noddle and Craig Herkert ignored this fact and focused on internal efficiencies, rather than finding ways to excite and WOW the customers.  Until they find a ways to be relevant to their customers and stand out from the competition, no amount of remodel dollars will drive sales improvements and the market share losses and earnings declines will continue.  I agree that there is still hope for SUPERVALU, but only if they can find a way to energize and excite customers.




On another subject, an MNB user wrote:

Had to share this with you given your recent rants against the post office... I needed to mail out some last minute Christmas packages this past Saturday (12/17) so I stopped by the post office on my way to the grocery store. Unfortunately, they close at noon on Saturday's. During the busiest shipping time of the year they don't adjust their hours or their service level and continue to operate oblivious to the needs of their (potential) customers. In the time it took me to walk up to the door and peer inside at the empty building, a half dozen cars pulled into the parking lot, all of them looking to mail packages before the holiday.
‘
Conveniently, there was a FedEx drop box on the post office property about three feet from the entrance. Even the short sighted folks at Blockbuster knew better than to put RedBox kiosks on their property.

You can't make this stuff up.




Regarding stores staying open for extended hours in the days before Christmas, one MNB user wrote:

I agree with you, I’m thrilled I won’t be at that store before Christmas. It will likely take 112 hours just to get through the incredibly slow lines there.  I went there to do some holiday shopping this year but after getting all of my stuff, when faced with three long lines that were not moving at all, I put all of my stuff back, and planned to buy it online.  But I was actually in a Target later that day, they had everything I was looking for, the prices were about the same and I bought it all then. And I vowed never to go back to Toys R Us again!




MNB user Sean Cassidy had some thoughts about a different subject:

I'm no longer in the trade, but still love reading your blog every day.  This is my first time writing to you, because I thought I should chime in on the cell phone debate.

As many have said, talking on your cell phone isn't that much different than speaking to someone else in your car.  But, where I haven't seen many comments, is in regards to texting while driving.  This is extremely dangerous, as people take one, or sometimes two hands off the wheel, look at their phone (usually below the steering wheel), and text or update their Facebook status!  I would be interested to learn how many accidents are caused by texting (as opposed to talking) on a cell phone.

I have seen many people doing this, usually at red lights or in traffic jams.  You've seen it too...that person just sitting there 5-10 seconds after the light turns green!  When you tap on the horn, you see her face look up from her lap!  The idea that someone can consider this safe is beyond me.  So, while I consider the legislation a bit tough on those who use hands free devices to talk on the phone, I think this could cut down on accidents caused by drivers who just can't wait to tweet that they're on their way to the JayZ concert.  Just a thought...

From another reader:

How about banning the pesky cell phones in public settings! I am in same demographic age wise as you are, can you remember it used to be rude to talk on the phone during a meal? How about using the phone in a public restroom, or when a retail clerk is trying to do what is asked of them and engage their customers whom are to rude to get off the damn phones! Cell phones have changed what used to be considered poor manners, into acceptable behavior. Shame!




On another subject, MNB user Philip Bradley wrote:

I agree completely with your suggestion that retailers who place too much emphasis on the cost of the product (pricing of e-books) will eventually diminish the value of what they sell.  Nowhere is this more evident than in the grocery business' relentless focus on price; the result is that the American consumer looks at food primarily from a price perspective.  In Europe, and particularly in Italy, consumers place a much higher value on the quality of the food--its appearance, taste, and nutrition--and are willing to pay a much higher percentage of their income on food.  There is much less emphasis on food as a low-cost promotional item.

It never fails to amaze me that people I know complain about the "high cost" of organic produce--so much revolves around price in the U.S. because that is what has been drummed into our collective heads by the supermarkets' insistent concentration on price promotion instead of focusing on the value of the food to the consumer.




Love this email about the whole Lowe’s / Muslim Americans controversy:

Kevin I love your commentary! I am a 22 year old that finds much pleasure in reading about business and other things that are happening in the world! Great way to educate, but it fun and easy to interpret!

I wanted to comment on your response on 12-20-2011 in regards to the TLC Show. I completely agree with you! I don't think you could have said it better actually. I was always told there are 4 mirrors to perception. 1. How we see ourselves, 2. How others see us, 3. The real perception of oneself and 4. What we, or anyone else, can’t see in us.

I think we all need to focus on the 3rd and 4th mirror, so that we can become better individuals, free from ignorance! And some of the comments I've seen are just that...ignorant. I thought this was a free country and no one is obligated to one certain belief. I am sure if we all watched the show, we could learn more about the Muslim culture and understand their perspectives. C’mon people! Where is the Diversity & Inclusion?!

Thanks goodness for 22-year-olds, who often have eyes not yet corrupted by time and events.




Finally, thanks to all of you who wrote in about how Love Actually also is their favorite Christmas movie.

I’m with you. (We should start a club, maybe have a convention. Or at least get together for a drink...)