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    Published on: January 12, 2012

    This commentary is available in text and video form. The content is similar, but not word-for-word. Enjoy both, or either...

    Hi, I’m Kevin Coupe and this is FaceTime with the Content Guy.

    A couple of folks in the MNB community sent me a commentary that appeared on a website called InvestorPlace.com, under the headline, “The End of the Big-Box Era.”

    The story starts out by saying that “a funny thing happened” on the road to the 2010 and 2011 retail recovery: “Big-box retailers didn’t pull out of their nosedive. More casualties are on the way, and unfortunately — not to mention needlessly, in many cases — these retailers are powerless to prevent their own demise.”

    There are a lot of names mentioned in this story, like Sears, Lowe’s, Borders, Linens ‘n Things and - no surprise - Best Buy. The story also suggests that Walmart’s recent same-store sales doldrums can be attributed to the same sort of problems that have plagued other big box companies.

    Here’s how the story assesses those problems:

    “What’s causing the mass extermination of big-box retailers is that they’re big-box retailers, with all the drawbacks and vulnerabilities thereof. These drawbacks and vulnerabilities include (1) poor in-store service, (2) not being price-competitive with the Web, and (3) not recognizing that drawing a spending crowd is as much about entertaining shoppers as it is about selling compelling merchandise ... Oh, sure, it worked until a few years ago because to buy something, you essentially had to go to a retail locale. That made retailers arrogant, thinking it was their special skill, quality of sales training, or knowledge of the customer that drew a crowd.

    “Surprise! It wasn’t.

    “As it turns out, Sears is boring. Dillard’s isn’t selling the hottest fashions. Shoppers may know more about the technology they’re looking to buy than most Best Buy employees do. These retailers did reasonably well through the early 2000s mainly because shoppers had little choice but to go to those places if they wanted to buy something.”

    The thing is, these criticisms can be leveled at more than just big box stores. Any retailer - big or small, chain or independent, upscale, mainstream or value-driven - that has not worked overtime at creating a compelling, transparent and effective store experience simply may not have any reason to exist.

    Let’s go back to the InvestorPlace commentary...

    “Consumers want to be dazzled by something they can’t get via their smartphone. Store employees can’t be insulting or annoying anymore — everyone knows those extended warranties are worthless. Retailers can’t count on being a price leader any longer, either, since everybody price-matches. Sadly, most of these big-box names will probably never get it. As such, they can make for poor investments, struggling to just survive. Many of them won’t even do that.

    “It really is a new era in consumerism.”

    Boy, do I believe that.

    That’s what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: January 12, 2012

    Delhaize America announced this morning that it will look to “strengthen its US portfolio” by closing 113 underperforming Food Lion stores, retiring its more up-market Bloom banner, and laying off about 4,900 employees. The moves are expected to happen within the next 30 days.

    “Today’s actions will continue to solidify our U.S. operations and enable our company to focus on our successful brand strategy repositioning at Food Lion and the expansion of Bottom Dollar Food in new markets,” said Ron Hodge, CEO of Delhaize America, in a prepared statement. “While these were difficult decisions given the impact on our associates, customers and communities, we believe these actions will enable us to better serve our customers in our markets with high density, while positioning the company for future growth.”

    The Food Lion closures are said to be primarily in markets where the company has the least store density. In addition, the company said it would convert 64 Bloom and Bottom Dollar Food stores in Maryland, North Carolina and Virginia to the Food Lion banner, close seven underperforming Bloom stores and six underperforming Bottom Dollar Food stores in overlapping Food Lion markets, and convert one Food Lion store in Florida to its Harveys banner. Delhaize also said it would discontinue operations of its distribution center located in Clinton, Tenn.

    The announcement this morning emphasized that the company is pleased with a brand repositioning strategy that it has been implementing, and that it plans to accelerate its rollout to more than 600 additional stores.

    “Food Lion is focused on repositioning our business for future growth,” said Cathy Green Burns, president of Food Lion.  “By closing underperforming stores, we will continue to position Food Lion for success, especially in light of our brand strategy results.  We are very pleased with the reaction from our customers on the implementation of our new brand strategy work, which includes being recognized as a price leader, making our stores easier to shop, offering the greatest value in private brands and providing fresh produce.  However, we also determined the most successful markets for these investments are areas where we have strong store density or high market share.”

    Belgium-based Delhaize also reportedly plans to shutter 20 convenience stores and supermarkets in Bulgaria, Serbia and Bosnia & Herzegovina.

    A Reuters story on what precipitated the moves notes that “Delhaize said that comparable store sales fell by 0.4 percent in the United States in the final three months of 2011, hit by inflation and weak consumer confidence. Belgian stores registered a like-for-like decline of 1.5 percent.”
    KC's View:
    I have to admit that I’m a little disappointed by the retiring of the Bloom concept; I was there when the company opened the first store under that banner, and I always liked the idea that Food Lion had a more upscale sibling to balance out its retail portfolio. This either proves that I have no idea what I’m talking about, or that the world and the economy changed to an extent that made having such an offering less sensible (especially if Delhaize thought that it could not compete in this area with other chains, like Harris Teeter and Publix, for example). I hope it’s the latter; I’d hate to find out that after all these years I’m a complete moron.

    It is worth noting that the company continues to invest in its Bottom Dollar discount format - with 14 stores expected to open in Pittsburgh and Youngstown, Ohio by the end of the first quarter, another 10-15 by the end of the year, and hundreds planned for the next five years.

    Nothing wrong with retrenching when things aren’t going the way you want things to go. Tough times require tough decisions ... and I have a lot of confidence that Ron Hodge and Cathy Green Burns, both of whom I have known for a long time, are the right kind of leaders to assure that Delhaize America gets over this rough patch.

    Published on: January 12, 2012

    The Sacramento Bee reports that Raley’s, “facing increasing pressure in a brutally competitive marketplace for grocers, announced Tuesday that it will close two Northern California stores, including one in Elk Grove.”

    The move will put about 150 employees out of work.

    The story notes that Raley’s, a union shop, says that it is at a competitive disadvantage when facing off against non-union retailers, and that it is one of several chains seeking wage and benefits concessions from the United Food and Commercial Workers (UFCW) in ongoing labor negotiations.
    KC's View:
    I get the whole union vs. nonunion issue, and I wish there were ways to get management and labor working together to guarantee the survival of companies like Raley’s.

    But I guess here is the question that I would also pose to Raley’s - and every other retailer facing brutally tough competition:

    Have you done everything possible to assure that you are offering shoppers a differentiated shopping experience? And I mean, really differentiated?

    Published on: January 12, 2012

    The New York Times reports that the state of New Jersey is using $100 million worth of tax breaks as a lure to get pure-play e-grocery retailer FreshDirect to relocated its base of operations from New York to the Garden State. The story says that New York State and City officials are countering with a similar package, in hopes of keeping FreshDirect in the Empire State.

    It isn’t just that New Jersey believes in e-grocery. The Times notes that “the battle over Fresh Direct is only the latest skirmish in the decades-long war for jobs between the two states. In the last two years, New Jersey has pushed harder, offering ever-larger subsidies and incentives to prospective candidates. Companies have long taken advantage of the fighting by playing one state against another to land the most lucrative benefits.

    “It is unclear how a move west to Jersey City would benefit Fresh Direct’s truck deliveries when the bulk of its business is east of the Hudson River. But New York officials, who were reluctant to discuss the matter on Tuesday while negotiations continue, say the company’s threat to relocate out of state is genuine.”

    The story says that FreshDirect projects that it could add as many as 1,000 jobs over the next five years - and so there is much at stake here.
    KC's View:
    Here’s my recommendation to officials in New York State and New York City.

    If New Jersey Gov. Chris Christie wants to make like Tony Soprano, I think you have to emulate a very specific New York family in fighting back.

    I was thinking the Corleones.

    Published on: January 12, 2012

    CNN reports this morning that the US Food and Drug Administration (FDA) has halted all imports of orange juice because of low levels of a fungicide called carbendazim had been found in products imported from Brazil.

    The FDA now reportedly plans to test all imports for traces of the fungicide.

    According to the story, “the FDA said it will examine all container shipments of orange juice that arrive at U.S. ports. The agency will sample contents from multiple parts of each shipment; the subsequent testing could take between five and ten business days.
    Shipments that test negative for ‘detectable levels’ of carbendazim will be allowed to enter the country. But orange juice that shows a level of carbendazim equal to or higher than 10 parts per billion, a baseline FDA level of quantification, will be denied entry into the US ... if three of a company's shipments test negative for carbendazim, that company's shipments will no longer have to go through mandatory testing.”

    About 25 percent of orange juice consumed in the US is imported, and 11 percent of all orange juice consumed here isn imported from Brazil.
    KC's View:
    Here’s the sentence that caught my attention:

    Orange juice futures jumped almost 10% Tuesday amid fears that the U.S. government could ban Brazilian orange juice, but retreated in trading on Wednesday.

    I smell a rat. Two rats. And they’re probably named Randolph and Mortimer Duke.

    Would anybody be surprised to find out that this is yet another attempt by the nefarious Duke brothers to make money on orange juice futures? I think not.

    Published on: January 12, 2012

    The Boston Globe reports that Massachusetts officials are considering a plan that would use DNA testing “to combat fish mislabeling and are launching a pilot program in partnership with Legal Sea Foods that would trace seafood using barcodes ... These efforts follow a Globe report in October that uncovered widespread seafood misrepresentation at area restaurants and lax government oversight. The five-month investigation revealed that Massachusetts consumers routinely and unwittingly overpay for less valued fish or purchase seafood that is different from what is advertised.”
    KC's View:
    Stories like this one ought to serve as fair warning to anyone thinking about passing one thing off as another.

    In today’s environment, with all the tools that regulators and scientists and citizens and journalists have at their disposal, you are going to get caught.

    Published on: January 12, 2012

    Crain’s New York Business reports that the New York City Department of Health has launched a new subway advertising campaign designed to warn people about the health risks associated with super-sized restaurant portions.

    “We are warning people about the risks of super-size portions so they can make more informed choices about what they eat,” said Health Commissioner, Dr. Thomas Farley, in a statement.

    The ads can be stark: One poster depicts an overweight man who has type 2 diabetes and an amputated leg, and the caption says, “Cut your portions. Cut your risks.”

    New York City has been aggressive in fighting such battles during the tenure of Mayor Michael Bloomberg; other efforts have included bans on trans fats and mandatory calorie count labeling on fast food menu boards.
    KC's View:
    I was talking to one of the panelists who will be participating in a discussion on food culture that I’ll be moderating at the upcoming Food Marketing Institute (FMI) Midwinter Executive Conference, and he suggested that portion size is the most important change that we could make in this country when it comes to battling the obesity epidemic. I’m sure there will be people who will suggest that the NYC Department of Health has no business meddling in such issues, but I would not be one of them.

    Published on: January 12, 2012

    Internet Retailer reports that a new IBM Benchmark report suggests that “sales stemming from smartphones and tablets accounted for 11% of total online sales, up from 5.5% in December 2010,” and that “total m-commerce sales for 2011 were expected to exceed $10 billion.”

    According to the story, the report “also found that 14.6% of all online sessions on retailers’ sites were initiated from a mobile device, more than double the rate of 5.6% during the same period in 2010.”
    KC's View:

    Published on: January 12, 2012

    ...with brief and occasional commentary...

    • Weis Markets announced it has lowered the prices on 1,700 staple items and that it will freeze the prices of these products for 90 days through April 2, 2011. It is the Company’s eighth 90-day Price Freeze since 2009; the current freeze includes 1,700 brand-name and private brand products in grocery, frozen, dairy, meat, health, beauty care and general merchandise.

    “Our prize freeze savings are significant,” says Kurt Schertle, Weis Markets’ Senior Vice President, Sales and Merchandising. “Over the past three years, our Price Freeze program has collectively saved our customers more than $35 million.”

    • The Financial Times reports that Tesco says its same-store sales in the UK were down 2.3 percent in the six weeks ending January 7 - meaning that the Christmas shopping season was not kind to the world’s third biggest retailer. The company now says that it expects only “minimal” profit growth for the current fiscal year - a prediction that sent Tesco’s stock price tumbling more than nine percent yesterday.

    • As expected, Hostess Brands - maker of Twinkies and Ding Dongs - has filed for Chapter 11 bankruptcy protection, just three years after it emerged from an earlier bankruptcy.

    • The New York Times reports that Hostess has an $860 million debt load and as many as 100,000 creditors.

    • The Wall Street Journal reports that Coors Light has passed Budweiser to become the second best-selling beer in the US by volume, behind only Bud Light.

    • Jewelry retailer Tiffany & Co. has reported that its sales growth “weakened” during the just completed holiday shopping season, with US revenue in November and December up 4 percent to $503 million and same-store sales up just 2 percent.

    I did a little quick checking because I was curious. It appears that there are no Tiffany’s stores in Iowa or New Hampshire. Newt Gingrich spent most of November in Iowa and New Hampshire. Coincidence?
    KC's View:

    Published on: January 12, 2012

    • Price Chopper Supermarkets/Golub Corporation announced that Robert Reagan, the company’s Manager of Merchandising Services, has been promoted to Director of Merchandising Services reporting directly to Angelo Cannistraci, Group Vice President, Center Store, Pharmacy and Senior Merchandising Coordinator.
    KC's View:

    Published on: January 12, 2012

    Yesterday, in a story about expansion plans announced by Publix, I said that they were planning to open their first store in the Charlotte, South Carolina, market.

    Which would be a pretty good trick, since Charlotte is in North Carolina.

    It isn’t that I’m geographically challenged. I just got confused...because the two new Publix stores actually are going to be just over the border, in South Carolina, in suburbs of the North Carolina city.

    Sorry for the confusion. I goofed.
    KC's View:

    Published on: January 12, 2012

    Responding to Kate McMahon’s column yesterday, one MNB user wrote:

    Kate is right to suggest that the jury is still out on QR codes. As you note, part of the challenge is that they appear to be much more interesting to marketers than shoppers.

    But there are tech-based alternatives to QR codes that are already in place and driving incremental revenue. And as it happens, one such alternative doesn’t even require the use of a smartphone.

    I’ve been watching for some time now the use of cell phone cameras to snap pics of cool or interesting merchandise and then forwarding said pic on to a friend or family member, perhaps for “approval” or later purchase. Maybe you’re not sure if those shoes will match the skirt in your closet, so you snap a pic for later comparison. The thing to note here is this is a consumer driven behavior and not something that originates on a marketer’s white board.

    Last December I was doing this very same thing. While shopping at my local grocery store—a well-regarded national retailer—I stumbled across a really wonderful (and expensive) holiday wreath. I decided to snap a pic with my phone to see if my wife would justify this pricey, impulse purchase. While I was focusing my cell phone’s camera, I was interrupted by a team member who, while polite enough, loudly informed me that there was a policy prohibiting the use of cameras in their store. When I explained what I was trying to do he replied, “Look, we understand that everyone has their reasons for why they want to take pictures in our store, but we simply cannot allow photography in here. It’s our policy.”

    So they lost out on $65 in incremental revenue.

    Meanwhile that same retailer had several dozen QR codes peppered throughout the store. So we are allowed to use our cellphone cameras to scan the marketer’s QR code for some kind of extra information, but we cannot use our cameras to solve our own shopping problems. To get the information we really need—our spouse’s approval. How very, very ironic.

    Of course the obvious answer is to roll back the archaic rules preventing in-store photography—though I doubt some stores ever will. But the more important insight is that it may be much more lucrative to learn how your customers are currently using technology in their native fashion before building marketing schemes that sometimes run in other directions. Put another way, why not encourage your customers to use their lens the way they want to and not the way we want them to?





    Following up on yesterday’s story about cuts being made at the USDA, MNB user Blake Steen wrote:

    As you now know I’m a huge fiscal conservative but these are not places we need to be closing.  Some government regulation is not a bad thing and our food supply is surely one of those good versions of government regulation.  I could give you 150 ways to save $150,000,000.00 - this is just not one of them.  This is a great example of the media not doing their job and just listening to Government mindlessly.  Do you really think that closing 259 offices is not going to affect the way they regulate?  Where is the journalistic nature we see in your blog every day?

    Not to engage in knee-jerk media defensiveness, but ... it was the media that first reported this story, and suggested that there are concerns about food safety issues.

    MNB user Pat Patterson wrote:

    I would be the last person to turn my back on $150 million, but in a time where we are all cutting our budgets I have to question the value of this cut.  If my math skills, and my calculator, haven't failed me, that $150 million is 0.103448% of their budget.

    To put that value into perspective, I am a large guy, weigh about 260 lbs.  If I lost that same 0.103448% that's just under 4 1/2 ounces.  I don't think that's enough of a  weight loss to get my doctor off my back.





    One MNB user wanted to comment on an email we posted yesterday about how Amazon Prime changes shopping behavior:

    I find I have done the same thing.  Before I had Prime, I would shop Amazon for books/electronics but go to dedicated web sites for other purchases.  Now, my go to is Amazon for everything. I sent my son-in-law a king size mattress for a Christmas present from Amazon.  Due to having Prime, my shipping costs were zero, and it got there in 2 days. I too wonder how long they can hold the $79 annual fee.  But, they have changed buying habits w/it; that’s for sure.
    KC's View: