business news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: February 9, 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. Two stories popped up this week that reinforced one of my core retailing beliefs.

    One had to do with Tesco’s Homeplus business in South Korea, which announced that it is expanding on the virtual store concept that it debuted to great acclaim last year in the Seoul subway system. (Here is a link to the original MNB story, along with a YouTube video.) Essentially what they did was plaster the walls of subway stations with pictures of their products, laid out just as they’d be in a traditional shop. The ‘shelves’ featured QR codes that could be scanned by a mobile phone, building up a shopping basket in the few minutes before the train arrives. You can go from station to station as you complete your shopping trip, and then have the order delivered to your home or office.

    The next step for Tesco is to install what sounds like a convenience-driven virtual store format at some 20 bus stops near universities around Korea ... and the company is now saying that it could bring the concept to the UK if it continues to work.

    I find this all to be incredibly fascinating, and I’m not surprised that other retailers, including Sears, Kmart and Ocado, are testing the virtual store concept.

    It’s also interesting that Procter & Gamble has tested it, especially because I remain convinced that companies like P&G are increasingly looking for ways to disintermediate traditional retailers...and the virtual store may address some of the logistical issues.

    And now, the Wall Street Journal reports that shopping has come to yet another form of public transportation - New York City taxicabs. The Journal writes that taxis in specific areas during the upcoming fashion week will carry special tags that allow people to order products by swiping their smart phones ... a process inspired by the Tesco experiment in Korea.

    The lesson here seems clear - that more and more, companies are finding ways to communicate with shoppers outside the confines of the store, while at the same time, shoppers are looking for ways to shop without actually going to the store. It is an enormous challenge to traditional retailers, which have to find ways to lure shoppers into the store, or find ways to reach beyond their traditional borders.

    But it also is going to be an insanely cool trend to watch unfold.

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

    KC's View:

    Published on: February 9, 2012

    by Kevin Coupe

    Online Media Daily reports on a new Forrester analysis saying that “nearly half of all online shoppers start their research process on Amazon or a search engine, i.e., Google; 47% and 43% of the world’s Web traffic visits Google and Facebook daily.”

    In addition, the analysis says that “21% of iPhone owners and 49% of iPad owners purchase physical products on these devices. Plus, 47% of online shoppers agree that friends’ social media (i.e., Facebook) posts and ‘likes’ are helpful in discovering new brands, trends, and retailers.”

    The conclusion is that a “big four” of technology companies - Google, Amazon, Apple, and Facebook - “now control the fate of online commerce,” and that other “online retailers’ success rests largely on the skill with which they can navigate this new reality.”

    Still, those numbers are extraordinary. And, one might, say, Eye-Opening about a kind of centralized power structure taking shape on the Internet, and the expanding power of social media.
    KC's View:

    Published on: February 9, 2012

    Two interesting stories that point to how the media world is changing, and suggesting how marketers will have to adjust their messages and their delivery strategies in order to reach their target consumers...

    • The New York Times this morning reports that The Nielsen Co. is out with a new study saying that “Americans ages 12 to 34 are spending less time in front of TV sets, even as those 35 and older are spending more.”

    The analysis goes on: “The divide along a demographic line reveals the effect of Internet videos, social networks, mobile phones and video games — in short, all the alternatives to the television set that are taking up growing slices of the American attention span. Young people are still watching the same shows, but they are streaming them on computers and phones to a greater degree than their parents or grandparents do

    “It has long been predicted that these new media would challenge traditional television viewing, but this is the first significant evidence to emerge in research data. If the trends hold, the long-term implications for the media industry are huge, possibly causing billions of dollars in annual advertising spending to shift away from old-fashioned TV.”

    • Meanwhile, the Los Angeles Times reports that “single-copy sales of consumer magazines took a major hit in the second half of last year, according to the Audit Bureau of Circulations. Publishers sold 28.9 million newsstand copies, 10% less than the number sold over the same period in 2010.

    “Women's and celebrity rags especially suffered. All three of the highest-volume publications slipped, with Cosmopolitan down 6.7%, Woman's World 8.3% and People 12%.” And, “Other major titles, including InStyle, National Enquirer and Vanity Fair, endured double-digit plunges as stores pushed magazine racks into less-trafficked aisles and consumers resisted impulse buys. Newsstand sales for O, the Oprah Magazine, dived 32%.”

    Where does the blame lie? The Times also notes that “a survey from Pew Research Center shows that 47% of American adults now get at least some of their news on a smartphone or tablet computer.”
    KC's View:
    The TV numbers have to be kept in certain amount of context. The average American still watches more than four hours of TV daily (way too much!), and a major event, like the Super Bowl, still can generate big numbers. (Last Sunday’s game was the most watched TV program ever in the US.)

    As for the magazine numbers, it just shows that traditional publishers have to find ways to adapt to the new reality, and to monetize it. Print is dying - like it or not - and they’d better find ways to deal with it.

    Published on: February 9, 2012

    The New York Times writes about how, when it comes to single-serve coffee systems, “you’re not just paying for coffee, you’re paying for convenience and the technology that makes it possible to brew a single cup in seconds. Pop in the pod, push the button: it’s a sure thing every time.”

    However, there is a cost for all that convenience and certainty. The Times points out that “the Nespresso Arpeggio costs $5.70 for 10 espresso capsules, while the Folgers Black Silk blend for a K-Cup brewed-coffee machine is $10.69 for 12 pods. But that Nespresso capsule contains 5 grams of coffee, so it costs about $51 a pound. And the Folgers, with 8 grams per capsule, works out to more than $50 a pound.”

    Compare that to bagged coffee costs that range from the ridiculous to the sublime: “An exclusive single-origin espresso like the Ethiopia, Gedeo Single Origin Espresso from Sightglass Coffee costs $19 for a 12-ounce bag, or about $25 a pound. La Cima beans for brewed coffee from Stumptown Coffee Roasters, a Grand Cru selection grown at Finca el Injerto, a renowned farm in Guatemala, is $28.50 for a 12-ounce bag, or $38 a pound. In fact, most high-end coffees cost less than $20 a pound, and the coffees you find on supermarket shelves are substantially cheaper. A bag of Dark Espresso Roast beans at Starbucks is $12.95 a pound, and a bag of Eight O’Clock beans for brewed coffee at the Food Emporium is $10.72 a pound.”

    The Times goes on to report that “the premium that single-serve coffee commands makes it especially lucrative. Julian Liew, a spokesman for Nespresso, said single-serve coffee is 8 percent of the global market, but accounts for 25 percent of its value. It’s likely that the number will continue to climb.

    “According to Keurig, 4 million of the company’s K-Cup brewers, for regular drip coffee, were sold in the 13-week run-up to Christmas 2011. During that same period, Green Mountain Coffee Roasters sold more than $715 million in K-Cup packs. The pods and brewers are now front and center at stores like Bed Bath & Beyond and Staples. Keurig licenses its technology to other companies, and last year, Dunkin’ Donuts and Starbucks started making K-Cup pods. Keurig even sells a refillable filter that you can pack with your own coffee.”
    KC's View:
    The suggestion here is that because Walmart is going to begin selling a more value-oriented single-serve coffee maker, we could be in for a price war in this burgeoning category.

    Tell you one thing, makes me glad I haven’t switched from my old standby - pound bags of Starbucks Verona, twelve bucks a pound. I don’t think I can afford the single-serve technology, especially because I drink about a gallon of coffee each morning...

    Published on: February 9, 2012

    Columbus Business First writes that the Merchant Medicine’s ConvUrgentCare 2012 Market Report is predicting a 10 percent increase in the number of in-store health clinics around the country this year, following an increase from 1,220 nationally a year ago to 1,360 on February 1, 2012.

    According to the story, growth is expected to be seen at Little Clinic (in some 80 Kroger stores at present), CVS’s MinuteClinic, and Clinic at Walmart.

    And, the story continues, “Urgent-care clinics should see equivalent growth, and worksite clinics should see even greater expansion fueled by new players. One of those players could be Dublin-based HealthSpot Inc., which is planning to launch its videoconference pods in clinics and pharmacies around the state this summer. Employers view worksite clinics as a cost control tool and the emergence of retail clinics as care management programs for chronic diseases like diabetes were cited as reasons for the expected growth.”
    KC's View:
    No surprise here. I’ve long felt that, especially in the current health care environment, in-store clinics are a strong long-term response, not to mention strategically smart thing for supermarkets and drug stores to do.

    Published on: February 9, 2012

    The Business Journal reports that Roundy’s initial public offering (IPO) debuted yesterday, making available to the public “more than 19 million shares at $8.50 per share, which would raise an estimated $111.15 million in net proceeds.”

    According to the story, “The company originally said it expected to sell 18.2 million shares at $10 to $12 per share. It increased the number of shares and decreased the initial price when it launched the offering Wednesday.”
    KC's View:

    Published on: February 9, 2012

    Advertising Age reports that “using a tool from startup LocalResponse, Walgreens finds public check-ins at its stores and sends users reply messages via Twitter. For example, when customers check in to any of the chain's 8,000 stores through mobile apps such as Foursquare or Yelp and publish ‘I'm here!’ to Twitter, Walgreens messages back: ‘Check out Halls new cough drops in the cold aisle’.”

    The story continues: “Walgreens has also been testing other means to use social media to make customers aware of products. When visitors checked in to the drugstore via a Foursquare or Facebook mobile app, it donated free flu shots to charity on their behalf. For Energizer, Foursquare check-ins served up a mobile coupon for a four-pack of batteries. The Energizer effort saw better redemption rates than traditional digital coupons, said Adam Kmiec, Walgreens' director of social media.”
    KC's View:
    Love it.

    Published on: February 9, 2012

    • Numerous published reports say that Tesco has decided to install Wi-Fi service in all of its Tesco Extra superstores in the UK and offer it free-of-charge to all customers who belong to its Clubcard loyalty program.
    KC's View:
    The goal here clearly is twofold. One, add value to the Clubcard program. Two, maker Tesco more attractive at a time when it is seeing some backsliding in terms of UK market share.

    Published on: February 9, 2012

    • Tops Friendly Markets, a leading full-service grocery retailer in upstate New York and northern Pennsylvania, announced today that the company will commemorate its 50th anniversary with a year-long celebration. As part of the anniversary celebration, Tops said it “will offer shoppers new promotions, exceptional savings, contests and events throughout the year.”

    • In the UK, Marketing Week reports that both Tesco and Walmart owned Asda have been cleared by the Advertising Standards Authority (ASA) of charges that they misled consumers with recent ad promotions. As the story notes, “The supermarkets have long used the ASA to make complaints against each other’s tactics, some of which have resulted in ad bans.”

    Ad Week reports that Walgreen-owned Duane Reade drugstores in New York City have begun offering self-service frozen yogurt kiosks, “complete with topping bars.”

    Joe Magnacca, president of Daily Living Products for Walgreens, tells the magazine that the move is part of the bigger strategy of “ looking at our business differently and evolving into a health and daily-living destination.”
    KC's View:

    Published on: February 9, 2012

    Got the following email yesterday regarding yesterday’s story about Supervalu making 800 job cuts as a way of trimming costs:

    I do a fair amount of consulting work for the supermarket industry in both CPG and retail and have gleaned some useful insights on SVU. Let me begin by expressing concerns for the many that were impacted by the announced downsizing.

    Unlike today's MNB reader comments, I think the reduction in force is long overdue however, misdirected and not deep enough.

    The Board of Directors must start at the top of the house, if they really hope to change the trajectory. 17 (?) consecutive quarters of comp sales decreases should not be tolerated, PERIOD.

    The CEO and his 30+ year cronies are too entrenched in a flawed and bureaucratic culture, too focused on things that don't matter when your house is on fire and are not prepared to quickly change the paradigm. It appears self protection is at the core of recent exec departures (Shaner, Jungman, Berg, etc). ! Once a new leadership team is in place, they must focus on things that matter- 1) massive org restructure with a focus on driving synergies from the center vs. trying to appease all of these chains and their large infrastructures (you can do local from the center- others have figured that out) 2) Improving the value proposition NOW before it's too late and scream from the mountaintops to customers so they know (+25% higher isn't going to cut it) 3) Overhauling the in-store experience (massive remodeling, getting customer service right) 3) Establishing Fresh and PL as key differentiators, 4) Shedding massive costs, like the army of consultants that have taken over their company (I'm a consultant but there's a difference between 'consulting' and running the company), and 5) Become a retail partner for vendors versus a wholesaler that shakes down vendors to pad the bottom-line...thus exacerbating the value proposition issue since vendors don’t want to invest where there isn't a good return.

    So how do you pay for all of this? Massive restructuring focused on their chains, move the consultants out saving millions/year, motivate vendors to ante up once you have a selling story that works for them), sell wholesale and become a retailer (to pay down debt and get focused), close/sell more unproductive stores.....and go private if they can find someone that will pay the $2B (market cap plus premium) and accept the massive debt or pull guidance from the street with a message that they're in it for the long haul. How bad could the stock price get when it's already trading an an all-time low? Drastic situations call for drastic action. I think the options described above are better than going belly up.

    But I think it is fair to say that MNB user Larry Lyons disagreed with some of this analysis:

    Let’s eliminate our most valuable employees to “cut costs”…

    Let’s forget about the cost of training we have invested in them.

    Let’s forget about the loyalty these people have developed over the years.

    These folks have proven they will show up each day, not steal from us, and do a good job…so what?

    Let’s not pay attention to their productivity, nor knowledge of our products.

    Let’s not worry about this vast brain-drain “helping” our competitors.

    Customers will not care that their favorite “expert” is no longer at our store.

    Who was sitting at the table when this decision was made, and thought it was a good idea?

    Does anyone remember the sinking ship that was Circuit City? Something about those who pay no attention to history…

    Regarding the new yoga room at San Francisco International Airport, one MNB user wrote:

    Quite often I intentionally route my travels through airports that I know provide pedicures and/or massages, since it seems I spend more time in airports than I do at home. Who would have thought I could actually look forward to a lay-over, and can magically produce a healthy budget for it! I love retailers that cater to my personal/emotional needs while I’m out doing my “chores”, which then gives me more time to cater to my kids’ needs during the precious time when I’m home.

    Excellent point.

    On the subject of concerns about imported orange juice that may be contaminated with a fungicide, and my suggestion that maybe this makes a case for country-of-origin labeling so people would have choices clearly laid out in front of them, one MNB user wrote:

    Too bad that we as consumers don't feel the same way when it comes to athletic clothing, and all apparel..  Most of these products come from off-shore countries.

    Just think of all the jobs we could add if those same jobs were here in the U.S.


    In response to our obit for Larry Zettle, one MNB user wrote:

    Larry Zettle:   A great man and leader who taught us all much about being a "leader as well as a manager."

    Regarding the CDC report saying there is too much sodium in the American diet, MNB user Derek Bionelli wrote:

    There are a number of study’s, books and documentary’s that make a case that the CDC has no idea what they are talking about and their guidelines are in fact nothing more than a way to get dollars funneled into their departments.

    The only type of “food” that has been consistently shown to negatively affect health is processed grains.  This does not include people that simply over eat any type of food.

    A rounded diet of fresh fruits, veggies, meats and naturally found spices, including salt, has been found to be extremely healthy.  In short, the government is almost certainly wrong with their recommendations, look at trans fat.

    Are you suggesting trans fats are not bad for us? Because a guy from the Culinary Institute of America (CIA) told us during my panel discussion at the Food Marketing Institute (FMI) that his understanding is that trans fats are just a few degrees away from being plastics.

    On another subject, MNB user Gary Narberes wrote:

    Thank you for always enlightening me with your website!  With regards to the WalMart's Nutritional Labeling Program as well as those at other stores (full disclosure, I work for Raley's) I sometimes wonder if it's more "fluff" than "stuff".  If stores think a customer cannot figure out that a candy bar is less healthy for you than an apple, methinks we've got a bigger problem on our hands! Likewise Rice Chex would be a better choice than Lucky Charms.  Unless these individual "programs" are rolled into one national program adopted by all stores, what's the use?  When I shop Wal Mart I'll be deciphering their program, Raley's another, and so on.  It's a point of difference that I find to be a dull one.

    And, about Netflix and the apparent flood of competition it is getting, MNB user Jenefer Angell wrote:

    I’ll tell you what: I’m so sick of Netflix’s disinterest in improving anything about my customer experience that a competitor will have to work hard not to get me. I am astonished that after four years of streaming they have never done anything to enhance their queue, such as defaulting to the STREAMING page, which I visit approximately 25 times a week, rather than the DVD queue, which I access about once per week. Also, hello: anyone else part of a family? One in which you need to track and negotiate three different tastes and priorities. Did they ever think of adding a favorites spot, so a person can return to certain movies but keep them out of the new lineup? Or how about what happened just today: I’m eagerly awaiting the first disc of Downton Abbey’s second season; however, the first disc has a long wait, so they sent me the second and third discs. Thanks! So now, I have two discs I can’t watch for who knows how long, so they’ll have to be returned. I have been a customer for eight or so years, and I think the only enhancement they have offered to the user interface in that time is to redesign the front page for better browsing. I would be glad of some better filters and search returns. I really don’t care how big the picture it.

    Yes, I’m bitter, and counting the days until someone gives me a better alternative. I hope someone out there is going to get it right.

    KC's View: