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    Published on: March 12, 2012

    by Kevin Coupe

    MNB user Tom Kroupa sent me a link to a TED talk that is an absolute must-watch. (TED - which stands for “Technology, Entertainment and Design - is a non-profit organization dedicated to disseminating “ideas worth spreading” through conferences that take place all over the country at which presenters have just 18 minutes to make their case.)

    In this case , the speaker is a designer named Kelli Anderson, who makes the case that “the world is full of order that does not necessarily deserve our respect.” And she offers three examples of how she deconstructed institutions that desperately needed rethinking, and put them back together in innovative ways. (The bit about the New York Times is priceless and as Tom said when he sent it to me, it may be one of the most entertaining things you’ve seen in years.)

    So check it out here. Trust me - if you are a business leader, or imagine yourself to be someone for whom innovation is a high priority, is is absolutely worth the investment of 16 minutes and six seconds.

    It is an Eye-Opener. The very best kind. And a great way to begin the week.
    KC's View:

    Published on: March 12, 2012

    The Los Angeles Times has a spectacular column by Michael Hiltzik in which he bemoans the state of American customer service...using a very real and close-to-home example. Here’s how he frames the story:

    “Advance ticket sales for Angels soared after the team announced its 10-year, $250-million contract with slugging superstar Albert Pujols in December. That's the good news. The bad news is that over the last week, they've squandered considerable fan goodwill through an execrable display of contempt for their paying customers. Think of it as a blown save of a game the team should have had in the bag.

    “The fiasco involves advance ticket packages. These come in the form of vouchers that have to be redeemed in person for seats in designated sections. Knowing that fan excitement would run high and that 7,000 packages had been sold, the team advised buyers by letter and email to high-tail it to Angel Stadium as soon as possible once the redemption period began last Tuesday at 9 a.m. to be sure of getting the choicest seats at the best games.

    “Yet the team was totally unprepared to handle the crowd that materialized. Somewhere between 1,000 and 2,000 customers showed up Tuesday, many arriving before dawn.

    “They discovered that only half the 14 ticket windows (and sometimes fewer) were staffed. The line moved at centimeters per hour, so no more than a few hundred customers made it to the ticket counters before the box office closed for the day at 5:30 p.m. Those left empty-handed were told they could come back the next day, as though it's no big deal for anyone to take a second weekday off from work and to trundle over to Anaheim. Even Donald Trump would understand that's a heavy burden for a working person to bear.”

    Now, Hiltzik concedes that he has a dog in this hunt - his wife was one of the people who spent all day in line, only to be told she had to come back the next day, when she waited another six hours before getting to the ticket window. But he rejects the accusation that he has a personal vendetta, and says that Angels’ management was “truculently defensive” - as opposed to apologetic - when confronted about the situation.

    Hiltzik uses the column to make a larger point:

    “This has become the American way, hasn't it? Many businesses regard customer service as an expense item rather than an investment and the workers on the front lines as their most expendable employees. The patrons in the cheap seats always can make do with fewer ticket sellers, fewer ushers. Have you tried lately to track down a sales clerk at your local Sears store, not to mention a knowledgeable one? How long does it take you today to reach a human being on the customer service phone line of your bank or cable company, equipped as they are with the latest technology in disembodied recorded voices?”

    He goes on:

    “Indifferent service doesn't save money in the global sense — the business saves only by pushing even greater costs onto you, the customer. Angels owner Arte Moreno can cut his $6 million Angel Stadium payroll a smidgen by staffing only half his ticket windows to service a throng of patrons, but what's the value to the customer of a full day of wages, maybe two, spent standing in line?”

    Hiltzik concludes by saying that “poor customer service is not a great long-term business model. If Moreno really doesn't understand that the fan base of even an iconic ballclub can vanish in the blink of an eye, he should take a drive up the freeway to Dodger Stadium, which was only half-full last season in part because owner Frank McCourt pursued a screw-the-customer strategy not unlike the one Moreno unveiled last week.”
    KC's View:
    I want to run that one sentence again, because it ought to be emblazoned in the offices of every retailer:

    Many businesses regard customer service as an expense item rather than an investment and the workers on the front lines as their most expendable employees.

    Which is just plain dumb.

    Workers on the front lines are not just the least expandable employees, but they are the people primarily responsible for whether or not a retail establishment succeeds or fails.

    And thinking that cutting back on front line employees to save money is the best way to make a business profitable is just self-delusion.

    Good job, Michael Hiltzik.

    Published on: March 12, 2012

    The Wall Street Journal reports on a study by Responsys saying that “last year, the nation's top 100 retailers by e-commerce revenue sent recipients an average of 177 emails apiece, up 87% from 2007 ... Some of the most aggressive emailers—including Neiman Marcus Group Inc.—sent each recipient more than 500 emails apiece in 2011, Responsys said.”

    Now, the Journal writes, “amid signs that the sheer volume of email is starting to turn customers off, some retailers have begun pulling back, reducing their mailings and fine-tuning their marketing tactics.”

    There’s good reason: “A study of its retail clients by email marketing firm Harte-Hanks found that since 2007, the rates at which recipients open retail emails and click on links have declined. In the first six months of 2007, consumers opened 19% of the retail emails they received and clicked through to the website 3.9% of the time. By the first half of 2011, those numbers shrank to 12.5% and 2.8%, respectively.”
    KC's View:
    The problem, of course, is that online sales are increasingly important to retailers - nine percent of total sales in 2011 - and emails are seen as a critical way of driving that traffic. And online sales are growing faster than sales in bricks-and-mortar stores.

    But I gotta tell you...this would be the fastest way to kill all this momentum.

    Remember...this is the lesson from The Descendants, which turns on whether a Hawaiian lawyer and landowner, played by George Clooney, should sell pristine island land that has been in his family for generations to developers who will turn it into an enormous commercial property. It is a question that every business owner faces at some point - Just because you can do something, doesn’t mean that you should do something.

    Published on: March 12, 2012

    Sprouts Farmers Market and Sunflower Farmers Market, two independent and value-driven natural food store chains, announced an agreement to merge.  The combined company will operate 139 stores under the Sprouts Farmers Market name and will have approximately 10,000 employees. The transaction is expected to close in the second quarter of 2012.

    It is currently expected that all of the Sunflower stores will be re-branded under the Sprouts banner by the end of 2012.

    Sprouts is majority-owned by investment funds affiliated with Apollo Global Management, LLC, and operated by the Boney Family; Sunflower, co-founded in 2002 by Libby Cook and Randy Clapp, is privately owned by the co-founders, management and KMCP Advisors, a provider of private expansion capital.  The combined company will continue to be majority-owned and controlled by Apollo.

    According to company officials, 2012 revenue for the combined company should be close to $2 billion. Terms of the deal were not disclosed.
    KC's View:
    While Sunflower has continued to grow, there’s no question that it was hurt by the events of a little over a year ago, when Michael Gilliland, the company’s CEO, was arrested on charges of child prostitution and subsequent had to resign.

    This certainly seems to make sense for both companies, and it helps to wipe away some of the negative energy attached to Sunflower.

    Published on: March 12, 2012

    The Wall Street Journal reports that Whole Foods is about to break ground on a new store - in downtown Detroit, a city with ongoing financial troubles and neighborhoods that could serve as a the poster child for urban blight.

    According to the story, “An unusual mix of business factors—some data driven, some instinctive, some unique to urban development—prompted Whole Foods to take this leap. And a leap it is. Detroit remains one of America's hardest hit urban centers. Since the 1950s, more than half its population has taken flight. Those abandoned homes seem to be everywhere. The city is now in another budget crisis.

    “Detroit's road to arugula also runs through plenty of resentment from local grocers, who see Whole Foods as unfair competition and a fancy national chain extracting special benefits from indulgent officials.”

    One of the attractions of Detroit, the story says, is that there are “more than 800 community gardens using some of that space to grow vegetables and fruit for home use.” In addition, there is “the city's bustling Eastern Market, one of the oldest and biggest farmers markets in the country. It draws in produce from throughout the region and sells it to supermarkets and restaurants. Up to 40,000 people shop at its Saturday Market. The new Whole Foods plans to buy there as well.”

    And so, Whole Foods thinks that there is an appetite in Detroit for its kind of store. And, it says it believes it can be profitable there.
    KC's View:
    At best, this is a gamble. At worst, it could be a disaster of epic proportions.

    I have no idea which it will be. Maybe they can make it work ... perhaps they have a format in mind that won’t be quite as up-market as many of the ones they operate.

    There is, however, one thing of which I am sure - that Whole Foods, no matter what they bring to the neighborhood, ought not get tax advantages that existing retailers with a long-term commitment to the community don’t get. That just doesn’t seem fair...especially since we are talking about a very profitable retailer here.

    Published on: March 12, 2012

    Starbucks announced last week that it will introduce its own proprietary single-cup coffee maker laster this year. The item will be made by Kreuger, a German company, but Starbucks is not yet releasing pricing or technical details.

    Advertising Age writes that “the news could be a threat to Green Mountain, with which Starbucks has a relationship. In March 2011, the company signed a deal with Green Mountain Coffee Roasters for the sale, manufacture and distribution of Starbucks and Tazo -- its tea brand -- in K-Cups, the dominant format in the single-serve market. Green Mountain has the patent on K-Cups and owns the Keurig machines for which they are used.”

    Starbucks CEO Howard Schultz said that while Starbucks plans to offer only Starbucks-branded coffee for now, "we reserve the right to open the system to others, and we have not made that decision as of today."
    KC's View:
    A retailer friend of mine suggested the other day that this move was akin to Steve Jobs wanting to control every part of the Apple experience ... Schultz essentially seems to want the same thing for the Starbucks coffee experience.

    Published on: March 12, 2012

    Pity the poor Swiss.

    The Associated Press reports that “Switzerland counted ballots Sunday for five national referendums, including one pushed by a union to raise the minimum holiday up from four weeks, which is the standard used in Germany, Italy, Russia and other European nations.”

    And go figure: “The Swiss heeded warnings from government and business that more vacation would raise labor costs and put the economy at risk.”

    In other words, the AP writes, “known for their work ethic, Swiss citizens appear to be leading the way on European austerity.”
    KC's View:
    The Swiss are nothing if not practical. The AP notes that one of the other referendums - the one designed “to move prostitutes out of residential areas by building an area for them to work in with parking and garages” - also passed, though by a narrower margin. (Prostitution is legal in Switzerland, and Zurich has what the story refers to as a “flourishing red light district.”)

    No word, however, on how the prostitute demographic voted on the vacation referendum. And to be honest, that’s the one piece of information that I really wanted to know...

    Published on: March 12, 2012

    • Winn-Dixie announced on Friday that its shareholders had voted overwhelmingly in favor of its acquisition by Bi-Lo, thus completing the $560 million sale of the company that was founded in 1925. The deal creates an organization with 690 stores and 63,000 employees in eight states, and that is expected to continue operating under both banners.

    Peter Lynch, CEO of Winn-Dixie, is leaving the company. Randall Onstead, CEO of Bi-Lo, now takes the reins of the combined organization.

    • The Chicago Sun Times reports that Walgreen CEO Greg Wasson is pushing the chain drug giant’s “growth in largely unseen and under-served areas — providing both medical care and fresh foods in food desert neighborhoods and expanding the hiring and training of people with physical and mental disabilities.

    According to the story, “The company’s commitment to the so-called ‘food desert,’ where residents lack access to affordable fresh-food within a mile or so, includes working with Chicago’s urban farmers to increase the amount of food they provide to Walgreen’s 12 stores with expanded fresh-food departments in predominantly African-American neighborhoods.”

    Food Safety News reports that Campbell Soup Company will end the use of bisphenol A (BPA) in its cans, even though it believes the chemical does not cause cancer. The company said it was reacting to public concern and that some of its packages already have made the shift.
    KC's View:

    Published on: March 12, 2012

    • The Wall Street Journal this morning reports that PepsiCo plans to name Brian Cornell, who recently left his job running Walmart’s Sam’s Club unit, to be the company’s new head of its Americas-wide food division. He will succeed John Compton, who becomes PepsiCo’s new president.

    The Journal describes the moves as an effort “to deepen its management bench and line up a potential successor to Chairman and Chief Executive Indra Nooyi,” though Nooyi has not indicated that she has any plans to step down.

    Reuters reports that bankrupt Hostess Brands has named Gregory Rayburn to be its new CEO, replacing the departing Brian Driscoll.

    The story notes that “as the new head of the company, Gregory Rayburn will oversee the Hostess' reorganization under Chapter 11 and the ongoing negotiations with its unions. Rayburn, who was the chief restructuring officer in the WorldCom bankruptcy proceeding, is also a former director of The Great Atlantic & Pacific Tea Co .”
    KC's View:

    Published on: March 12, 2012

    Last week, MNB took note of an ABC News report that so-called “pink slime,” described as a “cheap meat filler” made from low-grade trimmings, “is in 70 percent of the ground beef sold at supermarkets and up to 25 percent of each American hamburger patty, by some estimates.”

    One MNB reader, believing that perhaps we had only presented one side of the story, sent us a statement from Beef Products, Inc. about the issue.

    Now, the statement is more than 600 words, so we’re not going to run the whole thing. But here are some highlights...

    “At Beef Products Inc., we produce lean beef from trim. Trim is the meat and fat that is trimmed away when beef is cut into steaks and roasts. This lean beef is used in hamburger, sausage, ground beef, and as a valuable ingredient in many other foods. We use a natural compound - called ammonium hydroxide, which is widely used in the processing of numerous foods, such as baked goods, cheeses, gelatins, chocolate, caramels, and puddings - to slightly increase the pH level in beef and improve its safety.”

    And then, it quotes a diverse group of “experts who follow food quality and safety” on why the beef trim is safe. Here is one favorite...

    “Negative publicity about the company's process and the use of the compound ammonium hydroxide, a critical component of the process, is at the heart of Beef Products' recent challenges. This is distressing, because ammonium hydroxide was designated as “generally recognized as safe” for use in food by the Food and Drug Administration in 1974 and it has been used as a leavening agent in baked foods as well as a way to manage the pH in many types of food products since then. In 2001, the Food Safety and Inspection Service, the regulatory arm of the U.S. Department of Agriculture that regulates the U.S. meat and poultry industry, approved the use of ammonium hydroxide as a food safety tool.”
    KC's View:
    I’m sure that there are two sides to this story.

    That said, I’d just like to point out that nothing says “natural compound” like “ammonium hydroxide.”

    And that phrases like “generally recognized as safe” don’t exactly make my heart soar.

    The experts can say what they want. I was talking to some retailers last week who said that they would never use this stuff in their ground beef. I think, given the choice, I’d rather shop with them.

    Published on: March 12, 2012

    On Friday, in my usual “OffBeat” rant, I wrote, in part:

    I want to be very clear about this, because I am a person who depends on my sponsors for the financial support to keep MNB going.

    Under no circumstances will I ever think of my sponsors as french fries, and if I lose one, I would never think - or say - that it is like “losing a couple of French fries in the container when it's delivered to you at the drive-through ... You don’t even notice it.”

    Not only would that be a dumb thing to say to departing sponsors who had been supportive of me, but it would be a supremely arrogant thing to say to existing and potential sponsors, who rightly could expect greater appreciation and even discretion.

    Of course, there are a lot of things that I would never think or say out loud. And when I think about it, suggesting that my sponsors are as disposable and insignificant as french fries probably is just the beginning of what I would not say or think.


    This was not a political statement. It was a statement of business principles. However, there were a few people who had no idea what the hell I was talking about ... and for them, I will clarify.

    Last week, Rush Limbaugh, in saying that reports of sponsors jumping ship were inaccurate (those reports came after he was criticized for using certain terms to describe a woman with whom he had a philosophical disagreement), said that losing them was like “losing a couple of French fries in the container when it's delivered to you at the drive-through ... You don’t even notice it.”

    One MNB user thought I got it completely wrong:

    I think you missed the whole point of the Sponsor/French Fries article.  Maybe you only got to see part of the article taken out of context…..or maybe MNB hasn’t reached this level of sponsorship to fully appreciate the point…yet.  It was simply an analogy to help the common person like myself understand how things really work vs. how the main stream press presents a headline or article.  Basically confirmed my decision to stop getting/believing my news from mainstream TV/Newspapers.  I trust outlets like MNB and Fox News to present it to me “fair and balanced”.
     
    When I first heard the headlines of “lost sponsors” from the mainstream outlets….I thought…Wow, this has turned into some serious outrage….but the link below put it all in perspective for me.
     
    Here is the full article if that was the case:
     
    http://www.rushlimbaugh.com/daily/2012/03/07/clearing_up_misinformation_on_our_sponsors


    Well, you got one thing right.

    I don’t have as many sponsors as Rush Limbaugh.

    But you got a few things wrong.

    First of all, I don’t claim to be balanced. I try to be fair to all sides, but I don’t hide my opinions, nor do I suggest that I am always right and people with whom I disagree are always wrong. I probably learn more from the people who whom I disagree than I do from those who have positions that I would share.

    Second, the link you provided isn’t to an “article.” It is a defense, and while it may be completely accurate, it is hardly objective. It is in his best interests to shine the best possible light on the situation.

    Another MNB user wrote:

    Regarding your comments today referring to sponsors as french fries by Rush Limbaugh...I'm assuming you made those comments without all the information on the subject. The "sponsors" Rush was referring to aren't even necessarily sponsors to his show.  He doesn't know who they are nor do business with them. In most cases he doesn't even get paid by them. They are local sponsors who buy ads on a radio station. Their ads may or may not even appear during his show.  These sponsors called the radio station and said they don't want their ads to appear during Rush's show. The radio station doesn't lose money either though because they just swap an ad that was to appear on Rush's show to another show and swap a new one in.  Additionally the radio station has had to move about 43 sponsors off of Rush's show out of around 18,000. That is less than french fries...that's a couple of grains of salt on one of the fries.

    It is true that Rush has lost a couple of his national sponsors, but these were not the ones he was calling french fries. BTW, one of the national sponsors who left, Carbonite, has seen their stock plummet 12% since they announced they were pulling ads from Rush.

    The media is making this out that sponsors are flocking away from Rush and he is losing money and popularity, neither of which is true. Rush has the most popular and lucrative show on the radio. Even with all the controversy actual sponsors that pay him are still flocking to his show.
     
    I'm guessing that you would want all the details of the situation to present to your fans.


    Actually, nothing you say changes my mind about my original statement. The sponsors who asked the individual radio stations to take their ads off the Limbaugh show may not have been direct advertisers, but they still paid money to the stations, which in turn used that money to help buy the show for them to air. They lose that revenue, and they have less money to spend.

    My original point remains. Someone spends money on me, and I don’t think of them as insignificant. We may disagree, and if a sponsor decides not to be in business with me anymore, I shake their hand and say thank you for the good times, and I hope they’ll come back in the future.

    I think that’s smart business.

    To do otherwise is hubris.

    But hey ... that’s just my opinion.

    And it has nothing to do with politics or even the comments and attitude that set off the controversy.




    MNB wrote on Friday about a report saying that Walmart was all hat, no cattle when it comes to its environmental initiatives. MNB user Blake Steen had some thoughts about this:

    Let’s take a look at the real line in this story.  “The chain also regularly donates money to political candidates who ‘consistently vote against the environment,’ according to ILSR.”  So if you send money to a republican candidate that makes your store less sustainable? The story loses all credibility with that statement. First of all how do you “vote against the environment”? If they truly are falsely advertising sustainability and Wal-Mart is not doing what they are saying that is one thing, and I applaud this nonprofit for calling it out.  There is no need to bring politics into the message.

    I suppose that the point was that if a company makes a big deal about environmental initiatives, but then supports candidates that seem to have different priorities, it seems entirely justifiable to question whether it is sincere or just playing a PR game.

    Without passing judgement on Walmart, that doesn’t seem like such an outrageous position to take.




    There was also a story last week about Walmart being concerned about out-of-stocks, which led one MNB user to write:

    What is interesting is that several years ago under David Glass leadership, David addressed the company on this issue. His concern was not the out of stock percentages but rather what were the items that made up the percentage. That there was a big difference in being out of Tide vs. Aunt Penny White Sauce. That being listed on a out of stock report is different than being really out of stock (physically) on the shelf. That study showed ( as done by Safeway a few years back) that out of stock on own brand alone can cost you quite a bit in the profit column. So to bring this back up now to their associate is showing me that they have not had their eye on this issue for some time. Be real interesting to see who will be holding the “extra” inventory, Walmart or the supplier, I’ll bet the supplier…….

    Another MNB user wrote:

    Such a conflict those WalMart managers must face!  For years the policy being drilled into them:  Keep inventories low, low, low!  It became such a mantra that it was apparent to anyone with a little business insight that WalMart did not care that a certain item was out; they sold too much of everything else for it to make a difference.  So now the thought is one out-of-stock multiplied throughout the department, store, district, state, country, company can really add up.  Wow!!  I've been seeing (and saying) that for years.  But, I guess it's only a good idea when the executives think that it's a good idea.

    And, from another reader:

    I am "semi-retired" so maybe it's ancient history. I thought one of Walmart strengths was on time deliveries throughout the system. To me the combination of out of stocks and loaded back rooms is "interesting".

    It looks like the wrong items in the wrong places.





    On another subject, an MNB user wrote:

    I suppose it's a case of to each his/her own, but I for one am baffled by the reader whose vitriolic letter against Ron Johnson and the changes at JCPenney ran in today's 'Your Views'. Another similar letter a month or so ago, written by a woman who intimated that she and her fellow women shoppers were not intelligent enough to understand Penney's new, simplified pricing structure.  I don't get it.

    Over the past several years--admittedly as my body and I have entered our 40's--my clothes-shopping world has distilled down to three stores: Lord & Taylor, LL Bean, and JCPenney. Penney's has clothes that fit, are decent quality, are priced well and--very important--don't make me look like I'm trying too hard to look like a teenager.  However, their stores tended to be cluttered and their staff was frequently pretty lackluster. Not that Sears or Macy's or *gasp!* Nordstrom did any better.

    Recently my spouse and I made a trip to the mall specifically to use a gift card to another store and we stopped in at Penney's while we were there.  What a pleasant experience! Visually, the store looked much better, but it was hard to say why except that it was uncluttered, bright and easy to shop. It was not "'A' blouse on a glass shelf", and there was ample stock and selection, but gone was the overcrowded feeling and the extra tables, bins and stacks that get in the way.

    Furthermore, we were greeted warmly and genuinely by sales people in the departments and guided to the cash wrap when we were ready to ring out.  Even the checkout seemed to go smoother and quicker than usual. It was all kind of small stuff, but it made a big (positive!) impact on us.

    Oh, and who doesn't love Ellen?!

    KC's View: