retail news in context, analysis with attitude

Published on: July 2, 2012

by Kevin Coupe

Fascinating story in USA Today about how Tesla Motors, the US company that manufactures high-end, expensive electric cars, is looking to put the brand in front of consumers by opening dealerships in unusual places - like malls.

According to the story, "The Palo Alto automaker opened its 12th North American store and second in Southern California on the Third Street Promenade in Santa Monica on Friday. It's flanked by an Adidas store and Club Monaco, a trendy apparel seller. Parking is a block away in a public garage." It isn't just a west coast phenomenon; a similar dealership has opened in The Westchester, next to Nordstrom in an upscale mall in White Plains, New York.

The goal, the company suggests, is to position the company as being more like Apple than Chevrolet.

Now, Tesla is in a unique position to develop an unorthodox approach to sales. The company is sold out of cars at the moment, with every car manufactured already promised to specific buyers. And because it is a new company, without the legacy systems of older car manufacturers, it can find new ways of reaching out to potential customers without depending on a franchised dealership system - it gives them more control, though it also puts them at potentially greater risk.

What is instructive about this approach is the way in which it looks to get beyond the same-old, same-old as the company looks to build its brand and presence. That's something that all companies need to think about ... how to go beyond traditional approaches and find new ways to appeal to new consumers.

Because the old way of doing things simply may not be good enough anymore.

Published on: July 2, 2012

Tesco hosted its annual meeting on Friday, and came under fire from numerous quarters both about its stagnant UK business and its still unprofitable Fresh & Easy business in the US.

According to the Financial Times, a great deal of criticism came from Change to Win, an organization that "works with US union-sponsored pension funds," and that "called for Tesco to establish a committee of non-executive directors to review the future of Fresh & Easy ... and 'disclose the metrics and timeframe the board will use to evaluate Fresh & Easy’s future performance'."

However, Tesco rejected the call, saying that its existing board of directors reviews Fresh & Easy's performance on a regular basis and that uncertain economic times make it difficult to set ironclad metrics and timeframes.

CEO Philip Clarke promised that if the US business shows no sign of profitability, Tesco would pull the plug on the operation, just as it recently did in Japan, where it sold its business earlier this year.

However, he also said that "Fresh & Easy is improving as a business and I can assure you that it is receiving close attention from the executive team…We believe there is great value in the business and, if we get it right, an excellent stream of growth in future years."

The company also rejected calls from some investors for Clarke to resign if the company does not meet certain benchmarks.

Published on: July 2, 2012

The Wall Street Journal reports that the nation's senior corporate executives are ready to do battle with a provision of the 2010 Dodd-Frank financial legislation requiring public companies "to disclose the gap between what they pay their CEO and their median pay for employees, a potentially embarrassing figure that many companies would like to keep private."

While the legislation has been passed and signed into law, it remains a major point of contention in the political arena, and the Securities and Exchange Commission (SEC) has not yet issues rules for implementation. A proposal is supposed to be issued by the SEC by the end of July, with final rules adopted by the end of the year.

According to the story, "Since the bill's passage, the SEC has received more than 200 letters about the internal pay equity provision. Companies say they have a rough sense of their internal pay ratios, but they argue that their global workforces and varied payroll systems make calculating the median cumbersome, if not virtually impossible. What's more, they say, disclosing pay ratios would make them easy targets for CEO-pay critics."

"The ratio is not going to be a meaningful way to help investors but will be used as a political tool to attack companies," David Hirschmann, president of the U.S. Chamber of Commerce's Center for Capital Markets, tells the paper.

The story goes on:

"Total direct compensation for 248 CEOs at public companies rose 2.8% last year, to a median of $10.3 million, according to an analysis by The Wall Street Journal and Hay Group. A separate AFL-CIO analysis of CEO pay across a broad sample of S&P 500 firms showed the average CEO earned 380 times more than the typical U.S. worker. In 1980, that multiple was 42.

"Wide gaps in pay can affect employee morale, productivity and turnover, several studies have found. In the 1980s, management guru Peter Drucker advocated capping the ratio of CEO pay to average worker pay at 20 to 1. Beyond that, resentment creeps in, according to the think tank Drucker Institute. In 2010, a joint study by Northeastern University's business school and Bentley University found that employee productivity decreases as the disparity between CEO and worker pay increases."

Published on: July 2, 2012

The Wall Street Journal reports that in Los Angeles, where debate continues over a Walmart store being built in the city's Chinatown neighborhood, unions and other opponents of the development "are pressuring politicians to reject or return the retailer's campaign donations as a way to curb the company's influence as it tries to expand in major cities.

"Last week, three candidates in the crowded field for the 2013 Los Angeles mayor's race said they would refuse any donations that Wal-Mart offers. They were responding to a May letter signed by 11 union heads and sent to hundreds of candidates and public officials in Los Angeles County, calling on them to reject or return contributions from the company."

According to the story, "Wal-Mart officials said the unions won't stop them from opening smaller neighborhood stores and groceries in urban centers, nor from communicating directly with residents and customers about what they say are the stores' economic benefits."

The political strategy, it seems, is likely to be adopted by Walmart opponents in other areas of the country - like, for example, New York City.

Published on: July 2, 2012

Zagat is out with what it calls its "first-ever Pizza Survey, which looks deep into the pie-loving public's obsession with this food favorite."

Some results from the survey:

• Americans say they consume a pie or a slice 4.3 times a month, or about once a week.

• More than eight out of 10 people say pizza "is among their favorite foods."

• Close to four out of 10 people say pepperoni pizza is their favorite, while almost as many hate pizza with anchovies.

• New York-style thin crus pizza is preferred by 38 percent of respondents, while 23 percent like brick oven pizza, and only eight percent like Chicago-style deep dish pizza.

• "While 38% opt for the fold method, 43% eat it flat (and using a fork and a knife is still a no-no, with only 19% admitting to cutting their slice before eating it). The majority of folks like to add a little kick to their pie, with 51% saying they throw on some pepper flakes..."

• "Pizza is still a pretty affordable option for dinner - with the average slice in the U.S. ringing in at $2.99 and a whole pie costing $15.84. But, if you're located in the West, throwing a pizza party will cause more financial pain. The average slice on the West Coast is $3.24 - that's the highest in the country and is $.52 more than folks in the Northeast spend ($2.72 - the nation's lowest per-slice average)."

• "Midwesterner diners were much more likely to eat pizza for breakfast than pie lovers in any other region, while diners in the Northeast were much more likely to have it for lunch."

Published on: July 2, 2012

• Reuters reports that Walmart "has suspended one of its seafood suppliers amid allegations that the company, CJ's Seafood of Breaux Bridge, Louisiana, violated several federal labor laws.

"The retailing giant launched an investigation of CJ's Seafood following a report published by labor rights group the Worker Rights Consortium that said the crawfish processor abused migrant workers, forced them to work 24 hour shifts and used threats to prevent them from complaining to authorities."

The seafood company is being investigated by both the US Department of Labor and the Occupational Safety and Health Administration (OSHA).

Published on: July 2, 2012

• The University of Michigan's monthly economic sentiment index is out, with a final June reading of 73.2, described as the lowest level since last December and down from 79.3 in May, with the most pessimistic attitudes being expressed by households making more than $75,000 a year. To put the number in context, the year before the recession the index averaged 87.

• Interesting piece in the New York Times this morning about small farmers, noting that "a looming shortage of migrant workers, with fewer Mexicans coming north in recent years, could create a kind of rural-urban divide if it continues, with mass-production farms that depend on cheap labor losing some of their price advantages over locally grown food, which tends to be more expensive. From the vineyards of California to the cherry orchards of Oregon, big agriculture has struggled this year to find willing hands. Local farm sales are becoming more stable, predictable and measurable." The result, the story says, could be a "a vibrant new economic laboratory for American agriculture."

Published on: July 2, 2012

On Friday, MNB took note of a WSJ Magazine interview with Dan Barber, chef and co-founder of Blue Hill at Stone Barns, the award-winning restaurant in Pocantico Hills, New York. In my commentary, I wrote:

When it comes to food, I'd much rather be driven by pleasure than expediency. It won't always mean having a Dan Barber-style meal, but life is too short to eat crappy food.

Which led one MNB user to write:

In general I enjoy MNB and have been a long time reader, however, it has been striking me more and more over the past months that while not a big surprise, your comments are often right on for people in your demographic and socio economic group or above but are often demeaning to those millions that have fallen out of the middle class or are struggling to remain in it. You said today that live is too short to eat crappy food and I understand your meaning and context but it struck me immediately that for millions of Americans life is too short because they have not enough food or the only food they have access to is crappy food or the only food they can afford or have been taught to eat is crappy food by your definition.
 
I realize that MNB is a reflection of your own opinions and can go in any direction you wish it to go and I imagine that most of your readers are employed and solidly in the middle class. However I still think such comments which seem to be coming from you more and more often are insensitive to a very large percentage of people in this country that can in no way eat like you eat, shop where you shop, travel like you travel and enjoy the indulgences that you enjoy. NONE OF THAT MAKES YOU A BAD PERSON OR SAYS YOU SHOULDN'T CONTINUE TO ENJOY THOSE OPPORTUNITIES! My point is simply that not everyone is in the same situation and you seem more and more to either not understand that issue or not care about it.
 
When such attitudes can be seen by others it affects ones relationship with others which should be a business lesson for us all.

I think this is a fair point, but...

Where I guess I would disagree is that I'm not sure it is significantly more expensive to eat tasty and nutritious food than crappy food.  I can go out and buy decent hamburger meat, a tomato, onion and a whole grain bun and cook myself a much better hamburger than I'm going to get at McDonald's …or even (gasp!) In-N-Out.  It can be a lot more expensive, but does not have to be.  I realize that when a refer to "crappy food," whether in a general sense or when talking about some fast food joint that I don't like, it tends to be a little incendiary and overly glib, and that isn't really my intention.  (Okay, maybe being incendiary is a little bit on purpose from time to time…)

I guess it is all a matter of priorities, and I do think that in this country, our priorities when it comes to food are a little misaligned.  I grew up in a family where my dad was - and pretty much remains - an "eat to live" person, and I don't think my mom was significantly better.  Somehow, through a genetic accident, I ended up being a "live to eat" person, so I am passionate about food.  I'm not saying everyone has to be like me, and I do think there is a happy medium.  

If my comments somehow are coming across as patrician or condescending, then I'm not communicating very well.  I don't think that most people who know me would describe me that way (though I'm certainly capable of sarcasm and condescension, and that beast gets out of the cage more often than it should…).  For the most part, I'm just a happy guy, the descendant of Irish peasants, reveling in his good luck, taking none of it for granted, and always on the prowl for a really good meal, beer or wine.  And if somehow the image of me on my high horse is coming through, then it is entirely fair to knock me down, because that's not how I think of myself or want to be perceived.

One of the things that Dan Barber said in the story was that "true sustainability is about more than just deciding to cook with local ingredients or not allowing your child to have corn syrup. It's about cuisine that's evolved out of what the land is telling you it wants to grow."

Which led one MNB user to write:

That may be the most fatuous quote I've ever read!  Not only does the federal government tell us what to eat, but now we have to listen to "the land" as well?  I'm marketing-oriented enough to want to tell the land what I want it to grow.

I think there is a difference between a government mandate and being attuned to what the land is best able to grow at specific times.

I understand why some of what Barber says might strike people as being highfalutin or elitist, but I'm not sure that "fatuous" is the best word to describe his attitude. He seems like anything but foolish to me...

Can we all live and eat his way? Of course not. But he makes provocative points about sustainable agriculture and intelligent eating that are worth considering.




Regarding the mistakes made last week by both CNN and Fox News when they reported that the Supreme Court had overturned the Affordable Care Act, one MNB user wrote:

I think for Fox there was probably an element of wishful thinking in their “mistake” . . .

Y'think?




Responding to the story last week that talked about how retailers have to adapt to priorities and shopping habits of Millennials, MNB user Kathleen Whelan wrote:

I don’t see Millennials faithfully trudging up and down the aisles in their local supermarket on Friday night or Saturday afternoon.  It’s going to be really interesting when the Boomers are no longer around to keep the tradition going.

Agreed.




Chiming in on the ongoing conversation about what employees are paid, what is appropriate, and how such policies reflect on a company (like Apple), one MNB user wrote:

How can people expect to have it both ways?  This is what people seem to be saying:

I want to be paid as much as possible (as much as I think I’m worth).  But, I want to pay as little as possible for everything.  Don’t bother me with how those prices stay so low.  Underpaying young people because they “idolize” a brand.  Hiring illegal immigrants because they’ll work for next to nothing.  Buying things from other countries regardless of how they treat or pay their workers.

Or...

Let me take up the time of a sales consultant at the big box electronics store and then go home and order it online (or maybe I’ll just stand there and order it on my smart phone)  But, of course, I’ll crab about it when I go in the next time and there isn’t someone available immediately when I want help or the person who says she wants to help me is poorly trained and uniformed.

My gosh, Apple announces they are going to pay their people in a way that is a little more in line with the what those employees are generating in revenue and profits and folks worry it’s going to increase the costs of their precious techo-gadgets (the ones they are using in the scenario above) and Wall Street might punish Apple, too?  This is the beauty of capitalism?

I’m as guilty as the next person for buying things not “Made in the U.S.A.”  I do like sales and can’t say I really want to pay $9/lb. for my tomatoes.  I do buy some things online.  But, I am trying to do better.  I try to find American made options, when available (not always easy).  I buy from people - go to the store, avoid self-checkout and reward those who spend their time and expertise on me by spending my dollars with them.  Yes, I even go to the bank and post office. 

Maybe I’m a dinosaur. But, if I want to keep my job, I honestly believe I have to at least try to help others keep theirs.  And, I want those jobs in the U.S.

I think the big point here is a good one. And it actually sort of ties into one of the stories above, about new rules putting front-and-center the pay gap between CEOs and front line employees in public companies.

All these things are connected. What people are paid is directly connected to what they are able to spend. And I know there is a lot more involved - companies have to be profitable, have to be productive, and are under consistent pressure from investors to hit the numbers, beat the numbers, and do it again and again. But I think we sometimes lose sight of broader realities.

It is a good point.

Another MNB user wrote:

In reply to the reader who wrote:  "It is not any of your business what Apple pays. That is between them and the employee.  Only do gooders want to dictate to them.  I assume if someone is underpaid they can leave."

And what is wrong with "do-gooders."  Would you rather we all be "do-badders?"  Should we all just look after ourselves, grab what we can, take more than we give...and call it a day?

If we didn't have do-gooders, we wouldn't have people concerned about food safety, child welfare, humane treatment of animals, protecting the planet and yes -  concerned about the financial welfare of others.

Doing the simple math, if more people made a livable wage, there would be less need for government assistance programs and more people paying their taxes.  Even our most conservative friends can't argue with this logic!

Published on: July 2, 2012

Tiger Woods won the AT&T National at the storm-ravaged Congressional Country Club in Maryland this weekend, his 74th PGA Tour win that passes Jack Nicklaus and puts him second only to Sam Snead, who had 82 wins.

Published on: July 2, 2012

by Kevin Coupe

Fifty years ago today - July 2, 1962 - Sam Walton opened the first Walmart store in Rogers, Arkansas.

Today, it has well in excess of four thousand, and Walmart is the world's largest retailer, the world's largest private employer, and one of the most powerful companies in the history of the world. And, as befits such an enormous business and political powerhouse, it is also the subject of enormous and persistent debate, with questions raised about its treatment of suppliers and employees, its financial policies in foreign countries, and even its (some would say) cult-like culture.

But it is amazing. It all took less than 50 years to achieve.