retail news in context, analysis with attitude

Published on: December 13, 2012

This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

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

One of my favorite reads is Fast Company, a magazine and website that I think does a pretty solid job of keeping its eyes forward - looking around the corner at what's new, what's next and what's necessary.

In the current issue there is a piece by a fellow named Olof Schybergson from a design firm called Fjord that predicts some of the trends that we may be seeing in the new year.

There will be no paucity of such lists as we head toward the new year, but I thought that this essay made some extra points worth noting.

One is that people are in the process of developing what is called a "personal ecosystem," which basically means that they have all these gadgets - ranging from smartphones and tablet computers to things like the Nike FuelBand that provide and integrate personal living services to the user. Some of this sounds a little Star Trek, and may not see mass acceptance in 2013 ... but clearly we are going in that direction. Marketers need to figure out where they fit in that infrastructure.

At the same time, the article argues, the winners will be the ones who manage to keep all these services and gizmos simple, elegant and intuitive. My sense is that the phrase "learning curve" may become obsolete.

I think this one is very interesting - the notion that "access will supplant ownership." Zipcar is a perfect example of this ... building a business out of customers who want access, not ownership. One has to wonder how many other opportunities there are out there for businesses that can exploit this trend. Could it be that the old saw that "whoever dies with the most toys wins" is obsolete? Maybe that's one of the lessons learned, at least in some quarters, from all the economic turmoil of the last few years.

Finally, there is the concept that "I belong to me" - that most people are willing to put up with enormous amounts of data about their lives and habits and purchases being compiled ... but that they want to make sure that the information is used relevantly, discreetly, in a non-intrusive way. You may have the privilege of knowing about me, even if you don't really know me ... just make sure you don't abuse the privilege.

Tap into any one of these trends, or all of them, and you begin to establish a far more intimate relationship with the consumer. You don't just become relevant to their lives, but part of their lives. That's a huge difference, it has to do with being both efficient and effective, and it can be an enormous differential advantage for the marketer that plays it right.

That's what is on my mind this Thursday morning. As always, I'd like to hear what is on your mind.

Published on: December 13, 2012

by Kevin Coupe

Two Eye-Opening signs of the times...

• The Associated Press reports that The Sporting News is going online-only at the beginning of 2013. In a letter to readers this week, the magazine said that "neither our subscriber base nor the current advertising market for print would allow us to operate a profitable print business going forward."

The Sporting News has been published in print form - weekly, biweekly or monthly - since 1886.

• Pope Benedict XVI, with considerable fanfare, sent his first message on Twitter yesterday. The 85 year old pontiff of the Roman Catholic Church was brought a tablet computer at the end of a general audience, on which he pushed a button as an announced said, "And now, the Pope will tweet."

"Dear friends, I am pleased to get in touch with you through Twitter. Thank you for your generous response. I bless all of you from my heart," the tweet read.

Published on: December 13, 2012

The conservation advocacy group Oceana is out with a new study saying that "DNA tests of 142 seafood samples taken from New York grocery stores, restaurants and sushi venues showed that 39% were mislabeled as different species."

According to the Los Angeles Times story, "Earlier Oceana tests showed a 31% fraud rate in Miami, 48% in Boston and 55% in Los Angeles."

Furthermore, "Out of 81 retail outlets probed in New York - which included shops in Manhattan, Queens, Brooklyn, Staten Island, Commack, Scarsdale, Hudson and Edgewater, N.J. - 58 featured improperly tagged items, the group said. Small markets had a 40% fraud rate, it said, while 12% of items purchased at national chains were mislabeled. Each of the 16 sushi bars targeted served fish that didn’t match its menu description."

More than 90 percent of the seafood consumed in the US is imported, and Oceana says that ""with an increasingly complex and obscure seafood supply chain, plus lagging federal oversight and inspection of rising seafood imports, it is difficult to identify who along the supply chain perpetrates the fraud."

Published on: December 13, 2012

Online Media Daily reports on a new comScore analysis of online shopping during the first 32 days of the holiday shopping season, and the numbers are impressive. During that time:

• Online shoppers spent $21.4 billion, 14 percent more than during the same time a year ago.

• The increase was seen both in the number of people buying online (up nine percent to 128.7 million people) and the average spend-per-buyer (up five percent to $166).

• And, Online Media Daily writes, "The increase in spending per buyer came primarily from an increase in the number of transactions -- up 4% to 2.19 per buyer -- as opposed to the amount spent per transaction -- up only 1% to $76."

Published on: December 13, 2012

The Los Angeles Times reports that Bruce Smith, a former employee at Beef Products Inc. (BPI), has filed a lawsuit against ABC News, anchor Diane Sawyer, celebrity chef Jamie Oliver, and food blogger Bettina Siegel, among others, saying that their use of the term "pink slime" cost him his job.

According to the story, "The civil suit, filed this week in Dakota County District Court in Nebraska, seeks $70,000 in damages. Smith is also plugging a book he wrote, titled 'Pink Slime Ate My Job'."

“My former employer was maliciously and needlessly maligned and accused of producing a food product that did not exist -- a product derisively, repeatedly, and relentlessly called 'pink slime' by traditional TV broadcast and print media, in concert with social internet media critics, bloggers, politicians, and celebrity entertainers,” Smith said in a statement.

"Pink slime" was the term coined to describe lean finely textured beef, which was treated with ammonia to remove pathogens and included in ground beef sold by supermarkets and used by restaurants and school cafeterias. However, the lean finely textured beef was not specified on labels, and when reports of its existence became public, a number of organizations refused to sell it, which forced BPI to close plants and lay off some 750 people - including Smith, who was the company's senior counsel and director of environmental health and safety.

BPI filed a defamation suit against ABC News earlier this year.

Published on: December 13, 2012

AOL's Daily Finance has a story about how one customer engaged in "showrooming," and how the retailer has nobody to blame but itself.

Here's how the scenario unfolded:

"Last weekend, I decided to head down to my local Kmart (SHLD) to buy a new slow cooker so that I could make some chili. I found a Hamilton Beach model that looked good, but it was a bit on the pricey side (relatively speaking), with a sticker price of $34.49. So like any savvy shopper, I used one of the barcode-scanning apps on my smartphone (in this case, eBay's RedLaser) to see if I could find a lower price on, say, Walmart.com or Amazon.

"But the lowest price wasn't to be found on either site. Instead, I found it for just $17.99 -- nearly 50% lower than the price I was looking at in the store -- on Kmart's own website.

"I wasn't sure if Kmart had a policy of price-matching its own website, and I wasn't about to hold up a line of shoppers while I debated the point with a cashier. So I sat down at a nearby dining room display and bought the slow cooker from Kmart's mobile site, selecting the store-pickup option. An hour later, while running other errands in the neighborhood, I received an email alerting me that my order was ready, and returned to the store to retrieve it from the layaway counter."

Published on: December 13, 2012

Reuters reports that the European Union antitrust regulators have initiated an investigation into the private brand industry there, looking to determine if "retailers with own-brand products wield too much market power, to the detriment of suppliers of competing branded goods."

The regulators' concern, according to the story, is that "private label products had boosted retailers' bargaining power when dealing with suppliers ... This may result in unfair trading practices where individual suppliers are forced to accept unfavourable conditions for fear of losing a big - or sometimes even only - client."

Published on: December 13, 2012

The Sacramento Bee reports that University of California, Davis researchers have found that "bag-in-box wine is more vulnerable to warmer storage temperatures than bottled wine."

According to the story, "California chardonnay was analyzed in glass bottles, with corks from trees, synthetic corks or screw caps and two kinds of bag-in-box containers.

"Warmer temperatures made for changes in the wine - and bag-in-box wines changes were more pronounced, according to a university press release.

"Box wine stored at 68 and 104 degrees aged significantly faster than bottled wine. It became 'darker and developed sherry-like, dried fruit-like and vinegar-like attributes'."

To be fair, the report also says that boxed wine has some advantages: "More volume than the standard bottle, a corkscrew is not needed to open them and nothing breaks when dropped."

Published on: December 13, 2012

• The Wall Street Journal reports this morning that Walmart's India unit has received formal notice from the government there, informing it of an investigation into whether it violated India's foreign investment rules.

According to the story, "The investigation follows a complaint by a politician, M.P. Achuthan, who in September wrote to Prime Minister Manmohan Singh to say that a Wal-Mart unit in 2010 bought $100 million of convertible debentures in a company through which Bharti Enterprises controls the Easyday supermarket chain. Mr. Achuthan claimed that this was illegal, because the money was used by Bharti to fund investments in its supermarkets."

Until recently, India law restricted foreign companies to investing in joint ventures in the wholesale sector. A change in policy has meant that Walmart is preparing to open retail stores in India, but the investigation could slow that process.

• Reuters reports that Walmart is in talks to acquire an 80 percent stake in Turkish retailer Migros Ticaret AS from London-based private equity group BC Partners.

Published on: December 13, 2012

• MLive.com reports that Spartan Stores has opened two of its Valu Land small-format discount supermarkets in the Detroit area, and plans to open as many as six or eight more there in coming months.

According to the story, the stores are located in population-dense areas where customers are looking for a combination of low prices and convenience. However, the story also says that Spartan is being careful not to locate the stores in places where they could hurt its existing wholesale customers.

• USA Today has a piece about how the National Retail Federation (NRF) "puts a price tag of almost $9 billion a year on "return fraud," a crime where people exchange stolen goods for cash, use counterfeit receipts or bring back items that have already been worn or used.

"One category of the crime, the return of clothing and other items purchased for special occasions, even has its own name: 'wardrobing.'

"That issue affects about 65 percent of surveyed firms, according to a new report."

• The Financial Times reports that PepsiCo has a "whole range of products… in the pipeline that are value-added products that can be snacks made into beverages.” While CEO Indra Nooyi was not specific about these snack-based drinks while speaking at a beverage conference, she did use as an example an oatmeal drink sold in Brazil; among PepsiCo's brands, of course, is Quaker Oats.

“A way to grow the beverage business is to take foods and drinkify them,” Nooyi said.

Published on: December 13, 2012

• URM Stores Inc. has announced that Ray Sprinkle has been named to succeed the retiring Dean Sonnenberg as the company's president/CEO.

Sprinkle is a 30-year industry veteran who joined URM in 2003 as vice president of retail services, sales and procurement.

Published on: December 13, 2012

Got the following email about Supervalu's lawsuit designed to prevent its former executive, Leon Bergmann, from taking a job at Unified Grocers because of a non-compete document he signed:

A key detail of the Supervalu/Bergmann issue is the term... "Independent Business". The independent business side of Supervalu appears to be doing somewhat better than the corporate banners thanks to the independents who are supplied by the Supervalu wholesale regions. As the former president of independent business, Bergmann knows the services, marketing programs, pricing and other systems Supervalu offers to their affiliated independent retailers. In addition, it's likely he personally knows a lot of the Supervalu independent retailers in the western US.

Unified Grocers is a "retailer owned coop" and having someone with Bergmann's extensive knowledge of Supervalu wholesale and contacts with its "independent" retailers could give Unified a double competitive advantage. That being, United's retailers gaining information to better compete against their Supervalu independent competitors, plus giving Unified a foot in the door with Supervalu independents who could be new candidates for coop membership.




Yesterday it was announced that Clarence Gabriel has stepped down as president/CEO of Haggen Inc., the 28-store Washington State-based chain, to be replaced by a three-person "office of the president."

Which led MNB user Michael Griswold to write:

Setting up an Office of the President with 3 people running the company reminds me of a popular football adage – If you have 2 starting quarterbacks, you have no starting quarterback.

Pity the folks at Haggen if they begin playing their game the same way the New York Jets play theirs...




Regarding our piece about why Apple CEO Tim Cook decided to make some executive changes and out Jony Ive in charge of both software and hardware, MNB user Daniel McQuade wrote:

Jony Ive's statement was so great in the Job's book, it is perhaps the "simply made sense" reason why Cook made the move!

"Why do we assume that simple is good? Because with physical products, we have to feel we can dominate them. As you bring order to complexity, you find a way to make the product defer to you. Simplicity isn't just a visual style. It's not just minimalism or the absence of clutter. It involves digging through the depth of the complexity. To be truly simple, you have to go really deep. For example, to have no screws on something, you can end up having a product that is so convoluted and so complex. The better way is to go deeper with the simplicity, to understand everything about it and how it's manufactured. You have to deeply understand the essence of a product in order to be able to get rid of the parts that are not essential."




Responding to our short piece about how Walmart CEO Mike Duke says that more people were aware of the "fiscal cliff" after the presidential elections than beforehand, and that this awareness will impact at least some shopping trips, one MNB user wrote:

Come on man, CNBC just aired this and they didn’t get where Duke was getting all this facts? One wondered if they had the door greeters’ asking customers, but then remember they don’t have door greeters…  So we are to believe in the middle of the busiest time of the year, their out polling their customers on political issues.  Please…. This is a pre statement that while sales maybe ok, profits might not be..  poll that.




We continue have a lot of discussion here about the bribery scandal at Walmart, with some folks suggesting that it is just how business is done in some countries. I disagree with that, as well as with some of the absurd metaphors being drawn by some of these people, as did this MNB reader:

If in fact a person is arrested in a foreign country, they and their family have the US counsel to go to for help. Trying to bribe someone to obtain their freedom sounds good, but in the end just makes them part of the problem.  I just don’t get the excuse that “this is how things are done in foreign countries”.

Trust me, in the case of Walmart, there was a lot of discussions by  executives in this matter. This was not a one off, one person doing this. They knew the laws, in fact the General Counsel is involved in all of this.  While I’m sure Walmart thinking that by hiring a SVP, doing an “internal” investigation (again), saying that “new” safe guards are in place (like reading and knowing the law wasn’t good enough) will get them a hefty fine and slap on the wrist.  What I think they're overlooking is that Walmart is the biggest retailer with the biggest pockets in the world and a jury and Attorney General both know this and will send a loud message to all on “that the way it’s done”.




We had a piece yesterday about Amazon agreeing to collect sales taxes in the Commonwealth of Massachusetts beginning next fall, which prompted MNB user Steve Deveau to write:

Typical response by our Governor… "This agreement is a win for all sides, and I am pleased it promises to generate millions in long-term revenue for the Commonwealth".

I don’t feel that this is a “win” for me as I will be paying more for my Amazon purchases. As much as I agree that there needs to be a level playing field for all, it still has the feeling that the state, once again, is reaching into my pockets. The Governor obviously fails to see that part of the equation.

Or, just maybe he thinks that there are things that the government needs to pay for - because citizens demand them, even if they are not thrilled about paying for them - and that online retailers no longer ought to get a free ride since, they, in fact, use the roads and the airports and the public utilities that are supported by taxation.




On another subject - figuring out how to make best Buy competitive - MNB user Craig Espelien wrote:

I enjoyed the discussion around Best Buy and if they are becoming a transactional retailer.  Being from Minnesota, I remember their roots (Sound of Music) and how they were the first knowledge based chain of stereo stores – if you were an audiophile or aspired to be one, you could go to Best Buy and get information and see (and hear) options on what was best about stereo equipment.

As time moved forward, they expanded into other areas in an effort to capture more of the electronic dollar – and moved away from in depth knowledge of the equipment.

As I see it, for any retailer who desires to trade in knowledge, there is a line between variety and duplication – the duplication piece leads down the path of being a transactional retailer since the lowest common denominator – price – becomes the deciding factor.  If Best Buy (this is an example – you could use any specialty retailer as a proxy here) wants to stand out, they probably need to re focus on their knowledge base and how the consumer shops.  I may have shared this previously, but the consumer defines value in one of four ways – based on a price/quality relationship (an example from the auto industry is in parentheses for clarity):

• Value (Chevy)
• Mid-Price (GM)
• Premium (Buick)
• Luxury (Cadillac)

There are no purchases made outside of these parameters – but there is a value differentiator component once you are inside each one of these segments:
 
• Value = Price
• Value = Quantity
• Value = Quality
• Value = Innovation

As a category “expert”, Best Buy could embrace showrooming by displaying a single model (Example – one Blu-Ray player) for each one of the four consumer value propositions – based on their expertise and knowledge.  This item is always in stock for purchase that day (or, worst case – next day delivery). This could be accompanied by on-line offerings of other comparable items with delivery in a few days (more if the consumer wants it now) based on the 16 box matrix created by the four by four definition of value.  In this fashion, their expertise could be valued again and they would not compromise variety – but would avoid the in store duplication.

In my mind, this would work for many things – electronics, wine, cars (with a tweak or two for test driving the car you order), furniture, etc.  Not all things to all people – but the right things to the right value segment – with the flexibility of consumers moving up and down the value spectrum based on their needs.

I love an email that makes me smarter after I've finished reading it.




We had a piece the other day quoting a study that confirmed the significant and growing influence of the Internet and social media in the shopping decisions of U.S. moms. One passage from the study:

"Moms are 33% more likely to choose grocery stores offering cooking classes or cooking videos and 23% more likely to pick stores providing meal planner and recipe information. They’re also 16% more likely to say that they saw or heard promotional ads or communications from the store where they most recently went grocery shopping."

Which led one MNB user to write:

This article seems surreal...most moms work and don't have time to coupon or go to cooking classes. I guess that is just in your world, KC...

Not sure what world you think I live in. The woman who is the mother of my children and to whom I am related by marriage is a third grade teacher who does not have time to shop, much less cut coupons or take cooking classes.

But just because the study does not confirm or conform to my experience does not mean that I am going to dismiss it out of hand.

If I did, I would be guilty of epistemic closure. (Remember that phrase from an earlier MNB?)




Responding to the story the other day about how childhood obesity in some metropolitan areas seems to be on the decline, one MNB user wrote:

What is happening is that people are eating healthier these days and it is being reflected in their children. Physical activity declined in this country for decades with no mandatory exercise in schools anymore etc...which caused a population who eat fast foods, process foods, etc..and no way to burn off any calories...to gain weight. I think todays parents, and adults for that matter, understand the consequences of living an unhealthy lifestyle. Banning and taxing things does nothing but ban and tax things.




One MNB user had a thought about Wegmans' decision to shut down the Facebook page operated by its Massachusetts store (it was only meant to be temporary, got too much to run, and Wegmans has a corporate presence on Twitter, not Facebook):

How long before their customers set up their own Wegmans Facebook page now the control of the Wegmans brand is in the hands of the customer. If you don’t manage your brand, others will. It’s kind of like closing on your busiest day because too many customers come in to shop.




Regarding the silver Starbucks card that costs $450, provides $400 worth of value, and now is being resold on the Internet for as much as three times that, MNB user George Denman wrote:

If I were Starbucks, I am not sure that I would want the publicity that this gift card is generating. It seems to be very elitist at best.

Agreed.

On the same subject, one MNB user wrote:

Although probably not much more than a footnote for Starbuck’s accounting, selling 5,000 steel gift cards w/$400 of future liability on each of them is a nice little $2,000,000 accrued liability against the 2012 income tax form.  $2,000,000 in the bank (ignoring the $50 for the steel), $2,000,000 to throw against current income, not bad.

I knew I should have taken some sort of accounting class, because I have no real understanding of what you are talking about. But I'll take your word for it. (Fact is, the last math class I took was in 1971. I'm not even sure we used the same numbers then...)




On the subject of how a decline in the birth rate will have an impact on the US, MNB user Mark Raddant wrote:

(I had a conversation about this with my oldest son, currently working for a joint operation of Habitat and All hands in Cagayan de Oro in the Philippines, so what follows is not just my thought, but our discussion synopsized.)

The global economy, even in socialized countries, is based on growth, and that growth has been based on population growth to fuel it.  The globe is pretty near the saturation point population-wise, so a new model for some kind of new economy is needed.  The only remaining way to continue to grow is to enhance the living level of those lower on the scale.  The problem with that is that those on the top of the scale like to view the differences between them and others.

Another problem is there are a number of people who cannot or will not be able to contribute in a way to “earn” the material growth they need to earn to contribute to growth.  So to pull this off, we need to redefine a lot of the ways we define worth, value, work, growth in an economy and in a society.

Time to get started...




The other day I referenced a "Daily Show" segment in which Jon Stewart talked about the fiscal cliff, which led one MNB user to write:

Wow.  Our college freshman son came home from his Sociology course on Thursday (he lives at home with us and commutes to his classes at Western Illinois University-Quad Cities) and pulled out his laptop…..he proceeded to show us the excerpt from the Daily Show that you referred to.   His Sociology professor had the entire class watch the Jon Stewart clip to illustrate a point that she was trying to make about resolving the issue of the “fiscal cliff”.   I have to admit that we found it rather humorous and it did a great job of explaining how ridiculous this entire mess is.

His mom and I then proceeded to launch into the same discussion that you have had numerous times on your blog-----how more and more Millenials and Gen Y members (and others) get their news from “The Daily Show” or “The Colbert Report” rather than the network-based news we watch daily.   It’s just further evidence of the ways we will need to adapt to working with members of the younger generations as they move into our work force, knowing the ways they view our world are different from ours.

My daughter was working on a paper about political dysfunction for her freshman political science course, and she was jazzed whenI told her about the Jon Stewart piece and instantly added it to her paper. For my part, I was sort of appalled that the teacher was not making things such as "The Daily Show" required viewing ... not only would it be entertaining, but would make the subject a lot more accessible. So kudos to your son's Sociology teacher.