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: May 15, 2013

    by Kate McMahon

    "Kate's Take" is brought to you by Wholesome Sweeteners, Making The World a Sweeter Place.

    One of the real advantages that social media offers marketers is the ability to listen to shoppers.  Sure, there also is the opportunity to reply to what people are saying and even to initiate conversations about products, services or even larger issues.

    But the ability to listen to what people are saying, unvarnished and in real time, is enormous.

    To make it work and, indeed, to seem authentic, you have to actually be interested in what other people are saying.

    By that standard, JC Penney continues to fail the test. The struggling retailer’s comeback bid took a new turn this week. It went from an apologetic “we’re listening” campaign two weeks ago to sudden gratitude.

    “They’re two simple words. Thank you. We truly appreciate all of our fans” the company shouted out on Facebook, Twitter and in a new TV and YouTube commercial (as reported here on MNB yesterday).

    Sorry, JCP, but I think it’s a little too soon to break out the celebratory champagne, even amid reports about store traffic increasing. After all, you are digging out of a financial sinkhole with a teaspoon. And there’s that pesky issue of a generational divide that got you in this fix.

    JC Penney booted former CEO Ron Johnson last month when it was clear his radical approach to revitalize JC Penney (rebranded as "jcp") was failing. It took to social media and the airwaves to admit it erred in eliminating coupons and popular brands and asked shoppers to share their opinions and come back to the store.

    Share they did.

    One #jcpListens post on its Facebook page drew a whopping 19,000-plus comments and 56,000 “likes.” The JCP social media team was in overdrive responding to comments from traditional customers who missed their coupons and sales and did not buy into Johnson’s “fair and square” pricing and hipper clothes.

    These posts were typical:

    • “Before you destroy a long-time generational store, you need to put it BACK where it was!”

    • “Our marriage can work if you bring back the coupons.”

    To its credit, JCP did move quickly in bringing back its traditional St. John’s Bay sportswear for women. A company spokeswoman told MNB “what customers missed most are the promotions.”

    But here’s the deal – middle-aged customers buying $14.99 cotton T-shirts are not going to save this chain. Nor will sending mail-order catalogs as some requested.

    Younger buyers embraced the pricing and product changes, and said so on Facebook:

    Wrote one: “I loved the new JCP. And I was your new target market. You finally brought in youthful clothes that fit and I never had to remember to bring in a coupon.”

    And another: “Coupons are for old people.”

    In my mind, this response nailed it: “Your recently-fired CEO was going in the right direction, but you all can't reinvent the wheel every 18 months and expect overnight turnaround. My 20 something (clotheshorse) daughter was just saying that you had some great things at great prices, and then you trashed the concept. As long as you are pandering to long-time loyal customers (that is, people in their ‘70s) you don't have a prayer.”

    And there you have it. JC Penney was broken, Ron Johnson attempted a miracle comeback, stumbled and fell short, and now the old management is back to restore the old store. But to what?

    The travails of JC Penney will be long discussed, probably will be the subject of countless case studies and books, and will continue to offer retailers cautionary lessons about the most effective and efficient ways for a giant retailer to change direction.

    But for the moment, the adventure is far from over.  JC Penney has much work to do to repair relationships with shoppers, figure out what customers really want as opposed to what they say they want, and plot both strategies and tactics that will make it a relevant 21st century retailer.

    The best first step, if you ask me?

    Listen.  Really.

    Comments? Send me an email at .
    KC's View:

    Published on: May 15, 2013

    by Kevin Coupe

    Thanks to MNB user Michael Schillo, who pointed out this week after reading all about Starbucks' new food focus - being driven by Pascal Rigo, founder of San Francisco-based bakery chain La Boulange, which it acquired last year for $100 million - that this is not the coffee chain's first time at this particular rodeo.

    "You should find the 'proclamation' Schultz had when he came back into power ... and vowed to get rid of food 'since it smelled bad' or something like that," he wrote.

    Good point.

    In fact, the January 31, 2008 edition of the New York Times did have the following quote from CEO Howard Schultz: "In short, the scent of the warm sandwiches interferes with the coffee aroma in our stores."

    Of course, this week the Seattle Times reported that Rigo "is on track to improve not just the pastries at 8,000 U.S. Starbucks, but also — within two years — their sandwiches, salads and other food," and that his goal is to grow the current 19 percent of sales that food generates for the retailer.

    One of the things that Schultz talked about back in 2008 was the need for the company to spend more time listening to customers and less time listening to Wall Street. But, of course, the main reason that Schultz returned to Starbucks as CEO was because the recession was wreaking havoc on a business built on $4 lattes, causing the stock price to decline, and he felt that something needed to be done to restore Wall Street's faith in the company. And so Schultz, like MacArthur, returned. (He replaced Jim Donald, a highly thought of CEO who has been much lauded in this space.)

    Since then, the economy has improved. Starbucks' results have improved. And so a greater focus on sandwiches and other foods - even those that may distract from the coffee - is once again on the agenda. If, indeed, it ever left.

    Not that any of this is a bad thing. Or incorrect strategy.

    But thanks to Michael Schillo for the reality check. It was an Eye-Opener.
    KC's View:

    Published on: May 15, 2013

    Time magazine has a piece about how a group of trade associations last week led in the celebration of what was called "Imports Work Week," which claimed that "a cheap, robust imports marketplace not only helps American workers and families, but local farmers, manufacturers, and small businesses as well."

    The argument is that imports lower prices on items that range from television sets (down 87 percent in 10 years) to computers (down 75 percent), and toys (down 43 percent) to dishes and flatware (down 33 percent).

    The study also maintains that a robust import market improves the US standard of living by making cheap goods available, and creates 16 million jobs that are part of the import infrastructure, and concludes that "American consumers should, in fact, feel good about buying apparel and other goods imported from overseas."

    Mark Bloome, an activist who supports the buy American movement, tells Time that the report is myopic: "When Americans buy goods made in China, they are supporting the Chinese government and its military build-up, including potential cyber-warfare development which is stealing billions of dollars from USA companies right now. There is an old expression in retail: buy now pay later. When we buy Chinese products now, we pay for their development that may cost us more in the long run. The few dollars in savings now are minimal compared to what we will pay later in the costs our government has to incur to stop China’s manufacturing war machine."
    KC's View:
    The reality is that we do live in a global environment, in which both domestic and imported products are supposed to be able to compete fairly.

    But it strikes me that there is a certain defensiveness to this proclaimed celebration, promoted by organizations that have a financial stake in making sure that in the US, imports are not demonized, especially at a time when questions are being raised about the conditions under which some or many of these imports are being manufactured.

    Hard for me to believe that the US economy would actually suffer if imports became a smaller percentage of what people buy.

    Now, there may not be as many cheap products to buy. And people might actually begin to get a sense of the broader implications of rampant consumerism and what things cost.

    But to argue for the status quo is, I think, to suggest that the US would not be better off with a broader manufacturing base to support its innovation and service economies. Which just does not make any sense to me.

    Published on: May 15, 2013

    Reuters reports that Walmart has said that it will not sign onto an fire and safety agreement drafted by labor groups and non-governmental organizations Europe's IndustriALL and UNI Global Union that would have raised standards in Bangladesh in the wake of the collapse last month of the Rana Plaza factory complex, which killed more than 1,100 people.

    The reason: Walmart believes that its own plans - to "conduct in-depth safety inspections at all 279 Bangladesh factories with which it works and publicly release the names and inspection information" - will get faster results. The story also notes that "Wal-Mart began more rigorous inspections earlier this year after more than 110 people were killed in a November 2012 fire in a factory that was producing goods for Wal-Mart and other retailers."

    "The company, like a number of other retailers, is not in a position to sign the IndustriALL accord at this time," Wal-Mart said in a statement. "While we agree with much of the proposal, the IndustriALL plan also introduces requirements, including governance and dispute resolution mechanisms, on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals."
    KC's View:
    I have no idea whether this is a good idea or not. But it seems pretty obvious to me that Walmart doesn't want to sign onto any process over which it has no control - not for nefarious reasons, but because especially in situations like these, Walmart wants to be careful about both culpability and exposure.

    Published on: May 15, 2013

    Here at MNB, we do love unusual promotions.

    And so, we want to draw your attention to a new "Food On A Stick" promotion at Trader Joe's.

    "We’re looking for inspired Food On A Stick Recipes to feature on our website for the Trader Joe’s community to devour," the company says in its email to customers. "From appetizers to desserts to all-in-one meals—the potential for Highly Innovative Ingredient Pairing is endless!"

    Recipes can use a maximum of six ingredients bought at Trader Joe's - not including the actual stick - and must take no more than 20 minutes to prepare, though the cooking.freezing/grilling time is not included. Alcohol is banned, the company says, so that kids can enter.
    KC's View:
    I just think this is clever.

    I'll let you know what wins.

    Published on: May 15, 2013

    Reuters reports that Amazon is acquiring "Liquavista NV from Samsung Electronics Co. to help the world's largest Internet retailer develop new displays for mobile devices ... Liquavista focuses on a technology called electrowetting, which it says makes displays clearer in all lighting conditions and can show video without using much power."

    Terms of the deal were not disclosed.

    • The Wall Street Journal reports that " Inc. employees staged their first walkout in Germany Tuesday in a dispute over pay ... About 850 early-shift staff at the Internet retailer's Bad Hersfeld and Leipzig centers went on strike Tuesday ... The union is calling for Amazon's 9,000 employees in Germany to be paid in line with industry-wide salary agreements, rather than on Amazon's own pay scale."

    Amazon has eight fulfillment centers in Germany.
    KC's View:
    One can only imagine what Amazon could so with Liquavista's technology ... much less something called electrowetting (which sounds like some sort of futuristic mode of torture ... maybe they'll be testing it on the German employees...).

    Published on: May 15, 2013

    USA Today reports on the wave of protests staged by fast food workers in various parts of the country as they seek higher pay and look to stop employers from using more part-timers as a way of not having to pay for health insurance under new federal mandates.

    Here's how the paper frames the story:

    "Front-line, limited-service restaurant workers, a category that includes fast-food employees, earned a nationwide average $9.05 an hour in March, up 2.7% the past three years, according to the Bureau of Labor Statistics. By contrast, the pay of all private-sector non-management employees is up 5.7% in that period.

    "Adjusting for inflation, fast-food wages have fallen 36 cents an hour since 2010, even as the industry has raked in record profits.

    "Saying they can't live on such meager pay, the workers are demanding $15 an hour and the right to form unions without fear of reprisal. Although all U.S. workers legally have that freedom, many who try to organize are fired or punished with reduced hours, says Dorian Warren, an associate professor of political science and public affairs at Columbia University."
    KC's View:

    Published on: May 15, 2013

    ...with brief, occasional, italicized and sometimes gratuitous commentary...

    • The Florida Times-Union reports that Bi-Lo Holding has decided to contract out all buying, warehousing and transportation functions for its Winn-Dixie chain to C&S Wholesale Grocers, which has been handling those duties for the Bi-Lo stores since 2005.

    The announcement says that all Winn-Dixie employees engaged in those functions will become employees of C&S.

    Reuters reports that pork producer Smithfield Foods is saying that "it will soon raise half of its hogs on feed that does not contain the additive ractopamine, a lean muscle promoting drug that has been banned in China and Russia."

    According to the story, "China, the world's largest pork consumer and the third largest market for U.S. pork with sales of over $800 million last year, wants pork from the United States to be verified by a third party from March 1 to be free of ractopamine, an additive that promotes lean muscle growth ... Russia, which imported $550 million worth of U.S. beef, pork and turkey last year, has banned imports of meat from the United States due to the presence of the food additive."

    Advertising Age reports that "Bonnier Corp. has sold Parenting, Baby Talk and Conceive magazines to Meredith Corp., which will close them and begin sending their subscribers its own parenting and baby magazines instead, the companies said on Tuesday." Terms of the deal were not disclosed.

    They can rationalize this any way they want. The simple fact is that over the coming years, we're going to see a lot of print magazines either closing or being absorbed into other publications, as the digitization of media continues to have an impact.
    KC's View:

    Published on: May 15, 2013

    • The Kroger Co. announced that Scott M. Henderson, the company's vice president and treasurer, has been named Vice President of Pension Investment and Strategy, and Todd A. Foley, assistant corporate controller, has been named Vice President and Treasurer.

    • The National Grocers Association (NGA) announced the appointment of Brian P. Lynch as Vice President, Industry Relations. Prior to joining NGA, he served as Senior Director, Business & Industry Development for the Grocery Manufacturers Association (GMA).
    KC's View: