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    Published on: June 18, 2013

    by Michael Sansolo

    Customer loyalty is a strange thing. It’s enduring and yet fragile. It’s simple and yet stunningly complex. In many ways it can be explained the way US Supreme Court Justice Potter Stewart once explained his view of obscenity: “I know it when I see it.”

    Although with many businesses Stewart’s comment gets turned on its head. We know customer loyalty only when it is lost.

    Currently, one of my own most enduring areas of customer loyalty is being tested. Now granted, this will not be a perfect example because it comes from sports and it’s easy to argue that sports metaphors are both overused and less than useful. The rules of competition in sports are so different that many lessons in winning and losing can be oversimplified. (I write this knowing this is my second consecutive column referencing sports. Forgive me.)

    I’d argue customer loyalty is an area of rich lessons. Because while sports fans express their passions in ways that few loyal customers ever will, their loyalty can be tested in very understandable and relatable ways.

    Even casual readers of MNB know that Kevin and I share a major affliction: we are fans of the New York Mets. Our team has had some magical years and incredible triumphs. We’ve had great players, great memories and more. But being a Mets’ fan is a labor of love. The team regularly struggles and is stuck competing in a city with the hated New York Yankees, possibly the most successful sports franchise of all time.

    Yet we endure we because the word fans itself is simply shorthand for fanatics.

    So what does all of this have to do with business? I think that’s actually pretty simple. Like it or not, customers can become fans or loyalists, though to a lesser extent. They get used to our stores, our products and services. Over time they learn the good and bad, such as which cashiers are quicker or nicer, which departments are best.

    In many ways they find a way to stay loyal, which is why it can be so tough to win a customer away to a new business. It can take a lot to lose them.

    This year, the Mets are finding a way to lose me. It’s more than their incredible incompetence of the field. I’ve been a Mets fan since the team's beginnings and strangely enough, I’ve learned to enjoy the incompetence - something I wouldn’t say about many business relationships.

    What’s gets me this year is an apparent indifference. The team’s troubles in many ways are traced directly to ownership's financial woes, brought on from an ill-fated relationship with the now incarcerated financier Bernie Madoff. As the owners look to recover their footing, the main goal seems to be fielding the least expensive team possible.

    In short, it seems to me - and a lot of other fans - as if the franchise is simply not trying and that is galling. In fact, it’s to the point that my son, a second-generation Mets fan, is urging us to stray to the exciting and geographically closer Baltimore Orioles.

    But here’s one last place where the comparison gets tested. Although we may stray with our emotions and our dollars, we can easily return when we see signs of improvement by the Mets because it is easy to do so. We can read about the moves the Mets are making, follow signs of new player acquisitions and get a strong sense of improvement.

    Lost customers for stores or products don’t get easy clues like that. They don’t get box scores alerting them to new efforts and rejuvenation.

    When they leave, it’s very hard to get them back because the bad taste of incompetence and indifference is hard to lose.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: June 18, 2013

    by Kevin Coupe

    We've often written here on MNB about how Netflix - which used to just be in the business of mailing DVDs of other companies' products to its consumers - increasingly looking to compete with and differentiate itself from the likes of Redbox, HBO, Showtime, Apple's iTune Store, and virtually every cable and broadcast network by developing its own proprietary content.

    The first and most prominent examples - "House of Cards" and the revival of "Arrested Development," which were only available to Netflix streaming customers.

    Well, this strategic turn continues ... and Netflix reportedly has signed a multi-year contract with DreamWorks Animation (producers of such movies as Shrek and Kung Fu Panda) that will give it more than 300 hours of original programming.

    Programming that, as it happens, will appeal mostly to children who, as they grow up, will have absolutely no affinity for traditional television as opposed to other methods of obtaining content. It won't matter to them - and in fact, it probably does not matter to them now - where content comes from, or what device it happens to be available. They'll just want the content they want, and they'll access whatever systems have whatever it is what they want.

    That's an Eye Opener for every business, because this attitude will, I think, apply to everything they want. The next generation of consumers will be format agnostic, and will focus only on content, whether it is food, a movie, a news story, or shopping for clothes or shoes.

    In many ways, I think, this Netflix story is not about a technology company making a content play.

    It really is about a company making a generational play.

    It is an Eye-Opener.
    KC's View:

    Published on: June 18, 2013

    Reuters has a story about how, as Amazon Fresh expands to Los Angeles and beyond, it is being influenced by the Webvan experience. Webvan, as some will remember, was the e-grocery company that blew through $800 million in venture capital before flaming out - one of the more spectacular disasters of the dot-com era.

    "Twelve years later," the story says, "Webvan is rising from the dead - in the form of an online grocery business called AmazonFresh. Four key Inc executives - Doug Herrington, Peter Ham, Mick Mountz and Mark Mastandrea - are former Webvan officials who have spent years analyzing and fixing the problems that led to the start-up's demise.

    Here's how the story frames the issue:

    "Former Amazon and Webvan officials say Amazon drew three big lessons from the Webvan debacle: expand slowly, limit delivery to areas with a high concentration of potential customers, and focus relentlessly on warehouse efficiency.

    "The opportunity for Amazon is huge. The grocery business in the United States generated $568 billion in retail sales last year, with online accounting for less than1 percent, and it's among the last major retail sectors that the online giant has yet to tackle.

    "But the risks are large as well. Groceries are a notoriously low-margin business, and the aggressive expansion of discounters like Walmart has made the business even more cutthroat than it was in Webvan's day.

    "And competition in the online grocery business is heating up. FreshDirect and Peapod have been plugging away for years, while traditional grocery chains like Safeway also do online ordering and delivery. Walmart is testing its own fast delivery service in some markets in the United States now."
    KC's View:
    My friend Tom Furphy, who helped create both Amazon's CPG business and the Amazon Fresh model before evolving into a venture capitalist, says that "it was valuable to have the Webvan DNA at the table.  It was the combination of that DNA, with that of Amazon, Wegmans, Homegrocer and others that really enabled us to get the business off the ground.  Now it’s all Amazon DNA that is scaling it - enabling massive rollout on top of repeatable processes.  I’m sure they’re learning a lot in LA that will put into practice in future markets."

    In fact, Amazon would be guilty of retail malpractice if it didn't bring these folks and attitudes to the table. They know where the potholes are and where the land mines are buried ... as well as having a better sense of where the treasure can be found.

    Published on: June 18, 2013

    The Wall Street Journal this morning reports that a new study from the National University of Singapore suggests that "people who increased their consumption of red meat during a four-year period were more likely to develop Type 2 diabetes in a subsequent four-year period, according to an analysis involving about 150,000 people."

    The story goes like this:

    "While prior studies have also found a link between red-meat consumption and the development of Type 2 diabetes, the new analysis is believed to be the first time researchers have tracked changes in red-meat consumption over time with the risk of developing Type 2 diabetes ... Broadly, the study showed that, compared with a group of people who had no change in red-meat intake, increasing red-meat consumption by more than a half-serving per day over a four-year period was associated with a 48% increase in the risk of developing Type 2 diabetes during the next four years.

    "However, reducing red-meat consumption by the same amount during the same time period didn't cut the risk of diabetes during the next four years. It did reduce the risk by 14% over a longer time period, though. The changes were independent of other factors such as body weight and overall diet quality."
    KC's View:
    We've actually had kind of as remarkable shift in our household. Because I'm in my late fifties, I've been trying to eat healthier. (Stories like this just make the movement easier.) Red meat prices are going up. And suddenly, my kids - who not long ago had no interest in eating fish - have started liking things like salmon and swordfish. And so, our diet has started to evolve. We're nowhere near becoming pescetarians, but I have to admit that red meat is becoming less critical to our diets. And I wonder how many other families are making similar shifts, for all sorts of reasons.

    Published on: June 18, 2013

    The Dallas Business Journal reports that "WinCo Foods is expecting to add about 400 jobs in North Texas when it opens its first two Texas supermarkets within the year and a half ... The two stores will be between 92,000 and 97,000 square feet on 12 acres in McKinney, near the former University Drive Courts Facility, and on 12 acres near Sycamore School and Crowley roads in Fort Worth. The company plans its future sites to be smaller, ranging between 85,000 to 90,000 square feet."

    And there will be future stores. A WinCo spokesman says that the company has identified a number of additional sites that it is working on obtaining.

    According to the story, "The Idaho-based grocer is currently planning how it will recruit employees, and expects to begin the hiring process about two months before the stores open. It will transfer a small management team from its other locations to head up the North Texas locations."
    KC's View:
    It is this last paragraph that should most concern the competition. Because WinCo has great people in its system, and if they're moving to Dallas to help run those stores, it means they will hit the ground running.

    Published on: June 18, 2013

    The Boston Globe has a story saying that food companies, ranging from CPG manufacturers to fast food restaurants, have made imperfection a goal, believing that if they want to create the appearance of being artisan/rustic/local, they need to make sure products look less regimented and, well, perfect.

    Here's how the story frames the approach:

    "Americans still love their fast food and packaged snacks, but they’re increasingly turning their noses up at foods that look overly processed. Home-cooked meals - or ones that at least look like they were homemade - are seen as more wholesome and authentic.

    "The result is that companies are tossing out the identical shapes and drab colors that scream of factory conveyor belts. There’s no way to measure exactly how much food makers are investing to make their products look more natural or fresh. But adaptation is seen as necessary for fueling steady growth."
    KC's View:
    I think this only works to a point. I don't care how rough the corners are on a Domino's pizza, or how often they refer to it being "artisan." It still is what it is.

    Published on: June 18, 2013

    • The San Francisco Business Times has a piece about Instacart, a grocery delivery service there that "offers shoppers the option of buying groceries from Safeway, Trader Joe’s, Whole Foods and other shops online with delivery scheduled in short one or two-hour time window. It does this by employing personal shoppers to do the pickup and delivery of groceries, while it sits back and takes a cut."

    Now, Instacart is promoting itself as being able to sell "a variety of national-brand grocery items at prices much lower than what can be found in stores," though founder Apoorva Mehta refuses to disclose where he is getting those items.

    Mehta does say that "the company has been growing steadily within the seven months since its launch, with sales increasing at an average rate of 30 percent month over month."
    KC's View:
    He may not want to say where those cheaper products are coming from, but that's like waving a red flag in front of a bull ... and of dubious competitive value in the long run, because it doesn't seem sustainable.

    Published on: June 18, 2013

    ABC News reports that a McDonald's franchisee is being sued by a former employee of a Pennsylvania store, who says that "she was required to receive her wages through a debit card that charged fees, resulting in some hourly employees receiving less than minimum wage." The woman says that "she and other workers were paid through a JPMorgan Chase Payroll Card, which has a $1.50 fee for ATM withdrawals, a $10 inactivity fee after 90 days, and a 75 cent online payment fee per transaction and other fees."

    Lawyers in the case are hoping to have it classified as a class action. Attorneys for the defendants have not commented, saying they have not yet seen the complaint.
    KC's View:
    We haven't heard both sides of the case, but on the face of it, this hardly seems fair.

    Published on: June 18, 2013

    Accenture is out with a new study saying that while "consumer packaged goods (CPG) companies have invested heavily in technology platforms to improve their trade promotion performance," the fact remains that "many lack the talent or business processes to capitalize on these investments."

    The study, "based on interviews with 350 senior executives at large CPG companies," shows that "61 percent believe their technology investments have produced a wealth of data that can help improve their trade promotion performance but they lack the talent needed to put the data to its most effective use and boost the return on their analytics investment. In fact, one in five executives – 21 percent – admit that they trust their intuition more than the available data to make trade promotion-related decisions."

    Also according to the study, "71 percent of CPG companies have increased their trade promotion spending in response to the economic downturn ... Many executives participating in the study believe the additional investment has delivered additional value: 27 percent believe their return on investment (ROI) has increased by more than a quarter since the downturn, while 16 percent believe that their ROI has declined."
    KC's View:

    Published on: June 18, 2013

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

    • The Medfield Press, reports that Roche Bros. will open a small format store there, its first, probably sometime next year. No word yet on what the store will be called or what elements will be included, but the unit is expected to be convenience-driven.

    While there were a number of proposals for the property, Greg Salvatore of Salvatore Capital Partners, which owns the location, said, "We made the decision to go with Roche Bros, because, number one, we thought they would be the best choice to create vibrancy for the downtown and create an activity that could go into the evening hours."

    Just a quick note here ... the Medfield Press has the coolest name for its website - "Wicked Local." I just thought that this kind of ingenuity is worth noting.

    • The Rochester Democrat & Chronicle reports that Wegmans has opened its Amore Italian Restaurant, adjacent to its East Avenue store in Rochester (though it is "envisioned" as a separate operation).

    The story describes the restaurant as "a sitdown, 85-seat restaurant along the upscale lines of Wegmans’ Next Door Bar & Grill on Monroe Avenue in Pittsford. It is immediately adjacent to, and linked by indoor access, to the new 87,000-square-foot market. The grocery and pharmacy opened on May 19 to replace the outmoded and much smaller former East Avenue store."

    • The Associated Press reports that SodaStream, which manufactures a home machine that allows consumers to turn tap water into carbonated water and then make their own soft drinks by adding concentrated flavor packets, has struck a deal with KitchenAid, which will now manufacture and market an upscale version of the technology.

    Also on the SodaStream front, PepsiCo reportedly has denied that it is in negotiations to acquire the company.

    • The New York Times reports that Mayor Michael Bloomberg, who has made lifestyle issues - banning smoking from most public areas, encouraging bicycle riding, trying to reduce the size of sugary soft drinks - a hallmark of his three terms in office, now is making food composting a priority.

    According to the story, "Recent pilot programs in the city ... have shown an unexpectedly high level of participation, officials said. As a result, the Bloomberg administration is rolling out an ambitious plan to begin collecting food scraps across the city, according to Caswell F. Holloway IV, a deputy mayor.

    "The administration plans to announce shortly that it is hiring a composting plant to handle 100,000 tons of food scraps a year. That amount would represent about 10 percent of the city’s residential food waste."
    KC's View:

    Published on: June 18, 2013

    ...will return.
    KC's View:

    Published on: June 18, 2013

    Eleven Tunisian companies introduced their bottled olive oils at the recent Summer Fancy Food Show in NYC.  Tunisia is the most important olive-growing country of the southern Mediterranean region, producing some of the finest extra virgin olive oils in the world. Tunisia is also known for its organic varieties of olive oils, a growing segment within the olive oil category.

    The Tunisian olive oil companies plan to expand their presence in the US market in the coming year. Currently, Tunisian olive oils can be found on the shelves of hundreds of US specialty food stores. Now you can promote their branded oils in supermarkets and other food outlets. Tunisian olive oils are available in glass and tin for retailers.

    For more information about Tunisian olive oil, click here.

    KC's View: