retail 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: August 8, 2013

    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.

    Brand equity is something to be cherished. Nurtured. Attended to at every possible moment. It seems to me that every marketing, merchandising and even personnel decision ought to be made by using a filter that says, "How does this affect our brand and what we mean to our customer?"

    Violate the meaning of your brand, and you run the risk of disenfranchising your customers. Even your best customers. That's never a good idea.

    There have been a few stories over the past week or so that have gotten me thinking about this...

    For example, there was a story in the Washington Post about Weight Watchers, and how it is facing economic difficulties because in the Internet age, "there are a bunch of new ways to get free the stuff for which they used to charge." (Go figure - that ends up being something that the newly acquired Washington Post knows something about...)

    The thing hurting Weight Watchers is the fact that much of its brand equity and business are built on the notion of going to meetings for support. The Post describes it this way: "Weight Watchers offers something most other diet programs don’t: Weekly meetings with a community of people who provide encouragement and support, like Alcoholics Anonymous for overeaters. You pay to attend and get weighed on a weekly basis, and once you attain your weight goal, you don’t have to pay again unless you gain it back."

    But now, social networking makes it possible to create your own support system - no formal meetings, no weigh-ins, and no fees. it remains to be seen whether this will be as effective as what Weight Watchers has to offer, but the company now is faced with a challenge - how to sustain the business model in a world that has changed, and do so without hurting brand equity.

    Never an easy thing to accomplish.

    Or, take JetBlue, which after years of being successful as a discount airline, this week announced that it is adding a premium section to some of its planes, offering a walled-off section that will feature lie-flat beds, hot meals and free booze. JetBlue wants to get some of the first class and business class money that is going to other airlines, and thinks it can do this while maintaining what has always been a discount image.

    I don't know about that. I think JetBlue is going to have to step carefully as it goes about marketing these changes. Because if people who always perceived that JetBlue was an egalitarian kind of airline suddenly think that approach has been compromised in search of higher fares and a better class of customer, the whole brand image could be soiled.

    Never an easy thing to accomplish.

    Finally, the Wall Street Journal the other day had a piece about the Apple Store, which has been looking for a leader since John Browett departed last October; Browett had only been there a few months, having been brought in to replace Ron Johnson, who went off to his ill-fated and sort tenure at JC Penney, in April 2012.

    The problem, the story says, is that Ron Johnson focused on constantly improving and expanding customer services offered by Apple Stores. When Browett came in, he started cutting costs ... and the reaction to that explains why he got cut. But the headhunting firm that was hired to find a replacement hasn't been able to come up with the right person. (They've certainly been turning over every rock. They even called me six months ago thinking that I could give them some names. Which I did. Maybe it is time to get a new headhunter.)

    The problem for Apple is that without retail leadership and innovation, Apple Stores simply may not be seen as the gold standard that they once were. They're still better than most, but "better than most" simply would not have cut it during the Steve Jobs and Ron Johnson days.

    When I was out in Portland, I went to the new Microsoft Store there, which is big and beautiful and on a great corner of downtown. The Apple Store, on the other hand, is a small unit on the bottom floor of a downtown mall. Now, to be fair, that big, beautiful Microsoft Store had three customers in it when I was there, and five minutes later, when I visited the nearby Apple Store, I found it to be mobbed. And the Apple Store employees were a lot more engaged than those at the Microsoft Store. But that's not something that Apple can take for granted. One of its real brand advantages has always been the Apple Store, and it has to protect that advantage at every turn.

    Not easy to accomplish, but absolutely necessary.

    Many, if not most companies, probably can see elements of their own business models in these three examples. It is important to continue to innovate, to protect one's differential advantages, while burnishing brand equity, every moment of every day. That's how you stay relevant. That how you avoid obsolescence.

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

    KC's View:

    Published on: August 8, 2013

    by Kevin Coupe

    I've heard of disgruntled former employees, but this one is a little scary.

    In the UK, the Telegram has the story of James Hyett, a 33-year-old former Tesco store employee who apparently had a bone to pick with the retailer.

    So he visited a store where he used to work ... and when nobody was looking, left a severed deer's head in one of the self-checkout lanes, and animal entrails draped over the bread aisle.

    Hyett was arrested and charged with "criminal damage," though the reporting suggests that there may have been some emotional problems leading to what is called uncharacteristic behavior. He was granted "unconditional bail," and will return to court later this month.

    I'm thinking that maybe he watched The Godfather one too many times, and decided to use Tom Hagen as his role model.

    Mr. Corleone is a man who insists on hearing bad news at once...
    KC's View:

    Published on: August 8, 2013

    Fast Company has a long piece about Jeff Bezos, founder and CEO of Amazon.com, that is even more timely because of his announced acquisition of the Washington Post for $250 million.

    You can read the whole story here, but here are three excerpts:

    • "Amazon, in fact, is an eyes-wide-open army fighting--and winning--a battle that no one can map as well as its general. Yes, it is still the ruthless king of books--especially after Apple's recent loss in a book price-fixing suit. But nearly two decades after its real day one, the e-commerce giant has evolved light-years from being just a book peddler. More than 209 million active customers rely on Amazon for everything from flat-panel TVs to dog food. Over the past five years, the retailer has snatched up its most sophisticated competition--shoe seller Zappos and Quidsi, parent of such sites as Diapers.com, Soap.com, Wag.com, and BeautyBar.com. It has purchased the robot maker Kiva Systems, because robots accelerate the speed at which Amazon can assemble customer orders, sometimes getting it down to 20 minutes from click to ship. Annual sales have quadrupled over the same period to a whopping $61 billion. Along the way, incidentally, Amazon also became the world's most trusted company. Consumers voted it so in a recent Harris Poll, usurping the spot formerly held by Apple."


    • "AmazonFresh is arguably the last link in Bezos's big plan: to make Amazon the dominant servicer--not just seller--of the entire retail experience. The difference is crucial. Third-party sellers, retailers large and small, now account for 40% of Amazon's product sales. Amazon generally gets up to a 20% slice of each transaction. Those sellers are also highly incentivized to use Fulfillment by Amazon (known as FBA). Rather than shipping their products themselves after a sale is made on the Amazon site, these retailers let Amazon do the heavy lifting, picking and packing at places like the Phoenix center. For the sellers, an FBA agreement grants them access to Prime shipping speeds, which can help them win new customers and can allow them to sell at slightly higher prices. For Amazon, FBA increases sales, profits, and the likelihood that any shopper can find any item on its website."


    • "Given the astounding growth of Amazon, and the seemingly infinite ways it has defied the critics, Bezos may have proved himself the best CEO in the world at taking the long view. But he doesn't like talking about it. 'Did you bring the crystal ball? I left mine at home today,' he quips. He does, however, like discussing what the future might bring for his customers. In fact, he likes talking about his customer so much that the word can seem like a conversational tic; he used it 40 times, by my count, in just one interview. 'It's impossible to imagine that 10 years from now, I could interview an Amazon customer and they would tell me, 'Yeah, I really love Amazon. I just wish your prices were a little higher,''he says. 'Or, 'I just wish you'd deliver a little more slowly.'' In Bezos's world, the goal of the coming decade is a lot like the goal of the past two: Be cheap. Be fast. That's how you win."


    By the way, the Washington Post itself has a story about Bezos that is worth reading, which you can read here. Here's an excerpt that will give you a taste:

    • "This demanding style is as much a signature of the Amazon.com founder as his famously long-term approach to developing new products or services, say people who have worked with the man who this week agreed to buy The Washington Post for $250 million. Bezos ... has developed a precise and inventive approach to management that has powered Amazon to the top ranks of U.S. technology companies.

    "He favors a nimble, loosely organized company in which 'two-pizza teams' execute important corporate tasks, because a work group requiring three pizzas over a lunch meeting is inherently too cumbersome. And he often requires employees pitching new ideas to write mock news releases for their product’s imagined launch, a way of focusing their minds on what will most excite customers.

    "Annual salaries at Amazon are modest by the standards of the technology industry, with compensation weighted toward lucrative stock benefits designed to instill a sense of ownership and long-term purpose among employees. The key is measurable performance. His management team produces what some have called ruthless annual evaluations; top performers get larger stock benefits while laggards sometimes face pointed suggestions that they find new jobs."
    KC's View:
    Among the questions that I think business leaders have to ask themselves when reading stories like these...

    • To what degree should I be trying to emulate the Amazon business culture?

    • How do I compete with it?

    Published on: August 8, 2013

    Kantar Retail has released a new basket study concluding that Walmart Supercenters are less expensive to shop than both Amazon.com and Walmart.com.

    According to the study, Walmart.com's "basket was 8% more expensive than the Supercenter’s. Edible grocery and general merchandise were the most expensive while HBA was in parity with the Supercenter. Notably, items across baskets were not on Rollbacks at either Walmart venue.

    "Amazon’s basket was 16% more expensive than the Supercenter’s. Edible and non-edible grocery sub-baskets were the largest contributors to the high cost of the Amazon basket. Compared to the Supercenter, the edible grocery basket was 35% higher at Amazon and the non-edible grocery basket was 11% higher."

    And, "Amazon’s basket was 7% more expensive than Walmart.com. Amazon’s most competitive offer was in the general merchandise sub-basket. Higher third-party (3P) pricing greatly contributed to Amazon’s more expensive basket."

    However, the analysis also suggests that Amazon does not necessarily want to be the low-price leader - that it believes that a "vast selection" and "fast delivery" will combine to make it the preferred choice of consumers.
    KC's View:
    I think that such a study has to be taken in context - Amazon, because of its price transparency and algorithms, is bale to decide which products it can and should be lowest on, and then it is so.

    That said, the competition is going to be intense. With lots of collateral damage.

    Published on: August 8, 2013

    In Minnesota, the Star Tribune has a piece about how Target is trying to develop a nimble culture of innovation: "the Minneapolis-based retailer has gone on a digital tear, dramatically transforming a store-based culture ruled by marketers and merchandisers into an integrated innovation machine. The company that normally needs a year to plan collections of clothes and accessories now wants to roll out mobile apps and social media tools in just weeks."

    Here's how the story frames the changes taking place at Target:

    "At times, Target seems to be operating at 4G speed. Over the past several months, the company has retooled Target Mobile, launched a digital coupon program via Facebook and live streamed the doings of YouTube millennials residing in dorm rooms outfitted with Target merchandise that consumers could purchase by just scrolling over the products.

    "Such ambitious efforts come at a pivotal time for Target. The retailer has struggled to grow sales at its 1,784 stores in the United States as impatient and digital-savvy consumers flock to the Internet in search of deals, entertainment and convenience. As a result, retailers are searching for new sources of growth through online, mobile and social media.

    "Behind the scenes at Target, the cultural changes have been dramatic. Teams of executives regularly evaluate new technologies, whether they have originated from Target’s newly minted innovation center near Silicon Valley or from corporate employees. A dedicated group of technology and business strategists now try to quickly test inventions in individual stores. Every day, about 50 employees flock to Hi Tech, a Genius Bar-like support center where specialists offer personal IT help."
    KC's View:
    Great story ... and you can read the whole thing here.

    The thing about the new competitive environment is, companies like Target have to learn to grease the innovation wheels from within and develop cultures that nurture a level of inventiveness. Companies can't allow themselves to be in a position where they create a kind of force field around traditional ways of doing business, preventing change and challenge because somehow they are under the delusion that these methods represent "core values."

    I often suggest that Walmart is genetically engineered to protect its supercenter business, and that one of its biggest challenges is to re-engineer that culture so that it is able to commit to internal initiatives that could put its supercenters out of business. Same goes for Target. And the same goes for every company.

    Published on: August 8, 2013

    Time joins in what seems to be a rash of stories about WinCo, with the common theme being that WinCo is a company that keeps Walmart executives awake at night.

    "WinCo is a little-known player also because the company is a privately held enterprise that seems to take its privacy seriously, preferring a low-key, low-profile approach - which is extremely rare in a world of retailers boisterously begging for shoppers’ attention," Time writes, adding that the retailer manages to keep its prices low by being organized, minimalist, and not using distributors and other middle men when obtaining goods.

    "What really might scare the world’s largest retailer is how WinCo treats its employees," the story says. "In sharp contrast to Walmart, which regularly comes under fire for practices like understaffing stores to keep costs down and hiring tons of temporary workers as a means to avoid paying full-time worker benefits, WinCo has a reputation for doing right by employees. It provides health benefits to all staffers who work at least 24 hours per week. The company also has a pension, with employees getting an amount equal to 20% of their annual salary put in a plan that’s paid for by WinCo." More than 400 non-executive employees are said to have pensions worth more than a million dollars.

    And what really may keep Walmart awake is the fact that WinCo is expanding, with two stores slated to open in Texas next year, and with some analysts believing that it could double in size "every five to seven years going forward."

    You can read the whole piece here.
    KC's View:
    The thing about WinCo is, the people there don't breathe their own exhaust. They may find all these stories vaguely annoying, but not distracting ... because they won't allow themselves to be distracted.

    Published on: August 8, 2013

    • Walmart said yesterday that it has agreed to pay a $190,000 fine related to safety violations at a New York State store, and will make safety improvements at 2,857 Walmart and Sam's Club stores in 28 states that are supervised by the Occupational Safety and Health Administration (OSHA).

    USA Today writes that the agreement "stems from two 2011 inspections by the Labor Department's Occupational Safety and Health Administration at the store in Gates, N.Y., that found serious hazards affecting Walmart workers ... The hazards included an unlocked and poorly secured trash compactor, an unguarded grinder, obstructed exit routes, an absence of training in the use of the compactor and a general lack of information and training regarding the use of hazardous chemicals."

    There also had been previous safety problems found by OSHA "between 2008 and 2010 at workplaces in Alabama, Arkansas, Florida, Georgia, Illinois, Missouri, New York, North Dakota and Oklahoma."

    States not supervised by OSHA now can negotiate their own settlements with Walmart.


    Yahoo! Finance has a story suggesting that there are three reasons that Walmart could run into trouble as it continues to try to grow.

    For one thing, its store are "decrepit," and the perception is that to cut costs the company has been less than vigilant about maintaining its fleet. Second, the Walmart model does not necessarily translate to many global environments, and questions about the company's labor practices (and allegations that it bribed its way to high growth in Mexico) could create opposition to its entry in many countries. Third, America's big cities continue to resist Bentonville's charms, with no sign that this is going to go away.


    Reuters reports that Walmart may bid to acquire ParknShop, a Hong Kong supermarket chain owned by Hutchison Whampoa Ltd. The cost of such a purchase could be as much as $4 billion (US). Walmart now operates more than 380 stores in China, and said that it plans to open 100 more this year. However, Reuters notes that foreign retailers have had trouble managing growth in China, and a ParknShop acquisition could be seen as a boon to its plans.

    Walmart has not commented on the report.
    KC's View:

    Published on: August 8, 2013

    The Los Angeles Times reports that Oceana, the environmental advocacy group, is out with a new study saying that "seafood mislabeling can lead consumers to pay up to twice as much for certain fish." One example: "Consumers who order an 8-ounce fillet of grouper in a restaurant, which sells on average for $27, but are instead given a tilapia fillet, worth $15, they lose $12."

    Oceana has previously concluded that as much as a third of seafood sold in the US is mislabeled. The most commonly mislabeled are snapper and tuna; at issue, the story says, is a complex supply chain that is anything but transparent.

    There are bills in both the US Senate and House of Representatives designed to address the issue.
    KC's View:

    Published on: August 8, 2013

    • The Wichita Business Journal reports that Kroger-owned Dillons stores are "lowering prices storewide while ending their double-coupon policy ... the price reductions will apply to thousands of items in the store, including produce, organics and natural foods."

    Kroger has been rolling out this strategy to numerous divisions; Dillons is the latest to adopt the approach.


    Bloomberg reports that in South Africa, Pick n Pay may cut its middle management team - described by one analyst as "a huge middle management bulge" - as one way of compensating for declining profits. The company's margin structure apparently makes it hard to compete effectively - presumably Walmart's majority investment in Massmart is creating new pressures - and so management is looking for ways to tighten things up.

    According to the story, "The reductions will come in the form of so-called voluntary retrenchments and focus on head office and regional hubs."
    KC's View:

    Published on: August 8, 2013

    We had a story yesterday about declining childhood obesity rates in the US, which led one MNB user to write:

    It’s interesting to me that neither the item nor your comment mention that these numbers coincide with Michelle Obama’s “Let’s Move!” program. For all the criticism and cries of “nanny State,” it seems feasible that her campaign may have (for the first time in recent memory – “Just Say No” was a useless concept and a giant money sinkhole and “No Child Left Behind” set up unachievable expectations and pejorative consequences for educators without actually helping kids) used taxpayer money to make an effective impact on the nation’s overall well-being and future.

    I hope this news helps the cynics see that such programs can make a difference and helps quiet the persistent voices that seem above all else to prefer predicting and cataloging failure. It will be great if the “Let’s Move” program gets recognized and expanded. Even in affluent, foodie Portland it seems like half my friends’ kids live on mac ‘n’ cheese. Families with less money and fewer healthy choices close at hand deserve a LOT of credit for making small changes that translate to real, measurable positive effects on their children’s health.





    Got the following email from MNB reader Mike Franklin, responding to Kate McMahon's column about the social media efforts driving the return of the Twinkie:

    Why are so many companies and organizations afraid to put “GMO” on a label, when Twinkies puts “transfats, HFCS, gluten, artificial flavors & colors and rocket fuel” on their label and nothing happens but great sales?

    Enriched wheat flour, sugar, corn syrup, niacin, water, high fructose corn syrup, vegetable shortening – containing one or more of the following: partially hydrogenated soybean oil, cottonseed oil, canola oil, beef fat, dextrose, whole eggs, modified corn starch, cellulose gum, whey, leavenings (sodium acid pyrophosphate, baking soda, monocalcium phosphate), salt, cornstarch, corn flour, corn syrup solids, mono and diglycerides, soy lecithin, polysorbate 60, dextrin, calcium caseinate, sodium stearoyl lactylate, wheat gluten, calcium sulphate, natural and artificial flavors, caramel color, yellow No. 5, red #40.

    Twinkie cream gets its slippery sheen from cotton cellulose, which serves the same purpose in rocket fuel.


    I get your point. Though I have to admit that, while it probably has been 20 years since I've had a Twinkie, when I read that ingredient list I make a silent vow that a Twinkie will never, ever pass my lips. Yuck.

    Which is, of course, why companies worry about the "contains GMO" label. I would argue that transparency requires such a label, and that companies should make the case for why they are important and/or necessary.

    Companies that don't want to make such an argument are, in my view, intellectually lazy at the very least. Deceptive, at worst.




    Regarding yesterday's story about how Musgrave is rebranding the iconic Superquinn chain Ireland as SuperValu, MNB reader Allison Baker wrote:

    Since I moved to Ireland three years ago, I adopted Superquinn as my go-to market. They had the friendliest service, cleanest stores, and best selection of products of any competitor in the area. Many people here are shocked and sad at the loss of such a top-notch brand.  You might find this article very heartwarming. An ode to Superquinn from a local blog here:

     http://thedailyedge.thejournal.ie/superquinn-supervalu-memories-1025873-Aug2013/

    Also, check out #feargalstories on Twitter. A tribute to your friend's amazing work.





    Prompted by the stories about Jeff Bezos buying the Washington Post, MNB user Bill MacDonald wrote:

    Two factoids that opened my eyes:

    1. Bezos paid cash, out of his own pocket and the $250 million was less than 1% of his wealth.
     
    2. The Post could lose $100 million dollars a year for the rest of Bezos' expectant life span and he would still be worth $ 21 billion dollars.
     
    With that in mind and his natural energy and enthusiasm he certainly has what he needs to make the Post a great media outlet. We can hope it becomes a great paper but whatever he does will be the blueprint for the other legendary papers out there.


    But, from another reader:

    I’m still not convinced that the Emperor has clothes on. I am convinced that Bezos is affable and brilliant, but… I am not convinced that Amazon is a sustainable business model.




    I wrote the other day, in the wake of the MLB suspensions for steroid use, that there ought to be much tougher penalties - a minimum four year suspension on the first offense, and a lifetime ban on the second offense.

    One MNB user wrote:

    Your doping punishment suggestion of a 4 year ban and then lifetime is close to what Olympic athletes have, which is 2 years and then lifetime, which is under WADA (world anti-doping agency).

    From another reader:

    With all the indignation directed towards the players…where’s the indignation towards the owners and managers of baseball, who knowingly looked the other way for massive profits. And, if what Michael says above is true about hindsight…why do we continue to look the other way in any sport (football)…and when will we do something about High School PED users? I think we are all (sports fans, owners, players and parents of players) are being just a little disingenuous on this very serious issue.

    I'm indignant about the owners, though I'm not sure what to do about it. And I'm fully supportive of any efforts to do a better job to monitor young athletes.

    And another:

    I agree that penalties for rules infractions need to get harsher, but don't feel that suspensions and bans are worthwhile.  The desire to use PED's stems from an athlete's desire to improve their performance to get a big paycheck.  By the time they are caught, suspended, come back and are eventually banned, they could still walk away from the game with a huge stack of cash and have no cares in the world.  If you want to hit them where it hurts, hit them in the wallet: For all players: All contracts must include a clause that invalidates guaranteed payments if drug use is confirmed.  Then, First Offense: Current contract (in its entirety) is invalidated, they are made ineligible for all performance bonuses for that season, pay is set at league minimum for that season and, if you've already been paid above that amount, all additional amounts must be paid back to the team.  Second Offense: Contract is again invalidated, with reduction to league minimum pay and ineligibility for performance bonuses being permanent for the balance of your career.  End of story. If there is no financial benefit to doping, there won't be an incentive to do it.

    I can work with that.
    KC's View: