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    Published on: December 18, 2013

    by Kevin Coupe

    Over the years, a common complaint I've heard about e-commerce is that it has the potential to eliminate or vastly reduce impulse shopping. But, maybe mobile shopping ends up being a boon to impulse purchasing … because shopping with a mobile device ends up being a lot more like shopping in bricks-and-mortar stores than might've been expected.

    The Boston Globe has a story saying that new Boston College research suggests that "consumers feel a deeper affinity for products they touch on a screen than those selected using a laptop touchpad or a mouse."

    According to the story, "When consumers participating in the study reached out and touched an image on a touchscreen, the experience nearly rivaled their feelings of touching merchandise in a brick-and-mortar store, according to the measure of satisfaction used in the study … That’s because technology has made it easier for consumers to feel as if their iPads are an extension of themselves and easier for retailers to capitalize on those feelings, industry analysts said. Many e-tailers retain credit card information to allow shoppers to buy with a single click — or touch — to make buying easier as well as faster."

    “It’s kind of surprising how strong the effect is,” S.Adam Brasel, a Boston College business professor and lead author of the study, tells the Globe. “And we’re not necessarily aware it’s taking place.”

    And one expert on the subject says that as digital interfaces get more sophisticated, people may find themselves even more compelled to shop. And buy. And buy again.
    KC's View:

    Published on: December 18, 2013

    The Seattle Times reports that Costco has reached a tentative agreement to settle a 2007 class action suit that accused the company of failing to allow women an equal shot at getting into management.

    According to the story, the proposed settlement would have Costco agreeing "to establish an $8 million fund to compensate women in the lawsuit, which received class-action status in 2007. It also will overhaul its promotion procedures and tools. The company also agreed to have an industrial-organizational psychologist evaluate its methods to promote assistant general managers and general managers. The company will also create a posting process for assistant general manager promotions, and a system to register interest in promotions to general manager roles."

    The Times writes that women were were unfairly denied promotions will be able to get money from the fund to compensate them.
    KC's View:
    Without reading too much into this settlement, I would argue that while it is a shame that any company has processes in place - deliberate or not - that prevent women from being promoted, there is no shame in admitting that the system is flawed and doing what needs to be done to fix it.

    Beyond the legalities involved, companies like Costco are stronger when they have diverse management teams.

    Published on: December 18, 2013

    The New York Times has a good piece by James B. Stewart that chronicles how Best Buy seems to be changing its culture to be more competitive against Amazon … its stock price is up, other Amazon competitors are scrutinizing it to see what strategies can be be adapted to their categories, and, most importantly, same-store sales declines have been reversed.

    You can read the story here.
    KC's View:
    Here's what this story did to me … it made me think, when I go out to get a new Blu-Ray player for the office, I'll go to Best Buy.

    And that would've been unthinkable until now.

    Published on: December 18, 2013

    Bloomberg reports that in a new study it conducted measuring the online availability of a basket of 100 toys, Amazon surpassed Target, Walmart, Toys R Us and Kmart in terms of in-stocks, with 95 percent of the toys available.

    Target got the worst score, with just 40 percent availability. The story says that Walmart had 55 percent of the toys available, Toys R Us was at 50 percent, and Kmart was 57 percent.

    Of course, it isn't all good for Amazon: "Amazon’s outperformance is in part a testament to the company’s spending spree on warehouses for a growing array of items that can be shipped more quickly to buyers whatever their location, the story says. "While the proliferation of these facilities helps Amazon keep more stuff in stock, it also crimps margins and can lead to losses at the world’s largest e-tailer."
    KC's View:
    The story notes that in there same study, Walmart had the pricing advantage … though having lower prices is of dubious value when the product isn't in stock.

    Though I have to say that the results of the Bloomberg story don't exactly match up with what Target is saying in our next story…

    Published on: December 18, 2013

    Target said yesterday that its "digital platforms continue to surpass internal projections and overall online industry growth rates. Online traffic continues to grow at double-digit rates, with mobile sales growing more than 100 percent for the holiday period."

    The company says that it "experienced two of the strongest days of sales in its history on Thanksgiving Day and Cyber Monday."
    KC's View:
    I guess that the sales are in areas other than toys. Or maybe the lesson is that digital has become so important that out of stocks don't matter. Or that business was so good for Target that they kept running out of toys.

    Published on: December 18, 2013

    Bloomberg reports that Amazon is facing the possibility that for the first time, employees in one of its warehouses could become unionized.

    According to the story, "On Dec. 6, the International Association of Machinists and Aerospace Workers (IAMAW), a trade union of the AFL-CIO, filed a union election petition with the National Labor Relations Board on behalf of 30 equipment maintenance and repair technicians working at the year-old Amazon fulfillment center in Middletown, Del. The fact that the petition was filed suggests, according to the union, that it has interest from at least a majority of those 30 workers, who are seeking to vote on whether to hold elections to establish a union."

    Bloomberg notes that "Amazon has successfully fought such efforts in the U.S. for years. In 2000, workers at a customer service call center in Seattle lobbied to form a union and met with stiff resistance from the company. Amazon ultimately closed the facility during a broader retrenchment during the dot-com bust. In cases over the years where labor organizers passed out union literature outside Amazon facilities and tried to foment union activity, Amazon managers have reacted swiftly, meeting with workers and explaining the company’s strong opposition to organized labor."
    KC's View:
    Now, it isn't like this will be an enormous deal for Amazon. There are more than 1500 employees at the facility, but only the 30 technicians will vote, and if they decide to unionize, it won't affect the other 1,470 employees.

    But it would be a small crack in the facade.

    Published on: December 18, 2013

    • Walmart said yesterday that it plans to open two new Sam's Club in China next year and then hopes to ramp up the growth to 10 new Sam's stores per year for six or seven years, the Wall Street Journal reports.

    Greg Foran, CEO of the company's China operations, says, "There are a couple hundred million people in China who could be Sam's members. Right now we have 1.7 million members."
    KC's View:

    Published on: December 18, 2013

    Forbes reports that Tesco "has applied to open a supermarket chain in India," which would take the form of a $110 million investment in a 50/50 joint venture with Tata's Trent Hypermarkets there.

    India is a $490 billion retail market that some estimate will grow to more than $800 billion over the next decade. India's laws now allow for up to 51 percent foreign investment in multi-brand retail, though the complexity of the regulations have put off a number of global retailers.

    The Tesco application comes just days after Walmart got the go-ahead in India to acquire from Bharti the almost 50-percent stake in their joint wholesale venture there. The joint venture originally was set up weigh an eye toward Walmart being able to have retail interests in India, where laws current prohibit foreign investments in retailing. When the regulatory situation did not change to Walmart's liking, the two companies decided to separate their interests.
    KC's View:

    Published on: December 18, 2013

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

    • The New Haven Register reports that Big Y has opened its first convenience store/gas station combo, in Lee, Massachusetts, adjacent to a supermarket that it operates there.

    The opening comes just three months after Big Y announced a c-store driven partnership with FL Roberts, an automotive services provider. Big Y has said it plans to open addition c-stores, but timing and locations have not been disclosed.

    Bloomberg reports that Campbell Soup Co. is seen as a possible acquisition target."

    After the purchase of Heinz for $29 billion by 3G Capital and Berkshire Hathaway, the story says, the speculation is that Campbell could be "the next big target in the packaged food industry." Indeed, 3G and Berkshire Hathaway are seen as potential suitors, because it would make sense to combine the Heinz and Campbell portfolios.

    Not surprisingly, none of the companies involved are commenting on the speculation.

    • The Baltimore Sun reports that Giant and Safeway employees in the DC-Baltimore region have overwhelmingly ratified a new three-year contract that the story says "preserves health benefits and raises wages over three years." Labor leaders said the contract was one of the "best in the business" at a time when retailers are trying to cut back on labor expenses, and the retailers said the contract will allow them to remain competitive in a tough marketplace.

    Wow. It really is Christmas.
    KC's View:

    Published on: December 18, 2013

    • The Kroger Co. announced that Mark Tuffin, president of the company's Smith's Food & Drug division, has been named senior vice president of Kroger's retail divisions. He succeeds Michael Ellis, who has been promoted to become Kroger's president/COO.
    KC's View:

    Published on: December 18, 2013

    Yesterday, I took note of the fact that Beyoncé released a new album last week - without any promotion, only on iTunes, and with physical copies only to be available later this week. The record quickly became the fastest-selling album in iTunes history. However, while Walmart said it would stock the CD this week, Target said that it won't sell the album because it believes that records should not be made available digitally before being sold in stores. Such a strategy impacts sales, a spokesperson said, and so, at least for the time being, customers will have to buy the new Beyoncé album elsewhere.

    I commented:

    I recognize that the two different approaches to this situation each are entirely legitimate. Target is saying that if the record label wants to explicitly give greater support to a channel that is aimed at hurting its business, it isn't going to play that game. And Walmart is saying that it is going to sell the stuff that it believes its customers want to buy, and the Beyoncé album clearly falls into that category.

    But I have to admit that I'm certainly sympathetic to Target's approach in this case. Retailing is a cutthroat business, especially these days, and I think that sometimes retailers have to play hardball. I suspect that the record label will argue that the move hurts Target more than it hurts the Beyoncé album, and that may be true. But sometimes, retailers have to draw the line.

    It is not entirely analogous, but I saw some echoes of this story in an Advertising Age piece about how McDonald's plans to begin selling its McCafe coffee in supermarkets next year, and how Kevin Newell, Mickey D's US chief brand and strategy officer, says that this is primarily a way to drive "greater awareness and sell more coffee in our restaurants."

    If I were a supermarket retailer, I'd use this statement as an excuse to say that we won't be carrying McDonald's coffee anytime soon. After all, why would I want to give visibility, awareness, credibility and even sales dollars to a company that is after the same share of stomach that I am?

    Such an approach might hurt short-term sales, and might annoy some customers looking for these products. But in the end, a best they can, retailers ought to sell and celebrate the products that make them different, not the ones that make them the same, or help the enemy.

    Not surprisingly, this opinion generated a number of responses.

    One MNB user wrote:

    WOW, I guess this now means that everything that is sold in a grocery store cannot be eaten at a restaurant! OR what, the food police are gonna come and arrest you. Exactly what business are these people in anyway? Differentiation in a free market is the most overused word in the English language. Hey I got one for ya, HOW ABOUT IT SELLS AND WE ALL MAKE MONEY AND WE KEEP OUR CUSTOMER HAPPY!!!  I believe its called free trade and capitalism!

    I agree that this is one completely legitimate approach.

    I would also suggest, however, that the "free" in free trade also can be applied to the decision what not to sell. I'm not suggesting anything that is anti-free trade or anti-capitalism. And I'm not even sure how you make such a leap.

    And from another:

    So, based on this approach, you logically supported the Heritage Foundation push to shut down the government to try and defund Obamacare . Right?

    OK, I’m 99% sure you didn’t. And just for the record, neither did I. So let’s move on to the question I want to raise, which is “when, if ever, is it right to pursue any course of action that is a) doomed from the beginning, and b) will logically damage your brand/image/party/ the end -- on the basis of “principle” alone? And who’s interest should be paramount in making such decisions? Management’s? Shopper’s? Or Target shareholder’s? (Full disclosure, I had many “spirited discussions” with my spouse over this question in relation to the afore-referenced political action. And I think I lost. So I’m looking for help here!)

    My first reaction to the Obamacare metaphor was, "Huh?"

    But I think I see what you're asking.

    And my argument would be that plenty of stores have offered a limited assortment and been successful. Aldi, Trader Joe's, Stew Leonard's … all of these companies have successfully decided to sell "this" and not "that" because of a broader corporate strategy. While this is not a precise comparison by any means, I'm not entirely sure that Target's decision damages its brand or is necessarily doomed to failure … especially if the decision forces record companies to rethink such an iTunes-centric approach in the future. I'm not convinced that this will happen … but that is the Target goal.

    MNB reader Ben Hummel wrote:

    I found your article on Beyonce’s album not being sold at Target to be rather intriguing.

    Target is concerned about the online channel taking a bite out of their business because it has an exclusive 1-week deal with iTunes.  So instead of doing anything constructive that would provide future value to their consumers, their strategy is to pout in the corner and not sell the album when it does become available to them?  I disagree with your notion that this might just hurt short-term sales.  This action may bite them in the long term as well.  Every lost sale because of their choice not to sell leads to the possibility of turning away one of their regular customers, and having that customer buy from the competition- maybe just for a Beyonce album, maybe for all future purchases, or maybe for a much greater share of their wallet, abandoning Target altogether.  I think that this strategy could be detrimental to long-term customer retention if they take the same stance with every supplier that gives a short-term exclusive to someone else.

    Wouldn’t a more forward thinking strategy be to work with their suppliers to do something that provides value to the consumer?  Work with manufacturers/suppliers to create exclusive bundles, or experiential stations in-store, or unique limited edition items.  Create exciting displays that cross-merchandise and make the experience convenient for the customer- if setting up a display for a new DVD that came out, display with movie-branded clothing, posters, etc, or set it up around an upscale TV or home theatre equipment, or setup a display around family night – board games, snacks, movies, etc.  Secure future album releases to be exclusive at your store.

    Why become just another retail chain that is out of stock or doesn’t carry the item I want?  It turns off the consumer and drives us online where we KNOW we WILL find what we are looking for.

    From another reader:

    There’s a fundamental flaw with Target’s approach, and the many other retailers who use their size to “punish” suppliers.  They are forgetting the consumer.  Year’s back I was trying to buy a bag of ice at my favorite Costco, but was told they were not carrying it because they had a fight with their supplier.  As a consumer, I needed the ice and could care less about their disagreement, and had to make the purchase elsewhere.  So back to Target…while they may think it’s honorable to do this, the fact remains that they are not meeting their consumers needs, and they will go elsewhere.  Find a different way to punish the supplier, but don’t lose sight of who pays the bills!

    Back in the days when I drank soda, I can remember various times at both Costco and Stew Leonard's when they did not stock either Coke or Pepsi products, and used signage to communicate the fact that they would not carry them as long as they felt they were not getting an appropriate price. Those disputes did not last long, but I always felt that they actually gave the retailers credibility, as opposed to diminishing it.

    Another MNB reader wrote:

    Target needs to look at its own policies. This week they are offering 8 popular cd's with additional tracks only available at Target. I guess it is ok for them to try and control the market but not iTunes.

    And, in a similar vein, from another reader:

    Why then does Target aggressively negotiate with suppliers to sell them Target exclusive products across many categories across their stores? Not a week goes by that the weekly Target circular doesn’t include a Target Exclusive item. In fact they have sold Target exclusive CDs from time to time.

    IMHO exclusives are for your private label. Go out and invent something and sell it under your own brand if you want an exclusive. The resources expended by CPG companies to produce nominally relevant exclusive products for Target, Walmart and others are resources that should be used to develop the whole category. If Target, Walmart, etc.  can’t compete on the same items with others and must resort to exclusives from national CPG companies then clearly there is something else wrong with their model that band aids like exclusive items will not fix.

    I actually think that Target's approach to exclusives is completely consistent … it is not saying that the record company doesn't have a right to grant iTunes an exclusive, just that such actions have consequences, and that it intends to play hardball no matter which end of the decision it is on.

    Look, I know these are not black-and-white situations, and that the Target approach is not for everyone. What I'm really arguing for is a more competitive, differentiated approach by retailers … and unlike our first correspondent today, I do not believe that differentiated is the most overused word in the English language.

    I wrote yesterday about a miserable Toys R Us experience.

    Time to pile on.

    One MNB user wrote:

    Let me tell you my Toys R Us experience.  I too would never set foot in one of their stores but I had a young child’s name that I had pulled off the Giving Tree at work at the last minute and wouldn’t have time to get an Amazon order (Yes I am a Prime member and did most of my shopping on line) before the donation deadline.  I went to their website and they had the perfect item to fulfill the child’s wish.  I decided to buy it on line and pick it up at the store.  I placed my order, gave them my credit card information and was told I would receive an e-mail in 2 hours or less when my item was ready for pick-up.  The order was placed at 5pm, at 7pm I checked for the e-mail … nothing , again at 8… nothing…. 9… nothing, finally at 10:30pm I received an e-mail stating that the order had been cancelled because they were out of stock but that my card wasn’t charged, but just in case to keep the e-mail in the event that my card was charged.

    Yikes! I have been monitoring my credit card and so far no charges but I will continue to watch just in case.  The next day I went to a brick and mortar retailer and found a similar item to fulfill the wish.  I cannot see myself ever even bothering to deal with Toys R Us in the future.


    From another reader:

    I read your story on Toys R Us and I have had similar experiences in their stores. My son is 6, so I wander in once or twice a year. Interestingly, I never go near the place during the holiday season; I buy everything on Amazon.

    It reminds me of all the flak that retailers are taking in the media these days for being open during the holidays, but it also made me think of a store that is famous for being open 24/7/365 - LL Bean's (well, and Denny's, but let's not talk about them). Being from Maine, it would not be uncommon for me to run into my father, or brothers (sometimes both) at 2am Christmas morning at the store in Freeport looking for those last minute gifts. We'd laugh at the odds (apparently, good) all the while making sure they didn't see what we were buying.

    It was somewhat of a tradition in my household.

    Then came Amazon Prime and now my shopping is done by December 1st. Amazon ruined MY Christmas tradition!
    KC's View: