business news in context, analysis with attitude

Published on: January 22, 2014

by Kate McMahon

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

The cold and flu season is here in full force, meaning misery for millions of us and a multi-million dollar marketing opportunity for retailers and makers of remedies, facial tissues, disinfectant wipes and even chicken soup.

The Centers for Disease Control and Prevention (CDC) this week said the number of states reporting widespread flu activity increased from 36 to 40, and the H1N1 flu is to blame for increased hospitalizations and deaths. The CDC expects the flu epidemic to peak in the weeks to come.

For years, retailers and consumer product companies turned to the CDC’s weekly tracking report – now known as FluView -- to determine the path and severity of the flu virus. But social media and info gleaned from online search engines have changed all that. Personally, you can just click on your smartphone to see if the worst of the flu is heading to a zip code near you. If it’s your business to know, more real-time tracking and predictions allow a company to tailor shipping, marketing and advertising accordingly. Here are examples of how flu-forecasting has changed in the era of Google, Twitter and more:

• Google determined that certain search terms as simple as “flu symptoms” are good indicators of flu activity. So it launched Google Flu Trends , using aggregated Google search data to estimate current flu activity around the world in near real-time, and updated on a daily basis. It’s a go-to for health professionals and industry.

• In addition to tracking searches, Clorox also monitors Twitter for discussions about the flu, according to the Wall Street Journal. By matching Twitter feeds with zip codes, Clorox has been able to anticipate increased needs for its products, including disinfecting wipes. Last year, Clorox sent an additional 30,000 cases of wipes to six states most affected by the flu, the WSJ reported.

• Kleenex is promoting Myachoo.com, a proprietary forecasting tool utilizing CDC data, social media discussions, and weather and air-traffic patterns. Consumers can log on to see whether the germs are due to strike close to home in the coming weeks. (My zip code’s three-week forecast is “High: Prepare to hibernate. Avoid sick friends and relatives, get plenty of sleep, and continue to stock up on cold and flu essentials.”) For Kleenex, the additional info allows it to roll out a “Kleenex Checkpoint” traveling promotion and publicity efforts in hardest hit areas.

• Reckitt Benckiser, the maker of Mucinex cough remedies and Airborne vitamin supplements and Lysol products, is partnering with the health website WebMD to anticipate flu outbreaks and coordinate is distribution, advertising and promotions to meet demand.

• For chains such as Walgreens and CVS, flu marketing covers both in-store flu shots beginning in the fall to selling over-the-counter medications, thermometers, lip balm and more throughout the season. “This has been a more active flu season than we’ve seen in years,” a Walgreens spokesman told Forbes, and the retailer is aggressively promoting both flu prevention and remedy checklists in its 8,000 stores.

• A more anecdotal accounting of cold and flu cases was reported by Seamless, an online service that delivers from Manhattan restaurants. Orders for chicken soup jumped 35% last January from the previous year, including notes from appreciative flu sufferers.

The business takeaway here is simple: Search engines and social media provide a treasure trove of information that can help company anticipate consumer demand in real time, and failure to do so will leave you way behind the curve.

Comments? Shoot me an email at kate@mnb.grocerywebsite.com .

Published on: January 22, 2014

by Kevin Coupe

Good piece in the Wall Street Journal about a nine-month-old internet company, Harry's, which is endeavoring to outmaneuver more established shaving brands - Gillette and Schick - by bringing a different approach to the business.

Among its moves - the acquisition of a near-century-old German factory that has produced billions of razors over its history. "By running everything from the manufacturing of the razors to selling them online directly," the story says, the guys behind Harry's believe that "the start-up will control its entire customer experience, while allowing the company to change its products quickly … Harry’s is but the latest start-up to reimagine a prosaic product and give it a panache that helps it stand out from the crowd."

The business lessons abound … because there are a lot of industries and companies where managers are trying to figure out how to be leaders, how to disrupt conventional approaches in a way that serves their own growth, and how to create differential advantages that they can exploit in a sustainable way.

You can read the entire story here.

Published on: January 22, 2014

Wired has an excellent story about the importance of business model innovation, which is described as a cultural imperative at Amazon and defined as "reinventing its business model and finding new ways to create value, conduct business and get paid for it."

Over time, the story says, "the companies that fail to reinvent their business models to challenge outmoded assumptions about their businesses, renew their customer value propositions and change the competitive dynamics of their industries in their favor can quickly become vulnerable to commoditization, obsolescence or business failure."

There is a line that separates two kinds of companies, the story says. One kind of company tries to figure out "more efficient ways to operate in existing markets." But the other kind of company - and Amazon seems to be a prime example - companies look to reinvent themselves "to create entirely new markets, new opportunities and structural competitive advantages."

You can - and should - read the entire piece here.

Published on: January 22, 2014

The Wall Street Journal reports that in the wake of the data breach that affected hundreds of thousands of Target's customers, CEO Gregg Steinhafel "is calling on retailers and banks to adopt chip-based credit-card technology to better protect shoppers." Ironically, it was just a decade ago that Target "pulled the plug on a $40 million, three-year program" that did just that, but did not get any sort of mass consensus within the financial services and retailing industries.

The story notes that "progress on chip cards in the U.S. has been slowed in part because the financial industry and retailers have been at each other's throats over card-swipe fees and other issues, and because neither side has wanted to commit the billions of dollars necessary until the other side agrees as well … But another reason, some say, is the chill that came following the 2004 failure of Target's collaboration with Visa Inc. to use the chips across its 1,000-plus stores.

"Executives in Target's credit-card division tried to keep the program but lost out to the concerns of executives responsible for store operations and merchandising, a group that included Mr. Steinhafel, who worried the technology slowed checkout speeds and didn't offer enough marketing benefits, according to a person familiar with the decision."

Published on: January 22, 2014

The Wall Street Journal reports that Amazon "has approached big entertainment companies about licensing their television channels for a possible new online pay-TV service, in what would be a significant expansion of the company’s online video efforts."

The goal, in essence, would be build an online TV service that would appeal to people who have stopped using traditional cable companies' services, or want to - "whether out of frustration with outdated technology or rising bills."

The story notes that Sony and Google are considering similar initiatives, and that Amazon's discussions are still "in the early stages," with no sense of whether or when the project might come to fruition.

Published on: January 22, 2014

Whole Foods has announced that it is launching as new television series, "Dark Rye," that will take the same editorial approach as an online magazine of the same name that it launched in 2012, exploring "the realms of food, health, sustainability, design, technology and social enterprise."

The first season of “Dark Rye," the company says, "will highlight topics ranging from artists seeking social justice to entrepreneurs rebuilding Detroit to culinary masters maintaining sustainable food traditions."

"Dark Rye" will air on Pivot, a pay-TV network owned by Participant Media, and also will be streamed online at  darkrye.com and take part.com. The first episode is scheduled to be released tonight.

Published on: January 22, 2014

The Chicago Sun Times reports that Sears will close its flagship store in Chicago's Loop in early April, saying that the store has lost millions of dollars since it was opened 13 years ago.

The story says that the closing "is part of Sears’ efforts to cut expenses and rely more heavily on its web-based sales and operations."

Published on: January 22, 2014

• Business Today reports that Walmart "has registered a new company in India as it prepares to enter the country's lucrative multi-brand retail market with a new partner … The retailer has registered a new company called 'Walmart India Private Ltd' in the country, according to the data available with the Ministry of Corporate Affairs."

Late last year, Walmart broke up with Bharti, dissolving the joint venture originally set up so Walmart could have retail interests in India, where laws have prohibited foreign investments in retailing. When the regulatory situation did not change to Walmart's liking, the two companies decided to separate their interests, with Walmart buying out Bharti's interest.

Walmart currently has sole ownership of 20 wholesale stores in India; Bharti has, among many other interests, a chain of Easy Day-brand convenience stores.

Published on: January 22, 2014

• Reuters reports this morning that Target Corp. no longer will offer health care insurance coverage to its part-time employees, saying that by doing so it could prevent these employees from qualifying for government subsidies that they could use to purchase coverage under the new Affordable Care Act (ACA), better known as Obamacare.

The move is similar to those made by Home Depot and Walgreen.

Target said it would pay employees losing their corporate health care coverage $500, and that the affected group represented less than 10 percent of its 361,000 employees.


• The Fresno Bee reports that Grocery Outlet plans to take over a Fresh & Easy Neighborhood Market location in downtown Fresno, with plans to open the unit in June 2014.

According to the story, the downtown store will be a little smaller than Grocery Outlet's traditional units (15,000 sq. ft. vs. 20,000 sq. ft.), but also will face the challenge of catering both to urban employees who work near the store as well as local residents who may have different needs.


• The Akron Beacon Journal reports that Heinen’s Fine Foods "is opening a store in downtown Cleveland, betting that a grocery store is one of those key elements that will help the city tip the balance and grow a significant residential population." The story says that the "location they chose promises to make the grocery store something of a destination in itself. Because the store is being built in an enormous rotunda, shelves, displays and the entire flow of the store will have to be built to suit the continual curves of the dramatic space."

While the economics of operating a downtown store mean that it may take longer than usual for the store to be profitable, the story suggests that Heinen's will benefit from the fact that "there are no true grocery stores in the center of Cleveland other than Constantino’s, a smaller specialty market in the Warehouse District."

Published on: January 22, 2014

• The Kroger Co. said yesterday that Jay Cummins, has been serving as president of Kroger's Mid-Atlantic division, has been named president of the Smith's Food and Drug Stores division. He succeeds Mark Tuffin, who was named senior vice president of retail divisions in December.

Joe Fey, president of the company's QFC division, has been named president of Kroger's Mid-Atlantic division, succeeding Cummins in that role.

• The Wall Street Journal reports that Kristen Blum, the former senior vice president and CIO of enterprise solutions at PepsiCo who moved to JC Penney in 2012 to become CIO there, now has rejoined PepsiCo as senior vice president and CIO of commercial solutions, data and analytics.

Blum left JC Penney last June, when Ron Johnson was fired as the CEO there, replaced by Myron Ullman, who he had replaced just a couple of years before.

Published on: January 22, 2014

Yesterday, MNB took note of a CNBC interview with Thomas Stemberg, co-founder of Staples, in which he advised retailers about how to do battle with Amazon: "You have to go down there and fight in the trenches." He argues that retailers have use low prices as their best weapon, suggesting that when Amazon has to collect sales taxes around the country, it will level the playing field in a way that will hurt Amazon and help competitors.

Stemberg also told CNBC that "the big issue here is that Amazon is selling products at margins that are not sustainable. And for the longest period of time, they've been able to convince Wall Street—'Trust us, we'll make money some day.' At some point in time, there's a day of reckoning."

My comment:

First of all, let me make something clear. I'm aware of how accomplished Tom Stemberg is. He created Staples. All I've done is create MNB.

But … if the CNBC story accurately reflects his views, I'm afraid I disagree with him.

Sure, pricing is important. But I feel strongly that most retailers are going to have to find and exploit differential advantages that have nothing to do with price if they are to compete with entities like Amazon. (By the way…this is what Staples appears to be doing.)

I'm not persuaded that the sales tax issue is going to be significant. That's not been Amazon's experience, for the most part.

And finally, Amazon has profits. It just invests them in growth, in laying the infrastructure that essentially raises the bar on service and value and availability, making it harder and harder for other companies to compete with them effectively. That's different from not making money. I suppose there will come a point when it cannot do that anymore, but in the fast-evolving 21st century economy, that point may not be now.

One MNB user responded:

Regarding the article on Tom Stemberg’s views, I must say that Tom is a very well regarded marketer. I interacted with him when I was a food broker in New England when he was with Star Market. He was outstanding even then. His subsequent founding of Staples along with Leo Kahn and its success, speaks for itself.

On his comments about retailers vs. Amazon, the retailers in the long term have the edge if they use as a business model – Service and Quality.  It will win out in the long run. There is no question that Amazon is formidable, but the world is big enough for both to prosper. Bottom line – if you buy an item and then have problems, it is easier to deal with a person face to face than going on line on a computer to get a problem solved.

Sometimes it is easier. But not always.

For the record, I'm not questioning Stemberg's reputation or expertise. I just disagree with him on these conclusions.

MNB user Gregory Grudzinski wrote:

You nailed it—Stemberg is obviously an accomplished guy who has no idea what he's talking about with Amazon—goes to show you how deep the technology divide is between people who get it and those that don't.

Also, glad to see you make the point that Amazon is making plenty of profit—and reinvesting it.  This is lost on so many people out there it amazes me.

Then again, there are people who still think of Amazon as predominantly an online bookseller.

MNB user Danny Silverman wrote:

Agree with your point on Staples. His comments were…well, laughable.

Perhaps he was misquoted…

MNB user Dave Henry wrote:

You should remind people to read "The Everything Store" to better  understand what Amazon is doing. It will support your conclusion.

Agreed. My review of the book can be found

here.

And MNB user John Rand wrote:

I wonder how many people in 1985 were saying Walmart was unsustainable because it didn’t have high enough margins…

Excellent point.