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: January 31, 2014

    by Kevin Coupe

    You may remember that last June, General Mills unveiled a new commercial for Cheerios on both network television and on the internet - it showed a little girl asking her mother if it is true that Cheerios are good for the heart, and the mother says yes. Cut to sometime later, when the child's father wakes up from a nap with what appears to be an entire box of Cheerios poured on top of his chest. What made the commercial noteworthy to some was the fact that the mother in the ad is white, the father is black.

    In other words, without making a big deal of it, General Mills was marketing to America the way it is, rather than some Norman Rockwell vision of how some people would like it to be. (Yes, I know that interracial marriages are not a majority in the US, but the numbers are growing and, more importantly, it just isn't a big deal for most people anymore.)

    Of course, when the Cheerios ad first broke, it brought out the worst in some people on social media sites like Twitter and Facebook. But most of the reaction was positive … in part because the commercial was so well produced, and in part, I think, because the little girl was so incredibly cute.

    Well, she's back. General Mills is investing in its first Super Bowl commercial in almost two decades, and they're doing it with a kind of sequel to that first commercial. The little girl - we learn here that her name is Gracie - is once again the star … and the ad is charming as it possibly could be. And, I think, the subtle and even Eye-Opening point is that Cheerios are relevant to 2014 America … and not just because they don't have GMOs and are said to lower cholesterol.

    The ad is at left. Enjoy.

    KC's View:

    Published on: January 31, 2014

    The New York Times this morning reports that Amazon is close to raising its $79 annual Prime membership fee, which guarantees users two-day delivery on virtually all orders, plus access to streaming video. Speculation is that an increase will be between $20 and $40, or as much as 50 percent, which could add as much as $500 million to the company's bottom line.

    Amazon currently has an estimated 25 million Prime members, and has said that these customers tend to contribute a high percentage of its total sales.

    There seemed to be a strategic mindset behind Amazon's announcement that it might raise Prime prices; it came as the company's stock was declining after the announcement of its fourth quarter earnings, and the announcement shored things up a bit.

    "Considered in isolation, the quarterly numbers were terrific," the Times writes. "Revenue was $25.59 billion, up 20 percent from the quarter in 2012 … But expectation is all, and Wall Street expected more. Analysts had forecast that the retailer would report revenue of $26.06 billion and earnings of 66 cents a share. The stock immediately fell as much as 10 percent, or $40."

    Amazon also was not optimistic about the current first quarter: "Amazon is usually downbeat about the next quarter, and in this it did not disappoint. Sales would grow in the first quarter by 13 to 24 percent from 2013, the company said, while it once again forecast that it might lose money. Operating income in the first quarter of 2013 was $181 million.

    "Despite its new ventures, Amazon is still primarily a retailer, which makes its growth all the more remarkable. Amazon revenue grew 22 percent in 2013. Walmart’s sales, by comparison, rose only 2.2 percent.

    "Amazon, in fact, is growing faster than global e-commerce sales, which according to rose 18 percent last year."

    The losses, the Times notes, have come because "Amazon has been pouring money into new ventures, ranging from new warehouses to free videos for Prime subscribers. The eternal question is when it will turn all that expansion into profit."
    KC's View:
    Not being a creature of the stock market, it always amazes me when a company's strategies can be questioned when it has a 20 percent increase in sales, a number deemed disappointing because analysts expected 21 or 22 percent. But that's how the game is played…

    Amazon clearly believes that it can raise prices without any significant impact on Prime membership levels, and my personal reaction is that an increase won't affect me at all. I've always thought that the value provided by Prime is so far beyond what I pay for it, and I'm surprised that they haven't raised prices until now.

    I suspect that some folks in Amazon's competition will be heartened by this news. But I wouldn't see this as a predictor of any sort of long term Amazonian decline.

    Published on: January 31, 2014

    The Chicago Tribune has an interview with Thomas Parkinson co-founder and now chief technology officer and senior vice president of Ahold-owned Peapod, the e-grocery service.

    According to the story, Peapod is trying to rekindle "the startup vibe" it had when the company launched a quarter century ago. Among those efforts is Peapod's Propulsion Lab, based in downtown Chicago, which he says is "about getting all the technical people away from the slightly more bureaucratic scene. I’m trying to get it like the early days where things moved really quickly and give more independence to the group. I walk in there and I feel like I’m at the old Peapod. There are not a whole lot of meetings. If you have an idea, you’re able to execute it quickly."

    Parkinson goes on to say that Peapod has just "kicked off Propulsion Days, where anybody that works at the Labs presents their innovation ideas. We’re going to do it twice a year. We give them four days of time over four months to work, and then we decide if we move it forward."

    As for the competition, Parkinson says, "Instacart we believe has a limited customer base. And because we're Ahold, maybe we can work with them because we have physical stores. Having Instacart shop in our stores could be a frenemy kind of thing … On Wal-Mart and Jewel, it’s a hard business for these guys because they’re grocers and we're a logistics production company. We are worried about Amazon. They have proven time and again that they don't care about making money."
    KC's View:
    What Peapod is doing makes a lot of sense - create a culture that can disrupt from within, as opposed to waiting to see what happens when a disruption is created by an external force.

    Published on: January 31, 2014

    The Wall Street Journal reports that Amazon is developing a checkout system that will use Kindle tablet computers that it will offer to bricks-and-mortar retailers "as soon as this summer."

    The story suggests that there are several possible scenarios. One would have Amazon giving the tablets to retailers for use at checkout, and would make money on each transaction. Another would have the Kindles as part of a broader offering to retailers, which would include "website development and data analysis."

    According to the Journal, "The project would thrust Amazon, the largest U.S. e-commerce merchant, into the realm of physical retail stores, where more than 90% of commerce is still conducted, and open up a new trove of data from consumers' in-store spending habits … Because many of the largest physical retailers have extensive, complicated checkout systems that may be difficult or costly to give up, Amazon is likely to focus on smaller retailers."

    And, it goes on, "Amazon's plans remain fluid and the project might be delayed, altered or canceled."
    KC's View:
    If Amazon is looking for ways to build profits and add to its bottom line, this may be the way to go. But if I were a bricks-and-mortar retailer, I'd be a little leery about any sort of decision that would Amazon any access at all to my customers' in-store spending habits. And, I'd think twice about any sort of relationship that would give Amazon a piece of my action.

    Published on: January 31, 2014

    In Cincinnati, WCPO has an interview with Kroger CFO Mike Schlotman, in which he addresses the changes likely to take place and what initiatives can be shared now that the company's acquisition of Harris Teeter is complete. Some excerpts:

    What Kroger wants from Harris Teeter: "We'll look at the training programs they have, why their associates get high marks on ‘friendly.’ Our associates are very productive, very task oriented. Sometimes when a produce clerk is out stocking apples, they may think of their jobs as, ‘I’ve got to get 10 apples a minute stacked.’ If a customer stops with a question, they worry they’re going to get off their productivity number vs. answering a question. We just have to figure out how (Harris Teeter associates) get their job done and provide good quality service to the customer."

    What Harris Teeter wants from Kroger: "The queuing system (Que Vision) that helps the front-end manager decide how many check lanes need to be open at a time. Harris Teeter’s check out time is pretty good but ours is better. So, they’re very intrigued to learn about our system and how we can get that into their stores quickly. Another one is pharmacy. They have a rather antiquated pharmacy system that’s kind of running out of juice and people aren’t going to support the system any more. We have a state of the art system … It doesn’t cost us any more to put it into a couple hundred stores except the hardware."

    On exporting Harris Teeter's online ordering system to Kroger: "It is clearly one of the things that our digital folks, it wouldn’t surprise me if they’re already on their way to Charlotte to figure it out. We actually had been working on our own pilot before we started working on this merger. Rather than create things from ground zero we kind of put our own development on hold because we think we can leverage some of the infrastructure they have to roll it out a little faster than trying to develop it from ground zero. It wouldn’t surprise me if in a relatively short period of time, you’d see us test that in a market outside of the Harris Teeter footprint."
    KC's View:
    Schlotman says nothing is imminent, but I'm intrigued by the notion that Kroger, using Harris Teeter, could expand up through the Acela corridor into New York and New England.

    Published on: January 31, 2014

    MarketWatch reports that Starbucks, which has been enormously successful in getting customers to use applications on their smartphones as prepaid cards with which they pay for coffee, is considering a tweak to the app that would allow customers to order and pay for their coffee before actually getting to the store.

    CEO Howard Schultz said in a conference call earlier this week, “You can assume that over time we will lead in this area.” But the story notes that such efforts are not always as successful as one might think - there is a risk that orders might either be cold or not ready when the customer gets there. And, when offered by fast casual restaurants such as Chipotle and Panera, it seems not to have caught on.
    KC's View:
    This strikes me as an option that seems better in concept than it might be in practice. I'd rather wait the few minutes in the store than have cold coffee.

    Published on: January 31, 2014

    The New York Times reports that French lawmakers "are expected to approve this month a consumer protection law requiring restaurants to designate fresh dishes with a 'fait maison,' or 'homemade' logo. If a dish is unlabeled, some or all of it is presumed to come from an assembly line."

    What has led the lawmakers to this point is the fact that despite France's reputation for amazing food, "odds have grown that a savory-looking entree or dessert - especially at establishments near tourist attractions like the Eiffel Tower, Notre Dame or Montmartre - may have been at least partly prepared by an industrial food giant, frozen, then reheated in a kitchen. Even the bread, the French bread, may have been made in an industrial bakery."

    The story goes on:

    "As is often the case in France, however, resolving the issue is not so simple. Restaurant owners behind a fresh-food movement say the government has not gone far enough. They want menus to note every frozen item, citing the right for consumers to know after a European food scandal last year in which frozen beef products were found to contain horse meat.

    "Pushing back is an influential coterie of agro-food companies. Although the quality of frozen foods has vastly improved, they are concerned that singling them out on a menu could cut into a lucrative business that is expanding as dining habits shift and restaurants seek to improve margins as labor and food costs rise."
    KC's View:
    I've taken my shots at the French government over the past year or so because of its efforts to inhibit e-commerce through protectionist legislation that favors bricks-and-mortar retailers; in some ways, it seems firmly rooted in the 19th century.

    But … I think I like this legislation, if only because it seems to be pro-transparency. There is a difference between homemade food and factory produced food, and especially in a food culture like exists in France, that deserves to be certified.

    If this makes me a snob … c'est la vie.

    Published on: January 31, 2014

    If you're like me, this headline grabbed you.

    Not because I care anything about the Kardashians. I don't. But I also have to admit to not really understanding the whole bitcoin phenomenon, and when I saw this headline on a story reported by Marketplace on National Public Radio (NPR), I clicked on it … because I figure this would be an explanation that'll use terms I understand.

    Like, as it turns out, "shared illusion." Which is a phrase that seems to adequately describe both of them.

    If you're interested, you can read the story here.
    KC's View:

    Published on: January 31, 2014

    Bloomberg Businessweek reports that "President Barack Obama said Wal-Mart Stores Inc., Apple Inc. and Ford Motor Co. are among about 300 companies that have pledged to take part in an initiative to help the long-term unemployed find jobs … The administration and the companies will 'establish best practices' for hiring that 'do not screen people out' because they’ve been unemployed for an extended time, Obama said in an interview with CNN."

    • The US House of Representatives has approved the expenditure of $125 million on what is called a "national Healthy Food Financing Initiative (HFFI) to bring jobs and affordable food retail options to urban and rural communities in Pennsylvania and nationwide."

    On her website, Rep. Allyson Y. Schwartz (D-Pennsylvania) says that the funding will provide "funding for the HFFI to continue providing start-up grants and affordable loan financing for Pennsylvania’s food retailers, farmers markets, cooperatives and others who face obstacles to delivering and selling healthy foods. This targeted investment by increasing opportunity for healthy food will help combat obesity, which costs the U.S. health care system $190 billion annually."

    Food Safety News reports that a federal judge has sentenced brothers Eric and Ryan Jensen - who owned the Colorado farm where cantaloupes were grown that sickened 147 people and killed 30 because of Listeria contamination - to five years probation, six months home detention, and $150,000 each in restitution fees to victims.

    While some felt the Jensens should be forced to serve time in jail, the judge felt that because the contamination was inadvertent, probation was more appropriate. In addition, the severity of the sentence is seen as being a deterrence to other growers who might not be paying enough attention to food safety issues.

    • The Washington Post has a story about how traditional bricks-and-mortar retailers can compete with the "anticipatory software" that Amazon reportedly that has patented, allowing it to move merchandise around even before a customer places an order, so it is better positioned to ship items more efficiently.

    "Retail storefronts, after all, are the original hubs for data on what customers want," the Post writes. "And big retailers are very familiar with adaptive stocking: Certain branches of different grocery stores offer different items based on the demographics around them (Goya Foods, for example, helps grocery stores understand what Latino nationalities live in the area and what they eat). They stock for the weather, big sporting events, holidays and weird food trends. Now, since more retailers are able to ship from their stores, many -- from Footlocker to Dick's Sporting Goods -- have a network of warehouses and delivery hubs that Amazon's now building from scratch … Think about it like this: Brick-and-mortar retailers actually have two points of sale. They can sell something off the shelf or mail it to someone nearby. That creates more flexibility in the amount of inventory they can stock, alleviating the problem of empty racks."
    KC's View:

    Published on: January 31, 2014

    Got the following email responding to the story the other day about why expensive hotels charge for W-Fi and less expensive hotels do not:

    I like to try to take stories like this and apply/rationalize them with my own experiences. I had to make a run to the local Walmart the other evening; they were over the top busy, just like always. Got to the front end and out of the what seems like 400 or so check stands they have, I believe they had six open. Typical. They guy in front of me made a comment about the lack of service and I responded that they don’t have to have service at the front end…they get all the folks they want shopping with them with their low prices…and they keep coming back.

    Publix and other chains of that ilk must have efficient and well run front end management/service to justify their higher prices. So heck, I’ll put up with poor front end service if the prices are low enough, but I expect great service if I’m paying higher prices.

    If 600 thread count santeen cotton sheets, bell cap service, my own terry cloth robe, chocolate candy placed on my pillow every night, and plush towels that I’m not asked to use 4 times before they are washed is important to me, then perhaps paying for Wi-Fi service is no big deal, but perhaps I expect free Wi-Fi when I’m making my own waffles for breakfast with a side of powdered eggs.

    Regarding the request by both FMI and NGA that the definition of "part time employee" be changed to be 40 hours per week, one MNB user wrote:

    First,  I do understand the small business owners’ plight. Healthcare is very expensive to provide (I currently pay for my own).  I recognize this is a complex issue.  It touches on policies from educational opportunities (to allow for the folks dependent on those 30 hour a week jobs to move up the employment ladder) to business tax policies (how do we make it economically feasible for the small business owner to do the right thing and provide benefits to their employees) and many issues in-between.

    However, IMHO to ask for re-definition of full-time for purposes of the ACA pushes the expense of healthcare back to the US Government.  The working poor will now turn to the ACA exchanges and depend on subsidies to bring the cost of healthcare into the realm of reason while the employers see no change to their expenses.  It is no coincidence these folks are at 30 hours.  For years, a number of employers have reduced labor cost by chipping away at hours, reducing the number of “full time” employees to avoid paying benefits.  These employees are forced to take on second jobs just to make ends meet and/or depend on public assistance programs to survive.   So, as we push more folks to having to take advantage of public assistance programs to make ends meet (feeding themselves and their families, covering healthcare costs), we hear many voices calling for reduced government spending.

    From another reader:

    Hmmm… that's funny. We're an independent grocer that has figured out this would in fact, have little impact. And we employ more than 400 employees.  Of course we already provide benefits for employees and consider full time to be 32 hours a week right now. And gee, we're also working on paying all of our staff a living wage.

    It's pretty tedious. Quit whining and gnashing your teeth and figure out how to be a good employer. And saying 'this will impact employees flexibility' is just spin. I'd like to hear what their employees actually have to say.

    MNB reader Jim DeLuca wrote:

    I find it so business as usual that FMI and NGA want to press for a 40 hour definition of full time.  Some recent statistics I read indicated that the very vast majority of grocery employees are part timers; not by choice.  One of my cashiers who used to work at a very well known and respected Grocery chain was only a part timer, but was expected to be available for work when called last minute. She told me that if she declined the last minute work offer, her regular schedule for the following week was cut back.  So essentially, she was expected to be available as a full time person but not paid as one; and in fact punished for not being always available.  The ACA is attempting to make health care available to millions of uninsured workers; FMI and NGA are trying to avoid change and change is desperately needed in our wildly changing business environment.

    We've been having a discussion here about wage inequality, and Costco's policy of paying its people better - because it results in more committed employees and less turnover - has been one of the things most focused on.

    One MNB user wrote:

    I've been in Walmart.  I've been in Costco.  My conclusion - most of the minimum wage Walmart workers are overpaid.  The Costco workers are well worth 1.5x the minimum wage.

    I wrote the other day:

    Costco is known for paying its . . . senior executives significantly less in salary than executives make at other companies. . . .  Costco's leadership's response, in essence, has been that it more concerned with how it is regarded on Main Street.

    Which led one MNB user to write:

    And, just maybe, attracting subpar managers is the reason they make decisions like that.

    I have to be honest. This is the kind of response that makes me nuts.

    In all the years I've been doing this, I've never heard any sort of criticism of Costco for hiring "subpar managers." Far from it.

    Maybe I'm wrong about this, but it seems to me when I see emails like this that charges like this are made not based on any sort of reality, but rather because it is easier to suggest that Costco has subpar managers than it is to accept the possibility that a policy that pays people more money and challenges retailing conventional wisdom is a good one.

    Got the following email on the subject from Frieda Rapoport Caplan:

    TRADER JOE’s   is a great  example of the results of treating and paying your employees right. . They have the happiest and most helpful employees of any place I shop.  It is the only chain where I am aware that communities are begging TRADER JOE's to open a store in their neighborhood. 

    It is a HAPPY PLACE . . .mostly because of happy and helpful employees. Their cashiers are their best sales people  cause they often push SOMETHING YOU HAVE BOUGHT  by telling you how they prepare things themselves.

    HAPPY EMPLOYEES. . . . feel part of a team.  It all adds up to a great bottom line.. . .and I go out of my way to shop at T.J’s.

    From another reader:

    I believe a read a statement awhile back that came from the CEO  of Costco. It had to do with focusing on customers and employees verses.  Something to the effect that if we focus on our employees and customers then Wall Street will be taken care of.  Too many companies have lost their way and it is reflected in their customer service. I believe that the short term thinking will catch up to most of them some day.

    MNB reader Albert L. Bachman III wrote:

    …and as Henry Ford realized about 100 years ago, paying people more money meant they could buy the products that they were making.  Henry raised the pay of his employees to $5.00 a day, vs. The $3.50 they had been earning.  A Model T Ford was about $800 dollars, and soon fell to about $400.  Later they were $250.

    The other day, MNB took note of a Sacramento Bee report that David John Magana, a former advertising director for Raley’s, has been sentenced to almost four years in prison in a money laundering and mail/wire fraud case.

    Which promoted one MNB reader to write:

    This guy gets 4 years for $3M (that's great and all, glad they're cracking down on white-collar crime) yet with very few exceptions, everybody that caused our Great Recession is still walking the streets…

    I feel your pain.

    Finally….the other day, I was writing about the excellent StorePoint 2014 conference, and noted that day three presenter Amber MacDonald cited a stat that "20 percent of men use the iPad in the bathroom."

    I followed that up with a commentary that started as follows:

    First of all, full disclosure: The StorePoint folks hired me to speak on Day Two of the conference, and they advertised StorePoint on MNB. So I have a rooting interest in its success.

    A number of people wrote me emails along the same lines. Here's one:

    When you wrote “in the interest of full disclosure” I was afraid you were going to admit you were part of the 20% of men who use the iPad in the bathroom.

    However, that’s not as bad as talking on the phone while in the bathroom.

    Even I have boundaries. Though not many.
    KC's View:

    Published on: January 31, 2014

    I told you a couple of weeks ago that I had four movies among the major Oscar-nominated films to see, and I'm happy to report that I've knocked off three of them.

    12 Years A Slave is an enormous achievement - a movie so raw, so beautifully acted, written and directed that I felt I was watching a completely original piece of work.

    It tells the true story of Solomon Northup, a free African American living and working in upstate New York with his wife and children, who is kidnapped and sold into slavery. Played by Chiwetel Ejiofor (a British actor of enormous talent, known for everything from playing "Othello" onstage to being the bad guy in Serenity onscreen), Northup manages to maintain his dignity while understandably falling into varying levels of despair - he has gone from being an accomplished musician and free man to being a piece of property without rights or options. It is incredibly hard to watch at varying points, in part because of the base and repellent cruelty that it portrays, but also because it shows a time in our history that is impossible to reconcile with our vision of ourselves.

    Extraordinarily well acted, sensitively directed by British director Steve McQueen, and based by screenwriter John Ridley on the book "12 Years A Slave," written by Northup in 1853, this is a movie that is hard to watch, about a time that is difficult to understand, and, ultimately, unforgettable.

    It makes "Roots," a major work when it came out, look like "Mr. Rogers."

    I finally caught up with Blue Jasmine, the 2013 Woody Allen movie that was his version of "A Streetcar Named Desire," and that earned Oscar nominations for Cate Blanchett as Best Actress and Sally Hawkins as Best Supporting Actress. I know that this film has gotten a lot of positive notices, especially for its performances, but I must confess that I don't know what all the fuss is all about. Whatever charms Blue Jasmine has were completely lost on me.

    It is, on the surface, an interesting premise, with Alec Baldwin as a Bernie Madoff type who is all cool, silky reassurance. But when he's found out and sent to prison, his wife, Jasmine, slowly sees her life's illusions fall away, and she finds solace in vodka, Xanax and, eventually, madness. The problem is that there are hardly any lines in the movie that sound like they would be uttered by actual human beings, and I found the performances - even by Blanchett, who makes her unraveling painful to watch - unable to get past the over-the-top script. Everybody is "acting," and while the film is supposed to be stylized, it just doesn't work. Even the casting, usually an Allen specialty, seems off-key; characters who are supposed to be from San Francisco seem like they hail from Brooklyn, and Allen never seems to appreciate San Francisco the same way he's always appreciated New York and, in recent films like the wonderful Midnight in Paris and Match Point, Paris and London.

    And now, I'm going to write a sentence I never, ever thought I'd write. I thought the single best performance in the movie, with the single most truthful moment, was by Andrew Dice Clay.

    Clay plays the ex-husband of Jasmine's sister, who lost all of his money when he invested with Baldwin's character. He has a short scene, toward the end of the movie, that is utterly, nakedly painful, without any of the artifice of the other characters. And the shame of it is, the moment seems completely out of place.

    This is not something I would say about many movies, but I loathed Blue Jasmine.

    Her is a fascinating piece of work, set in a near-future Los Angeles, at a time when technology has become even more pervasive than it is today. The Spike Jonze written-and-directed movie casts Joaquin Phoenix as Theodore Twombly, a nebbish who makes a living hand-writing letters for people …. except, of course, he doesn't actually write them, but rather dictates them to a computer, which converts them to hand-written text. He's lonely, having recently separated from his wife, and he fills the hole in his life by falling in love with his computer's operating system.

    Now, that's not quite as bizarre as it sounds. The movie takes great pains to explain that the OS has virtual intelligence, able to learn and exhibit human characteristics. And it's even less strange since the voice of the OS is that of Scarlett Johansen, who brings an impressive fully formed sexual huskiness to a part that she recorded in an audio studio. Her OS, named Samantha, is fun, inquisitive, playful, smart and seemingly the girl of his dreams, especially as, over time, she becomes increasingly sentient. Except of course, he can't touch her and she can't touch him. In many ways, it seems like the perfect 21st century romance.

    There are all sort of directions that Her could've gone, but what I found most impressive about it was the movie's ability to keep me off balance. It could've been a treatise on society's depersonalization and isolation, but instead I left the theater wondering about the similarities and differences between love and intimacy, and about acts of love that have nothing to do with sex. I liked Her, but more importantly, it has kept me thinking about its premise and implications. That's a good thing.

    In case you're interested, the fourth movie I need to see is Dallas Buyers Club, which I'll catch up with one of these days. There's only one major Oscar nominee that I have absolutely no interest in seeing - August: Osage County, which, in the commercials and clips I've seen, seems preposterous, contrived and over-acted. Maybe I'll catch it on TV at some point, but not anytime soon.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: