business news in context, analysis with attitude

Published on: February 25, 2014

by Michael Sansolo

Gazing towards the future competition of stores and dot com retailers, Wakefern President Joe Sheridan made a somber prediction at the recent National Grocers Association (NGA) convention. The coming battles with the dot coms, he said, will be painful for all and fatal for some.

Even those who are best at adapting and evolving will feel the pinch of the new wave of competition. And those who fail the Darwinian test will be the latest casualties in the non-stop wars of retail.

Pain for all, fatal for some: it’s pretty hard to argue with that. Given that likely outcome, it behooves all retailers to be on the lookout for what works and what doesn’t. For that reason I hope my recent experience shopping for a computer might provide a lesson for you and your front line staff.

My wife desperately needs a new computer. Now, ours is a mixed marriage: I use Macs and she uses PCs. So rather than a fashionable trip to the Apple store, it was off to Best Buy for a chance to see how the company’s new retail model is working.

Best Buy is a palace of retailing and our local store reflects all the changes the company is making to fight off the dot coms. The store is well lighted, well signed and well designed. Computers are in ample supply and variety. And because I wanted my wife to have a trouble free experience, I assured her that Best Buy’s staff is well trained and could handle all her questions.

I was wrong.

At the store we saw numerous Best Buy staffers in their blue shirts, all looking very busy and none rushing to serve us. We got numerous “hellos,” but that was it. No recognition that we might want help or any promise that help was coming.

We weren’t alone in our frustration. Two women in the computer section actually resorted to loud clapping and yelping until a staffer came over to quiet them. They used that moment to get questions answered.

That same staffer had to walk past me and answered my request for help with a promise that someone was coming right over. In fact, he told me that both times I encountered him. Our patience worn thin, we left the store only to find three staffers outside the front door on a smoking break.

As we walked past, one told us to have a nice day. My wife responded that Best Buy’s day would have been nicer if someone had actually served us and gotten the sale. His one-word response: “Ouch!”

The truth is, I was in no mood for that employee to win me back. Yet there were so many things he could have said or done that might have given his store a fighting chance to do so. That’s why I think this part of the story bears sharing with front-line staff.

"Ouch" indeed.

This would be a problem in any era, but especially today.

I knew I had tons of options to get this computer on line and I told my wife I was prepared to use any of them. But I wanted to give brick-and-mortar another chance, something I bet many other shoppers would never consider.

About half-mile away is Micro Center, a far less glitzy electronic store. Jammed into a somewhat down-market mini-mall, Micro Center looks like a showroom combined with someone’s closet. There are narrow aisles, warehouse racking and ad circulars ripped from the 1950s.

It’s a far more techie-looking store than Best Buy, too. There’s a counter for those who like to assemble their own computers. There are racks of hard drives and all the other computer insides that folks like me should never touch.

At Micro Center the staffers in white shirts are busy and constantly on the run, just like at Best Buy. In contrast, though, they were quick to make eye contact and quick to promise me they were coming right over. In fact, when no one got free quickly enough, the department manager came to answer our questions and did so without irony or condescension, even though I will admit my technology questions are not always the savviest.

Needless to say, he got the sale. And when I told him how much I enjoyed working with him, he said, “There’s a reason we are opening stores while others are closing."

Granted, this is one customer with one need on one day. But the lesson, I’d argue, is essential for retail today. What made the sale wasn’t store design or ad campaigns. Rather it was a retailer who seems to understand its niche and serves it beautifully. A retailer whose staff kept me from going on line to make the same purchase and who has me thinking that I have a new store for my technology needs.

Would your customers say the same about you? It’s a question to consider, especially in a world quickly becoming painful for all and fatal for some.

Ouch!

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: February 25, 2014

by Kevin Coupe

GeekWire reports on an interview in Playboy (which I don't read, not even for the interviews) with Nick Denton, founder of Gawker Media (which owns Gizmodo, Deadspin and other properties), in which he offers Amazon founder/CEO Jeff Bezos some advice about what he should do with the Washington Post now that he owns it.

Here's what he says:

"The interesting move would be to see whether you could take an entire newspaper-reading population and wean them off print. The price of Kindles is coming down. How much would it cost to bundle a Kindle with your subscription to the Washington Post? Discontinue the print and, as a gift, give everybody a Washington Post reader that can also buy books for them. That’s what I’d do. That’s what Bezos would do if he were ballsy."

Which is an interesting idea. Not a new one, since there are other papers - the weekday Christian Science Monitor and the Seattle Post Intelligencer, for example - that have done the same thing. The difference is that the Post, because of its Amazon connection, would have the ability to achieve a real game-change in terms of delivery systems.

Speaking of delivery systems….

GeekWire has another suggestion for Bezos:

"He could use the Washington Post’s fleet of trucks as a mechanism for delivering additional products, beyond the news. In Seattle, LA and San Francisco, Amazon.com continues to experiment with grocery delivery through its Amazon Fresh business."

All interesting ideas.

And Eye-Openers … mostly because they suggest the ways in which business leaders need to think about next week, next month, next year.

Published on: February 25, 2014

The Cincinnati Business Courier that there are rumors about another possible suitor for Safeway, now that the California-based supermarket chain is considering a sale of the company. Kroger, the country's largest supermarket retailer, is being mentioned as a possible buyer, mostly because it is seen as having the financial wherewithal to make such a deal.

However, the story also notes that such a purchase could hit major regulatory potholes, since there are markets such as Southern California where they compete head-to-head. In addition, it is described as unusual for a company to make acquisitions back-to-back, and Kroger has just completed a purchase of Harris Teeter, a much smaller company that has not yet been absorbed into Kroger's organization.

Finally, the story says, "Kroger also might not be interested in buying a company whose operations haven’t been up to snuff. Safeway’s market capitalization has declined and its fourth-quarter earnings fell by about half. Its same-store sales growth is nowhere near that of Kroger."

Published on: February 25, 2014

The Orange County Register reports that Fresh & Easy Neighborhood Markets have begun selling Wild Oats organic and natural foods on its shelves - the first time the label has been seen in stores since Wild Oats was acquired by Whole Foods.

Fresh & Easy was bought by Ron Burkle-controlled Yucaipa Cos. last year … and Burkle also owns the Wild Oats brand.

According to the story, "Cage-free eggs and four types of organic milk sporting the 'Wild Oats Marketplace' label landed in the dairy section of 167 stores this week, including 102 locations in Southern California. Brown eggs boast 'Just Laid' stickers on cartons and 'hen laying' date stamps on each egg. The 'Portlandia'-inspired move comes as more consumers demand transparency on food origin and animal welfare from grocers."

Published on: February 25, 2014

Forbes has a piece about General Mills' decision to make its original Cheerios cereal GMO-free, suggesting that "the new, non-GMO version of Cheerios isn’t moving the sales needle significantly … and the giant cereal company isn’t planning any more non-GMO products after it went to a lot of trouble to source non-GMO Cheerios."

The story notes that "anti-GMO alarmism still doesn’t persuade Americans the way it has Europeans. Many Americans are smart enough to understand the flimsy arguments about the supposed dangers of genetically modified organisms and even appreciate the many benefits of the practice of bioengineering crops." And it points out that anti-GMO forces are planning to keep pushing General Mills to change other cereals to be GMO-free.

Published on: February 25, 2014

Bloomberg reports that Starbucks next week will introduce new breakfast sandwiches, created by its La Boulange division, "such as a 490- calorie ham-and-swiss croissant and a ciabatta with vegetables, egg and fontiago cheese that’s 470 calories," which will cost $4.45.

The product introduction is part of an overall Starbucks effort to improve its food offerings.

Meanwhile, the Los Angeles Times reports that "Taco Bell is moving in on the morning market, angling to compete with fast-food rivals such as McDonald’s by launching a breakfast menu nationally on March 27.

"The menu -- which the Irvine company said is its most extensive in more than 50 years -- includes items such as a waffle taco, the A.M. Crunchwrap and breakfast burritos. The options will be available from 7 a.m. or earlier until 11 a.m. at more than 5,500 restaurants."

At the same time, the Associated Press reports that McDonald's "is in the early stages of looking at whether it can make breakfast available later in the day." Doing so has long been considered logistically difficult, but the company is trying to figure out how to achieve something for which many of its customers long have clamored.

According to the story, "The push to make breakfast outside normal hours also reflects how McDonald’s is working to keep pace with shifting habits. In particular, executives have noted that customers increasingly want foods personalized to their tastes and schedules."

Published on: February 25, 2014

• In Minnesota, the Pioneer Press reports that Iowa-based Hy-Vee has announced its intention to open stores in the Minneapolis-St. Paul market, opening several of its 90,000 square foot stores each year for the next several years. Specific locations and opening dates have not been announced.

Hy-Vee already has 16 stores operating in the southern part of the state.

The Twin Cities region is considered to be one of the most competitive markets in the country, featuring local names such as Lunds/Byerly's, Cub, Target, and Rainbow, as well as national players such as Walmart, Aldi, Costco and Whole Foods.


• The New York Times this morning reports on how "lost in the turmoil over the immense theft of Target’s customer information in the United States has been the remarkable failure of its Canadian expansion. Instead of reaching profitability by the end of the year, as Target had hoped, analysts expect that the company will report this week that the Canadian operations produced an $8 billion to $9 billion loss."

The story goes on to say that "the causes of Target’s stumble in its first foreign excursion are varied." Some suggest that the company should not have tried to open so many stores (124) so quickly. There also are criticisms that there are out-of-stock problems, and that Target's prices are too high.

None of the problems are seen as "irredeemable," the story says, but "exactly how quickly the company can achieve profitability and by what methods it can do so remain unclear."


• Advertising Age reports that the Milk Processor Education Program is abandoning its "Got Milk?" ad campaign replacing it with a new slogan, "Milk Life," which "puts emphasis on milk's nutritional benefits, including its protein content," and which the industry group hopes will "return the sluggish dairy milk category to growth."

According to the story, "The national group, known as MilkPEP, plans to spend more than $50 million on the campaign, which will include TV, print, digital, retail promotions and PR."

Published on: February 25, 2014

• AB Acquisition LLC, which operates Acme, Albertsons, Jewel-Osco, Shaws & Star Market stores, announced that Rick Navarro, who has been the Company’s Chief Financial Officer since its inception in 2006, has been appointed Chief Administrative Officer. Succeeding Navarro as the company’s CFO is Robert B. Dimond, most recently the Executive Vice President, CFO and Treasurer at Nash Finch.

Published on: February 25, 2014

Harold Ramis, one of his generation's foremost comic voices, known best for his film collaborations with Bill Murray, died yesterday at age 69 from complications related to autoimmune inflammatory vasculitis, a disease that involves the swelling of the blood vessels.

Published on: February 25, 2014

MNB yesterday took note of a New York Times report on the coming legal battle over the rights of businesses to deny service to people with whom they disagree on religious grounds - specifically, people engaged in same-sex relationships and marriages - and when this becomes the kind of discrimination forbidden by the US Constitution.

I commented, in part:

I don't think that businesses ought to be able to deny service to gay people any more than they ought to be able to deny service to African-Americans, Muslims, or women.

Which led one MNB user to write:

If a chain I shopped at suddenly instituted a "no-White-man-over-65" policy, I would derive immense satisfaction out of giving my money to one of its competitors.

Which is a wonderful argument, albeit one that only would be made by a white man over 65, since white men over 65 rarely, if ever, have had to deal with this kind of discrimination in their lives.

I wonder how that argument would've gone over during the Civil Rights movement. ("Sure, that hotel won't let you book a room there, and that restaurant won't let you sit at the counter, and you can't sip from that water fountain, but you should derive immense satisfaction from sleeping in hotels, eating at restaurants and sipping from water fountains that actually want you.")

It also begs the question that discrimination is illegal.

What a crock.




We had a piece yesterday about how, as the Wall Street Journal reported, "the American Academy of Pediatrics (AAP) is officially saying that people should not use retail health clinics for children's primary medical care needs, that they work against the concept of having a personal physician with a sense of medical history, and 'don't provide the continuity of care that pediatricians do'."

I commented:

In a perfect world, every kid would have a dedicated and selfless pediatrician with unique knowledge of the child's medical history and a passionate service mindset. But we don't live in a perfect world - we didn't before Obamacare, and don't now.

I would simply argue that these two segments of the health care industry need to find a way to work together and get along. Because in the end, what's most important is making sure that kids get the care they need. Maybe it would make more sense to spend time and energy creating a more responsive system, rather than arguing that one is better than the other.

MNB reader Mike Franklin responded:

My comment…these two organizations need to continue competing, driving costs down…not begin a collusion driving costs up…similar to the comfortable working relationships between doctors, hospitals & insurance companies.

Kids are America’s assets…why do we find it so difficult to nurture them with decent healthcare, education and providing a slow, calm childhood!

Fair point.

I certainly didn't mean to equate collaboration and collusion.




Regarding Walmart's new "made in the USA" initiative, one MNB reader wrote:

Full disclosure: I’m a huge fan of the band Rush.

The new Walmart commercial caught my eye (and ear) yesterday when it aired during the Daytona 500.  It features one of my favorite songs, Working Man.  I couldn’t figure out what the spot was far until near the end when the graphic talked about Walmart’s pledge to buy $250MM in American made goods.  Then the irony hit me, their commercial features a song by a CANADIAN band.  Guessed they haven’t started that whole “buy American” thing just yet…..

From another reader:

If you watched the little bit of the Daytona 500 before the rain delay, it appeared Wal-mart had the most commercials, which were all geared toward made in the USA. I guess they know the NASCAR audience and what made in USA means to them. I agree with you that it may not be here to stay, and I think most of us remember they were the main company pushing for off shore production. The saga continues…




We had a piece yesterday about Mariano's, and I mentioned how people I know in Chicago love those stores.

One MNB user confirmed it:

Count me in on that double. Once as an industry observer and twice as a complete Mariano’s convert from the day they opened in my neighborhood. I haven’t set foot in the Jewel right across the street (which used to be “my store” for 15 years) ten times since they opened the door. The only other place that earns our food dollar these days is Costco.

But MNB reader Frederic Arnal had a different perspective:

I was initially enthralled with Mariano’s at first but have since cooled off.  Robert Mariano was known as a great innovator when he ran Dominick’s in Chicago.  They consistently came up with new formats  and approaches but often failed to sustain the execution.  Mariano’s today is a way for Mariano to get back into the Chicago market but I’m concerned that again he’s not fulfilling the promise.

The Mariano’s format today is essentially the Dominick’s Fresh Store concept from years ago.  An expanded bakery and prepared foods area was combined with a better-than-average produce department and a conventional center store.  That was enough then to create a difference.  Today with competitors like The Fresh Market, Sprouts and Whole Foods it’s not.  The produce department has fallen to just average.  Meat, seafood and deli need improvement.  Center store and frozen departments lack assortment.  Some of the stores are better than others, notably the city units.  The piano in the front of the store seems out of place.

Chicago has been one of the weakest supermarket environments in the country especially when compared to retailers at the level of Giant Eagle, Wegman’s, Hy-Vee, HEB, etc.  It’s dominated primarily by Jewel-Osco, a bland middle of the road retailer at best.  There is a tremendous opportunity here for Mariano’s.  I hope they seize it.




Regarding the situation at JC Penney, one MNB reader wrote:

It was nice to read the comments from your reader who, like me, felt the Ron Johnson approach to changing JC Penney was the right direction.  However, the number of commenters who attacked the Penney’s employee who submitted pictures of unkempt stores to the Huffington Post was a little disappointing.  Unfortunately, none of us knows the true motivation of this employee, or the exact context of the pictures.  Having worked on the retail front lines for quite a chunk of my life, for a variety of stores, I can recall many instances of being smacked down (figuratively, of course) for caring about my store/department.  Taking the initiative to make any improvements not rigidly spelled out by Corporate was NEVER acceptable.  I would be absolutely not surprised to learn that the shutterbug employee had been sent home early because of a mandate from somewhere above to control department (or store) labor costs, despite clear evidence that there was plenty of work to be done.

I think it is entirely fair to wonder about the employee's motives. But that doesn't mean the pictures misrepresented some of the problems facing the retailer … and denying that possibility is to defend the status quo … which strikes me as problematic if you work for JC Penney.




Going back a few days, we had a story about the problems facing Fairway, the NY-area food retailer that, I would argue, has been more focused on Wall Street than Main Street.

MNB user Don Stuart wrote:

"If you can make it in New York means you can make it anywhere."  This axiom doesn’t appear to ring true when it comes to grocery retailing.  Fairway’s IPO assumed the concept was scalable.  Whoops!  My daughter- a dedicated foodie and resident New Yorker-said, “no way this plays in Omaha, Dad”.  So, if you live in greater New York, enjoy the shopping experience; for all others, don’t invest.

The problem, of course, is that they're even having problems in the NY metro area.

One MNB user wrote:

We met with Fairway late last year and we have to we weren’t impressed. For a supposedly upscale brand for “foodies” as they themselves describe their position in the marketplace they had a decidedly down-market sensibility. Not only did we witness a Fairway employee in the office yelling at a colleague while we stood in the non-existent waiting area as if we were in a food stamps office waiting for our case worker, the person we met with who had a “VP” attached to his  name exhibited nothing of the kind of sensibilities we usually find when we meet with upscale food retailers around the country-which is our company’s focus.

The VP came from Pathmark - not exactly a “foodie” brand and spent a moment pining-it seemed to us-for the time when he was in charge of “magazines, cigarettes “ and other products as category manager. But his whole approach was one treating everything like a commodity.  His modus operandi revolved around how much he could beat up venders rather than truly evaluate what might be the best option for supporting the Fairway brand as upscale retailer. He didn’t appreciate anything about the differences in demographics between say Stamford, CT and Manhattan. It was one size fits all and how much slotting money is Fairway going to get rather than how will you help Fairway best serve its clientele.

It’s not surprising they’re  seeing a decline in same store sales when you consider how the customer is treated in the stores.  The original location is one thing, a product of a certain time … so why export the immigrant bazaar mentality to their other stores like Chelsea where there are … people who don’t want to be treated like cattle or they just got off the boat. We too have looking at their financials for a few years and we held off wanting to work with them because they don’t look right and after meeting with them we think we understand why.




Remembering Bill Davila, MNB reader Bill Renton wrote:

I worked at the Vons main office, first in El Monte, then in Arcadia, during Bill Davila's presidency (late '80s, early '90s), and an always interesting glimpse into Bill's humanity & effect on people would pop up every few months when Vons would publish a new edition of the company newsletter.  This news brief always contained short items honoring employees who had reached significant service milestones like 40 years, 45 years, etc.  The employees being recognized always had brief comments printed from being interviewed by someone from Corporate Communications, and invariably, there would be one or more quotes from long-time store employees along the following lines: "I was a Produce Clerk in store XYZ for 44 years, and the highlight of my career came one day in 1974 when Bill Davila toured our store; he walked through the produce department, came up to me and introduced himself.  Bill made me feel appreciated and proud to work for the Company."

Bill Davila was a truly great man, and knowing him on a face to face basis certainly was a highlight of my own career.




On another subject, MNB reader Larry Bourland wrote:

Your rebuttal as to whether a publicly traded company should reinvest income into higher wages is naive at best.  Management and boards are entrusted with delivering shareholder value which in most cases works directly against increasing expenses.  I would also argue that minimum wage should be tied to inflation given the basic economic formula that the only justification in increased wages is either a corresponding increase in productivity, or inflation.

Maybe I'm naive. But then, I'm just naive enough to think that shareholder value can actually be burnished by a philosophy that rewards front line employees, makes them feel both valued and engaged, and invests in the people who can make a difference.

And, BTW… many of the same executives who say it is their job to cut, cut, cut expenses at the front lines don't seem to worry about expenses when it comes to negotiating their own pay and benefits packages. You may think my argument is naive. But I think yours is cynical. Unfortunately, I think your POV seems to be winning.

MNB reader Denis Zegar wrote:

Platitudes about pulling oneself up from the boot straps is just that, platitudes with no basis in today's economic reality. Our economy is in a transitional stage moving from hands-on manufacturing to robotics, which requires new skill sets. Not everyone will be capable of making this transition. Does society abandon these individuals or does society enable them to make a contribution albeit limited by allowing them to retain some pride in what they are doing?

The constant bantering about "how I worked at a minimum wage job while going to college" is a non sequitur in today's world.  My college education at one of the best universities in the country cost all of $1000 for the 4 years.  Even in today's dollars my education 40 years ago was a pittance.  Getting an education, if you are poor, is daunting and unimaginable for most.  Raising the minimum wage will help many more than it will hurt. It gives people a fighting chance to move up the ladder of "working" poverty.  The alternative is the fostering of a "Downton Abbey" society.

Agreed.




Got the following email from MNB reader Skye Lininger, responding to my piece, “From Buggy Whips to E-Commerce.”

With every seismic innovation, there are winners and there are users. Buggy whip sales declined, but cars were a better solution. With cars came repair shops, gas stations, interstate highways, motels, and fast food. All this is celebrated in Steinbeck’s “Travel’s with Charlie.”

The Internet, software, and technological advances in chips and hardware form a triumvirate that is more powerful in its ability to create rapid innovation and disruptive change than anything that has preceded it. Every industry is in one phase or another in being impacted. And, this rate of change is only going to accelerate as the “wiring together” of everything—from devices to the “Internet of things” to the data about them and the people that use them—continues relentlessly. No industry, service, or way of doing things will be untouched. If you think your business is immune, you are just not paying attention.

What can you do? In our opinion, every business and service should have teams focused on understanding how disruptive technology could impact its business model. Unfortunately, we see many organizations leaving this to their IT departments, who are not equipped to think about disruption—their focus is day-to-day and operational; or under-funding and under-resourcing the teams or partners that could help lead them into the future.

In baseball terms, we are only in the early innings. The pace is accelerating. As Ken Kesey said, “You’re either on the bus or off the bus.”




Interesting comment from a reader about my review of Dave Barry's new book:

I’m a longtime fan of Dave Barry, so thank you pointing me to this new collection 🙂

But wow, does he have an appalling haircut; it only seems to be getting worse. I think this author’s name has enough recognition, and his picture is best restricted to the inside jacket.

Actually, I think when you are Dave Barry you can have any haircut you want. I was more surprised to find out he was 65 years old. Must have a portrait in his attic that is aging rapidly.




And, responding to one of my recent movie reviews, one reader wrote:

Loved your reference to The Train last week! I saw it recently with my daughter at a small repertory theater in Minneapolis. A great film that holds up well, even after 50 years. Hopefully The Monuments Men will draw attention to it and allow new audiences to find this under-appreciated classic.