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    Published on: April 22, 2014

    by Michael Sansolo

    Will on-line shopping take hold and can it be done in a way that is actually profitable? Is social media simply an environment for making “friends” or is there actually a business building application?

    Those and a thousand other questions make up the unknowns in business today. In truth, in most cases we really don’t know what the future holds.

    But an interesting parallel came up this weekend in an article on baseball in the New York Times that demonstrated both the hazard of being too far ahead of your time and the power of new measurements to alter the status quo. Hopefully, even the non-baseball fans out there can appreciate this.

    Each week, the Times Sunday magazine runs a feature called “Who Made That?” examining the origin of all manner of products, services and ideas. This past week they examined the concept of the relief pitcher.

    At one time, relievers were rarely used in major league baseball. The pitcher who started the game routinely took care of all nine innings. In the 1870s, more than 90 percent of games featured just one pitcher and by 1921 that was still the case in 52 percent.

    In 2013, just 3 percent of games fell into the category of complete games - pitched by a single player. In short, this has been a stunning change in strategy and tactics and also a reason why baseball games now take so much longer to complete. Pitchers now are specialists, with some facing only certain types of hitters or only working the final three outs of the game.

    The idea for all of this actually came up in 1903, when John McGraw, manager of the New York Giants, unveiled a new plan to split games between two pitchers. His idea was seen as original and nervy but was soon abandoned. McGraw, like so many others in so many fields, found the thin line between the leading and bleeding edge. In short, he was too far ahead of his time.

    According to the Times analysis, the role of the relief pitcher didn’t fully blossom until 1969 when baseball created a statistic - the save - to reward relief pitchers for doing their job. Baseball historian John Thorn said the statistic changed the way relievers were perceived and used.

    “Managers are in some measure, prisoners of the statistic," he says. "The creation of the save has come to drive their strategy.” In short, a new statistic provided clear value to a specific role, leading to newfound importance for relievers from Bruce Sutter to Mariano Rivera, who revolutionized and dominated the game.

    So what does that tell us about business?

    First, it reminds us that innovators don’t always succeed. It’s possible that someday Amazon Prime might be seen as the Rivera of home delivery, making everyone take a different look at the countless services that came before. Or it maybe that Prime is another innovation that came along at the wrong time.

    We can’t know.

    Second, it reminds us that sometimes we don’t value things because they aren’t easily measured by familiar and current standards. In my work with social media folks throughout the industry, I hear them voice a similar concern. Inside their companies, many layers of management don’t see how Facebook, Twitter or the rest will help build sales, profits and loyalty. Consequently support is slow to grow, handicapping efforts even more.

    Again, we cannot know if social media will become a powerful marketing force, but we somehow have to measure it differently than an ROP ad.

    That’s the thing about innovation, we can’t know. John McGraw conceived a baseball innovation, but was nearly 70 years ahead of his time. Yet had he and others not pushed the change a new statistic wouldn’t have been created and the impact of a brilliant player like Rivera might have gone unnoticed.

    We can’t ever know.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: April 22, 2014

    by Kevin Coupe

    eMarketer has a story about a new study from AYTM Market Research indicating that when US consumers choose to do business with small companies instead of big ones, there are two major reasons. According to the study, 56.2 percent of the time it is to support the local economy, and 52.7 percent of the time it is because of personal service. Almost 30 percent of the time, it is because of having higher quality items; 27 percent of time, it is because of lower prices.

    And, the story continues, "An August 2013 study by and Toluna found similar results. The factor that US consumers considered the most important when choosing small businesses over other types of businesses was customer service (86% of respondents). Personalized and intimate experiences as well as small businesses’ understanding of customers’ needs were also popular, each cited by 84%."

    These numbers are not surprising. In fact, it would only be a shock if people preferred small business for other reasons. But the facts are good to keep in mind, especially when they are illustrated by actual experience.

    Last weekend, Mrs. Content Guy and I were in Manhattan Beach, California, and she suddenly found herself in need of a shoemaker. (Nothing major … just a little fix to make her shoes more comfortable.) We actually found on on the main street there, and discovered in chatting with the owner that his grandfather started the business 80 years ago. They've been saved from rent increases by owning their location, and they offer not just the kind of shoemaking skills that can be hard to find in our disposable economy, but also great service. They helped Mrs. Content Guy out in about two minutes, and I also noticed a sign saying that if customers have a hard time parking (Manhattan Beach can be a pain!), they should just give the store a call, and then toot their horns when they arrive so that the owner can come out and take care of them.

    That's pretty cool. While the folks in this shoe repair shop might not think of themselves as "customer-centric," that's exactly what they are - they are offering a hard-to-find, personalized service that remains necessary, and doing everything they can to make the shopper's life easier. And when you go in, you feel good about the experience.

    It was an Eye-Opener.
    KC's View:

    Published on: April 22, 2014

    Bloomberg reports that Ohio State University researchers have published a study suggesting that in states where sales taxes are being charged for online purchases, Amazon's sales are being affected.

    According to the story, "In states that have the tax, households reduced their spending on Amazon by about 10 percent compared to those in states that don’t have the levy. For online purchases of more than $300, sales fell by 24 percent."

    However…while bricks-and-mortar stores in the states where sales taxes are being collected by Amazon saw a two percent increase in sales, the real benefit seems to accrue to other online retailers, which saw a 20 percent increase in sales. And, ironically, "the biggest sales uptick -- 61 percent for big-ticket items -- went to merchants that use Amazon Marketplace. These outfits pay Amazon a fee to offer products through the Amazon website, yet don’t collect taxes. The products are typically available alongside Amazon’s own listings.

    "That means Amazon still indirectly benefits, since it collects a fee from merchants on its marketplace."

    Bloomberg notes that "Amazon collects sales tax in 20 states, according to its website. More are set to follow as the company has become a popular target to help state governments generate more revenue to cover budget shortfalls; Florida is set to begin charging a tax on May 1. States lose an estimated $23 billion a year in uncollected sales taxes from Web retailers."

    KC's View: The loophole seems to be size; many of the online retailers not collecting sales taxes are said to be too small to be affected by the new state laws.

    This study runs contrary to what many experts believed would be the case with Amazon as sales taxes began to be collected; while I'd never qualify myself as an expert, I've tended to agree that sales taxes wouldn't be a big deal.

    I will say this. It is absolutely fair for online purchases to be taxed at the same rates as purchases in physical stores, and Amazon is going to have to figure this all out - it has to make sure that its value proposition in terms of price, selection, speed of fulfillment and the broader customer experience more than compensate for the fact that sales taxes are now being added to purchases. I happen to believe that this is exactly what they're focused on at Amazon, and that the long-term prognosis is good.

    In the short-term, Amazon may lose business from people who only shopped there to avoid sales taxes. But in the long-term, I believe its customer-centric model will serve it well.
    KC's View:

    Published on: April 22, 2014

    The Wall Street Journal has a report - based on a new proxy statement - on the $9.4 billion acquisition of Safeway by Cerberus Capital Management, saying that the "heavily negotiated deal" came after Kroger, in fact, offered more money for the company but had to pull out of the bidding because of concerns about antitrust issues.

    According to the story, "Safeway signed a deal with Cerberus on March 5 but gave Kroger a chance to continue its due diligence during a three-week 'go-shop' window. Kroger conducted 'extensive' due diligence and contacted 26 potential buyers of Safeway stores that would likely need to be sold to get antitrust clearance. But the grocery chain eventually bowed out, citing the costs associated with making divestitures. "

    The final deal, expected to close later this year, combines Safeway with Cerberus-controlled Albertsons, which is the nation's fifth largest grocery chain.
    KC's View:

    Published on: April 22, 2014

    Variety reports that Netflix announced yesterday that it plans to raise prices for new subscribers to its streaming video services by one or two dollars a month - depending on the country - but will "grandfather" existing customers at current rates for a period of one or two years.

    The announcement came as Netflix said that it "added 2.25 million streaming subs in the U.S., in line with its previous guidance, and 1.75 million internationally (vs. previous expectations of 1.6 million). It ended the period with 48.35 million total."

    The move is different from 2011, when Netflix tried to simultaneously raise prices and separate its DVD rental and video streaming businesses, an effort that resulted in both a customer revolt and analyst suggestions that the Netflix business model was about to crash and burn. However, Netflix quickly reversed the decision, apologized, and focused on both international expansion and original productions (like "House of Cards") that it could use to differentiate itself.
    KC's View:
    It is the increased cost of original productions that Netflix is using to justify the price increase … and I suspect that this time the move will go down a lot more smoothly than the last time. The fact is that Netflix has distinguished itself with "House of Cards" and other original series, and a lot of people will be happy to pay the extra buck to have access to them.

    Published on: April 22, 2014

    The Boston Globe has a story about how independent grocery stores there "are worried about their livelihoods as big supermarket chains such as Wegmans and BJ’s Wholesale Club open more locations in Greater Boston neighborhoods. The arrival of new competition is particularly troubling for small grocers already struggling to gain market share in an industry dominated by large companies."

    The story notes that next week Wegmans will open a new 80,000 square foot store - small by its standards - in Chestnut Hill, five minutes from a store called Baza Gourmet Foods and Spirits, owned by Andrian Shapiro.

    "Shapiro said his store has competed with nearby Whole Foods and Shaw’s stores for the last six years by offering Eastern European foods his customers cannot find anywhere else," the Globe writes. "With a large produce section and many specialty counters, Baza resembles a smaller, Russian version of Wegmans. It is packed with counters serving smoked fish, meats, cheeses, sandwiches, and other prepared foods. A hot foods section serves duck wings and draniki, a Russian potato pancake. The bakery offers fresh khachapuri, a Georgian cheese bread, and smetannik, a Russian sour cream cake.

    "But Wegmans’ reputation and emphasis on fresh produce prompted Shapiro to make changes in his store. He spent $200,000 on a liquor license last year and now serves a unique collection of Russian vodkas. The store also sells a variety of European beers like Leffe from Belgium, the German brand Bitburger, and Lezajsk of Poland.

    "Shapiro also created a customer loyalty program that gives big spenders a small discount, and he recently introduced a grocery delivery service. He intends to run advertisements before Wegmans’ arrival, offering deals on produce, such as tomatoes for 99 cents a pound."
    KC's View:
    New entrants will make life difficult for everyone in Boston. But I am impressed with what Shapiro is doing - he's created new niches, offering new products and services, and promoting, promoting, promoting.

    "Compete" is a verb.

    Published on: April 22, 2014

    The Glasgow Evening Times reports that following on a series of price cuts on staples such as butter, milk and eggs, Tesco is additional UK-wide price cuts on more than 30 items that include "bacon, baked beans, broccoli, peppers, sugar, lettuce, cucumber portions and lines from its bread ranges."

    And, embattled CEO Philip Clarke says, there will be more price reductions in coming months as the company looks to dig itself out of a revenue and profit hole that reflects a series of recent declines that has led to diminished market share.
    KC's View:
    I do love the quote in the story from Tesco UK marketing director David Wood, who says, : "I'm absolutely delighted we can do this for our customers. We never stop thinking about how to make their lives better and easier, and these new lower prices on everyday products will really help families on a budget."

    Which sort of translates into "We're going to do everything we can to keep this ship afloat and save our jobs."

    What Tesco has to worry about, it seems to me, is whether price cuts are enough. Because if UK residents have become reflexively anti-Tesco - or, worse, reflexively pro anyone else - simply cutting the prices on bacon and broccoli may not do it.

    Beyond that, I keep hearing more comments from readers about the so-called "culture of fear" at Tesco, and how Clarke's leadership is being questioned not just by the investor class, but at many levels from within the organization.

    Published on: April 22, 2014

    Business Insider has a story about Louis Borders, who launched the Webvan e-grocery service in 1999 only to see it collapse when it tried to expand outside the San Francisco area, taking with it hundreds of millions of dollars in investment capital.

    He's gonna try again.

    According to the story, "a stealth startup called Home Delivery Service" can be found on Borders' incubator website, describing the service as offering shoppers "a single online store to shop for fresh foods and general merchandise from the world’s leading retail brands … The company will have distribution centers where it will assemble multiretailer orders in returnable totes that it will send to users free, with same-day delivery."
    KC's View:
    If that doesn't work, maybe Borders will try the book business…

    Actually, I think it would be a great story if the founder of one of the worst dot-com failures ever got a little redemption. I'd certainly be willing to try his service.

    I wouldn't invest in it. But I'd try it.

    Published on: April 22, 2014

    • The Toronto Star has a story about how Walmart Canada has linked up with a new discount law firm - Axess Law - designed to provide "fast and affordable legal services to time-pressed shoppers. Simple wills are $99. Notarized documents are $25, plus $19 for each additional document." (The firm will add uncontested divorces to its suite of services later this year.)

    There are four such Axess Law offices open in Walmarts now, with more to come; they are open seven days a week until 8 p.m.

    The story notes that Axess was founded by two Toronto lawyers, Lena Koke and Mark Morris, "who met at the University of Toronto Rotman School of Management while completing their MBAs."
    KC's View:

    Published on: April 22, 2014

    • The Chicago Tribune quotes the new president of Jewel-Osco there as saying that things are the chain are "getting better, but we've got a long way to go." Shane Sampson, who took over the presidency of the company last month, says that he's visited more than 100 of the chain's stores in that time and is "constructively dissatisfied" with what he has seen.

    The goal, Sampson says, is to improve both the company's fresh foods and customer service profile … and he has to do so at a time when the competition is getting tougher (from the likes of Mariano's, Whole Foods, Heinen’s Fine Foods and Fresh Thyme Farmers Market), even though the major competitor - Dominicks - has abandoned the market.

    • The Huffington Post reports that Chipotle plans to raise its prices across the board for the first time in three years.

    According to the story, "The price hikes aim to address pretty much the only problem that roiled Chipotle during what was an otherwise pretty good quarter: Food inflation. The prices of beef, cheese and avocados have all reached elevated levels in recent months and are expected to stay high. As a result, Chipotle executives felt it was time to pass the cost onto customers."
    KC's View:

    Published on: April 22, 2014

    Advertising Age reports that Campbell Soup has hired Umang Shah, Walmart's director for social media strategy for the past two years, to be its new global director for social media and digital marketing.
    KC's View:

    Published on: April 22, 2014

    Continuing our discussion of wage disparity, one MNB user wrote:

    In the late 70’s and early 80’s, I had been working at my Uncle’s restaurant and making not much more than minimum wage, including my tips (a poor, shortsighted decision). In the early 80’s, I started in retail as a 22 year old who hadn’t done much preparation for a career and more or less fell into a job as an apprentice meat cutter with one of the chains. Although grateful for the opportunity, I soon found that as a journeyman meat cutter I might initially make more money than many of my friends who were just graduating from college, my options would be limited and the career channel narrowed. In addition, my pay would soon top out while my friends’ earning power would continue to grow. I would also work weekends, holidays and various less-than ideal shifts over the next 20 years, all while being treated as an expendable commodity. Combined with my wife’s income as a medical assistant, we struggled as we raised 7 children on that meat manager salary (again, my choice).

    I’d always kicked myself for not having furthered my education but had felt trapped by my circumstances. In the end, I discovered that it was only my limited perspective that kept me “trapped”, that this was my life to live and that if I didn’t like my circumstances, it was up to me to change them. So, at the age of 41, I quit the business, acquired my real estate license to allow for more flexibility, and earned a 4-year degree in the next 18 months. Suddenly, the world was wide-open with a myriad of opportunities at my feet. To make a long story short, I’ve spent the last 11 years as a regional rep for a branded beef company which has provided me with not only financial blessings, but the opportunity to continue to learn, grow and share from my now 40 years in the food/meat industry.

    I don’t believe the minimum wage was ever intended to be enough to support a family on. I do believe it’s purpose is to allow for teenagers, college or tech students and secondary income earners to learn how to work, to acquire some job skills and additional knowledge which will allow them to take the next step. My poor, shortsighted planning put me in a position where my work choices were limited. In the end, the opportunity to change that dynamic was in my hands. The same applies to my wife who could have chosen to earn her nursing degree vs. earning the much lower income of a medical assistant. I fully understand that there are those who because of no fault of their own (disability, etc.) may not be able to ever overcome their circumstances. Those individuals are the ones that the public assistance safety net should be helping. Those who have chosen not to plan, work and climb any higher than they are today have that right. They DON”T have the right to command a higher wage than what the free market will pay. Jobs pay what individuals are willing to work for. To artificially inflate that wage is a slippery slope and in the end will do nothing to help those individuals overcome their circumstances, as prices will rise to compensate for those additional labor costs. Personal responsibility coupled with a compassionate public assistance program for those who CAN’T do for themselves seems to me to be the answer.

    I would never presume to quibble with your life view. After all, it is your life that created it.

    I'm not sure it is true that the minimum wage was created just for teenagers and secondary earners. Rather, it always has been my impression that it was created by FDR as a way of preventing workers from being exploited.

    I do find it interesting that some people think that working in retail is a circumstance that people ought to be able to rise above, while at the same time there is a suggestion in many quarters that the one thing that would help many retailers survive is to have better, more engaged employees to improve the customer experience. I'm not sure those two views go hand-in-hand.

    From another reader:

    I find it odd that there remain people who think a company can't know about the personal situations of its employees in this day and age.

    But, assuming they do not have electronic ways to do it, here's an old-fashioned way.

    Employee wage + Number in Household + Working partner (yes-no) + poverty level = Pretty Good Guess.

    When I started out as a cub reporter in 1972 that was how we had to do things and if memory serves, we came pretty close with our pre-internet techniques.

    And another:

    Just thought I’d chime in on the Walmart conversation regarding public assistance. One of your readers said the study was based on one store in Wisconsin. What constitutes public assistance? I only ask because Wisconsin is a state that offers part time unemployment. Meaning, if you lose your FT job, obtain  a part time job as a replacement, you still qualify for reduced unemployment to cover the other 20 hours per week.

    This happens often with workers at Walmart in WI. They’ve lost lots of manufacturing jobs and these people end up working at Walmart less than full time. The state’s UI program kicks in to offer them assistance. This study is unfair in that it takes a particular state unemployment law and applies to Walmarts entire US workforce. Other states do not offer part time unemployment.

    I learn something every day.

    BTW…on the subject of wage disparity, I'd like to offer this story, which appeared yesterday on Marketplace, from National Public Radio:

    "Wealth is the value of everything you own: stocks, bonds, your home, your car -- minus your debts. And while income inequality has taken center stage in debates about the growing gap between rich and poor, what's happening with wealth paints an even more staggering picture.

    "The wealth share of the 0.01 percent, or the top 16,000 families in America, has skyrocketed. That tiny group now owns 12 percent of the wealth in America.

    "The wealth of the larger one percent  -- and even the .5 percent -- isn't rising.

    "These days, if you want to be among the biggest winners, says UC Berkeley researcher Gabriel Zucman, who co-wrote a new report on wealth, it helps to be in the 0.1 percent or better.

    "Around 50 percent of the US population, Zucman said, has zero net wealth. Their debts, effectively, equal their assets."


    I'm not sure what the solution is. The top earners in this country should not be demonized (unless they do something illegal or immoral to accumulate that wealth). And I'm pretty damned sure that raising the minimum wage to $10 or $15 won't solve the broader problem.

    But I do think that if you have this kind of disparity, with trend lines suggesting that the chasm is getting wider, not smaller, then there is a socio-economic and cultural issue that needs to be addressed.
    KC's View:

    Published on: April 22, 2014

    Meb Keflezighi, a 38-year-old immigrant from Eritrea, yesterday became the first American citizen since 1983 to win the Boston Marathon, with an time of 2 hours, 8 minutes, 37 seconds.

    Rita Jeptoo of Kenya won Monday’s women’s race in 2:18:57, a course record.
    KC's View: