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    Published on: May 6, 2014

    by Michael Sansolo

    On its own, the news of Gregg Steinhafel’s ouster as CEO of Target in the wake of the company’s unprecedented data breach is one big story. Yet it may only be a piece of an even bigger one.

    Stop for a moment and consider how many large retailers have changed CEOs in say, just the past two years. The list would start with Walmart, Kroger, Safeway, JC Penney, Supervalu, Delhaize (global and America, including Food Lion and Hannaford) and now, of course, Target.

    Now there’s two obvious points to make. First, that list is hardly complete, rather it’s just top of mind. Many other retailers of all stripes have also changed leadership in the past two years.

    Second, and more importantly, there is very little or nothing in common in the leadership shifts at all these companies. In some cases (think Kroger) the change was quiet, planned and orderly. At other companies the skies were darkening, storm clouds were gathering or, in the case of Target, it was raining like crazy.

    Yet the reality is that an incredible amount of leadership talent just moved around at the top of US retailing. That’s something that has to matter.

    For instance, all of the new people in place all share a similar goal and desire: to improve the performance of the companies they are now running, no matter the circumstances that caused their elevation. That alone means throughout the industry there will be pressure on all parties for improved sales and profit performance.

    In many of these companies there will be new initiatives to revive stagnant fortunes, which in turn means there simply has to be a ratcheting up of pressure. It means new optimism, new competitiveness and possibly new growth goals that include mergers and acquisitions. There is also new uncertainty at companies that taken together account for hundreds of billions in annual retail sales.

    While all this change may be coincidental, it also happens at a very interesting moment, when all of retail is increasingly aware of how economics is changing the basic demands and habits of shoppers; how demographics are changing those very shoppers themselves; and how technology is shifting everything from how we buy to how we form communities.

    In other words, the to-do list is something special and that means all this change should be on your mind.

    • If you do business with any of these companies you should be thinking about how their demands on you might be changing. That could be really good or bad news, depending on how effective you are. Either way, you have a terrific topic for the next staff meeting.

    • If you compete with one of these companies, you need to think about how that could change. The future could hold greater pressure on price, a better focus on localization of marketing or some other shift impossible to foresee. The companies you compete with today could be very different in a year or two and you need to plan for that.

    • We all have to believe that the new leaders at each of these companies are spending significant time thinking about how to deal with the problems at hand and the problems soon to come. That means expect experiments and examination of web-based shopping. If these new CEOs plan to keep the job for any length of time they have to be acutely aware that the battle with is coming on their watch.• That in turn has to make you wonder how they’ll compete with a company that quite publicly talks about forgoing immediate gains at the expense of long-term success. Fighting Amazon won’t be a conventional marketplace war.

    One final question…

    What kinds of plans do you and your company have for succession?If this run of executive movement tells us anything, it’s that change is constant and in most cases, you can only plan to a point.

    And to think, there are those who believe that "Game of Thrones" is fictional.

    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: May 6, 2014

    by Kevin Coupe

    The Wall Street Journal reports that for the first time in a decade, Walmart's annual online sales grew more than Amazon's - up 30 percent to $10 billion in 2013, compared to up 20 percent to $67.8 billion.

    Amazon's total sales were more than its next 10 biggest competitors - combined. (That list of competitors includes Walmart, Apple, and Staples.)

    According to the story, "Wal-Mart is intent on catching up with Amazon. To that end, the retailer is buying up e-commerce businesses. On Tuesday it is expected to announce the purchase of Adchemy, a search-engine marketing company that helps retailers optimize their use of search terms. It marks Wal-Mart's 12th e-commerce acquisition in three years … Wal-Mart has spent heavily to boost its online presence. In the year ended Jan. 31, it plowed roughly $500 million into e-commerce investments, including opening three new online fulfillment centers in Texas, Pennsylvania and Brazil and hiring 1,000 employees in Silicon Valley."

    In my view, this illustrates why Amazon is likely to maintain its approach of reinvesting its profits in research and development - and most important, implementation - of new services that will drive new customer interactions. While this looks like Amazon isn't making any profit, the fact is that it cannot afford to relax … not even for a moment, much less for a quarter or two, and not even when investors get restless. Amazon has to count on the fact that its long game is going to work, and that there will be enough customers - and investors - that support its vision.
    KC's View:

    Published on: May 6, 2014

    AT Kearney is out with a survey suggesting that "local food is fast becoming a necessity for attracting and retaining grocery customers. Comparing survey results to the 2013 survey, an increased number of shoppers indicate that local foods are an important factor in what they buy and where they buy it. A majority of grocery shoppers in the survey indicated that they think more highly of retailers that carry local food and will consider switching retailers to find better local food selections."

    According to the survey:

    • "More than 40 percent of respondents say they purchase local food on a weekly basis, and another 28 percent buy local food at least once a month. A majority of respondents say that local food helps the local economy (66 percent) and brings a broader and better assortment of food (60 percent). It is clear that retailers offering local food will positively influence customer perception."

    • "Local food awareness and price perception have improved over the 2013 survey results. Sixty-eight percent of respondents say they are aware that their supermarket of choice offers local food. Similar to 2013, shoppers indicate their primary reason for not buying more local groceries is lack of availability at their retailer of choice. In the 2014 survey 47 percent of respondents say availability is the primary reason they do not buy local, down 10 percent from 2013, which underlines growing awareness of local selections."

    • "Seventy percent of consumers say they will pay a premium for local food. One-third of survey respondents (compared to one-quarter in 2014) say that they will pay a 10 percent premium for local food."

    The survey also says that "big-box and national retailers still lag in customer perception when it comes to providing high-quality, affordable fresh and local foods."
    KC's View:
    I've always said that I became a local food convert when, having had the best BLT of my life, found out that the bacon came from pigs raised just down the road. And I think that it seems entirely likely that "local" will end up having more staying power than "natural" (a largely meaningless term), and may even outlast "organic" as being important to consumers.

    Published on: May 6, 2014

    Bloomberg reports that Amazon and Twitter have signed a deal that lets Twitter users "shop directly from posts on its microblogging service, part of a push to add e-commerce options for advertisers."

    The story goes on to explain that "when product links appear in a tweet, U.S. customers can add the items to their Amazon shopping carts by replying to the post with the hashtag #AmazonCart … While Twitter won’t get a cut of individual sales, Amazon will increase spending on Twitter advertising products … Amazon and Twitter users must connect their accounts on the two websites to enable the new service, and the shopping tweets will be shared publicly in Twitter feeds if the user’s account is unlocked, Seattle-based Amazon said on its website. The items won’t be purchased until users go to their Amazon shopping carts to complete the transactions."

    According to the piece, "By enabling e-commerce, Twitter is aiming to keep consumers on its site for longer and learn more about their interests and shopping habits - valuable information for advertisers, which contribute the bulk of the company’s revenue."
    KC's View:
    This is all part of that I've been calling the"long game" - Amazon finding ways to connect with customers whenever and whenever possible. it is about being both the first option and creating a path of least resistance between customers and the products in which they are interested. Or, as Jeff Bezos likes to say, "making it easier for people to buy things."

    Published on: May 6, 2014

    The Los Angeles Times reports that Best Buy will begin featuring in-store entertainment boutiques in its stores, with Samsung Entertainment Experience sections in 500 stores and Sony Experience sections in 350 units.

    According to the story, "Last year, Samsung opened hundreds of mini-shops inside U.S. Best Buy stores that focused on the brand's smartphones, tablets, laptops, cameras and accessories. The latest iteration is driven by home theater offerings. In particular, the new shops will highlight Samsung's latest line of televisions, including its selection of curved ultra-high-definition TVs, and home audio products … Sony says its Experience at Best Buy shop-in-shops will provide customers with interactive demonstration areas and dedicated Sony Experience Experts. It, too, will be heavily touting UHD television sets, also known as 4K."
    KC's View:
    It seems to me that this represents a calculation on Best Buy's part that its brand is far less important to consumers than the brands it sells. Which may not say a lot about Best Buy, but I still think this is a good idea … it at least provides the retailer with a reason for being, and saves Samsung and Sony from trying to copy the Apple Store.

    Published on: May 6, 2014

    In the UK, the Daily Mail reports that Tesco is fighting against "pound shops" - which, in the US, would be called dollar stores - by creating "pound shop" areas in more than 60 stores, with expansion to close to 300 over the next few weeks.

    According to the story, "A range of products will be sold for as little as 50p, including items such as health products, kitchen tissues, washing-up liquid, pet food and detergents."

    And, the story goes on to say, "The Tesco launch highlights just how severely the success of the pound shops is hitting the profits of established supermarket giants in Britain."
    KC's View:
    Some of this kind of stuff is necessary, but I can't shake the feeling that Tesco is playing a lot of defense these days, and not a whole hell of a lot of offense. And that's never good.

    Published on: May 6, 2014

    MediaPost reports on a new Deloitte study saying that "private-label brands, which gained so much ground during the recession, are still drawing new fans: It reports that 88% of consumers now swear by store brands, and say they have found many private-label products just as good (or even better) than their former favorites."

    Indeed, the study says that more than seven out of 10 respondents "believe they are spending less on their grocery bills, without sacrificing much. And only 31% say brands can be a 'must have,' something they’d buy whether it was on sale or not." The segment sin which brands are cited as being most important: beer, soft drinks, pet food and coffee.

    Pat Conroy, vice chairman, Deloitte LLP and U.S. Consumer Products leader, says that many brands are suffering from "a crisis of the similar," which means that they don't give consumers any compelling reasons to buy them.
    KC's View:
    "Crisis of the similar." I love that. I think I'm going to steal it. Because I think it sums up the problems facing not just a lot of brands, but a lot of retailers trying to define for themselves a differential advantage in the marketplace.

    Published on: May 6, 2014

    • The Associated Press reports that "Dunkin’ Donuts has been quietly building up its presence in Europe and now has 120 outlets, mostly in Germany but also in Russia, Spain, Bulgaria and most recently, Britain." This marks a return to Europe, where Dunkin' Donuts tried to establish a presence back in the nineties, but withdrew when things didn't go so well.

    The story notes that while Dunkin' Donuts features its mainstay menu of coffee and doughnuts, it also features some local products … such as, in London, "a savory snack called ‘'Bacon Buttie,' as well as porridge."

    • Coca-Cola said yesterday that in addition to removing brominated vegetable oil from its Powerade sports drinks, a move similar to that made by PepsiCo's Gatorade brand, it also will remove it from all its drinks that contain it - a list that includes Fanta and Fresca.

    According to the Associated Press story, Coca-Cola said that "it would phase out the ingredient to be consistent with the ingredients it uses around the world. It said it would instead use sucrose acetate isobutyrate, which Coca-Cola said has been used in drinks for more than 14 years, and glycerol ester of rosin, which it said is commonly found in chewing gum and drinks."

    • The Financial Times reports that "Germany's Bayer has agreed to buy Merck's consumer healthcare business for $14.2 billion, ending an auction for a business that makes Coppertone suntan lotion and tempted suitors including Britain's Reckitt Benckiser.

    "The acquisition is a significant bet for Bayer on the US, where the consumer healthcare division, whose products also include the anti-allergy medicine Claritin, generates about 70 per cent of its revenue."

    • The Detroit Free Press reports that Kroger has decided to end the practice of double couponing in its Michigan stores, the company has announced. Kroger said that it instead will focus on across-the-board price cuts on thousands of items within its grocery, health, beauty and other departments." The practice is in keeping with what Kroger has been doing in other divisions.

    Interesting note: Kroger says that less than one percent of its shoppers are "traditional coupon users."
    KC's View:

    Published on: May 6, 2014

    Responding to yesterday's breaking news story about Gregg Steinhafel being out from the chairman/CEO job at Target, one MNB user wrote:

    It was time for Gregg to leave Target.  We’ll soon learn if the delay was caused by finalizing a buy-out package or just simply waiting until the firestorm was over (i.e. the same departure plan for Kathleen Sebelius, when she departed the Cabinet post over the flawed ACA rollout debacle). Or, figuring out if Bob Ulrich wants to come back…

    Most in the MNB community like Target because readers shop in / identify so well with their stores, which are more focused on higher income guests (shoppers). We all want TGT to win. However, there are at least eight challenges that lie ahead for the new CEO:

    • Inventory leadership – TGT has admired the inventory problem far too long and needs to deal with the in-stock issues and metrics they use. Even internals inside TGT know the metrics aren’t legit.

    • Culture – TGT doesn’t take enough risks. There isn’t enough being done in certain categories (like men’s softlines, seasonal, sporting goods and others). What is both a strength and a weakness at TGT is the willingness to innovate, risking that the TGT brand might feel some impact.  Men’s softlines have been horrible for years – even Costco is innovating in this space faster than TGT. “Exclusive at TGT” items are managed horribly – pumpkin M&M’s being the bellcow here since they are a couple years into this program and still can’t get inventory right.

    • Canada – Counter to my point above (where in fact risk was taken) Canada needs a re-think. I was recently in a couple of their stores and counted more teammates than guests on a payweek Friday. They made the same mistake as many global retailers who venture into their first international market by trying to recreate their home market stores. That works near the border – but it doesn’t work the further you get away from the border. They may need to retreat (I hope not) but for certain they need to “get local”.  John Morioka, Head of Merchandising for Canada, who’s considered a fast-track leader, seems to have his hands tied. John’s a better merchant than what the Canadian stores show right now.  The “A” team in Canada isn’t getting the job done. I don’t believe it’s their capability nor capacity….

    • Role of Private / Captive Brands – Gregg has been heavily focused on driving private brands which is not a bad thing unless your core shopper decides to shop elsewhere, which, is exactly what is going on right now. This is the time for Brands to play a major role in helping TGT regain their core shoppers. (But, there’s only so much soda TGT guests will buy, so running another “5/$10 12 pack offer” isn’t going into home but rather every caterer…hardly the core guest.)

    • Start paying attention to Vendors which aren’t the Top 20 but can innovate too – The “bigs” get preferential treatment at TGT. No one admits it but the reality is that when TGT HO teammates are stretched, it’s easier to leverage the large vendors  than to have to see the second / third tier of vendors (for something other than a “create my Private Label” discussion).

    • TGT Online – Pitiful doesn’t even begin to describe the current offer and alignment with stores. Gregg gets his panties in a wad around how one large vendor is managing Amazon vs. TGT – but candidly he didn’t make online a priority. Someone needs too. Quick.

    • Formats – “city” is an interesting idea in Minneapolis but not in many other cities. The new CEO needs to “fix the core” and worry less about small box TGT. It doesn’t seem likely the economics will work anytime soon. However, given the growth of small box retail, this is a focus area but the core needs to be sustainable first.

    • Credit – I’ll shamelessly repeat myself: Gregg could have prevented this problem by issuing TGT Chip cards long ago. (Like the rest of world uses….) In this case, differentiation would have saved his job. I guarantee you that other retailer leaders can thank Gregg for making IT a stronger focus in their company.

    The new CEO begins with some strengths, namely that they have a smart, young, hard-working culture inside Minneapolis HO, which are data-driven and brand-centric.  Core guests want a reason to go (back to) Target; they really don’t want to shop WMT. For the most part, the real estate is well situated. TGT have some good marketing vehicles, even if over-priced. Their enterprise can easily “sell more” and sweat the existing assets easily.  It’s a good time for a new CEO to make the right changes. (S)he should find it easy to quickly implement a change culture.

    I fear the Board will pick Ulrich to come back, under the heading of “stability with a leader we have history with, who got us here and will help us with succession”. I think it’s a better idea to get someone from an international market who’s dealt with much of the above. I can think of a couple of names (as you can, Kevin).

    I commented yesterday:

    I happened to be in a Connecticut Target store over the weekend, and I will tell you this - it was one of the crappiest big stores I've ever been in. The workers were ineffectual and lacked any sort of inventory knowledge, the shelves were only intermittently stocked, the displays lackadaisical, and the general experience was enough to make my skin crawl. I'm sure that every store is not this bad, but I'm equally sure that this store is not an outlier - there probably are plenty of stores in equally lousy shape.

    I walked away from that store thinking that somebody needed to be fired. I didn't necessarily think it would be the CEO.

    From another reader:

    I have visited several Target Stores in NJ, as both a shopper, and a CPG professional, and I must say that your CT store experience is certainly not “an outlier”.

    I’ve been awestruck at the amount of O-O-S in the HBC area, OTC’s most notably, to the point that my family no longer considers Target as a destination for our OTC needs.

    While the pricing of OTC’s is great compared to chain Drug, wasting the time and gas to get to the store only to find the items needed as unavailable is a huge sales deterrent. Sales Prevention 101.

    Whomever replaces Steinhafel as CEO hopefully has the foresight and vision to “get it right at the shelf” as a prime focus area.

    And another:

    KC, I read your Target review and I must say the two stores near us in Austin TX are rather impressive. They are always clean and presentable, with fully stocked shelves most days of the weeks. As good as any other store in this area including the high priced Whole Foods. What is most impressive about Target is their line of private label brands....exceptional ! Cannot speak for other areas and/or how management functions overall, but if these stores are an example of what could be...the foundation is strong.

    We'll see.
    KC's View: