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    Published on: May 7, 2014

    by Kevin Coupe

    The Boston Globe has a story about a joint study conducted by Harvard Business School and New York University's business school into how the availability and use of reusable shopping bags affect consumer behavior.

    "Using transaction and cardholder data from a single 'major' grocery chain store in California – which was not identified – the researchers uncovered several fascinating examples of reusable bags changing shoppers’ buying patterns," the Globe writes.

    Among those conclusions are three major takeaways:

    • People who use reusable bags tend to make more environmentally friendly and organic choices, paying a premium for such goods and helping drive growth in these segments.

    • These customers also seem more willing to indulge in items like ice cream and snacks, at least in part because they feel good about their other choices; however, they also tend to be more vigilant about the food choices they make for their children, not being as willing to indulge them in sweets.

    • Interestingly, people who freely choose to use such bags tend to spend more at the supermarket, while people forced to use them because of local regulations tend to spend less.

    I'm a little skeptical about these results, if only because the sample seems limited - lots of customers and transactions, certainly, but things could read every differently in other parts of the country. (I love California deeply, but it usually is not representative of anything national … it is a unique place and experience.)

    That said … I do think that there is a lesson here. It is better for almost everyone if such transitions and trends are organic, not dictated by government. That's not to say that government should not have a role in establishing priorities and appropriate public policy responses, but people just do better when they make such decisions on their own.
    KC's View:

    Published on: May 7, 2014

    MNB editorial partner The Hartman Group has a good piece on its Hartbeat blog, in which it looks at the increased demand for fresh, healthy food, and how evolving retail competition - such as Walmart and Target expanding their focus on organics, and retailers like Sprouts emerging as legitimate players in a segment formerly dominated by Whole Foods - will both respond to and drive these shifting trends.

    The piece looks at the consumer and cultural perspectives, and is worth reading if one wants to get a sense of the broader picture. You can check it out here.
    KC's View:
    This is especially interesting right now because Whole Foods this week announced lower than expected quarterly revenue and profits for the third time in recent months, and projected weaker than expected numbers for the rest of the year. And there is growing skepticism among analysts about its plan to have as many as 1,200 stores, up from its current 380, especially because a growing list of competitors is vying for the same customers, often with lower prices. Which is forcing Whole Foods to compete more on price. (It has to be careful about this, because it does not want to lose its essential values proposition by stressing value, but doesn't want to ignore value to the extent that it loses relevance.)

    Understanding consumer motivations is key to understanding the competitive field.

    Published on: May 7, 2014

    Prosper Insights & Analytics is out with a list of what it calls "Customer Service Champions for 2013," based on consumer evaluations, and Amazon come sin at number one, followed by LL Bean, Lands' End, Kohl's, and Cabela's.

    In the 6-10 positions are JC Penney, Zappo's, Newegg, Macy's and Nordstrom.

    "With the retail landscape set to evolve and become more competitive as the pace of online and mobile shoppers grows," the report says, "all retailers will be tasked with providing consistent, secure, and delightful experiences for shoppers across all buying channels – a challenge that many of those who didn’t appear in this year’s top 10 list will surely take on."
    KC's View:
    erhaps the biggest surprise here is that JC Penney makes the list after all the problems it has, and that Lands' End - until recently owned by Sears - also makes the list.

    Do you believe in miracles?

    I'm a customer of four of these companies - Amazon, LL Bean, Zappo's and Nordstrom - and I'd vouch for all of them. And I'd argue that every retailer needs to examine their service policies and emulate them, because they are setting the tone for what consumers expect.

    Published on: May 7, 2014

    Walmart and Kellogg Company this week announced what they described as a new collaboration "to support the livelihoods of rice growers and sustainable rice growing practices around the world." Because "today's rice crops are under pressure from climate change, as well as a contributor to climate change due to methane emissions from current growing practices," Kellogg has said that it wants to "help smallholder rice growers advance their practices, while also reducing greenhouse gas emissions by 2020."

    Kellogg has committed "to promoting and supporting initiatives with producers in every country in which Kellogg sources rice globally, that will, by 2020, lead to a 25 percent increase in the adoption of Climate Smart Agriculture (CSA) practices."

    The announcement was made at the Walmart Sustainable Product Expo, described as "a three-day meeting with eight of the largest U.S.-based food companies" focused on "expanding the availability of products that sustain people and the environment."
    KC's View:
    It seems to me that we're likely to see more and more being done in this arena, and I think Walmart is smart to position itself as a kind of retail springboard from which manufacturers can launch, prove and grow environmental and sustainability initiatives. (Interesting note: President Barack Obama is supposed to visit a Walmart store in California later this week to talk about energy efficiency issues … which dovetails nicely with a lot of Walmart's priorities.)

    Yesterday's National Climate Assessment, issued by the federal government, only adds fuel to the fire. As the New York Times writes…

    "The effects of human-induced climate change are being felt in every corner of the United States, scientists reported Tuesday, with water growing scarcer in dry regions, torrential rains increasing in wet regions, heat waves becoming more common and more severe, wildfires growing worse, and forests dying under assault from heat-loving insects.

    Such sweeping changes have been caused by an average warming of less than 2 degrees Fahrenheit over most land areas of the country in the past century, the scientists found. If greenhouse gases like carbon dioxide and methane continue to escalate at a rapid pace, they said, the warming could conceivably exceed 10 degrees by the end of this century … The report is the latest in a series of dire warnings about how the effects of global warming that had been long foreseen by climate scientists are already affecting the planet. Its region-by-region documentation of changes occurring in the United States, and of future risks, makes clear that few places will be unscathed — and some, like northerly areas, are feeling the effects at a swifter pace than had been expected."

    The companies that embrace this information and act on it are likely to find themselves with a differential advantage. The ones that ignore it do so at their own peril.

    Published on: May 7, 2014

    The Wall Street Journal reports that Tesco plans to launch its own smartphone, called the Hudl phone, by the end of the year, hoping to earn some market share at the budget end of the spectrum. The phone will use Google's Android software.

    According to the story, "Tesco didn't give any details on pricing, but the new smartphone will likely fill a similar position to the Hudl tablet, which was launched last year at £119 ($201), toward the bottom of the market. Like the tablet, the Hudl phone will include a "T-button" linking to Tesco's online products, including grocery shopping, banking and Blinkbox, the retailer's on-demand music and movie service."

    The Hudl tablet is seen as being "a rare bright spot for Tesco during a period when it has struggled at home and abroad," and reportedly has sold more than 500,000 units.

    Meanwhile…also in the UK, the Mirror reports that Tesco has decided to eliminate in-store bakeries in as many as 100 of its stores.

    According to the story, "Fresh bread and bakery products will mostly be shipped in from a new facility in Weybridge, Surrey. The factory will also produce artisan bread for sale in new Euphorium concessions opening in the stores."

    Tesco is said to be considering expanding the initiative to other stores if it is successful in the first hundred.
    KC's View:
    The funny thing is that I remember interviewing then-Tesco CEO Sir Ian MacLaurin back in the late eighties/early nineties, and he emphasized that to remain effective and efficient, Tesco was embracing centralization - and central bakeries rather than in-store bakeries was one of the things he pointed to as reflective of the approach.

    The more things change…

    Published on: May 7, 2014

    MobileMarketer reports that Coca-Cola is testing what is described as "a line of interactive refrigerators integrated with augmented reality and mobile technology," which, the story says, "highlights the need for marketers to round out digital investments with physical assets to make the most of in-store experiences."

    The tests reportedly have been conducted in Atlanta, Tokyo, London and Australia, and the story says that the unit "leverages augmented reality, facial recognition, social media and mobile to dole out relevant offers and content to specific consumers in-store … The technology lets marketers push out coupons, promotional material and games based on data that is gleamed from the appliance, such as a shopper’s emotion.

    "For example, Coca-Cola can theoretically push out different offers to consumers based on demographic information that the fridges’ facial recognition features are picking up, such as age, gender or emotion."
    KC's View:
    Yikes. I guess this is going to be enjoyed and embraced by a lot of people, but I think they have to be careful to somehow turn this into an opt-in service. Nothing would annoy me more than be talked to by a refrigerator if I don't want to have such a conversation.

    Published on: May 7, 2014

    Crain's Chicago Business reports that in a speech at the company's annual shareholders meeting, Sears CEO/chairman Edward Lampert said that "closing stores is going to be part of our future … I'd rather do (fewer closures) rather than more, but the world has shifted."

    The story notes that "Sears has closed about 500 stores since 2005 — 305 of them since 2010 — but Mr. Lampert said he could not estimate how many more will shutter. He did say that whereas he previously would have kept a marginally performing store open in the hopes of improving it, industry changes and the shift to online means that today 'the decision more often than not is to not renew the lease'."

    According to Crain's, Lampert "outlined a vision of Sears' stores five years from now that will be physically smaller and sell both Sears merchandise and goods from third-party retailers, much the way the company's online Marketplace currently sells 120 million products, the vast majority of which are not Sears' own merchandise."
    KC's View:
    Sure, Sears has to subtract from its store count. But I think it'll be addition that determines whether or not it is successful … the addition of relevant products and services that make it a desirable option for shoppers.

    Published on: May 7, 2014

    • Alibaba, the Chinese Internet behemoth, yesterday filed for an initial public offering in the US, which is expected to raise as much as $15 billion. The numbers being bandied around suggest that Alibaba could end up with a higher market capitalization even than Google, and Alibaba described itself in its filing as "the largest online and mobile commerce company in the world."

    • The Associated Press reports that Nestle Purina PetCare Co. has filed a lawsuit against Blue Buffalo Co., accusing it of false advertising, disparagement and unjust enrichment and saying that it has been "misleading consumers about the ingredients in its dog and cat foods."

    According to the story, "Blue Buffalo advertises that its pet foods contain natural ingredients and do not contain chicken or poultry byproduct meals. The company also says the pet foods do not contain corn, wheat or soy - potential allergens for some pets. The suit claims that testing by an independent lab and funded by Purina showed that several Blue Buffalo products contained 'significant' percentages of poultry byproduct meal and corn. The suit also says several products promoted as 'grain-free' contain rice hulls."

    USA Today reports that Office Depot plans to close at least 400 stores by the end of 2016, resulting in annual savings of about $75 million. The story says that "the company's merger with OfficeMax resulted in an overlap of retail locations that needed to be consolidated."
    KC's View:

    Published on: May 7, 2014

    Reuters reports that Target interim CEO John Mulligan, who had been serving as CFO until the ouster this week of Gregg Steinhafel, says that he has no interest in the job for the long-term.

    However, he said, "Interim here does not mean idle. We are going to make progress and continue to make progress … This is about driving our business forward and not just maintaining it."
    KC's View:

    Published on: May 7, 2014

    Responding to Michael Sansolo's column yesterday about the new crop of retailer and supplier CEOs, one MNB reader wrote:

    Michael, one of the primary responsibilities of the Board of any company is to ensure succession for CEO and key roles. If the Board is doing their job, why do so many have to go to the outside to replace the CEO?  Shouldn’t those Board members be giving their pay back for not delivering their key responsibility as a Board member? 

    We all read AG Lafley’s HBR articles on Succession Management that he penned when stepping down from P&G, only to find out that Bob had to be replaced by AG himself. This is only one example of many; I called it out because someone felt that what AG did was noteworthy of a HBR feature.

    When do Boards start accepting accountability for their failure?

    Regarding our coverage of Target, and my assessment of the company's current status, MNB reader Anne Maas wrote:

    I have always been a huge fan of Target since shopping the stores in MN from a very young age, spending 8 years of my career in multiple positions within their HQ, and continuing to shop their stores faithfully since that time.

    My experiences in their stores have always been positive up until the past 6 months. We relocated to NJ and, like another reader, have found the stores not living up to the Target standards I have previously been accustomed.

    In-stocks are not great, the bathrooms have been horribly filthy, and there literally have been no carts available anywhere inside the store on multiple occasions. (And trust me, it wasn't busy in the store ...) During my last visit to a NJ store I was searching for a cart with multiple management-looking team members right nearby, none of which took notice and offered assistance.

    Not the Target I've always known and loved.

    But, from another reader:

    I am not happy with their mishandling of my private data but to your point on the state of some of their stores, one thing I will say in their favor is their stores are a thousand percent more cheerful, neat and clean and well organized vs other major discount/value chains that are literally depressing to walk into. I (used to) enjoy going to Tarzhay.  Less so now, but for data breach reasons, not because my store fell off. Walnut Creek CA store is a nice store.
    KC's View: