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    Published on: August 14, 2014

    This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy, once again coming to you from the classroom where I've spent some time this summer, enjoying my adjunctivity at Portland State University's Center for Retail Leadership.

    While out here in the Pacific Northwest, I've had a chance to do some traveling. And go figure, while on the road I ran right into a retailing and business metaphor.

    Readers of MNB know that I tend to climb on my soapbox when it comes to the actions by the French government to protect independent booksellers through legislation, rather than forcing them to actually compete with online retailers such as Amazon. And you know that when taxicab drivers decided to battle with Uber, the car sharing service, by protesting and blocking city streets rather than actually competing more effectively, I thought it was, to say the least, shortsighted.

    But let's not delude ourselves that such reactions are in any way a reflection of modern sensibilities.

    One of the places I went during my trip was a place called Whidbey Island, in Washington State, just north of Seattle. On Whidbey Island, there is a town called Coupeville … which was founded by a sea captain named Thomas Coupe. Well, as it happens, my grandfather's name was Thomas and my middle name is Thomas … though neither of us had anything to do with the founding of Coupeville. Still, it is fun to visit and learn a little history.

    Whidbey Island is separated from the mainland by a treacherous waterway that is called Deception Pass, and during the early part of the 20th century, the only way to cross Deception Pass was on a dilapidated ferry called the Acorn, run by a woman named Berte Olson. The Acorn didn't offer great service … there was no regular schedule, the boat didn't run if the weather was lousy, and you pretty much couldn't depend on it. You were at the mercy of whatever Berte Olson's whims happened to be.

    Still, when plans began to be drawn up that would build a bridge across Deception Pass, making it far easier for people to go back and forth, Berte Olson's first impulse was to - you guessed it! - lobby the governor to make sure the state would not fund the bridge and ruin her livelihood. And she was successful for a time, blocking inevitable and appropriate progress.

    To me, that's precisely the wrong response. When competition looms, you have to get better … not look for ways to block the competition from doing business. It's delusional to think you can stop progress … and in the end, the only one you are deceiving is yourself.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: August 14, 2014

    by Kevin Coupe

    The New York Times this morning has the story of how a retailer, looking to add value for its customers, managed to largely miss the target and alienate a number of shoppers, many of whom have gotten vocal about it via social media.

    The scenario involves Lands' End, which has a year-long arrangement with magazine publisher Condé Nast, sending lifestyle and fashion magazines to its shoppers as a way of rewarding them for their purchases. For Condé Nast, the motivation is simple: it wants to attract new subscribers at a time when fewer people than ever are reading magazines.

    Last month, however, the deal went south when Condé Nast sent out the current edition of GQ, the cover of which featured model and actress Emily Ratajkowski wearing nothing but a come hither look and a strategically placed white flower lei.

    Well, there were some Lands' End shoppers who were upset.

    One wrote: "We received your ‘Lands’ End Bonus’ of GQ magazine this weekend, and we are absolutely horrified. How can buying something as family friendly as school uniforms lead to soft porn in the mailbox? I’m thankful my son did not bring in the mail.”

    Another wrote: "I ordered Christian private school children’s uniforms from your company and you sold my home address to a magazine company that peddles in soft porn for men???."

    The thing spun out of control so quickly that Edgar Huber, Lands’ End's CEO, sent an email to customers apologizing, saying it was a mistake. "To make amends," the Times writes, "Lands’ End said in its apology that it had switched its customers’ names from the GQ subscription list to subscriptions to Condé Nast Traveler."

    (I hope that magazine doesn't have a swimsuit edition…)

    The Times writes that "Lands’ End’s botched promotion comes months after Sears spun off the retailer into an independent publicly traded company. (Sears acquired Lands’ End in 2002 for $1.9 billion.) As part of an effort to keep its brand fresh, Lands’ End has added a touch more stylishness to its more traditional merchandise in hopes of attracting younger shoppers. Glossy fashion magazines would seem to align with that ambition.

    "And while GQ is a long-respected voice on men’s fashion and home to narrative journalism, the magazine’s image has evolved in recent years — especially its covers. Until recently, the covers rarely featured women, instead opting for portraits of celebrities like Muhammad Ali or Sean Connery. But now, scantily clad women — Jennifer Aniston, Kate Upton, Rihanna — are routinely featured on its covers."

    Make no mistake. This was a Lands' End mistake. Condé Nast makes it clear to the Times that the list was provided by Lands' End, and that it had no input as to who would get the magazine. And the kerfuffle certainly suggests that retail brands, when looking to reward customers, have to be a lot more careful about what the reward is and who it is going to.

    On the other hand … until now, I had no idea that Lands' End was trying to be more stylish. (Though it only will really matter to me if they can achieve the stylish heights of my favorite designer, LL Bean.) Maybe all this bad publicity could end up being good publicity, if it raises brand awareness and also establishes that Lands' End has gotten away from the Sears umbrella. Maybe Edgar Huber is trying to suppress a smile as he strolls to work this morning.

    I also think that "kerfuffle" is pretty much the right word to describe all this. I happen to get GQ (though clearly not for fashion advice), and when the magazine showed up in the mail, my first reaction was "wow," and my second reaction, about five seconds later, was that they were pushing the envelope a bit. (No further than they did when the magazine featured Jennifer Aniston wearing nothing but a tie, which also elicited a "wow" and a "whoa" when it showed up.) But I think there is a difference between "evocatively pushing the envelope" and "soft porn," though I'm not exactly sure where the line is and I recognize that the placement of the line sort of depends on your perspective. (It also may have something to do with the placement of the lei.)

    That said, I am amused by the person who wrote to Lands' End saying that her "14-year-old son brought in the mail today & was quite disturbed & fascinated by a ‘gift’ Lands’ End sent us."

    I'm sure he was fascinated. But disturbed? It wasn't that long ago that I was 14 (attending a Christian private school, as it happens) and I'm pretty sure that I wouldn't have been disturbed by it. But I definitely would've been fascinated, because the cover, if nothing else is an Eye-Opener … as well as a lesson in target marketing gone awry.
    KC's View:

    Published on: August 14, 2014

    CNBC reports this morning that while Walmart reported a 2.8 percent increase in quarterly sales, US same-store sales were flat, which new CEO Doug McMillon blamed on "intense competition" and "weak consumer spending."

    "We're encouraged by the performance of our small-format stores and e-commerce, areas where we're investing significantly this year. But we wanted to see stronger comps overall in Walmart U.S.,'' McMillon said in a statement.

    Walmart said that its e-commerce sales, which includes orders fulfilled by stores, were up by double digits.
    KC's View:
    Isn't it almost always the case the stagnant sales are caused by intense competition and/or weak consumer spending?

    Let's move on to our next editorial story…

    Published on: August 14, 2014

    The Wall Street Journal reports that "Retail sales last month were essentially unchanged from June after adjusting for seasonal differences, the Commerce Department said Wednesday. Americans spent more at clothing and grocery stores but scaled back spending at auto dealerships and department stores.

    "Consumer spending drives the U.S. economy, accounting for more than two-thirds of output. But sales growth at stores and restaurants has slowed since the spring, when retailers benefited from a burst of demand that was pent up during an unusually harsh winter across much of the country."

    However, the Journal also notes that "The deceleration in spending is at odds with strong hiring by U.S. firms, which added jobs over the past six months at the fastest pace since 2006. As more Americans find work and begin collecting paychecks, consumer spending should gain traction."
    KC's View:
    So pretty much everybody is experiencing weak consumer spending? Hmmm…

    It is worth pointing out that despite all the debate about Amazon's profit issues, its sales last quarter were up 23 percent. (I'm pretty sure the competition was intense for Amazon, too…)

    So apparently consumers were willing to spend money with a retailer that they felt had a relevant offer. The problem for Amazon isn't how much money people are spending on its site, but how much money it is spending on various technologies and programs…

    Think there might be a broader message in here somewhere...?

    Published on: August 14, 2014

    Today's stories from the soap opera called Market Basket…

    • The Boston Globe reports that the Lowell Spinners,the A-level minor league affiliate of the Boston Red Sox, is calling its home game next Wednesday an "Artie T. Party," after Arthur T. Demoulas, the deposed Market Basket CEO who is trying to buy the 50.5 percent of the company he does not own from his cousin, Arthur S. Demoulas, and has been supported in his efforts both by protesting employees and boycotting customers.

    According to the story, "Workers are eligible to buy tickets to the game for only $4—a homage, according to a team statement, to the 4 percent that former CEO Arthur T. Demoulas knocked off Market Basket prices this year. The team also plans to invite those associates onto the baseball field for a parade before the game commences … Spinners President and General Manager Tim Bawmann called the decision a way to honor the community members who took it upon themselves to leave work and protest the ousting of the beloved former CEO."

    “It’s not about who’s right and who’s wrong,” Bawmann tells the Globe. “This is about recognizing the role Market Basket plays in our community and the invaluable role the associates play within our community. This is about giving them a night to relax, enjoy a ballgame and be entertained."

    • Meanwhile, the Globe also reports that Massachusetts Gov. Deval Patrick has urged Market Basket employees to go back to work as negotiations for a sale of the company continue, saying that a return to work was in their "best interests." The Market Basket board of directors applauded the statement, saying, in part:

    All we seek is to get our Associates back to work earning a steady income so our customers can go back to shopping. In return, we can’t offer a resolution to the deal negotiations, but have and will continue to offer a way to return to normal while negotiations continue. Playing with fire that will hurt us all – Associates, customers, and communities – is a no-win situation, and we all need it to end.

    It’s well past the time when anyone can frame the crisis as “us vs. them,” or a “family feud.” There are too many families being impacted by this. Rather, for good or ill, many are being asked to sacrifice their pay, their jobs, and their ability to shop at affordable prices in their own neighborhoods, against the hope that it will help one side achieve a preferred business deal rather than another. No one should ever hold 25,000 associates, 2 million shoppers and our local economies as leverage in a business negotiation.

    KC's View:
    At this point, because the company's employees believe that Arthur T. Demoulas will invest in the company and Arthur S. Demoulas is more interested in taking money out of the company, it is hard for me to believe that suddenly the employees are going to give up the leverage they've developed for themselves and just go back to work.

    Rather than urging a return to normal, Patrick ought to be calling for the two sides to conclude their negotiations.

    One thing you have to say that the Market Basket employees - they have cojones. They are taking ownership of their own situation and the company's future, and they're not letting go.

    Published on: August 14, 2014

    The New York Times reports this morning that Amazon has introduced a mobile credit-debit card reader called Amazon Local Register, described as "a black, compact rectangular card reader stamped with Amazon’s logo across the front. The $10 device plugs into a merchant’s smartphone or tablet, and works in conjunction with a smartphone app to process and track all of a merchant’s business transactions. It also comes with an enticing offer: lower processing fees."

    According to the story, "Amazon is offering early adopters an especially low processing fee on each credit card swipe processed. If a merchant signs up before the end of October, each swipe will cost 1.75 percent of the total transaction, a deal that will last until the end of 2015. That is a full percentage point below Square’s cut, which is 2.75 percent per swipe, and less than PayPal’s 2.7 percent charge as well. Even after the promotional deal expires, Amazon will charge merchants 2.5 percent."

    While there are a number of companies making similar products - Square is perhaps the best known, but PayPal and Verifone also are in the category - there has not been one clear winner. While Amazon is late to the game, the hope seems to be that it can get retailers hooked into its ecosystem, and that over time they will use Amazon for more and more of their tech needs.
    KC's View:
    The feeling seems to be that Amazon doesn't need to make a lot of money on this program, that it hopes it will see a long-term payoff in terms of both volume and data generated by the card reader, which will allow it to market other products and services more effectively.

    Which makes sense - for Amazon. For other retailers, I think, less so … because why would you want to do anything that would help a competitor that has as part of its broader business plan making you irrelevant?

    I also cannot help but think, when I read about how Amazon doesn't have to make a lot of money on this because it will pay off in other ways … isn't that sort of how it got into its current mess to begin with?

    Published on: August 14, 2014

    Bloomberg reports that Target is hoping to jump-start its Canadian operations by "revamping the product lineup, improving supplies and teaming up with celebrity designer Sarah Richardson … Richardson, who will offer a line of home decor in the fall of 2015, is a Canadian interior decorator known for hosting shows on the HGTV network."

    Target also said that it "will begin matching rivals’ prices and better the supply chain in a bid to change that impression."

    The story says that Target "plans to bring 30,000 new items to its Canadian stores by Christmas, including more options from Beaver Canoe, an arm of Roots Canada Ltd., this fall. Next year its Canadian shoppers will have access to Nick & Nora, a popular U.S. women’s fashion line, the retailer said.

    "The store chain is pledging to make sure its shelves stay stocked in Canada by better forecasting and adjusting delivery schedules. To improve convenience for shoppers, Target is enabling them to use smartphone applications such as reebee and Flipp for price matching, instead of having to track down offers and bring in printed flier. Customers will also be able to match prices from the Canadian websites of Inc. and Wal-Mart Stores Inc. among other online retailers."
    KC's View:
    Maybe it'll work. But it is hard to make a second first impression, and Target is going to have to be patient if things don't turn around quickly.

    Besides, I'm willing to bet that Target Canada also will have intense competition, and maybe even weak consumer spending, to deal with…

    Published on: August 14, 2014

    • Burger King said yesterday that about 7500 of its franchised stores - or about 75 percent of the fleet - have decided to phase out the sale of Satisfries,a low-fat french fry menu items that was introduced less than a year ago as a way of addressing customers' nutrition and obesity concerns. The remaining 2500 will keep selling Satisfies as a regular menu item.

    The reason was simple - while 100 million customers tried them, too few bought them on a regular basis to make them a chain-wide staple. Which means that while people may have said they were worried about nutrition and obesity issues, at the end of the day they were not willing to change their consumption behavior.

    • The Associated Press writes that Kellogg "will step up efforts to reduce planet-warming emissions in its supply chain as part of a broader initiative designed to be more environmentally friendly.

    "Under the plan, the Battle Creek-based food products manufacturer will require key suppliers such as farms and mills to measure and publicly disclose their greenhouse gas outputs and targets for reducing them. The company said it will report annually on those emissions and include climate and deforestation policies in the company’s code of conduct for suppliers."

    • The Chicago Sun Times reports that Walgreen Co. "s expanding its Healthcare Clinic network into the Dallas-Forth Worth market. The Deerfield drugstore company opened its first clinic there July 28 and plans to open 13 more by the end of this year … The company has more than 400 Healthcare Clinics in 23 states and Washington, D.C."

    • The Charlotte Observer reports that Lowes Foods "plans to close two Charlotte-area stores, as the supermarket chain continues shifting its store portfolio away from Charlotte … The company is also closing two supermarkets in Cary and West Jefferson."

    In 2012, the story notes, "Lowes Foods sharply reduced its presence in and around Charlotte by swapping stores with Harris Teeter. The company sold 10 stores to Harris Teeter, in exchange for six Harris Teeter locations in smaller markets such as Asheville and Gastonia and $26.5 million." One of the stores being closed was a Harris Teeter locations that switched to Lowes Foods.
    KC's View:

    Published on: August 14, 2014

    …will return.
    KC's View: