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    Published on: January 16, 2015

    by Kevin Coupe

    There was a lot of analysis taking place yesterday after Target CEO Brian Cornell announced that the retailer plans to close all of its 133 stores in Canada, laying off more than 17,000 employees, ending a venture that launched less than two years ago. The move, while not wholly unexpected, struck me as both a decisive repudiation of previous management's strategy and tactics, as well as a concession that Target's global ambitions have come to an end, at least for the foreseeable future.

    Since it had been reported earlier in the week that Cornell was preparing to make a decision about Target's Canadian prospects - and he concluded that Target could not be profitable there until at least 2021 - I was convinced that whatever decision he made had to be both quick and final. There was no room for dithering.

    In looking at a lot of the coverage of Target's decision and reflecting on what I've been told by people in the know, it doesn't seem particularly hard to pinpoint the retailer's problems north of the border. It didn't have the right products and often was out of stock, it didn't have the right prices, it didn't deliver on a value promise consistent with its US image, and it often didn't even have the right locations. If all those things are true, then it isn't hard to understand why Cornell felt that it was time to rip off the band-aid and move on. (Several stories suggested that what Cornell is going to focus on are small stores and the City Target concept, which he thinks have the best chance of driving growth.)

    Colin Powell once said, "Bad news isn't wine. It doesn't improve with age." And it strikes me that Cornell demonstrated an understand of this precept and real leadership in making such a big decision.

    If Cornell had been less decisive and allowed the Canadian disaster to fester, it would have become increasingly distracting - both culturally and economically - as well as becoming his problem. To this point, it was still a problem of his predecessors' making ... and it was best disposed of quickly.

    In reading all the stories about Target's Canadian misadventures, I found myself thinking about Tesco's misadventures in the western US. It isn't apples-to-apples, but I do think that to a great extent, its Fresh & Easy Neighborhood Markets suffered because they didn't have the right products, didn't communicate the essential value proposition, and in some cases didn't have the right locations. (All problems, by the way, that new management brought on by Yucaipa Cos. seems to be addressing.)

    I wonder how different Tesco's current situation might be if CEO Philip Clarke, immediately after succeeding Sir Terry Leahy in the big chair, had decided to shutter or sell the Fresh & Easy stores. He seemed to be evaluating them from day one of his tenure, and the indecision seemed palpable. Had he moved more decisively to cut off a limb that seemed to only cost money and distract the company's management from serious issues in its home UK market, Clarke might have saved Tesco from at least some of its recent heartache, not to mention saved his own job.

    Not many executives will necessarily find themselves in the position of having to make a decision about a foundering global expansion plan engineered by their predecessors. But it seems to me that the broader Eye-Opening lesson - that bad news almost never gets better with age - is a good one for every leader to keep in mind.

    BTW ... on the morning of Tuesday, January 27, I'll be moderating a panel of industry experts at the Food Marketing Institute (FMI) Midwinter Executive Conference ... the panelists will be Burt Flickinger, Managing Director of the Strategic Resource Group; Scott Moses, Managing Director at Sagent Advisors; and Andrew P. Wolf, Managing Director at BB&T Capital Markets. We'll be talking about a lot of stuff, and I'm pretty sure that one of the things I'm going to ask them is about lessons learned from Target and Tesco.

    It should be fun. If you're attending FMI Midwinter, I hope you'll stop by and say hello.
    KC's View:

    Published on: January 16, 2015

    The Triangle Business Journal reports that Carol Levenson, director of research at New York-based corporate bond research firm Gimme Credit, is telling clients that she believes that there are strong indications that Kroger management wants to "make a major acquisition."

    The story notes that "Kroger's last major acquisition was a year ago, when it bought North Carolina-based Harris Teeter Supermarkets Inc. for $2.5 billion. That added more than 200 stores to Kroger's stable. It also bought online vitamin and supplement retailer Vitacost.com for $280 million in August."

    While Kroger did not comment on the report, the story notes that Kroger CFO Mike Schlotman has been quoted in the past as saying that the company's balance sheet is strong enough for a major purchase.

    The story continues:

    "Where might Kroger make an acquisition? It already has 2,600-plus stores around the country, but it still lacks stores in almost all of Florida and in Chicago, the Northeast, upper Midwest and Oklahoma. Those would be likely target areas.

    "Schlotman has said that Kroger will enter a new geographic area that it has identified. That sounds like a region it will enter on its own by opening stores, but it could do that and add other markets through an acquisition."
    KC's View:
    I'm rooting for a northeast US acquisition of some kind ... just because I'd love to see how this market reacts to a first class competitor like Kroger.

    But maybe it'll be something else ... something unexpected ... something not even on anybody's radar. Maybe something that makes an e-commerce splash? If I had to put money on something, that's where I'd place it.

    Published on: January 16, 2015

    The Puget Sound Business Journal reports that Starbucks is laying off an unspecified number of its Seattle headquarters employees, the first such move since 2009 when the recession hit the company's sales and profits.

    No layoffs are slated to take place in the company's stores, management said. A spokesperson said that the jobs being eliminated were "redundant or not in line with our growth strategy."

    The moves come just a week after the decision by COO Troy Alstead to take an extended unpaid leave of absence, but the spokesperson said there was "absolutely" no connection between the two things.
    KC's View:
    The most important part of this story is that the layoffs are not happening in the stores ... because it tells you that Starbucks understands where the money is made, and the importance of the folks on the front lines.

    Published on: January 16, 2015

    There is a wonderful piece in Slate by Stefan Fatsis in which he looks at the dictionary business, which has taken a major hit because of the growth of the internet.

    There is a lot of resonance there for other industries. When you think about it, dictionary publishers for centuries served as the final authority on what was a word and what wasn't. They published the books, and consumers paid attention. There was, for all practical purposes, no other option.

    But the growth of the internet has democratized the process. There are tons of sources where one can get definitions, and it is a challenge for traditional dictionary publishers to maintain visibility, credibility, and a sustainable business model.

    The Slate piece looks at how various publishers are addressing the issue. One key insight has ben that "a dictionary isn’t primarily a book anymore. It’s a database." And once you've made that leap of faith, you start competing with an entirely different set of expectations and strategies.

    Fascinating story ... and you can read it here.
    KC's View:

    Published on: January 16, 2015

    Fast Company has a piece noting that "this January, millennials began outnumbering their older colleagues in the workplace, and as a handful of studies have shown, this generation cares a lot about finding meaning in the workplace. That's a big opportunity for nonprofits, B Corps, and other companies with social good missions. Over half of millennials are willing to take a 15% pay cut to work at a company that matches their ideals, research shows."

    The story goes on: "Compensation is a major consideration for potential employees, and mission-driven companies don't often have the advantage in that area. Instead, the report suggests that companies focus on the non-monetary forms of compensation that they can offer, like a sense of purpose, opportunities for growth, and a quality work culture."

    Instead of focusing on the nuts-and-bolts of a job, the story suggests, companies "can attract socially minded candidates by pointing out the company's larger social impact and its unique opportunities for growth."

    You can read the whole story here.
    KC's View:

    Published on: January 16, 2015

    • The New York Times is reporting on its website this morning that Dollar General management is hoping to secure more time to resolve regulatory issues and accomplish its proposed $9.1 billion takeover of Family Dollar. "In highlighting the obstacles that it still faces — principally a disagreement with the Federal Trade Commission over how many stores it would need to sell should it buy Family Dollar — Dollar General was seen by analysts as conceding defeat," the Times writes. "That would leave Family Dollar clear to merge with a smaller rival, Dollar Tree, in an $8.5 billion deal."

    The story notes that "two prominent investor advisory firms have urged shareholders to vote in favor of the lower offer, arguing that it provides more certainty."


    • The Food Marketing Institute (FMI) yesterday announced that it has joined a newly formed coalition of 20 merchant and Silicon Valley groups with the intention "to reform the patent system and combat abusive patent litigation that unfavorably impacts business."

    FMI said that it was joining "industry retail partners at the National Retail Federation and Retail Industry Leaders Association, restaurant groups in addition to online search engine Google and communications firms to fight back against patent trolls ... that are targeting end-users of widely adopted technology. FMI stands strong with its coalition partners against these meritless, abusive strains inflicted on the businesses we represent."
    KC's View:

    Published on: January 16, 2015

    • Ahold announced yesterday that Wouter Kolk will replace Sander van der Laan as CEO at its Albert Heijn supermarket chain in the Netherlands.

    Reuters reports that "Kolk rejoined Ahold in 2013 after spending six years as CEO of Dutch fashion retailer WE Fashion." Albert Heijn is seen as being under sales and margin pressure because of the growth of discount stores and online shopping.
    KC's View:

    Published on: January 16, 2015

    • Natan Tabak, the longtime Wakefern Food executive who retired in 2013 from his role as chief information officer and senior vice president, passed away earlier this week. He was 67.

    In lieu of flowers, the family has requested that donations in his memory be made to the Caroline Vandermark Fund for Brain and Spine Tumor Research at Hackensack University Medical Center in New Jersey.
    KC's View:

    Published on: January 16, 2015

    We had a story the other day about the resurgence of "made in America" marketing, which prompted one MNB user to write:

    I'm old enough to remember when "Made in America" meant something. They use to brag about it in Walmart. It's time we do it again and stop funding countries and people who want to do us harm. We might not be able to stop the beast but we certainly can stop the funding!'

    One of the big challenges about "made in America" products is that a lot of companies claim it but don't certify it ... because they can't. So I suspect there will be some fallout on that issue even as companies and consumers focus more on American-made products.




    Responding to our piece the other day about how Tiffany is marketing engagement rings to same-sex couples, and what this suggests about marketing to the broader LGBT community, one MNB user wrote:

    At a dinner over the holidays a conversation started about homosexuality, and what one of the guests said was “the abundance of things gay.” Someone asked if anyone knew what percent of the population was gay. I guessed that it was somewhere in the teens. They suggested I look it up.
     
    I was surprised. You may find a source that was different than mine, so I would suggest you look it up.
     
    A couple of thoughts I believe worth sharing:

    Homosexuality has been a big discussion in the United Methodist Church, and it is so divided that it might cause a fracture because there are churches that staunchly ascribe to the “homosexuality is a sin against God” stance. Our church takes a view that we are to love one another regardless of our any differences to sexual orientation. It is hard to believe it is such a lightning rod issue.

    My 27 year old son asked me recently if any of my beliefs from when I was near his age had changed over the years. Homosexuality was on the short list. Immigration and government were two others that quickly came to mind. It has been interesting hearing how others have responded; tee it up some time.


    I thought I did tee it up.

    You are right that the LGBT community is smaller than a lot of people think. The nationwide average is said to be 3.5 percent of the total population, with denser pockets in certain states. Those are Gallup numbers, though I'm not entirely clear if they include people who are gay but have not come out of the closet.

    But civil rights are civil rights. I'm not aware that there are any provisions in the Constitution saying that you only get civil rights if your percentage of the population exceeds a certain point. And that seems to be the position that more and more jurists and legislatures are taking.

    I am sympathetic to people who have trouble with some of these issues because of their religious beliefs; it makes it a lot harder to be tolerant and accepting of social changes when your priest or minister offers spiritual guidance that points in a different direction.

    But I've always felt that religious beliefs are distinct from what the law can and should allow. And I think right now that the broad cultural acceptance of same sex marriage is something that cannot - and should not - be reversed. The Tiffany ad is just another indication.

    As I said the other day, my only agenda here is to suggest that this new acceptance really offers marketers an opportunity to sell more stuff to a demographic they may have been ignoring.




    On another subject, one MNB user wrote:

    I stopped by my local Chipotle for lunch today -- bummed a little by the "No Carnitas" sign (they're my favorite) -- but it didn't dissuade me.  Tried the Sofritas tofu -- not as good as the carnitas, but still very tasty (and getting me to say nice things about tofu is a big accomplishment).

    Asked the young man behind the counter if they were getting any blowback about the carnitas -- he said no, people are being really understanding, and are happy that Chipotle has made such a stand.  He said business hasn't been affected at all.  (granted, he's not a manager, but if he's standing there taking orders, he knows...)  He also added that it makes him happy that he's working for a company willing to draw a line and defend it, and his wide smile told me that he was absolutely sincere.

    Score points for Chipotle.





    Regarding US Postal Service customer service, one MNB user wrote:

    I thought I would share yet another USPS story with you!

    Mailed two boxes last Saturday.  Insured both, and was told they would arrive (from MSP) in Chicago on Monday.

    Monday came and went.  Online still said they were due to arrive any moment.

    Tuesday came and went.

    Wednesday came and went.

    It's now Thursday night.  USPS online (attached) still says they are coming LAST Monday.  When you try to speak to a human being, you are put into phone hell and told that no one there can help you, and to listen to the tracking information given on the message (Monday the 12th).

    I just got back from my neighborhood post office.  They think they both are lost, and that I should file a claim.  Aaargh.

    I'm giving them until tomorrow COB, then I guess I'll file the claim.  So much for 1) delivery estimates and 2) online updates!


    Good luck.




    Responding to my piece yesterday about William Shatner's one man show, one MNB user wrote:

    I saw this show with my wife – she treated me as I am a huge fan. If you recall the first reboot of Star Trek with Chris Pine – when they are trying to beam the Vulcans up from the planet being destroyed – which they were struggling to accomplish - Chekov said the very same “I can do that” and ran down to the transporter room to try and make it happen.

    Good commentary and lesson today. I really do admire how Shatner does keep reinventing himself and he doesn’t appear to be afraid to do that.


    Just FYI...Sansolo and I, being unrepentant Trekkies, checked. In fact, Chekov utters that line not when he is beaming up the Vulcans, but when beaming up Kirk and Sulu while they are plummeting towards a planet without parachutes.

    A small difference, but we wanted to be accurate.




    Got lots of email about yesterday's Eye-Opener about the Icelandic beer made from whale testicles. I objected to the beer largely because I have a problem with any product being made from an endangered species, but also said that I was appalled that they did not give the beer a name that, in my view, would have been perfect: Moby Dick.

    One MNB user weighed in:

    Trademark issues. But Bollocks Brew is available…

    Boom!

    And from another reader:

    LMAO at this. You are hilarious. And I’m with you - using endangered species as an ingredient? Unforgivable.

    And another:

    Dude, I gotta love ya. I don't come close to reading anything in business (or any other topic ) in which the writer has such cheesy irreverence. Keep it coming.

    I don't often bust out laughing when I'm reading something but I did this morning.


    FYI...I'd rather have this sort of praise than any other.

    And from still another reader:

    I assume it's the Peter principle your invoking for not trying this Icelandic craft brew.

    Thanks for the comic relief from a business news letter.





    One viewer accused me earlier this week of being pretentious, saying that this is why I don't appreciate the charms of Dunkin' Donuts and McDonald's.

    My response:

    Can I be pretentious sometimes? Probably.

    I wanted to make sure I had the definition right, so I checked. Webster's defines the word as "attempting to impress by affecting greater importance, talent, culture, etc., than is actually possessed." I wish I weren't pretentious, but I have to concede that I'm not all that important and probably don't have that much talent.

    But when it comes to doughnuts or coffee or hamburgers, I think better is better. I think that Stumptown coffee is better than Dunkin' Donuts coffee, and that In-n-Out and Shake Shack burgers are better than McDonald's. Good wine and beer is better than cheap wine and beer. Does that make me pretentious? I don't think so ... because preferences often are a matter of taste, not better. I also think that when it comes to issues like this, it isn't pretentious if I'm right.

    Though just saying that probably makes me pretentious.

    C'est la vie. (In the interest of full disclosure, that's most of the French I know.)


    Leading one MNB reader to write:

    That’s more French than I know and your comments on pretentiousness cracked me up.  Keep it coming.

    And another reader offered:

    I took two years of French in high school and visited France for a week.   Therefore, I know a little more French than you do.    
     
    “Je suis Kevin Coupe!”


    Merci beaucoup.




    Finally, I got the following email from MNB reader John McGuire:

    I really enjoy your emails and attitude every day!  I have a millennial home from college and I was showing her your Thursday “FaceTime with the Content Guy” spots over the past several weeks and her perspective was that coming from your home kitchen wasn’t really professional.  I mentioned that you do report from other locations at times.  We’ve talked about your Thursday editions the past 6 to 8 weeks which I believe all have been from your kitchen.  I do have to agree that I enjoy a mix of the locations and reporting from appropriate locations do add some interest to your reports, although I’m more interested in the content.

    There are much bigger issues in the world, but it was an eye opener to me that my daughter had an issue with it.   We spend a lot of time figuring out how to reach and stay relevant to millennials and I thought you might be interested in her perspective.


    I am interested, and it concerns me a bit when a millennial doesn't like something I'm doing ... because I want to be relevant to them.

    That said ... at the risk of seeming defensive, which I'm really not ... I guess I'd point out a couple of things. First, my kitchen is a lot nicer and more orderly than my office. So when I'm not on the road, it seems like a better place to do it. (Plus, I waited 30 years to redo that kitchen. I'm kind of proud of it. Be glad I didn't decide to show off our new bathrooms...)

    But more importantly, I guess my response would be that I kind of like the informality of doing FaceTime from the kitchen. (I prefer "informal" to "unprofessional.") That's because I've always thought of MNB as an ongoing conversation, not a newscast ... so I try to strike an appropriate tone.

    I'm just glad your millennial only criticized the kitchen. If she had taken a shot at my jeans and flannel shirt, I would have been devastated...
    KC's View:

    Published on: January 16, 2015

    In going through yesterday's announced Oscar nominations, I was pleased that I've seen more than half the nominees in every major category. The worst category for me, ironically, is Best Picture; I still need to see half the nominees: American Sniper, Boyhood, The Grand Budapest Hotel, and Selma.

    The other moves I need to see, spread out among the various categories, are Still Alice, Two Days, One Night, Into The Woods, Nightcrawler and Inherent Vice. I ought to be able to get most of these done by Oscar night, February 22, but it'll be a push...

    If I had to guess who the big winners will be, just based on momentum, I'd probably bet on Birdman (or The Unexpected Virtue of Ignorance) and Boyhood, but that only a moderately informed guess. I'll know a lot more in a few weeks.



    Of course, timing is everything ... and this week one of the movies I saw ended up being snubbed by Oscar voters - Unbroken.

    In retrospect, I must admit, I'm not surprised. Unbroken is one of those movies that is loaded with good intentions and loaded with talent ...but loaded to the point that it never takes flight and captures the viewer's imagination. The story is about Louis "Louie" Zamperini, the son of Italian immigrants who found his way out of a troubled childhood by running, and eventually went to the 1936 Olympics. Later, during World War II, he endured enormous psychological and physical torture in a Japanese prisoner of war camp, which is where most of the movie takes place.

    I've not read the source material by Laura Hillenbrand, but Mrs. Content Guy has and loved it, so I'm inclined to blame the movie's faults on director Angelina Jolie. For reasons I cannot quite put my finger on, she is unable to establish - beyond obvious physical courage and enormous character - the transcendent nature of Zamperini's personality. Jack O'Connell is very good as Zamperini, but I don't think he's served well by the script and direction; they tell things that we ought to see, and we see things we ought to feel. In the hands of a more accomplished director, this could have been powerful stuff. But in Jolie's hands, it is a movie biography that paints b the numbers. Disappointing.



    The other movie I saw this week was Taken 3, which they are telling us the third and final installment in the enormously successful series of old-guy-beats-up-young-guys movies that have turned Liam Neeson into an action star in his sixties. Neeson is fine, but the movie sort of hits the expected notes and never offers any real twists on the formula. That said, I enjoyed the movie for what it was .... but it is time for Neeson, who is a legitimately great actor, to do a movie that challenges him. And us.



    I had a terrific red wine the other night - the 2011 laMaialina Gertrude Rosso Toscana, a fabulously rich Italian wine that is wonderful with any tomato or pasta dish. Get it, and thank me later.




    That's it for this week. Have a great weekend ... and I'll see you Monday.

    Slàinte!
    KC's View: