business news in context, analysis with attitude

Published on: January 27, 2015

by Michael Sansolo

Which of the following is more improbable: That an episode of "The Simpsons" would clearly explain the future challenges of competition or that a speech detailing the death of retail would actually contain a single nightmarish line?

Let’s call it a tie and accept, incredibly, that the two events happened within 15 hours of each other. Start with the speech.

Doug Stephens, the opening guest speaker at the Food Marketing Institute (FMI) Midwinter Executive Conference, detailed the stunning challenges facing retail due to changing consumer habits fueled by the world of e-commerce. Although Stephens offered hope to the conference through the power of experiential marketing, he did include one important zinger.

“Your real competitor,” he said, “is not at this conference.”

Stephens is right. In our times of change there is no telling where the next threat will arise. I doubt Uber attended any taxicab owners’ convention. Nor do I remember Walmart being a regular at FMI events prior to invading the industry 25 years ago.

You never see the one that gets you.

The FMI crowd got another warning along the same lines from John Zogby, the political and social pollster. In talking about the different habits of Millennials, Zogby said this young and powerful generation “will bypass traditional channels not geared to solving problems.”

To make the point clear, Zogby detailed numerous industries being heavily impacted by free apps, from medical care, legal advice or video downloading services. As we are found of saying here at MNB, things are only impossible until they are not.

And that takes us to "The Simpsons. " Thanks to the lingering effects of the stomach flu I skipped the FMI Sunday reception to rest in my room watching television. As a complete sophisticate, that meant tuning into "The Simpsons."

In this week’s episode Elon Musk, the founder of Tesla and Space X, literally rockets into Springfield. Finding himself bereft of new projects, Musk hangs with Homer and starts turning all of his inane ramblings into revolutionary inventions. In no time, Springfield is a haven of driverless cars and all manner of creative technologies.

There’s one wrinkle. Tycoon Montgomery Burns links up with Musk, sold on his notion that there are countless new ways for Springfield to use Burns’ supplied energy. Burns is delighted until he suddenly realizes that the innovations are costing him millions of lost profits.

As Musk explains, Burns is passing on profits now to benefit society well into the future. Needless to say, Burns isn’t pleased.

Only it is not a joke.

Think about those warnings from Stephens and Zogby. The future is likely to bring competition unlike anything we know today. And as Musk explained on "The Simpsons," they may do it without any regard for next quarter’s bottom line.

Taken together it means your company need think more creatively than ever about how to provide relevant, important and authentic experiences, services and products to your customers. It means you need keep a wary eye on the horizon and keep asking “what if” as you see changes in other industries. It means accepting that what you might currently think is impossible could very well happen soon.

Or you could do nothing and one day soon, you’ll have a one word response to the trouble you are in.

“D’oh!”

It’s your choice.


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: January 27, 2015

by Kevin Coupe

MIAMI BEACH - The thing about a meeting like the Food Marketing Institute Midwinter Executive Conference is, there tend to be more questions than answers.

Maybe that's normal. After all, we live in a fast-changing world with evolutionary and sometimes even revolutionary competition, enormous financial and infrastructural challenges, and a consumer population that often is near impossible to judge and/or satisfy. So it's natural that during the course of several days of events, there will be more sentences ending in question marks than periods.

But that's certainly the way I felt on Monday. And it is one of the things I am going to try to address in the panel discussion that I'll be moderating at FMI Midwinter this morning.

Monday started with a presentation by Doug Stephens, an author and self-described "retail prophet," in which he talked about how traditional retailers can compete with e-commerce offerings. The prescription won't be a surprise to anyone who has been reading MNB for the past 13 years - stores, Stephens said, have to tell a story and need to create "an intensive experience that you can't have online." Retailers, he suggested, need to treat the store as a kind of 'living website," constantly offering new products and services, and be ready to adapt to shoppers who no longer are homogenous and predictable. There will, he said, be retailers that are immersive, value-added and that will create an emotional connection to the consumer, and there will be retailers that will be ubiquitous, low-service and low-cost, creating a cognitive connection to the consumer. But there won't be much in the middle, he said.

"This is an historic change," Stephens said, "and if you miss it, you are going to have a hard time staying in business." He did offer one terrific metaphor, showing a picture of a dreary bus stop and suggesting that retail has been just like it - doing what it is supposed to do, and no more. But then he showed a picture of a bus stop in Paris where the seats have been replaced by swings, and where the expectations about waiting for a bus have been turned on their head.

That, Stephens said, is what retailers need to do.

In a later presentation, pollster John Zogby - in addition to talking about the powerful habits of Millennials as described above by Michael Sansolo, also offered a somewhat dour view of the American dream circa 2015, a time when there is greater food insecurity than ever, and when more and more people are working at jobs making less than they did in earlier jobs. And, he talked about the segmenting of America, as people break up into "neo tribes," challenging marketers to figure out how best to influence them.

The thing is, all this got me thinking...

Okay, the industry has to adept to new competitive realities. New ways of segmenting and targeting customers. Has to find new products and services to offer, and figure out which products and services are less relevant. And they have to create new and immersive store experiences, except when they don't.

To me, the question becomes simple: How?

Or more specifically, how do the economics and the infrastructure of the industry have to change in order to make these adjustments?

The business world often doesn't take kindly to retailers who try to create fast, revolutionary change in their organizations. (Just ask Ron Johnson, late of JC Penney.) So what is required of leaders who lead their companies in these new directions, hoping that the destination will be a profitable one and not the edge of a cliff. And how will all these changes affect the competitive landscape of the industry?

That's what I want to talk about this morning when I get on stage with three very smart guys: Burt Flickinger of Strategic Resources Group, Scott Moses of Sagent Advisors, and Andrew Wolf of BB&T Capital Markets. I've talked to all three of these fellows ... I think they'll be provocative and lively ... and we'll bring you up to date tomorrow about what they say.

Published on: January 27, 2015

There is a terrific piece on The New Yorker website that highlights the power of small:

"Consider a few surprising and optimistic facts for the new year: nationwide, independent bookstores have grown by about twenty per cent since 2009; meanwhile, American craft breweries collectively now sell more than 16.1 million barrels of beer annually, outpacing, for the first time, Budweiser. This isn’t the only evidence that small-scale businesses are making a comeback. Over the last ten years, the long-running decline of small farms has levelled out, and more than three billion dollars was spent last year on more than four thousand independent feature films. Over all, since 1990, small businesses (with, generally, fewer than five hundred employees or less than $7.5 million in annual receipts) have added millions of employees, while big businesses have shed millions.

"None of these developments has individually transformed the American economy, but taken together they represent something."

And, the piece cites as an example an industry dear to the Content Guy's heart:

"Consider the story of craft beer. Large-scale breweries destroyed their smaller rivals in the twentieth century because they were able mass produce the stuff for cheaper (reaching wholesale prices of about fifty cents a beer or less) and because their fat margins allowed them to pay for things such as television advertising. In the late nineteenth century, there were thousands of breweries in the United States; then, Prohibition came, and, after it ended, a consolidated industry emerged. By 1979, there were just forty-four remaining. The giants had won again.

"But the small breweries came back. Their beers were not better advertised and certainly not better priced. Rather, the crafts went after an enormous blind spot for the big breweries—namely, flavor. I don’t entirely mean to be snide; more precisely, craft beer succeeded by opting not to compete directly, instead pursuing what can be called a “true differentiation” strategy. That means they established a product that, in the mind of the consumer, is markedly and undeniably different (as opposed to “false differentiation,” which is more or less the same thing with different packaging). True differentiation, if it works, actually changes consumer preferences. The dedicated craft-beer drinker, once he’s hooked, no longer cares if Coors Light costs three dollars less. Today there are once again thousands of breweries in the United States (more than 3,000, in fact)."

It can't work everywhere, or in every industry ... but it can work in a lot of places, where people of independent thought and innovative mindsets look for places where they can find a differential advantage. You can read the entire column

here.

Published on: January 27, 2015

Business Insider reports that Starbucks is getting closer to launching its new delivery service, with CEO Howard Schultz telling analysts that the company is "finalizing plans for two distinct delivery models — one of which utilizes our own people, green-apron baristas, and the other, which leverages the capabilities of the third-party service."

The story says that "members of Starbucks' loyalty program will be able to request delivery through Starbucks' new mobile order and pay app, which will be rolled out nationwide this year."

Schultz told the analysts that "what’s actually occurring is the cultural shift in time allocation away from retail experiences people have felt forced to undertake and towards retail experiences that people want to enjoy with convenience as the key enabler. Now what you’re going to see in the years ahead will be a rapid acceleration in mobile device purchases and a continued significant migration away from bricks-and-mortar commerce. There is obviously a huge prize there and that’s why we’re seeing so much activity around the payment space from all kinds of companies."

Published on: January 27, 2015

The San Antonio Business Journal reports that HEB plans to "build its smallest store in the chain in downtown San Antonio, a harbinger of what may come to Central Austin in the future." The company has gotten approval to open a 12,000-square-foot grocery store and gas station on South Flores Street and East Cesar Chavez Boulevard; the story notes that "the store in downtown San Antonio will be about one-sixth the size of an average HEB grocery store."

William Triplett, senior vice president of strategic design at HEB, tells the paper that "everyone always likes a bigger store because it allows us to increase our variety and offerings. We tried to make (the downtown location) as big as we could with the land available after a reasonable amount of parking, space for truck docks and the gas station."

Triplett says that HEB's biggest challenge going forward "is figuring out how to operate such a small store — especially in terms of delivery methods and stock."

Published on: January 27, 2015

The Nielsen Co. is out with a new study suggesting that - no real shock here - low gas prices mean greater consumer confidence.

"With gas prices down 31% since June, 2014 and oil prices around $85 a barrel, tumbling rapidly to its lowest levels in several years, American Consumer Confidence has improved dramatically, going up 12% points year over year," the study says, adding that "Americans are feeling good again about their personal finances (+6% points) and immediate spending intentions (+8% points)."

The report goes on: "The percentage of Americans who felt it was a good time to spend also increased, by 9% points.  US shopping trips/consumer rebounded in November and December, increasing from 13 trips/month in June to 15 trips/month in December. Americans also have more money to spend on each of these shopping trips, as a result of cheaper fuel – spending at least a $1 more a trip. 39% of respondents said they have more money to spend due to declining gas prices and are putting this money towards paying their bills (50%), everyday essentials like food (36%) and discretionary items like home entertainment (30%) and clothing (30%).

Published on: January 27, 2015

Mobile Commerce Daily reports that Wawa, the Pennsylvania-based 640-unit convenience store chain, is "launching a new mobile application featuring a payment function and rewards program.

"The new Wawa app, which is available for Android and iOS devices, enables consumers to earn rewards points for purchases made at any of its 680 bricks-and-mortar stores, as well as pay for orders within the app. Users can also check nutritional information of various items, look up store hours and directions, and view up-to-date fuel prices."

The new app is said to be similar to those advanced by Starbucks and Dunkin' Donuts, both of which have found their versions as being strong contributors to ongoing customer loyalty and growing sales.

Published on: January 27, 2015

Tesco may be fighting for its competitive life because of lackluster sales and an accounting scandal, but that doesn't mean it isn't innovating.

The Guardian reports that "at the Tesco Extra in Osterley, west London, Paul Goodale (a former restaurant director at Harrods, no less) has just launched Fred's Food Construction, a very on-trend diner selling New York deli-style subs and US 'French dip' sandwiches. If it goes well, you can expect to see Fred's, in which Tesco has made a 'small investment,' rolled out in-store nationally."

The story goes on to note that Tesco "has been more energetic than most" in building a presence in the restaurant business: "It part-owns coffee chain Harris + Hoole, and last year bought Giraffe, which now has four in-store restaurants at Tesco sites, with more to come. Apparently, its introduction of places to eat, drink and hang out after the Friday night shop is all part of a bid to make Tesco stores 'warmer and less clinical.' In an attempt to squeeze a few more quid out of its captive audience, of course."

Published on: January 27, 2015

• TechHive reports that Walmart has begun selling its Vudu Spark streaming USB dongle, which allows consumers to plug into their TV sets and rent or purchase content from the Walmart-owned Vudu service, for just $25.

The story notes that "the Vudu Spark’s release is another sign that it isn’t enough to just provide an online storefront - you need to give TV lovers an easy and affordable way to watch the media you sell on their big-screen TVs ... Walmart seems uniquely qualified to get the booming streamer dongle market an added boost, too, thanks in big part to its devotion to low prices. Sure enough, at $25, the Vudu Spark is $10 less than the Chromecast ($35) and $15 less than the Fire TV Stick ($40). Meanwhile, Roku’s Streaming Stick retails around $50 and Microsoft’s Miracast will cost you around $60. All of those are fairly inexpensive, but $25 moves streaming dongles solidly into the impulse-buy range."

Published on: January 27, 2015

• The Wall Street Journal reports that "Post Holdings Inc. has agreed to buy privately-held MOM Brands Co. for $1.15 billion in a deal that will add Berry Colossal Crunch and Frosted Mini Spooners to Post’s trove of cereal brands ... Under the terms of the deal, Post will pay MOM $1.05 billion in cash and issue its owners 2.45 million shares of Post stock."


• The National Retail Federation (NRF) reports that its Consumer Spending Survey suggests that "the average person celebrating Valentine’s Day will spend $142.31 on candy, flowers, apparel and more, up from $133.91 last year. Total spending is expected to reach $18.9 billion, a survey high."

The study goes on to say that "men will spend nearly double what women plan to spend ($190.53 versus $96.58 on average, respectively.)  Additionally, adults 25 to 34 will outspend other age groups at an average of $213.04; 35 to 44 year olds will spend an average of $176.21 and 18 to 24 year olds will spend an average of $168.95."

Published on: January 27, 2015

• Bloomberg reports that Walgreens Boots Alliance Inc. has named George Fairweather, group finance director for Alliance Boots Holdings Ltd. before its acquisition by Walgreen Co, to be CFO of the combined company. He succeeds Tim McLevish, the current CFO, who will become a senior adviser to the CEO.

Published on: January 27, 2015

...will return.