retail news in context, analysis with attitude

Published on: March 30, 2015

by Kevin Coupe

The Associated Press reports that one of just three remaining Howard Johnson's restaurants in the US has been sold and is closing, leaving just two restaurants in the formerly iconic chain in existence.

The unit that has been sold and is closing is in Lake Placid, New York, where it has operated for almost six decades.

At one time, there were more than a thousand Howard Johnson's in the US, owned and franchised units that together made up what then was the largest restaurant chain in the country. There were also more than 500 Howard Johnson's "motor lodges" around the country. (There used to be one right off the Connecticut Turnpike, not far from where I live. It declined to the point where, just before it closed, it was best known for being a place where truckers could avail themselves of certain personal, adult services. It was torn down a few years ago and replaced by a Whole Foods and a BMW dealership. That's my idea of gentrification...)

I think it fair to say that this yet another example of a company that simply did not see change coming and was unable to adapt to an evolving competitive landscape. As it was declining, America was also seeing an explosion in fast food franchises and highway travel, and yet, for a wide variety of reasons, it seemed unable to capitalize on the opportunities.

Which is a valuable lesson for every marketer.

Bt the way ... the remaining two Howard Johnson's are in Bangor, Maine, and in Lake George, New York.

Which shocks me. Because I would have bet real money that there was one in Rock Ridge.

Published on: March 30, 2015

Coverage of the new Religious Freedom Restoration Act signed into law last week by Indiana Governor Mike Pence details the extent to which the business community is opposing the initiative, saying that it creates the potential for discrimination against the LGBT community.

The new law says that “government action may not substantially burden a person’s right to the exercise of religion unless it is demonstrated that applying the burden to the person’s exercise of religion is: (1) essential to further a compelling governmental interest; and (2) the least restrictive means of furthering the compelling governmental interest.” Opponents of the law take the position that it potentially institutionalizes the rights of people, businesses and institutions to discriminate against gay people and claim they have the religious right to do so.

Pence has said that "this bill is not about discrimination, and if I thought it legalized discrimination in any way in Indiana, I would have vetoed it." However, he now is saying that he will consider legislation that clarifies the language in the bill in a way that mollifies the opposition, though he continues to say that he is "proud" of the law and stands by it.

The BBC has a story saying that a number of technology executives have written to Pence expressing their opposition to the legislation. "Among the signatories." the story says, "was Marc Benioff, the boss of US tech firm Salesforce, who subsequently announced that his company was canceling 'all programs that require our customers/employees to travel to Indiana to face discrimination'."

The BBC also reports that Apple CEO Tim Cook has come out in opposition to the law, saying on Twitter that "we are deeply disappointed in Indiana's new law," and that "Apple is open for everyone".

The Indiana Chamber of Commerce also has opposed the law, calling it "entirely unnecessary" and saying that "reactions to it are not unexpected or unpredicted; passing the law was always going to bring the state unwanted attention."

USA Today reports that Angie's List CEO Bill Oesterle "said his firm will pull out of a pending deal with the state and city to expand its headquarters in Indianapolis because of his disagreement with the state's passage of the 'religious freedom' law. Oesterle said he opposed the passage of the bill, intends to keep speaking out against it, and feels he can't accept state subsidies for his company's expansion given his disagreement over the act."

The Wall Street Journal reports that "Indianapolis-based drug maker Eli Lilly & Co., which has 11,000 employees in Indiana, said the law 'is bad for Indiana and bad for business' and would complicate the company’s task in attracting top talent. 'Many of those individuals won’t want to come to a state with laws that discriminate,' the company said."

In addition, the NCAA has expressed concerns about the law, saying that it will compel to re-look at its short-term and long-term plans for events in the state. The men's college basketball Final Four championships are scheduled to be played in Indianapolis next week.

National Public Radio reports that "although the law is similar to a federal one and those in 19 other states, sexual orientation is not a protected class in Indiana, leaving the door open for discrimination, critics say." Pence says that any clarification of the law that makes sexual orientation a protected class "is not on my agenda."

Published on: March 30, 2015

The New York Times reports this morning that supplement retailer GNC has reached a deal with the New York State attorney general's office, promising "to institute sweeping new testing procedures" for dietary supplements "that far exceed quality controls mandated under federal law." The story quotes experts as saying that says that "the announcement marked an initial but significant step forward for the $33 billion-a-year supplement industry, which is loosely regulated and plagued by accusations of adulteration and mislabeling."

The deal comes after GNC, Walmart, Target and Walgreen were accused of selling dietary supplements that were not what their labels said they were, which the state Attorney General said was reflective of broader problems in the industry.

According to the Times, "GNC, which has more than 6,500 stores nationwide and annual revenue of $2.6 billion, said that its herbal products had passed several rigorous quality-control tests and that it stood by their quality. But as part of its agreement with the attorney general, the company said it would in the next 18 months put in place additional quality-control measures to restore the trust of its customers and set new standards for the rest of the industry.

"The company said it would use advanced DNA testing to authenticate all of the plants that are used in its store-brand herbal supplements, and extensively test the products for common allergens like tree nuts, soy and wheat. In addition, GNC will submit semiannual reports proving that it is complying with the attorney general’s demands."

The Attorney General's office is not commenting on the Times report, but it seems clear that it is hoping to reach similar agreements with the other three retailers.

Published on: March 30, 2015

The New York Times has a column by Alexandra Levit in which she talks about what distinguishes Generation Z (those born from the mid-nineties to the mid-2000's) from Baby Boomers, Generation X and Generation Y.

"I’ve now had the opportunity to meet lots of Gen Zers, and here’s what I’ve noticed," she writes. "To start, they tend to be independent. While a 2015 Census Bureau report found that nearly a third of millennials are still living with their parents, Gen Zers are growing up in a healthier economy and appear eager to be cut loose. They don’t wait for their parents to teach them things or tell them how to make decisions.

"As demonstrated by the teenagers attending the recent Generation Z Conference at American University in Washington, Gen Z is already out in the world, curious and driven, investigating how to obtain relevant professional experience before college. Despite their obvious technology proficiency, Gen Zers seem to prefer in-person to online interaction and are being schooled in emotional intelligence from a young age. Thanks to social media, they are accustomed to engaging with friends all over the world, so they are well prepared for a global business environment.

"Gen Z is also diverse. My 15-year-old next-door neighbor is a quarter Hispanic, a quarter African-American, a quarter Taiwanese, and a quarter white. That’s Gen Z — they are often a mix of ethnicities."

Interesting story ... and you can read it here.

Published on: March 30, 2015

Capgemini Consulting is out with a new study in which it suggests that "loyalty programs have not evolved with the digital age and are failing to engage consumers." The report notes that "active participation rates in loyalty programs are often low," and posits that "89% of social media opinions on loyalty programs are negative."

Key findings from the report:

• "Just 11% of loyalty programs offer personalized rewards based on a customer’s purchase history or location data."

• "79% of loyalty programs use the mobile channel, and yet only 24% allow redemption through it."

• "97% of loyalty programs are based primarily on purchases made by consumers."

• "Only 16% of loyalty programs reward customers for activities, such as taking online surveys, rating and reviewing establishments or referring friends to the program," and only "14% employ gamification mechanisms to reward customers."

And, Capgemini recommends that successful loyalty/engagement programs should:

• "Integrate loyalty programs with the overall customer experience."
• "Deliver personalized customer experiences."
• "Conduct 'Social Listening' to understand customer needs."
• "Reward members for social media engagement and advocacy."
• "Provide value beyond traditional rewards."

Published on: March 30, 2015

The Philadelphia Inquirer reports that Aldi plans to "reopen 30 of the 66 former Bottom Dollar stores it took over in Pennsylvania, South Jersey and northeast Ohio after past owner Delhaize Group shut Bottom Dollar last year. Five ex-Bottom Dollar stores in Philadelphia and 14 in the suburbs will reopen; 4 of Bottom Dollar's Philadelphia stores will stay shut, along with 13 in the suburbs.

According to the story, the company said it 'will continue working with' 36 ex-Bottom Dollar communities where it doesn't plan new stores 'to ensure a new transition'."

Published on: March 30, 2015

The Chicago Tribune has a good story about how, "thanks to recent advances in synthetic biology — a hybrid discipline of engineering and biology that makes possible the manipulation of DNA of microorganisms such as yeast, bacteria, fungi and algae — a new generation of 'organism engineers' has already started experimenting with the creation of new flavors and ingredients. In doing so, they have the potential to transform synthetic biology into a new creative platform to enable chefs, bakers or brewers to create new flavor profiles for food and drink."

The story goes on to say that "obviously, there are a number of concerns about synthetic biology, especially in an era when even the mention of genetically modified organisms (GMOs) tends to freak people out. But these concerns are largely overwrought. Synthetic ingredients are actually more 'natural' than the artificial ingredients found in stores. There are no genetically modified organisms in the final food product — the 'engineered organisms' are only used in the fermentation process as a raw material to help make the final product."

You can read the entire story here.

Published on: March 30, 2015

The Private Label Manufacturer Association (PLMA) is out with its annual report saying that "total sales of private label in the U.S. were $115.3 billion" during 2014, and that during that time, "store brands had accounted for nearly three billion dollars in incremental sales overall, an increase of +2.5% over the previous year and more than twice the percentage gain that was recorded by national brands."

The report goes on to say that "over a three-year period, store brands sales across the combined retail outlets have increased by $5.5 billion, moving store brand dollar market share from 17.3% to 17.7% ... Unit market share for store brands was 23.1% in U.S. supermarkets, while dollar share increased to 19.5%. In drug chains unit share was 17.3% and dollar share increased to 16.5%. Unit share was 21% for all outlets combined as dollar share grew to 17.7%."

Published on: March 30, 2015

...with brief, occasional, italicized and sometimes gratuitous commentary…

• The Seattle Post Intelligencer reports that electronics retailer Best Buy "is laying off 500 full-time and 1,000 part-time employees in Canada as it consolidates operations." The company says it "will close 66 of its Future Shop locations and rebranding the remaining 65 as Best Buy stores."

Death by a thousand cuts?


• The Associated Press reports that "an outbreak of a deadly bird flu strain spread to one of the top poultry producing counties of the nation’s top turkey producing state of Minnesota, government officials confirmed on Saturday, raising fears that the that the highly contagious disease could seriously damage the industry.

"The highly pathogenic H5N2 strain of avian influenza has infected a third turkey farm in the state, this time a commercial flock of 39,000 birds in Stearns county in central Minnesota. The county is No. 2 in turkey production in Minnesota and is also one of the state’s top chicken and egg producers."

Published on: March 30, 2015

...will return.