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    Published on: April 7, 2015

    by Michael Sansolo

    The incredibly important role food retailing plays in people’s lives was placed in sharp focus last week in a reverse price war taking place far from the US.

    Last Friday, discussion of a potential arms deal with Iran dominated news around the world, and nowhere was that topic as important as in Israel. Yet there was a secondary story in one of Israel’s major newspapers that focused squarely on supermarkets - especially because last Friday was the start of the Jewish holiday of Passover, a celebration that itself focuses squarely on food.

    Thanks to numerous economic issues, Israeli shoppers are doing something very strange these days, according to the newspaper Haaretz: They are simply buying less food. That in turn is putting a squeeze on the country’s food retailers, causing them to discount ever more heavily in a failing attempt to win back sales.

    As any retailer in the US knows, such policies lead to an additional problem in the form of falling profits. Plus, when everyone is discounting, no one is special or is gaining sales. So productivity measures are falling everywhere.

    Israeli retailers responded with a strange marketing tactic.

    To explain, virtually the entire industry abandoned price merchandising for the Passover holiday. No price breaks on chickens (usually a centerpiece in Israel), or the holiday’s key food, matzo, or on any of a wide range of products shoppers specifically buy for the eight-day holiday.

    According to Haaretz, the trend started with the nation’s largest retailers and everyone down the line quickly followed suit.

    What’s more, the supermarkets stopped advertising because they had no sales to trumpet and wanted to save on the cost of marketing. After being immersed in a bitter price war with new discount chains, Israeli food retailing has essentially gone cold turkey. Haaretz said consumers were noticing now - and buying less for the holiday - and one can only imagine how consumers will respond in the long run.

    It likely won't be pretty. At some point, one retailer is going to break from the pack and the war will get jump started.

    The celebration of Passover focuses on discussion of a series of historical questions, starting with, “Why is this night different from all other nights?" When the inevitable Israeli price war begins, retailers there should ask themselves, “Why is this price war different from any other?”

    The answer is that it is not. Price wars almost never are.

    Countless price wars have demonstrated the futility of a race to the bottom. In the end, virtually everyone loses and customer loyalty is reduced to one special at a time. Through the years the more prudent approach of reducing costs to enable price savings, while enhancing differentiation has shown to work much better.

    Here in the US, we are coming off a dreadful economic period and we, too, have ample numbers of discount invaders. However, the chains most beloved by shoppers, at least according to Consumer Reports, are those that seemingly found a way to carve a new path. Companies like Wegmans, Publix and Trader Joe’s top the list, thanks to their well-earned reputations for unique and highly pleasing shopping experiences. And all three did a strong job featuring price savings throughout the Great Recession.

    You’d think that lesson would be global.


    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.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.
    KC's View:

    Published on: April 7, 2015

    by Kevin Coupe

    With the opening of the baseball season comes the inevitable press release from the National Hot Dog and Sausage Council (NHDSC) - inevitable, but impressive nonetheless.

    The NHDSC says that "baseball fans will consume more than 18.5 million hot dogs and nearly 4.2 million sausages during the 2015 Major League season.  The combined hot dog and sausage total could stretch from Citizens Bank Park in Philadelphia to Chase Field in Phoenix.  The hot dog total alone would reach as high as 7,827 Empire State Buildings."

    The press release goes on:

    "The Los Angeles Dodgers can relish in victory as the team’s fans are once again projected to consume the most hot dogs, totaling more than 2.5 million.  That is enough to round the bases at Dodger Stadium 3,551 times, and based on last year’s attendance, means that 66 percent of fans at Dodger home games will eat a hot dog.

    "The New York Yankees have come from behind to reclaim the second spot, as fans are expected to consume more than 1.5 million hot dogs.  Batting third are the Cleveland Indians at 1,252,463 hot dogs, followed closely behind by the Texas Rangers with 1,024,559 anticipated hot dog sales.  The Chicago Cubs round out the lineup of top hitters, with fans expected to consume more than 855,000 hot dogs, representing a 21 percent increase over last year."

    Which, of course, reminds me of a movie....2010, the underrated sequel to 2001, in which one character says that while in space he misses the hot dogs at the Astrodome. (The filmmakers didn't know that the Astros wouldn't be playing in the Astrodome in 2010.) And Roy Scheider, as Heywood Floyd, responds, "Astrodome? You can't grow a good hot dog indoors. Yankee Stadium. September. The hot dogs have been boiling since opening day in April. Now that's a hot dog."

    Agreed. Sign me up.
    KC's View:

    Published on: April 7, 2015

    Forbes has a story suggesting that Amazon Prime "is starting to crowd out online competitors like Walmart and Target despite the best efforts of these big-box retailers."

    According to the story, "Market research consultancy Millward Brown Digital analyzed the buying patterns of more than 2 million online consumers, finding that Prime membership narrows the field of retailers a shopper is willing to consider. The company’s analysis of Prime versus non-Prime members’ cross-shopping behaviors found that less than 1% of Prime members are likely to consider other mass-market retail sites — Walmart.com and Target.com, for example — during the same online session.

    "An Amazon shopper without a Prime membership is 8 times more likely than a Prime member to cross-shop between Amazon and Target.com in the same session."

    While Amazon does not reveal specific Prime numbers, it is estimated that there are 40 million members of the Amazon Prime service, which carries a $99 annual fee and provides two-day shipping plus access to a variety of streaming services.

    Millward Brown also estimates that Amazon's traffic from Prime members has gone up 300 percent in the past year, the Forbes story says, adding that "Prime members are bigger spenders than the average online shopper, buying about $1500 worth of goods and services at billionaire Jeff Bezos’ web emporium each year."
    KC's View:
    What this comes down to is what we've been writing about a lot lately - the notion that Amazon wants to create an ecosystem that kind of traps (or seduces, depending on your point of view) customers into turning to Amazon as their first, best choice for, well, everything.

    It is all about creating the path of least resistance between shopper and shop. And it establishes Amazon as an extraordinarily dangerous competitor.

    Published on: April 7, 2015

    The Seattle Times reports that "Starbucks has revamped the college plan it offers U.S. employees in order to cover full tuition for all four years of college in Arizona State University’s online program. The plan, also underwritten by ASU, previously paid for the last two years of college, while freshmen and sophomores had access to partial scholarships and financial aid."

    The story says that "Starbucks, which aims to graduate 25,000 of its employees by 2025, says the program may end up costing it up to $250 million over that period."
    KC's View:
    Starbucks could have made the decision years ago that it was going to take the lowest common denominator path when it comes to labor. Probably could've saved money. Certainly could've avoided spending $250 million on an education initiative.

    But instead, it invests in its employees. Those investments continue. And bear fruit in terms of an engaged employee base that differentiates it from other retailers.

    Think about it. McDonald's and Walmart and Domino's and other retailers talk about giving employees a buck an hour here and a buck an hour there. And Starbucks shows how to do it right.

    Published on: April 7, 2015

    Reuters reports that "a group of 14 state attorneys general ... asked the U.S. Congress to investigate the herbal supplements industry after a New York probe of the products turned up ingredients that were not listed on labels and raised safety concerns," as well as to "consider giving the U.S. Food and Drug Administration more oversight of herbal supplements."

    The lead attorneys general were Eric Schneiderman of New York and Greg Zoeller of Indiana. "The attorneys general sent their letter requesting a probe to Kansas Senator Jerry Moran and Pennsylvania Representative Joe Pitts, chairmen of subcommittees on product safety and health," the story says. "They cited the New York probe and said researchers also have found other problems, including high levels of lead, mercury and arsenic in certain supplements.

    "The letter was signed by attorneys general from Connecticut, District of Columbia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Massachusetts, Mississippi, New Hampshire, New York, Northern Mariana Islands, Pennsylvania and Rhode Island."

    The New York Attorney General's office earlier this year accused four retailers - Walmart, Walgreen, Target, and GNC - of selling mislabeled herbal supplements.

    Reuters goes on to say that "Steve Mister, president of the Council for Responsible Nutrition, an industry group, said the New York attorney general's investigation was discredited and concerns about 'alleged widespread safety issues are not true.' He said 'the industry is already amply regulated on a federal level'."
    KC's View:
    This case clearly is going to be litigated, and we're going to find out if every herbal supplement manufacturer defines "responsible" and "amply" the same way most consumers (and attorneys general) would. I also suspect that one thing we're going to find out is if the supplement business has ample funds to bribe ... I mean, lobby ... enough legislators to prevent greater federal oversight of their industry.

    Published on: April 7, 2015

    The New York Times reports that Standard General, the lender that has taken over about 1,700 of RadioShack’s 4,000 stores, is trying to define the core of the chain that makes it worth saving. The question is what consumer problem it is solving, and "that is a question that RadioShack, the 94-year-old electronics chain, has tried to answer for years as the digital revolution sapped demand for its staples and its stores tracked a slow decline. In February, it filed for bankruptcy protection, buckling in the face of bigger rivals and online competition."

    So what will the new RadioShack look like?

    According to the Times, "RadioShack will slim down to become an electronics convenience store of sorts, focusing on things like Bluetooth headsets, chargers and other accessories that shoppers may need immediately rather than waiting a day or two for shipment of a web order. One of the most profitable RadioShack stores is a Bridgehampton, N.Y., outlet that is frequented by weekend vacationers who have forgotten their smartphone chargers or earphones. And one of RadioShack’s top-selling products is hearing aid batteries.

    "Tablets, laptops and digital cameras will disappear from RadioShack stores, and mobile phone sales and services will be handled by its new partner, Sprint, all of which affects just 7 percent of RadioShack’s sales. Remaining product lines will also shrink, to 60 headphones from about 180, for example, and to just one fitness wristband from 34."
    KC's View:
    There is something ironic about hearing aid batteries being one of RadioShack's best sellers. After all, many of the people who continued to shop there probably need them.

    With all the work that Standard General is doing to revive the RadioShack brand, the story makes the point that the retailer's largest creditor, Salus, actually owns the name - Standard General has six months to make a deal to buy the name, or rebrand all its stores. Whether such a change would be a blessing or a curse is debatable.

    I guess there will be people who will miss RadioShack's traditional approach, however this all turns out. I'm not one of them. But I did get this email from an MNB reader, who was feeling a little sentimental (and I have no idea if he wears hearing aids):

    For those of us that actually bought resistors and capacitors and knew what to do with them, this is certainly the closure of a significant “chapter” in our culture and the retailing industry. But for me, I will miss the old Radio Shack. I recently needed to buy a pocket-sized transistor radio. (How many young people even know that that is?) But I knew exactly where to look first – Radio Shack. I went online and sure enough, they had a few. I even went to the store to buy it. Everything changes and the Radio Shack of old will be no more. Good thing we no longer need those resistors and capacitors…

    Why the hell did you need a transistor radio? I can't even imagine...

    By the way, if RadioShack wants to be relevant, it probably should be in the capacitor business ... as long as the product it is selling is a flux capacitor. I would totally buy one of those, though I'd have to ask Doc Emmett Brown to install it for me.

    Published on: April 7, 2015

    Re/Code reports that the US Department of Justice has announced its first antitrust prosecution of a company in the e-commerce arena, "saying a man has agreed to plead guilty to conspiring to illegally fix the prices of posters he sold online. David Topkins was accused of conspiring with other poster sellers to manipulate prices on Amazon.com’s Amazon Marketplace, a website for third-party sellers, from September 2013 to January 2014, according to papers filed in San Francisco federal court."

    According to the story, "Topkins was accused of conspiring with other poster sellers to use algorithms, for which he wrote computer code, to coordinate price changes, and then share information about poster prices and sales. The Justice Department said this activity violated the Sherman Act, a federal antitrust law, by causing posters to be sold at 'collusive, non-competitive' prices."

    Amazon was not charged in the case. Amazon Marketplace enables third party retailers to sell products, but is a separate entity from its own retail business.
    KC's View:
    I think the most shocking thing about this story is that this is the first e-commerce driven antitrust prosecution. Go figure.

    Published on: April 7, 2015

    Technology company Aspect Software is out with a new survey saying that:

    • "Fifty-five percent of Millennials say that their customer service expectations have increased over the last three years, more than half have stopped doing business with at least one company because of poor customer service in the past year."

    • "Customer experience is increasingly defined by customer service: 76 percent of all generations view customer service as a "true test" of how much a company values them."

    • "Nearly 3 out of 4 consumers prefer to solve their customer service issues on their own, setting the stage for big changes in the consumer experience landscape."

    • "Sixty-five percent of all consumers and 69 percent of Millennials say that they feel good about themselves and the company they are doing business with when they resolve a problem without talking to customer service."
    KC's View:
    So, what this seems to mean is that millennials think customer service is important, will abandon companies that don't provide a good customer experience ... but may define customer experience differently than older generations, because they'd like to be enabled and empowered to fix their issues by themselves.

    That's interesting, because it suggests that consumer-facing companies may have to rethink how they provide customer service and what the whole concept means.

    I'm not sure what shape these changes will take. But I do believe that marketers who ignore these kinds of demographic shifts could be making a serious mistake.

    Published on: April 7, 2015

    • The Albany Times Union reports that a Price Chopper store in Wilton, New York, is the first store in the chain to be rebranded as Market 32. According to the story, Golub Corp. "unveiled the new facade, which shows giant images of food on the exterior along with the new name and logo. The words 'by Price Chopper' appear in smaller print.

    "Interior renovations also are nearing completion inside. On its Market 32 Facebook page, the chain has been sharing images of the new cheese and deli section, floral department and extensive collection of domestic, imported and microbrew beers. Market 32 takes its name from the chain's history. It was founded by brothers Ben and Bill Golub in 1932."

    More than half the 135-store chain is expected to be rebranded within five years.


    • The New York Times reports that FedEx has struck a deal to acquire TNT Express, a Dutch delivery company, for about $4.8 billion.

    According to the story, "The transaction would greatly expand the American delivery giant’s presence in Europe and comes less than two years after European regulators blocked a bid by United Parcel Service, its global delivery rival." Those same regulators will have to approve the FedEx-TNT deal.


    Reuters reports that Patrick Doyle, CEO of Domino's, told CNBC this week that the company "planned to raise wages for some United States workers," and that it needs "to raise its base pay to get the 'right people' to stay competitive." The move comes as companies including Walmart and McDonald's are moving to increase worker pay in a tightening labor market.
    KC's View:

    Published on: April 7, 2015

    Yesterday, MNB reported that "Ahold USA has announced that Mark McGowan, the company's merchandising EVP, will now take on a dual role - EVP of operations while simultaneously becoming president of Stop & Shop."

    I got it slightly wrong. McGowan is simultaneously becoming president of the Stop & Shop New England Division.

    Apologies for the mistake.
    KC's View:

    Published on: April 7, 2015

    On Friday, the six Star Wars movies will become downloadable for the first time, available from a range of e-tailers, including iTunes, Amazon, and Vudu.

    According to the story in the Wall Street Journal, "Disney and 20th Century Fox, which together control rights to the films, will make them available to purchase for digital devices individually and as a set. Previously, Star Wars has been available on DVD and Blu-ray, but not online." They will only be available to buy online, not rent.
    KC's View:
    This is all part of the studios' efforts to ramp up enthusiasm for the next Star Wars film, The Force Awakens, which is due out on December 18.

    On the one hand, it is almost silly to suggest that they need to drum up enthusiasm. After all, it's freakin' Star Wars! But while the last three George Lucas-directed movies were financial successes, they were not an overwhelming success with critics or audiences ... and the studios have turned to JJ Abrams to re-energize the series and make it relevant to modern audiences. (Which means, I think, that we're never going to see Jar Jar Binks again. Ever.)

    The Star Wars galaxy may be far, far away ... but the audiences it needs to appeal to is right here, right now. I don't think there's much question that the new movies will make a ton of money, but it is critical that the makers not take them for granted.

    That's a critical insight for every retailer and every marketer. Even if you are trying to market a proven success and a global juggernaut, you have to keep doing it, every day, with discipline and innovation. You can't assume the Force is with you. You have to make it work for you.

    Published on: April 7, 2015

    We had a piece last week about the closure of one of the last Howard Johnson's, an event and story that seemed to make some MNB readers nostalgic.

    Peter Talbott wrote:

    Fried clams and ice cream was our family’s big night out back in the 60’s…

    For reference, 1965 sales at Howard Johnson's surpassed McDonalds, Burger King and KFC combined.  Mad Men’s season 5 episode “Far Away Places” prominently features Don Draper’s road trip to a Howard Johnson’s in upstate New York which was actually shot at a former HoJo in the LA suburbs.  It had since been sold to another chain and repainted, but through the magic of TV it was returned to its blue and orange glory.


    From another reader:

    My kid is crazy about mid century modern so we were amused and delighted when we discovered her dorm at the Savannah College of Art & Design (SCAD) was a cleverly repurposed Ho Jo:  Family sized dorm rooms, large windows and a built in pool all located in walkable proximity to historic sites.     FYI- SCAD is known for historic preservation.




    Regarding Target CEO Brian Cornell's decision to shut down the company's Canadian stores, one MNB user wrote:

    While Brian Cornell made the right and decisive decision to pull the trigger, if his suppliers / partners are not paid in full it will strain relationships here in the US. Trade suppliers shipped on the full faith and credit of Target and now the lawyers are trying to say since Target Canada was a separate subsidiary Target parent is not responsible. Hope Cornell steps up to the plate and makes a decisive decision to keep his trading partners whole.




    On another subject, one MNB user wrote:

    While reading and then discussing with my college age daughter the McDonalds plan to test “all day breakfast”, she quickly replied “they would do even better if they offered “all day French fries”.  After discussing further, she explained to me that although she rarely goes there with her friends, that when they do, the one common denominator is that they all love McDonalds fries and can’t get them until after 11 AM most days at the McD’s near her campus…

    Memo to McDonald's. Take this idea and run with it. It is brilliant.




    Responding to Kate McMahon;'s column last week that criticized Domino's for using social media to get its customers to inform on franchisees that have not yet taken the word "Pizza" out of their banners.

    But one MNB user disagreed:

    I think the idea of engaging potential customers to become Domino's 'Pizza' Snitches is brilliant.  I’ll bet a lot of people with time on their hands will try to hunt down the offending signs.  They are probably already pizza lovers, since one of the prizes is a year’s worth of free pizza.  I’ll bet many of the searchers find new store front Domino’s they were previously unaware of.  Simple but effective branding strategy…  And, as long as they went out thinking of pizza; why not buy one.



    Some reader thoughts about the new Amazon Dash button being tested. One wrote:

    What a great idea!  Coming from a mom of a 2.5 year old and a 6 month old, and a family that puts electronics away when around the kids (my husband has his Masters in School Counseling and there is growing concern about the amount of time parents spend “plugged in” and its effects on young children) – if I could just push a button to reorder and not have to remember to log in somewhere or pick these items up at the store?  A-MAZ-ING.  As soon as they are available to everyone, sign me up.

    Now to just make sure they’re put somewhere the 2.5 year old can’t reach/find otherwise…I may have laundry detergent delivered by the truckload.  If anyone from Amazon is reading this – please make sure it has the fingerprint scan option like my phone so I can avoid the above situation.


    From another reader, Anjana Agarwal:

    Amazon's Dash is yet another way of making it convenient for the shopper and make it habit forming. Through, Dash Amazon is making it extra convenient to purchase a product, now that they've established shopper trust on fair pricing and fast shipping. They're counting on members trusting Amazon to send the product to them without even looking at the current price or for better options. And it's convenient for sure. Many times I notice we're running out of something when I don't have my phone handy - like when cooking or doing laundry or washing dishes - and then I end up having to make a run to the store. For those who use it, this button could be potentially habit forming and convenient that they stop buying the product from anywhere else. I don't know if I will as I like to check prices.

    Tying it to the Prime program is inevitable as they already get free and fast shipping.

    Amazon knows that Prime becomes a habit and Prime shoppers engage much, much more with the retail site in every category and with all digital products that Amazon offers.
    This is why Jeff Bezos is focused on making Prime so attractive that the members don't want to leave it.

    Consider the benefits:
    -Free shipping in 2 days, lower cost one day or same day shipping
    -Lightning deals start 30 minutes earlier for Prime members
    - Amazon Instant video Prime programs stream free
    - Free Prime Music streaming service
    - Free Kindle books pre-release - 1-2 books every month (Kindle First program)
    - Free Kindle Owner's Lending Library - you can currently borrow one book free per month
    - Prime members get many discounts - Fire TV stick for $19.99, Amazon Echo for $99, Extra benefits and pricing programs for Kindles
    AND
    - Best of all storage for ALL your photos for FREE - I have currently 59,602 photos on this service or 97GB of storage (plus 5GB is free for other files) - you can view them on any device with the app including Fire TV

    As we all know, we would give up many other possessions before we give up precious photos, and now that I have all my Photos in one place with easy viewing, I am going to have a tough time going anywhere else or dropping Prime. To keep my photos I would have to pay at least $59 per year (as per new Cloud Drive terms that were announced last week). Why not pay an extra $40 and get ALL of the above benefits for the cost of a $99 Prime membership?
    Now I'm resigned to be a Prime lifer anyway, why would I not consider using some convenient services like Dash... as you can see...it's an ongoing eco-system.

    And that's what Jeff Bezos wants.


    Couldn't have said it better myself.




    Following up on my comments about the beginning of the baseball season, MNB reader Gary Mountain wrote:

    Saw an interesting news article last night regarding how about 15 Major League baseball parks are now home to “All You Can Eat Seats” (unlimited hot dogs, nachos, popcorn, peanuts, soft drinks, and bottled water).  Is this a new marketing angle, or just trying to make everyone feel at home?

    I can't imagine doing that ... I just don't eat and drink that much at the ballgame. A beer, a hot dog, maybe a pretzel. But different strokes...

    From another reader:

    How can you have not managed to hit up a Rays game yet? 

    What are you waiting for?  It's a pretty cool little stadium and it's a pretty cool team.

    It also sits right in the middle of one of the hottest craft brew scenes in the country right now -- the current tally of breweries in the Tampa Bay region is now close to 30 and growing every day, it seems. 

    (and it's where *I* live -- so baseball, beer, and the chance to have a cold, er, lovingly chilled sample of our local brews with ME.  What's keeping you?  LOL)


    I appreciate the invitation ... and when I finally get to Tampa during the regular season, I'll give a shout. (I got there for spring training and saw a game at Steinbrenner Field this year...but I'm totally up for a Rays game.)




    I don't want to get into the whole "religious freedom" law debate again, but in all fairness, I did want to post an email from MNB reader John Ruocco, who wanted to comment on the criticism I got yesterday that I was spending too much time focusing on politics and not enough on issues relevant to business. For the record, I reject that characterization ... but that doesn't mean everybody agrees with me:

    We expect to better understand the industry, not your views. In the past I have sent on many of your news reports, now I skim to find news and seldom read your comments.  No one was as good as you for a fast way to see knowledge we might have missed if not for your ability to gather and post.

    "Was"> Sigh.

    I think it was Woody Allen who once said that it is the curse of all artists that most people say, 'I liked his early stuff."

    I guess you really can't please all the people all the time.

    But on the same subject, MNB reader Rich Heiland wrote:

    A couple of folks have said they tune in, read you because they want grocery news.

    I don't, not that I don't find it interesting. But, I spent 20-plus years in newspapering as a reporter, editor, publisher. Since 1992 I have been doing a lot of stuff on my own working with all kinds of companies and organizations nationally and internationally - not a grocery store among them.

    I have followed your blog for two or three years now because much of what you write about applies to all businesses and I frequently share it - with credit - with my clients. 

    As for your "political" commentary - it's not political. It's life. We all operate in a diverse and complex stew of customers, clients, employees and events. To think we can separate social, religious and government issues from our businesses is naive, but also short-sighted. 

    What I respect about how you handle it is that it is always civil, always thought-provoking and moving toward a point, whether I ultimately agree with that point or not. I hope you continue to comment on the breadth of life.


    Thanks. I'm sure I will. In part because I can't help myself. And in part because I think it is more interesting and more fun to look at the bigger picture.
    KC's View:

    Published on: April 7, 2015

    In the NCAA men's college basketball national championship game, Duke defeated Wisconsin 68-63. It is the Duke Blue Devils' fifth championship since Mike Krzyzewski took over as coach in 1980.
    KC's View: