retail news in context, analysis with attitude

Published on: April 14, 2015

by Michael Sansolo

There was something interesting about the juxtaposition of articles on the front page of the Washington Post one day last week that highlighted the challenge we all have in separating incremental change from disruption. There’s a distinction - we can deal with incremental change, but true disruptions are unsettling, illogical and frequently fatal to the status quo.

It is a distinction to which businesses should pay close attention.

Let’s start with the articles. The first, the lead story in the paper that day, was about Sen. Rand Paul launching his campaign for president. Now I’ve got no skill set to properly judge the senator. I can’t say with any certainty if he’ll meet with success or even if his ideas are truly distinct.

Yet I thought it ironic that he positioned himself as a candidate running against the system even as he started his bid to win clearly inside the system. Remember, he, like his father before him, is seeking the Republican nomination. Paul might feel that is the only path to possible victory, but either way, he’s playing inside the system.

The article below his demonstrated something completely different. It was an examination of the problems cable television companies are starting to encounter at an alarming rate. The problem is the percentage of young people simply cutting the cable and getting television programs through Hulu, Netflix and Amazon, with more choices coming daily. This is something to which we pay a lot of attention here on MNB, because it seems to reflect the kind of change that is taking place in many industries.

It isn't just change. It is disruption, and it is happening precisely because some companies are endeavoring to win by playing outside the established system. (In this case, "system" is exactly the right word, because it is the cable systems that are under attack. In the end, I think it is because the cable companies have delivered a product that has not generated significant levels of customer satisfaction. Though I have to wonder if people are less satisfied with their cable choices or their choices of politicians...)

I think there is a strong parallel between cable companies and food retailers. Think about it: Cable stations offer a stunning array of choices for viewing, but most of us watch barely a handful of stations. I love sports, but even I can’t wade through all the choices of non-stop sports programming I face daily no matter how fast I surf.

Increasingly, my range of channel decisions gets reduced to the same group and the rest become invisible. (Really, I am never going to make it channel 986!) It’s like my trip through the supermarket where, like most people, I buy a small fraction of the 40,000 SKUs available.

That’s why I think the cable disruption is one we need watch. Consumers are finding a way to overturn the system. They are becoming their own curators, essentially building their own collection of channels and programs and eliminating all else.

Self-curating may be more difficult when it comes to buying food, but the growth of limited assortment operators from Trader Joe’s to Dollar General and the looming specter of competition with Amazon has to make you wonder what the next challenge will really be.

What’s more, can we successfully and profitably respond or do we just behave like politicians and talk about it.

To paraphrase Forrest Gump, “disruptive is as disruptive does.”


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.

Published on: April 14, 2015

by Kevin Coupe

There is a good column in the Chicago Tribune by Phil Rosenthal in which he addresses the changing ways in which people in the US view age ... and he uses the soon-to-retire David Letterman as his example.

"Age isn't what it used to be," he writes. "Maybe it never was.

"Letterman's 68th birthday is Sunday. His last 'Late Show' is set for May 20, seven days after Stephen Colbert, his successor effective in September, turns 51.

"This isn't a commentary on how old network television viewers or late-night TV hosts are or should be. It's more to note that the perception of age has and will continue to evolve.

"And while this shift is reflected in part, even informed, by trivial matters such as entertainment, its impact weighs on far more substantive matters."

You can read the entire Rosenthal column here.

We actually addressed this in a slightly different context the other day, noting that while Frank Sinatra retired the first time at age 56, nobody today would consider retiring at 56. Mick Jagger is 71. Paul McCartney is 72. Billy Joel and Bruce Springsteen are both 65. (I was curious, so I checked - Johnny Carson retired from "The Tonight Show" at age 67.)

Rosenthal makes the following observation: "Letterman, it can be argued, isn't retiring because he's in his late 60s, but because it's 2015 and there's not much else to do that's new and different and still authentic."

And maybe that's the real shift that matters - not so much that people are living longer but that at an age when people used to retire, a lot of them are looking to continue doing something that is new and different and authentic.

Mrs. Content Guy mentioned to me the other day that whenever she decides to retire, one of the things she'd like to do is start taking college classes. She's not sure in what, but she believes she wants to challenge herself. Learn stuff.

And because she also wants to do something new and different, she also said she thinks she'd like to take blacksmithing lessons.

Now that was an Eye-Opener.

Published on: April 14, 2015

The Associated Press reports that Jack DeCoster and his son Peter DeCoster, formerly of the Quality Egg Co., have been sentenced to three months in jail apiece for their role in a 2010 salmonella outbreak that was linked to almost 2,000 reported illnesses.

The DeCosters were accused of knowing that their Iowa egg facilities were contaminated but ignoring the problem; they could have been sentenced to a year in jail each.

In addition, the story says, "the Quality Egg company paid a $6.8 million fine as part of a plea agreement, and the DeCosters paid $100,000 each."

Published on: April 14, 2015

The Associated Press reports that Target has named Anne Dament, most recently vice president for services at PetSmart and before that group vice president for perishable strategy at Safeway, to revamp the company's food business as Senior Vice President, Merchandising.

Target CEO Brian Cornell has identified Target's food business, which generates roughly one-fifth of its annual revenue, as an area that needs to be overhauled over the next 12 to 18 months, with a focus on "making better-for-you options simple and attainable, providing meal solutions and offering unique selections for everyday occasions as well as entertaining."

Dament worked with Cornell when he was chief marketing officer at Safeway.

Published on: April 14, 2015

The Cincinnati Enquirer has a piece looking at Walmart's relationship with major manufacturers, upon which it is trying to place pressure to reduce costs so it can emphasize its low price roots at retail.

The piece suggests, no surprise, that Walmart has a lot of clout with these manufacturers, owing to how much it contributes to these companies' sales figures.

For example, PepsiCo does $8 billion in sales at Walmart, which represents 12 percent of its total revenue. Kraft does $4.7 billion, or 26 percent of its total. Campbell Soup does $1.6 billion, or 19 percent of its revenue. JM Smucker does $2.3 billion, or 30 percent of its total. And Clorox does $1.5 billion at Walmart, or 26 percent of its revenue.

Published on: April 14, 2015

Internet Retailer has a piece quoting from an ARK Invest report projecting that "Amazon.com Inc.’s proposed use of drones could drive down the cost to deliver small packages crosstown to about $1—a fraction of existing same-day delivery options."

The story goes on:

"Barring regulatory obstacles, Amazon would face an upfront cost of about $100 million to buy tens of thousands of drones. The company also would see expenses of about $300 million to deploy them to deliver 400 million orders annually, according to the report, which based its findings on existing technology and prices.

"Amazon would need to hire thousands of operators, each capable of monitoring multiple drones simultaneously, to ensure safe takeoffs and landings, according to the study, which included the personnel cost in its calculations. Most of the drone flight would be automated, according to the study, which assumes each package weighs as much as 5 pounds and each delivery is no more than 10 miles."

Published on: April 14, 2015

• The Phoenix Business Journal reports that Walmart is taking "umbrage" at a new University of California Berkeley Labor Center study suggesting that "low-wage jobs in Arizona cost taxpayers $686 million a year. The study authors said Arizona taxpayers are subsidizing those businesses as nearly three-quarters of those families qualify for some form of public assistance despite drawing a paycheck."

A Walmart spokesman called the study "flawed and rooted in false assumptions," adding, "The fact is, Walmart represents economic opportunity for our more than 32,000 Arizona associates who receive competitive wages and have access to quality benefits, including affordable health insurance and 401(k) retirement plans." Walmart also has pointed out that the study "was sponsored by the Service Employees International Union."

Published on: April 14, 2015

• The Wall Street Journal reports that Procter & Gamble CEO AG Lafley seems to be "laying the groundwork" for his departure, a move that could happen as soon as this summer.

The job is likely to go to an internal candidate, the story says, and Lafley would remain as chairman in order to smooth the transition.

This would be the second time Lafley has stepped down from the CEO job at P&G; he first held the job from 2000 to 2009, then returned two years ago "with a mandate to revive the company’s fortunes and find a new successor."


• In Minnesota, the Star Tribune reports that Coborn's "is expanding in Wisconsin, purchasing Marketplace Foods, owner of four grocery/liquor stores in the western part of the state. The purchase price was not disclosed.

Coborn's currently has 52 stores in Minnesota, North and South Dakota, Iowa, Illinois and Wisconsin, operating under a variety of banners.


• The Indianapolis Business Journal reports that Marsh Supermarkets plans to chose four stores within the next few weeks, saying that the stores "do not meet our business requirements regarding sales or future growth potential going forward."

The units are in Indianapolis, Fishers, Mooresville and Lafayette.

The story notes that "the latest round of closures is the second for Marsh since the beginning of 2014. The grocery chain announced last January that it was closing eight stores, including five in the Indianapolis area." Marsh has about 78 grocery stores in Indiana and Ohio.


• The Kroger Co. announced that unionized employees have ratified a new labor agreement with UFCW Local 227, covering nearly 14,000 associates working in 89 stores in the Louisville and Southern Indiana areas.

Published on: April 14, 2015

• Weis Markets announced it has promoted Brent Mertes to Regional Vice President where he will oversee the day-to-day operations of 51 stores located in South Central Pennsylvania, Maryland and West Virginia. Prior to his promotion, Mertes worked as a District Manager for Weis.

Published on: April 14, 2015

Responding to yesterday's story about the Australian hotel chain that is ranking its guests and then posting those rankings online, MNB user Mark Boyer wrote:

Seems Uber-ish. I like it.

"Uber-ish." Sounds like an adjective we may be hearing a lot of.

I like it.




Got the following email from MNB reader Michelle Graham, reacting to the story yesterday about retail chains that force part-time employees to be on-call without pay, which gives the store maximum flexibility but does not allow the employee to get another job if he or she needs one. She wrote:

Kevin, I read every day but rarely comment.  This particular piece struck a nerve.

I come from a challenged background.  My mother was Bi-Polar and out of our lives when I was seven.  My father had Rheumatic Fever as a baby, which damaged his heart, had his first of many heart attacks in his 30’s and died at 50.  I am the oldest of 4 and I worked as many jobs as possible to keep a roof over our heads and continue to go to school at a community college.  I knew I had potential, I was smart, but had no financial means.

Vons was within walking distance of my home, so I applied there as I heard they paid well and offered medical benefits.   I became a courtesy clerk at 16.  At that time, Vons allowed me to define my available hours and the store manager would schedule accordingly.  This scheduling practice allowed me to go to school in the morning, clean houses when available in the afternoon and start an office cleaning business from 9pm to 2 am each night, in addition to working at Vons.  If asked to cover a schedule at Von’s when someone else called in sick, I would make every effort to do so as my goal was to have as many hours at Vons as possible due to pay and union benefits.

My hours at Vons eventually increased.  I was trained to run the front-end of the store, then became a bookkeeper and at 24 was hired into the Corporate office.  Ultimately, through Vons/WAFC I received a scholarship to USC’s Food Industry Management Program and received my BS from USC.  I have had a long and successful career working with Vons as well as on the manufacturer sales and business development side of the business.

If Vons had not been willing to work around defined hours, I am not sure what would have happened to our family – I’m sure we would have lost our home and the 4 of us likely on the street as we did not have relatives close by.   My point in all of this is that I remain very loyal to Vons, shopping there when the prices would not make that a logical decision.  I encourage other people in similar situations to enter the industry, even if the hourly pay has diminished.  I truly believe that companies that try to accommodate bright employees will reap the rewards.

Wow.

This is about as eloquent an explanation as I can imagine for why it makes business sense to treat their employees as if they are an investment. Because they are.

By doing so, employers can make a real difference in people's lives - it isn't a gift or charity, but living up to what I think is business's greatest opportunity.

There will be people who will disagree with that, who will argue that business's greatest responsibility is to get as much work from employees for as little money as possible ... that labor is to be exploited, not invested in ... that investors and the bottom line are not just the most important thing, but should be catered to at the expense of every other consideration.

I think they are wrong. That they are not just short-sighted, but lack vision.

Thanks for sharing, Michelle. This is an important story for people to hear.