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    Published on: July 21, 2015

    by Michael Sansolo

    “You can observe a lot by just watching.” Let’s be honest, if we had a motto here at MNB, it might very well be that saying from baseball great Yogi Berra. As you might have noticed, we try - and hopefully succeed - at finding lessons everywhere.

    Sometimes, even where you least expect it.

    Recently I finally got to see “The Book of Mormon,” the outrageous and wonderful Broadway musical based on the very same religious book you find in every Marriott Hotel. If you haven’t seen this show there are two key points I need make.

    First, the show was conceived and written by the guys behind the television show “South Park.” So as you might expect, it possibly contains the most profanity of any Broadway show in history. Its references are irreverent, bawdy and many times embarrassing.

    Second I’m actually a big Broadway fan and I’ve been blessed to see countless shows in my life. Without hesitation I can say that “The Book of Mormon” is one of the best musicals I've ever seen and I understand why it is constantly playing to sold out houses in New York and beyond. The energy, the comedy and the sweetness of it are all amazing - even if it’s impossible to sing most of the songs out loud without offending everyone nearby.

    The business lesson however came in the Playbill, the show’s printed program handed to the audience. It reminded me on a line from the first (and best) “Pirates of the Caribbean” movie, when a British officer calls Captain Jack Sparrow, “the worst pirate I’ve ever heard of.”

    Sparrow’s response: “But you have heard of me.”

    All publicity can be good publicity - remember that.

    On three consecutive right-hand pages in the Playbill for “The Book of Mormon” were ads from the Mormon Church or, more correctly, the Church of Jesus Christ of Latter Days Saints. Each ad features a close up picture of a person suggesting that if you like the play you are guaranteed to like the book. The real Book of Mormon that is.

    Here’s the thing: the musical is probably the least reverent portrayal of the Mormon faith ever. EVER!!! Every part of the religion’s teachings get a solid ribbing from Joseph Smith to Brigham Young to the missionaries who ring your door bell. Even Jesus gets in on a couple of songs.

    The church could have taken offense, staged pickets, urged boycotts or, let’s be honest, done far worse. Instead, based on those ads, it seems the folks at LDS decided to go along with the joke and just maybe use it as the most unorthodox marketing tool ever.

    And you know what, it might just work. It’s highly possible that many theatergoers might watch the musical and leave with some curiosity as to what the actual book says. That in turn could lead anywhere. Even, perhaps, to new Mormons.

    The lesson is clear: sometimes in this hyper-serious world, we need to remember to pack our sense of humor and our willingness to laugh at ourselves. It’s not ever easy, but just maybe others will laugh with us. Or, when things aren’t so funny, it reminds us that a willingness to engage an issue can be far better than hoping it goes away.

    You really can observe a lot by just watching…and maybe smiling.

    Michael Sansolo can be reached via email at . 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: July 21, 2015

    The Great Atlantic & Pacific Tea Co. (A&P) yesterday filed for Chapter 11 bankruptcy with plans "to sell or close its remaining stores," according to the Wall Street Journal story. It did so "just three years after emerging from a previous trip through bankruptcy," and after years of mismanagement and misjudgments that seemed to make it less competitive with every decision.

    "A&P, which has about 28,500 employees, said it has so far found bidders for 120 of its 296 grocery stores, and will continue to seek buyers for many of the rest," the Journal writes. "It also plans to close 25 underperforming stores."

    The story goes on to report that "A&P said it has existing bidders for its 120 stores including Acme Markets Inc., Stop & Shop Supermarket Co. and Key Food Stores Co-operative Inc. for an aggregate purchase price of almost $600 million. Ahold NV, the Dutch owner of Stop & Shop, said Monday it plans to acquire 25 A&P stores in the Greater New York area for $146 million."

    The Journal goes on: "A&P exited its last chapter 11 in the hands of investors including supermarket mogul Ron Burkle, whose Yucaipa Cos. led a $490 million financing package that the company called its only alternative to full liquidation. A&P had hoped that bankruptcy would better position it to compete. It renegotiated labor costs with unions, and adjusted food and supply-chain costs with vendors. It also planned to remodel its outdated stores and modernize its technology. But sales fell 6% to $5.5 billion in the latest fiscal year after a 7.6% drop the year before."

    The New York Times writes that "none of the bidders have agreed to assume the employees’ collective bargaining agreements and pensions, A&P said in its court filings. The company said it was 'committed to engaging in direct and comprehensive negotiations” with its unions'."

    A&P CEO Paul Hertz described the moves as the best way to "preserve as many jobs as possible" and "maximize value for all stakeholders ... While the decision to close some stores is always difficult, these actions will enable the company to refocus its efforts to ensure the vast majority of A&P stores continue operating under new owners as a result of the court-supervised process."
    KC's View:
    Can anyone actually be surprised by this? A&P has been around a long time, sure, but much of its recent past has seemed marked by an inability not just to compete, but to even recognize that companies top-heavy with administration, light on strategy and tactics, and with no apparent sense of how both the marketplace and consumers have changed, have little chance of surviving.

    I just hope that whoever buys all these stores, they are able to bring some real innovative and disruptive thinking to the marketplace, and an ability to implement on promises made to consumers.

    The A&P story should serve as a warning to every retailer that no matter how big or ubiquitous you may be, you are only as effective as you are today and tomorrow.

    Dead company walking? Hell, this dead company is crawling toward an ignominious end.

    Published on: July 21, 2015

    by Kevin Coupe

    John Oliver has done it again.

    On Sunday night's edition of "Last Week Tonight" on HBO, Oliver focused on the issue of food waste - talking about the various reasons for it, and suggesting ways in which the problem can be addressed. As usual, Oliver is very funny, frequently profane ( want to be careful about playing this in a work cubicle or around kids), and makes a lot of excellent points. I continue to marvel at Oliver's ability (along with that of his terrific writers and researchers) to use humor to illustrate serious issues and make them accessible.

    Watch it. Enjoy it. It is an Eye-Opener.

    KC's View:

    Published on: July 21, 2015

    The Los Angeles Times reports that Albertsons is suing Haggen for fraud, saying that the grocery chain has withheld more than $36 million in payments that it owed for inventory received as part of its acquisition of former Albertsons and Safeway stores.

    The complaint says that "Haggen's acts were fraudulent in nature and done with malice and a willful disregard for Albertsons' rights."

    It is just the latest bad news that has plagued Haggen since it made the decision, fueled by private equity money, to grow from an 18-store Pacific Northwest company and acquire 146 former Albertsons and Safeway stores that needed to be divested when those two companies merged. Since then, Haggen has gotten mixed to poor reviews for the stores it acquired and converted, and has recently been laying off employees and reducing store staff hours to compensate for disappointing sales.

    According to the Times story, "Albertsons says that Haggen refused to pay for $36 million of inventory at 32 stores it acquired. Nearly $5 million in inventory at an additional six stores will be past due Tuesday -- bringing the total to more than $41 million, the complaint said.

    "Haggen waited until deals closed on all 146 stores before notifying Albertsons that it would not pay for the inventory, the lawsuit alleged. The reasons -- related to unspecified issues that Haggen contends occurred during the acquisition process -- are 'baseless,' the lawsuit said.

    "'Haggen's acts were fraudulent in nature and done with malice and a willful disregard for Albertsons' rights,' the lawsuit said."

    Haggen has responded by saying that "it notified Albertsons in June of Albertsons' violations under the purchase agreement and possible further violations related to requirements of the Federal Trade Commission and various state attorneys general. Haggen declined to disclose those alleged violations. By filing a lawsuit, Haggen said Albertsons appears to be trying to avoid 'addressing its wrongful conduct'."
    KC's View:
    Just what Haggen needed.

    I have no idea what the specific issues are in this dispute, but the headlines that this lawsuit will generate cannot help Haggen's already tattered reputation in the new markets it is serving. BTW ... I stopped at another couple of just-converted Haggen stores last weekend, and found them as lacking in inspiration as the one I visited a couple of months ago. And yes, they still had some California wine mixed into some Oregon wines on a display marked "local" - you'd think these guys would learn.

    I also talked to some more local shoppers who'd decided to give Haggen a try after the conversions, and to a person they said that they thought that the prices were high and the stores "nothing special," and that they would not be going back.

    This story just keeps getting worse and worse.

    Published on: July 21, 2015

    Interesting story in the Seattle Times about Alibaba's decision to sell 11 Main, its US operation. While 11 Main was a small operation taken within the context of Alibaba's $12.3 billion in revenue last year, "the setback ran counter to the remarkable growth that Alibaba has enjoyed."

    Christopher Tang, UCLA distinguished professor in the school's Anderson School of Management, tells the Times that despite Alibaba's global reputation, the company "misjudged the market completely, and there was no traction. They didn’t understand American consumers’ expectations and that the market is highly competitive. And they didn’t understand how logistics support is crucial."

    A core problem for 11 Main was that, much like Alibaba does in other global markets, it served largely as a portal for other retailers to sell their products; Alibaba owns no inventory and does not handle fulfillment. While a sale made be on Alibaba's site, the transaction is between the merchant and the consumer, with Alibaba having no role in whether the customer is satisfied or the retailer lives up to expectations.

    "American consumers by and large are e-savvy and, thanks to Amazon and eBay, they are used to a mostly good experience in terms of e-commerce," Tang says. "They expect many products to be available at a competitive price, they expect two-day delivery, they know they can trust the order and return the products usually without any hassle ... If you buy something at Amazon, the product is either shipped by Amazon or by the merchant through Amazon. Alibaba wasn’t doing that. After a sale at 11 Main, the transaction was between the consumer and merchant. Alibaba was more like an agent. That is the business model they run in China."
    KC's View:
    This reflects the degree to which Amazon continues to shape consumer expectations about the online shopping experience, but one should not underestimate Alibaba's pocketbook nor its desire to make a go of US online retailing. I suspect they'll learn from their mistakes, and they'll be back.

    Published on: July 21, 2015

    Seeking Alpha has an analysis suggesting that Amazon has the "stickier ecommerce platform," especially when you factor in its Prime program:

    "It is quite impressive given that Prime Day was limited to AMZN Prime users rather than all the consumers. The idea of Prime shoppers generating sales that was more than that generated by both Prime and non-Prime shoppers on Black Friday is simply mind boggling and it really highlights the stickiness and the adoption of the Prime ecosystem. The combination of cloud service, online video and two-day shipping already offer the consumers significant value-add, and I believe that AMZN will continue to expand Prime services similar to that of Apple adding services such as Music and potentially web TV to strengthen its ecosystem."
    KC's View:

    Published on: July 21, 2015

    • The Financial Express reports that in addition to Walmart Canada and CVS closing down their online photo processing websites because of a data breach, possibly through a technology vendor, "Costco Wholesale Corp, Sam’s Club and a handful of other large retailers have disabled their online photo printing stores in recent days" as well. Other retailers that may have been affected include RiteAid and Tesco.

    • The Food Marketing Institute (FMI) is out with a new study saying that "food retailers can expect to see a correlation between how engaging and entertaining their app is and their digital customer retention."

    In addition, the study shows that "active grocery app users are not overly concerned about their privacy but appreciate transparency by retailers regarding how their data is used."

    “Digital trust is key,” says. Nancy M. Childs, Ph.D., Gerald E. Peck Fellow and professor of food marketing at Saint Joseph’s University, who conducted the study. “The more consumers feel they are in control of their data, the more generous they are with information, and the more they are locked into an app for sales. The level of digital trust a consumer has with an app is critical and will be a meaningful differentiation when choosing grocery apps.”
    KC's View:

    Published on: July 21, 2015

    I've gotten numerous requests from folks living in the Portland, Oregon, area for one of those casual MNB get-togethers that we occasionally do when I'm visiting a city. And so, we're planning one for next week...

    Let's plan on meeting at 5 pm on Thursday, July 30 at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours - if the weather holds, on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.
    KC's View:

    Published on: July 21, 2015

    Yesterday, MNB took note of a piece by William Saletan that takes on the anti-GMO movement.

    One MNB use responded:

    I was glad to read Slate’s article about GMOs. The problem with government-mandated labeling is that, like cigarette labeling, it implies that GMOs are dangerous. Would this mean that the government should mandate labeling for everything that anyone is paranoid about, no matter how invalid their concerns?

    There’s nothing stopping someone from putting a “No GMO” label on their products. But mandatory labeling for a safe product is taking government power too far.

    MNB user Ken Wagar wrote:

    It is so refreshing to see a reasoned alternative view on GMOs and to see you accepting of the possibility of being on the wrong side of this or at least not fully investigating the issue but rather being caught up in the hype.

    Keep up the good work as well as the open mind.

    I almost always accept the possibility that I'm wrong. Except about how awful the designated hitter rule is, and how Pete Rose should continue to be kept out of baseball.

    But MNB reader Lisa Malmarowski continues her objections:

    I would argue that the main case against GMOs is putting the control of our food supply in a few hands - those of multi-national corporations. 

    And I’m still waiting to see the hard evidence that they are not harming nor have the ability to harm our environment and food diversity in the long run.

    On the subject of Jet, the new competitor to Amazon that launches today, MNB fave Glen Terbeek wrote:

    Just another example of the retail price approaching the lowest common denominator.  The beauty of a national brand is that it is the same any place you buy it.  And that, unfortunately, is why it will be harder for retailers to compete on price alone in the future.   (Really, does a retailer change the contents of a national brand to justify setting its price?) They will need to add value in some other way than just availability, to be competitive long term.  The industry (retailers and CPGs/suppliers) needs to re-align revenues with real shopper value created, and eliminate the false economics in today’s store, logistics based industry model.   E-commerce will force this re-alignment.  Great real stores will be part of the future, but only if they create local added value through solutions, information, social, etc; and if they are leveraged by a value added virtual shopping experience.

    The beat goes on!  Isn’t it interesting that these new models are coming from outside the industry?

    I suggested yesterday that perhaps Walmart made a mistake by competing directly with Amazon's prime Day promotion, and that maybe it should have played its own game instead of Amazon's. MNB reader Herb Sorensen replied:

    Walmarts "own game" is well on its way to disaster, choking on inefficient capital deployment ... Playing your "own game" when the rules are changing before your eyes is a guarantee for disaster.  It is more than a year since I personally liquidated my small position in Walmart.  I am sad.  ;-)

    I did not mean to suggest that Walmart's traditional "own game" was enough to compete with Amazon ... just that rather than blazing its own e-commerce trail with its own set of distinct and differential advantages, it decided to follow Amazon.

    Finally, from MNB reader Mark Boyer:

    It took me all day to get through today’s edition because of work-related stuff, but what an issue. I simply could never keep up with the reading I would need to do to stay current on one-tenth of what you are covering. Thanks.
    I’ve passed along several of the articles to colleagues, and will dig deeper into some of them (especially the argument for GMOs) when time permits.
    And I learn of the passing of “Moe Green.” The guy who gets a massage from two buxom broads in bikinis while lounging on his boat.
    Well played today. Well played.

    KC's View:

    Published on: July 21, 2015

    • Zach Johnson won the British Open in a playoff over Louis Oosthuizen and Marc Leishman, gaining the second major triumph of his career. The first was the 2007 Masters.

    KC's View: