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    Published on: December 8, 2015

    by Michael Sansolo

    Given all the changes swirling around the business world, it should hardly be surprising - in fact, it should be encouraging - to stumble on out-of-the-box solutions.

    Only this story doesn’t involve e-commerce, drones or social media. It’s simply about a different way to go to market and, for that reason, it’s a story well worthy of consideration.

    A press release came out last week announcing a new recruitment drive by Grocery Outlet stores that turns the entire model of independent retailing on its head. Even if you aren’t in that universe, it’s a paradigm-breaking proposal you need ponder.

    Grocery Outlet’s Bargain Market stores run very differently. The stores, found mostly in the far western US and also Pennsylvania, feature extreme values thanks to what the company calls “opportunity buys.” In other words, all kinds of products on which others would pass.

    As the company describes it, “We buy products that are outside the traditional retail channel because of packaging changes, product overruns and surplus inventories.” Grocery Outlet has a track record of making this work. The company will soon turn 70 and rings up $1.6 billion in annual sales.

    Given the well-documented economic hardships in many parts of the US and the coming storm of even more extreme value merchants, it’s easy to see the appeal of the company’s marketing plan. Only that’s not the most surprising part of the Grocery Outlet story.

    Independent operators in the Grocery Outlet world have only one job: selling. The company does all the buying, owns the real estate and even owns all the products in the store. Everything is sold on consignment so the operator’s focus is simplified.

    The operator has a small investment in the store and its equipment—usually up to about $200,000 according to Grocery Outlet. (All details of the company and the plan are on the company's new website.

    Here’s the thing: I love the world of independent operators and consider them some of the most creative, most community minded businesspeople I have ever met. I have the good fortune of working with people like those at IGA and marvel at their ability to survive competitive challenges largely thanks to their hometown savvy and progressive partnerships with their wholesalers.

    Still, I have to believe this recruitment drive by Grocery Outlet will and should merit a little discussion among independent groups and chains everywhere.

    First, the merchandising model so long employed by Grocery Outlet fits better than ever with the bargain hunting needs or whims of shoppers from urban to rural areas. Extreme price models are becoming increasingly important given today’s competition and economic realities, and Grocery Outlets’ formula may be a powerful weapon for fighting back.

    In addition, shoppers are becoming increasingly aware of the enormity of food waste in the US and might see some attraction to stores that view excess products as “opportunity” not landfill-bound.

    Lastly, and maybe most importantly, this recruitment drive may cause important discussions elsewhere. In a time of challenges from Amazon to Aldi, from Lidl to Save-A-Lot, traditional models need re-examination and, in some cases, a new direction.

    I really don’t expect 10,000 independents to sign on with Grocery Outlet tomorrow, but I have to believe all sectors of the industry can find some aspects to consider from this company’s creative approach and aggressive growth strategy.

    The status quo needs a good jolt every now and again. Maybe this is that time to ponder the path less traveled. There might be something good down there.

    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: December 8, 2015

    by Kevin Coupe

    The commercial at left has been getting a lot of views on the Internet, but I hadn't seen it until the other day, when an MNB reader sent me a link. And it strikes me as a terrific example of smart, emotion-provoking advertising that serves the brand without overtly selling the brand, which in this case is Edeka, Germany's largest supermarket company.

    I think you'll find it memorable. I suspect, like me, you'll want to show it to your kids.

    It is an Eye-Opener.

    KC's View:

    Published on: December 8, 2015

    The Great Atlantic & Pacific Tea Co. (A&P) has asked the bankruptcy court overseeing its affairs for permission to sell its Pathmark brand and intellectual property to a subsidiary of the Foodtown chain. The cost: $1 million.
    KC's View:
    So let me get this straight. In 2007, A&P bought Pathmark for more than $600 million. Now, it is selling the brand name for $1 million.

    Now, granted that the 2007 purchase included actual stores, and the current sale is just brand equity and intellectual property.

    But while I'd be happy to rant for a while about the management malpractice that characterized much of A&P's top management and its board of directors for so long, I find myself wondering if Foodtown is, in fact, overpaying.

    After all, how much brand equity does the Pathmark name actually have? And doesn't the term "intellectual property" sound like a non sequitur when used in the same sentence as A&P?

    Published on: December 8, 2015

    The Minneapolis / St. Paul Business Journal reports that Target is going to collaborate with the Media Lab at the Massachusetts Institute of Technology (MIT), as well as the design and consulting firm Ideo, to develop a new Food and Future CoLab that is described as designed to "focus on issues such as urban farming, food transparency and authenticity, supply chain, and health and safety."

    In a press release, Target said that "this multi-year collaboration will push the edges of science, technology and design to give people better control over their food choices and help them to eat healthier."

    The new CoLab will be located in Cambridge, Massachusetts, where Target has taken out a two-year lease on a 7,200-square-foot facility.

    According to the Business Journal, "Target CEO Brian Cornell has made food one focus of his plan to reinvigorate the discount retailer. The company is revamping grocery sections with updated layouts and healthier food, replacing its instore cafes with fresh-casual concepts, testing same-day grocery delivery in the Twin Cities."
    KC's View:
    I'd really like to visit this lab when it is up and running ... it sounds fascinating. The question will be how the innovations generated there can and will be applied to such a big operation as Target's.

    Published on: December 8, 2015

    The Wall Street Journal has a story about Costco, which continues to be far more profitable than Amazon even if the e-tailer is poised to surpass it in total annual sales. (Costco has been number two globally, and Walmart, of course, is number one. For now.)

    The story notes that one strong advantage Costco has is gasoline: "The company is one of the largest sellers in the U.S. and is adding more pumps overseas. Gasoline accounts for about 10% of Costco’s annual sales.

    "That heft pays off. By contrast to traditional gas stations, Costco purchases gasoline in bulk on a daily basis. When gas prices are falling as they are today, Costco can benefit by quickly capturing lower wholesale prices, yet still offering higher retail prices. It then pockets the difference."

    The other advantage, according to the Journal, is Costco's customer base, who serve as "the company’s delivery fleet and tend to buy in bulk. The result: The majority of Costco’s annual membership fee falls to its bottom line, bolstering profits.

    "That is a contrast to Amazon’s own membership program, Prime. This incorporates shipping costs that are a benefit to members. To attract Prime customers, Amazon also has to splash out on video and other content."

    The story concludes that while "most retailers are right to fear Amazon ... until the online behemoth’s delivery drones can ferry gasoline, Costco will have an edge," at least in the profitability column.
    KC's View:
    Gotta take your advantages when, where and how you can.

    Published on: December 8, 2015

    The Associated Press reports that the World Trade Organization (WTO) ruled yesterday that "Canada and Mexico can slap more than $1 billion in tariffs on U.S. goods in retaliation for meat labeling rules it says discriminated against Mexican and Canadian livestock. At issue were U.S. labels on packaged steaks and other cuts of meat that say where the animals were born, raised and slaughtered."

    The WTO previously had ruled that country-of-origin labeling of meat products unfairly put Canada and Mexico at a competitive disadvantage. This new ruling puts a dollar value on the level of unfairness, and the story says that Canada can impose $780 million in retaliatory tariffs and Mexico can impose $228 million.

    Country-of-origin labeling has been an issue creating considerable disagreement in the US, with consumer groups and some US ranchers supporting them, while meatpackers have argued that they are expensive and unnecessary.
    KC's View:
    Legally, this is a dead issue. But I still don't understand how not telling people where products are from is a good idea, or even appropriate in a world where transparency is more evident than ever. Just shows that global politicians and bureaucrats think the same way as our local variety.

    Published on: December 8, 2015

    The New York Times reports that the Federal Trade Commission (FTC) has filed suit to block the proposed $6.3 billion purchase of Office Depot by Staples, saying that such a merger would significantly hurt competition in the office supplies field.

    The objection seems to focus more on purchases by governments and large businesses, not those by individual consumers.

    Following the 2013 merger of Office Depot and OfficeMax, there are only two national office supply "category killers." The FTC clearly believes that reducing that to one would be bad for competition.
    KC's View:
    This was expected, but I still think that this perspective on competition is through a 20th century prism. No reason, to my way of thinking, why companies and governments can't order from Amazon, just like everybody else. I'm pretty sure that Amazon will take those orders.

    Published on: December 8, 2015

    The Observer reports that the US Postal Service (USPS) is launching a new service called Informed Delivery, where if you sign up, the Postal Service "will email you photos of  your letter-size mail envelopes by 11 AM each day ... After a successful pilot program in Virginia last year, Informed Delivery is expanding to all New York City ZIP codes. along with Connecticut ZIP codes beginning with 066 or 069."

    There is an irony in the introduction of the new service, since there was a similar startup business called Outbox in 2013 that post office officials fought fervently against: "Outbox fought the good fight to digitize mail for a few more months, but finally had to shut down in February 2014 due to lack of government support."

    According to the story, "When founders Evan Baehr and Will Davis were contacted by then-Postmaster General Patrick Donahoe, they thought the agency wanted Outbox to help them save money. But instead Mr. Donahoe told them, 'You disrupt my service and we will never work with you…Digital is a fad'."
    KC's View:
    In so many ways, despite the fact that the USPS has improved in some ways, it seems so typical that just two years ago the guy running the place would say that "digital is a fad."

    What a moron.

    This said, I'm not sure that I want anyone as the USPS opening my mail to digitize it. It just doesn't seem like the most intelligent approach to the digital revolution.

    On the other hand, the NSA would probably love the program. It might even fund it.

    Published on: December 8, 2015

    Ad Week reports that online retailer Zappos engaged in a marketing stunt last week in Hanover, New Hampshire, sending 30 employees there in "the dead of night" and having them deliver gifts - headphones, backpacks and other warm-weather gear - to the doorsteps of every single home.

    Some 1,900 boxes were delivered in a single night in a town that Zappos describes as "fiercely loyal" to its brand; Hanover is one of the state's wealthiest communities, and is home to Dartmouth University. The residents were not informed of the largesse in advance, but Ad Age notes that the intent of the stunt was to generate subsequent social media attention that would bolster the Zappos brand.
    KC's View:
    This all sounds lovely. Very Christmas-y.

    Except that I have a problem with all this charity being visited upon a town described as one of the wealthiest in the state. Y'think maybe there are other people and places that might've benefitted more from Zappos' marketing stunt? The pictures might not have been as pretty, but the impact might've been a lot more significant.

    I hate to say it, but, "Bah. Humbug."

    Nice try. But in the end, IMHo, this is a miss.

    Published on: December 8, 2015

    • In Canada, the Globe and Mail reports that Sobeys "is moving to drop some controversial supplier pricing practices as the grocer works to streamline its operations and provide better deals for shoppers.

    "Marc Poulin, chief executive officer of Sobeys, said in an interview that the steps the retailer is taking with its suppliers are aimed at removing the 'complexity' and administrative cost of deducting multiple payments from vendors for such things as bulk buying and flyer promotions."

    The story notes that "the moves come as the grocer struggles to integrate its newly acquired Safeway Canada chain amid challenged financial results. As well, Sobeys is grappling with an uncertain economy, especially in Western Canada, where the retailer lacks discount formats to serve a more fragile consumer."

    CNBC reports that private investor group JAB Holding is acquiring the Keurig Green Mountain company for about $13.9 billion.

    According to the story, "The agreement was unanimously approved by Keurig's board of directors. The deal is expected to close in the first quarter of 2016 ... This is the latest in a string of coffee deals by JAB as it seeks to become a formidable competitor to Nestle, which operates the world's biggest coffee business."

    • On National Public Radio (NPR), Marketplace reports that Dunkin' Donuts plans to " make all its breakfast items with eggs from cage-free chickens, but it will take the chain a decade to reach that goal ... This announcement comes just months after the donut chain set a goal of 10 percent cage-free eggs in their breakfast products by the end of 2016 and 100 percent crate-free pork products by 2022."
    KC's View:

    Published on: December 8, 2015

    • Kings Food Markets said yesterday that its COO, Rich Durante, will take on the addition role of president.

    He succeeds Judy Spires in the role; Spires has been serving as president/CEO, but recently took on the role of chairman.

    Kings also announced that Jessica Gasser, the company's VP of human resources, labor relations and administration, has been promoted to the role of senior vice president of talent and technology.

    • Dollar General announced that it has named John Garratt to be its executive vice president/CFO; Garratt has been serving as interim CFO since June.

    Reuters reports that Jill Easterbrook, Tesco's group business transformation director since the beginning of the year, is leaving the company.

    The story notes that Easterbrook will take with her a lot of institutional memory. Easterbrook sat on the company's executive committee, and she joined Tesco in 2001. She "has held leadership roles across the group including retail operations, group strategy, corporate affairs, clothing (stores and online), developing businesses and marketing."
    KC's View:

    Published on: December 8, 2015

    A couple of interesting emails.

    One, from MNB reader Tom Redwine:

    Just a couple of thoughts about Monday's MNB that I wanted to share.

    Re: Amazon Plans To Hit The Roads...

    Not much of a stretch of the imagination to think that an Amazon truck, parked in a centrally-located spot, could deploy several drones at a time to deliver the bulk of it's cargo.

    Or maybe not even parked…

    Re: your Monday Morning Eye-Opener (Screen Test)

    I recall seeing both of those films (Earthquake and Rollercoaster) in the theater (and sitting next to one of the Sensurround speakers for Rollercoaster). Until reading your column, I'd not thought of that experience in years.

    Better yet was the immersive, interactive Star Trek Experience(s) that I had in Las Vegas several years ago; we were shot at by rogue Klingons while riding in a Federation shuttle in one, while nearly being assimilated by the Borg in the other. That's something I remember on a yearly basis, as I keep going back to review old episodes of the different series on Netflix.

    Thanks for being a wonderful memory-jogger today.

    By the way ... I wrote yesterday that I thought that Earthquake and Rollercoaster may have been the only movies that made a big deal out of the Sensurround technology. One MNB user wrote in to point out that Midway also used Sensurround ... and one of the things I love most about the MNB audience is that this guy was absolutely right.

    By the way ... Earthquake, Rollercoaster and Midway all were pretty mediocre movies that came out of the Universal factory at that time. There was another movie that might've gone in that same direction, if not for the particular genius of a young filmmaker named Steven Spielberg. It was called Jaws.

    Talent matters.

    Also got this email that speaks volumes about how many people shop, from MNB reader Josh Neely:

    I’m relatively new to shopping online but with Prime it’s so easy and actually affordable when you don’t have to pay shipping. My wife has always been a huge Zappos fan because she can order a bunch of different things and send back what she doesn’t like. The biggest differentiation to her in Zappos is the free shipping (usually 2-day) and free return shipping. As we were trying to find things for a Griswold Christmas party we looked on Amazon and to our surprise some things were Prime eligible while a lot of other objects were not. Shipping seemed high and on top of that the items were not going to get here in time (5-7 business days). I think as Amazon expands they will eventually have to make all of the products they sell Prime eligible. If they don’t people won’t even look at those items and go somewhere else.

    I got an email from Amazon last week that said I was eligible for Prime Music. I was skeptical but figured it was worth trying for a chance to win $25,000 in a sweepstakes. When I realized it was exactly like Pandora without having to pay $5 a month for commercial free music I cancelled my Pandora membership. I think as the Amazon empire expands people will pay more for the Prime membership. Prime Music alone is worth $60 a year if you feel it is comparable to Pandora or $120 if you compare it to Apple music. I think the Prime membership price has to increase for the company to continue expansion but people won’t care because they will see the value when they try to go without it for a month.

    Apple, Pandora, Wal-mart, Zappos and the list goes on… Nobody is safe.

    KC's View:

    Published on: December 8, 2015

    In Monday Night Football, the Dallas Cowboys defeated the Washington Redskins 19-16.
    KC's View:

    Published on: December 8, 2015

    I've liked "The Daily Show with Trevor Noah," though I must concede that it does not carry the same edge that the program did when Jon Stewart hosted it. It can be funny, if a lot more lightweight.

    But last night, Jon Stewart returned to "The Daily Show" ... for a pair of segments that carried enormous and undeniable emotional and moral power. You can watch it here.
    KC's View: