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    Published on: August 2, 2016

    by Michael Sansolo

    It was a Wow! moment, the reaction every retailer wants from a shopper and it happened to me as I entered my favorite supermarket.

    Sadly though, it had nothing to do with the displays, products or even the nearby sample station. No, it was better than that. I had just entered the store and there they were: three Pokémon I could capture and one Pokémon Stop where I could collect some supplies.

    Now I’m betting your reaction to that previous sentence goes one of two ways. Some of you will want to know exactly where I was to collect the same haul, while others will roll their eyes in much the way my wife (and the woman at the sample station) did when I said what I found.

    But don’t scoff long. The craze that is Pokémon Go is not something to be ignored, in fact, it’s something you need to engage and even consider taking to another level.

    I’m happy to say many are not ignoring it. There have been countless reports of businesses of all kinds looking for ways to tie in to the craze by signing on as a site and that makes lots of sense. We may not always understand or appreciate every craze or fad out there. However if shoppers like - and every number suggests millions of shoppers worldwide really like Pokémon Go - we need to engage.

    In fact, there’s even a church in my neighborhood hoping that playing on the game will bring prayers in the pews. (See the picture. Say hallelujah.)

    Still I think this gets even bigger. We are constantly writing here about electronic commerce and the challenge of doing it correctly. Consider that just yesterday Kevin had a story about Walgreens shutting down two e-commerce sites that simply never performed profitably, just as last week I wrote about the margin crushing efforts to bring opera to the masses. Transforming the shopping experience won’t be easy.

    Unless there is another way to enliven the shopping experience ... and that’s one reason why we need games. There’s no explaining why something like Pokémon Go is so insanely popular although granted, I am a poor source of information. (Although I keep capturing the characters and rising in levels, I freely admit I don’t have a clue as to what I’m doing.)

    But here’s what I have learned. Players are constantly getting information about interesting local sites, historical and otherwise. For instance, where I live I’ve discovered a series of murals and the gravesite of F. Scott Fitzgerald, so there is actual educational value in this game.

    Plus, elements of Pokémon Go actually encourage the user to get out of their houses and walk around. Think about that: a video game has actually attacked and beaten the lure of sitting on the sofa.

    That’s a lesson for all of us. I know nothing about how these games are built and how Pokémon Go actually combines my location with the arrival of characters, but it does. Who’s to say we can’t do the same inside supermarkets to help turn the shopping trip from a chore into a treasure hunt. We could hunt components of specific recipes, special savings or even involve children in filling our shopping list.

    It could even be a device to feature nutritional information that entertains and educates at the same time.

    Technology is already mixing with mealtime. Numerous restaurants already feature tabletop devices to keep diners entertained and yesterday Kevin also had a story about McDonald’s bringing new technology to improve their customers’ experience.

    So like it or not, the gaming experience is already in the marketplace, we simply have to figure out how to win in the process.

    Which reminds me, I think there’s a Tentacool outside my office.

    Gotta catch ‘em all you know.

    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: August 2, 2016

    by Kevin Coupe

    Here's a sentence I never expected to read, as reported by the Washington Post:

    "Experiments suggest that cockroach milk is among the most nutritious and highly caloric substances on the planet."

    And it goes on:

    "Pound-for-pound, cockroach milk crystals contain three times more energy than buffalo milk."

    It is, according to scientists, "a complete food."

    The Post explains:

    "Most roaches lay eggs. Not the Pacific beetle cockroach. It gives birth to live young, sort of like humans if we kept babies by the dozen in fleshy organs called brood sacs. Also like humans, mother Pacific beetle cockroaches produce food for their offspring. The embryos dine on a liquid substance packed with fats, sugars and protein. You can think of this like cockroach milk.

    It gets weirder."


    It is only recent research by the Institute for Stem Cell Biology and Regenerative Medicine in Bangalore that has demonstrated that this cockroach milk is enormously nutritious, and in fact could end up being a highly desirable ingredient in, say, energy drinks.

    There are just two problems.

    One is getting the milk. You can't milk a Pacific beetle cockroach the same way you would a cow.

    The other problem is one of branding ... because saying you are actually putting anything with the name "cockroach" in it into a product is probably a fast way to kill sales.

    But if they can just get past these two'd be an Eye-Opener.
    KC's View:

    Published on: August 2, 2016

    California-based Raley's said yesterday that it is launching what is described as a "new, multi-dimensional effort to share their vision of health and wellness with customers. The campaign entitled, 'Let’s Begin' invites customers to take small steps toward a healthier lifestyle through education, personal goal setting and sharing."

    According to the announcement, "Raley’s has developed new resources on their website to support customers’ personal goals.  The website will update weekly to share insight on how to buy products, how to eat real food and how to eat healthier on a budget."

     "Learning more about your food — where it comes from, how it was made and how personal choices affect your body — can be revolutionary to your health,” Emmie Satrazemis, Raley’s Wellness Evangelist, said in a prepared statement. "Your health is an accumulation of all the choices you make over a lifetime, so every snack, every sip and every meal is an opportunity to tip the odds in your favor. It only takes small and simple changes, like drinking more water or cooking more of your meals at home, to make a big difference.”
    KC's View:
    This sounds like one of our mantras around here - that retailers (and suppliers, for that matter) need to be more than just a source of product. They also have to be a resource for information ... because in doing so, they create extended, sustainable relationships with customers.

    Published on: August 2, 2016

    The New York Times reports that McDonald's yesterday "announced several changes to its ingredients, including eliminating artificial preservatives from some breakfast foods and Chicken McNuggets, its most popular food item, and removing high-fructose corn syrup from its buns."

    Among the changes - McDonald's will use real butter in its Egg McMuffins, as opposed to liquid margarine.

    The story notes that the fast feeder also "is increasingly testing new products and ingredients in regional markets, which allows it to develop larger supply chains over time. It is, for instance, testing Latino-inspired breakfast bowls in Southern California, like an egg white scramble with sautéed baby spinach and kale, and a scrambled egg with cheese and chicken chorizo, garnished with McDonald’s hash browns." At the same time, while "many of the new ingredients it is starting to buy, like cage-free eggs and antibiotic-free chicken, are more expensive ... McDonald’s is determined to continue to keep its prices steady.
    KC's View:
    One of the interesting things about this story is how it describes McDonald's as long being resistant to talking about ingredients, but now is being more transparent ... in line with the public mood.

    Published on: August 2, 2016

    Amazon this week achieved a market capitalization of $366 billion, pushing it past Exxon at $354 billion to make the online retailer the world's fourth largest public company, behind only Apple, Alphabet (Google) and Microsoft.
    KC's View:

    Published on: August 2, 2016

    Whole Foods would like to invest in a meal kit business, the company has announced to investors.

    The company's intentions were made public as it dealt with the revelation that its most recent quarter saw same-store sales that were down 2.6 percent, making it four straight quarters of same-store sales declines.

    Such a move would put it in expanding company - pure players in the category such as Blue Apron, e-commerce companies such as Amazon, and even media companies such as the New York Times and the Food Network.

    At the same time, Fortune reports on Whole Foods' plan to nationally roll out its Market Rewards loyalty program, which is being tested in a dozen markets.

    However, Fortune seems a little skeptical about its prospects: "Whether or not the rewards program will actually help the retailer is uncertain. People who are willing to drop $35 for an emu egg from Whole Foods likely don’t need the 10% off. Additionally, according to a price comparison from All Natural Savings, comparable items that can be found at Costco would still be more expensive at Whole Foods, even with the discount.
    KC's View:
    Maybe I'm wrong about this, but sometimes it just seems like Whole Foods lately is throwing spaghetti against the wall to see what sticks ... as opposed to having a nuanced view of the customer. I know that can't be right, but it feels that way sometimes.

    Published on: August 2, 2016

    The Cincinnati Enquirer reports that Kroger-owned consumer insights firm 84.51° is acquiring Market6, described as a "predictive analytics firm" that "focuses on product movement data, insights and customer experience for more 1,000 packaged goods and retail companies and has extensive experience in demand forecasting and analytic solutions."

    84.51° is the subsidiary formed last year when Kroger bought out the other half of its dunnhumbyUSA joint venture.

    Terms of the deal were not disclosed.
    KC's View:
    Actionable data that Kroger actually acts upon. Because they're not formidable enough.


    Published on: August 2, 2016

    The United States Department of Agriculture (USDA) is out with a report about US consumers' demand for convenience foods, saying that "Americans have increased consumption of foods that save time in food preparation." And, the report says, "The most convenient foods - purchased from fast-food and sit-down restaurants - constitute around half of the total food budget.

    "Between 1999 and 2010, the average share of the food budget spent on fast-food meals and snacks grew from 24 to 27 percent, with decreases in this share beginning just before the most recent economic downturn, starting in 2007 across most geographic regions. During this overall period, the average share of the budget spent on sit-down meals and snacks decreased from 25 to 23 percent."

    The report cites a number of factors influencing the consumption of convenience foods - including the fact that "prices of many convenience foods may have fallen relative to their less convenient counterparts." Which may account for the decreasing recent spend on such products. In addition, influences are said to be time constraints that give consumers less time to prepare food, as well as the amount of money spent by companies marketing such foods.
    KC's View:

    Published on: August 2, 2016

    • Retail delivery service Instacart said yesterday that it has expanded its service to Dallas, offering consumers the ability to shop online at retailers such as Whole Foods, Central Market, Petco, Total Wine, Kroger and Tom Thumb.

    Instacart has been available in Austin and Houston since 2014.

    • Salesforce Research is out with a new study called the “2016 Connected Consumer Goods Report," finding that "when researching brands prior to purchase, consumer good purchasers tend to leverage online product reviews, the retailer’s website and the brand’s website. However, during the purchase process, consumers are split on where they get the best experience, finding the best prices at online-only retailers but the best service at brick-and-mortar stores."

    The study also says that "generational gaps emerge when comparing how shoppers express their loyalty to brands, with millennials more likely than other generations to complain about a brand publicly (33%), but also more likely to join a loyalty program as well (44%). At the end of the day, consumer goods companies who target millennials through online ads and other social channels based on personal preferences; improve their online experiences to better compete with web retailers through superior search and service; and build strong loyalty programs based on pricing, service and personalization, are more likely to succeed in today’s competitive market."
    KC's View:

    Published on: August 2, 2016

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

    • The Lakeland Ledger reports that Publix announced yesterday its Q2 results, with $8.1 billion in sales, up 2.1 percent increase from $8 billion in sales during the same period a year ago. However, while same-store sales for the quarter were up 1.1 percent, after-tax profits were $478.2 million, 0.9 percent down from last year’s $482.7 million figure.

    The company said that Q2 results were negatively affected by an early Easter holiday that took place in the first quarter.

    According to the story, "Effective Monday, Publix’s stock price was $41.90 per share.
    That’s a 4.7 percent decrease from the company’s $43.95 per-share valuation in May. It is also the second consecutive quarter that Publix’s stock price has dipped: the $43.95 valuation from May was itself a 2.8 percent decrease from the grocer’s $45.20 valuation in March."

    No reason to think that this alone is an indication of problems for Publix, but keep in mind that just yesterday we took note of some analysis suggesting that it may not be best positioned for heightened competition that will include formidable players like Wegmans, lower-priced stores such as Aldi, and e-commerce purveyors such as Amazon. Publix always has been a tough competitor, but some of these issues won't solved by Easter falling in the second quarter.

    Eater reports on a new study based on data compiled by Foursquare and Swarm looking at America's most popular road trip dining destinations - and Starbucks tops the list. Rounding out the top 10 are McDonald's, Tim Hortons, Dunkin' Donuts, Burger King, Popeyes, Dairy Queen, Auntie Anne's, Cinnabon and Subway.

    The story notes that about a half-century ago, the top roadside dining destination spot was held by a company that barely exists anymore - Howard Johnson's.

    Y'think there's a lesson in there somewhere?

    • The Chicago Tribune reports that the Center for Science in the Public Interest (CSPI) is out with its annual list of the nation's most unhealthy restaurant meals, and they include the Whole Hog Burger from Uno Pizzeria & Grill, which is described as "'over a pound of meat,' including bacon, prosciutto and pepperoni. Add to that four types of cheese, garlic mayo, pickles, a side of fries and onion rings, and the total calories come to 2,850. " Also on the list is "Jersey Mike's Subs Giant Chipotle Cheese Steak, with cheese, peppers and onions, spicy chipotle mayo and 1,850 calories," and the "Build Your Sampler at Applebee's, which comes with between two and five appetizers and could reach 3,390 calories if you include Cheeseburger Egg Rolls, soft pretzels and beer cheese dip, a chicken quesadilla, Buffalo wings and spinach and artichoke dip."

    And, there's the Cheesecake Factory's Fried Chicken & Waffles Benedict (2580 calories), Dave & Buster's Short Rib & Cheesy Mac Stack (1910 calories), Buffalo Wild Wings Dessert Nachos (2,100 calories and 64 grams of saturated fat), and Sonic's RT 44 Grape Slush with Rainbow Candy (44 ounces and 970 calories).

    I cannot even begin to tell you how glad I am that I've never consumed any of these. Now, pardon me while I get sick in my garbage can.
    KC's View:

    Published on: August 2, 2016

    Regarding possible headwinds that Publix could be facing, one MNB reader wrote:

    I believe that Publix is going to face some tough challenges as it enters into VA and tries to continue to expand into NC. Their hi-lo strategy leans on BOGO’s to drive consumption which favors only those brands that participate. The other brands have to lean on innovation and quality to compete but even that is difficult when these BOGO’s proliferate their stores weekly. These BOGO’s drive 10 weeks of turn business for the manufacturers on average and then the shoppers load up and await the next BOGO buy. Over time this commoditizes these brands as consumers just but from deal to deal.

    But the other brands also see erosion from the competitive onslaught and end up getting whacked by Publix over time. Wegman’s uses an EDLP strategy and consumers learn that their prices are low everyday no matter what they buy and this drives greater loyalty to brands and to Wegman’s. Kroger’s massive loyalty card data gives them another advantage to compete with Publix by offering consumers coupon values on the brands that they buy not just the ones willing to participate in the BOGO’s like Publix.

    Responding to our piece yesterday about McDonald's, MNB reader Stewart Sundholm wrote:

    We had a chance to try a McDonald’s near Bordeaux last summer (sometimes the comfort/familiarity of home is nice to have when traveling abroad.) The tablet ordering was cool and the service was friendly even if we had some language barriers.
    But here’s the thing. The food was much better than what they serve here. That made the real difference.
    Side note: it was fun to order a “Royale with Cheese”, just like Pulp Fiction!

    But, from another reader:

    The marketplace votes on their food with their franchisees’ sales and McDonald’s royalties.  When sales sag severely, they will have to address the food quality, but based on McDonald’s value offering, which you seem to overlook, it works – but not for you or me.

    Inevitable constructive destruction in the store will be due to: a) technology, b) customer experience; & c) $15.00 hour minimum wage.

    Where will the part time workers go for jobs in the urban environment when these unskilled positions disappear?  Union Halls?

    And another:

    I believe that McDonald’s has boxed themselves into a value position that prevents them from selling better quality food at a premium price.  They’ve tried to market sirloin and angus burgers, along with premium grilled chicken sandwiches.   However, they missed the boat on these opportunities, because their brand perception is about value and speed as opposed to quality.  Basically, they cannot be what they are not.  You (and I) are not their target customer (except when I have a craving for their fries). 
    They can, however, thrive on their value positioning by offering a good dining out experience to customers seeking speed, fun, or inexpensive food. Happy Meals now offer apple slices, yogurt, milk, and apple juice as alternatives to fries and soda.  They offer salads for parents.  Their system is about speed- drive through or dine in.  Their locations are convenient and their value menu is extensive.  Plus, they offer pretty good coffee drinks.  Just as Aldi is not for everyone, so it is with McDonald’s.  They just need to excel for their target customers.

    And, because some folks may never believe, this email from MNB reader Joe Elledge:

    Amazon’s recent quarterly results prove nothing regarding the sustainability of its business model.  Until Amazon can recover its shipping and handling costs,  it has failed. Wall Street will ultimately grow weary of Amazon subsidizing it’s failed retailing operation with its cloud computing and on-line exchange businesses.  Amazon will then face a depressed share price until it spins off its successful businesses. Going forward I suggest that you look more closely at the order on line and pick-up in or at  store model – particularly in grocery.   From a logistics/operating POV, the cost recovery challenge is much smaller than Amazon’s home delivery model.  Amazon lacks the neighborhood level distribution centers (a.k.a. stores) required for that business.

    That is not to say that there will be no internet home delivery grocery business, but it will likely be a niche business and lack the economies of scale required for anything other than premium pricing.   And, of course, it will suffer during our periodic economic down turns.  With the store pick-up internet grocery business, on the other hand, folks will simply go in store and do their own shopping/picking when times get tough.  So the neighborhood grocery retailer will retain its scale economies even during economic down turns.  A pure play home delivery operation like Amazon will, on the other hand, lose scale while still having the fixed costs of a large physical distribution network.  When all is said and done, the order on line and pick-up at store grocery retailers will own the business segment both in a physical and virtual sense.

    I do admit, however, that your Amazon “eco-system” makes for interesting readingJ.  Net, IMHO, the clock is still ticking for Amazon’s failed business model of subsidized shipping and handling costs…

    On the subject of cash-only restaurants, one MNB user wrote:

    My brother-in law and his wife recently opened an upscale Italian restaurant in Loveland, OH and they shared that close to 90% of their sales are credit card. One of the downsides of this though is that they have to keep a significant amount of cash on hand to allocate the tips each night. Maybe they should consider just adding the tip allocation weekly so that they are not dipping into cash flow awaiting payment from credit card transactions.

    And, regarding hotels with flexible check-in and check-out times, MNB reader Richard Heiland wrote:

    Timely post on the hotels and guest arrivals, departures. We are going to UK for most of September and get into Heathrow at 7 a.m. I asked our hotel, The Swan in Bibury, Cotswold area, if it would be possible to check in mid-morning, at least stash bags. Got a prompt and friendly email back welcoming us, telling us we could check in any time and there were no fees and could they do anything else for us. That's going to make a huge difference in the comfort of our arrival and our first day so needless to say I was impressed.
    KC's View: