retail news in context, analysis with attitude

Published on: August 22, 2016

by Kevin Coupe

As part of its regular "Corner Office" column this weekend, the New York Times had an interview with Logitech CEO Bracken P. Darrell, in which he made a couple of interesting observations worth noting in this space...

• Important values... "Early on, we defined several values in the culture that I didn’t think were there enough. One of them was speaking up, and that’s the most important one. When people go through a tough time, as Logitech had for about four years, everybody’s talking about problems. But if nobody listens to them they stop talking about problems, so you don’t know what they are. The most dangerous thing is to be sitting in an office and nobody’s telling you what’s wrong. So I immediately started talking about speaking up and moving fast."

• How to hire... "The most important thing for me is frequency of interviews over depth. I don’t hire anybody who I’ve met just once. It’s a long process. And then I get other people to meet them because I have blind spots. I’m super-intuitive, and that’s really dangerous when you’re hiring people because you can really miss things.

"And you can get a feel for what people are like when you’re in a restaurant. We’re a humble, self-effacing company that’s just trying to do good work. There’s no room here for enormous egos. I don’t like people who don’t respect others as equals, whether it’s a recruiter or a waiter."

I especially love this last point.

I've been on the road a lot this summer, which means I've been in a ton of hotels, restaurants and airports. And I've gotten really tired of people who treat the people who work in those places like crap.

I don't know what the hell is going on in our culture, but somehow the message that we can treat badly the people who work in a service capacity seems to have gained some traction. This isn't to say that all those employees and service workers are themselves barrels of charm ... but that's no excuse. I've seen more cases where consumers seem utterly unable to say please, or thank you, or demonstrate any sort of common courtesy.

It doesn't take much. And the thing is, when the employee is curt or unpleasant, I've generally found that a nice word or a smile puts them in a better mood. Which seems like a small effort to make in order to create a more friendly environment.

I think Darrell's point is well taken. Potential employees should be taken out for a bite to eat, if only so one can see how they treat people. It is a great litmus test for character.

In some of the stories about Garry Marshall, the Hollywood director who recently passed away, one of the common refrains was about how he never forgot about his roots. And one of the lines of his that I really liked was this:

It is nice to be important. It is more important to be nice.

Bingo.

That's my idea of an Eye-Opener.

Published on: August 22, 2016

Sales and marketing agency Acosta is out with a report entitled "The Revolution of Grocery Shopping," concluding that health and wellness, meal solutions, perimeter growth, and millennial preferences are among the mega-trends influencing the shape of the modern, relevant supermarket.

More specifically...

• Health and wellness... "Consumers’ focus on healthy eating and lifestyles is more than just a fad; it is permanently shifting how they approach food shopping and, in turn, how retailers and brands must cater to their attitudes and preferences." For example, the report says that "shoppers rank fresh produce (89%) as a more important feature than competitive pricing (86%) and product selection (84%) in their grocery store experience," and that "nearly one-third of shoppers report their perception of a store skews negatively if it does not have a dedicated section for natural or organic options." These preferences also are leading to an expansion of traditional perimeter departments, taking up space usually devoted to center store.

• Meal solutions... "Half of shoppers admit they decide what’s for dinner within two hours of mealtime," with "millennials are doing the least amount of meal planning with 68 percent waiting until a few hours before dinner to make plans." In addition, when buying prepared foods, "shoppers report making their selections based on variety (72%), if it is ready-to-eat (66%) and healthy options (62%)."

• Millennial preferences... "72 percent of Millennials enjoy grocery shopping versus just 60 percent of total U.S. shoppers, highlighting the importance of fostering an emotional connection with shoppers and the growth of in-store destinations." And, "nearly half of Millennials - representing more than 10 percent of all U.S. shoppers - said they would use an app allowing them to pay for their groceries, signaling the increased integration of digital technology into the path to purchase."

• Digital marketing... "Nearly one-third of shoppers say they would use various forms of digital technology if it were offered at their grocery store," such as "an app that provides the ability to order items not available in store and the ability to scan items as they shop in order to bypass checkout." And, more than four out of ten shoppers surveyed said that they shop for groceries online at least once a month.

Colin Stewart, Senior Vice President at Acosta, described the industry as being "at a tipping point" where retailers have to be prepared to adapt to these shifts if they want to take "full advantage of opportunities to capitalize on change."

Published on: August 22, 2016

The Harvard Business Review has an interesting piece about Airbnb, which, it notes, currently has a $30 billion valuation that makes it more valuable than most of the world's hotel chains despite the fact that it does not own a single room or building. But while "disruption" is the common word applied to the success of a company like Airbnb, that doesn't accurately or completely describe its success.

"Disruption theory explains and predicts the behavior of companies in danger of being disrupted, but it doesn’t tell a start-up company exactly what product or service to create to successfully disrupt a giant," the story says.

"To get that right, companies have to understand what Harvard Business School Professor Clayton Christensen calls the theory of Jobs to Be Done. Too many companies focus on making their products better and better without ever understanding why customers make the choices they do. Customers don’t simply buy products or services. They 'hire' them to do a job. That job is not just about function (having a nice bed to sleep in) but about creating the right set of experiences for customers. Those experiences have social and emotional components that may be even more powerful than the functional ones ... Being cheaper and 'good enough' doesn’t guarantee that people will choose your product or service over all others. You have to know what job customers are hiring you to do before you can hope to create the perfect solution for them – one that they’ll choose over all other options."

Published on: August 22, 2016

Bloomberg reports that Alimentation Couche-Tard, which operates more than 12,000 c-stores around the world, including the Circle K brand, has agreed to acquire the 2,000-store CST Brands chain for $4.4 billion.

CST operates mostly in Texas, Quebec and Atlantic Canada.

According to the story, "The acquisition, the fourth announced by Couche-Tard this year, is the largest in the company’s 36-year history. It eclipses the 2012 purchase of Statoil Fuel & Retail ASA for about $2.8 billion, which established a foothold in Europe."

Published on: August 22, 2016

The New York Times reports that the increasingly controversial Hampton Creek currently is the subject of an investigation by the federal Securities and Exchange Commission (SEC).

According to the story, "The SEC inquiry is a response to a recent report from Bloomberg News that described an organized effort by Hampton Creek to buy large quantities of its Just Mayo product — a mayonnaise that uses a plant-based ingredient instead of eggs — by sending undercover contractors into stores ... Bloomberg’s report said the product buyback effort, which took place in 2014, made Just Mayo seem more popular than it was, not long before Hampton Creek raised $90 million from venture capitalists and other private investors. The basic details of the program were confirmed by a former Hampton Creek employee, who asked for anonymity because of confidentiality restrictions with his onetime employer."

The Times story goes on: "The inquiry puts a cloud over Hampton Creek, which has described itself as the fastest-growing food company in the world. It has promised to tackle the food industry with the gusto of a technology start-up, using some of the same big data tools to do so. One of its goals is to identify healthy, plant-based ingredients that can substitute for common foods like eggs, with less of a negative impact on the environment ... The inquiry may be only the start of tougher questions facing Hampton Creek. The company is believed to be losing significant amounts of money."

The company's CEO, Joshua Tetrick, has claimed that the buyback program was part of a quality control effort.

Published on: August 22, 2016

The Daily Mail reports that Amazon "is rumored to be behind a mysterious new construction site in Seattle, simply dubbed 'Project X' in planning documents."

The 9,800 square foot space is said to be described in planning documents in wording "near identical to proposals submitted by Amazon for grocery stores in San Francisco." Those two stores, yet to be opened, would be in Sunnyvale and San Carlos.

Published on: August 22, 2016

The Washington Post reports that after years of creating a virtual army of more than a million drivers around the world, ride-sharing company Uber will begin this month "deploying self-driving cars — equipped with cameras, lasers and GPS systems — to pick up passengers in downtown Pittsburgh ... The custom Volvo SUVs will offer free introductory rides and, at least for now, be supervised by engineers in the driver’s seat."

The premise, the company says, "is to eventually replace human drivers with automated systems. The fleet of 100 new vehicles, will come with tablets in the back seats to tell customers what’s happening and to discourage them from interacting with their drivers."

Published on: August 22, 2016

The Wall Street Journal has a story about Kimberly-Clark Corp., a company that traditionally offered its workers a virtual lifetime of employment - even the poorest of performers, who were able to "hide in the weeds."

"That’s over," the Journal writes. "One of the company’s goals now is 'managing out dead wood,' aided by performance-management software that helps track and evaluate salaried workers’ progress and quickly expose laggards. Turnover is now about twice as high it was a decade ago, with approximately 10% of U.S. employees leaving annually, voluntarily or not, the company said ... It has been a steep climb for a company that once resisted conflict and fostered a paternalistic culture that inspired devotion from its workers.

"The changes mirror what is happening inside many large companies, where 'performance management' reflects the conviction that a sharpened focus on creating a high-performing workforce is a vital tool to generate revenue and profit."

It is an interesting piece about corporate culture, and you can read it in its entirety here.

Published on: August 22, 2016

• The Retail Learning Institute (RLI), which offers online training programs for food retailers around the globe through organizations such as IGA Coca-Cola Institute and the National Grocers Association, announced that it is teaming up with the University of the Cumberlands in Kentucky "to provide educational opportunities to food retail associates worldwide." The program allows RLI students to "validate their online training courses for college credit towards an Associate of Science Degree in Business-Retailing," which then can be applied to advanced degrees.

The announcement notes "RLI online courses make up 25 percent of the Associate of Science Degree in Business-Retailing which means that 25 percent of the degree is free to associates using RLI’s training. "

The University of the Cumberlands describes itself on its website as a "liberal arts university that encourages intellectual and spiritual growth, leadership and service" by offering "promising students of all backgrounds a broad based liberal arts program enriched with Christian values."

Published on: August 22, 2016

Got the following email from an MNB reader:

Couple of comments about the Target struggle with groceries.

1. C&S may not be the best partner
2. Target does not know how to refill sale items on a timely basis.  Plenty of holes and dissatisfied customers. Visit their stores on a Monday and you will see plenty of out of stock sale items. They need a separate computer assisted ordering system for their food items. And a scheduling system just for grocery.
3. In most stores they placed the grocery/perishable departments on the far side of the store ( I guess hoping to drag customers through the rest of the store.) So the customer who would think of just shopping grocery is greatly inconvenienced.  Says to me -the customer is not number one.
4. Seems like they need some seasoned supermarket operations and logistics people.
Some of these same items also apply to Walmart.

From MNB reader Mitzi C. Everhart:

Regarding the piece on Target's drop in sales  It seems as if they are blaming everything except for the fact (which you mentioned) that several hundred thousand people had pledged to boycott them in Q2.

I think that absolutely was the main cause of their loss in sales, and I believe they know it too, since they're now installing special restrooms trying to make up for it.  I may be in the minority, but I'm happy to see that people can cause a retailer of this size to make changes, by hitting them where it hurts; in their sales.

It also may be that Target's real problem is less-than-compelling stores.

From another reader:

In my opinion, Target does not need to be in the grocery business.  Many of their competitors sell groceries and do so much better than Target.  Devoting so much space to grocery seems to me to wasted floor space.  Alternatively, Target should concentrate of categories in which they have unique, differentiated positioning- beauty care, trendy clothing, and house wares.  What about the make-up and facial specialists that are prevalent in the mall department stores?  These departments always seem to be busy.




MNB took note the other day of a Dallas Morning News story about why Walmart's efforts to get traction in urban markets - other than Dallas, where it has been successful, as it happens - has been blunted by tough competition (like from HEB) and a variety of other factors.

Prompting MNB user Lisa Bosshard to write:

Glad you shared the Dallas Morning News article – I missed that one and live in the area.

What I can say about the ‘battle’ is my entire town/community (Denton, TX area, just north of DFW) is very excited to see all the ‘new’ retailers coming in.  This year alone, we have a WinCo and Aldi that opened in addition to Sprouts next month and HEB getting ready to break ground.   Somehow the Albertson’s is still open, but always light on traffic, WM is doing okay, but losing customer’s to the beautiful, clean, friendly Kroger just down the street (opened 2 years ago).  I haven’t talked to a single person, family or friend who chooses to shop at WM.  More and more of my household dollars have shifted to (wait for it) Amazon, Kroger and Aldi so far. 

OH, and did I forget to mention that a brand new WM Neighborhood Market also opened this year?  It’s just that far down on the list of stores to shop…  Add to the fact that the Kroger is getting ready to implement their version of click and pick up and I’m starting to hear bells tolling for WM.  They don’t have a merchandise problem, they have an image, reputation and perception problem.




Regarding the ongoing Amazon-Walmart battle, MNB user Tom Murphy wrote:

I completely believe that it would be in Walmart’s best interest to consider second place to Amazon as a good place to be.  For two reasons, first – I don’t believe Walmart has the business model, nor could they transform to one, that will allow them to outpace Amazon and two – when you are running from a bear you don’t need to be the fastest, just faster than everyone else!  In a big market, second can be pretty good.




And regarding the Walmart-Aldi battle, MNB user Bob Vereen wrote:

As I’m sure all of your readers know, Aldi and Walmart operate vastly different concepts which account for price differences.   Aldi offers almost all private brands and very limited assortments, so if a consumer wants choice, he or she must go to Walmart.   Also if he or she wants a national brand, it is Walmart.   But Aldi’s private brands are very high quality, so if brand names are not important or basics are all one wants, Aldi wins and can charge less.   My local Aldi, for example, has had gallons of milk for as little as $1.29, though regularly it is $1.49, still the price leader against everybody.

By limiting its inventory, by operating smaller stores, by not being open 24 hours, Aldi’s costs simply are lower and markups can be less.




Responding to another story, MNB reader Barrie Berquist wrote:

I was very pleased to learn that “young people seem to be showing an aversion for credit cards and credit card debt”.  Yay!  Like you mentioned, maybe these millennials are learning from the mistakes of their parents.  This is exactly what my husband and I are hoping for from our children.  My husband and I got ourselves into major debt due to lack of budgeting, 4 layoffs between the two of us, and medical/funeral bills from a child that had a rare, terminal condition.  In 2012, we completed Dave Ramsey’s Financial Peace University course and got back on track.  This past May, we finished paying off $111,783.18 in non-mortgage debt and travelled to Nashville to meet and thank Dave...
 
I disagree with your statement regarding the implications of the resistance to debt on the economy.  Less debt means less interest paid which means more money to spend on “stuff”.  Bankruptcies have declined as people have learned to resist the lure of racking up credit card debt for instant gratification.  That’s a good thing for everyone, right?  One of the biggest lies that has ever been told is that you need to establish a credit history to be able to buy a car or house down the road.  Credit card companies created this lie and benefit from young people believing it so they sit in the commons area at every college  trying to lure young people into a lifetime of debt and interest payments with an offer for a free t-shirt.  The truth is, you CAN buy a house or car without a credit history.  There are lenders that understand that credit scores are not the best method to assess a borrower’s true likelihood of repayment.  Credit scores are a calculation based on the following five components: 30% of the score comes from the amount of debt owed, 35% comes from payment history, 15% comes from the length of the credit history, 10% comes from the types of credit, and 10% reflects new credit.  Therefore, credit scores are an “I love debt” score where those with long histories of debt (and paying interest) will have higher scores than people who have managed their money well enough to not need to borrow money from credit card companies.  That’s messed up.  Here’s another option:  save up, start small, and upgrade as incomes increase.  That’s what people did pre-credit cards.
 
Finally, banks no longer deluge people with credit card offers?  I got three in the mail just yesterday.  My 20 year old daughter got 2 yesterday and she has never owned a credit card.  My 11 year old daughter was watching Star Wars and when she saw Samuel L. Jackson, she exclaimed “Hey! It’s the Capital One Guy!  What’s in YOUR wallet?”  Seems to me that credit card companies are still doing everything they can to attract and retain borrowers.

From MNB reader Joe McCarthy:

I’m surprised that you accept the premise that it will be tough for younger consumers to get financing simply because they don’t currently rely as much on credit cards to build a credit history.  There is simply too much money to be made in financing to let something like a lack of credit history deter lenders.  Instead, it seems very likely that other metrics will come in to play to determine someone’s likelihood to repay debt: salary history, education, family debt history (this is where I would look first, as financial habits seem to be learned behavior), etc.  I don’t know what those new indicators of creditworthiness will be, but the banking and credit rating industries will find them.  It may not be a good idea to lend the money, but there isn’t a world in which those with cash to loan will sit back and let someone else edge them out over something that is likely to become obsolete.  Will there be disruption in lending practices? Yes.  Will people hold back because millennials didn’t start borrowing at 19 years old? No way!
 
Like any other part of our society, just because we grew up with one system is no guarantee that the folks behind us will want to use it if something better comes along.

And from another reader:

The first thing that strikes me as funny about the story is the assumption that Millennials want those things (home ownership, new cars, etc.). You can’t blame Millennials for their current behavior and it’s ignorant to assume it’s not intentional. Much of the burden Millennials carry is from residual issues created by generates before us. I graduated college almost a decade ago and just this summer paid off my student loans. I’m fortunate that my husband and I are in a position where we could allocate a lot to monthly payments, in addition to using bonus money. But I know that we are not the norm. Financial institutions (and the government that bailed them out) have done little to earn the trust of Millennials. Especially when my lowest interest rate was 6.8% from Sallie Mae / Navient. I had some that were over 12%. What, I ask, was the interest rate offered to banks that had to be bailed out?

My mom is a realtor and everyday she works with young clients who have little interest in buying large homes and becoming house poor. The big, flashy, homes that many of older generations sought are not what Millennials are after. My husband and I do own a very nice home, but we are much more focused on putting money into our 401ks and a 529 for our kids (so they don’t have the burden of ridiculous loans), versus upgrading to a larger / more expensive home. Money beyond what we save is for experiences. My son is three and has been to Disney World four times. I will gladly forego a larger home if it means I can take my kids to Disney every year.
 
You talk about disruption every day and I’m sure those industries (cars, housing) will be disrupted too. We are already starting to see it with companies like Airbnb and Uber. In my opinion, the main take away is that what some perceive as issues for their future Millennials likely don’t see as issues. Don’t make the assumption that we, as a generation, will behave the same way as those before us. Just because someone turns 30 doesn’t mean they move to the suburbs, buy a van and have 2 kids. Smart businesses will figure out a way to react to the changing tides.




Finally, I got an email from MNB reader Jim DeLuca about my piece bemoaning the departure of "The Nightly Show" with Larry Wilmore from late night television:

I have been a big fan and have watched almost every episode and been very impressed by the diversity of women, black and hispanic "correspondents". Certainly I have been exposed to a much bigger variety of thought.  And it was often funny.  How Larry regularly skewered Bill Cosby was especially powerful in supporting women.

Agreed. I thought what he said last week about Bill Cosby and Roger Ailes was particularly compelling:

"“Look, there is a reason Cosby and Ailes and other serial harassers have so many victims, because for years, we let them get away with it. Because when we tell victims that their assaults didn’t happen, we also tell assailants that they don’t need permission. And when we protect powerful men, we make women invisible.

“I know I’m a man saying this, but men, we need to do the work, too.”

Absolutely.