business news in context, analysis with attitude

Published on: December 10, 2012

by Kevin Coupe

Two interesting stories over the weekend illustrating trends that speak to how consumers consume...

• The Los Angeles Times reports that "thanks to improving job prospects and super-low mortgage rates, adults in their 20s and early 30s are moving into their own apartments and buying homes in increasingly greater numbers, according to real estate experts and government statistics.

"Census Bureau data show that the nation added more than 2 million households in the 12 months that ended March 31, about triple the annual average for the previous four years. Most of the gain came from baby boomers, but young adults are hitting the road as well."

More households means more shoppers. That's a good thing.

• The Associated Press reports that a new survey from Leichtman Research Group "finds that digital video recorders are now in more than half of all U.S. homes that subscribe to cable or satellite TV services."

According to the survey, 52 percent of households "have pay-TV service also have a DVR. That translates to about 45 percent of all households and is up from 13.5 percent of all households surveyed five years ago by another firm, Nielsen."

The growth of the DVR generation suggests that to a greater extent than ever, people want what they want, when they want it, how they want it. That's an attitude that carries over to every facet of their consumption lives. And it is why multi-channel retailing is so important.

Published on: December 10, 2012

MarketWatch reports that "the preliminary University of Michigan-Thomson Reuters consumer sentiment index fell to 74.5 from 82.7 in November.

"That’s far below the 82.0 expected in a MarketWatch-compiled economist poll, eliminating four months of gains and also representing the biggest one-month drop since March 2011.

The movement in the report came overwhelmingly on the expectations side, where the subindex tumbled to 64.6 from 77.6 in November.
Consumers’ assessment of current economic conditions were mostly stable, edging back to 89.9 from 90.7.

And, the Wall Street Journal this morning reports that "consumer spending, a rare pillar of economic strength in recent months, is showing signs of weakening. American consumers helped carry the economy through a spring slowdown and appeared to power a summer resurgence in growth. But in recent weeks government data have shown spending was slower over the summer than previously believed, and it has started off the final three months of the year on an even weaker footing."

Among the trends cited by the Journal:

• "Consumer spending, which accounts for more than two-thirds of economic output, is especially important at a time when other sectors have been struggling."

• "Manufacturing, which helped drive the early stages of the recovery, has faltered amid uncertain demand at home and weakness overseas; the factory sector contracted in November after two months of growth, the Institute for Supply Management reported a week ago."

• "Business investment fell sharply in the third quarter and has likely stayed weak as concerns mounted over the fiscal standoff in Washington. The housing market has shown strong growth this year, but construction activity remains depressed compared with before the recession."

• "Friday's employment report showed the economy added jobs at a steady though hardly spectacular pace in November, but the Labor Department also revised downward its estimate for the number of jobs added in September and October by a combined 49,000 jobs."

All of these trends are occurring within the context of a budget debate between Democrats and Republicans that could well determine - depending on whether they are unable to come to a negotiated agreement on fiscal policy that keeps the country from going off the so-called "fiscal cliff" - whether the country enters another recession.

"The resolution of the budget debate may well determine the outcome," the Journal writes. "Slow but steady job growth and the recent rebound in the housing market have left many households on firmer financial footing, and consumers could again drive the recovery if leaders in Washington succeed in averting the cliff's worst impacts. If they don't, experts including Federal Reserve Chairman Ben Bernanke and the Congressional Budget Office predict another recession."

Kroger CEO Dave Dillon told investors last week that he has seen evidence "of people having a little bit more money in their pocket, or at least the willingness to buy a little bit more." However, Dillon reaffirmed the notion that the economic recovery is "fragile," and that there has not been much improvement among lower-income shoppers."

Published on: December 10, 2012

Last week, MNB reported on how Starbucks was selling via the luxury site Gilt.com a $450, steel, limited edition (only 5,000 of them have been made), pre-paid. specially etched Starbucks card that has $400 worth of value on it (the steel costs the other $50).

The 5,000 cards sold out in less than one minute, according to reports.

Well, now Forbes is writing that the rules of supply and demand seem to be kicking in ... and that one sold on eBay for $1,074.

And "as of late Saturday evening, there were 95 Starbucks Metal Cards for sale on eBay."

Published on: December 10, 2012

• Call it another benchmark in the digital revolution.

The Wall Street Journal this morning reports that wine critic Robert M. Parker Jr., editor in chief of the Wine Advocate newsletter, plans to phase out the print version and turn it into an entirely electronic publication, possibly by as soon as the end of 2013. Parker tells the paper that he will "offer incentives to print subscribers to make the change to an online-only format," and may even "offer them Kindles."

The planned move comes at the same time as Newsweek is converting to an online-only format (in just a few weeks), and also as Parker makes other changes at Wine Advocate - accepting ads for the first time (but only from non-wine-related advertisers) and selling a "substantial interest" in the publication "to a trio of Singapore-based investors who will take over its day-to-day financial operations."

Published on: December 10, 2012

• Bloomberg reports on the complicated supply chain that connected Walmart to the Bangladesh factory that burned down last month, killing more than 100 people.

According to the story, Walmart used Success Apparel as a supplier, and Success Apparel planed an order with a company called Simco, which was a Walmart-approved vendor. Simco then subcontracted out seven percent of that order to Tuba Group, which owned the Tazreen Design Ltd. factory in Bangladesh.

Bloomberg writes that " at least five Wal-Mart suppliers, including Success, made clothes there this year, documents found by a labor-rights group show."

Now, Walmart has fired Success Apparel after a 20-year relationship, though Success is saying that the factory was not "on our matrix and we have never done business with them,” Success said in the statement. “We have been a trusted supplier to Walmart for over two decades, never had any violations and complied with the highest ethical and safety standards that our company sets forth.”

• Walmart Canada has opened its 200th supercenter - a store in Edmonton, Alberta.

According to the announcement, the grand opening "marks a major milestone for Walmart Canada. The company opened its first supercentres in Ontario in 2006.  Today, Walmart Canada has supercentres in six provinces and 373 stores nationwide serving more than eight million customers each week."

• Walmart says it plans to open a number of online specials of up to 60 percent off today, dubbed "Green Monday" - expected, based on last year's numbers, to be the company's busiest online sales day in December.

According to data-analytics firm comScore Inc., the Wall Street Journal writes, "Green Monday was also the third highest online shopping day of the season last year."

Published on: December 10, 2012

• The Wall Street Journal has a story this morning about Starbucks' plan to acquire Teavana Holdings for $620 million and to jump start growth in the tea category, which some analysts question because "Starbucks is focused on brewing drinks, with a side order of retail. But Teavana receives just 4% to 6% of its revenue from brewed beverages, selling most of its tea in loose-leaf form for home consumption." However, Starbucks says that it plans to "bring Teavana's 300 mostly mall-based shops to more urban, stand-alone locations, that look more like its own" and "help drive customers to one another by uniting their customer loyalty programs, social-media efforts and mobile applications."

• Weis Markets announced that it has opened its store in Fogelsville, Pennsylvania, saying that "upon approval from the U.S. Green Building Council, the 65,800 square-foot facility ... will be the first 'green' grocery store in the Lehigh Valley."

Published on: December 10, 2012

• Mark Hollis, the retired president of Publix Super Markets and director emeritus of the company, passed away last Friday. He was 78.

Hollis began working for Publix in 1946 - he was 12 years old, and his job was to bag potatoes. He worked in a wide variety of roles, including president of the company from 1984 to 1996. Hollis also was co-founder and chairman emeritus of Florida TaxWatch and the Florida Retail Foundation.

• Berthold Albrecht, chairman of a family foundation that owns Aldi Nord and Trader Joe's, and one of the world's 100 wealthiest people, has passed away. He was 58.

According to press reports, Albrecht died last month, though specifics about the place and cause have not been divulged. News of his death only became public when his widow placed a full-page death notice in the local newspapers.

Albrecht inherited his wealth from his father, Theo Albrecht, who with his brother Karl founded the company.

Published on: December 10, 2012

by Kevin Coupe

I could not let the morning go by without reporting on last weekend's performance of "A Klingon Christmas Carol" in Chicago, in which my son David has a prominent role.

That's me, at right, with much of the cast. (I'm the one with the smooth forehead.)

For those of you who may have missed my earlier mentions, "A Klingon Christmas Carol" is essentially a retelling of the immortal Charles Dickens story, transposed to the Klingon home world and culture that has been made famous in the Star Trek series and movies. The entire performance is done in the Klingon language, with opera-style subtitles explaining what people are saying in English.

It is terrific - and I'm not just saying that because my son was in it (swinging a mean bat'leth, by the way), or because I'm a total Star Trek geek. It was just fascinating to watch a bunch of committed actors and actresses giving their all on stage, performing an entirely unfamiliar language with verve and enthusiasm. The show is funny, touching (there is a Tiny Tim moment that gets an enormous audience sigh) and utterly original.

I had a great time, and I am a very proud dad. If you like this kind of stuff, you will, too.

"A Klingon Christmas Carol" is being performed at the Raven Theater in Chicago, and you can check it out here .)

Published on: December 10, 2012

Some thoughts about the sweeping executive changes announced last week at Delhaize America:

Time will tell if these mega moves fundamentally changes the performance of the company. Delhaize has never had a shortage of very smart, dedicated people.  But even with smart people, they will be challenged as the entire C-suite team are now in a new roles with many of these folks handling responsibilities very new to them.  Roland Smith obviously has a flare for the dramatic, but now that he has made these moves, the most important changes are yet to come as it will be more about the overall strategy coming from Smith that will determine the level of success Delhaize U.S. Achieves, not executive level musical chairs.

Obviously, with all these new assignments, more re-structuring and reporting assignments will be announced as each of these leaders will build teams around them.  Given that, it will be very interesting to see how quickly this new team can form and train their effort on improving sales, profits and corresponding market share some very tough markets.




We've gotten a number of emails about the likelihood that Tesco will sell or close its US Fresh & Easy operations. This one, from MNB user Mike Parker, was sort of typical:

If you reviewed your ancient emails when Tesco opened I advised you that they would fail due to their arrogance and the absence of a reasonable American presence in management.  I take no pride in being correct, but I do take pride in my knowledge of successful and unsuccessful retail start-ups.

A lot of smart people thought that Fresh & Easy would work ... and a lot of smart people thought it would fail. I'm not all that smart, which explains why I was on the fence ... I had issues with the format, but I always thought that Tesco would be able to make the adjustments necessary to make the concept viable.

I was wrong.

In the end, though, I do think that it is time for people to stop talking about how bad timing and a tough economy caused Fresh & Easy's demise. Really good retailers adjust to circumstances, and don't blame circumstances for poor performance.

In this case, Tesco dropped the ball. No excuses.

Great line from MNB user Gary Loehr about the package Tim Mason is getting as he departs Tesco and Fresh & Easy:

Just once in my life, I would like to be bad at something important enough that I would get paid $9 million to get out.




Regarding the delivery of marketing information to people's smart phones and tablet computers, one MNB user wrote:

I think the bottom line is people aren’t interested in junk. It doesn’t matter if it comes electronically or in paper format. My junk e-mail box fills up fast and I empty it regularly without even looking at what’s in there. I have several rules set up that send undesirable e-mails do my deleted items box, which I empty daily. I never check the box on electronic forms to add me to mailing lists. I seldom look at the ads in the newspaper and only open personal letters and bills from my mailbox.

I don’t know the solution but I think marketers will be more successful when they develop something that enables the consumer to control when and how they interact with the retailer and that entices them to interact regularly.




We had an email last week from an MNB user complaining about customer service from a casino where they would only take a money order from the gift shop, and would not take a credit card. But another MNB user has a take on the situation:

The reader who had to ask about why they couldn’t get a gift card with a credit card, the answer is very simple.  Federal law prohibits it.  Its illegal to pay a casino in any form than direct with cash unless you’re at the casino.

I had no idea.




We continue to get email that chimes in on the Amazon.com debate.

MNB user Garry Adams wrote:

You make good points about Amazon as a retailer.

A client of mine is an on-line retailer.   Great sales and growing.   I think if they opened a small number of brick-and-mortar stores in select markets where they have a ton of customers, they would be hugely successful – like Apple, Microsoft, others.   And isn’t Amazon opening (or has it opened) a bricks-and-mortar location?

If they have already established a brand, which they have,  I think it would have great potential. 

What do you think?

I think that when and where it works, multi-channel is a smart strategy. But I also think that being good in online doesn't guarantee that one will be good at bricks-and-mortar retailing. And vice-versa. I would walk quickly but carefully.

Another MNB user wrote:

It is difficult to compete with Amazon, but there is one very important thing that brick and mortar retailers can do.  That is to lobby congress to allow states to collect sales tax on all on-line business.  The definition of having a presence in a state needs to be expanded to include shipping into it, not just having a warehouse or store.   Then each state needs to be lobbied to collect the taxes.  Arguments as to difficulty to an e-retailer to collect the taxes will be fixed by the market.  It is easy for a company to create a database by zip code that can be updated by the states.  The database will contain the required sale tax amount.  The online retailer can apply the tax to each invoice and forward the data and one payment to the clearing house.  This information and money can be consolidated and sent to the states.  A company like GS1 could create something like this in a week.  The Republicans in Congress keep claiming that they are small business friendly, here is a way to prove it.

This is already happening ... and since it is collecting sales taxes in a number of states, it is taking advantage of the moment to open warehouses there, which will allow it to speed up delivery times.

I've said it before and I'll say it again. If you think collecting sales taxes is going to slow Amazon down, you are mistaken. Lack of sales taxes has very little, I believe, with its success.

MNB user Allison Enright wrote:

Couldn’t agree with you more on today’s FaceTime. Amazon continues to step up its game and it’s up to everyone else, if they want to stay in business, to figure out how to keep playing.

From another reader:

With Google searches so often topped by Amazon, it looks like an opening for another search system which is more shopper neutral.  I think it could be powerful to advertise “your searches are not for sale to the highest bidder”.  Amazon, too may pass, or just become one part of a retail fabric.

MNB user Daniel Drotning wrote:

I am not sure how to compete with Amazon as a grocery store, but we are trying to figure that out.  However I do think that if another “super storm” like Sandy is going to hit your neighborhood tomorrow if you do not have a bricks and mortar store to run to for supplies going online to an Amazon like site will not make it to you in time.

Nobody is saying that there is no role for the traditional neighborhood store. Just that competition is tougher ... and you can't depend on hurricanes to keep your business viable.

From another reader:

I think all the points being made were good.  Competing with Amazon doesn’t necessarily mean going dollar-to-dollar with them.  I do quite a bit of business with them, but I have “MY” local stores.  Where I know the people.  Where I sit and talk about what I’m looking for.  Where I walk in and they recognize me  and SUGGEST THINGS TO BUY for Emily or Elizabeth or Gabby or Skyler or Kate or Sarah or Piper or Timothy or Meghan BY NAME (our grandchildren).  Gee, do you think they have figured something out there?  This IS their competitive edge.  This IS those retailers competing.  The ‘buy local’ and ‘support your small business’ movements are great, but they have to earn that business by making ME want to shop or use their services.  And price is not always the deciding reason.




We had a story the other day about how lobsters in Maine, because of overfishing, are resorting to cannibalism and eating each other to stay alive ... and I joked about whether a lobster wears a bib when it eats another lobster.

Which led one MNB user to write:

How horrible.  We’ve overfished their ecosystem, and they’ve had to resort to cannibalism just to survive.  I think that’s sad, and there’s nothing funny about that at all.

Maybe.

But I take very seriously the admonition I recently got from MNB user Matt Mroczek, who said that "if you stop cracking jokes every time there’s bad news to break, I’m going to stop reading your blog!"

Never gonna happen.

Published on: December 10, 2012

It's Week Fourteen in the National Football League...

St. Louis 15
Buffalo 12

Carolina 30
Atlanta 20

Dallas 20
Cincinnati 19

Cleveland 30
Kansas City 7

Indianapolis 27
Tennessee 23

NY Jets 17
Jacksonville 10

Minnesota 21
Chicago 14

San Diego 34
Pittsburgh 24

Philadelphia 23
Tampa Bay 21

Washington 31
Baltimore 28

San Francisco 27
Miami 13

NY Giants 52
New Orleans 27

Seattle 58
Arizona 0

Green Bay 27
Detroit 20




And, Johnny "Football" Manziel, the freshman quarterback at Texas A&M, won the Heisman Trophy over the weekend, college football's highest honor.

Published on: December 10, 2012

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