business news in context, analysis with attitude

Published on: October 15, 2013

by Kevin Coupe

The Los Angeles Times reports on a new study conducted by the Associated Press-NORC Center for Public Affairs Research saying that "more than 4 in 5 older Americans expect to keep working during their latter years, a sign that traditional retirement is out of reach for vast swaths of society ... Among Americans ages 50 and older who currently have jobs, 82% expect to work in some form during retirement."

Other revelations from the survey:

• "Excluding pensions and homes, 39% of survey respondents said they have $100,000 or less saved for retirement. Nearly one-quarter have less than $10,000."

• "One-third of retirees say they didn’t have a choice in the decision to leave the workforce."

“The survey illuminates an important shift in Americans’ attitudes toward work, aging and retirement,” Trevor Tompson, director of the AP-NORC Center, tells the Times. “Retirement is not only coming later in life, it no longer represents a complete exit from the workforce.”

I think this study has important messages to both retailers and manufacturers, who need to realize that there is this important demographic to which they can market their products and services; this also could be an important source of talent for some companies, especially those that see value in people who have some life experience.

Some will find this trend to be alarming. I would not be one of them.

People are living longer. People generally are healthier. And I think the whole notion of "older Americans" and retirement has to be reconsidered, both personally and in terms of public policy. (The public policy component, because of lobbying by special interests intent on preserving entitlements, will be a lot tougher for a government that increasingly seems to be personified by people with no interest in governing.)

Personally, I plan on working until I drop. Not at the exclusion of all else, certainly, but work is not a four-letter word in my mind. Now, I recognize that I'm lucky. I have a great job, I love what I do, it is fun a lot more often than it is not, and there's absolutely no reason to stop. (Unless, of course, you all decide to stop reading.)

Published on: October 15, 2013

The Wall Street Journal this morning has a piece about how Amazon.com "is quietly setting up shop inside the warehouses of a number of important suppliers as it works to open up the next big frontier for Internet sales: everyday products like toilet paper, diapers and shampoo."

An example: In Pennsylvania, Procter & Gamble has a warehouse that has within it an Amazon facility, and "each day, P&G loads products onto pallets and passes them over to Amazon inside a small, fenced-off area. Amazon employees then package, label and ship the items directly to the people who ordered them ... The under-the-tent arrangement is one Amazon's competitors don't currently enjoy, and it offers a rare glimpse at how the company is trying to stay ahead of rivals including discount chains, club stores and grocers."

The story goes on: "The economics of the arrangement benefit both sides. For Amazon, co-location reduces the cost of storing bulky items like diapers and toilet paper and frees up space for the Web retailer to stock higher-margin goods in its own distribution centers. The location in northeastern Pennsylvania is 5 miles from one of P&G's largest plants, which makes diapers, paper towels and toilet paper, and within a day's drive of major cities in the U.S. Northeast and Canada. The warehouse also stocks other P&G products from pet food to razors to shampoo.

"P&G, meanwhile, saves on the transportation costs that it would have incurred trucking products to Amazon's regional distribution centers. Plus, it gets Amazon's help in boosting online sales, a priority for many in the industry."

Amazon is reported to be in talks with a number of companies to create similar arrangements, including Seventh Generation, Kimberly Clark and Georgia Pacific.

The Journal notes that Amazon's competitors are not happy with what some of them perceive as being preferential treatment for one of their more formidable competitors, though it also reports that "Yannis Skoufalos, P&G's global product supply officer, said the company values its relationships with all its customers and works closely with many retailers to help reduce costs in their supply chains and meet their unique needs."

Published on: October 15, 2013

• Advertising Age reports that Netflix, which has grown from a company that shipped DVDs by mail to one that also offered an extensive streaming service, and then to one that created its own original content, now is in discussions with several cable companies that would allow the Netflix app to be available to consumers on their set-top boxes.

Previously, Netflix users had to rely on external systems - such as Blu-Ray players, Apple TV and Roku - to access Netflix content. The new arrangement - which already exists in Europe - would make access to Netflix "frictionless."


• Variety reports that Netflix continues to add new original series to the roster of projects (think "House of Cards" and the revived "Arrested Development") that it is using to establish its differential advantages as a content source, not just a content delivery system. This one is described as a "psychological thriller" from the makers of "Damages," the Glenn Close cable series.

Published on: October 15, 2013

Apple announced this morning that it has hired Angela Ahrendts, CEO of Burberry, to run its retail business in a newly created role that will have serving as senior vice president overseeing the strategy and operation of its retail and online store.

The company's retail stores - despite being leaderless since last year - are an enormous source of revenue and visibility for Apple, with its average stores generating in the neighborhood of $50 million a year. (There are more than 400 of them around the world. Do the math.)

The New York Times reports that "Ahrendts is Apple’s second big hire from the fashion industry amid reports that the company is readying an Internet-connected wristwatch. In the summer, the company hired Paul Deneve, the former chief executive of Yves Saint Laurent, the French fashion house, to work on special projects, reporting directly to Timothy D. Cook, Apple’s chief executive."

Apple fired the previous executive in charge of its retail stores, John Browett, after he embarked on a strategy of cutting back on staffing and broader cost-cutting; Apple Stores are renowned for high customer service levels, and Browett's moves seemed to indicate a fundamental lack of understanding of the concept. The previous executive in charge of retail, Ron Johnson, who helped develop the concept with Steve Jobs, left Apple to run JC Penney, an effort that itself came to an ignominious end when he was fired because of plummeting sales, profits and customer traffic.

Published on: October 15, 2013

In Toronto, the Globe and Mail reports that "discount behemoth Wal-Mart Canada Corp. has quietly started to sell food online, ranging from Halloween candy to gluten-free organic cereals and prepared Thai dishes. Its initiative sets the stage for an even more intense battle with grocery rivals in an already cutthroat field."

The story goes on to say that "Wal-Mart, which already sells food online in the United States and beyond, is starting in Canada with non-perishable fare, but will look into expanding into fresh and frozen offerings, spokeswoman Susan Schutta said."

Published on: October 15, 2013

The Huffington Post reports that Amazon.com has launched its "Luxury Beauty Store," designed as "a sleek, more streamlined design than your typical Amazon page along with a slew of top-notch hair, skin and makeup offerings ... The 24 brands featured on the site ... are certainly not the drugstore staples already found on the site or the discounted high-end fare we've come to expect from Amazon Marketplace."

Published on: October 15, 2013

Yesterday, MNB posted the text of an internal memo from Delhaize America CIO Deb Dixson in which she outlined the decision to outsource "certain functions" within its Technology Services department, suggesting that the move will allow the company to be both more effective and efficient.

One MNB user wrote yesterday to suggest that we had not included an important sentence from the end of the memo:

"All associates who are impacted by Data Center Operations will be offered employment for a minimum of six months with IBM."

Fair point. The exclusion of that sentence was inadvertent, and it does have an impact on how Delhaize is perceived. Thanks for pointing it out.

Published on: October 15, 2013

• Advertising Age reports that Walmart will spend more this year than in past years on television advertising during Thanksgiving Day National Football League games, "to support its Black Friday sales."

Asked why Walmart hadn't been more aggressive with Thanksgiving Day TV ads sooner, CMO Stephen Quinn says, "I don't know why we didn't figure it out sooner."

Published on: October 15, 2013

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

• The New York Times this morning reports that CVS "is taking a big step forward in the increasingly popular realm of personalizing and selecting products for shoppers. The effort will offer customers who belong to the chain’s ExtraCare loyalty program tailored versions of the weekly print circulars distributed through newspapers and in stores to an estimated 45 million people. The initiative, under the rubric of myWeekly Ad, will use the data gathered by CVS from ExtraCare members’ purchases to do things like suggest sale items based on previous purchases and make available in one place all ExtraCare savings and rewards offers.

"Users will also be able to build digital shopping lists that can be personalized based on the CVS store at which they shop most often — down to the aisle in which each product can be found."

The story notes that the initiative - supported by $7 million in advertising - "is emblematic of a trend as brick-and-mortar retailers seek to fend off growing competition from online retailers."

I am so tired of the ten-foot-long register receipts that I get at CVS that seem designed to let me know that I can get discounts, while being engineered to make sure that I never actually use the discounts because those pages are so damned annoying, that I am about ready to start shopping somewhere else.


• Salon.com reports that "pregnant women with the highest exposure to BPA, an industrial chemical found in plastic water bottles, receipt paper and canned food linings, among other consumer goods, had up to an 80 percent greater risk of miscarriage than those who had been exposed the least, a new study found ... Most miscarriages are due to egg or chromosome problems, and a study in mice suggested BPA might influence that risk, said Dr. Ruth Lathi, a Stanford University reproductive endocrinologist."

While the researchers said that the study "is not cause for alarm," it is "far from reassuring that BPA is safe."

Maybe this is not conclusive, but if an "80 percent greater risk" isn't cause for alarm, then what is?

Published on: October 15, 2013

You may not want to read this over breakfast, but the New York Daily News has a story about how some high-end NYC food retailers have not been living up to billing when it comes to food safety.

An excerpt:

"The Whole Foods on the Upper West Side is a foodie nirvana that sells top-quality cuts of grain-fed beef, pricy produce like organically-grown heirloom tomatoes, and a mouthwatering selection of fine French cheeses.

"It's also been found to have mouse droppings in the loading dock, crusty food gunk on the cold-cut slicers, and lukewarm barbeque ribs and mac and cheese sitting in the prepared food section."

Yuck.

You can read the whole thing here.

Published on: October 15, 2013

Michael Sansolo is off on assignment. "Sansolo Speaks" will return next week.

Published on: October 15, 2013

More about the decision by Safeway to sell off its Dominick's stores in Chicago.

One MNB reader wrote:

I grew up in Chicago, and after a years-long absence, returned there just about the time that Safeway bought Dominick’s.

As a younger person, Dominick’s was where we went when we wanted something a little bit more “special”. It wasn’t custom-meat-market-special, it wasn’t specialty-international-market-special, but it seemed above all of the other mainstream grocers. They seemed to carry a great variety of unique and specialty items. Their managers seemed to know just a little bit more than the Jewel managers about food; they seemed to care a little bit more.

Enter Safeway. I remember the Dominick’s in Elk Grove Village near my office. Shortly after Safeway took control a huge 300 case display Safeway Select soft drinks went into the lobby. It was always visible. One time, talking with the manager I commented on it. “That display most be very productive to leave up for three months”. His simple response was, “no, we haven’t sold a case… that is the identical display.” I watched as every reason I ever had to shop at Dominick’s disappeared. At the same time, over time I saw Safeway take many of the ideas that Dominick’s instituted in Chicago in the nineties show up in Safeway in the 2000's as if they were new ideas. I honestly think they thought of them themselves. I am still surprised how much Safeway’s Healthy Living resembled the very old Dominick’s Fresh Stores.

It wasn’t all Safeway’s fault. When Safeway bought Dominick’s they did so at a high value period. Dominick’s closed the high volume Omni group to seem simpler, but still had that old volume on the books. Dominick’s was positioned to sell with great purpose. Safeway got suckered.

But Safeway took what could have been the dominant format in Chicago (because Jewel was just as dysfunctional) and destroyed it because they thought that all value and knowledge came from the minds of northern California. It was years before they understood what the people of Chicago wanted and valued. By then it was too late. I am amazed it took them so long to get out of the market. Ultimately, a great grocer brand has died due to institutional arrogance.

In the wake of the world where Jewel and Dominick’s own the majority of the market, we have seen the re-emergence of some great independent grocers. I am surprised how strong they are. It is because no one good has risen to be the strong player.

And from another reader:

As a former Safeway employee, I've never understood the fragmentation that grocers are willing to tolerant within their own chains. Kroger, Supervalu and Safeway all seem to be determined to maintain a variety of banners without trusting the inherent value of their own Corporate brands. While the death throes of Dominick's have been legendary the past 10 years, I would argue that the demise of that brand is less about Safeway trying to run it from Corporate and not "getting" the Dominick's customer, but rather it is more about Corporate trying to operate a non-Safeway brand leading to internal confusion as to who exactly they were trying to please.

I've pondered for a while, whether most or all of these grocers would be better served putting a solid face on their stores by creating a tiered and branded approach based on demographics ; i.e. Safeway Plus for upscale stores (not a marketing guy, for example only), Safeway for midmarket, and Safeway Value for price sensitive markets. Stand behind the brand, understand that some regional variation of product selection/preferences will exist, and stop trying to support multiple brand entities. At Dominick's, they ended up trying to run stores that no longer really had the feel of a Dominick's but nor did they feel like a Safeway, leading I would suspect to customer confused by the approach as well. Vons, in California, is headed down the same path, not really feeling like Vons of old, but not really a Safeway either, leaving no heart and soul truly representing either brand.

Not to mention the extra cost of generating advertising for each brand, buying staff procuring for each brand and failure to build corporate brand awareness, much less loyalty, I would think in the long run that with Walmart eating them alive on the price side and Whole Foods succeeding wildly on the innovation and quality side, that the chickens have to come home to roost at some point. Bite the bullet, solidify the brands into something your customers will understand for the long haul and execute the hell out of the plan.

I would challenge the notion that Kroger has the same problems as Safeway in this regard. My sense of Kroger is that they are very good at operating multiple banners - hence the general belief that in buying Harris Teeter, Kroger is uniquely qualified to make an acquisition that will work.




Following yesterday's obituary for independent grocer Orville Roth, MNB reader Monte Stowell wrote:

I do not know if you knew Orville Roth, but he was truly one of the finest men that the Oregon independent grocery trade has ever had. He held the banner higher for the independent grocer than anyone I have known in this industry here in Oregon. A true giant and he will be sorely missed by all of us here in Oregon.  A sad day indeed for his family and all of us who have had the pleasure of working with him and know him as a friend. He will be sorely missed with that trademark green bowtie and big smile.

I did know Orville, and liked him enormously. As I said yesterday, he always struck me as a happy warrior ...

Published on: October 15, 2013

In the National League Championship Series, the Los Angeles Dodgers defeated the St. Louis Cardinals 3-0, but the Cards retain a 2-1 lead in the best-of-seven series.


In Monday Night Football action, the San Diego Chargers defeated the Indianapolis Colts 19-9.