business news in context, analysis with attitude

Published on: April 15, 2014

by Michael Sansolo

Despite my endless efforts to find interesting and sometimes obscure business lessons, I get powerful reminders of two contradictory bits of business wisdom.

1. Keep it simple, stupid, because simple usually works.

2. Sometimes it has to be complex and if you do that well, you can win.

Last week I had the opportunity to join a group of retailers from Latin America on a tour of supermarkets in the New York City area. Just on the surface, that’s an interesting turn of events. Not so long ago, New York was hardly the most innovative retail market in the country.

Now, thanks to new entries, the Big Apple and surrounding suburbs provide a wide range of retailers breaking barriers in supermarkets, convenience, drug and almost every other kind of retail. Yet it was one of the market’s long-standing operators that gave the group a lesson in world-class execution of simple ideas.

That operator was Stew Leonard’s. Sure, the group loved the quirky layout, the colorful décor and the incredibly engaged staff. But what got the retailers talking endlessly were two simple items.

First was a display of avocados, an item you can find in pretty much any supermarket. Yet Stew’s did it differently. At Stew’s store in Yonkers, NY, the display featured a simple selling device, dividing the avocados in three groups: today, two days and four days. In other words, the display explains exactly when a shopper needs to start making guacamole.

So simple, yet so brilliant and the retailers loved it.

What’s more they were blown away by the sensible nature of Stew’s cross merchandising. At two locations in the store tomatoes, basil, olive oil and mozzarella were merchandised together as the building blocks for caprese salad. Simple, but brilliant.

Yet not everything is so simple. In Northern New Jersey the retailers were taken aback, with good reason, at both Wegmans and the new Village ShopRite in the Morristown area. Both stores feature stunning prepared food departments, each with a wide range of cuisines from the most basic pizza and sandwiches to increasingly complex international fare.

Still that wasn’t what got the group. Rather it was that both stores - especially Wegmans - featured a heavy emphasis on price in both fresh departments and throughout grocery. As one retailer from Buenos Aires protested, that combination isn’t ever supposed to exist.

That retailer - who is very successful in his own country - said the conventional wisdom in retail is you cannot offer too many attributes. You can’t win on price and service, convenience and pizzazz all at the same time. He likened it to the age-old business adage that when it comes to “good,” “fast” and “cheap,” you can only have two of the three benefits. Never all three.

The more the retailers compared notes, the more they came to the realization that old adages aren’t as relevant today. The non-stop competitive battles taking place through the US have forced every retailer to make one of two choices: get a lot better or prepare to close up.

The looming specter of Amazon.com means the rules are likely to change even more.

So the lessons were clear. Creativity and simplicity matter more than ever, especially when it comes to building a great shopping experience. At the same time, being good is no longer good enough.

Today you must be confounding as well.


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .

Published on: April 15, 2014

by Kevin Coupe

Call it yet another milestone in the drone wars.

Google said yesterday that it has acquired a company called Titan Aerospace, which makes high-altitude, solar-powered drone satellites that it says it will use for two purposes - taking photos of the earth, and connecting people to the Internet.

In a statement, Google said that the acquisition is based on a shared and "profound optimism about the potential for technology to improve the world," and that these drone satellites could be used to "bring Internet access to millions of people, and help solve other problems, including disaster relief and environmental damage like deforestation."

Terms of the deal were not disclosed.

The testing of drones by companies such as Amazon, FedEx and UPS has been focused on speeding up delivery times in appropriate markets, but the Google efforts seem to have a higher set of goals. And Google is not alone; the New York Times reports that Facebook recently bought Ascenta, a British company that makes similar drones, and had been in discussions to acquire Titan Aerospace.

The Times notes that Google and Facebook have an obvious shared interest in delivering internet access to people in remote locations: "While satellites can deliver Internet access to sparsely populated areas, the cost of using satellite data connections can be very high. Drones, in comparison, will be able to reach those customers at a much lower cost."

I don't know about you, but I find this to be totally cool. And the very definition of an Eye-Opener.

Published on: April 15, 2014

Wells Fargo yesterday released the results of a new study designed to evaluate how online grocery businesses "engage, inform, and interact with customers."

The big conclusion: "While a few companies offered some interesting features, such as a $12.99/month 'Delivery Pass' at Fresh Direct, occasion-based curated product suggestions at Google Shopping Express, shoppable recipes at Amazon Fresh, and barcode scanning at Safeway.com and Amazon Fresh, most companies are not effectively grasping how to translate the process of buying groceries from the offline to the online world.

"Additionally, we found that the aura of same-day delivery was often not a reality, with next-day more the norm in practice. We still believe that online grocery will be become a significant disruptor in the U.S. grocery industry over time, although current kinks at existing players suggest the dislocation might not be immediate and may perhaps buy the bricks and mortar grocery retailers a brief window in which to catch up (for those who are willing and able to invest)."

The winner in the study's estimation is New York-based Fresh Direct, described as "the overall leader in our study and the only player to score an average score of more than 4 out of 5, with the best blend of a grocery and digital mindset, in our view: high-quality merchandise, a large selection of local and prepared foods, great product photography, an easy reordering process, and category-relevant features like recipes, pantry suggestions and Buy Big (for bulk items). Fresh Direct requires only a $30 minimum order and charges $5.99 per delivery or offers attractive unlimited delivery passes ($12.99/month, $69/six months, $119/one year)."

Other major players ranked by Wells Fargo and Fluid, a digital commerce expert:

• "Amazon Fresh was not the clear leader, falling shy of our expectations in terms of the user and delivery experience, as well as product information, despite its apparent advantages in fulfillment and ecommerce. Product information is very sparse, which is surprising to us given its importance for food items and the extensive information on core Amazon.com product pages. Delivery windows were often next day and sometimes two days out despite the premise of same-day delivery. However, Amazon excelled in some areas, such as easy reordering, a powerful mobile site and app, and neat features like shoppable recipes."

• "Walmart To Go met or exceeded our expectations in some areas (quality of perishables, wide selection, low $30 minimum order, ease of checkout); but we found the browsing process to be very time consuming and same-day delivery was not always available. We also found the delivery process to be a bit awkward as the delivery person must enter the home and unload all items unless you pay extra for bags; but you still have to be home and receive the order (most others offer unattended delivery options)."

• "Google Shopping Express, unsurprisingly to us, excelled in search, product information, and reviews, but seemed to miss some more important grocery-/retailing-centric features such as quick reordering and personalized merchandising based on past purchases. The lack of perishables also remains an impediment. It was, however, one of the few companies we tested that actually had same-day delivery windows available."

• "Safeway.com ranked better than we expected and, in our view, did a good job of leveraging its grocery expertise and store base in some areas, such as the ability to view and reorder past in-store purchases online (based on club card history) and the ability to create notes for each item and indicate substitutions. However we found product pages to be underwhelming and, like Walmart, same-day delivery to be somewhat of a fallacy, with most time slots not available until the next day unless placed before 8:30am and same day typically not available until 8-12 hours after ordering."

Published on: April 15, 2014

Reuters reports that the National Retail Federation (NRF) yesterday announced the formation of an Information Sharing and Analysis Center (ISAC), an industry group for the retail industry that is described as focused on "collecting and sharing intelligence about cyber security threats in a bid to prevent future attacks in the wake of last year's big attack on Target Corp."

The story explains that "ISACs are industry groups that typically run security operations centers that operate around the clock, providing alerts about emerging threats to their members and sharing information provided by law enforcement and other government agencies.

"They are set up under terms of a 1998 U.S. presidential directive to foster sharing of security information between the public and private sector.

"There are more than a dozen such organizations among industries including financial services, emergency services, healthcare, technology companies, public transportation and utilities."

The financial services industry ISAC will help with the set up of the retail industry ISAC.

Published on: April 15, 2014

USA Today reports on how Coca-Cola seems to have come to the tipping point with its Freestyle soft drink machine, which can dispense some 146 different combinations of beverage, and which is described as "a formula for survival in the $76 billion soft-drink industry awash in competition and growing consumer rejection."

The story says that "after five years in the marketplace, Freestyle is at a critical crossroads as it evolves from the new kid on the block to an incredibly costly hit or miss. Coke won't say what it's invested in Freestyle — whose original code name was Project Jet. But Freestyle ranks as one of the largest equipment investments the company has ever made. Coke's Freestyle may be one of the industry's most high-profile, most expensive and most widely watched attempts to stay relevant … Freestyle needs to be a hit. Its off-and-on roll-out, which began every-so-slowly, has recently gained some momentum as there are currently 19,000 machines in about 10,500 locations globally, including most domestic Burger Kings. But Coke Freestyle is still missing industry kingpin McDonald's as a major partner - which has recently begun to test it in some New York City locations. Freestyle is increasingly catching the eye of Millennials, who are its consuming future."

The Freestyle machine allows customers to mix and match flavors, customizing drinks to an almost unprecedented degree using an interface that seems closer to an iPod than a soda vending machine. In an effort to sustain the tech/cool factor, USA Today writes, "Freestyle's even got an app in the works for next fall that will let folks pre-mix and match their drinks on their cellphones. Then, when they hold their devices up to a Freestyle machine, they'll receive the exact drink that they've mixed in their app."

But Coke's problem has less to do with the technology than the product itself - consumption is down, soda is losing its cool factor, and the company's stock is down, which means that it is perceived that Coke needs more than one hit to get its buzz back.

Published on: April 15, 2014

• The Wall Street Journal reports that Google is testing a new program that is helping a half-dozen advertisers "match the anonymous tracking cookies on users' computers to in-store sales information collected by data providers like Acxiom Corp. and DataLogix Holdings Inc. "

The goal is to begin drawing direct lines between online and in-store behaviors, so Google can prove that the ads on its pages actually are responsible for people making specific purchases.

Published on: April 15, 2014

Michael Sansolo the other day devoted to a column to the old-world sensibilities in some states that seem designed to protect traditional car dealership networks … even if those networks are not in the consumer's best interests. It all has to do with political power, lobbying and the inability in some quarters to recognize the inevitability of change … and resistance to change is hardly something limited to the car business.

Well, James Surowiecki has an excellent piece in The New Yorker that explores the same subject … and it is worth taking a look at here. Ironically, this is one of those cases where some pro-business interests are in favor of restrictive government regulation … and pro-consumer interests are opposed to such regulations.

Published on: April 15, 2014

• The Democrat & Chronicle reports that Wegmans pledged a donation - 50 cents for each pound of plastic above 177,000 pounds, with a minimum of $10,000 - to the Nature Conservancy based on how many extra plastic bags customers return to its stores this month.

The move is part of a broader campaign by Wegmans to increase recycling of disposal plastic bags.


• Safeway said yesterday that it has completed the distribution to its stockholders of 37,838,709 shares of Class B common stock of Blackhawk Networks Holdings, Inc. the gift card distribution company owned by Safeway. After the completion of the distribution, Safeway no longer owns any shares of Class B common stock of Blackhawk.

Published on: April 15, 2014

• The Wall Street Journal reports that John Agwunobi, who has led Walmart's expansion into health care services, has left the company after seven years "to explore other opportunities in health care." The Journal writes that he will be replaced by Labeed Diab, who most recently led Walmart’s U.S. Midwest division.

As the personnel shift takes place, Duncan Mac Naughton, Walmart's chief merchandising officer, says that the retailer plans to "accelerate our health and wellness growth in the future, helping even more Americans get access to high quality, innovative and affordable health care solutions."


• Ahold USA announced the hiring of Amy Hahn as its senior vp of marketing, a new position. Hahn is a two-decade veteran at Hershey, where she most recently served as global VP/general manager for direct retail and licensing.


• Marc Rosen, Walmart's senior vice president of global e-commerce, has left the company and will become executive vice president and president of global e-commerce at Levi Strauss & Co.

Published on: April 15, 2014

Yesterday, MNB took note of a Financial Times report that Walgreens management is under pressure from some shareholders to relocate its corporate headquarters to Europe, a move that could save it significant tax exposure - a concept called "inversion."

It would, in fact, be one of the largest tax inversions ever attempted, the story said: "In a note last month, analysts at UBS said Walgreens’ tax rate was expected to be 37.5 per cent compared with 20 per cent for Boots, and that an inversion could increase earnings per share by 75 per cent. They added, however, that 'Walgreens’ management seems more hesitant to pull the trigger near-term due to perceived political risks'."

While Walgreens management may be resistant, FT reported, the Paris discussions were characterized as "constructive."

My comment:

I recognize the tax problem. But Walgreens risks an enormous political blowback if it becomes a European company. Just as, I'd expect, there could be political blowback against governmental policies that force such a high-profile entity offshore.

I think the responses to this story are instructive.

One MNB reader wrote:
 
Your words - “But Walgreens risks an enormous political blowback if it becomes a European company."

Since Walgreens is not a political entity, where do you see this “political blowback” coming from? From the United States population or from the government itself?
Frankly I don’t think the population at large would care at all especially if some of the Walgreens tax savings was realized in better pricing or some other improvement in the shopping experience at Walgreens. I sense what is being communicated and what many of us know instinctively is that our government, not the people, would retaliate against Walgreens if they made that move.

Regarding your other comment  - “Just as, I'd expect, there could be political blowback against governmental policies that force such a high-profile entity offshore.” Could be political blowback????  There damn sure better be some. YES, the politicians responsible for these policies and policies themselves that would motivate Walgreens to consider this move should be the target, not Walgreens.
 
The sad reality about your whole commentary is that it even includes the consideration that if Walgreens makes a completely legal move to lower their tax liability they risk some sort of retaliation from an unnamed source.  The ONLY mention should have been that the very people and policies responsible for creating an environment where this would even be considered by Walgreens should be under fire. Walgreens does not get to create the rules, they only get to play by them!!

But MNB user Mike Franklin had a different take:

There is no tax problem…so how can you recognize it? Please understand the issue(s) of taxation.

It’s not governmental policies forcing Walgreens to consider relocating…it’s greed. There is a price to be paid, by citizens and corporations, to live in America. That price includes paying a fair share for taxes…a concept many corporations forget about. Walgreens’ effective tax rate may have been 37.5%...but what was the actual rate they actually paid after all the corporate tax loopholes have been exploited.

Another reader chimed in:

I would be the first to boycott a company who is not supportive of our country and who plays such monetary games without consideration of its human and social implications and I would relish sharing that sentiment with anyone who would read/hear it.  I imagine others might feel and behave the same.

MNB reader Doug Campbell wrote:

There is a CVS on almost every corner where there is a Walgreens, and Publix or Costco will be more than happy to take our prescription business.  I really want to buy American so we can create a few more jobs in the USA.

Fascinating. I'm sure that if Walgreens were to make such a decision, the reactions would be all over the political spectrum … which is precisely what these emails suggest.




One more comment on the whole paternity leave question that we've been talking about:

I’m not a big sports fan, so maybe I don’t see the “take one for the team” side of things as clearly as others.  I agree that family comes first, and taking a few days for the most important moments of your life makes sense to me.

But as you like to point out, there’s a business lesson here as well.  What state is a team in when one person can’t take a few days off?  As a manager, I try to develop a team so that it has enough depth, skill, and teamwork to cover if someone is gone.  If the team can’t handle one player attending the birth of his child, it seems to me they have bigger problems.

Agreed.