business news in context, analysis with attitude

Published on: November 8, 2016

by Michael Sansolo

Depending on where you live, you likely have been drowning in a sea of political ads for the past months.

But in between those apocalyptic messages has been a very strange business campaign that both catches my attention and leaves me scratching my head each time. And sadly, for the company running the ads, the message hasn’t come close to making me take action.

I’m referring to Sprint’s new campaign, featuring an actor who used to pitch rival Verizon’s wireless service. His pitch is that Sprint’s service is now within one percent of Verizon’s, so why not change companies and pay less.

Bob Garfield, the long time Advertising Age writer and co-host of On the Media show on National Public Radio (NPR), says the message is worth considering both for where it works and where it fails.

Garfield says the most obvious parallel to the Sprint campaign is the old Avis car rental ads that proclaimed, “We’re number two (to Hertz), but we try harder.”

Garfield says Sprint’s message is different. “It’s saying that we are not quite as good, but we are cheaper, which may makes sense in this particular category,” Garfield says. Looked at that way, Sprint could get credit for being straightforward.

However, the comparison isn’t all that simple because each wireless company, like car companies before them, finds ways to select attributes on which to compare themselves to the competition. So most consumers don’t fully trust the information they are pitched and the credibility of the comparison fails.

And there’s one bigger problem. “What troubles me is they are communicating that they are okay with being slightly less good than the dominant player. At some point they have to say they will try to be as good,” Garfield said.

I agree with Garfield on that last point whole-heartedly because being one percent less good is hardly an aspiration, especially if that little percentage actually matters.

For instance, when it comes to wireless service, if I live or regularly travel through the part of the country where the one percent is all that works, I’d see that as a big gap. The reality today is that all businesses need to know what matters most and least to their customers.

For instance, if my supermarket were 100 percent less appealing in cat food I really wouldn’t care because I’m just not a cat person. (Sorry, it’s all about allergies.) More significantly, I might forgive and not even notice if my store were one percent higher on prices or had one percent less inventory.

I’d feel very differently if my store were one percent less effective on food safety or the taste of produce. In those areas, I want top performance.

One last thing to consider and it starts with those historically great Avis ads, targeted at then-industry leader, Hertz. Today Enterprise is by far the top car rental company and it did that by beating Hertz and Avis in places where those two weren’t even looking.

In other words, don’t benchmark the past. You might find out you are second to the wrong competitor.


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 on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: November 8, 2016

by Kevin Coupe

Fast Company notes that it has been two years since Amazon introduced its Echo/Alexa voice controlled computer assistant - a launch that was unusually low-key, with Amazon saying that it would only be sold invitation-only to Prime members. My daughter, prescient about such things, applied for and received an invitation, and has been using her Echo constantly and enthusiastically ever since. (I'm following her example - I have an Echo in my home office and an Echo Dot in the kitchen.)

The Fast Company piece, which you can read in its entirety here, looks specifically at the lessons that Amazon has learned so far.

One important lesson was how critical it was to "look forward" while "working backward." The Echo/Alexa system was conceived as being like the computer on Star Trek ... and once that bar was set, Amazon's engineers had specific benchmarks that they had to hit, gaining expertise that matched the established goal.

And the company continues to look forward: "The next frontier for services such as Alexa is interacting in ways that feel less like automated responses to commands and more like genuine human interaction. That's a basic research problem rather than something any one company is likely to fully achieve on its own. So in September, Amazon announced the Alexa Prize, an annual competition, with up to $2.5 million in prizes, in which university students will try to create bots that can intelligently chat about topical matters for 20 minutes."

The goal is to open consumers' eyes with every interaction. The approach ought to open the eyes of competing retailers and suppliers alike.

Published on: November 8, 2016

The Seattle Times reports that Amazon has put up a couple of job postings in Seattle for concierge-like “home assistants," who the company says would be "“experts in helping Amazon customers keep up their home.” Duties would include “tidying up around the home, laundry, and helping put groceries and essentials like toilet paper and paper towels away.”

The posting appears to be part of an experiment that would make such services available only to Prime members ... and thus part of Amazon's ongoing quest to develop an ecosystem in which Prime membership becomes a central driver of consumer behavior and Amazon is the first, best choice for pretty much everything.

The Times puts it this way:

"The apparent venture serves to underscore how creative Amazon is becoming when it comes to reasons to join the Prime membership program. Members pay $99 a year for guaranteed shipping, and also receive that range from a Netflix-like streaming video service to photo storage and even free books.

"Membership also includes discounts to Amazon Music Unlimited, a Spotify-like music-streaming service, in addition to a more limited music library at no extra cost.

"In exchange, Amazon receives cash flow that helps cover the cost of the perks. Most important, it gains loyal shoppers. Members spend twice as much as nonmembers do," the story says, adding that "the success of the program has been such that it has become one of Amazon’s main 'pillars,' multibillion-dollar revenue generators. Nearly half of U.S. households belong to the program, according to analysts."

Published on: November 8, 2016

The Financial Times reports that Tesco Bank, which is owned by the UK supermarket chain of the same name, has had to block the credit cards used by some of its customers because of reports that some had seen the equivalent of as much as $750 (US) removed from their accounts fraudulently.

“We have taken steps to protect a small proportion of customers’ current accounts from fraud following an alert yesterday,” Tesco Bank said in a prepared statement. “All our customers can continue to access their account as normal through online banking and can make chip and pin transactions. For those impacted, we are working to re-establish a full banking service.”

FT notes that Tesco Bank has more than seven million customers, but only will say that between 1,000 and 10,000 were affected. However, the BBC reports that 40,000 accounts were hacked, with money removed from about half of them.

Published on: November 8, 2016

Marketing Daily reports that "JC Penney and Kohl’s are breaking new ground for retailers, offering pre-Black Friday sales that highlight deals they will offer as soon as the pumpkin pie gets served. And Amazon has thrown down the gift gauntlet early too, with relentless Black Friday specials starting earlier this week."

According to the story, experts say that "it’s part of retailers’ increasing pricing transparency with consumers." Michael Dickenson, CEO of Ironbridge Software, which has been tracking CPG and store data since the 1980s, says, "What’s the point of chasing a Black Friday deal down at the mall when the same prices and goods — maybe even better ones — are available all month long?”

Dickenson "credits the rise of e-commerce - not just from competition like Amazon, but also the success of their own online sales - with helping retailers continue to distance themselves from the oh-so-analog tradition of Black Friday, or even Cyber Monday, its digital stepchild."

Published on: November 8, 2016

The Orange County Register reports that " Toys R Us is tinkering with an interactive prototype shop that’s making its California debut Saturday in Santa Ana."

This new 25,000 square foot store is described as featuring "vibrant red, yellow and blue with 'experiential' elements such as a play lab ... Distinctly branded aisles and sections display merchandise such as American Girl, Lego and 'Star Wars' toys. Other parts of the store boast music and movie and buckets filled with toys ranging from $1 to $5 ... The changes are aimed at enhancing the shopper experience at a time when consumers - especially millennials - are seeking entertaining experiences."

This new store is one of four in the format being opened by Toys R Us; the other three are in Florida. The story says that they are "part of a turnaround plan by CEO Dave Brandon," who is "reconfiguring existing stores and opening smaller shops to fight off competition from online vendors such as Amazon."

Published on: November 8, 2016

• Fortune reports that PetSmart has begun offering same-day delivery "through services provided by Silicon Valley startup Deliv," allowing its customers to oder online and have products delivered to their homes as soon as two hours later or up to two days later.

According to the story, "PetSmart says that its new delivery service is available now in Los Angeles, Orange County, San Francisco, San Jose, Las Vegas, Atlanta, Miami, Seattle, and Chicago. By mid-November, the new delivery service will be available in eight additional metro areas for a total of nearly 2,500 zip codes serviced."

Deliv is described as "a key player in the battleground between e-commerce giants, like Amazon, and brick-and-mortar stores." It has financial backing from companies that include UPS.

Published on: November 8, 2016

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

• Kroger said yesterday that associates working at the company's Fry's Foods division in Arizona have ratified a new agreement with United Food and Commercial Workers (UFCW) Local 99" that covers more than 20,000 associates working at 122 stores there.

"This new contract provides wage increases, affordable health care and ongoing investment in our associates' pension fund to support their retirement," said Steve McKinney, president of Fry's Food Stores.


• In New York's Westchester County, the Briarcliff Daily Voice reports on how shoppers at Mrs. Green's Natural Markets there "say that the shelves are empty and the store has blamed its vendors; the company says its stores are not closing, even though consumers say that the situation resembles a going-out-of-business sale.

According to the story, a spokesman for the company said that Mrs. Green's is "working to resolve the issue. He said it was a supply side problem and not related to the company's finances."

However, Mrs. Green's has closed at least four stores in over the past year or so, even as it keeps others open in New York and Connecticut.

Not sure how vendor issues would not be related to financial problems. I think Mrs. Green's is going to have to come up with a better story.


• Business Insider reports that Starbucks CEO Howard Schultz has written an open letter to company employees decrying what he called am "epic, unseemly" election season, and saying, "Let's each embrace the universal virtues of respect and dignity, refusing to allow the hatred on cable news, the ugliness of our politics, and the lack of political role models for our kids to define us and to dictate how we treat each other."

The story says that while Schultz has endorsed Democratic candidate Hillary Clinton - even while acknowledging that she was not a perfect candidate - he did not ask his employees t vote for anyone specifically.

Published on: November 8, 2016

• In Minnesota, the Star Tribune reports that Target has hired Shekar Natarajan, who most recently has been overseeing Walmart's warehouse drone initiative, to be its new senior vice president of network planning and operational design, responsible for improving Target's supply chain.

Natarajan's Walmart title was vice president of last mile operations, emerging sciences and operational excellence.


• Interactive multichannel retailer HSN announced the hiring of Carmen Bauza, most recently the senior vice president for consumables, health and wellness merchandising at Walmart, to be its new executive vice president and chief merchandising officer.

Published on: November 8, 2016

MNB yesterday took note of a CNBC report that the Grocery Manufacturers Association (GMA) "has been ordered to pay $18 million for violating campaign-finance laws to conceal the identities of corporations that poured $11 million into defeating a 2013 food-labeling initiative in Washington."

MNB reader Tom Kroupa responded:

It's amazing that corporations have gone this far to put their profits above the health of our citizens. They have finally been punished. But is it enough? We have a human right to know what is in our food! Who could be against that?

To be clear, GMA isn't being fined for opposing food labeling legislation ... but for trying to hide the names of the corporations that were funding its lobbying efforts. But if nothing else, the fine is a major victory for transparency.

One thing that didn't really occur to me yesterday was whether GMA has the kind of reserves that will allow it to pay this fine. (Assuming it loses the appeal. I wouldn't be surprised if appeals result in the reduction in the fine.) One industry expert pointed out to me yesterday on the phone that in one month we've seen FMI lose its central revenue-producing business with the cancellation of its annual convention, and now GMA get hit with what could be a crushing fine. All of which suggests, this person said, that maybe something bigger and structural is happening here.




Got the following email from MNB reader Larry Ishii about the sale of Andronico's to Safeway, which I said was a shame:

I called on Andronico’s for ten years for Unified Grocers and I agree with your comments.

But there was another independent retailer that has befallen the same fate, G&G. During my years at Unified, G&G was a much more stable retailer yet the changes in the marketplace caught up to it as well.

Unless these retailers make changes that they must, more will succumb to the same fate or simply shut down. The independent retailer is the essence of what our great grocery industry was always about but time marches on…

It is a very sad pattern.




Responding to yesterday's story about Walmart's aggressive and progressive sustainability and environmental goals, one MNB user wrote:

Sustainability is a nice goal to have and has long been the target for the specialty market.

It is now gaining more traction within the regular retail community as show by major retailers directives for their own brands.  Now we see Walmart making a statement.

My only question, since this direction comes at a cost; how is Walmart going to continue their pricing structure and competitive “cost edge” when traditionally they have pushed production off shore to achieve that edge?

As Walmart’s retails climb closer to other retailers, their consumers' purchasing power diminishes.  That makes them very vulnerable to competition, since in my eyes, they have nothing else to offer.

This is a great announcement for Trader Joes, ALDI, the new Lidl, and the 4 “bigs” of retail.
 
Regarding the energy efficiency statement: I think solar company stocks just went up.



Regarding the fact that even as deflation causes supermarket prices to drop, restaurant prices are going up, MNB reader Tom DeLuca wrote:

Hate to admit it, but after reading the article, I have to finally side with my wife (of 20 years) and agree that perhaps we should ‘eat in’ vs. ‘dine out’ to save some money.

I certainly agree with your view, that supermarkets need to know that they can’t compete on just price.  In fact, they need to end their own in-fighting and how who gets credit for what.  Said differently, they need to figure ways to create “experiences” as you mention, but in ways that go beyond their compartmentalized thinking of “that’s my department [offering]”. Not just cheeky end caps with Taco Shells, Salsa and a Mexican Flag, rather, a ‘solutions’ center that offers all that and a way to recreate the restaurant “experience” at home. Not just meal components / ingredients, but some simple and inexpensive way to recreate the ambiance that going to “Uncle Vito’s” might offer.  Perhaps it’s that end cap of spaghetti, sauce, and maybe some candles (from the GM side of the store)?

From MNB reader Kevin C. Lavin:

I am a food broker in California. We recently had an Australian Company visit us. They were shocked at how low our restaurant prices are. They said comparable restaurants in Australia are triple.




And finally, one MNB reader had some thoughts about yesterday's Eye-Opener about business lessons to be learned from the Chicago Cubs:

Much like Ryan Murphy, I am a lifelong Cubs fan who used to cut school to attend games, was a 7 year vendor, made sure my family attended Cubs games at different ballparks as my career moved us around the country, often attended games by myself to “sort out life” and plan to be a WF usher in retirement. There is no better place in the world than Wrigley Field.

I 100% agree with Ryan but with one addition. It is hard to top the Cubs Brand. When the entire Chicago metropolitan area is 7M and 5M attend the parade, it goes beyond baseball and (not an exaggeration) extends worldwide.

The question then becomes how do companies…and people continue to build on their brand and generate loyalty while continuing to innovate, update and remain current and relevant while not hurting the tradition. The Ricketts certainly seemed to have figured it out.

Published on: November 8, 2016

In Monday Night Football action, the Seattle Seahawks defeated the Buffalo Bills 31-25.