business news in context, analysis with attitude

Published on: January 23, 2017

Reuters is reporting that Kroger said this morning that "it would fill 10,000 permanent positions in its supermarket divisions."

According to the story, this comes after a 2016 in which its total active workforce grew by 12,000.

The Reuters story notes that this comes just a week after Walmart said it would create about 10,000 US jobs, "as President Donald Trump puts pressure on companies to hire more U.S. workers."

Published on: January 23, 2017

by Kevin Coupe

The Wall Street Journal reports that traditional gyms are losing business - to online options.

Sort of like every other bricks-and-mortar entity.

Go figure.

Here's how the Journal frames the issue:

"Streaming fitness is surging. So are services that let people sample nearby fitness studios for a monthly fee, according to new data from Atlanta-based firm Cardlytics. Many subscribers to these on-demand fitness options are siphoning spending from traditional gyms, the data shows.
Payments to on-demand fitness services jumped to 7.7% of total spending on workouts last year, up from 4.8% two years earlier, according to Cardlytics. Spending for on-demand fitness now exceeds spending at yoga and Pilates studios, according to the data.

"Traditional gyms still command the overwhelming majority of workout spending, but that share fell to about 73% in 2016 from nearly 78% in 2014."

Is there any question that traditional gyms are going to continue seeing an erosion in their market share?

This is yet another Eye-Opening example of how digital disruptors can affect anyone.

Anyone.

Published on: January 23, 2017

The Wall Street Journal has a story about how Kroger "is testing sensors and analytics technology to let shelves and products interact with shoppers walking the grocery aisles. The system, which detects individual shoppers through their mobile devices, can offer tailored pricing on specific items and, through 4-inch color display screens, highlight products on the customer’s mobile shopping list. Tests began late last year and are expected to expand in the coming months."

According to the story, "The 'digital shelf edge' project is part of Kroger’s strategy to automate and personalize the shopping experience as the chain faces competition online from Amazon.com Inc., Wal-Mart Stores Inc.’s Jet.com unit and others."

Chris Hjelm, Kroger's chief information officer, says that the goal is "to bring technology to life in the store."

Published on: January 23, 2017

Save-A-Lot announced on Friday that it is getting out of the California and Nevada markets, closing 14 stores and a distribution center there. The closures represent less than one percent of the company's fleet.

In a prepared statement, the company said that the decision followed "rigorous review and analysis," and would "free up resources to allow the company to focus on building out markets where it already has a larger, more established footprint of corporate and licensee stores."

The closing include one licensed unit and 13 corporate stores.

Save-A-Lot was recently acquired by Canadian private equity firm Onex Corp. from Supervalu for $1.37 billion.

Published on: January 23, 2017

Yahoo News has a story about Campbell Soup CEO Denise Morrison, who last week attended the World Economic Forum in Davos, Switzerland, and seems to be taking the position that there has been a kind of bifurcation in the food marketing business.

The cause, she said, is "the shrinking middle class," which has created a kind of global economic realignment: "“People are really concerned about value and affordability of food. And then, of course, there’s the digital tsunami where consumers are connecting differently with food companies and they want to know everything about their food - where it’s grown, what’s in it, and ‘is it good for me?’”

It appears that Morrison believes that while traditional brands - like Campbell Soup - are often best positioned to address the concerns of the former group, while so-called "challenger brands" are best positioned to disrupt traditional businesses. That's the reason that Morrison has acquired and invested in entrepreneurial efforts that, she said, "gives us a purview of some of the different technology disruptions [and] food disruptions, all the way from growing to last mile delivery. We get to connect with the entrepreneurs. I have people that are advising them and I’ve personally gotten engaged with them because we can learn a lot about what the entrepreneurs are thinking.”

Published on: January 23, 2017

The New York Times has a story this morning about how a number of hotel companies have decided to build their marketing efforts around the simple fact that "travel can be cramped, hectic or disappointing." By reminding people about that angst - and suggesting that their hotels are a great place to escape or relieve it.

"It can actually be a strategy to disarm consumers,” Derek Rucker, a professor of marketing at Northwestern University’s Kellogg School of Management, tells the Times. “When you represent some of the potential negatives of a product or service, that actually makes me feel as if I’m better informed.”

Airlines are an easy target, the story says, with hotels suggesting that they can be a great place to decompress from middle seats, crying babies and long lines. The hotels also are targeting other hotels, but especially services like Airbnb, which are tweaked for "partly clothed and poorly groomed hosts."

Published on: January 23, 2017

Fox Business has a story about what appears to be Amazon's fastest-growing demographic - lower-income households. According to the story, "a new survey from Baird Capital found that Amazon is quickly growing Prime membership among lower-income (less than $50,000 per year) households, which is the key to its ongoing growth in the U.S."

Amazon's penetration among higher income households already is considerable - about 50 percent of US households already are Amazon Prime members, with 75 percent of households with income of more than $112,000 and 60 percent of households with income of more than $68,000 being Prime members. But by marketing extended Prime benefits, and even offering the ability to pay for membership by the month as opposed to an annual $99 payment, Amazon is making a play for all-important lower-income consumers.

This "could have a meaningful impact on Wal-Mart's foot traffic," the story says. "Wal-Mart historically appeals to lower-income households, and Amazon's incredible growth has been one of its biggest competitive threats over the years. Attracting more Prime subscribers from Wal-Mart's core shopping demographic could have a meaningful impact on how much lower-income households spend at Wal-Mart. Countless surveys show that Prime members spend significantly more than non-Prime members on Amazon."

Published on: January 23, 2017

• The Wall Street Journal reports that Walmart has begun the process of eliminating as many as 1,000 corporate jobs, with the layoffs affecting "employees involved with the retailer’s supply chain, known as 'replenishment,' a person familiar with the situation said. They are expected to continue through the end of the month, executives familiar with the process said, as workers in human resources, technology and e-commerce are cut."

The Journal quotes a memo from CEO Doug McMillon as saying that "to fuel our growth and our investments we have to manage our costs ... From time to time, you’ll see the company eliminate positions in an effort to stay lean and fast."

The paper also notes that this requires a kind of juggling act: "working to follow through on investor promises to create leaner operations while placating" the new Trump administration "by highlighting US job growth."

Published on: January 23, 2017

• The Wall Street Journal reports that while Google sells advertising on its site to a wide variety of companies, it also is "among the biggest buyers of those ads, promoting products from its music service to its app store.

"These days, Google often pushes its growing list of hardware products, from Pixel phones to Nest smart thermostats, in the top ad spot above its search results. A Wall Street Journal analysis found that ads for products sold by Google and its sister companies appeared in the most prominent spot in 91% of 25,000 recent searches related to such items. In 43% of the searches, the top two ads both were for Google-related products ... The results show how Google uses its dominant search engine to boost other parts of its business and give it an edge over competitors, which include some of its biggest advertising customers."

According to the story, "a Google spokesman said the company has 'consciously and carefully designed' its marketing programs not to affect other advertisers." And Google maintains that "its house ads appear on a significantly smaller portion of searches than in 2010, but declined to say whether the total number has declined or increased. Google says it handles trillions of searches a year, significantly more than in 2010."

Published on: January 23, 2017

• CNBC reports that the acquisition of Rite Aid by Walgreen Boots Alliance is facing "reported resistance from U.S. antitrust regulators."

The story notes that "Walgreens said in September it would divest between 500 and 1,000 stores to help get cleared by the Federal Trade Commission for a $9.4 billion deal to acquire Rite Aid, according to Reuters. However, reports say the antitrust regulators will not accept this concession. The merger agreement was previously scheduled to be completed on October 27, 2016 but was delayed until January 27."

Published on: January 23, 2017

We had a piece the other day about Target's continuing troubles, which prompted a number of emails.

One MNB reader wrote:

I read with interest todays story about Target sales, especially the statement that was made that, "Grocery sales continue to be a tough slog for the retailer."  It reminded me of a piece you had back on November 21 from Target's Mark Tritton.  In it, the statement was made that, ""We're doing more sampling (of food). It creates a high level of engagement."

At the time, I thought, "We're heading into the Christmas season, and this is the only strategy that Target has for selling more groceries?"  Well, my wife and I happened to be in a Target store shortly after that and we did notice that there were a few sampling stations in the grocery department.  We were prepared to be "engaged."  However, not one of the people in the stations offered us a sample of anything.  We even walked by a couple of them multiple times as I wanted to see if we would be offered anything and we were not. 

Maybe this is part of the problem that Target is having selling groceries.  They just don't seem to get it.  Gone are the days when Target seemed to be a magical store with a great selection and great prices.  You didn't even need to look at an ad, you went to Target knowing you were going to get a great price.

Having associated with Target people in my past, I always thought that they seemed to have a bit of an air of arrogance.  Maybe it was justified as Target was a leader at the time.  However, that has changed, at least in my opinion.  I get the feeling that Target thought that all they had to do was put groceries on the shelf and customers would beat a path.

I don't have a solution for Target.  If I did, I would apply for a job there.  However, if nothing else, they need to take a look at their competition.  If imitation is the sincerest form of flattery, then Target needs to imitate.  Nothing wrong with copying what the competition is doing, especially when you are still considered the new kid on the block when it comes to selling groceries.  Walk before you run.  Assortment, price and a positive shopping experience is all it has ever taken to attract me to a store.  Maybe there are others that have the same criteria.

MNB reader Kristie L. Allen had some thoughts about Target's concerns about cannibalization of store sales by online sales:

Cannibalization is such a silo term, a blame term … an excuse for not seeing something sooner than your competitor.

Customer needs change & evolve.  Your Target article shows people moving from in-store to digital (OR new customers using digital that weren’t able to make it into the store).  Don’t think of this as robbing the store of business.  Instead think about maintaining the business that was perfectly willing to click to a different retailer if there was no digital alternative.

Would they rather have 90% of the basket or 0%?

Excellent point.

Another MNB reader wrote:

When discussing Target sales trends, I continue to hear former patrons of Target state they quit shopping Target because of Target's recent positions on social issues- specifically restrooms.

Don't underestimate the power of public positions (both positive and negative) taken by retailers who are so bold to take a stance - especially a stance that stands counter to the vast majority of the population.

Just for the record, we need to define "vast majority."

Politico reported several months ago on a survey saying that "nearly half—46 percent—said transgender people should be required to use the bathroom corresponding with their birth gender, while 41 percent said they should be able to use the restroom bearing the gender with which they identify. The results are largely split along lines of party, ideology, region, and gender."

So it isn't exactly vast. It is, however, split down the middle ... and I think it is entirely fair to say that companies have to be careful about what they say and do when it comes to cultural issues. Sometimes you do what you think is right, and it can backfire.

MNB reader Gerry Buckles wrote:

No mention that Target’s “progressive” stance on who can use what bathroom might have had an impact on their foot traffic? Kind of like Colin Kaepernick’s antics had no impact on the NFL ratings.

Hmmm, what to do when political correctness is actually the reason something is not going well?………. I know…. Pretend it’s something else. There! Fixed!

Was that what I was doing?

Published on: January 23, 2017

In the NFC Championship game, the Atlanta Falcons defeated the Green Bay Packers 44-21.

And, in the AFC Championship game, the New England Patriots beat the Pittsburgh Steelers 36-17.

The Falcons will play the Patriots in Super Bowl 51 on Sunday, February 5. It is early, but at the moment oddsmakers put the Patriots as a three-point favorite.

Published on: January 23, 2017

This year's National Grocers Association (NGA) Show will feature a new event - a special after party with MNB's Kevin Coupe and Michael Sansolo.

MNB readers know that food, beer and wine are something of a preoccupation around here (some might call it a minor obsession!). Well this year, immediately after the NGA Best Bagger Contest Finals on Monday, February 13, Coupe and Sansolo will host an after-party that will be a place to kick back, enjoy a libation or two, and just decompress after a long day at the show.

The vibe will be irreverent and fun ... with great thanks to PepsiCo for sponsoring the event, and Anheuser-Busch and EJ Gallo for providing the beverages.

The date: Monday, February 13.
The time: 6-7 pm.
The place: The NGA Show, The Mirage, Las Vegas Nevada.

Slàinte!

Published on: January 23, 2017