business news in context, analysis with attitude

Responding to our comment about a Penn State University study suggesting that when Wal-Mart comes to town, poverty rates can increase, MNB user David J. Livingston wrote:

Is Wal-Mart bringing low prices any different that all those 2 cent per minute long distance companies that have forced all those telephone company workers out of a job? Sure somebody loses when somebody wins. While a small percentage of people might go into poverty the other 95% gain by saving money on their purchases. Should we keep a Wal-Mart out just to save a few mom and pop hobby businesses?

We didn’t suggest that we should. However, if the perception or reality of low prices have an associated cost, shouldn’t we at least be aware of it?

There is continued email reaction to Larry Johnston’s expressed high-tech plans for Albertsons. One MNB user wrote:

Anyways, if Larry’s view of the future is the Symbol hand-held scanner units in Texas, he might be living in the late 80’s. The monochrome hard to read units are difficult to navigate and the checkout and produce process is anything but “futuristic.” Ask a store manager, they will be the first to tell you usage is very low. While I do believe mobile-checkout is right around the corner, Mr. Johnston happened to make a U-turn.

And another MNB user wrote:

Just between us kids, I talk to an awful lot of people who call on the Big Four grocery retailers, and an interesting thing is happening.

They are beginning to think of Albertson’s as capable of executing something.

Now that is not suddenly setting new standards for excellence, and it says nothing about stockholder returns or profitability or any of the other things ABS needs to get right.

But it’s a nice start. The investment “back of the house” was and will continue to be critical to execution and to proper management of an entity as large as Albertson’s. They are putting money and time and effort there. They have greatly simplified their company and reduced the number of call points without using a Gatling gun on their footwear, like Safeway did. They now know what they sold (which, incredibly, they didn’t know a few years ago) and have at least some clue about who bought it. They are experimenting with multiple formats and show a willingness to try new things that only Kroger can surpass among the big boys.

I think they are moving in the right direction. Too slow, perhaps, but then, I hate waiting and I am always impatient to know the end of the story. But right now, they look a lot better than they did, and are gaining on their problems. I can’t fault that. Good one, Larry J.

MNB had a story about the Salvation Army being an acceptable charity to Wal-Mart but an unacceptable solicitor to Target, which prompted MNB user Charles Owen to write:

What is the definition of an "appropriate charity" and could you publish a list of the top 50 "appropriate charities"?

We would never deign to suggest the appropriateness of one charity over another. What is laudable to us may be reprehensible to others. In fact, that’s almost a certainty.

On the subject of Walgreen deciding not to taker American Express anymore, we got two very different emails.

MNB user Fitzhugh Elder III wrote:

I applaud Walgreens. I have never understood why American Express could get away with charging a premium. Smart consumers would be wise not to use American Express. They are picking up the premium. Merchants can not afford to eat the difference. If anyone reconsiders in this deal, it should be American Express. They have an unsustainable pricing model going forward.

But MNB user Jeff Folloder disagreed:

It's a simple decision for me, really. I have filled prescriptions at Walgreen's for over a decade and have paid for them, exclusively, by using my American Express card. I like the convenience, I like the billing summary at the end of the year, and I like the points. With one silly decision by Walgreen Co., I will be moving all of my prescriptions for my entire family to the CVS across the street. I suspect that there are more American Express customers than Walgreen Co. realizes...

On the apparent trend of removing the word “diet” from diet soft drinks, one MNB user wrote:

Interesting to note that there are actually very few countries around the world where Diet Coke carries the "Diet" name. In most countries the same beverage is known as Coke Light. I've always liked the Coke Light moniker as it would seem to appeal to more consumers, cultures, and countries.

And MNB user Chris Utz wrote:

This branding brainstorm brings to mind the New Coke debacle. Customers
wanting to order Diet Coke may eventually tire of having a server correct them and could eventually switch preferences... If its not broken, why lose market share?

We also continue to get an avalanche of email about the Cleveland Clinic vs. McDonald’s issue. To recap, the clinic is attempting to evict McDonald’s from its food court in the middle of a 20-year lease because it feels that it ought to be making more heart-healthy food available, while McDonald’s defends its menu and diversity of choices, not to mention its lease.

One MNB user wrote:

I'm not objecting to your closing statement today about the Cleveland Clinic versus McDonald's issue, but I do want to question it. You said, "While the doctor who is trying to evict McDonald's certainly is setting himself up for criticism, it seems to us that he is trying to behave in an essentially ethical manner." So, let me see if I have this right. Are you saying that arbitrarily and unilaterally trying to break a signed contractual agreement with another party/company is ethical? I hope not! (I don't think that's what you meant, but that's the way it came across to me when I read it.)

We despise this kind of behavior in our athletes. Why is it any different with businesses? Consider the outcry when some athlete two years into their five year contract wants to have it "renegotiated" because they don't like their deal any more. To top it off, they decide to "hold out" and not show up for work. To me, if that athlete wants to be ethical, they should live up to their signed contractual agreement and be at work whether they like their deal or not. It certainly isn't ethical to walk out arbitrarily and unilaterally, which your POV "seems" to suggest. (Again, I'm trying to give you the benefit of the doubt here.) The same can be said for management. When they enter into a signed contractual agreement with an athlete, they are under obligation to meet the terms of that agreement whether they feel like they are getting an acceptable return on their investment or not. Is the athlete allowed to say something to management about their contract if they don't like it? Sure. Is management under any obligation to change the contract just because the athlete doesn't like it? No. Is management allowed to say anything to the athlete if they don't feel they are getting a good return on their investment? Sure. Is the athlete under any obligation to change the contract because management doesn't like it? No. Should both the athlete and management act responsibly and live up to their agreement. No doubt! That, to me, is being ethical. (All of this doesn't even address the other ugly issue about airing your dirty laundry in public to try to get them to side with you instead of dealing with this kind of thing behind closed doors.)

One of your readers touched on what I think is a more reasonable and responsible (even ethical?) approach. "Talking turkey with McDonalds about more healthy choices on the menu seems to make much more sense than yanking the food establishment" (with whom you have entered into a signed contractual agreement).

And another MNB user echoes this sentiment:

So breaking a lease is ethical? Didn't those nuns teach you that the end never justifies the means?

You’re right. In making our statement about the hospital CEO’s apparent desire to take an ethical stand, we did not consider the ethical issue of breaking a contract. And it is an excellent point.

What we were thinking about was the doctor’s ethical responsibility to his patients. Is it possible that there are two conflicting ethical issues here? Is it possible that a choice needs to be made?

If so, we would suggest that the patients take priority, and that the hospital arrive at a financial settlement with McDonald’s.

We had a story yesterday about how Shaws and other New England supermarket chains were being criticized by the Boston Globe for “10 for $10” promotions that have become popular in the region, saying that the retailers aren’t telling consumers that they don’t have to buy 10 from the select group of items to pay a dollar for each one.

“What the circulars and in-store ads don't say is that a shopper doesn't have to buy 10 items to qualify for the deal,” the >i>Globe reported. “In other words, it's really a 1 for $1 deal, but the supermarkets don't mention that because they want you to buy more items and spend more money.”

While saying that they are not deliberately misleading shoppers, several of the retailers concede that their goal is to drive more sales, and that they are “pushing the envelope” with this promotion.

MNB user Stan Johnson wrote:

I agree with the retailers on this one....they are trying to sell the multiple. Unfortunately there are many consumers that can't divide. I have seen ads and they look fine to me.

Another MNB user wrote:

Umm...I hate to be the one to tell you, but in ANY sale price (or regular shelf price) you do not have to buy the total number shown...i.e.: 4/$1 in order to get the item for, in this example $.25.

I guess now that the Red Sox have won the series, those New Englanders have to complain about something! Geez!

Another MNB user wrote:

Lets face it, it is a ploy to get the masses to buy more. I live in the Boston market, and the sad truth to this type of advertising is, it is working in favor of the supermarkets, are we that stupid? Most of the items that are 10 for 10 are items that we used to buy for .89 to .99 each. Here in lies the poor excuse of getting your customer to make extra purchases. If you can get your customer to increase their average order by .50 cents, and the average traffic count is 20000 per week -you do the math-it is that easy. An average order of .50 increase can yield a year-end sales boost of 1/2 million in sales and maybe 100k in margin-no capital investment-just creativity and a smile! Chase the pennies and they will roll into dollars, chase the customer into foolish gimmicks and you just might chase they out the door!

Yet another MNB user wrote:

I'm not an Albertson's fan, but when tomato sauce is 3/$1.00 does the consumer think they have to buy 3 to get the same price as it breaks down evenly? Of course not. Enough said on that issue.

And still another MNB user wrote:

How is this all that different from any other multiple pricing format? Shaw’s and other retailers have sold things for 2/$3.00 for example and if customers purchased only one they would pay $1.50… 12 packs of soda would be another example of pricing such as 3/$8.00… Wouldn’t it be worse if they DID require consumers to buy all ten to get the discount?

We had a piece yesterday about a new innovation in the coffee arena – a self-heating single-serve container.

MNB user Chris Fromm responded:

There is no mention of what the targeted retail price for this 10 oz. wonder will be. I had seen prototype products with this technology about a year ago. Unless the projected cost has come way down, the consumer price tag for 10 oz. of latte is going to be quite high. If that is the case, it will be interesting to see if consumers are willing to trade up for the convenience.

If not, it will be another “hot flash” in the pan.


MNB user Paul Schlossberg added:

This is not new. It has not been marketed effectively in the past. It is a solution to getting hot coffee when you want it, where ever you happen to be. If the price/value is reasonable and if the coffee tastes good and if the marketing is effective, it might catch on this time. What makes this interesting (and potentially more appealing) is attaching a big brand name to the concept.

We had a piece yesterday about a UK holiday season trend – senior management (including CEOs) moving to the sales floor to help out during the Christmas rush, often moving merchandise and stocking shelves as a way of pitching in.

Among the companies where this tradition has taken hold – Tesco, Wal-Mart’s Asda Group, Marks & Spencer, and Boots.

But there’s another strong motivation behind this time spent on the sale floor – it allows top management to get hands-on experience that helps to generate new ideas, as well as generating kinship with the people on the front lines.

And we suggested that retail leadership is really fostered on the front lines, and that more executives ought to be spending time there – not only would it give them a better sense of what customers want, but it might create better understanding of what labor faces. We urged senior executives to spend one day a month on the sales floor.

This generated a lot of reaction…some of it surprising.

MNB user Frank S. Klisanich wrote:

I agree with your opinion about Retail leaders getting on the floor and enjoying, experiencing face to face contact with their customers. Same issue for leaders in ANY business …food industry leaders need to walk the stores and see their brands at retail (packaging, shelf impact, displays, pricing, consumer promotions) and the competition….”management by walking around”.

It doesn’t happen nearly enough, and I am not talking about the CEO being shuttled around to stores that have been set up for his/her visit. Simply call the local sales manager and walk some stores, no big entourage otherwise the purpose is defeated.

Or here’s another radical notion – CEOs could actually do their own supermarket shopping each week. Yikes!

One MNB user wrote:

Great idea! As long as you work with a great team. Where I work if any non-union manager(store manager or assistant)helps out there's ALWAYS one whiner saying he/she is taking our job away.

I don't see it that way. I'm glad they're helping. Besides, the managers finally get to hear from a real customer instead of through the employees what the customers say. For some reason most managers don't believe employees but that's another issue.

When a store/assistant manager helps on the floor as said always one union member files a grievance. the reason usually managers don't help is because it's a damned if you do damned if you don't situation.

As for me I'd love to trade with my manager and head office for a week. They'd see what really goes on.

Another MNB user wrote:

Check the union contract - maybe they can't.

But MNB user Krag Swartz wrote:

Kevin, your assessment is on the mark regarding the benefit of senior management and headquarters management working the front lines during the holidays. We’ve been doing that for years in our Lunds and Byerly’s stores and the benefits are numerous. Retail gets much appreciated assistance during the busiest days of our year and management experiences a reality check with customers, programs and employees. Our work environment includes three unions and this in-store action is seen as more than goodwill, it’s seen as relationship building. CSO (corporate support office as our headquarters is called) staff volunteer for store duty during Thanksgiving and Christmas weeks.

For some of us – it’s an opportunity to get in touch with our roots. Others experience the pace of retail for the first time. In the end, we all appreciate each other a little more and have a lot of fun in the process.

Any contract that doesn’t allow management to help out on the sales floor and see what is really happening there strikes us as being a bad deal – for both sides.
KC's View: