business news in context, analysis with attitude

Catching up with some of the email we got before I went on vacation…

We continue to get email about Target’s problems. One MNB reader wrote:

In light of the recent comments about Target’s store conditions in the Northeast, I realize that this could be viewed as piling on, but I think it needs to be said.

Our son is working as an intern in Buffalo for the summer and we just returned home from a trip to visit him. He is the only member of our family to have not worked in a retailing career, so we have been coaching him from afar on where to do his shopping while living in Western New York. I suggested that he to go a nearby Target to do his nonfood shopping and he complied. While we visited him he took us back to the same store he had shopped previously and I felt compelled to share our experience with you.

Upon pulling up in the parking lot, we found the front of the store strewn with garbage that was emanating from the store’s NY bottle redemption machines as there were empty cartons and non-deposit bottles all over the place. Once inside, we found a dingy, drab store that had too many issues to count.   There were shelves that had empty sections so large you could crawl up onto them and take a nap.   We found a clothing section that had clothes just piled on tables that hadn’t been properly sorted or folded and much of the hanging clothing had no organization by size.   There was a cheerful conversation between three employees standing with arms akimbo talking about things that had nothing to do with work while a cart with ice cream waiting to be stocked dripped onto the floor nearby.   We did not find a single department that had its shelves full or at least faced up to appear to be full.   The concept of “merchandising” did not appear to be even a consideration, based on the appearance of the displays and endcaps.   The bathroom was both filthy and in disrepair and there was no evidence that it had been serviced any time earlier in the day (it was 5:30 pm).   Most of all, the store had only three checkstands open out of twelve as they clearly expected most people to use the four self-service checkouts that were available (but were stacked up with a line of people nine deep). 
In the Midwest where we live, Target can usually be viewed as the “anti-Wal-Mart” and you can expect to find a store that is clean, full, and seasonally prepared, depending on the time of year. I mistakenly assumed that you could (and should) expect to find the same conditions anywhere else that Target does business.   One can only hope that someone in Target’s executive staff will take the initiative to set some higher standards and hold people accountable. 

P.S. After 30 years of hearing about them, I finally got to visit my first two Wegmans stores in Buffalo.    WOW.    Even though they were older stores, they were packed with people.   If I was still running a store, I would have gone back and ripped out all my refrigeration and completely reset my store to have a space designed to look more like their first two aisles.

One MNB reader had some thoughts about delivery costs:

The last mile challenge sunk Webvan. It costs roughly $40/hour to run professional grocery delivery in USA.

Operators can plan only 3 deliveries/ hour outside of dense population centers like NY or San Francisco. Profitability possible through click and collect or other models with outsourced logistics. Amazon and Walmart have deep enough pockets to subsidize delivery, but will have to sell a lot of profitable non food items to make it work.

On the subject of Lidl’s entry into the US:

Reminder, all Lidl price comparisons are based largely upon private label, which accounts for 18 percent of Dollar sales according to Nielsen. Any true market basket study should examine how most of USA shops....stocking up on favorite national brands when they are on sale.

Thanks for MNB , an honest forum for industry experts. Many other news sources simply recycle optimistic press releases from retailers. I remember all the positive press on Tesco Fresh and Easy until almost the very end.

We try.

Got the following email from MNB reader Deb Faragher:

The continued coupon debate is interesting to me as a consumer. Your comments have been right on and I’d like to add a couple of observations.

I’m a Boomer who has downsized so the requirement of the majority of coupons relevant to me to buy multiples of products when I have limited storage makes those coupons of no value. Including coupon lookalikes in FSI’s that then refer you to a website to print out are too much trouble. Relevance, to be sure, is also an issue. I get multiple emails weekly from Publix, Fresh Market, and Kroger. Of these three, Kroger is the only one that has a specific loyalty program which I know has an impact on the data Kroger captures. Having said that, I spend about $175 a week at my Publix and the coupons emailed “especially for me” are always the same, usually limited to 3-4 items, and generally worthless to me. Kroger, on the other hand, uses their technology from the loyalty program to target me specifically so my emails include not only coupons for merchandise I actually buy, and I also receive targeted “Best Customer Bonus” coupons by email and direct mail for merchandise I’ve purchased in the past. Kroger’s emails show merchandise I buy that’s on sale to help me create a shopping list. It’s a good use of the data they glean from me.

It goes without saying that downloaded electronic coupons must work at the point of sale. I’ve spent a lot of time at the Customer Service counter at Publix getting money back for coupons that didn’t work at the register. Finally, it is very frustrating to get in a store and see a shelf label with a sale price that can be gotten if you return to the front of the store to get yet another flyer, not the weekly one. It’s no wonder coupon use is on the decline.

One other note. You’ve talked a lot about points of differentiation and what continues to take me to Publix when I live much closer to Kroger is that Publix offers online deli ordering. The annoyance of having to stand in line is totally removed and keeps me loyal to Publix as a result.

From MNB reader Howard Schneider, on the subject of loyalty marketing:

You are right on, KC. Programs that focus on discount are not really loyalty programs. Successful loyalty efforts engage customers emotionally as well as providing some hard value. Great programs – like Starbucks or Walgreens – anticipate and solve problems for consumers. And to your closing comment: years ago we published a white paper entitled, “Why Marketers Should be Loyal to You.” Thanks for making this important point.

From another reader:

Your comment today advising companies to use loyalty programs to demonstrate their loyalty to their customers caught my attention.

Raleys’ “Something Extra” program is unique in my experience in that it seems focused on just that. Instead of being used as a gateway to everyday discounts, or a marketing vehicle for vendors, Something Extra has two primary benefits for customers: 1) cash rebates as a percentage of purchases, and 2) coupons for the items a customer buys the most. As a vendor, it’s not my favorite program, because I can’t use it to target consumers for my benefit, but I admire Raleys for putting their customers first.

Contributing to the ongoing minimum wage discussion, one MNB reader wrote:

The minimum wage issue is yet another headwind for labor heavy traditional grocers.  These higher labor costs will pressure gross margins and prices for traditional grocers, widening the price gap with the less labor intensive channels.

And from another reader:

The government is always about giving/ entitlement not earning your way. Why not incent a worker for productivity, engagement, attendance and contribution to their employer? How novel would it be for an hourly employee to be accountable for the profit and success and be able to earn accordingly.

The current minimum wage is around $7.65? If an employee hit the required metrics, I don’t think that any employer would have a problem with $15 or even $20 /hour!

We can’t/ should not force entitlements in to American businesses look what it’s done to government!

But, from another reader:

Imagine if workers received a wage that actually put them above the poverty line.

They would no longer have the need to be on tax payer subsidized programs like food stamps, assisted school meals, government funded medical care etc.
What a panacea …a perfectly legitimate option to reduce or nearly eliminate the working poor and their ongoing need for government tax payer funded support.
Maybe at the same time we can eliminate all these farm subsidies too since lower food cost is just another subsidized program compliments of the U.S. taxpayer.
As inflation occurs raise the wage…over time it’ll sort itself out…the rich will never notice the difference…until they get lower tax bills because all the support programs shrink.

I did a piece before I went on vacation about the importance of sampling, prompting MNB reader Mitzi Everhart to write:

I definitely agree with your sampling article.  The night before I read this, I was doing a little online cosmetic shopping.  The price of my item was about the same at most of the major retailers, but I went with Sephora for my purchase because 1) you get 3 free samples with your purchase.  I can tell you that in the past, these free samples have led me to purchase new items at a minimum price of $45.00 for the item.  I'm not sure what it costs the retailers to offer these (and there are a multitude of samples to choose from) but surely if a sample leads to a purchase and the item is $45-$50, it's a win for them in sales. I've even gotten samples of products I already use, because they're great to throw in a travel bag.

I think that consumers love the word "free", whether it's free shipping, free samples, etc.  Bottom line: I will always go with the retailer that gives me a little something extra, and yes, they sucker me into more purchases with their "free samples.”

I took exception to some of the conclusions reached in one analysis of Amazon Go, which suggested that the continued “beta test” status of the store means that it is unlikely to be a big deal for the company.

One MNB reader responded:

Thanks for taking the CNet comments about Amazon Go to task point by point. I am tired of the dramatic key word use and jumping to conclusions that pervade articles these days. I agree with your comments. Amazon will just keep working to get it right and then have a working solution that the same journalist will gaspingly marvel at.

Thanks for your thoughtful, fun journalism Kevin.

Is it wrong of me to think that “fun” is as important as “thoughtful”?
KC's View: