Monday, July 31, 2006

A cracker jack promo

A common putdown is to say that something's so cheap that it's given away as a prize in Cracker Jacks or a cereal box. So I wonder if this promotion conveys the proper image for Ford. They're giving away a car as a prize:
Ford Motor Co., in an effort to keep promoting its Fusion mid-sized car, plans to put 600,000 toy cars into Kellogg Co. cereal boxes starting Sunday.

The boxes, each containing a Fusion Hot Wheels car, will be distributed out of discount retailer Target Corp.'s stores nationwide. Fusion photos will appear on each box, the nation's second-largest automaker said.

The Fusion toys will be inserted in boxes of Froot Loops, Apple Jacks, Frosted Flakes and Cocoa Krispies. Ford said one red model with the Target logo will be among them, and whoever gets that box will win a real Fusion.

Sunday, July 30, 2006

Wal-Mart admits defeat in Germany

Wal-Mart is pulling out of Germany, selling their 85 stores to their biggest competitor, Metro. This is another big defeat for Wal-Mart, who just sold their stores in Korea a couple months ago.

They're taking a beating in Japan and UK as well, as we commented a few months ago, although they are upping the ante in Japan, claim to be committed to the UK, and have invested heavily in Latin America, according to this item from the Washington Post:

Wal-Mart denied that it had any plans to bail out of Britain, where it acquired supermarket chain Asda with some 320 stores and 140,000 employees in 1999.

"Asda is right on track. We've made some significant changes in Asda over the past year, and we're seeing some positive changes there and positive results," a spokeswoman said.

Wal-Mart has invested heavily in other regions in the past year, buying a majority stake in Japan's Seiyu, completing its acquisition of Sonae in Brazil, and expanding into new markets including Costa Rica, El Salvador and Nicaragua.

Another use for RFID

This is somewhat off-topic, but I'll post it since people here are interested in RFID.
Bob Lewis Automotive is using RFID-enabled car keys to automatically track test-drives, improve security and simplify key access for salespeople at its Volkswagen showroom in San Jose, Calif.
One of the things that is particularly fascinating about technology is the way it is adapted to uses far different from the original idea.

Wednesday, July 26, 2006

Chicago passes 'big box' wage bill

Chicago today approved the bill requiring large retailers (Wal-Mart and Target, principally) to pay a "living wage" to workers.
The measure only applies to companies with over $1 billion in annual sales and stores of at least 90,000 square feet, which means it primarily affects Target and Wal-Mart.

It requires them to pay at least $10 an hour in wages plus another $3 in fringe benefits by July 2010. The state's minimum wage is $6.50 an hour.
It's possible the mayor will veto the bill, which he opposed, but it passed by a wide-enough margin to override. It's also possible it might be declared unconstitutional (as was a recent Maryland bill mandating health benefits and aimed at Wal-Mart).

Target has indicated they might leave Chicago rather than comply with the bill, as we reported here last week.

Update Thursday: Chicago Tribune has some response from Wal-Mart and info on their plans in the Chicago area:
Michael J. Lewis, president of Wal-Mart's Midwest division, sees millions of consumers hungry for Wal-Mart's low-priced groceries and envisions operating 40 Supercenters in the Chicago area in the next three years by building new stores and expanding existing stores. Wal-Mart currently has only a handful of Supercenters in the outlying suburbs.

"Our share of the market is relatively low in Chicago," said Lewis. "And that's an opportunity for us. We think there's tremendous opportunity to double or even triple our market share in Chicagoland."

That expansion is a threat to Jewel and Dominick's, the Chicago area's two major supermarket chains, where workers are unionized and where prices are generally 15 to 30 percent higher than those at Wal-Mart.

In an interview at Wal-Mart's Chicago office last week, Lewis said if the city council approved the bill, Wal-Mart would "put more time and effort in the suburbs," in particular focusing on those close to the city in order to draw shoppers across city lines.

"It would stand to reason that we would ring Chicago with Supercenters," Lewis said.

Tuesday, July 25, 2006

Old Navy/Gap getting desperate

Old Navy's comp store sales are down and Gap's share price is down 24%. Time for desperate measures, according to Forbes.

The problem is that there is a lot of competition for the low-cost fashion niche that Old Navy occupies -- Target, Kohl's, H&M (my daughter's favorite). Apparently, they're going to try upgrading their line. If it doesn't work, it could be the end of the line for some folks:

The stakes couldn't be higher for the company. Or for Paul Pressler, CEO of parent company Gap.

"If this doesn't work, the story is going to end for him," says Richard Jaffe, a retail analyst with Stifel Nicolaus. "That's why we're seeing a big push for fall 06."

The Forbes article also has a link to a slide show on various retailers who have rebuilt their image.

Bye-bye, TeenPeople

Time Warner is killing off their People spin-off for teens:

The decision to cut the magazine comes as the U.S. publishing industry tries to preserve newspapers and magazines as Internet popularity grows among readers and advertisers.

Hachette Filipacchi Media said in April it would close its Elle Girl magazine for teenaged girls but preserve the brand online.

Dose, a free Canadian paper designed for younger readers, said in May that it would cut its printed product in favor of an Internet-only approach. Dose is owned by CanWest Media Works, a unit of Canada's largest media company, CanWest Global Communications Corp.

The constant is that they are all keeping their on-line presence.

When I read the article, it struck me that I'd never seen anybody reading TeenPeople.

Monday, July 24, 2006

UK supermarket investigation going slowly

The UK Competition Commission's investigation of the supermarket industry is off to a slow start, with Tesco announcing that they will miss the deadline for responding to the commission's request for evidence.
Britain’s four largest supermarkets — Tesco, Asda, J Sainsbury and Wm Morrison — are believed to have concerns about the amount of information sought by the commission, which has asked for replies to 131 questions.

“It took one person five days to assemble the data for just one of the questions,” said one supermarket executive.

“Our systems are built for selling things — not mining financial data,” said another.

The questions — many of which include dozens of supplementary inquiries — cover a number of areas including buying, property, pricing and promotions.

There are also concerns that testifying against the big retailers could be unhealthy for witnesses.

Meanwhile, Mark Prisk, shadow minister for business and enterprise, has written to the Competition Commission seeking assurances that the anonymity of those who give evidence to the inquiry is protected.

“Concerns have been expressed to me about the risk of retaliatory or bullying tactics by larger players in the industry against those who may raise points unfavourable to them,” wrote Prisk.

Mid-price retailers will be 60% private label by 2010

NPD Group, according to this Boston Globe article, says that the merchandise mix at mid-price stores is becoming increasingly heavy on private label.
The trend is expected to accelerate. Research firm NPD Group predicts that by 2010, 60 percent of the merchandise mix will be private brands and labels, up from 25 percent in 1975.
It seems like every retailer is looking to private label as the magic bullet. The contrarian side of me says anything that popular is certain to be overdone. Look for somebody to do very well by swimming against the tide, with a strong brand name approach.

1.2 billion impressions

That's what Adidas is said to have gotten in the US from the World Cup final, according to Nielsen Sports. All those impressions were on an audience of 6.2 million, which means 200 impressions per viewer -- feasible, since the Adidas logo was on the ball, on the French jerseys, the ref's clothing, and everywhere else.

And it doesn't hurt that everytime the infamous head-butt was replayed, there was the Adidas logo on Zidane's jersey.
Under a rundown of "how the Adidas apparel sponsorship became a success," Nielsen said: "The much talked about 'head butt' by France's star player Zinedine Zidane was shown repeatedly." That exposure continues with replays on Web sites, such as YouTube.

Wednesday, July 19, 2006

AMD v. Intel -- this time in Germany

Advanced Micro Devices, which has already sued Intel in the US, and has pushed authorities to act against their rival in Japan, Korea, and the EU, has now sued in Germany.

The latest complaint was filed last week with Germany's Federal Cartel Office .... In it, AMD claims that Intel made deals with German retailers that violate the country's competition laws.

The complaint was prompted by a report in the German edition of the Financial Times claiming that the Media Markt retail electronics chain had agreed to only sell computers that used Intel's processors in return for a payment from the chipmaker.

"AMD had already received similar information, so we decided to file a formal complaint with the Federal Cartel Office," AMD spokeswoman Hollis Krym explained.

Corruption at Carrefour China

Carrefour is trying to root out corruption among its buyers in China, some of whom apparently are taking bribes from suppliers, according to People's Daily.
Rapid expansion in China by the France-based retail giant has generated huge profits but also caused problems such as bribes and corruption in stores. The company's Shanghai headquarters yesterday sent a memo to its South China Office urging it to crack down on corruption in its purchasing process.

Market analysts said corruption has taken root in the retail sector, particularly in supermarkets. There are too many suppliers like food companies trying to sell their products to supermarkets, but only a few of them will be lucky.

I wonder if the bribes are less than slotting fees.

Hispanic mall

Desert Sky Mall, a Westcor operation, has turned itself into what may be the first major mall to market itself to Hispanics.

In trouble a few years ago, with two of its five anchor locations empty and its cineplex closing, the mall went in a new direction -- reopening the cineplex showing movies with Spanish subtitles.
Today, Hispanic shoppers crowd a revitalized Desert Sky - now a mall with a Mexican accent. Moviegoers get salsa with their popcorn, salespeople are as likely to speak Spanish as English, and sneaker store Finish Line abuts Mexican bootmaker La Gran Bota, which was recruited from a swap meet down the road. Sales at the mall are up 15 percent annually since 2004.

While ethnic shops catering to Latinos and Asians have long existed in small strip malls, many larger malls have been slow to wake up to the Latino potential. "The malls got there before the market did, and some malls don't see the opportunity," says Michael Falkenstein, a senior vice president at La Curacao, a Hispanic-focused, Los Angeles-based department-store chain that plans to open a store early next year at Desert Sky, its first outside California.
It seems to be working:
National retailers that not long ago wouldn't touch the place are opening stores at Desert Sky - among them, the Children's Place and music retailer F.Y.E. - and owner Macerich is preparing to spend millions of dollars renovating the mall. But the transition has faced some resistance. When Mr. Valenzuela proposed putting in bilingual signage three years ago and encouraging bilingual hires, some retailers balked. Now almost all are on board but he says he still must walk a fine line in making sure the mall isn't "too Mexican," alienating the white and black longtime shoppers who still make up nearly 30 percent of customers.

Rhode Island outlaws mail-in rebates

Rhode Island now requires that all rebates be credited by the retailer at the cash register, becoming the second state (after Connecticut) to do so.

Under the law, retailers advertising a manufacturer's rebate on any sale item must apply the rebate amount at the time of the sale and complete the rebate redemption process themselves, rather than requiring the consumer to do it.

The law prohibits retailers from advertising a "net," or final, price for an item that includes a payment from a manufacturer -- unless the retailer gives the buyer the amount of the manufacturer's payment at the time of the sale.

Further down in the article, I learned something I hadn't heard about before:
Separately, Massachusetts filed suit against Young America to demand that it submit to an audit of $43 million in uncashed rebate checks. Bay State officials claim the company kept that amount over seven years in return for charging its clients lower fees. The arrangement could be an incentive to deny legitimate rebate requests.
I've heard before stories that some rebate fulfillment services were using uncashed checks as a revenue source (I have no way of knowing if it's true), but I wasn't aware that any states had taken action on it.

Sunday, July 16, 2006

A couple notes from the 'death-of-media' front

This blog notes that the merger of Federated and May, combined with a likely change in media buying strategy by Federated for its Macy's brand, could result in a loss by newspapers of $425 million annually.

May and Federated combined were the newspaper industry's largest advertiser last year, spending about $1.2b. A significant drop could be expected just from eliminating redundant advertising in many markets. But also, if Macy's takes a national advertising approach, a Deutsche Bank analyst notes that it could result in only 30%-40% of the ad budget foing into newspaper instead of the current 70%.

On the TV side, however, the news is little better: the first week of July was the networks' lowest-rated week ever. While the week of Independence Day is traditionally poor, never before was it as bad as this.
CBS, ABC, NBC and Fox averaged 20.8 million viewers during the average prime-time minute last week, according to Nielsen Media Research. That sunk below the previous record, set during the last week of July in 2005.

Rebates: Another one bites the dust

Dell has jumped on the bandwagon:
Dell joins several retailers who have cut back or eliminated mail-in rebate programs since last year.

In June, OfficeMax Inc., one of the nation's leading office supply chains, said it would offer immediate discounts on product pricing instead of mail-in rebates. And in April 2005, electronics retailer Best Buy Co. Inc. said it would abandon all mail-in rebates in two years.
If I were in the rebate-processing business, I'd be looking for some ways to branch out.

Target to pull out of Chicago?

Target is issuing thinly-veiled threats to pull out of Chicago if the City Council passes a "living wage" bill as expected on July 26th.
... Target becomes the second retailing giant to threaten to pull out of the lucrative Chicago market in a last-ditch effort to stop an ordinance championed by organized labor that breezed through the City Council’s Finance Committee by a vote of 15-to-6 and has attracted support from 33 aldermen.

Wal-Mart has threatened to cancel plans to build as many as 20 new Chicago stores over the next five years if retailers are required to pay employees at least $10 an hour by July 1, 2010.
I was amused by this comment by one of the aldermen: "If they want to lose the more than $3 billion that is not being captured in my ward, that’s a bad business decision for them.”

Based on the 2002 national Retail Census, and adding 20% or so for growth, Chicago has somewhere around $21b in retail sales annually. It also has fifty wards. What are the odds that $3b of that is in one ward?

Oh well, expecting truth (or common sense) from any politician is pretty hopeless -- how much more so from a Chicago wardheeler?

Wednesday, July 12, 2006

Macy's continues alienation campaign

Having already made enemies of most of the people in the nation's third-largest market, Federated Department Stores is now trying to see if they can make it unanimous.

Okay, that's probably not their intent, but it sure seems that way.

Macy's dealt a new blow Monday to Marshall Field's loyalists: Field's credit-card holders who cancel their new Macy's cards out of anger will be canceling their Field's accounts, too.

The new wrinkle came in a press release with information that had been unavailable last week, when Field's owner, Federated Department Stores, said Field's card users won't earn rewards points as of the end of the day July 31. Only Macy's cardholders may start accumulating rewards points Aug. 1.

I understand that the next step they're planning is to take any customers who mention the words "Marshall Fields" and subject them to the rack and thumbscrews. That'll make 'em love Macy's!

Monday, July 10, 2006

Spinning the unspinnable

I love it when somebody tries to make a disaster sound good. Album sales are down 4.2% this year, this is the fourth year of the past five that sales have declined, and what's the industry spin?
The decline reflects in part a dearth of big hits compared to the same period in 2005, which saw Mariah Carey and rapper 50 Cent each release multi-platinum sellers.

"Considering that you haven't had a 50 Cent to be the Pied Piper during the first half of the year or a Norah Jones the year before that, being behind 4 percent in album sales is really not that bad," said Geoff Mayfield, director of charts for music tracker Billboard.
Uh, I have news for you. Yes, it's bad.

I have this image of Zinedine Zidane's agent trying to sell an endorsement deal: "Hey, other than the head-butt, he had a really great World Cup."

Off-Topic: Brainstorming

Not totally off-topic, perhaps. We've all sat through brainstorming sessions -- whether on trade promotion or other topics. We've listened to the facilitator (or whatever title is in vogue currently) tell us that "there's no such thing as a bad idea." Which, as this article points out, is patent nonsense: Of course there are bad ideas -- I've certainly had more than my share.

Has anybody ever been part of a brainstorming meeting that actually accomplished anything? I haven't, and it was good to see that others share my skepticism about this particular manifestation of the groupthink culture.
John Clark, a former university dean of engineering, says brainstorming sessions come in handy to distribute blame in the event of failure. But in his experience, most often someone hijacks the topic at hand, tries to prove everyone else wrong, works to impress the superiors who are present, or just plain blathers for his own enjoyment. "I can't remember a single instance where a group produced a really creative idea," he says.
The article comes down hard on teamwork, as well. I have mixed feelings about that -- as far as ideas are concerned, my own experience has been that the best ideas develop through a mix of individual and team inputs. My best ideas have generally been things I come up with on my own, then take to someone else; we hash it out a bit, then usually s/he comes back to me a day or two later and says, "You know, I think it would work better if we ..." Then we might bring in a third opinion, who adds something or points out a flaw, and we go from there.

But as for formal brainstorning -- I've never seen it work.

Sunday, July 09, 2006

Korea fines Carrefour

The Korean Fair Trade Commission has fined Carrefour for pushing suppliers around.
The nation's No. 4 discounter was cited by the Fair Trade Commission (FTC) for unilaterally forcing manufacturers to cut prices on products they sell to Carrefour stores, returning products without due cause and intentionally delaying the signing of contracts with suppliers.
Carrefour Korea was recently sold to Eland, a Korean clothing manufacturer. I wonder if Eland was one of the suppliers Carrefour demanded special terms from?

China to regulate big-store expansion

The Chinese government is expected to issue rules limiting the expansion of large retailers. Although the rule will officially be directed at all retailers, clearly it will more strongly affect foreign firms.
Many local retailers have expressed concern over the growing influence of foreign store chains like Wal-Mart and Carrefour, which have made significant inroads into the Chinese market in recent years.

Weekend Quick Notes

Kellogg's is looking for growth in China, and word is that they are planning to buy a local food company (or two or three). They need to adapt their products to the culture, however, since Asians don't go for cold cereal with milk.

Automakers are going back to incentives. Big surprise -- even though they were talking big about cutting back a few months ago, as we reported here. "After sizable incentives last summer, automakers vowed to embrace value pricing, providing the lowest price available without incentives."

Fry's, a division of Kroger in Phoenix, will open a new format aimed both at Hispanics and at Anglos with a taste for Hispanic foods. Called Mercado, "the 66,284-square-foot store is designed to offer Mexican shoppers products they grew up with, and other shoppers new foods ..."

More on the Kraft spin-off

Kraft is getting closer to a spin-off from Altria, after a favorable decision in a tobacco lawsuit. We mentioned a week or so ago that a spin-off was looking likely. Wall Street observers think it will be next year, apparently.
'I don't see them spinning off Kraft until sometime next year,' said Greggory Warren, an analyst with Morningstar Inc. He said Kraft's new chief executive needs at least six months to get a handle on the foodmaker's problems ...

Sunday, July 02, 2006

OfficeMax eliminating rebates

OfficeMax says it will eliminate mail-in rebates. I predicted when Best Buy announced last year that they were phasing out rebates that others would feel the pressure to join in.

It's a major customer satisfaction issue -- rebates annoy the consumer.

The decision was the culmination of almost uniformly negative feedback regarding the lengthy and often-frustrating process of mailing in a rebate form and proof of purchase, followed by weeks of waiting for a check, a company spokesman said on Friday.

"Rebates were the No. 1 customer complaint we were getting," said Ryan Vero, OfficeMax's chief merchandising officer.