Tuesday, December 30, 2008
As the graph shows, the net had a big jump this year, possibly explained by the poll being taken shortly after the election, during which political junkies (myself included) checked websites regularly for the latest news, rumors, and polls. It's possible, then, that the numbers are inflated, but the long-term pattern is nonetheless clear -- papers are down fifteen points from their high and TV down twelve points, while the net is up 27 points.
This is not necessarily all bad news for the papers -- many of the most popular news websites are run by the newspapers themselves, but for it to be good news the publishers are going to have to figure out a way to turn those online readers into advertising dollars, something they've had trouble doing thus far.
Clothing makers, balking at the deep holiday discounts offered by retailers such as Macy’s Inc., may force department stores to eat more of the markdowns.Some analysts are saying that stores used to guarantees of 40% may have to settle for 35%, and that mid-range stores like Penney may see their guarantees cut from 35% to 30%. The cuts could save suppliers a billion or more. There may be some interesting conversations at the NRF meeting next month.
Liz Claiborne Inc., HMS Productions Inc. and a raft of apparel companies plan to push back at the retailers who have slashed some prices by 70 percent amid what’s shaping up as the worst holiday shopping season in four decades.
Monday, December 29, 2008
Consistent and balanced enforcement of our nation’s antitrust laws, including the Robinson-Patman Act, is especially important to ensure a level competitive playing field for entrepreneurial businesses. N.G.A. encourages you to appoint a Chairman of the Federal Trade Commission and Assistant Attorney General for Antitrust that will enforce the law in a consistent and balanced manner. A level playing field provides the appropriate marketplace environment where diversity thrives and consumers are well served with an abundance of choices.I have mixed feelings on R-P enforcement: I agree with the NGA that there are serious abuses in trade promo and other channel practices, but I have doubts about R-P itself, which surely ranks among the most poorly-written major pieces of legislation ever (in the famous Fred Meyer decision, the Supreme Court wrote, "Conceding that the Robinson-Patman amendments by no means represent an exemplar of legislative clarity ..."). It's tough to comply with a law that no one quite understands.
An overhaul of R-P would be the ideal solution, but I have a hard time foreseeing that happening.
For 2009, sales growth for the year (excluding automobiles and gasoline) is forecast to approach 2% growth compared with the 2.3% average growth for 2008 through November, based on data reported by the U.S. Department of Commerce.I wonder if it's realistic to expect to regain 5% annual growth in retail sales -- GDP growth and income growth were both below 5% over the recent past, so is such a figure sustainable for retail sales over the long haul? I'm not an economist, but it seems like perhaps we should recalibrate our expectations -- both as consumers and as marketers.
TNS Retail Forward anticipates a rebound to occur in 2010 and gain momentum through 2013, when annual increases in sales will again approach the 5% average growth rate of the past 10 years.
"It's dead, this is it, this is the last Christmas, without a doubt," said Kugler, 34, a Burbank businessman. "I was the last one buying VHS and the last one selling it, and I'm done. Anything left in warehouse we'll just give away or throw away."The real interest in the article is simply reading about somebody who sees opportunity where the rest of us see a product that is far enough past the end of its lifecycle that it has started smelling a bit. He unabashedly describes himself as a bottom-feeder, but his bottom-feeding has done quite well for him: "I'm not sure a lot of people are going to miss VHS," he said, "but it's been good to us." And he's looking forward to reprising his success as DVDs are replaced by Blu-Ray.
Combined with Walmart's absence from syndicated data, this may seem to indicate a chronic inability to commit, but a more likely explanation is simply that Walmart feels that their competitors may gain more from having Walmart data in the mix than Walmart gains from being in the consortium -- the same reason they withhold their POS from the syndicators. Having been part of the pilot, Walmart now knows enough about how the new tool works to do the same thing on their own and make it part of RetailLink.
It makes perfect sense, though it is no doubt a disappointment to Nielsen, and will further complicate the lives of marketers who were looking forward to the new tool.
I was initially dismissive of PRISM, because I felt sales data was a better measure of the effectiveness of in-store marketing, but I came around as I appreciated better that PRISM's purpose is different (to measure brand-building) and should be seen as supplemental and complementary to sales measures, rather than as an attempt to supplant those measures.
While Walmart's defection means that PRISM measurements will be less comprehensive, that does not mean they will be without value. We will continue to look forward to PRISM's rollout and hope that it fulfills marketers' hopes.
Thursday, December 25, 2008
And the angel said unto them, Fear not: for, behold, I bring you good tidings of great joy, which shall be to all people.
Monday, December 22, 2008
Wal-Mart spokesman Kevin Gardner said from the company's headquarters at Bentonville, Ark., that D&S operates 185 stores in Chile and is a "significant" player in the country's grocery-retail sector.Walmart is currently operating in Argentina, Brazil, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua and Puerto Rico.
Carrefour, meanwhile, is planning to expand in Brazil, with expectations that Brazil will become their second-biggest market (it's currently third, behind France and Spain).
Carrefour SA, Europe’s biggest retailer, plans to open a many as four new stores in Brazil in the first quarter even as growth slows in Latin America’s biggest economy.
Carrefour sees growth opportunities in the southern part of Brazil and is interested in buying other companies, said Pedro Daniel Magalhaes, chief financial officer of Grupo Carrefour Brasil, in an interview with Bloomberg Television in Sao Paulo.
Standard practice in the book trade is to allow 100% return on unsold books:
Industry practice dating from the 1930s allowed retailers to return unsold titles to publishers for full credit and without incurring shipping costs, the newspaper said.The deal with HarperStudio calls for increased discounts upfront to replace the return privileges. One wonders, if this practice spreads, if we will soon be seeing the introduction of markdown allowances and TPRs.
These titles, about 30 percent to 40 percent of all titles according to industry figures, eventually get sent back to the stores for heavily discounted sale, the paper added.
In any case, the practice of returning books and then having them shipped back for sale at reduced price seems inefficient, a point acknowledged by HarperStudio:
The paper quoted HarperStudio's president and publisher Robert Miller saying that the economic downturn has made publishers and booksellers more open to experimenting with models that might decrease waste and increase profit.
Through the partnership, announced this month, News America will design coupon machines, shelf messaging, floor ads and sampling programs in more than 1,500 Staples stores nationwide. The in-store media will launch next month.The deal is an expansion into a new market for News America, which has been concentrated almost entirely on the food and drug channels. News America notes, though, that they have working relationships with many of Staples' suppliers.
This is another example of the growing intrusion of CPG marketing practices into other channels. In early 2007, I posted an item titled HP goes CPG that involved, by coincidence, Staples:
Hewlett-Packard is employing tactics from the world of consumer packaged goods, demonstrating once again something I (and others) have been noting for a while – the growing convergence of the two wings of trade promotion in consumer products, CPG and consumer durables.This is not necessarily because CPG has the better set of tactics (a strong case could be made for the contrary), but because the nature of trade promo has always been driven by the nature of the channel, and the durables channels today are becoming more similar to the mass, grocery and drug channels. As retail concentration increases, therefore, we will likely see more coupon dispensers and floor ads in unexpected places.
BusinessWeek reported recently that HP is making payments to retailers to get them to stop selling private label cartridges for HP printers:
Those executives say the company has approached chain stores that sell store-brand cartridges compatible with its printers and offered them incentives if they end the practice.Staples is offered as an example. The article goes on to raise questions about the legality of the practice, which is of interest, of course. But I was more struck by how HP, an iconic company in the high-tech arena, is using a marketing tactic more identified with the selling of canned peas.
On a somewhat related note, Brandweek had an article entitled "OgilvyAction's Roth Explains Shopper Marketing", which I read eagerly in the hopes of having Shopper Marketing explained to me (heck, I'd settle for having it clearly defined). I was, alas, disappointed, although some good examples were cited. Interesting, though, how much interest ad agencies are showing now in in-store marketing. Do you think it might be related to declining revenues from traditional media?
The Seattle Times is asking its employees to take a week off -- unpaid. This comes after three rounds of layoffs this year that reduced staff by 22%. Again, it seems that the day of the two-newspaper town (with the exception of New York and maybe Chicago) may be over.
But the award for most-innovative approach goes to the New Britain Herald and Bristol Post in Connecticut, where they are trying to arrange for a taxpayer-funded bailout for the papers.
Update, Tuesday: A reader says that the Connecticut papers are not asking for a bailout, and provides this link to information on the subject. It's good to have multiple views on a subject, and I'm grateful for the information. The question might be what constitutes a "bailout" -- legislators are asking the state Department of Economic and Community Development for assistance for the papers, including low-interest loans or other incentives.
Sunday, December 14, 2008
But the category has been struggling with irrelevance for a long time:
Just how challenged the newsweeklies have become can be seen by comparing current ad page counts to those of eight years ago.In the past couple decades, the newsweeklies have mostly appeared to respond to the changing market by dumbing themselves down to the point that they're pretty much indistinguishable from People. (I admit I'm basing this on limited observation -- it's been decades since I read any of those mags anywhere other than doctor's offices). This left a niche that has been filled by The Economist. And now it seems that Newsweek wants to crowd into the same niche:
January through September 2000, Newsweek reported 1,613 ad pages, with revenues of $294,259,907, based on ratecard before discounts. Time reported 2,032 ad pages and revenues of $449,397,814. For the first nine months of this year, Newsweek reported 1,035 ad pages and revenues of $237,578,612. Time reported 1,179.46 pages at $313,886,163.
According to these reports, Newsweek plans to shed news coverage in favor of analysis and opinion journalism as practiced by The Economist and other so-called thought-leader titles, relying on big-name journalists rather than the teams of reporters and editors who now put out the magazine each week. Shedding a good share of that staff would mean huge cost savings. Already this year, Newsweek has shed more than 100 positions.Good luck to them, of course, but Newsweek trying to reposition itself as intelligent reading seems to me kind of like Lindsay Lohan trying to rebrand herself as Grace Kelly -- it's a worthy effort, but unlikely to succeed.
The media is in no position to fight back, as P&G well knows:
"This media environment is a big 'O' opportunity for us, because we're the biggest advertiser in a lot of these countries, and we just go in and tear up the contract," Mr. Lafley said. "Whole industries have walked away [from media advertising]. So everything is getting renegotiated, and we want to be ahead of the curve."The article notes that P&G's media spending has decreased by double-digit numbers the past two quarters, but I wonder if much of that decline is offset by in-store spending.
Wednesday, December 10, 2008
After trimming jobs throughout the year, Madison Avenue is bracing for even bigger layoffs in 2009.Some of the ad agencies have recently created divisions to deal with shopper marketing and other in-store promotion. Perhaps they will finally be motivated to become seriously involved in the segment where most of the marketing budget is spent.
Ad executives and recruiters expect agencies, which have been cutting in dribs and drabs, to hand out a flurry of pink slips early next year as the ad downturn worsens.
The talk in industry circles is that the major agency holding companies - Interpublic, Omnicom and WPP - are planning deeper cuts to ring in the New Year.
"Close to 50 percent of agencies are owned by holding companies," said Joanne Davis, a longtime ad-industry consultant. "The public markets are putting pressure on these companies to perform."
In what looks like the beginning of the end for the retailer, its administrator Deloitte has said that some shops could close for good by the end of the year.
Deloitte is also due to consult with Woolworths' 30,000 staff over the possibility of redundancies.
Talks over the sale of the leaseholds of individual stores are continuing. It is thought that Sainsbury's, Asda, Tesco, the Co-op and discount chain Poundland are still interested in picking up some of the retailer's prime sites.
Retailers Shrink Ad Spending During Holiday Sales PeriodBut the actual story indicates that a survey says that 32% of retailers are cutting their marketing budgets, which would seem to indicate that more than 2/3 are not cutting.
BDO Seidman said that of the 100 chief marketing officers surveyed, 32% report having a smaller holiday advertising budget than last year. Forty-three percent of retailers said their budgets are flat, while only 25% said their budget would increase for the holiday season.Hmmm ... that reads a little differently from the headline, doesn't it?
How to spin a story as negatively as possible is also demonstrated in this paragraph:
But CMOs are not only pessimistic about the holidays, they are uncertain about the economy's ability to recover. The vast majority, or 65%, of CMOs surveyed said they do not expect to see a meaningful turnaround in the economy until the third quarter of 2009 or later. Twenty-nine percent expect a recovery in the third quarter, while 17% are looking to the fourth quarter of next year for a recovery. Nearly a fifth of CMOs say they don't expect a turnaround until 2010.Let's do some math: Apparently 35% of CMOs think the economy will recover earlier than Q3 '08, and 29% think the recovery will come in the third quarter, which means instead of reading:
The vast majority, or 65%, of CMOs surveyed said they do not expect to see a meaningful turnaround in the economy until the third quarter ...It could just as truthfully read:
The vast majority, or 64%, of CMOs surveyed said they expect to see a turnaround by the third quarter ...But that would be unchicly positive, wouldn't it?
Okay, I'll stop the bashing long enough to point out a rare positive piece of news for the newspaper biz -- 57% of respondents plan to spend a majority of their budgets in print.
While just about everybody was down in November, I don't think anyone else was -28%. The positive, though is that A&F has maintained not just their brand image, but also their margins:
Gross margins at American Eagle slid 6.4 percentage points to 41% of sales in the third quarter, while at Pacific Sunwear they fell 4.9 percentage points to 28.7% of sales. Abercrombie, meanwhile, closed the quarter with relatively high gross margins of 66% of sales, with a much smaller decline of 0.2 percentage point.So maybe A&F's bottom line isn't suffering much more than it would with price-cutting, in which case protecting the brand makes sense. A question remaining to be answered, though, is what happens when the inventory backs up. The WSJ article says A&F is maintaining normal inventory levels, but if sales are down so sharply, then there's going to be a lot of stuff gathering dust on the shelves in January, meaning either huge sales or stale merchandise.
It will be interesting to see how this works out.
Monday, December 08, 2008
In this function, Ms. Petrelli is responsible for developing value-added partnerships, and for overseeing MEI's global operations and sales management efforts. She replaces Fred Schroeder, who previously held the position of Executive Vice President of Sales.Anybody who can cross over between Sales and Finance is a real Renaissance person. Best wishes to Andrea in her new role.
Andrea Petrelli comes to MEI with a successful track record in managing operations and growing sales for global consumer package goods manufacturers. Most recently, she served as Vice President of Finance and Operations for Pinnacle Foods Canada where she was responsible for finance, trade and inventory management, production planning, and sales operations for the manufacturer, a marketer and distributor of branded food products. After being promoted from Pinnacle's Director of Finance, she was instrumental in driving the strategy to maintain sales in a time of extreme market turbulence among retailers in Canada, while continuing double digit growth of the bottom line. Ms. Petrelli began her sales career with Compaq Canada and went on to assume several sales and finance positions with Nabisco Canada LLC - one of Kraft's billion-dollar brands.
Tiny companies like NetEnforcers -- with only 56 staffers jammed into a dim, spare cubicle farm in Arizona -- wield economic power far beyond their size. These companies scour hundreds of thousands of Web sites daily, looking for retailers offering bargains below the "minimum advertised price," or MAP, set by manufacturers on an array of consumer goods.MAP is slightly different from reseller price maintenance (RPM) in that MAP deals with policies involving advertised price, whereas RPM deals with efforts by a manufacturer to set a selling price, whether advertised or not. Both types of policies are getting a lot of attention these days, and my guess is that the level of attention is likely to escalate considerably in 2009.
When NetEnforcers finds items like cameras, handbags or ovens for sale at too-low prices, as it claims to do 5,000 to 10,000 times a day, it alerts its clients, including Sony Corp., Black & Decker Corp., Cisco Systems, JVC Kenwood Holdings and Samsung.
The FTC is investigating musical-instrument and audio-gear makers for possible MAP-related antitrust violations. And online retailers such as BabyAge.com and HomeCenter.com have sued manufacturers with MAP or similar price-maintenance policies, alleging antitrust violations.
As we watch retail bankruptcies in the recession speed up the trend to channel consolidation that has been going on for decades, we can expect to see vendors following the same path:
Slowing purchases of clothing and accessories may spur consolidation in the fashion industry, Liz Claiborne Inc's chief executive officer (CEO) said on Friday [...]
He said there could be more consolidation among department store vendors than among the stores themselve
- 12 of the 42 drivers have no sponsor for the 2009 season
- TV ads were down in 2008 to $539mil, a drop from $567mil in 2007
- Both TV ratings and track attendance have dropped three years in a row
Nonetheless, Nascar still remains the #1 sport in trerms of sponsorship, and trails only NFL in most other measures. Still, the numbers above seem particularly troubling when you consider than the full effects of the automakers' problems haven't been factored in yet for Nascar.
I was basing my thinking on a couple things I had read in which some small to mid-sized retailers indicated that they were being pressured by their vendors to take on more fourth-quarter inventory than they felt they could sell.
Here's an opposing view, based on something I hadn't considered -- the credit crunch might make the channel impossible to stuff, even if the retailers were willing:
Will there be an increase in the level of channel stuffing that occurs if vendors are under pressure to compensate for softer markets ... ?
I don't think so because stuffing happens when there is credit available. If there is less credit it will be cleaner. Banks and insurance companies will have reduced the credit and so I think you'll start to see the real players emerge that are committed to the business and have their own capital investment.
The people who used to make money in between as the second or third intermediaries will be wiped out by the credit crunch, which will improve the profitability of real customers.
Media conglomerate Tribune Co. filed for bankruptcy protection Monday, as the owner of the Chicago Tribune, the Los Angeles Times, the Chicago Cubs and other properties tries to deal with $13 billion in debt.
Severe reductions in advertising this year because of the recession have put pressure on the Chicago-based company. Most of its debt comes from the complex transaction in which the company was taken private by real estate mogul Sam Zell last year.
Private-label gains come as some name brands lose market share, a shift that industry experts say could benefit grocers on several fronts in their dealing with suppliers. To help further promote their brands, branded consumer goods companies may have to kick in more to a retailer's marketing fund to pay for discounts, two-for-one offers or prime placement in supermarket circulars. Retailers may also get juicier rebate offers from their suppliers, as incentive to help push sales of branded products.Since PL still only amounts to 16% of volume and with many brands still having a powerful allure to consumers, retailers need to find strategies that balance their marketing of PL and brand names. Trade promotion and pricing will be an important piece of that balancing act..
The increasing role of private label and the effect it will have on trade promotion funding and pricing points out (yet again) how vital it is that brand marketers have effective tools for analyzing and optimizing their promotional efforts.
Part of that strategy may come to include more so-called trade funds that grocers receive from national brands to promote their products in various ways, Karabus's Mr. Weintraub said. This money is usually hashed out in annual contracts, which, with the changing landscape and end of year coming up, are producing some interesting discussions right now.
Additional talks will likely center on price increases that national brands pushed through to retailers throughout the past year as costs for ingredients and fuel rose.
Sunday, December 07, 2008
U.S. District Judge Stephen Larson in Riverside, California, yesterday granted Mattel’s request to stop MGA from making most of its multiethnic fashion dolls that have contributed to a drop in Barbie sales since being first sold in 2001. A jury earlier found that a Mattel designer came up with the Bratz name and characters and secretly took the idea to MGA.
“Mattel has established its exclusive rights to the Bratz drawings, and the court has found that hundreds of the MGA parties’ products, including all the currently available core female fashion dolls Mattel was able to locate in the marketplace, infringe those rights,” Larson said in his ruling.
Mattel had earlier won an award of $100 million in damages. MGA is appealing both that decision and now the injunction.
Ann Arbor, Mich.-based Borders Group Inc. recently reported a widening loss for the third quarter, but said it is no longer for sale.The cynical side of me wants to sneer that the only reason they aren't for sale is that they figured out there are no buyers, but there's another side to the story (and sometimes we can overdo the cynicism):
The bookseller has been in the midst of a turnaround for more than a year, during which it weighed the possible sale of its core business. However, company executives said Tuesday that the progress made during that time will allow the company to stand on its own, even in the middle of an economic downturn. During the restructuring, Borders cut staff, sold select business units, revamped some stores and dramatically lowered its inventory and debt.Good for them -- let's hope that the restructuring has enabled them to weather the storm.
Friday, December 05, 2008
The newspaper industry has been caught in a tailspin for three years, a trend variously blamed on plummeting ad revenues, declining readership, growing competition from the Internet and a deepening national recession.
On Thursday, Colorado's oldest newspaper joined the growing list of dailies on the market. E.W. Scripps Co., owner of the 149-year-old Rocky Mountain News, offered to sell it after reporting an $11 million loss through the first nine months of this year.
"It's a terrible time to put the Rocky Mountain News up for sale, clearly," said John Morton, a veteran newspaper-industry analyst in Maryland. "Whatever price they might attract probably will be quite low. I think it's going to be very difficult to find a buyer."
The RMN is the #2 paper in Denver, and there are few markets that can support two papers anymore. Here in Chicago, the Sun-Times has been reported to be up for sale for a while. Worse, now there's a report by an industry analyst saying that some markets may end up with no papers at all:
Newspaper and newspaper groups are likely to default on their debt and go out of business next year -- leaving "several cities" with no daily newspaper at all, Fitch Ratings says in a report on media released Wednesday.I wonder if we will end up with a few national and/or regional papers, supplemented by hyper-local sections; e.g., the Dallas Morning News and Houston Tribune being pretty much the only newspapers in Texas, but being distributed in Austin, San Antonio and Corpus Christi with local sections (much as metro papers today have neighborhood sections).
"Fitch believes more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010," the Chicago-based credit ratings firm said in a report on the outlook for U.S. media and entertainment.
Update, Sunday 12/7: It appears we can add the Miami Herald to the list. McClatchy took on a lot of debt when they bought Knight-Ridder two years ago, which is weighing them down now, and the Herald is one of their more valuable assets.
A complaint filed today in New York State Supreme Court in the Bronx on behalf of survivors of the fallen worker, Jdimytai Damour, claims that besides failing to provide adequate security, Wal-Mart "engaged in specific marketing and advertising techniques to specifically attract a large crowd and create an environment of frenzy and mayhem," according to published reports.The local police chief similarly blamed Walmart and their marketing:
"When you advertise products, and you market it heavily, and it garners public interest, and it's great bargains with limited quantities of merchandise, and you have a crowd that can grow beyond the quantity available, it is a recipe for disaster," Mr. Mulvey said.I'm seldom inclined to say that anyone is responsible for anyone else's actions. The members of the crowd who couldn't control their lust for bargains are the ones responsible, and if they can be identified they should be prosecuted. But Walmart (and many other retailers) have unquestionably gone overboard with Black Friday hype, and maybe this tragedy will restore some sense of proportion, among both retailers and shoppers.
He also said Wal-Mart didn't appear to have enough security to handle the crowds and that police had told retailers in the county two weeks earlier that security and crowd control were their responsibility.
Sunday, November 30, 2008
Sears is allowing Comcast to promote and sell its digital-cable TV, high-speed Internet and digital-voice services in Sears stores nationwide.The selling of services is nothing different from traditional leased departments being set up in stores. But I love the idea of television using in-store marketing.
Consumers can sign up for Comcast’s services in more than 400 Sears location. Comcast will set up a HDTV display in 100 of those stores so customers can see the features of the operator’s services and products.
(Thanks to Co-op Connection for catching this one).
Over a third (35%) of consumers who tried a sample purchased the product during the same shopping trip. This effect spanned across all customers – regardless of whether this was their first introduction to the product or a repeat purchase.About half of those who sampled also expressed an intent to buy in the future, including 85% of those who had never bought the product before. In addition, 24% said they would switch from the brand they had previously planned to buy.
OgilvyAction's research from the spring indicates that 29% of U.S. shoppers impulsively buy from categories they didn't plan to when they entered the store. Of that group, 24% said they were influenced by secondary displays (away from the product's usual aisle), 18% by in-store demonstrations, and only 17% by price promotion.I'm always suspicious of surveys based on what shoppers say influenced their decision, but this seems like a reasonable result, and is in line with previous studies I've seen. Most studies I recall, however, indicate that the best results come from combo actions, e.g., display + price cut or, better yet, ad + display + price cut.
The study also found 39% of U.S. shoppers have a category in mind but pick their brand in store, and of those, 31% were influenced by in-store demonstrations -- more than the 28% by price promotion and the 27% influenced by some other form of consumer promotion.
Supermarket groups including Asda and Iceland have said they would be interested in individual stores. Tesco is understood to be interested in up to 20 Woolworths shops. Other retailers such as Poundland, Primark and Wilkinson are also probable contenders to acquire sites.Deloitte (the administrator of the bankruptcy) says there are some interested in the whole enchilada, but one potential bidder says they see no hope for such a deal:
Iceland chief executive Malcolm Walker, who looked into buying Woolworths earlier this year, has cancelled himself out of the race for the retailer. "To run Woolies as Woolies, which is what we wanted to do, is now a lost opportunity," he said.
Tuesday, November 25, 2008
But Sun is putting money into Limited -- $50mil capital and a $75mil line of credit, and Limited is responding with new store formats and plans for modest expansion (four new stores this year, 10-20 next year), redesigns of existing stores, and introductions of new product categories (lingerie and cosmetics).
So the effect is that we see this:
The reality is worse, since this represents measured media, and does not include the money taken out of the media by stores. I suspect that if the chart did so, the "in-store" line would be rising almost as fast as the line for the internet. (Another note is that in one sense, the graph overstates the decline of newspapers, since much of the local internet spending is on newspaper websites).
But when you see a decline in market share from 35% to 20%, with no sign of slowing, you have to ask how much longer can things go on without a recognition that major changes must be made in the business model.
Monday, November 24, 2008
- Data problems are the biggest problems in global TPM implementations -- incomplete data from retailers, lack of standardization, and inconsistencies in how data is analyzed are all among the top barriers for suppliers
- Most respondents use TPM systems for fund management and planning, but far fewer have modules for post-event analysis
- 56% say that their TPM system is mostly customized
- The one-time cost of a TPM system implementation was in the range of 1%-2% of revenue for most respondents
Sunday, November 23, 2008
The Leegin rule allows manufacturers to set retail prices under certain circumstances, although the Supreme Court seemed to make clear that they would be more suspicious if the manufacturer imposing RPM had significant marketing power (which, to belabor the obvious, Sony has more of than Leegin does). Still, I'm sure Sony had a battalion of lawyers study this before proceeding.
Eliminating price competition among retailers for high-end cameras and TVs is a great benefit for consumers — or so Sony executives argued Thursday.
At a chat with reporters in New York, Stan Glasgow, the president of Sony Electronics in the United States, and Jay Vandenbree, the company’s president for consumer sales, discussed its new rule that bans retailers from discounting Sony’s Alpha digital camera line, its more expensive televisions and some other high-end products.
Mr. Vandenbree said that by having the price for these products be the same at all retailers, Sony had eliminated stress for buyers.
“Consumers don’t have to worry about whether I can get a better deal at retailer A or retailer B,” he said. “Everybody gets the best deal.” He said stores can now compete on other attributes, like education and support.Mr. Vandenbree said this program was part of the reason that the Alpha line was gaining share in the single-lens reflex camera market.
As a reminder, the FTC is going to have workshops soon on this subject.
- "Kohl's, a mid-priced retailer of clothing and home goods, said it would substantially increase its marketing and cut prices to attract bargain-hunters on Black Friday, the day after Thanksgiving."
- "J.C. Penney Co Inc and other department store chains plan similar increases in holiday promotions and marketing ..."
- "Limited Brands, whose main chains are Victoria's Secret and Bath and Body Works, also expects to be more promotional than previously planned, the retailer said Thursday on a call with investors."
Although Best Buy warned of a "seismic shift" in consumer behaviour, Best Buy Europe chief executive Roger Taylor said there would be "no effect at all" on the duo's plans to launch four or five Best Buy Europe stores next year and 100 across Europe by 2012.
"Best Buy has a strong balance sheet and no debt," said Taylor, who is also finance director of Carphone Warehouse. "We don't need an excessive amount of capital in terms of our plans next year."
Canon warned its customers that CPG checks issued for printer and video products may bounce. A spokesman said the company has also secured a new rebate fulfillment partner.According to another report I saw, Canon had hired Advertising Checking Bureau to take over its rebates. ACB handles trade promotion outsourcing but, like some of its competitors in that field, also does rebates.
The financial health of outsource services is always a concern, but probably ought to move up a few points in priority these days.
Thursday, November 20, 2008
G.M. has been scaling back its sports presence for at least a year. Cadillac, a G.M. brand, withdrew its sponsorship of the Masters golf tournament in January, and this summer, G.M. ended its relationships with two Nascar racetracks: Bristol Motor Speedway in Tennessee and New Hampshire Motor Speedway. The company is not renewing its longstanding partnership with the United States Olympic Committee when their contract expires at the end of this year. In one of the most dramatic examples of the company’s diminishing sports profile, G.M. said recently that it would not buy television commercials in this season’s Super Bowl broadcast.GM had eleven spots in last year's Super Bowl. The company recently reported that it plans to cut advertising 20% and promotional spending 25%.
Much of sports advertising and (especially) sponsorships is image-related and intended to have long-term brand-building effects. That's not easy to justify when you're close to bankruptcy and every expenditure is looked at in terms of immediate benefits.
They might be wiser to put their money into dealer advertising, where it can do double duty in producing immediate sales and in helping out the dealers, many of whom are themselves teetering on the edge.
Wednesday, November 19, 2008
The company, which was bought out of bankruptcy in August, laid off many of its corporate staff Monday, including its newly appointed chief executive, Harold Kahn, sources said. Only a skeleton crew of about 30 remains.If the reports are true, I'll be sorry, since I really like S&B's clothes, the stores' ambience, and (of course) the prices. The chain enjoyed sufficient success, combined with some obvious errors, that I imagine someone will try a similar plan soon.
The layoffs came as a surprise, and no reasons were given, the source said. The chain has four Long Island locations and more than 5,000 employees.
Investment firms Bay Harbour Management and York Capital Management bought the ailing clothing retailer out of bankruptcy at the end of August as the economy and the retail sector continued to slide. Even as the greater economy appeared to be crumbling in October, Steve & Barry's seemed to be pushing forward, announcing Kahn's hiring and preparing for a new Manhattan store opening that had been planned months earlier.
But in reality, the company was not generating enough sales, according to a source. Gun-shy vendors were demanding upfront payment for spring inventory and the cash infusion needed grew far beyond original expectations, the source said.
Update, Thursday 20 Nov: The rumor has been confirmed.
One pound is what Britain's Woolworth's chain will reportedly be sold for, although the buyer, Hilco, may be balking at taking on the pension shortage of $150mil.
Woolworth's was in trouble before the economy soured (I posted this item back in June), and there has been takeover talk for a while. Reportedly there was a bid to take it over for 50 million pounds in August. Bet they wish they had taken that offer.
Any deal will also require the approval of the pick and mix retailer's banking syndicate, which recently appointed restructuring advisers Deloitte.
In a statement this morning, the Woolworths' board confirmed that it is in preliminary discussions regarding a possible offer for the retail business. However, it added that "there can be no assurance that any offer will be forthcoming".
It is widely believed that a demerger of Woolworths' underperforming retail arm and its media and distribution business – 2entertain, the DVD publisher, and EUK, a specialist distribution business – would be the best outcome for the struggling business.
One possible bidder for 2entertain is BBC Worldwide, which already owns 60 per cent of the joint venture.
Update, Sunday 23 Nov: According to this report, Hilco is now willing to take on more of the debt, but a decision must be reached very quickly or Woolworth's will have to declare bankruptcy.
Tuesday, November 18, 2008
I think it's encouraging that someone who knows the business sees a future in it. And (presumably) sees a reasonably short-term return to growth.
Ricardo Salinas Pliego, who is on Forbes magazine's list of the world's richest people, is "banking on a great trademark, which is Circuit City," said Luis Nino de Rivera, a spokesman for Grupo Salinas, a conglomerate that controls television, retail and cellular businesses in Latin America.
"That's a very important name in the retail industry in the United States and it has great value. ... There's a great market opportunity here that certainly has to be looked at in detail," Nino de Rivera said in an interview with The Associated Press. [...]
Salinas and his family have been involved in the retail industry for the last 100 years, Nino de Rivera said. Among Salinas' businesses is Grupo Elektra, which operates more than 1,000 stores that sell electronics, furniture and appliances.
"Circuit City is right in line with that experience and with his family tradition," he said. "He is furthering his investments in a business he knows very well."
The company has consistently missed market expectations for its results in recent years, and the onset of the global economic crisis has further hurt its business, as French consumers increasingly seek out discount stores.The company's stock is down 44% this year. Carrefour has been very active internationally in recent years, especially in China and Brazil, but it hasn't been enough to offset poor performance in France.
Monday, November 17, 2008
If your company might be interested in using some form of price maintenance program, but aren't certain if you would be safe in doing so, you might wish to send your corporate attorneys to these workshops at the Federal Trade Commission.
The Federal Trade Commission today announced that it will hold a series of public workshops early next year to explore, for the purposes of enforcing Section 1 of the Sherman Act and Section 5 of the FTC Act, how to best distinguish between uses of resale price maintenance (RPM) that benefit consumers and those that do not. The Commission expects the workshops to focus on legal doctrines and jurisprudence related to RPM, theoretical and empirical economic research, and business and consumer experiences.There will be 4-6 workshops in the January-March timeframe, although exact dates haven't been set.
(Thanks to Consumer Goods & Retail Industry Litigation Blog for letting us know about this).
Sunday, November 16, 2008
Although it remains very much a long-shot (the WSJ economists' survey referenced below says that we'll have mild inflation next year in the US, about 1.5% or so), the possibility of deflation has gotten a bit of buzz lately, not just in the US, but around the world. A quick round-up:
- India's Economic Times has an article on the (remote) possibility of deflation there.
- This item says that consumer prices in Ireland will decline next year (by a modest 0.5%).
- The UK's Times reports on concern about deflation in that country.
But still: what if?
The reason I ask it in regard to trade promo is that it is often argued that the great increase in trade funding (which was in the low single digits when I got into this business -- a 5% co-op allowance was considered generous) began in the high-inflation seventies, when consumer goods manufacturers began raising prices dramatically as a hedge against the possibility of federal price controls (which were imposed, then withdrawn). The idea was to have a pro forma price increase so that the high price was on the books, but to give most of the increase back to the retailers as allowances.
Would deflation reverse that process? Would an extended decline in what suppliers could charge retailers cause cuts in promotional spending?
Given the large percentage of spending that goes into cutting prices at the shelf, especially in CPG and food, would there be a need for large trade promo budgets in a deflationary environment? What's the point of promoting your price cuts when shoppers have come to assume that prices are going to decrease?
Again, this probably won't happen, but occasionally it's interesting to consider possibilities. It would certainly be different, since none of us have seen deflation in our lifetimes (unless we've lived in Japan), which is what makes guessing the results difficult.
I thought, therefore, that I would pass on an item on some forecasts by people who, unlike journalists, actually know what they're talking about -- the Wall Street Journal's quarterly survey of leading economists. It's certainly not good news, except in comparison with what your local paper is reporting. A few of the consensus findings:
- GDP, which declined 0.3% in the third quarter, will hit a nasty -3.0% this quarter. It will be a little better (but still bad) in the first quarter of 2009: -1.5%. Then it will be flat (+0.3%) in Q2, and the return to modest growth in the second half (Q3: +1.6%, Q4: +2.1%).
- Employment, as we've seen in recent recessions, will be slower to recover -- they predict 7.5% in June 2009, and 7.7% in December.
- Oil is a bright spot, since the consensus is that the price will stay below $65/barrel through 2009. Inflation will be below 2%.
- Housing will stay bad (which means I'm stuck in my house for another year at least),with prices dropping another 3.5%.
Here's a write-up on the survey by one of the economists who participated in it. He's slightly more pessimistic than the consensus (he forecasts unemployment topping at 8.5%), but the main point of his piece is that the recessions of 74-75 and 81-82 are far more accurate comparisons than the 1930s.
Friday, November 14, 2008
Specifically, the company must deliver $400 million to lenders in May of 2009, six months from now. The company has only $46 million of cash on hand, and its operations will likely begin consuming this meager balance this quarter or next. The company has been shut out of the commercial paper market, but has a $366 million short-term credit line remaining that it entered into several years ago, when the industry was strong. It has not yet drawn this cash down, and given the current environment and the trends at the company, we would not take for granted that it will be able to do so.This does not mean that NYT won't be able to pay its bills, but that it must start acting soon to do so. The writer suggests three things the company needs to look at:
- Sell assets (Boston Globe, Red Sox?)
- Use the credit line (this assumes the credit line remains available)
- Cut costs (including cutting the dividend, which the Sulzberger family probably won't like)
... Alberto-Culver clearly is looking to spend much more. Though Ms. Boswell declined to specify a budget, one person familiar with the deal said the company may spend as much as one year's sales on an initial marketing push.P&G spent about $2mil last year on Noxzema in measured media (probably a good deal more in-store).
Noxzema had $39.9 million in sales across numerous categories for the 52 weeks ended June 15, according to Information Resources Inc., but U.S. retail sales likely reach closer to $60 million in all channels, not counting other countries. That would peg annual sales out Alberto-Culver's door in the U.S. at more than $40 million.
The brand has a strong name and a following, and will certainly mean much more to Alberto-Culver ($1.4bil in sales) than to P&G ($85bil).
Thursday, November 13, 2008
In the coming months, we will be focusing on building the membership of the organization and communicating our value proposition. It’s pretty obvious to me that the hundreds or thousands of companies who spend many millions or billions of dollars on channel marketing programs, and the many companies who serve their trade promo needs, should be part of a network to share ideas and gain insights and meet with industry thought leaders. That to me is a no-brainer, but we need to communicate exactly how that is done, and will be done, through TPMA.
As these ideas develop, I’ll be sharing some of them with you here, and will solicit your input on them. But TPMtoday and my newsletter, TPM Update, will not become advertising vehicles for TPMA. The newsletter and blog will continue to serve wide areas of interest and concern, and will be my personal communications formats, as they have always been. Therefore, it's important to note that TPMA and its partner organizations bear no responsibility for anything posted here – the views expressed here are my own.
The graph illustrates the levels of retail concentration (the share of market held by the four largest players in each category) in four major channels – the ones where people buy the essentials: food, medicine, clothing, and similar items. (Other channels – such as books, sporting goods, electronics, hardware – all show similar patterns). The data is from the Census Bureau's Economic Census, conducted every five years (another such census was done in 2007 but, this being the government we’re discussing, the results won’t be known until 2009-10).
As you can see, the degree of concentration increased significantly in most channels. Although department store concentration dropped slighly in 2002, since then #3 Marshall Field was bought by #2 May Company, which was then absorbed into #1 Federated/Macy’s. I have no doubt the 2007 results will show far greater concentration in all categories, and the recent wave of bankruptcies, liquidations, and store closings ensures that those results, when they finally arrive, will greatly understate reality.
The drug channel has seen the recent takeovers of Eckerd and Osco; discount obviously has reached a point of absolute concentration, at least by this measure.
The big increase in the relatively unconcentrated (on the national level) grocery business between 1997 and 2002 reflects the entry of Wal-Mart into that channel and their immediate rise to dominance – the 2007 figures will be interesting. Despite the national numbers, the grocery industry is extremely concentrated at the local level: Concentration in Chicago in 2003, for example was 68.5%, Los Angeles was 61.8%, Phoenix was 84.7%, Boston was 70.8%, and so on. No major city except New York was below 60%.
Take another look at the chart and then reflect that the rule of thumb in antitrust is that 60% concentration is the point at which free competition begins to suffer, and 80% is the crisis point. When everything shakes out, how concentrated do you think the consumer electronics channel, as one example, will be?
We most often hear references to the dangers presented by too few sellers (oligopoly), who control a market and thereby set prices unfairly. There can, however, also be a problem with too few buyers (oligopsony), who can also control a market and dictate prices.
This problem already exists in some categories, as I hear endlessly from various vendors (though they are, to be sure, not unbiased sources). But I’m fairly sure that we will come out of the current economic turmoil with more channels impacted and with some channels in severe situations.
I have often advocated that manufacturers undertake efforts (through their trade promo programs, or perhaps by other means) to nurture their smaller customers. While such efforts might not pay the immediate dividends that can be gained by running promotions in the big boxes, the long-term interests of the manufacturer are advanced by having a thriving channel and lots of smaller customers to serve as a counterweight to the few big ones. Unfortunately, in some channels, it may already be too late.
It will be interesting to see if the new administration will pay any attention to this problem.
Tuesday, November 11, 2008
The combination of a feature and display produced 176% lift, displays alone produced 87%, features alone 78%, TPR alone 44%.
The average promotional lift was 68% in the grocery channel, and 59% in drugstores.
By category, the highest percentages of promo sales were in soft drinks (63%), ice cream (53%), and crackers (52%)
Monday, November 10, 2008
So the only surprise was only that they filed before Christmas rather than after:
However, subsequent the the analyst speculation mentioned above, there was the news that NYSE had warned Circuit City about their stock price dropping too low to meet Big Board standards, and then the announcement last week that CC is closing 155 stores. The combination proved too much for the vendors
Circuit City, the biggest electronics retailer in the U.S. until the mid-1990s, filed for bankruptcy before it had a chance to take in cash from the holiday selling season, when it gets more sales than any other time of the year. [...]
"It's very incongruent for retailers to file bankruptcy before Christmas,'' Burt Flickinger, managing director of consultant Strategic Resource Group in New York, said in a Bloomberg Television interview.
A list of creditors is included in the linked report. H-P and Samsung are the biggest, each on the hook for more than $100 million.
Circuit City will continue operations as it attempts to reorganize.
Sunday, November 09, 2008
I’m not going to go into the details of the paper and the methodology of the research, which would take too long, but I'll pass on a few of the findings and some of the related facts that Sorenson notes.
- The typical shopper only spends about 20-30% of his/her time in the store actually buying things – leaving the remaining 70%+ (about fifteen minutes of a typical twenty-minute supermarket trip) to be persuaded by the multitude of marketing messages in the store.
- The shopper, however, only reads about 8-10 text-type messages; most marketing messages are absorbed via color, shape, and icons/logos.
- Most purchasing decisions are made very quickly (note that only about five minutes of the trip is spent buying the many items that a typical family shopper purchases on a weekly trip – therefore each decision takes only a few seconds on average). Any marketing message that is intended to result in immediate purchase therefore must be presented, seen, processed, and acted upon in less time than it took you to read this sentence.
Again, I’m not going to go into detail on his findings – no one will be surprised to learn that endcaps are the most frequently seen type of display and get the most attention from shoppers. I’ll mention one item that I found surprising (though, on relection, it made a great deal of sense): In-store flyers are used by a relatively small portion (21% in the case cited) of shoppers, but those shoppers who do carry the flyer with them refer to it so frequently that it ranks third among all the in-store media.
From a TPM perspective, I think the research, as it is followed up and expanded upon, should be used by marketers to assist them in evaluating in-store promotions and how much to pay for them. It also points up the need to capture full information about promotions – how often is “in-store promo” the totality of information entered into the planner?
Thursday, November 06, 2008
The Nikkei news service cited “company sources” in a report today saying Panasonic will launch a tender offer for Sanyo shares as early as January, with plans to make the acquisition a subsidiary after acquiring a majority stake at the end of March.
Panasonic is expected to begin due diligence on Sanyo's assets and hopes to reach a basic agreement with the three largest holders of Sanyo preferred stock about the purchase price and other terms of the tender offer by the end of November, Nikkei’s sources said.
Based in Arizona, Shamrock Farms is one of the largest family-owned and-operated dairies in the country, according to the company. One of the first dairies to become a nationally-known brand, Shamrock Farms single serve milk has been gaining notoriety as the official milk of Subway Restaurants, as well becoming a staple in vending machines and a must-have for school lunches across the Southwest.Kroger and Marsh will be selling Shamrock products in Indianapolis and in several mid-Atlantic markets. The marketing plan includes print and broadcast as well as in-store (of course), plus sampling at "high-traffic locations."
There were 98 units in the group, 78 stand-alone stores and twenty store-within-a-store units operating in department stores (such as Carson Pirie) that used to be part of Saks' department store groups. Saks has sold off the mid-range department stores, reducing the company to its upscale Saks Fifth Avenue core, with which Libby Lu didn't make a good fit..
The Club Libby Lu business generated $60 million in sales last year. Saks will take an after-tax charge of $11 million in the third quarter and after-tax charges of $18 million to $27 million in the fourth quarter for the closing.
Saks has been selling off its non-core holdings. It sold its northern department store group, including Carson’s, to Bon-Ton Stores for $1.2 billion in March 2006, and sold its Proffitt’s/McRae’s business to Belk for $622 million in May 2005.
Wednesday, November 05, 2008
According to Piper Jaffray analyst Mitchell Kaiser Sr., Best Buy could conceivably pick up as much as 30 percent of the approximately $2 billion that will be up for grabs, the Associated Press reported.Certainly in markets like Phoenix and Atlanta, from which CC is withdrawing completely, Best Buy should gain quite a bit. Where else can buyers go? (Though WalMart and Target will certainly grab a piece of the pie). In other markets, Circuit City will grab up some of Tweeters' former customers.
Looking at Circuit City alone, Credit Suisse analyst Gary Balter believes Best Buy will capture “well above” its 21 percent market share from the 155 liquidating stores, aided by the chains’ close proximity within the affected markets, he wrote in a research note.
I think, though, it's time for me to write again about the longer-term effects of retail consolidation. This time I think I'll bring in some thoughts about whether a new administration might seek to reverse the trend. Give me a few days to ponder.
The good news about Nash Finch Co. is that there hasn't been much news lately.
That's probably a welcome relief to the Edina-based food distributor and retailer. Over the past few years, Nash Finch has endured management turmoil, slumping sales, a federal insider trading investigation and lawsuits from competitors, investors, and shareholders. Several Wall Street analysts have stopped covering the company.
But now there is some good news. The stock price was up strongly before the recent market problems, and sales have been growing in both main sectors of the business -- food distribution and military.
Under Covington, Nash Finch has also boosted profitability, invested millions of dollars in marketing and retooling retail stores, and -- perhaps most importantly -- cleaned up the mess left behind by former CEO Ron Marshall.
"Morale seems to have improved," said David Livingston, managing director of DJL Research in Pewaukee, Wis. Nash Finch "has more clear-cut objectives in terms of what they want to do. They certainly stopped going in the wrong direction. They seem to be on the right path."
Apparently, it has happened:
Has retail patriarch and larger-than-life Reading philanthropist Albert R. Boscov pulled off the miracle that saves his father's legacy - and the nation's oldest family-owned department store chain?There are still hoops to be jumped through, most importantly court approval, but the bid is supported by the creditors and the only competitive bid has been withdrawn, so it seems likely to go through.
The irrepressible Boscov, 79, has orchestrated a deal, announced today, that may rescue his family's company from the clutches of bankruptcy.
Boscov signed an agreement to buy back most of the assets of Boscov's Department Store L.L.C. despite the credit and consumer crises that have brought much deal-making to a standstill in the last two months.
The chain will emerge from Chapter 11 with 39 stores that generate about a billion in revenue. Ten stores have been closed.
I am, to put it mildly, skeptical about the department store channel. I think it is dying. But nonetheless, I wish the Boscovs and their employees and vendors the best in proving me wrong. Perhaps they will be the ones, after many false claims, who will truly "reinvent" the channel.
Tuesday, November 04, 2008
Build-A-Bear Workshop Inc. has fired Chief Operating Officer and President Scott Seay, and the company said it won't be paying him a severance package.Gee, I usually expect, "We jointly agreed that now was a good time for both ______ and the company to seek new directions." Or at least, "He wants to spend more time with his family."
The Overland-based stuffed toy animal retailer said Monday that the board of directors terminated Seay's employment effective Friday. The company would not disclose why it fired Seay, 45, who has held the two jobs since January 2007.
"The circumstances (of the firing) are not related to business operations or the company's performance," said Molly Salky, Build-A-Bear's director of investor relations. Seay, who was earning a base salary of $368,324, is not entitled to a severance package under termination provisions in his employment contract, and there will be no charge to Build-A-Bear's earnings, she said.