UK supermarkets cheaper than discounters

There's been an interesting development in the UK supermarket arena -- the major grocery chains are now priced at or below the level of discounters -- at least in Edinburgh. In test-shopping a range of products at the "big 4" chains and the Lidl and Aldi discount stores, a Scottish newspaper found:

Asda was the cheapest for the overall shop, at £42.90, narrowly beating Lidl by just 17p – the cost of a tube of value brand toothpaste. Only Sainsbury's (£48.16) was more expensive than Aldi, at £46.39.

The interesting turnabout was:

The no-frills stores have – perhaps turning popular preconceptions on their head – defended their prices, saying it is about value for money and shoppers have to take quality into account.

The juggernaut rumbles on

When you're wrong it's best to admit it and move on. A couple years ago, it appeared that Walmart was struggling, especially overseas (closing operations in Germany and Korea, and posting poor performances in Japan and UK).

But things have changed. Actually, I admitted this last year, when I posted this, but now things are looking even better:

• International operations Q1 underlying sales up 9.1 pct
• International Q1 underlying operating profit up 7.8 pct
• Says outperforming in almost every foreign country
• "Stand out" quarter from Asda in Britain

Some of their growth of course must be attributed to the recession, but the improvement seems to have predated the worst of the downturn. It looks like Walmart's growth continues unchecked.

The continuing decline of the magazine biz

I most often post about newspapers, and to a lesser extent about broadcast, when discussing media fragmentation, because those are the media most often used in advertising supported by trade promotion funding. Media fragmentation is creating problems for other media as well, of course, and the readers of this site are mostly marketers with interests beyond just trade promo.

Or at least that's the rationale I use when I get off-topic. In reality, I sometimes just use this blog to post about things that I find interesting that may have only a very tangential relationship to trade promo.

In any case, the magazine sector is continuing to have problems. Conde Nast killed off Portfolio recently, joining a number of titles that have disappeared. The survivors are dropping their circulation guarantees, as Newsweek and Time have done and as New York is now doing:

New York's circulation will fall to 400,000 from 425,000, while the magazine's introductory subscription price is jumping to $24.97 from $19.97.

While raising subscription prices may seem counterintuitive in the face of declining circulation, the idea (don't know if it works or not) is to make the remaining circulation more attractive to advertisers. And, of course, to cut costs.

Newsweek's efforts to survive are more drastic. They have loudly proclaimed their move away from straight reporting to "interpretation" of the news (I mentioned it last year in this post -- Newsweek wants to be The Economist when it grows up).

The makeover has recently hit the newstands, and I enjoyed reading this devastating review by Michael Kinsley:

The next page of content is headlined "Scope," with the explanatory subhead "news, scoops and the globe at a glance," which is pretty much what Meacham had said Newsweek was not going to cover anymore. But never mind the headline. Most of the page is a picture of Miss California in a white bikini. I know she's Miss California because of a quote from Donald Trump just over her right shoulder, with the added information that he had "allowed [her] to keep her crown." Her breasts are covered by a table of contents of the Scope section. These contents include "InternationaList" (short dispatches from foreign parts; no list that I can see); a source-greaser (flattering profile of a figure who may prove useful) about CIA director Leon Panetta; something called the "Indignity Index," described as "an unscientific appraisal of dubious public behavior" (comedian Wanda Sykes gets a 12 for a rude joke about Rush Limbaugh, Keifer Sutherland gets a 68 for some kind of unpleasant encounter at a party); a short, serious essay by Melinda Gates about building institutions in underdeveloped countries to help poor people save money; and so on.

I say "and so on" as if there is some pattern or similarity here. But the only thing these various features have in common is nothing more about Miss California. It's been said that the test of a newsmagazine is whether you would grab it if you'd been trapped in a coal mine for a week and had one hour to catch up. And after a week trapped in a coal mine, perhaps an hour with a picture of Miss California in a bikini will be more useful than any explanation of why she's in the news. But the new Newsweek maintains the same irritating practice as the old one of half-explaining, which is no use either to those who already know the story or to those who don't.

The newsweeklies, as I noted last year, have dumbed themselves down to the level of People. It doesn't appear that this makeover has changed much. My comment back then stands: "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."

(As an aside: It's probably fair to note that Kinsley was writing in The New Republic, which is a left-of-center opinion magazine -- which is what Newsweek apparently is trying to be. So maybe there's some bias involved in his review.)

EU fines Intel billion-plus

I've posted several times previously (most recently here) about the legal battles between Intel and AMD, and the related battles between Intel and various regulators (Korea, Japan, EU). Last June, Korea fined Intel $25 million for offering improper rebates to customers:

Intel offered about $37 million in rebates over 2 1/2 years to Samsung and Trigem on the condition that they wouldn't buy from Advanced Micro, according to commission's statement.

The EU has just handed down a fine that makes Korea's look like chump change:

The European Union fined Intel Corp. a record euro1.06 billion ($1.44 billion) on Wednesday, ordering the world's biggest computer chip maker to stop illegal sales tactics that shut out its Silicon Valley rival AMD.

The findings are detailed in the article linked, and are too lengthy to quote here, but they are similar to the Korean case:

Wrapping up an eight-year probe, the EU says Intel gave rebates to manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units, or CPUs, from Intel and paid them to stop or delay the launch of personal computers based on AMD chips.

Intel has denied the validity of the findings and says they will appeal within the next sixty days.

I have no knowledge of who is right or wrong in this case, but obviously a fine of this size indicates the importance of reviewing your trade promotion policies carefully. For American readers who will try to draw solace from the fact that the fines have been overseas, I draw your attention to this part of the article:

[EU Competition Commissioner] Kroes said she hoped the administration of President Barack Obama would join Europe in subjecting corporations to closer anti-trust scrutiny.

This week, one of America's top antitrust officials, Christine Varney, signaled a return to tougher enforcement as the Obama administration dropped a strict interpretation of antitrust rules that saw regulators shun major action against monopolies over the last eight years.

Kroes said Varney's words gave her hope that current "close cooperation" and information exchanges with the Federal Trade Commission "could go in a very positive way" in the future.

"The more competition authorities are joining us in our philosophy, the better it is for it is a global world," she said. "The more who are doing the job ... and with the same approach then the better it is."

Walmart won't report monthly

Walmart says that the purpose is to allow the chain to focus longer-term, rather than concentrating on justifying very short-term changes in sales.

I'm a bit of a crank on the subject of short-term thinking -- I blame it for a lot of the ills in American business (probably even more that it deserves). So I approve of Walmart's thinking -- having to justify sales blips to Wall Street every month probably motivates a lot of poor decisions.

A number of other retailers have moved in this direction recently (Eddie Lambert of Sears took heat for doing this a few months back, as I recall).

Over the past year, about a half dozen retailers have done so, but they mainly are specialty retailers such as AnnTaylor Stores Corp., Guess Inc., Bebe Stores Inc., Cache Inc. and Pacific Sunwear of California Inc. Analysts say many of the stores acted because their comparable-store-sales were deteriorating and it is more of a cost drain compared to better-capitalized large retailers.

Macy's Inc., among the biggest retailers in the nation, stopped dispensing same-store-sales figures in February 2008 but started again last October.

But what will all us nerds do if we can’t obsess over monthly sales figures?

International retail: Russia, Japan

I've been ignoring developments outside the US a bit lately. There's been enough action here recently to keep us all focused.

But for retailers, the opportunities for growth may look better overseas. Carrefour is apparently in negotiations to buy one of Russia's leading grocery chains:

French retail giant Carrefour is negotiating to buy Russian supermarket chain Sedmoi Kontinent for 1.25 billion dollars (938 million euros), the daily Kommersant reported.

The paper, quoting an unnamed senior Western investment banker close to the talks, said Carrefour would formally submit its bid on May 15 under the terms of a preliminary agreement signed in April.

The paper said the French retailer would pay 1.25 billion dollars to acquire 75 percent of Sedmoi Kontinent and 100 percent of Mkapital, the firm managing the real estate holdings of the Russian supermarket chain.

Russia could be an interesting market to watch, since my first thought when I saw this article was, "Hey, didn't I see something a few weeks ago about Walmart planning to enter Russia?" As a matter of fact, I had:

Reports of out Russia suggest Wal-Mart Stores Inc. may be in negotiations to buy a controlling stake in one of the country's leading “hypermarket” big box retailers. An article in the Kommersant newspaper said the ownership stake in Lenta could approach 51%. This follows similar reports in July 2008.

As the quote indicates, Walmart has been looking at Russia for a while. Presumably they'll take the leap soon, especially now that Carrefour has gone first.

Meanwhile, in Japan, where Walmart, Tesco, and Metro are established, the Wall Street Journal thinks the action is going to be defensive consolidation by local chains, especially by the biggest of the locals:

Still, any efforts to push their presence out into the regions by Wal-Mart, Tesco or Metro may put them into competition with domestic heavyweight and serial acquirer Aeon.

"Aeon's strategy has been one of looking at M&A as a platform for sales volume expansion," says Larke. "It's seen what the large overseas competition have done and come to the conclusion that sales volume is the way to go."

In the past three years it - or its affiliates - have on average conducted a merger, private placement or capital tie-up with another retailer every two and a half months, according to data from CapitalIQ.

Carrefour pulled out of Japan a few years ago, and Walmart has struggled there.

Maryland outlaws RPM

A bill passed by the Maryland legislature is intended to nullify the effects of the Supreme Court's Leegin decision in that state.

Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.

The article says that several other states are considering such legislation, but I doubt there will be any need. Senator Herb Kohl's subcommittee begins hearings next month on a bill to overturn Leegin at the federal level, and that will preempt any state actions.

The invention of the supermarket

An interesting story in Forbes on the founding of King Kullen supermarkets in 1930 and its effect on how we live. They describe the way people bought groceries before self-service stores were invented, with a clerk picking out the individual items customers wanted (with few or no brand choices).

The process was erratic, labor intensive and costly. In 1930, Americans spent 21% of their disposable income on groceries. By 1940, that percentage dropped to 16%. Today, that figure is less than 6%--thanks to innovations in food distribution, mass merchandising and price competition that began in the 1930s.

"Supermarkets made it possible to achieve economies of scale at a lower cost to consumers," says Leslie G. Sarasin, chief executive of the Food Marketing Institute. "Americans were able to spend more of their disposable income on cars, education, clothing. They effectively created America's middle class."

A sidelight not mentioned in the story is that supermarkets spread so fast and destroyed the existing small retailers so quickly that only six years later, in 1936, congress felt it necessary to try to save the small retailers by passing the Robinson-Patman Act. Didn't work, did it?

Off-topic rant: Remember paragraphs?

Take a look at the article referenced in the previous post.

There are eleven sentences in the article and ten paragraphs.

I see a lot of articles written like this.

What is it with the current fad in newspaper writing of having only one sentence per paragraph?

Although there are two sentences in one paragraph. But they’re short ones.

It’s very annoying to anyone with a reading comprehension level beyond third grade level.

Is this something they teach at J-School now?

I was taught (in third grade or thereabouts) that several related sentences that form a thought should be combined into a single paragraph.

Is that no longer true?

Kroger not pushing back on pricing

At least, not hard. But they warn their suppliers to watch out for the consumers pushing back.

"While we'll push back a little, what a vendor decides to do with pricing is their decision, but they also own the volume result," Kroger Chief Executive David Dillon said at a Barclays Capital conference.

Nietsen questions Twitter retention

There has been a lot of celebrity-centered hype about Twitter lately, with Oprah sending her first tweet and a big race to be the first to have a million followers (won by Aston Kutcher, who I think is an actor).

Any communications vehicle is potentially a marketing vehicle, and a lot of marketers are giving thought to Twitter's potential. A study from Nielsen indicates that, while Twitter may be spreading like wildfire, the fire may burn out just as quickly:

Currently, more than 60 percent of U.S. Twitter users fail to return the following month, or in other words, Twitter’s audience retention rate, or the percentage of a given month’s users who come back the following month, is currently about 40 percent. For most of the past 12 months, pre-Oprah, Twitter has languished below 30 percent retention.

That doesn't mean that Twitter will not be successful. If thirty to forty percent of users remain active, and if the application continues its spread to the point that just about everybody tries, then it will be huge. If, however, the anti-hype from the Twitter Quitters begins to discourage new trials, then there will be a problem. We'll keep watching (and even tweeting).