TPMtoday

Rite Aid Pleased with Save-A-Lot Combo Stores

2011-01-05T00:46:00.000-06:00

Rite Aid and Save-A-Lot have been involved in a pilot project in several South Carolina locations, in which Save-A-Lot has sold groceries in the front end of underperforming Rite Aid pharmacies. Apparently it has worked well:

"The stores have done extremely well since opening and as a group are comping up over 100% on the front end with pharmacy running consistent with the trends before the conversion,” John Standley, Rite Aid’s chief executive officer, said in a conference call discussing the retailer’s quarterly financial results Thursday.

Reportedly there are negotiations between the firms to expand the project. It's an interesting approach, and at this point any good news has to be welcome for Rite Aid.

Sticking with the Trade-Down

2011-01-02T22:09:00.001-06:00

It looks like a lot of the people who traded down to the dollar store channel are sticking with it, even if things are improving. Dollar General, for example had same-store sales that were up 7.4% in the most recent quarter.

Rick Dreiling, chairman and CEO of Dollar General Corp., told an investor conference last week that upper-income shopper are still turning up at the stores, and promise to stick around.
"For the second year in a row," he said, "95% of our trade-down customers are saying that, regardless of what happens to the economy, they're going to continue to shop with us."

Growth for the past several years has been impressive:

But can it continue? The companies seem to think so, and are adding lots of stores.

The long-term outlook for dollar stores could dim as the economy recovers but the chains are pressing ahead with plans to add hundreds of stores to the thousands that they already have.

To hold on to higher-income customers, many of the stores have stepped up their game in terms of what's on the shelf and how it's displayed. There's a new focus on nationally known brands and frequently purchased items like snack foods and cleaning supplies.

I wonder, though, if they can continue to offer huge savings if they are selling national brands. And if they don't, will they alienate their core customers (and give someone else the opportunity to steal those customers away)?

Gillette Axes Tiger

2011-01-02T21:51:00.000-06:00

Gillette is cutting ties with Tiger Woods, although it appears to be part of a broader cutback in athletic endorsers.

The company will not renew its relationship with Woods as part of a plan to phase out its Gillette Champions marketing program in the first quarter of 2011, Norton said in an interview earlier today with USA Today.

Gillette also will cut ties with soccer players Thierry Henry, Kaka, Rafael Marquez and Lionel Messi and other athlete endorsers around the world, Norton told the newspaper. Gillette will retain endorsement ties with athletes including tennis’ Roger Federer and Derek Jeter of the New York Yankees.

I guess the people in Cincinnati have completely taken over. Can you imagine a Boston-based company cutting most of its athletic ties, but keeping the Yankee?

I'm skeptical about endorsements in general -- whatever benefit there may be (and part of my skepticism is that I can't see many people buying something because of the endorser) seems small compared to the risk of a Tiger-like situation. Butthis is way out of my area, and the people who should know keep doing it, so I guess it works.

Note: Yes, I know Axe is a Unilever product.

Yes -- The Other Lane Really Is Faster

2011-01-02T21:33:00.000-06:00

According to this scientist, you're not imagining things. The other checkout lane really is faster than yours.

Poll Result: 2011 Economy

2011-01-02T21:24:00.000-06:00

Our year-end poll asked readers to look into their crystal balls and forecast the economy: “At this time next year, will we be in the midst of a strong recovery?” The consensus was that there was no consensus:

35% Yes
48% No
17% Too many unknowns

Our readers tend a bit to the bearish side, as summarized by one of our comments: “I want to believe it’s turning around. I really do. But we’ve had this ‘green shoots’ talk a bunch of times already. There are some things that are looking good – we had a very good holiday season. But there are also a lot of ugly obstacles in front of us. Europe makes me very nervous.”

Will 2011 Be a Year of Supplier-Retailer Pricing Conflicts?

2011-01-02T21:21:00.001-06:00

If, as some economists argue, large government deficits will result in inflation, then suppliers will have no choice but to increase prices. If consumers, having become used to heavy discounting, resist the increases, then fights between suppliers and retailers will become commonplace.

Here we see reports of ConAgra and General Mills seeking price increases. General Mills is seeking to cut $1b from its costs to offset commodity price increases, but will nonetheless have to pass some increases on:

The company posted earnings and sales on Thursday that missed Wall street estimates, hurt by higher commodity costs and spending on promotions.

The story was similar at ConAgra:

ConAgra Foods Inc is looking to price increases to help boost results in coming months after reporting quarterly profit that fell due to rising commodity costs and weak response to promotions.

And the issue is not limited to the US, of course. In China, the leading supplier of noodles, Ting Hsin, stopped shipping to Carrefour after Carrefour rejected a price increase of 0.2 yuan (about three cents) per unit.

Ting Hsin International told the Hong Kong Stock Exchange in October that it was raising the retail price of each package of instant noodles from 2 yuan (30 cents) to 2.2 yuan due to an increase in raw material prices.

Two months after the announcement, the Taiwan-based food and beverage maker halted shipments of instant noodles to Carrefour stores in the mainland. A company official told First Financial Daily that the reason for the halt is that Carrefour wants to cut 0.1 yuan from the suggested 0.2 yuan price hike.

Whether these attempts to raise prices succeed will depend in large part, of course, on the strength of the supplier. ConAgra and General Mills have some very strong brands, and Ting Hsin’s Master Kong brand has over 40% of the noodle market. Other suppliers recognize that they may not be able to do the same:

"Only large suppliers such as Ting Hsin can negotiate with the retailers. For small suppliers like us, it is always take it or leave it," said Yang Lei, general manager of a food and beverage distributor in Beijing. […]

"We have little bargaining power over the purchasing price of the big retail chains. Because they have extensive sales channels with high sales volume, suppliers can't afford to lose this business relationship," said Yang, whose company supplies to Carrefour and Wal-Mart.

Also in China, Kraft recently stopped shipping Oreos to local chain Lianhua in a pricing dispute.

Exit Question: Are you expecting to see an increase in supplier-retailer pricing fights this year?

Is Groupon Too Good to Be True?

2011-01-02T21:09:00.001-06:00

The amazing growth of Groupon is certainly one of the biggest business stories, and biggest social marketing stories of the year. But is being featured on Groupon necessarily good for a business? The answer seems to be, as it so often is, “It depends.”

But the inevitable backlash began this fall, with a blog post from the owner of Posie's Café in Portland detailing how its Groupon offering was a financial disaster for the company. In particular, the post took issue with Groupon for not capping how many coupons can be sold and taking too large a cut of sales. "There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign," the owner wrote.

Groupon responded that 97% of participating businesses want to be on Groupon again. But a study by Rice University finds that the truth may be somewhere in between.

Of the 150 businesses it surveyed in 19 cities, 66 percent said Groupon promotions were profitable, while 32 percent said they weren't. More than 40 percent of the companies wouldn't run a Groupon offer again.

Rice’s suggestions for retailers doing Groupon promotions seem sensible: “Use deals for building relationships rather than just creating one-time buys; don't offer discounts on a total bill but for specified products or services; and use Groupon to sell slower-moving items.” I would add that, given the discounts Groupon consumers expect, that the coupon better involve an extraordinarily high-margin item or service.

At Last! Competition for TicketMaster

2010-12-20T13:56:00.000-06:00

A bit of a personal rant: Of all the companies that I patronize regularly, TicketMaster is certainly the one I most despise and most want to see brought down.

Unfortunately, there is often no alternative to paying TM's absurdly inflated 'convenience fees' when buying tickets for many types of events -- if you want to buy a ticket to see 'Wicked' here in Chicago this week, a $92.50 ticket will cost you $106.71, an upcharge of more than 15%.

They are an unregulated monopoly, but it looks like perhaps they are about to get some competition.

ScoreBig Inc., which has raised $8.5 million from investors including private-equity firm Bain Capital and media executive Shari Redstone, has been quietly testing a system that aspires to do for concert and sports tickets what Priceline.com does for airline seats and hotel rooms: Allow customers to buy them at cut-rate prices, while avoiding the whiff of desperation that typically accompanies discounts.

Unsold seats are a major problem for the music and sports industries alike. "We have 35% to 50% of total industry capacity that goes unsold each year," said ScoreBig Chief Executive Adam Kanner, "and fans that can't afford" the events.

Granted, it's only the left-over seats, but it's a step in the right direction. Anything that puts pressure on pricing, even in one area, should (I hope) have the effect of bringing down prices overall.

A Year-End Visit to the Corporate Graveyard

2010-12-20T13:33:00.001-06:00

A listing of companies that went bankrupt and brands that disappeared in 2010 includes a number of retailers -- Blockbuster and A&P most notable, but also Urban Brands and Jennifer Convertibles. A lot of car brands on the list, as carmakers downsized -- Mercury, Pontiac, Hummer ...

I was also struck by not just the number, but the variety of media listed. There was Affiliated Media, which publishes a bunch of major newspapers (San Jose, Denver, etc), but also Penton Media, a trade press group (Nation's Restaurant News and Farm Press among them), and trashy tabloid publisher American Media (National Enquirer, Star). And then there was mainstream magazine Newsweek, which didn't exactly go bankrupt, but when you're sold for $1, it's pretty much the same thing.

Most of course are just companies that over-expanded or got over-leveraged in buyouts when things were good. That's usually the story in a recession. But the broadness of the media category of failures is a reminder that there's a systemic element to this. We all are conscious of the effect of the internet on local newspapers and broadcast (though there were no big broadcasters on the list), but trade press is equally damaged by the changing dynamics of news delivery. And as for gossip -- who needs to read it in the checkout aisle anymore?

Michael Vick as Product Pitchman

2010-12-20T13:05:00.000-06:00

Has Michael Vick's on-field performance been so good that the public has forgotten his dog-fighting past? He hasn't gotten any serious endorsement deals, but a Philly area Nissan dealer hired him for this spot:

This is a dreadful ad, in my opinion, although I don't know if it's much worse than most local car-dealer spots. But I guess Vick had to start somewhere on the endorsement comeback trail. I just can't see a spot like this making Nike sit up and take notice.

Best Buy Takes on Dick's and Sports Authority

2010-12-20T12:43:00.000-06:00

When a category killer has finished killing off its category, what's the next step in growth? Moving into somebody else's category, it seems.

Best Buy is introducing health and fitness equipment, stuff that would seem more appropriate at Sports Authority.

A 30-foot-long in-store health and fitness presentation area enables consumers to sample many of these devices before they buy. On display are state-of-the-art heart rate monitoring watches, pedometers, special MP3 players, ear buds, headphones, yoga mats, scales, blood-pressure monitors and other products from leading manufacturers such as Gaiam, GoFit, H2O Audio, MIO, Polar, Sportline and Yurbuds.

They are concentrating on techie sports equipment, which lends some logic to their actions, but it does beg the question of what the next move might be.

A&P Declares Bankruptcy

2010-12-13T11:49:00.000-06:00

Not exactly a shock, this has been expected for a long time -- helped along by the most recent quarterly report, which showed losses of over $150 million.

This article says that Ahold may bid for A&P's Pathmark stores, but I'm sure there will be lots of such speculation over the next few months.

Video Game Sells $650mil in Five Days

2010-12-12T21:26:00.001-06:00

I continue to be stunned by the extent to which video games have displaced movies as the most important entertainment medium for a substantial portion of the public, and more generally by video games as a money-maker.

The latest release of Call of Duty, Black Ops, generated $650 million in sales in its first five days of release. By comparison, the biggest movie of all time, The Dark Knight, had a box office of less than a third of that, $200 million, in its first five days.

I wonder what the star game designers are making compared to movie personnel?

Mail-In Rebates Continue Decline

2010-12-12T19:22:00.001-06:00

According to this article in USAToday, mail-in rebates on Black Friday promotions have declined dramatically the past few years:

The number of Black Friday promotions from major retailers with mail-in rebates has dropped from about a third a few years ago to just 10% so far this year, says Brad Wilson, founder of BradsDeals.com.

I'm not sure what the statistical basis is for his numbers, but I think it's unquestionable that many suppliers and retailers are avoiding mail-in rebates. The decline began several years ago when the public clamor about practices that were often deceitful and sometimes flat-out fraudulent reached a point where the Federal Trade Commission began investigating. Fines and public shaming followed, and some retailers (Best Buy most prominent among them) began eliminating the practice.

I see a lot of ads indicating 'instant rebates' -- prices reduced at the cash register. Is there any research indicating that this is more effective than a TPR? -- which is what it is.

US Ad Biz to Recover Slowly

2010-12-12T18:18:00.000-06:00

Projections of the advertising market over the next few years are that the recovery is going to be slow. According to ZenithOptimedia:

... ad spending in the U.S. will grow just 2.5 percent next year to $155 billion, and a total of just under 9 percent between 2010 and 2013 to $164.8 billion, an increase that the agency termed “disappointing.” The Olympic-Election year of 2012 will see growth of just 3 percent to $159.6 billion.

Global growth will be a bit better, with Brazil, China and India expected to lead, and China surpassing Japan to become the second-biggest ad market.

The hold-up in the US?: "... corporate concerns about debt, unemployment and government spending."

Zombie Brands

2010-12-11T20:37:00.002-06:00

I've been interested for years in examples of old brand names being revived -- I recall being intrigued in the late 1980's when the Packard Bell computer was introduced. As a kid, our family's first TV in the early 50s was a Packard Bell, and I briefly thought it was from the same company. Which was, of course, the idea -- the computer company had bought up a respected brand name that was in disuse and thus gained a measure of credibility.

There was an auction of such brand names in New York recently:

It featured names in categories like beverages (Meister Brau beer, Snow Crop frozen orange juice) financial services (the Kuhn Loeb and Shearson brokerage firms), packaged foods (Allsweet margarine, Lucky Whip dessert topping), personal care (Mum and Stopette deodorants), publishing (Collier’s, Saturday Review) and retail (Computer City, Phar-Mor).

The Victrola brand name was sold for $1000 -- I wonder what it might be used for?

Are Sales Associates Passe?

2010-12-11T20:19:00.004-06:00

A survey by Accenture finds that most smartphone users would rather consult their device to get basic shopping information than ask for help from a store employee:

73% of shoppers with smartphones favor using their smartphone to handle simple tasks in stores compared with 15% who favor interaction with an employee, the survey says. Similarly, 71% favor using their smartphone to identify a store with a desired item in stock, while 17% would prefer to get that information by speaking to an employee.

My first reaction was that the issue isn't asking a store employee a question -- it's finding a store employee to ask.

Which gets to the core of the issue: employees are expensive, so stores have cut back. They can cut back more if they improve their digital service offerings. Which means it will get even tougher to find a store employee when we need one, I guess.

But opportunities are there, as always. One obviously is offering a suite of services via mobile devices that make it quick and easy to find help that way; another is to differentiate oneself by offering good in-store service from human beings; a third might be offering the best possible combination of both forms of customer service.

Is Borders Going to Buy Barnes & Noble?

2010-12-11T19:57:00.004-06:00

More than two years ago there were rumors that Barnes & Noble might buy Borders (we mentioned it here), and those rumors have persisted. Now the hot rumor is that the tables might be turned:

A hedge fund managed by Borders investor William Ackman is now offering to finance a bid of $960 million in cash, or $16 per share, for Borders to buy the much bigger Barnes & Noble, which put itself up for sale in August. Mr. Ackman, whose Pershing Square Capital Management LP holds 37.3% of Borders shares, made his offer in a regulatory filing that became public Monday.

A marriage of the two book behemoths could lead to some significant cost savings through economies of scale. Barnes & Noble also has proven to be a more adept operator, with skills that it could be applied throughout a single, combined chain. But a combination of the No. 1 and No. 2 bookstore chains in the U.S. would face headwinds, including antitrust scrutiny and Borders' own shaky finances.

Very shaky -- Borders' market capitalization is less than one-eighth of B&N's.

Whichever way the merger goes (if there is any merger) I would wonder about its chances of success -- it seldom works out that combining two weak companies creates one strong one (e.g., Sears and Kmart). And a merger wouldn't solve the real problem, digital books, which was just exacerbated by Google's entry into the market. As a hardcore bibliophile, I fear that book stores are following record stores into oblivion.

Barnes & Noble recently cited studies that suggest consumer spending on new physical books will fall to $19 billion in 2014 from $20.5 billion in 2009.

Are iPad apps killing newspapers?

2010-12-11T19:54:00.000-06:00

As if the newspaper biz needed more bad news (here's yet another report on declining ad revenues), a survey says that heavy iPad users are more likely to cancel their newspaper subscriptions: "The survey showed that 58 percent of respondents who use the Apple tablet at least an hour a day for news are very likely to cancel their subscription in the next six months."

Actually, I wasn't all that impressed with this result after I pondered it. iPad users -- early adopters of new technology -- are probably younger than the populace as a whole, and therefore more likely to discontinue newspaper subscriptions (and less likely to subscribe in the first place). In addition, it seems hardly surprising that anyone who reads an hour of news per day online (via any technology) would be contemplating unsubscribing.

A few thoughts on channel-stuffing

2010-12-11T19:36:00.002-06:00

I've seen several articles recently alleging that General Motors has engaging in channel-stuffing -- shipping out more cars to dealers than the dealers could sell -- in the months preceding their IPO. I have no idea if it is true, though the graph accompanying this blog post would seem to provide some evidence to support the idea -- though it may also merely be proof of poor forecasting (another point of some interest, of course).

Regardless of the merits of the charge against GM, something that I notice is that such charges are being made with more frequency, to the point that the term 'channel-stuffing', once used only among channel marketers, has become fairly common.

Channel-stuffing has always been a stupid tactic, in my opinion, at least for the company involved, though not necessarily for individual employees involved. (The employees may benefit from incentives based on short-term sales goals, and figure on having moved on to another position before the consequences hit). But the growing knowledge of the practice among the general public (read, 'customers') and the frequency with which the charge is (fairly or not) being leveled, means that companies can suffer a PR hit -- whether the real problem is channel-stuffing or bad forecasting. A good reason to avoid both, it seems.

What do you think? Is channel-stuffing just commented about more these days, or has it actually becoming more common?

UK supermarkets cheaper than discounters

2009-05-25T19:01:00.002-05:00

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

2009-05-25T13:55:00.004-05:00

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

2009-05-25T13:03:00.002-05:00

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

2009-05-13T22:41:00.005-05:00

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

2009-05-10T18:55:00.004-05:00

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

2009-05-05T21:26:00.006-05:00

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

2009-05-03T13:04:00.004-05:00

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

2009-05-03T12:33:00.003-05:00

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?

2009-05-03T11:41:00.004-05:00

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

2009-05-03T11:36:00.002-05:00

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

2009-05-01T15:36:00.002-05:00

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).

Possibly big price discrimination decision

2009-04-29T13:34:00.004-05:00

Time will tell how big this is, but a food distributor in Pennsylvania won a Robinson-Patman suit against a supplier for discriminatory pricing and against Sodexho for inducing discriminatory pricing.

Feesers filed its complaint against Michael Foods and Sodexho on March 17, 2004, alleging price discrimination in violation of the Robinson-Patman Act. A three-week bench trial took place in early 2008 before Judge Sylvia Rambo in the federal district court in Harrisburg, which resulted in the April 27, 2009 decision.

At trial, Michael Foods and Sodexho argued that Feesers and Sodexho were not in "actual competition" for purposes of the Robinson-Patman Act because Sodexho provides food management services to its customers, whereas Feesers is a food distributor. The court found, however, that both Feesers and Sodexho procure and distribute food for the same institutional customers and, thus, are in actual competition for the same food dollar.

Although the injunctions issued by the district court are binding only as to Michael Foods and Sodexho, it is now clear that price discrimination by food suppliers against distributors such as Feesers and in favor of large-volume food management companies and GPOs such as Sodexho will not be tolerated by the courts.

This law blog quotes attorneys for the two sides, who disagree (no surprise) as to the importance of the decision:

Kessler [Feeser's attorney] told us Wednesday that the decision could have a major impact on the food distribution industry. In recent years, he explained, food management companies like Sodexo--which provide procurement and management services for cafeterias at schools, hospitals, and prisons--have used their large client base as leverage to extract better pricing deals from suppliers. That's hurt distributors like Feesers. "Sodexho [said to its clients], 'We don't compete with distributors so you can give huge discounts,' " Kessler told us.

Peggy Zwisler of Latham & Watkins, who represented Michael Foods at trial, disputed Kessler's view of Judge Rambo's opinon. She told us it's "very fact specific" and does not have broad implications. She also said that Michael Foods has "strong grounds for appeal" and it intends to do so.

The decision is here.

I am not an attorney, so take my opinions with several grains of salt, but it seems to me that the most significant point in the decision is that no proof of competitive harm is required, that harm can be assumed from the size of the price differential. My understanding is that this interpretation, if upheld, would make such suits easier to win in the future.

“Competitive injury” is established prima facie by proof of “a substantial price discrimination between competing purchasers over time.” In order to establish a prima facie violation of section 2(a), Feesers does not need to prove that Michael Foods’ price discrimination actually harmed competition, i.e., that the discriminatory pricing caused Feesers to lose customers to Sodexho. Rather, Feesers need only prove that (a) it competed with Sodexho to sell food and (b) there was price discrimination over time by Michael Foods. This evidence gives rise to a rebuttable inference of “competitive injury” under § 2(a). The inference, if it is found to exist, would then have to be rebutted by defendants’ proof that the price differential was not the reason that Feesers lost sales or profits.

Radio Shack brings us some good news

2009-04-28T20:18:00.004-05:00

Radio Shack is not exactly the coolest name in retail, and a couple years ago I couldn't resist posting this bit of satire from The Onion, purporting to quote the chain's CEO:

"I'd like to capitalize on the store's strong points, but I honestly don't know what they are," Day said. "Every location is full of bizarre adapters, random chargers, and old boom boxes, and some sales guy is constantly hovering over you. It's like walking into your grandpa's basement. You always expect to see something cool, but it never delivers."

Added Day: "I may never know the answer. No matter how many times I punch the sales figures into this crappy Tandy desk calculator, it just doesn't add up."

But Day may be having the last laugh:

Net income rose to $43.1 million, or 34 cents a share, from $38.8 million, or 30 cents a share, a year earlier. Revenue grew 5.6% to $1 billion.

Analysts had, on average, been expecting Ft. Worth-based RadioShack to earn 20 cents a share on revenue of $944.8 million, according to consensus estimates derived in a FactSet Research survey.

The numbers may be inflated by sales of digital converters, but anybody who's showing good increases right now is doing something right.

Pontiac: R.I.P.

2009-04-28T20:10:00.003-05:00

Old brands can be like old friends, I guess. When they die, we're saddened, we feel a void in out lives.

That's a bit of hyperbole, of course, but I will miss Pontiac, as I miss other brands that are gone, and as I will miss some others that appear to have one foot in the grave. I never owned a Pontiac, but it's a brand that I grew up with. It has always been there, and now it won't be.

Newspaper circulation falls -- even more

2009-04-27T16:39:00.004-05:00

Just when you think things couldn't possibly get worse for the newspaper industry ... things get worse.

The latest circulation figures just came in, and they are ugly. Of the top twenty-five daily papers, only the Wall Street Journal had an increase (less than 1%). Many of the others had double digit decreases -- the New York Post was down more than 20%, and New York Daily News, Houston Chronicle, SF Chronicle, Boston Globe, Philadelphia Inquirer, Cleveland Plain Dealer, Newark Star-Ledger, St. Petrsburg Times, Portland Oregonian, and Atlanta Journal-Constitution were each down between ten and twenty percent. Overall:

... for 395 newspapers reporting this spring, daily circulation fell 7% to 34,439,713 copies, compared with the same March period in 2008. On Sunday, for 557 newspapers, circulation was down 5.3% to 42,082,707.

Well, at least things can't get any worse than this. Right?

FTC's RPM workshops scheduled for May

2009-04-27T16:32:00.004-05:00

The Federal Trade Commission will hold workshops on resale price maintenance May 20-21:

The first panel will be moderated by Pauline Ippolito, Acting Director of the FTC’s Bureau of Economics, and will examine empirical evidence on the effects of RPM. Specifically, it will review existing empirical studies of RPM, or studies of other vertical restraints that might inform the thinking on RPM. The panel also will explore potential future research in light of possible testable hypotheses underlying the competitive effects of RPM.

The second panel, to be moderated by Laurel Price, Attorney Advisor to FTC Commissioner Pamela Jones Harbour, will examine the legal and business history of the use of RPM in the United States. It will explore how RPM has been treated in this country historically, as well as the legal and business management doctrines related to RPM.

The third panel, also to be moderated by Price, will examine “rule of reason analyses” after the Supreme Court’s landmark Leegin decision, and will assess guidance provided by the Leegin Court regarding the analysis of RPM.

The sessions will be of value to manufacturers who wish to establish minimum pricing rules for their resellers, although it's quite possible the rules might change again very soon.

Recessions get a bad rap

2009-04-25T22:50:00.003-05:00

Advertising Age had an article last week about the big increases being seen in private label, “Don't Blame Private-Label Gains on the Recession”.

Not only have private label brands been gaining share for the past decade, experts say these gains are the single-biggest problem facing branded packaged goods players. House brands, once a staple of lower-income households, now enjoy roughly equal penetration among demographic segments. Improvements in quality and packaging have helped removed the stigma attached to buying a no-name product.

The recession has accelerated the growth of private label, but it is a long term trend that was happening before the recession and will (presumably) continue, though at perhaps a reduced rate, when the recession is over. The increasing concentration of retail, and the increasing power of the surviving retailers, virtually ensures it.

That’s an interesting thing about recessions – they speed up trends that already exist, especially speeding up the effects of secular decline. Besides private label, we see similar effects from the recession in media and retail. (I did a similar post on this point almost exactly a year ago).

Some of the biggest (or at least most publicized) hits in this recession have been felt by the big media, especially newspapers. But media watchers have been warning about the effects of media fragmentation for the past few years (I did a presentation on its effects on trade promo at a TPMA meeting three or four years ago – and I wasn’t first), and newspapers have been in decline even longer. The recession has merely exacerbated existing problems.

In retail, department stores are hurting, and several chains (including Linens ‘n Things and Circuit City) have liquidated. But the consolidation of channels has been killing off the also-rans in each channel for years now, and department stores’ market share has been dropping for decades. Again, the recession has just sped up processes that were already in action.

It’s convenient to blame recessions for business problems. But often the recession merely exposed the problem, it didn’t create it.

Some brand marketers may want to believe that the recovery will solve their problems with private label, and media people and retailers may have similar dreams, but the recovery will solve nothing if the underlying problems are not addressed.

Google interview, part two

2009-04-25T21:34:00.003-05:00

A few weeks ago, I was interviewed by Brett Goffin of Google. The video from that interview is now available on the Google Retail Blog, in two parts. The first part, dealing with general trade promo issues and background matter, is here. Part two, dealing more specifically with trade promotion online, is here.

I’ll wait a few moments, while you click the links and watch the interviews … Okay, now that you’re back, I’ll expand a bit on what I said there.

I’m astonished, frankly, that online promotion has not yet attained a much higher percentage of trade spending. Our survey several weeks back indicated that it is under 5% for most programs. While our surveys are not scientific, the results comport with my observations. Given that online promotion offers both immediate sales opportunities at e-commerce sites (equivalent to in-store promotion), as well as brand-building opportunities (equivalent to print or broadcast advertising), and also customer education opportunities (equivalent to collateral material) – often serving these functions simultaneously – it seems retailers and their suppliers should be doing far more online promotion this many years into the internet age.

So why hasn’t it happened? There probably are multiple explanations, but it seems that the most likely reason is the usual one – money. Retailers make money off circulars and they make money off endcaps. They’re not going to get excited about online promotions until they can make equivalent amounts of money there.

When the internet first emerged, most of us looked upon it, in terms of trade promotion, as being analogous to broadcast or print, and therefore we tended to think of payment for it as being cost-based, as payment for those media (other than circulars) was traditionally arranged. But if we change the analogy to in-store promotion, then it is easier to think of payment as value-based.

The internet, of course, is both advertising medium and store (and more), and therefore both analogies are apt. But more to the point, there is no reason why retailers cannot charge what they see fit for online trade promotions, just as they do for an endcap in their store.

(A caveat: There are Robinson-Patman considerations concerning any trade promo payment that is not strictly cost-based – but value-based payments for internet promotions should be no more nor less questionable legally than value-based payments for in-store promotions. A second caveat: I am not a lawyer).

So what is needed for online trade promotion to advance beyond the level it is at today? Retailers need to see the opportunity to use it as a profit center, and then to present the value proposition to their suppliers; and/or, suppliers need to approach their channel partners with proposals to use online trade promotion that offer incentives comparable to in-store promotion; and/or, online media need to broker the deal.

The means exist to create online promotions that tie together search, banners, and “virtual endcaps”; promotions that build the brand, that sell, and that provide information to facilitate in-store sales. Retailers and their suppliers need to cut their ties to old models and move forward.

American Greetings gets out of retail, into distribution

2009-04-21T22:33:00.005-05:00

American Greeting s has pulled off what amounts to a trade with a privately-held card company, Schurman Fine Papers. AG sold their retail outlets to Schurman, which operates card stores under the names Papyrus and Carlton Cards, and simultaneously bought Schurman's distribution business, and a 15% share in Schurman.

American Greetings is selling its retail store operations to Schurman, which operates Papyrus card and gift retail stores. Schurman will operate stores under the American Greetings, Carlton Cards and Papyrus brands. Schurman paid American Greetings approximately $6 million for its retail business.

The card companies also announced that American Greetings purchased the wholesale division of Schurman, which supplies Papyrus brand greeting cards to specialty, grocery and other retailers. Following the close of the deal, American Greetings will become responsible for service to those accounts where Papyrus brand products are sold.

American Greetings paid approximately $18 million dollars as consideration for the wholesale division of Schurman.

American Greeting is a pretty well-known name -- I'm surprised to see that their retail business is worth only $6mil. But then, I also don't remember having seen any of their stores recently (if ever) -- which may be a clue as to why they are exiting the business. This would seem to be one of those "concentrate on your core business" moves.

Update 4/22: The Cleveland Plain Dealer reports that American Greetings closed sixty of its stores in February, leaving about 355. And this quote from AG's boss indicates that they looked at getting distribution rights to Papyrus as the focal point of the deal (and maybe the reason for the relatively low price for the stores):

“The addition of the Papyrus brand to the American Greetings family provides the opportunity to serve a consumer with distinct tastes—a consumer who appreciates the Papyrus approach to design and quality,” says American Greetings CEO Zev Weiss.

S&P downgrades Macy's and JCP to junk

2009-04-21T22:21:00.003-05:00

Standard & Poor's has lowered the ratings on pretty much the whole retail sector, it appears, with Macy's and J.C. Penney taking the biggest hits.

"The rating actions reflect Standard & Poor's deepening concern about the impact of the U.S. recession on the increasingly troubled department store sector," Standard & Poor's credit analyst Diane Shand writes in her reports, "which has felt the full brunt of the declining U.S. economy and weakening consumer confidence in 2008. We believe lower consumer spending and declining mall traffic will affect the sales and profits of the department store operators this year," Shand writes, "and that recovery will be slow."

I'm not a market analyst (as a glance at my portfolio would quickly prove), but I certainly agree that "recovery will be slow" for the department store sector, since their problems pre-date the recession and will continue after the recession is over.

When retailers suffer, so do mall owners

2009-04-19T19:45:00.002-05:00

General Growth Properties (ironic name), the second-biggest owner of shopping malls, declared bankruptcy this week, a victim of the ripple effects from the battering of their retail tenants. The company had $25 billion in debt, much of it coming due next year, and had bought out Rouse Company for $12.6 billion in 2004.

As more stores have closed, mall vacancies are at their highest point in almost a decade, according to Reis, a research company, which said the vacancy rate at the end of 2008 was 7.1 percent, compared with 5.8 percent at the end of 2007.

That has left many of the roughly 1,500 malls in the United States groping for a solution — any solution — to their woes. Some have converted retail space into office space. Others have drastically lowered rents for prized tenants, agreeing to cut deals to keep revenue flowing. Some have simply gone dark.

Shares in General Growth, which closed on Wednesday at $1.05, have fallen 97 percent over the past 12 months.

Down 97% -- sounds like some of my investments.

Mexican retailer enters US market

2009-04-18T22:29:00.004-05:00

A Mexican 'cheap chic' retailer with 64 stores in its home country, has opened its first store in the US. Shasa says the Houston store is just the first of 100 planned by 2012. Some might consider this an inopportune moment to be opening new stores:

Trendy vendor and possible competitor Wet Seal reported that its net revenue fell to $593 million last year from $611 million in 2007. Clothing retailers like Ann Taylor, Eddie Bauer and Gap have shuttered stores across the nation of late. And retailers like Meryvn’s and Steve & Barry’s declared bankruptcy last year.

But the store owners are undetered:

“It’s the best time to enter. From here, it’s all up,” Armando Dollero said as he toured the 6,300-square-foot store on opening day.

The recession is also forcing customers to exchange expensive name brands for cheaper retailers, Carlo Dollero said.

“We’re getting a market we didn’t have before,” he said, adding that sales in Mexico shot up 42 percent last year compared to 2007.

Good luck to them. I love that attitude.

Designers want to control their brands

2009-04-18T22:01:00.004-05:00

We've posted before about the havoc wrought by department stores, especially Saks, in taking panicky markdowns last fall, which many designers feel caused serious damage to their brand names.

Now some of the designers, according to this Wall Street Journal article, are seeking to regain control over their brands, and specifically over the pricing of their products. One tactics is to demand to be left out of "storewide" sales:

These days, many fashion brands are effecting their own pushback, demanding to be left out of department stores' sales. "All our brands are taking great care to ensure that what happened in November will not happen again," says Paola Milani, a spokeswoman for Gucci Group, which owns Bottega Veneta, Yves Saint Laurent, Gucci and other brands. "The idea is to maintain pricing coherence in the regions in which our products are sold regardless of channel of distribution." [ ... ]

Saks, which was a leader in last fall's discounting, declined to comment. But this week, notices for Saks's 25% off "Friends and Family" sale exclude, in the teensy fine print, more than 40 top luxury brands, including Gucci, Cartier, Chanel, Loro Piana, Oscar de la Renta, Zegna and Christian Louboutin.

One wonders if that will be legal if the Leegin decision is repealed, as Senator Kohl is demanding.

Other tactics include opening new stores, in order to reduce dependence on the department store channel:

Her company depends on department stores for 70% of its revenue, which was $273 million in 2008. But she would like to whittle that share down to 50%.

To that end, Eileen Fisher will open six new stores of its own this year in the U.S. -- slightly accelerated from an average of five new stores per year -- and is launching a costly new technology platform for Internet sales that will offer greater flexibility, allowing online customers to pick up items in stores, for instance.

Probably not a bad idea anyway, considering the current state of department stores. Another variation is opening leased departments within the d-stores.

And now ... private label cars?

2009-04-16T21:05:00.003-05:00

Saturn car dealers, faced with imminent closure, are looking for an opportunity to buy the Saturn brand name from General Motors. They plan to buy cars from foreign carmakers, tweaking the design, and sell them as Saturns -- effectively creating the world's first private-label automobiles.

Telesto Ventures said it would not build vehicles and would only keep a skeletal design crew on hand to adapt models from other automakers to a Saturn look. It also said it would focus future models on fuel-efficient and electric vehicles from other automakers.

While such a business model doesn't exist today, Telesto's backers say the global overcapacity among automakers and the growing number of start-up firms in China and elsewhere would give the reformulated Saturn several possible sources of new vehicles.

Finding automakers to work with "is not a tremendous concern," said John Pappanastos, a group spokesman. "It would allow manufacturers not in the United States to launch without incurring the largest expense they would otherwise face, setting up a distribution network."

I wish them well, and I find it fascinating to watch the concept of private label spread into areas where one could never have imagined.

Google interview

2009-04-15T16:25:00.002-05:00

Brett Goffin of Google interviewed me recently concerning trade promo, both in general and in regard to its utilization on-line. Part 1 of the interview is up now, with the second part to be posted next week. It's posted here. In this first part, we're discussing general principles, and we get more into on-line in Part 2.

I appreciate Google making this available, and I think it was a good interview (they edited out much of my mumbling and rambling).

Y&R allies with Mars

2009-04-14T22:31:00.002-05:00

Ad agency Young & Rubicam has created an alliance with in-store specialist Mars Advertising.

Young & Rubicam, looking to snag more revenue in one of the few ad sectors still growing despite the recession, is forming an alliance with Mars Advertising, a specialist in pitching products to consumers while they're busy shopping.

Traditional ad agencies, finding their business shrinking as a result of the decline of traditional media, are following the money into in-store marketing. Y&R is just the latest of several firms to enter the field.

Y&R faces stiff competition in the in-store sector, where some of its rivals were faster to bulk up. Publicis Groupe's Saatchi & Saatchi, for example, purchased in-store marketing firm Thompson Murray in 2004. Now named Saatchi X, the firm has 15 offices around the world and works for marketers such as Procter & Gamble, Wal-Mart Stores and PepsiCo's Frito-Lay.

It's good to see the ad agencies catch on (if belatedly) to what we've all known for a decade or more. It remains to be seen if they understand the dynamics of trade promo. It's a little different from competing for Golden Lions at Cannes.

Record companies try adding value

2009-04-12T23:25:00.004-05:00

Record companies are looking for ways to make more than 99 cents per song. One new effort is to bundle a group of added attractions around a new release. Epic, a Sony label, is offering a $17 “season pass” for fans of their group, The Fray.

"The pass delivers songs, video footage and photos, but spaces out the offering over several weeks in the hope of holding consumers' attention and justifying the premium price."

The music industry is flailing about, looking for new revenue streams. It may be that producing value-added bundles of this sort might be one way out of their dilemma. Interestingly, their problem has been caused by the collapse of bundled deals -- albums -- that they have been offering for generations. Downloads have de-bundled albums, and consumers are choosing to buy the one or two songs per album that they care about and ignore the useless filler songs that the record companies had been forcing their customers to pay for.

These new bundles will work only if enough consumers see the extra material as being of real value.

How to fight Walmart

2009-04-11T19:01:00.003-05:00

Dartmouth's Tuck School of Business studied Walmart openings in new markets -- how local retailers reacted and Walmart's effect on their sales.

The effect was huge -- a 40% drop in sales for neighboring mass merchants and a 17% drop for grocers.

How did most retailers react to Walmart?:

Cut prices
Reduced number of brands carried
Cut back on promotions

All three are bad moves, according to the study. Kusum Ailawadi, who led the study said that retailers who cut price were merely giving up income, since they could never hope to match Walmart's pricing. And instead of cutting brands, they would have been better off to diversify their offerings, especially on higher-end brands where they would not be competing with Walmart.

In regard to promotions, they should increase, not decrease their promotions. "If a store is offering weekly specials, it's harder to make exact price comparisons," she says.

Where are they now?: Polaroid

2009-04-11T18:29:00.003-05:00

Ever lose track of an old friend and wonder what they're doing now? Polaroid was a client a number of years ago when I was with CoAMS, and it's kind of sad to see how far they've fallen.

Polaroid Corp., the twice-bankrupt pioneer of instant photography whose brand name may be its most valuable asset, must try again to auction off its assets after failing to win a judge’s approval for a $56.3 million sale.

Fifty-six million. Wow.

Of course, even ten or fifteen years ago, it was obvious the company was in trouble -- their product had been rendered obsolete by digital photography. They were milking film sales desperately. A company that had been a technology leader had not come up with anything new in a long time. They should be a good case study on how not to react to disruptive new technologies.

Acer gains ground by cutting costs and prices

2009-04-10T16:12:00.004-05:00

Acer may be poised to become king of the PC hill:

... Acer could pass second-place Dell in number of computers shipped this year—and close in on HP. Acer "has a strong chance of overtaking HP," wrote analyst Gokul Hariharan of JPMorgan Chase in a report earlier this month.

This is based on unit volume, not sales, and many of the units are low-priced netbooks. But it's impressive nonetheless. They have moved up by cutting costs to be the bone (their overhead costs are barely half of Dell's and HP's), and doing the same with their prices.

Acer's new ultrathin laptop will have a starting price of $650, compared with $1,800 for a similar HP Voodoo Envy and $2,000 for a Dell Adamo. "They're changing customers' perception of what you should pay for a computer," says Richard Shim, an analyst with the research firm IDC.

So Acer is taking the low end of the market, but also attacking their rivals on the high end.

VF turning more to own stores

2009-04-05T19:53:00.004-05:00

There is much to be said for zigging when everybody else zags, and that appears to be what VF Corp. is doing.

Many U.S. apparel makers are ditching acquisitions and store expansion plans to conserve cash amid the consumer-spending downturn. But VF Corp. is taking a reverse tack to survive the turmoil.

The largest apparel maker in the world by revenue, VF is continuing to add new retail stores and plans to snap up new brands, said Chief Executive Eric Wiseman.

The Greensboro, N.C., company plans to open at least 70 new boutiques world-wide this year, Mr. Wiseman said in an interview. It is committed to a five-year plan that began in 2007 to reduce its reliance on flagging department stores.

Last year, it opened 89 new stores and drew 16% of revenue from its own outlets. It aims to boost direct sales to 22% of revenue by 2012, Mr. Wiseman said. The stores also showcase its brands, which include Nautica, The North Face, Lee Jeans and Vans.

In a recession, it's possible to grab market share as competitors retrench. Companies that do so often come out the recession stronger than ever.

Its expansion plans are a contrast to those of rivals such as J. Crew Group Inc., which has said it is revisiting all store openings. Jones Apparel Group Inc., which owns brands such as Anne Klein, Nine West and Jones New York, said it was "substantially" paring back its store expansion plans. And Liz Claiborne Inc. is postponing store openings until the economy improves.

Of course, expanding in a tight credit market requires having manageable debts, and the article notes that "VF has no long-term debt coming due until the fall of 2010."

The company also appears to be looking toward the recovery in terms of its brand acquisitions, which include luxury products:

Although the luxury sector has been one of the hardest hit in all of retail, Mr. Wiseman said that he is looking to buy more contemporary apparel brands. Earlier this month, VF spent $208 million to acquire the shares it didn't already own and debt of Mo Industries Holdings Inc., which owns Ella Moss and Splendid, makers of $100 t-shirts sold at Barneys New York.

"We know the challenges of the upscale department stores," said Mr. Wiseman. Nevertheless, he defends his strategy, arguing that, for now, VF can capture consumers at lower- and mid-tier retailers, but "when they shift back up to luxury we can catch them there as well."

These may or may not be good moves. Time will tell. But what I like is that VF seems to be a company that is looking beyond the recession and adopting a strategy to maximize the recovery.

Saving the newspapers

2009-03-29T15:35:00.003-05:00

A US Senator has drafted a bill to provide tax breaks to newspapers that become non-profit corporations.

Cardin's Newspaper Revitalization Act would allow newspapers to operate as nonprofits for educational purposes under the U.S. tax code, giving them a similar status to public broadcasting companies.

Under this arrangement, newspapers would still be free to report on all issues, including political campaigns. But they would be prohibited from making political endorsements.

Advertising and subscription revenue would be tax exempt, and contributions to support news coverage or operations could be tax deductible.

Senator Cardin says that the "bill was aimed at preserving local and community newspapers, not conglomerates which may also own radio and TV stations." According to other things I've read, though, it is not the smaller local independents that are hurting the worst, because they are not facing as much competition as the big metro dailies, and they are not over-extended financially as the chains are.

A few positive indicators

2009-03-29T14:23:00.003-05:00

In my never-ending quest to counter what seems to be the never-ending pessimism that I hear around me, I want to point out some of the good things I came across this week.

First, we have this item, confirming previous similar surveys of economists I've read:

A group of financial wizards looked into their crystal ball Tuesday and saw some good news.

The recession will ease by the end of this year and companies will begin adding workers, signaling the end of the worst economic downturn since the Great Depression.

We'd all rather that the recession ends tomorrow, of course, but year-end doesn't seem all that far away.

And then there's this, indicating that consumer confidence, while low, is trending upward.

For the past two weeks, the percentage of respondents in The Gallup Poll who say the economy is getting better has been steadily ticking up. Monday through Wednesday, 29% took the optimistic view — the highest number since July 2007.

And finally, more specific to our business, we see Wall Street rallying on good news from consumer products companies and retailers:

Better-than-expected earnings from big consumer brands Best Buy, ConAgra Foods and Dr Pepper Snapple Group sent the Dow Jones industrial average up more than 174 points Thursday to its highest level in six weeks. It has surged 21 percent since hitting a nearly 12-year low on March 9.

Put it all together and we get ... nothing definite, but perhaps some reason for cautious optimism.

Repealing Leegin is Kohl's job #1

2009-03-28T22:14:00.003-05:00

Senator Herb Kohl has been speaking out strongly against the Leegin decision, which legalized resale price maintenance under certain circumstances, ever since the Supremes handed it down almost two years ago. This matters because Kohl is chairman of the Senate Antitrust Subcommittee. The subcommittee announced its agenda this week, and guess what's the first item on the list?:

Discount Pricing of Consumer Goods: The Subcommittee will continue its examination of the elimination of the nearly century-old ban against manufacturers setting a minimum retail price as a result of the 2007 Supreme Court decision in the Leegin case. Allowing retail price maintenance has the potential to seriously harm discount pricing and retail competition. Senator Kohl intends to seek passage of the Discount Pricing Consumer Protection Act (S. 148), his bill to restore the ban on vertical price fixing.

There are few guarantees in life, but I'll be shocked if this doesn't pass.

NSI buys CoAMS

2009-03-27T15:05:00.003-05:00

NSI Marketing Services has purchased CoAMS, a firm based in Chicago primarily involved in trade promo outsourcing services.

NSI Marketing Services (NSI), the St. Louis based channel marketing services firm, that provides technology-enabled marketing administration, communication and research solutions, has acquired privately-held CoAMS, Inc. In announcing the acquisition, Mark Mantovani, President and Chief Executive Officer of NSI, called the event “pivotal” as it “brings together two established firms with long track records in providing first-class channel marketing services to world-class clients.”

NSI was formerly known as The National System. They have a variety of channel marketing services, to which CoAMS' administrative offerings would seem a good complement.

Recessions have mixed effects on trade promo outsourcing companies. Some companies that do administration internally will consider going outside in order to reduce headcount and overhead costs. Offsetting that, however, some existing clients will put on pressure to reduce fees, or even move to a competitor offering a lower price. Joining CoAMS' services to the wider offerings of someone like NSI might ameliorate some of the price-shopping clients do -- the wider the range of services you provide to a client, the harder it is for them to move.

I worked for CoAMS for a number of years, and I hope this change works out well for my friends there.

Update Sunday: Relative to the point about the effect of recessions on outsourcing companies, Mark Mantovani, CEO of NSI, told me in some emails we exchanged that both CoAMS and NSI had increased revenues in 2008, with NSI up 32%.

The Trade Promo Stimulus Act of 2009

2009-03-23T12:56:00.005-05:00

There was an article in Brandweek last week advocating a stimulus plan for advertising:

The government's stimulus plan won't work as planned if we don't get consumers spending again. But in the nearly $800 billion package, there is one thing missing that would surely help accomplish this: advertising. To get people spending again, and the economy moving, the government needs to provide help for businesses in America to advertise their products and services.

The author says that companies should receive a tax credit for advertising.

I will admit that when I read the article, my first inclination was to make fun of it. After all, it seems everybody is jumping on the bandwagon (perhaps I should say “gravytrain” instead) and asking for some of the taxpayers’ money.

But there is at least some merit in the idea. It is a proven fact that maintaining advertising in a recession has positive effects for a company (I wrote an article almost a year ago for the Journal of Trading Partner Practices, "The Importance of Recession Marketing Remains Constant through Time", summarizing results of studies on recessions from 1921 through 2001).

The problem is that the positive effects of advertising are not always immediate. Though some of the studies indicate that companies that maintain their advertising do better during the recession, most of the effects are seen when recovery comes. The point of a stimulus package is to stimulate now, right? So what form of promotion is it that has an immediate sales effect? Trade promo, of course: co-op/mdf, TPRs, end caps – all are intended to drive immediate incremental sales. So suppliers should receive tax credits to encourage them to spend more on trade promo.

But that isn’t all. We know that not all promotions are successful. There are some great analytics and forecasting tools out there that will help suppliers and retailers choose better which promotions will work. But unfortunately, many suppliers have not yet purchased and implemented such tools and, because of budget cuts, cannot do so now. Since the government wants their stimulus money spent effectively, it makes sense that they should subsidize the purchase and implementation of the best available trade promotion forecasting tools, which will then assist suppliers and retailers in designing promotions that will drive greatly increased sales and therefore save the economy and the country.

That’s OK, you can thank me later. Well, actually, when this bill passes, I expect something a bit more substantive than a “thank you” from Oracle, SAP, DemandTec and the others who would be the principal beneficiaries. I prefer cash – it stimulates my bank account.

Just in case you’re wondering – no, I’m not serious. Though I do think it makes better sense than subsidizing advertising. Come to think of it, it makes more sense than a lot of the stuff I’ve heard.

Settle the suit by buying the plaintiff

2009-03-22T19:22:00.002-05:00

News America was being sued by Floorgraphics. Not any more. The two companies settled in mid-trial, and then a few hours later announced that Floorgraphics was being bought by New America. Perhaps a coincidence, but I don't think so.

The acquisition — which consists primarily of FGI’s client and supplier contracts and “other assets” — comes immediately after the two companies agreed to settle their lawsuit in midtrial over whether Rupert Murdoch’s News America had sabotaged FGI’s business by lying to its customers and hacking into its computers.

Coupon use up 15%

2009-03-22T19:14:00.003-05:00

Coupon use rose in the fourth quarter of 2008, according to NCH:

Coupon use rose 15 percent in the last three months of 2008, compared with the same period of 2007, said Charlie Brown, vice president of marketing at NCH, the redemption unit of Livonia, Mich.-based Valassis ...

Apparently the percentage of coupons redeemed must also be increasing, since manufacturers produced only 5% more coupons. Low redemption rates are one of the biggest complaints I usually hear from manufacturers. NCH, of course, is quick to rattle off the benefits of coupons:

Larson rattled off the grocery coupon's various effects: They draw attention to a product, lower its price for past buyers and attract new ones, generate consumer "pull" during soft sales periods, remind even nonclippers of the product's existence, create a marketing synergy benefit when coupled with in-store specials, and they limit growth of private-label competitors.

A new type of store for Macy's

2009-03-20T16:33:00.002-05:00

Macy's has opened a new store in Phoenix's East Valley that is the first of a new format:

For starters, the store is only one level and 122,000 square feet - smaller than a typical store - making it easier to shop, she said.

It's also designed with four entryways and extra-large dressing rooms featuring waiting areas with televisions. The store also features price-checking stations where customers can scan merchandise.

In terms of size and the single-story layout, Macy's seems to be taking a cue from Kohl's. Additional stores of this type are coming soon to Texas, Idaho, and Montana.

I'm not bullish on the department store channel, but it's good to see them still trying to find something that works.

How many ounces in a pint?

2009-03-15T22:15:00.004-05:00

Not to get off-topic, but one reason I'd like to see the US switch to metrics is that I can never remember how many of this there are in that. But Ben & Jerry's is out to remind us that there are sixteen ounces in a pint.

This is not an instance of corporate high-mindedness -- taking on a civic responsibility of educating the masses. The reason for B&J undertaking this campaign is that their principal rival, Haagen-Dazs, has begun marketing fourteen ounce "pints" of ice cream.

"One of our competitors (think funny-sounding European name) recently announced they will be downsizing their pints from 16 to 14 ounces to cover increased ingredient and manufacturing costs and help improve their bottom line," the statement said. "We understand that in today's hard economic times businesses are feeling the pinch. We also understand that many of you are also feeling the same, and think now more than ever you deserve your full pint of ice cream."

I can see Ben & Jerry's having some fun with this, but I guess Haagen-Dazs has found itself caught between rising commodity costs and retailers who won't accept price increases. Cutting down sizes has been a traditional method of avoiding price increases, but it's one thing to shrink a candy bar or fill a cereal box a bit less full, and quite another to redefine accepted units of measure.

CVS and the "Lipstick Index"

2009-03-15T21:28:00.008-05:00

CVS is taking the bold step of going upscale in the midst of a recession. According to this article, they have been trying for years to get prestige cosmetics and fragrance brands to sell through CVS, but were unsuccessful. Their solution is to open boutiques in the 2500-4000 square foot range, connected to but clearly separate from adjoining CVS stores. At present two are open, fifty are planned for 2009, with the possibility of up to 500 eventually (and talk of being a billion-dollar business).

According to Bloom, CVS shoppers had for years expressed a desire to purchase high-end cosmetics and skin-care products in a convenient location with great service. CVS certainly had enough convenient locations—60% of the female population in the U.S. lives within five miles of one of its 6,800 stores. The key was convincing the top brands to work with CVS. "Health and beauty is important to us, but suppliers have refused to sell us whole classes of products," says CVS CFO David Rickard.

Bloom enticed vendors with a retail environment that looks nothing like a CVS drugstore—white tiled floors, brushed-metal walls, and sea-foam color accents. (The stores measure between 2,500 and 4,000 square feet and are connected to adjacent CVS stores via a breezeway.)

In the course of the video interview attached to the article, a CVS exec refers to the "Lauder Lipstick Index" as part of the justification for the new stores. I had heard the term a couple times recently, but wasn't clear just what it was, so I did a bit of research: It's an idea, proposed by Leonard Lauder, head of the Estee Lauder company, in 2002, that consumers will cut back on big-ticket items in a recession, but will compensate by splurging on a few small "affordable luxuries". Thus a woman might make herself feel better about canceling a proposed winter holiday by buying an upscale lipstick from Estee Lauder.

It's an interesting idea, although The Economist gives it the kiss-off, so to speak, in this graph, which seems to indicate that there's little if any correlation between lipstick sales and the economy -- sales were up a bit in the 2001 recession, but sank in 1991 even worse than the economy did.

I don't know that Mr. Lauder meant his index to be taken quite so literally, though. The idea that people might compensate for foregoing big luxuries by indulging in little ones seems to make sense intuitively, and has obvious applications for a great many marketers in the current economic environment. It would be interesting to know if there is any proof for it, or if any research has been done.

To get back to CVS, their experiment seems like a worthwhile effort. Certainly the times demand innovation, and past history indicates that companies who innovate during recessions benefit disproportionately. Their timing is very good in one regard -- with the decline of department stores, historically the principal channel for prestige cosmetics brands, the suppliers are probably more open to the idea of working with someone like CVS than they were a few years back. They have signed on some leading brands, including Laura Geller, Paula Dorf, and Coty Fragrance.

Walmart opening "Supermercado de Walmart"

2009-03-13T16:25:00.004-05:00

Walmart is opening two news stores, in Phoenix and Houston, catering to the Hispanic market. The stores will open in former Neighborhood Market locations of about 39,000 square feet.

The retailer said that the stores were in “strongly Hispanic neighbourhoods” and would feature a “new lay-out, signing and product assortment designed to make them even more relevant to local Hispanic customers”. The staff will also be bilingual.

Wal-Mart’s Sam’s Club warehouse store also plans to open a 143,000 sq ft Hispanic-focused store called Más Club in Houston this year.

Other supermarket chains (e.g., Publix, HEB) are opening similar stores, and a great many retailers, including Walmart, are customizing some of their stores to reflect the demographics of their area. It probably is relevant, as well, that the head guy at Walmar's US stores was formerly the head of Walmart Mexico.

New study questions in-store shopping decisions

2009-03-08T19:57:00.006-05:00

Tradition says that 70% of shopping decisions are made in the store. I've heard that figure quoted so often that it seems to be almost an article of faith. From time to time, I've seen it questioned, but nobody questions that a great many decisions are made in-store.

An IRI study, though, says that a result of the recession may be that more consumers are planning out their shopping at home.

... IRI's research found that by the end of last year, more than three-quarters -- 76% -- of consumers were making their purchase decisions at home, up from 60% in the first quarter.

Just because people put together a shopping list at home, of course, does not mean that they follow it when they get to the store and see something they want. It does make sense, however, that people are more cautious in a recession, and will likely make fewer impulse purchases.

But the other point about this is that the article is entitled "Trouble in Store for Shopper Marketing?", with its theme being that if in-store marketing is likely to impact fewer buying decisions, then money should be pulled out of Shopper Marketing.

But that gets us back once again to the question we asked here a couple weeks ago: What is Shopper Marketing? In a poll we ran on the TPMA newsletter, we found that 71% believe it to be a hybrid of trade promo and brand-building. The Ad Age article seems to assume that it is strictly trade promo and that, therefore, if it does not produce immediate sales, it should be dumped.

For those making strictly trade promo decisions, it's worth noting the IRI study, and perhaps moving some promotions to formats where they reach the consumer at home (e.g., inserts or coupons). But Shopper Marketing decisions would be less impacted by the study.

FTC finally settles with Whole Foods

2009-03-08T19:29:00.002-05:00

The Federal Trade Commission gave up their years of fighting the Whole Food / Wild Oats merger, getting Whole Foods to agree to a face-saving deal to sell off thirty-two Wild Oats locations (some of which were already closed), and give up the Wild Oats name.

The FTC said the settlement substantially restores competition that was eliminated by Whole Foods' acquisition of Wild Oats, its closest rival.

It does nothing of the sort, of course. It's unlikely that there will be many bidders for the locations to be sold, given the current glut of retail space. It's possible somebody will buy the Wild Oats name, but in reality there never was a competition deficit in the space -- Whole Foods' most serious competitor was not Wild Oats, it was the growing organic aisles/sections in every supermarket chain in the country.

Someday I hope someone explains to me why the FTC went off on such a crusade against this particular merger -- a fairly small one in the great scheme of things, and one that had little impact on competition -- when they were rather quiescent on so many other larger deals in recent years.

A tale of two RFIDs

2009-03-08T19:10:00.003-05:00

Just a couple weeks ago, P&G announced that they are discontinuing tagging of displays at Walmart to track compliance, apparently because of lack of cooperation from Walmart.

Now we see the other side of the story, with Walgreen announcing that they are expanding their efforts in using RFID to track in-store implementation of promotions. Why? Because it works:

The results have been impressive: Over the past year, our in‐store execution has grown to nearly double the industry average. Incremental sales assure us that we are on a good path to improving our customers’ shopping experience.

The lesson here, I think, is not a new one. Information is only valuable if it is used. Walmart, for whatever reason, decided that the information it gained from tagging displays was not of sufficient value to use their resources to act on it. Walgreen felt differently. The numbers seem to support Walgreen's approach, but perhapr Walmart was looking at very different numbers from their efforts.

Triplefin acquires Flintfox USA

2009-03-05T22:52:00.003-06:00

Triplefin, a Cincinnati-based provider of supply chain solutions, has acquired Flintfox USA as well as an interest in Flintfox's international business. Flintfox is based in New Zealand and offers a TPM package that will be complementary to Triplefin's offerings.

"Triplefin constantly works with our clients to make it transparent and easy for their staff, customers and other authorized users to create, execute and manage promotions," stated Jill Hein, Business Development Account Manager of Triplefin. "Triplefin has been a leader in promotion technology and execution for e-Commerce, DTC and retail channels, but it lacked a truly best-in-class technology for retail trade-spend. Flintfox is the answer, and I am very excited about the integration of Flintfox into Triplefin's Salefish technology platform," concluded Jill.

Flintfox had had a relationship with Kineticsware before that company ran into financial problems.

Is this the new look for Walmart PL?

2009-03-03T20:42:00.005-06:00

Supposedly, this pic (and others here) are examples of the new logo and package design for Walmart's Great Value line.

Couldn't possibly tell you if it's true or not, but it's an interesting look. Not that anybody would ever hire me to do a graphics job for them.

This ties in with the post immediately below, speculating on the effect on suppliers if Walmart's private label efforts are successful.

How high will PL go at Walmart?

2009-02-28T21:58:00.006-06:00

Walmart is reformulating and repackaging its Great Values food brand, with the intent to significantly increase its market share (it's already, they claim, the #1 food brand in the country).

Which raises a question: how high will Great Value's share go?

According to Information Resources, Inc., the Chicago-based market research firm, private label accounts for 17.6% of dollars and 22.5% of units at Wal-Mart. One securities analyst — Deborah Weinswig of Citigroup — has been quoted as saying that private label might skyrocket to 40% of dollars at Wal-Mart within the next three years. She figures that if Wal-Mart carries the top three branded products in a given category, it could substitute one of them with its own brand.

Even if, as the article argues, the 40% number is too high, if 30% or so is more like it, that still means major food brands will lose ten to fifteen share points at the world's biggest retailer. What is that going to mean to them?

If Great Value is going to be getting that big a share of sales, then it probably also means, as the Citigroup analyst noted, that some brands will be squeezed off the shelf. Which plays into Walmart's efforts at "SKU rationalization":

So Wal-Mart went deep on benchmarking its competition to understand where the product range started and stopped within a given category. Then it worked to achieve a clear offering — paring down to the right number of SKUs so that categories weren’t diluted and fuzzy. With SKUs cut by 10% to 50%, Wal-Mart has been able to achieve higher sales. Fleming says he hasn’t yet seen departments that have lost sales from SKU cuts.

I'd hate the be the #3 brand at Wal-Mart right now.

Forecast says local advertising will drop through 2013

2009-02-28T21:39:00.003-06:00

A forecast by BIA and The Kelsey Group says that local advertising (much of it supported by trade promo funding of one sort or another) will decline sharply in all categories except online over the next five years.

Between 2008 and 2013, local ad spending will decline at a 1.4 percent compound annual rate to $144.4 billion. In contrast, the share of interactive ad spending will more than double from 9 percent in 2008 to 22.2 percent in 2013.

The question for many traditional media (especially newspapers) will be whether they can grab a significant portion of the online growth. In a great many markets, the newspaper web site is the leading local site, but newspapers have not grabbed as big a piece of online revenues as they would like.

If they don't get more of the online money, we'll probably see more papers, and maybe some broadcast outlets, joining the Rocky Mountain News.

Traditional media -- including newspapers, direct, broadcast, Yellow Pages, out of home, cable TV and magazines -- are forecast to decrease from $141.3 billion in 2008 to $112.4 billion in 2013.

I'm curious how much of the loss of revenue in local advertising is traceable to funding moving to in-store promotion.

Saks will stop deep price cuts

2009-02-28T21:26:00.003-06:00

Saks, which took a lot of heat from fashion designers and other retailers for their deep discounting in Q4, said they won't continue the practice, but they are expecting to reduce prices overall, with the help of their suppliers:

Saks said it was expecting its vendors to provide products at price points more in line with the current climate.

The Q4 price cuts, as much as 70%, caused Saks' margins to drop from 37% to 20%, at the same time sales were dropping 15%, Lower margins on lower sales is a nasty combo.

Barbie in Shanghai

2009-02-28T21:09:00.002-06:00

Mattel is opening a Barbie store in Shanghai, according to People's Daily:

World's premier toy company Mattel is expected to open its first Barbie flagship store in Shanghai next month in Shanghai, the country's economic hub, in hope of a market expansion in China when its global sales contracted.

The 3,500 square meter, six-floor Barbie flagship store along Shanghai's trendy Huaihai Road, is expected to open on March 7 to celebrate the brand's 50th anniversary, said Julia Jensen, Mattel's vice president of Public Relation and Communication International said in an e-mail to Xinhua.

A number of major brands and retailers seem to be looking at international expansion as a way of growing through the hard times. Mattel's sales in 2008 were down 1%, but Q4 was down 11%. Mattel has been in China for seven years now, according to the article, but this is their first major store.

The competition doesn't sound frightened:

"The market positioning of Barbie is quite different from Chinese toy brands. I don't think the flagship store would have much impact on the sales of Chinese toys," said Xie Min, the business department head of Huaihai Youth Articles Store, several hundred meters away from the pink Barbie flagship.

"China's toy market has long seen foreign brands including Winnie the Pooh and Mickey. Compared with them, Barbie is still less competitive in terms of its franchisers and product chain," says Xie.

Definitions and metrics

2009-02-24T15:14:00.003-06:00

In an article entitled, "What Is Shopper Marketing, Anyway?", Ad Age tries to get to a meaningful definition of Shopper Marketing (something I've tried myself).

A few definitions are offered. Here's an exercise in gobbledygook from an agency: "any stimuli or any marriage of a brand with a shopper or consumer along the shopper continuum which turns them from consumer to shopper to buyer." Which is so broad as to be meaningless.

Something more to the point is this from Kimberley-Clark:

K-C officially defines shopper marketing as "integrated-marketing programs based on a deep understanding of shopper attitudes and behaviors designed to build equity for the brand and differentiate the retailer while the consumer is in shopper mode and prepared to make a purchase," said Mark Scott, VP-sales and shopper marketing.

It's often said that "you can't manage what you can't measure." It's equally true that you can't measure what you can't define. I've written before that I see Shopper Marketing as being the nexus of trade promo and brand advertising which, if correct, would mean that such promotions would need to be measured in ways similar to traditional media (e.g., reach and frequency), and also in trade promo terms (volume lift, incremental profit, etc).

The aborted PRISM initiative was an effort to develop the former, while several companies offer the means to do trade promo measures. But there still is no consensus definition, which means that there are no consensus measures, which means that establishing best practices and benchmarks is still somewhere off in the future.

Newspapers still make a profit

2009-02-24T14:34:00.003-06:00

The title for this post may come as a surprise, but Ad Age made a good point today -- for all the bad news in the newspaper business (the Philadelphia newspapers joined the line at bankruptcy court), the business is still profitable. The problem is that their ownerships, many of whom bought up multiple papers in recent years, are so buried in debt from the buyouts that they can't pay the bills on the reduced profits they're getting today.

"Not a lot of papers are operating at a loss," said John Morton, the veteran industry analyst. "There are roughly 1,400 daily newspapers. We only hear about the top markets. That leaves at least 1,300 papers out there."

Publicly owned newspapers averaged an operating profit of 10.8% in the first three quarters of last year, Mr. Morton said. That's not the margin enjoyed by newspapers when they were monopolies, but it's not nothing either.

Ten percent plus is better than the oil companies were doing when gas was at four bucks (something to think about the next time a paper runs an editorial denouncing "excessive profits"). The problem is that it's only half what profits were when projections were made justifying, for example, the $13 billion debt from the buyout of the Tribune Company (now in bankruptcy).

Ad Age has some interesting stats. For example, Lee Enterprises, which just reported a loss of $889 million, actually had a 20.8% operating profit; the loss was from write-downs on the value of holdings. Even Tribune Co. made a modest 5.4%.

So, once again, gloomy as the picture is for newspapers, the business is not going to disappear. The fundamentals are sound, and after the weakest players are eliminated and the rest downsized, the survivors will likely prosper.

Leibowitz to be appointed FTC chair

2009-02-24T14:14:00.002-06:00

Jon Leibowitz is to be appointed today to chair the Federal Trade Commission. Leibowitz is currently a member of the commission, so President Obama will need to make another appointment to fill the vacancy.

Leibowitz's views on Robinson-Patman enforcement are unknown (since nobody bothers to talk about it much). He has taken strong positions on privacy issues, which could have impact on on-line marketing practices, and possibly on some in-store practices (e.g., studying shopper behavior via camera, and possibly even collection of loyalty card info).

P&G expects to hold the line on price hikes

2009-02-22T22:38:00.004-06:00

This looks likely to be one of a long series of posts on the Great CPG Price War of 2009. First there was this, in which I speculated that perhaps the price hikes are a hedge against uncertain economic conditions (following the model of the '70s). Then we discussed the Delhaize-Unilever spat.

Now we have P&G's CEO A.G. Laffey saying that the price increases his company put through last year will stick.

"Our products don't deliver value [just] because the prices on the shelves are lower," A.G. Lafley, chief executive of Procter & Gamble Co., told analysts and investors at a conference here.

Like several other industry executives who spoke at the event, Mr. Lafley said his company doesn't plan to roll back the significant price increases it has made over the past several months.

There also is a report in the article that Safeway suspended shipments from P&G in late December, but that appears to have been an inventory decision, rather than part of the pricing fight.

Executives from Clorox, Nestle, and Kimberley-Clark are also quoted as saying they will hold on to their price hikes.

The decline of dedpartment stores, chapter 50 (or so)

2009-02-21T14:02:00.003-06:00

The Dallas Morning News has an interesting article, "Shoppers departing department stores - and may not be back" hitting on a theme I've posted on often -- the terminal decline of what was once America's principal shopping channel.

There are a few good statistics in the article, one being that there are now ten chains in the category doing $3bil or more; collectively they do $110bil, which is about one-fourth Walmart's sales. How the mighty have fallen.

The most interesting line from the article is this one:

The new mantra for one of America's oldest retail categories: When the economy rebounds, everything will go back to the way it was.

It's probably true. For those chains that survive the recession, things will return to normal. "Normal" for this channel, however, is a long, slow decline. In the almost forty years I've been observing department stores (my first job in this business was in the advertising department of Goldwaters in Phoenix) I have watched them go through several economic cycles. In each recession, they hit a bottom that was a bit lower than the last time; in each recovery they reach a top that was a bit lower.

Meanwhile, brands that have for decades been sold exclusively through department stores are looking for other ways to reach their consumers. An example cited in the article is Estee Lauder, which is now sold on-line. If my brand were heavily dependent on department stores for distribution, I'd certainly be seeking alternatives.

Kmart goes PL on shoes

2009-02-21T13:13:00.004-06:00

Kmart cut their relationship with Footstar, which had been running its shoe departments, at the start of the year, and is now producing its own shoes.

Kmart has taken its shoe business in-house and is introducing low-priced sneakers endorsed by NBA player Al Harrington and women's shoes aimed at attracting the "frugalista," a retail executive said Wednesday.

"We were neglecting to serve our Hispanic and African-American customers," said Nick Grayston, who served as CEO of Foot Locker's U.S. business before becoming president of footwear for Hoffman Estates-based Sears Holdings Corp. last June.

"We've injected some fashion in our shoes, which had been sadly lacking," he said.

They have a line of men's/boy's sneakers endorsed by Harrington (of whom I've never heard, but I'll assume he's a mildly big deal), priced as low as $19.99 -- which seems to be taking a page out of Steve & Barry's book.

I haven't been too worried up 'til now

2009-02-21T12:58:00.002-06:00

But when I find out that Girl Scout cookie sales are down, it's clear that the sky is truly falling.

National numbers are not yet in, but regional Girl Scout councils nationwide are seeing the impact of the down economy, as well as bad winter weather, in declines as large as 19% in pre-order sales, which took place January through early February.

I will do my duty to jump-start the economy by buying a couple extra boxes of Thin Mints.

Microsoft adds to the blur

2009-02-17T12:59:00.003-06:00

I posted an item several months ago about the blurring between channels, between manufacturers and retailers, and between both of them and media. Microsoft has apparently decided to jump on the blurwagon by hiring a long-time Walmart exec to head up a retail division:

The move is a sign of the deeper role consumer-technology companies are playing in the retail business, despite the many risks of straying from their traditional businesses of making hardware and software. Apple, of Cupertino, Calif., encountered widespread skepticism when it first began opening its own retail stores in 2001. [...]

At the same time, some large electronics retailers have fallen on hard times amidst the weakening economy. CompUSA Inc. last year closed most of its retail stores, while Circuit City Stores Inc. is in the process of shutting down all of its stores and laying off more than 30,000 employees.

As retailers become their own suppliers through private labeling, and as the number of potential channel partners shrinks through consolidation, it seems inevitable that we will see more suppliers playing retailer.

More on the food-price battle

2009-02-17T11:26:00.005-06:00

In the comments to my previous post on pricing tensions between suppliers and food retailers, Mark Ahrens pointed us to the Unilever-Delhaize dispute in Europe, where Delhaize tossed hundreds of Unilever products out of their stores.

Unilever spokeswoman Aurelie Gerth said Delhaize, which had already removed 70 other Unilever goods before October, refused to buy all the brands the company offered and wouldn’t guarantee new products would get shelf space. Though talks continue, there’ll “probably not be a solution this week,” she said.

“We didn’t agree to their terms, so they refused to grant us discounts,” said Delhaize spokeswoman Liesbeth Rogiers. “That would really boost our purchasing prices and we can’t and won’t pass those on to our customers.”

Throwing out one of the world's leading CPG companies seems like a pretty bold step, and one suspects Unilever won't be out for long. But I was struck by this step that Delhaize has taken:

Delhaize plans to sell the remaining Unilever products it has in stock, and has put up signs in its stores directing shoppers to alternative brands and private labels, Rogiers said.

In regard to food prices in general, a bit of perspective might be in order. This item from WomensDay has, among other things, comparative prices (adjusted for inflation) for food products -- in the 1950s, a dozen eggs cost the equivalent of $5.29, and in the '70s a pound of round steak was $9.33. The next time I gripe about prices, I'll try to keep those in mind.

I love the Wii

2009-02-16T22:12:00.006-06:00

And not just because it's a lot of fun. I also love the Wii because it's a great marketing story. Nintendo, if I recall the numbers correctly, was trailing Sony and Microsoft fairly significantly pre-Wii. Hardcore video gamers (such as my son) turned up their noses at Nintendo's products.

So Nintendo simply redefined the market, creating a family-friendly game system that facilitates rather than impedes social interaction, and that appeals more to adults and little kids than teen boys. It was marketing genius -- if you're losing in the existing market, create a new one.

And it has paid off big-time. The video game business is one of the bright spots in the economy, with January sales up 13% over last year, and within that growing market, Wii's console sales are double those of Playstation and Xbox, while the top three games are all for the Wii.

And besides that, Mario Kart is a blast.

P&G no longer tagging displays for Walmart

2009-02-16T21:51:00.004-06:00

I'm not sure what to make of this item:

The Procter & Gamble Co. (P&G), a pioneer in the use of Electronic Product Code (EPC) technologies in the supply chain, has ceased placing EPC tags on promotional displays bound for Wal-Mart's RFID-enabled stores.

Although I haven't followed the subject closely, from the early days of RFID I have thought that its most significant application, from a trade promo standpoint, was in tracking displays for purposes of compliance monitoring. The article seems to support this view, quoting a P&G exec: "... the work we conducted with Wal-Mart has shown that this use of the EPC can deliver improved promotional effectiveness, better sales and, most importantly, higher shopper satisfaction."

So why stop doing it? It appears that Walmart was was not cooperating with the project. The article cites a P&G supplier as saying that "the company is frustrated that Wal-Mart's sales associates have not acted on the data in order to improve compliance with promotional programs."

P&G's managers, the contract manufacturer explains, "were asked to put the tag on and absorb the cost of that, and I think they felt Wal-Mart should be doing more to live up to their end of the bargain. Why put the tag on if Wal-Mart's not going to act on the data?"

P&G of course is not going to say anything like that. But they seem to hint at it:

"We've been working on these applications for close to 10 years. We have learned that to secure sustainable benefits, the use of EPC requires deep levels of collaboration between the manufacturer and the retailer, and a commitment to use the actionable visibility provided by the EPC to change business processes. "

Hmmm ... Walmart not collaborative?

Local TV in decline

2009-02-16T13:48:00.003-06:00

There was a time when being granted a license to operate a TV station was equivalent to having a license to print money -- with margins as high as 50%. Local TV stations, especially network affiliates made tons of money regardless of how they were managed or marketed. There was no way they could fail.

Of course, pretty much the same was once true of newspapers. But not anymore:

LAS VEGAS -- Lisa Howfield, general manager of KVBC, the NBC affiliate here, watched last year as the broadcast-television business began to shrink. She started cutting. She combined departments. She made do with old equipment, and did away with luxuries like yearly sales getaways.

In December and January, she laid off 15 employees, or 6% of her staff. After the weatherman left last month, one of the morning news anchors took on both jobs. "It's like a bad roller-coaster ride," says Ms. Howfield. Her station's full-day viewership is down 7.7% this TV season from the same period last year, according to Nielsen Co., and Ms. Howfield expects her ad revenue in 2009 will be down 30% from 2008.

To the combination of media fragmentation exacerbated by the economic and advertising downturn, you can now add the threat (beginning to be openly discussed by network honchos) that the networks may decide they don't really need local affiliates, given the levels of cable/satellite penetration. Why, the networks are asking themselves, should we split the (shrinking) ad revenues with the affiliates, when most of their viewers are watching us on cable? Why not just switch our programming to cable and keep all that lovely money for ourselves?

This probably won't happen in the next couple years (as the article makes clear), but it will happen reasonably soon. When it does, another important medium for local advertising will decline, pushing still more trade funding into the store.

A bit of speculation on food pricing

2009-02-09T22:23:00.004-06:00

A week or so ago, I posted an item about the increasing tension between supermarket chains and their CPG/food & beverage suppliers who raised prices in 2008, but have not lowered them since. As usual in such cases, there are two sides to the story.

I also quoted from a news item that commented on a sidelight of the story:

But analysts say they're already seeing an increase in so-called promotional dollars, or money that vendors give to retailers to subsidize temporary discounts like two-for-one offers.

I have ever since been musing on that sidelight, and wondering whether it might in fact be a key component of the story. This is, I hasten to say, pure speculation, and I have no way of knowing whether it has any foundation in fact.

Let's start the speculation with a bit of history. The great increases in CPG/food trade promo spending -- when spending as a percent of sales doubled and tripled to near today's range of about 15%-20% -- occurred in the 1970s. They resulted, those who were involved tell us, out of the massive inflation of that decade and out of the government policies that attempted to deal with the inflation.

In 1971, the government instituted wage and price controls to fight inflation. As almost always happens with such policies, they failed, and were withdrawn in 1973. Inflation continued throughout the 70s and into the early 80s. Many manufacturers raised their prices more than necessary after the controls were lifted and kept them high throughout the decade, offsetting the excess increase with allowances to their retailers. They looked at this as insurance against reimposition of controls -- they had higher prices on the books to protect themselves from government auditors -- and meanwhile the allowances effectively cut their prices down to reality.

So much for the history, here comes the speculation: I'm wondering if part of the suppliers' reluctance to cut their prices now has a similar foundation. In the face of economic uncertainty, and with the likelihood of huge government deficits that could trigger inflation, are suppliers hedging their position by keeping relatively high prices on their books, while effectively decreasing the real price through allowances? If so, history tells us that once the new levels of trade spend are established, it may be tough to lower them.

As noted, this is just speculation, but I'd be curious to hear from anybody who has information to support or debunk it.

Chaos in the luxury market

2009-02-09T21:52:00.004-06:00

Wall Street Journal reports on the fallout from Saks's deep discounts on top fashion lines.

When Saks Fifth Avenue slashed prices by 70% on designer clothes before the holiday season even began, shoppers stampeded. "It was like the running of the bulls," says Kathryn Finney, who says she was knocked to the floor in New York's flagship store by someone lunging for a pair of $535 Manolo Blahnik shoes going for $160.

Saks' deep, mid-November markdowns were the first tug on a thread that's now unraveling long-established rules of the luxury-goods industry. The changes are bankrupting some firms, toppling longstanding agreements on pricing and distribution, and destroying the very air of exclusivity that designers are trying to sell.

Other high-end retailers followed suit, as did many of the designers who have their own retail outlets. But will consumers who grow accustomed to designer shoes at $160 be willing to pay $535 again when the recovery comes?

Besides creating a suspicion of high prices among consumers, Saks's actions broke the unwritten law under which designers and retailers operated: "Leave the goods at full price at least two months, and don't do markdowns until the very end of the season."

Some designers now are looking for ways to protect themselves in the future. Among the options being considered: Giving department stores only a limited assortment of goods, retaining the top items for their own outlets; or, operating leased departments with department stores.

... New York design house Derek Lam, which is known for cocktail dresses that sell from $1,200 to $3,500, is opening its own New York store next month. To protect itself against other retailers' discounts, it's thinking about creating "special editions" of its lines that wouldn't be sold in Saks and other retailers.

In hindsight, Saks admits that it may have over-reacted.

"We didn't need to do what we did in accessories," Mr. Frasch says. High-end shoes and handbags would probably have sold out, even at higher prices, because shoppers see them as more practical wardrobe updates than another new outfit.

The retailer is still not out of the woods. Saks shares were recently trading at $2.72, down from $22 in December 2007. In mid-January, it laid off 1,100 people, or 9% of its work force, and could close some stores.

This year, Saks is spending about 20% less on merchandise to keep inventories lower, but Mr. Frasch acknowledges the number is only a guess. The luxury-goods business is "absolutely flying blind," he says.

His boss, Mr. Sadove, agrees. "One of the big questions that people are asking," he says, is: "Will people ever buy at full price again?"

I'll be interested to see if the Saks approach or the Abercrombie & Fitch approach (refusing to cut price) is more successful.

P&G expanding car washes

2009-02-08T22:05:00.005-06:00

Procter & Gamble has bought an Atlanta car wash chain and will use it as a foundation for expansion of their Mr. Clean experiment.

The move follows an August announcement by P&G that it was seeking franchisees to expand the car wash centers throughout Ohio and Kentucky, including with locations in the Dayton area. At the time it operated two local operations – in Deerfield Township and Evendale – and offered services at Fountain Square garage in downtown Cincinnati.

Now, Mr. Clean Car Wash operates 16 locations, including the two corporate-owned sites. Three other franchised locations are in the works.

On the one hand, using the Mr. Clean name on car washes certainly sounds like a natural brand extension. On the other, going into the car wash business seems rather distant from P&G's core competencies. On the third hand, who am I to question P&G?

Update on automotive channel-stuffing

2009-02-08T21:47:00.002-06:00

There are continuing reports of car dealers being pressured by manufacturers to take on excessive inventory:

[Chrysler] has urged its dealers to take on more inventory in February and March as it looks to boost revenue ahead of a first quarter deadline to secure additional government aid and prove that it is viable.

Automakers book revenue when vehicles are shipped to dealers, not when they are sold to customers.

The problem for the dealers is that they already have an average of five months inventory on their lots.

Fewer stores, fewer brands, fewer choices

2009-02-08T21:31:00.003-06:00

As consumers, we will need to adjust to fewer choices during the downturn -- fewer choices of where to shop, as stores close, but also fewer choices in the stores that remain open. Suppliers cutting costs will take fewer chances with new products, and retailers cutting inventory will trim their assortments.

Toy maker Mattel, Inc., which posted a 49 percent drop in fourth-quarter profit, said its focus this year will be "cost and spending reductions." It added that it's cutting back on underperforming products. Whether that means fewer choices with Barbie or Hot Wheels isn't clear yet. [...]

The caution can already be seen in the lean assortment of spring items in stores like Banana Republic and AnnTaylor, which have empty space in areas once teeming with tables of merchandise.

Another way we will see fewer choices is likely to be retailers cutting not just assortments (carrying a dress in three colors instead of five), but also cutting suppliers and brands:

"How many different brands of men's black shoes do we need?" is one example of the questions Macy's is asking itself, Chief Executive Terry J. Lundgren told the The Associated Press this week after the chain announced it was cutting 7,000 jobs. "We have to do a better job in turning our inventory," he added.

Touching increases value

2009-02-04T15:00:00.003-06:00

An interesting piece of research says that touching an item may increase its value to consumers.

Researchers from Ohio State University and Illinois State University tested how touching an item before buying affects how much they are willing to pay for an item. A simple experiment with an inexpensive coffee mug revealed that in many cases, simply touching the coffee mug for a few seconds created an attachment that led people to pay more for the item.

The results, which were published recently in the journal Judgment and Decision Making, found that people become personally attached to the mug within the first 30 seconds of contact.

Handling the mug increased the value of the mug by significant percentages, based on what participants were willing to pay in an auction setting.

Not definitive, of course, because it's just one study. But it seems intuitively reasonable, and has implications for online and bricks & mortar marketers.

Macy's changes course (or do they?)

2009-02-04T13:15:00.003-06:00

Macy's is announcing that they will be doing more localization, both in merchandise and marketing.

The retailer will eliminate its current structure -- a relic of its May Co. acquisition that had stand-alone divisions such as Macy's Central and Macy's Florida -- and streamline functions into two corporate offices. Marketing, merchandise planning, buying and stores' senior management will be located in New York, while finance, human resources, legal and real estate will be housed in Cincinnati.

That's cool. But this is just an extension of a change they announced a year ago, and that I commented on last April. They don't exactly turn on a dime, do they?

The real concern is the one I expressed last April (though I was no doubt too harsh -- I must have been feeling really crabby that day): The raison d'etre of the merger that created Macy's was nationalization (national advertising, national merchandising, economies of scale). Now they are abandoning that, and going back to having 69 regional marketing/merchandising plans. Macy's is the bellwether of the department store channel and they are demonstrating that they really have no vision or direction for the channel.

A first in Second Life

2009-02-04T12:24:00.006-06:00

TPMA held its first event in a virtual world yesterday, hosting a series of panel discussions via Second Life. I moderated the three panels, which featured lively discussion on collaboration, customer-centricity, and positioning trade promo programs for recovery.

The panelists -- Peter Eschenberg (Hitachi), Harris Fogel (O4), Blake Watts (Plan4Demand), Jim Nadler (afterBOT), Tom Strubel (Oracle), Phil Conner (IAB), Lauren Robinette (Cisco), Armen Najarian (DemandTec), Chris Wiesen (SAP) -- did a great job, and there was lots of interaction from the attendees.

It was different and it was fun. This was a case where the medium was at least a big part of the message. The content was important, of course, but it was also an opportunity for all of us to try out a new medium and see whether it can be an effective way to communicate.

I think the medium passed the test. There were few technical glitches and none of any significance. We deliberately kept things simple, but now we know that we can add other elements (slides, maybe video). And most importantly, we learned that this is a format for delivering information that engages the audience more than traditional webinars. I'm not saying this will replace webinars -- there are limitations as well as strengths -- but its another option to consider.

PS: Armen posted about the event on his blog -- get his view here.

Are GM and Chrysler stuffing the channel?

2009-01-31T22:41:00.005-06:00

There are indications that General Motors and Chrysler, in an effort to make their sales figures look better to the Feds, are using incentives to push car dealers to accept unrealistic shipment levels. If so, this is classic channel-stuffing.

AutoNation, the largest dealership chain, is resisting:

GM and Chrysler "have implemented wholesale incentive programs where they basically say to get the incentives for the inventory you want, you have to buy more inventory," AutoNation Chief Executive Mike Jackson said Thursday in a conference call to discuss fourth-quarter financial results.

"I think this is the wrong thing to do," Jackson said. "We are not playing that game."

[...]

"The channel is full, and they are trying to stuff more in," he said.

The manufacturers want dealers to order as many cars as they did last year, but AutoNation is forecasting a 24% sales decrease.

Grocers complain that prices aren't dropping

2009-01-31T22:07:00.003-06:00

Business Week reports that grocers are warning they will fight food manufacturers who raised prices last year in the face of commodity price increases, but have not lowered them as the commodity prices have declined recently.

Manufacturers respond that their price increases were not excessive in light of the cost increases they had previously absorbed. This graph offers some support, showing that producer prices increased more than consumer prices for the seven quarters preceding Q4 '08.

Nonetheless, retailers are threatening increases in private label and possibly dumping uncooperative suppliers. SuperValu's CEO noted that "In almost every category, you have other vendors to look to."

It appears that suppliers may be trying to compensate for the increases by bumping up their trade spend:

But analysts say they're already seeing an increase in so-called promotional dollars, or money that vendors give to retailers to subsidize temporary discounts like two-for-one offers.

The Cincinnati Enquirer carried a similar article, noting that Walmart is talking tough:

"We worked with them when raw-material costs rose," said John Simley, a Wal-Mart spokesman. "Now that they've dropped, we want to see prices come back down. Our suppliers know we are the advocate of the consumer."

NRF predicts return to growth in Q4

2009-01-31T21:59:00.003-06:00

The National Retail Federation predicts that sales will be down 2.5% in the first half of 2009, down 1.1% in the third quarter, but will rise 3.6% in Q4 (compared, of course, to weak sales in Q4 '08).

They also think that retailers have now reduced inventory enough that price-cutting will abate a bit:

"Because of what's happened, retailers are being more conservative with inventory, and so the need to have that panicked price-cutting is lessened," says Wells. And in addition to better inventory management, adds an NRF spokesperson, stores are "trying to be efficient as possible, to do more with less in their advertising, and sometimes changing their merchandising mix."

Latest media casualty: Mad

2009-01-25T14:41:00.003-06:00

Not that it has anything to do with trade promo, but Mad magazine is switching to quarterly publication after 56 years as a monthly.

The venerable humor magazine today announced that starting with issue #500 in April, it will move to a quarterly publication schedule from its current monthly. The magazine’s version for younger readers, MAD Kids will cease publication with the issue on sale February 17th, while the final issue of MAD Classics will go on sale March 17th. Both of the spinoff magazines launched in 2005. Circulation numbers for the magazines were not readily available.

Handling the news with style typical of MAD, Editor John Ficarra said, “The feedback we've gotten from readers is that only every third issue of MAD is funny, so we've decided to just publish those."

Just about every item I've seen on this has some variation on "What, me worry?" in the header or text. It is worrying (to work it in here, as well) that the economy has damaged even such an institution. Though, in reality, it is probable that (as with many/most recent victims in media and retail) the economy has merely sped up Mad's partial demise. When I was a kid, I read Mad religiously (if that's the right term), but how many kids are doing so today? Times change, and media changes with it.

Nielsen drops PRISM

2009-01-25T13:56:00.005-06:00

Nielsen has announced that it is "suspending" their PRISM initiative, stating that the prices for the information created would be too high in the current environment.

"While the industry as a whole is very supportive of the syndicated service, many clients, in the face of the current economic environment, are not in a position to fully fund a syndicated service at this time."
Nielsen said it will keep providing custom work measuring and analyzing shopper marketing "until a syndicated service is financially viable for many of our clients."

I hope the initiative is revived. Although I was initially skeptical about it, I eventually came around to the view that it would provide valuable data, and now I'm disappointed not to see that data, and (more importantly) not to see how it is used to improve targeting of in-store promotions.

We will continue to have the most basic (and most important) measure of trade promotion -- POS (though often lacking, for in-store promotions, vital performance data to give full meaning to it). But PRISM was intended to be about Shopper Marketing, as distinct from trade promotion. Shopper Marketing, as I understand it (it's not always clearly defined), is intended to be more than trade promo alone -- it is intended to perform both the usual functions of trade promo (immediate sales lift) and of national advertising (brand building) . Without PRISM we will not have any measure of the second function.

It also seems that the costs are not excessive, though any cost may reasonably be viewed that way in the current economy.

... the cost of PRISM data, which an executive for a consortium member said ranges from the low to mid-six figures annually (and up to seven figures for bigger marketers), is particularly daunting in the current economy.

A million-dollar (to choose the higher end of the range) expenditure to measure and improve the effectiveness of a billion-dollar expenditure seems quite reasonable to me. But again we are playing by different rules today.

GameStop makes money on used games

2009-01-22T20:04:00.002-06:00

GameStop, according to Wall Street Journal, is making a large part of its profit from sales of used games.

About 42% of GameStop's overall gross profits come from its secondhand business, compared with half that level for new games. "When you consider that most retailers operate on single-digit margins, it's astronomical," said Evan Wilson, an industry analyst with Pacific Crest.

The big contribution to the bottom line is due to the margins on used products -- typically the used games are sold for double what the store gives the former owner (and that payment is in credit toward future purchases). Thus GameStop averages 48% on used product, compared to 20% on new games and a miserable 7% on new consoles.

A guaranteed argument-starter

2009-01-19T20:30:00.002-06:00

If you want to get a heated argument (or at least a spirited discussion) going, just put together a list and title it "Best of ______". Whether it's the Top 100 Movies of All Time or the Best Books Ever Written or the 10 Best Quarterbacks, you're certain to leave a name off the list that many people believe should be near the top.

Interbrand has been putting out lists of the top brand name for a long time now, but this year for the first time they have compiled a list of the Most Valuable U.S. Retail Brands.

Numero Uno isn't going to surprise anybody, with Walmart's $129.8bil brand value being rated roughly six times that of runners-up Best Buy's $22.0bil and Home Depot's $20.8bil. Target and CVS follow.

But two of the top ten "retail" brand names are brands I would think of first as products -- #6 Dell and #10 Coach. Besides Dell, two other on-line retailers are in the top fifteen -- #11 Ebay and #14 Amazon. (Is Ebay a retailer at all? They sell nothing, others sell through them. They are really more like a mall, aren't they?)

See how quickly we can get an argument started?

There were a number of other interesting points. I was surprised to see Sherwin-Williams, with their mostly small outlets located in strip malls, ranked at #23. I was equally surprised to see American Girl, with only three or four outlets, on the list. But on reflection, both companies, however different, have done a good job of establishing thyemselves as brands, and maintaining their brand identity.

Where's Macy's?

The most interesting thing about such lists, though, is not who's on them, but who isn't. The #1 department store chain in the country, Macy's, is conspicuous by its absence, as is the former #1 retailer in the world, Sears.

Three department stores made the list -- Nordstrom (13), Kohl's (22), and JCPenney (24). Interbrand states, though, that department stores as a group have become "commodity chains without real difference." But they add a hopeful note:

... Macy's, Saks Fifth Avenue, Dillards and Sears have considerable brand strength, though they didn't make the list. All have the opportunity to capitalize on their brand to improve their financials.

But the most glaring omission was ...

No Supermarkets?!?!

Not a single traditional supermarket made the list. The only food retailer was Whole Foods at #47. Kroger? SuperValu? Didn't make the cut.

Traditional grocery earned the weakest customer loyalty scores. Over-reliance on discounts, rewards and promotions undermines any move toward a meaningful proposition and results in low brand strength.

If customer loyalty is a key measure of brand strength (and most would agree it is) then it's hard to argue that supermarkets have strong brands. Interbrand notes that further undermining the brand names of the leading chains is their multiple banners (Kroger includes Ralph's, Fry's, etc). And they also mention how excessive reliance on promotional funding can undercut branding:

The grocery sector also often misses out on opportunities for product differentiation, since small entrepreneurial manufacturers can’t afford to supply supermarkets due to the cost of supporting their promotions and the payment of slotting fees. In the U.S., there are a trillion dollars moving from the manufacturer to the grocer every year. As long as their vendors continue to pay for play, supermarkets may see no need to understand and serve the shoppers in their stores.

That last sentence sounds a bit harsh (and that's the first time I've heard that trade promo equals a trillion (!) a year in the supermarket channel alone), but I do agree that supermarkets harm themselves by locking out smaller suppliers, who could help them create a brand difference. Unfortunately, they're now hooked on trade promo, which is the difference between profit and loss, and kicking the habit (or even cutting back substantially) might be too tough a challenge.

I don't agree with all the rankings, but I found the exercise interesting and thought-provoking. Give it a read, and enjoy arguing with Interbrand (or with me).

Are the agencies starting to get it?

2009-01-19T19:42:00.003-06:00

There has been a notable increase recently in the interest shown in shopper marketing by Madison Avenue types. They are apparently becoming aware that all that grubby in-store stuff actually produces sales, and also that it represents far more money than the more glamorous TV advertising they've long been addicted to.

Adweek has an article this week about shopper marketing that points out that American Idol reached 35 million people for its season finale last year, while 150 million shop at Walmart each week. After acknowledging that the stores are today's true mass medium, the article focuses mostly on the number of ad agencies that are creating shopper marketing divisions and on the creation of in-store advertising networks.

I'm still not convinced that the agency world really understands trade promo and in-store (and they probably won't get fully on-board until we start holding our annual meetings in Cannes), but they are slowly groping their way toward understanding.

Magazines take a big hit

2009-01-19T19:12:00.002-06:00

I sometimes am criticized for writing too much about the decline of the newspaper industry. It is perhaps a fair criticism, though I do so because newspapers are, outside the store, the largest medium for trade promotion spending. Newspapers are not alone, however -- all the media (again, excepting the store) are hurting.

According to the Magazine Publshers of America, advertising revenue in their medium was down 7.8% last year, with the fourth quarter down a mind-boggling 13.8%. These numbers are worse than most of those I've seen for newspapers. Some of the major magazines have even worse numbers: Time was down 14.1% for the year, Newsweek -27.1%, the New York -20.7%. Those are some scary numbers.