Kohl's opened 65 stores today

That's a lot of stores, folks. And this is a company that is doing very well.

The company’s financial picture is the envy of the retailing industry, analysts said. Revenue is up, to $13.4 billion last year, from $6.2 billion in 2000, during which time profits rose to $842 million, from $372 million. Shares of Kohl’s rose $1.61, to $69.14 on Wednesday.

And on Thursday, when the nation’s retailers report September sales for stores open at least a year, a closely watched industry measure, Kohl’s is expected to report a 16 percent increase, above the industry average, which is in the single digits.

Kohl's has done this well by being determinedly mid-market:

The no-frills, no-mall, no-full-price retailing model of the Kohl’s department store has turned the once-quiet Wisconsin company into a clothing industry powerhouse ...

So why am I reading this:

So the chain’s once-steadfast focus on the classic, traditional consumer — who had a family and bought snowflake mock turtleneck sweaters and plaid button-down shirts — has expanded to include clothing like white fur vests from Daisy Fuentes, a brand exclusive to Kohl’s.

And this:

In a coup, Kohl’s wooed the designer Vera Wang — a name associated more with Sak’s and Bloomingdale’s than discount retailers — to design a line of contemporary clothing, handbags, shoes and home goods. The products will reach stores in autumn 2007.

And this:

The company has said it will make women without children, who typically have more disposable income and crave more fashionable merchandise than the average Kohl’s shopper, a priority in its merchandise and marketing.

Why is it that stores have this craving to move "up-market"? I have always suspected that it's because the execs are embarrassed to be running a store where they and their friends wouldn't be caught dead shopping.

But then I'm a cynic.

Obviously, the people who are running Kohl's are successful merchants who presumably know their market a whole lot better than I do, but every time I read about a store moving up-market, I hear a voice whispering "sell that stock."

Best Buy partners with SanDisk and Real

Best Buy will be marketing a new line of SanDisk MP3 players together with subscriptions to Real Networks' download service.

The company said it would use Real's Rhapsody subscription service, hand-in-hand with a new line of SanDisk Sansa digital music players, much in the way that iPods work with iTunes.

"The customer expects everything to work together," said Jennifer Schaidler, vice president of music for Best Buy.

The service and players will both be available starting October 15 and will be heavily supported in its more than 840 nationwide stores.

The article doesn't say so, but it sounds like an exclusive deal.

Best Buy said it will throw its promotional weight behind the new service, offering buyers of the Sansa a free two-month subscription with up to 30 hours of preloaded music already on the player.

It will be interesting to see if this three-way partnership can cut into iTunes' 88% market share or iPod's 60%.

The end of the insert?

Probably not. But Media Daily News offers up something worth thinking about:

Verklin, who heads up Carat's Americas and Asia units, dropped the bombshell that a major retailer has told agencies that future media plans would eliminate FSIs--the colorful supplements used to distribute coupons and promote retail sales--from its advertising plan by 2007.

That's about all the already-punchdrunk newspaper industry needs to hear.

I very much doubt that the FSI is going away anytime soon. But a significant decrease in frequency and/or size would affect not only the newspapers, but vendors. Where will all those trade promo dollars go? What leaps to mind is in-store, but as a shopper I'm wondering how many more ad impressions I can handle as I traverse the aisles.

More trouble at Penn Traffic

I commented a week or so ago about Deloitte & Touche resigning as auditors for Penn Traffic. The company has failed to issue any financial reports for about a year and a half, and I concluded that, "You gotta wonder what's in those reports."

There's more reason to wonder now. Yesterday , the CEO quit very suddenly.

The company didn't say why Chapman decided to retire. Chapman could not be reached for comment.

Not a good sign, especially when combined with the collection of bad news packed in this paragraph:

Penn Traffic's biggest investors, the private equity firms that invested in the company, are firing salvos. The company has not released any financial statements since it reorganized in 2005. Its reasons include ongoing internal and external audits and investigations by the Justice Department and the Securities and Exchange Commission over promotional allowance practices.

Coach suing Target over fakes

Coach has filed suit against Target to stop them from selling fake Coach hanfbags:

Coach Inc., which markets luxury handbags and leather products, sued discount retailer Target Corp., asking that Target "immediately cease and desist from selling" counterfeit handbags that claim to be the real deal. In addition to seeking any profits on its sales of the alleged Coach knock-offs, "we'd also like them to make all records of these sales available to us," including suppliers, said a Coach spokesperson. Target did not return phone calls.

If the allegations are correct (we have no way of knowing), it's a poor idea on Target's part, since word of something like this can undermine shoppers' confidence in everything they carry. We'll wait to hear Target's side of the story.

The biggest turkey ...

... company.

Sorry -- I couldn't resist the headline.

Carolina Turkey has gobbled up (oops, there I go again) Butterball, buying it for $325 million from ConAgra, making them the biggest company in the field.

The expanded company expects production to reach 1.4 billion pounds of turkey in 2006, or 20 percent of total turkey production in the United States.

Another retailer fiddles with allowances

Ahold, Kmart, Office Max, Saks, Home Depot, Penn Traffic … I’ve probably missed a few, but that’s the list that comes to mind of retailers who have recently been accused of playing around with vendor allowances in one way or another. Now CSK Auto joins the list.

You may not know CSK if you live in the eastern half of the country, but in the west, the component parts of their name (Checker, Schucks, Kragen) are among the leading names in auto parts – they have almost 1300 stores and sales of about $1.6 billion – a good-sized outfit.

But apparently some of the top managers didn’t feel that profits were quite as good as they could be, and so they “improved” things. Here’s the press release CSK put out Thursday:

CSK Auto Corporation announced today that the Audit Committee of its Board of Directors has substantially completed its previously announced internal investigation (commenced in March 2006), which was conducted with the assistance of independent counsel and a separate accounting firm. The scope of the investigation focused primarily on the Company's accounting for inventory and vendor allowances associated with the Company's merchandising programs, but was not limited in any way by the Audit Committee. The investigation identified accounting errors and irregularities that materially and improperly impacted various inventory accounts, vendor allowances, other accrual accounts and related expense accounts.

Several people, including a couple top execs, got the axe:

The Company announced that Martin Fraser (President and Chief Operating Officer), Don Watson (Chief Administrative Officer and former Chief Financial Officer), as well as several other individuals in the Company's finance organization are no longer employed by the Company.

The restatements are tentatively expected to come to $82 million, most of it being related to inventory, but $12 million from vendor allowances.

As we’ve said previously, we don’t expect this to be the last such case. There simply is too much money available in allowances, and it is too easy for an executive under pressure to meet quarterly expectations to fudge those numbers.

TPMA posts a big win

The just-concluded annual conference of the Trade Promotion Marketing Association had the biggest attendance for the association in many years, and was hailed as a great success by attendees.

Kudos to Mike Kantor and his team for putting on a great show and continuing the turn-around efforts Deb Kuhns put in place over the past few years. Mike has done a great job since taking over from Deb, and it showed in the capacity crowd and the strong agenda.

Part of AMD's suit against Intel dismissed

A federal judge this week dismissed an important part of Advanced Micro Device's antitrust lawsuit against Intel. AMD has sued Intel for, among other things, using rebates to coerce customers into buying exclusively from Intel. Similar charges have been brought against Intel in other countries, including Japan, Korea, and the EU. AMD wished to use foreign activities as part of their case in the US, but the judge ruled against them.

Farnan [concluded] that he lacked jurisdiction over AMD's claims based on conduct and harm that took place outside the United States.

"AMD has not demonstrated that the alleged foreign conduct of Intel has direct, substantial and foreseeable effects in the United States which gives rise to its claim," Farnan wrote in an 18-page opinion.

At best, he said AMD's allegations described activity that might have had "ripple effects" in the United States, but not enough to give rise to an antitrust claim.

The case will go to trial in 2009. No kidding -- 2009.

Coles Myer turns down Wal-Mart and Tesco

We've reported previously on various rumors of a buyout of Australia's Coles Myers chain. Now the company is denying that they have even been in talks with anybody.

Australian retailer Coles Myer Ltd. said on Thursday it has had no talks with British retailer Tesco Plc or U.S. giant Wal-Mart Stores Inc. and did not plan to sell any of its businesses.

Ex-CFO charged with channel-stuffing

The ever-popular gimmick of channel-stuffing has found another victim. The Securities & Exchange Commission has "charged the former chief financial officer of Lantronix Inc. with orchestrating a scheme to inflate the company's financial results for fiscal 2001 and 2002."

The SEC said that Cotton ... orchestrated the scheme, which involved deliberately booking revenue and delivering products to a distributor before orders had been placed, violating accounting procedures by booking revenue from orders that gave distributors expanded rights to return unsold products.

Marketing execs axed at Revlon

The new boss at Revlon took only a few days to fire a bunch of people, including top marketing execs.

The cosmetic marketer's new president-CEO, David Kennedy -- tellingly, the former chief financial officer -- is sweeping out 250 jobs, among them several executives from Mr. Stahl's team, notably CMO Stephanie Klein-Peponis; Chief Creative Officer Rochelle Udell; and Revlon Director-Marketing Maura Mottolese. No successors were named; the company said brand managers would report to Mr. Kennedy. A spokeswoman did not return calls for comment by press time.

According to an executive close to Revlon, the cuts are a part of Mr. Kennedy's strategy to develop a more cost-effective structure. "We were fat in terms of senior-level marketers," the executive said. The team is also likely taking the fall for the failure of a multitude of recent efforts intended to turn the company around, among them the launch of the Vital Radiance brand aimed at older women.

Revlon had put more than $17mil in media behind the new line, but they're dumping it now:

Mr. Kennedy said the company has decided to discontinue the line, taking a negative hit of $110 million, figuring it was unlikely to receive space at Revlon's "best [retail] accounts." Instead of building Vital Radiance, the investment saved will be used to leverage the mainstay Revlon brand, he said.

Rob Hand joins Oracle

Oracle has hired Rob Hand. Smart move, Oracle.

TPMA: SRO

The TPMA meeting next week here in Chicago has apparently reached capacity.

Having too many attendees has not been a big problem at TPMA meetings in the past -- we salute the people involved for putting together a great agenda and promoting it successfully.

Tesco may be close to India deal

The Business Standard reported that Tesco will announce by October 10th if they have a deal with Indian conglomerate Bharti to become the first foreign grocery chain to enter the Indian market.

Although Indian law has been liberalized, Tesco still could not enter the country directly, it would be acting with Bharti as a franchisee.

"Planning is underway and a team is carrying out extensive research and is testing various models," Bharti chairman and managing director Sunil Mittal told the Business Standard daily newspaper.

Auditors quit at Penn Traffic

Deloitte & Touche has resigned as Penn Traffic's auditors over the company's refusal to release financial reports.

We've reported previously (here and here) on the company's problems, which stem apparently from misbooking trade promotion allowances: ("The Audit Committee found that the Company had engaged in certain improper practices principally relating to the premature recognition of promotional allowances ...").

The company, which operates 112 stores in the northeast US, is being investigated by both the SEC and the Justice Department, and fired a couple top executives earlier this year as a result of an internal investigation. But they have not released financials since emerging from Chapter 11 in April 2005.

You gotta wonder what's in those reports.

CompUSA for sale?

The Dallas Morning News says that Grupo Carso, the Mexican conglomerate controlled by billionaire Carlos Slim, is trying to find a buyer for CompUSA.

They dumped their CEO last week, or rather, he is leaving "to focus on his family and new professional endeavors." And they brought in a new CMO as well.

The 230-store consumer electronics chain posted its strongest operating results in a decade in 2005, but it wasn't able to keep up the momentum and needs additional capital to remodel and build new stores.

According to industry sources familiar with the offer, Mexico's Grupo Carso SA has asked Credit Suisse to quietly approach people who might have an interest in buying the company.

Over the last two years, private equity firms flush with cash have turned to the retail sector to find companies that are poised for growth or ripe for a turnaround.

CompUSA's problem is that retail is going to the two-per-channel model, and they're a poor #3. CompUSA's sales of $4.6b are less than half of Circuit City's $11.6b, and only about a seventh of Best Buy's $31b.

Wal-Mart international news

After Wal-Mart's pull-outs from Korea and Germany, a lot of attention is being paid to their international moves.

Wal-Mart has been doing very poorly in Japan ("having lost $105 million in 2004 and $152 million in 2005, [Wal-Mart] expects losses of $468 million during 2006") and there has been some speculation that that country might be the next cut. But Business Week reports that Wal-Mart may be looking to buy their way to prosperity.

... for all the backtracking elsewhere, Wal-Mart doesn't appear ready to give up on Japan just yet. On Sept. 4, Kyodo News, a Japanese wire service, reported that Wal-Mart and market leader Aeon have submitted proposals to acquire a stake in Daiei from trading house Marubeni, the largest shareholder in the once mighty retailer.

Wal-Mart declines to comment on the report, but the impact of a deal with Daiei shouldn't be underestimated. Its outcome could well determine the success or failure of Wal-Mart's experiment in Japan, the world's second largest retail market after the U.S.

BW suggests that Wal-Mart may quit Japan if they are unsuccessful in this bid: "But if Wal-Mart fails again to get its hands on Daiei, some fear it will bolt from Japan as it has from other countries." For the contrary view, they quote a local analyst:

So does that mean Wal-Mart should cut and run if Daiei slips its grasp? Not necessarily, says Yoshihiro Tamehiro, director of the Distribution Economics Institute of Japan in Tokyo. "Wal-Mart is desperately looking for M&A opportunities in Japan. If they don't get Daiei, they should have other plans in place." If they don't, the Seiyu gambit could turn out to be another messy and expensive overseas quagmire for the king of U.S. retailing.

Meanwhile, in Australia, the latest Coles Myer rumor is that Wal-Mart is interested in buying.

Australian retailer Coles Myer Ltd. Thursday declined to comment on a report that U.S. retail giant Wal-Mart Stores Inc. was considering a bid for the company. "We don't comment on speculation," a spokesman for the Melbourne-based company said.

The Crikey corporate gossip newsletter earlier Thursday quoted unnamed sources saying Wal-Mart directors were in Melbourne along with advisers from McKinsey and in the advanced stages of a bid, which could lead to Coles Myer being carved up.

The report said the proposal would lead to Wal-Mart buying the Coles grocery business, Kmart, Vintage Cellars and Liquorland, while Melbourne businessman Solomon Lew would buy Target. The Officeworks office supplies and furniture business would be sold to the highest bidder, the report said.

Clinique in drugstores

Estee Lauder is putting their Clinique line into the drug channel:

Estee Lauder is going mass by expanding distribution for its prestige Clinique cosmetics brand to include Shoppers Drug Mart, the largest drug store chain in Canada.

My first reaction was that this is a disastrous move -- that going mass will destroy the brand image. Some analysts quoted in the story disagree, however:

Industry analysts did not seem particularly concerned that distribution in an "assisted self service" channel would harm Clinique's image.

It's good to test different channels, said Suzanne Grayson, industry expert and president of the consultancy Grayson Associates. "If it's executed well -- and I'm sure it will be -- with the mix of other high end brands already [in the shopping venue], it won't affect the brand image."

On reflection, though I'm not convinced that the move will not damage the brand, I'm also not certain Lauder had a lot of choices. With the continuing constriction of the department store channel, the fact is that they (and many other "department store brands") are running out of places to sell their products.

EU takes on German Intel case

The EU has taken over Germany's investigation of Intel for anti-competitive practices. We reported on this in July.

Germany's antitrust agency, Bundeskartellamt, received a complaint from AMD alleging that Intel had abused its dominant market position by putting pressure on major electronics retailer Media Markt to not sell AMD's chips. Because the Commission found similarities with its existing probe into Intel, it took over the German investigation in late August, Commission spokesman Jonathan Todd said.

AMD has pressed similar charges with the trade commissions in Japan and Korea, in addition to filing a private action against Intel in the US.

Other countries have weighed in with their own investigations into Intel's business practices. Earlier this year, the Korean Fair Trade Commission sought more documents from Intel relating to its antitrust investigation into the chip giant.

And last year, Intel agreed to abide by recommendations from the Japan Fair Trade Commission, which had launched its own probe. The recommendations called for Intel to halt its practice of requiring PC makers to restrict the use of competitors' chips in exchange for monetary rebates. Intel accepted the recommendations but disagreed with the facts underlying the allegations.

We'll continue to monitor this closely, because the issues are important ones.

Dell expanding retail presence

Dell, which opened its first store in Dallas earlier this year, is planning to open more stores. The next will open in NYC in 2007.

Parra noted that while Dell had other cities in mind, further expansion would depend on results at these stores.

However, there are no plans to put Dell product in conventional retail outlets.

Parra said the company would not seek to put its products in other big-box electronics retailers.

"That's not us," he said. "It is unlikely you will see our PCs in Best Buy."

This is part of the increasingly-blurry lines between manufacturers and retailers, as retailers increase their private label and manufacturers open retail outlets. (Though Dell was always a cross-over).

Walgreen cutting SKUs

Walgreen is planning to reduce the number of SKUs on its shelves, both because they think they may be confusing customers with excessive choice and because they are looking toward building smaller stores.

Walgreen wants to reduce the number of good its carries, such as multiple varieties of Tylenol, Chief Executive Officer Jeffrey Rein said at a Goldman Sachs Group Inc. retail conference in New York City Friday. The company is also considering opening stores that are smaller than its traditional stores in the 10,000- to 14,000-square-foot range.

While multiple varieties of the same product are one thing (not happy news for McNeil Labs to have their product singled out, is it?), I wonder if this will also be another case of a major retailer reducing the number of brands it offers.

Catering to ethnics

Bet you thought this was a post about US stores targeting Hispanics.

Nope, it's about British stores targeting Poles.

Leading British supermarkets are stocking up on Polish food to supply the thousands of Poles who have moved to the UK in the past two years.

Sainsbury's, Tesco and Asda are all introducing new Polish ranges, keen to tap into the substantial spending power of the UK's growing Polish communities.

Items sold include borscht, meatballs, pickled vegetables and sauerkraut soup.

There are apparently as many as 600,000 Poles in the UK -- a fairly significant market.

Wal-Mart: niche marketer?

A news article on the International Council of Shopping Centers website says that Wal-Mart is ...

...effectively breaking its 3,400-unit U.S. division into six smaller chains that will target specific consumer segments: affluents, African-Americans, boomers, Hispanics, rural residents and suburban residents. For example, stores aimed at African-Americans will feature more urban-style apparel and ethnic hair care products in addition to expanded gospel and rap music selections. The chain is renovating units at the rate of about 300 stores per year to reflect the new merchandising strategy ...

A few stats were cited that indicate success with the idea:

So far, 200 stores have undergone conversion, he said. At one Houston store recently converted to the Hispanic-targeted model, sales per square foot are 7.6 percent higher and gross margins are 156 basis points higher than those at other Houston Wal-Marts, he said. At a suburban Chicago store converted to the African-American-targeted model, gross margins are 250 basis points higher than other area stores.

Sounds like a good idea, but I wonder if Wal-Mart's legendary logistical efficiency can stand the strain of supplying six chains simultaneously.

Big box ordinance vetoed

Chicago's mayor has vetoed the "big box" law passed a few weeks ago, which would have required large retailers to pay $10/hour (rising to $13/hour by 2010).

It was the mayor's first veto in his seventeen year term (in Chicago, it's rare for the council to pass a law that the mayor doesn't approve of), and he appears to have pulled a few aldermen over to his side to ensure he won't be overridden.

The golden mean

It looks like J. C. Penney is seeking the middle ground in their new ad approach and new agency Saatchi.

J.C. Penney's desire to reposition its brand as the preferred choice in the "hearts and minds of Middle America" drove its decision last week to shift creative duties from DDB to Saatchi & Saatchi, said Penney chief marketing officer Mike Boylson. The shift came after months of presentations by both DDB in Chicago and Saatchi in New York.

"We believe that the hearts and the minds of Middle America are up for grabs," Boylson said Friday. "Middle America is really underserved. And we think there's a unique opportunity in owning the middle, owning the moderate space."

Not that I know much about advertising or positioning -- I'm strictly a trade promo guy -- but all the talk about the country going high/low (it's either Wal-Mart or Nordstrom) has struck me as overdone. I think JCP has the right idea. In any case, we'll see.

Shameless self-promotion

My new book, Trade Promotion Marketing, is available at the ANA Bookstore.

I'm sure you'll love it -- buy several and give them out as Christmas gifts.

Coles Myer update

We mentioned a few weeks ago that Coles Myer, Australia's #2 retailer, was being pursued for a buyout. As an update, the board yesterday rejected a $13b bid -- although that may be an effort to get the pot sweetened:

Coles Myer said the bid, pitched at an indicative price of A$14.50 a share, was opportunistic and highly conditional, subject to unspecified due diligence, and offered no certainty on proposed financing.

However, analysts said the consortium, a group of top private equity players led by U.S.-based Kohlberg Kravis Roberts, could return with a higher bid, given the potential to add value to Coles Myer's food and liquor stores across Australia. The bid was pitched at a 5.8 percent premium to Coles latest share market close at A$13.71.

Tesco US update

I've been following Tesco's plans with interest, and here are a few more tidbits.

First, from LA, we learn that Tesco is building a distribution center in the desert east of LA on the site of the old March air base -- convenient to LA, Phoenix, and Vegas, where the first store will be going up. They also report that the stores are anticipated to be in the 10,000-12,000 square foot range and will go for a somewhat upscale approach:

In America, Tesco plans to roll out a chain of convenience stores based on its Express format, a move that will have it go head-to-head with niche retailers such as Trader Joe’s — a gastronomic grocery chain that prides itself on its hip image — rather than Wal-Mart.

Tesco’s small-store format, Tesco Express, has proved a huge success not just in Britain, but around the world.

It was in 1994 that Tesco opened its first trial Express store in Barnes, southwest London. Originally developed on petrol forecourts, Tesco initially appeared to be unconvinced about the new format — a year later it had opened only two more trial outlets.

But today it has 830 in Britain, Thailand, Japan, Korea, Malaysia, Turkey and Ireland and is opening two Express stores a week in the UK alone.

From Phoenix, we hear that the name of the stores might be "Fresh & Easy", and that they are planning to open fifty stores in the first wave, with an eventual goal of 100 in the Valley of the Sun.

Tesco's Phoenix concept is to provide the convenience of a Circle K or 7-11 mini-mart, while offering fresh and prepared foods, such as those found at Trader Joe's, Whole Foods or Sprouts.

Sara Lee spins of Hanesbrands

The spin-off of Sara Lee's apparel brands is officially complete.

Winston-Salem, N.C.-based Hanesbrands, whose largest customers are Wal-Mart Stores Inc. and Target Corp., had $4.49 billion in sales for the year ending July 1, compared with $4.68 billion a year earlier.

The new company includes the Hanes, Champion and Playtex brands.

More paper-cuts

The newspaper industry continues to shrink. We noted the staff cuts a few days ago, and now we note The Boston Herald cutting the paper itself -- by about six pages:

The cuts were as follows: one news page; one sports page; two business pages, including a listing of financial tables; and two features pages.

That'll pull in the readers.

Okay, I'll admit it: I can't see what else they can do. The fact is there are fewer readers, therefore fewer advertisers, therefore fewer pages. The problem the industry faces is ... where does the cycle end?

News Flash!: Selling to department stores is getting tougher

Despite my snarky headline, this USA Today article is interesting.

Some of the best-known clothing and accessories companies, such as Jones Apparel and Liz Claiborne, are dealing with fewer outlets to sell in, thanks to department store consolidation. Federated Department Stores bought May Department Stores last year, and on Sept. 9 former May stores across the country will become Macy's. Meanwhile, Saks has sold several of its non-Saks department stores to Belk and Bon-Ton.

The mergers leave clothing brands looking for new outlets, opening their own retail stores and trying to quickly make friends with new buyers for the remaining department-store names.

The article lists some anticipated winners and losers from the coming shake-out:

Winners:

• Polo Ralph Lauren
• Liz Claiborne
• Philips-Van Heusen

Losers:

• Jones Apparel
• Kellwood
• Tommy Hilfiger

Some thoughts on how to adapt to the new market:

... smart brands also will form partnerships with the strongest retailers and customize their offerings the way some already have with Macy's. Along with heavily promoting its private labels, Macy's will have exclusive merchandise from Elie Tahari and Martha Stewart in fall 2007. Vera Wang announced a deal last week to create an apparel line for Kohl's, just as Isaac Mizrahi did for Target.

Rigby says shoppers will benefit from some of the likely improvements made in a downsized retail environment. Among them: Apparel companies will need to shorten their lead times to help get the trends and fashions consumers want into stores.

Is in-store TV effective?

Yes, says this study by Nielsen. It appears from the write-up that it might be sponsored by an in-store TV company, so take it with a grain of salt.

Consumers for the most part enjoy watching ad-supported media while grocery shopping and their buying decisions are often influenced by such messages.

So says a Nielsen Media Research study that examined in-store media provided by Fairfield, Conn.-based SignStorey. Albertsons and Pathmark are among the grocers that carry the SignStorey video network, which is now in 1,300 stores.

According to the study, 68 percent of those surveyed said in-store messages would sway their product purchasing decisions. Another 44 percent said they would swap a product they had intended to buy for one advertised on SignStorey.

The study, Nielsen's first customized analysis of supermarket data, gauged overall SignStorey viewership at close to 40 percent. (That figure—which represents approximately 22 million shoppers—included consumers who briefly glanced at the screens, listened to messages or watched intently for extended periods.)

Frankly, the first sentence makes me question the whole thing. I really doubt anybody enjoys it, but I'm willing to believe it might be effective. It's in line with my long-held belief that the store is the most effective marketing medium.

According to research house PQ Media, in-store TV ads tallied nearly $100 million in 2005 revenue, a 45 percent increase from the previous year.

Impressive numbers.

Death to the clamshell!

All consumers will be pleased to know that progress is being made in ridding the world of those horrible, impossible-to-open packages made of steel-reinforced plastic.

The end may be near for the seemingly impenetrable plastic clamshell package.

Costco Wholesale Corp. will begin rolling out to its membership warehouses this fall more product packaging that combines plastic and stiff cardboard.

With these hybrids, consumers can still see the product through the plastic bubble, but the edges are cardboard. And while consumers still will need scissors to cut and separate the sealed cardboard halves, the process will involve cutting a flat piece of cardboard rather than piercing welded plastic ridges and a molded case.

I was thinking this was off-topic, but it really is a channel marketing issue. In any case, it has always amazed me that marketers would show so little interest in an issue that angers so many of their end customers.

Another retail milestone in Chicago

My hometown seems to be getting a lot of attention in the retail sphere lately, with the disappearance of Marshall Fields and the anti-big box law.

And this weekend it was announced that Carson Pirie Scott will be closing its downtown location. The closure of the 600,000 square foot store is part of the long decline of State Street, once one of the world's premier shopping districts:

State was once studded with department stores. Among the names gone forever are Montgomery Ward & Co., Rothschild & Co., Schlesinger & Mayer, the Fair, Mandel Bros., Goldblatt Bros. Inc. and others.

Sears left, then came back. Marshall Field's remains, though it is about to become Macy's. Others are long gone.

CMOs don't last

If you report to the chief marketing officer and you don't like him/her, don't sweat it -- the bum will be gone soon. If you are the CMO, keep your resume polished.

According to a recent study, the life-span of the CMO is short and getting shorter.

The tenure for chief marketing officers at the 100 top consumer branded companies has continued to decline, according to a new study. Over the past three years CMOs at these companies have seen their time on the job drop from 23.6 months to 23.2 months, said Greg Welch, who heads the marketing officer practice for the executive search firm Spencer Stuart, Chicago.

This is the second such study undertaken by the firm.

“The surprising thing is that this trend is continuing,” said Welch. “When we did our first survey three years ago we really didn’t expect this to happen.”

By comparison, CEOs last 44 months, CFOs 39, and CIOs 36.

Free Pepsi in Rhode Island

Rhode Island's new law on rebates (which we reported on last month) has resulted in stores being forced to give away merchandise for free.

People flooded Shaw's supermarkets around the state when consumers spotted print ads that offered four, 12-packs of Pepsi products for free with a mail-in rebate. Shoppers also ran to Stop & Shop stores where ads offered 10 free 2-liter bottles of Pepsi with a mail-in rebate.

Sharp-eyed Walgreen's customers scooped up free toothpaste because of a similar ad snafu.

The law requires retailers to apply all rebates at the cash register and submit the paperwork themselves, rather than having the customers submit the rebates.

More on Rite Aid

Rite Aid's strategy was praised by the New York Times: "Analysts said that Rite Aid is poised to thrive, citing stronger sales and a boom in generic prescription drugs."

But some negative opinions were raised as well. Toronto's National Post questioned the deal:

A deal by Jean Coutu Group Inc. to sell its 1,858 U.S. drugstores in exchange for cash and a 32% holding in Rite Aid Corp. has left both stock investors and bondholders nervous, with some credit watchers predicting a revolt by holders of US$850-million worth of high-yield Jean Coutu debt that is part of the transaction.

Meanwhile, Moody's indicated they might downgrade Rite Aid:

Moody’s Investors Service has put Rite Aid Corp.’s credit rating on review following the drug giant’s announced purchase of Eckerd this week, and said a downgrade is possible.

The buyout puts Rite Aid at risk of taking on an additional $2.3 billion in debt, in addition to the burden of the leases that had been paid by Eckerd’s parent company, the Jean Coutu Group.

Rite Aid buying 1800 Eckerd/Brooks stores

I'll update this when there's more news in, but Rite Aid this morning announced that it is buying 1800 stores from the Jean Coutu Group.

This will give Rite Aid about 5000 stores and make it a closer #3 behind Walgreen's and CVS.

Newspapers cutting staff

The newspaper industry is trimming its staff in response to circulation and advertising declines.

Among others, Belo Corp. said on August 10 its flagship Dallas Morning News wants to cut 85 positions through buyouts as it prepares for a restructuring this fall. A day later, The Plain Dealer in Cleveland, owned by privately held Advance Publications Inc., said buyouts were coming.

In July, Tribune Co. said it would cut 120 jobs at the Chicago Tribune, and The New York Times Co. said it would cut about 250 jobs in its printing operations.

While the NY Times cuts are in printing operations, most of the article deals with newsroom cuts. I wonder if this is the equivalent of manufacturing companies cutting R&D when sales slump?

While I believe there is a decline in interest among readers (and therefore advertisers) in newspapers I don't perceive any decline in interest in news. When they cut back in the newsroom, it looks to me like they're cutting the part of the operation that has a future, in order to milk the remaining profits from the dying part of the business.

Program differentiation by product

In a recent conversation with an industry professional, he quoted a top Wal-Mart exec as saying that manufacturers often don’t realize that they have the upper hand when they have innovative products, and the retailers only have control with commodities.

An excellent point, which raises the idea of differentiating trade promotion approaches by product (and more specifically by product life-cycle). It’s not a new concept, by any means – I recall Levi Strauss withdrawing co-op advertising support from their 501 jeans about thirty years ago, trying to encourage retailers to promote other products, and I don’t imagine they were the first.

While I like the idea, a problem I see is the increasingly-rapid pace of commoditization. I was struck recently, while wandering through Best Buy, at how quickly MP3 players have moved from a totally new idea to near-commodity status (though Apple seems to be able to continue to demand a pricing premium, for the moment). And Best Buy is reported to be about to introduce private-label plasma TVs.

But that’s a problem with execution, not with the concept. It simply means that trade program managers will need to remain alert to the rapid changes in their product’s position in the life-cycle and be nimble enough to make rapid changes to the program in response. Differing marketing goals at different stages (e.g., awareness and acceptance in the introductory period, gaining distribution and grabbing market share in the growth stage, etc) will require managers to alter the program on the fly.

Add into this the need to differentiate your program by channel, and to maintain specific programs for key customers, and it demonstrates the growing complexity of trade promotion.

The in-store agency

Wal-Mart has appointed Saatchi & Saatchi X (conveniently headquartered in Springdale, Arkansas) as their first agency of record for in-store marketing.

It may be that other retailers have named agencies of record for in-store but, because they weren’t Wal-Mart, it escaped my notice. In any case, Wal-Mart’s embrace of the concept indicates (again) the growing importance of the store as a medium.

I have been arguing for years that the store is the most-important advertising medium, an idea that has gained further traction with the fragmentation and decline of what used to be “mass” media – especially TV and newspaper.

While Saatchi has long been working with Wal-Mart on store design projects and promos, it will be interesting to see what being agency of record truly means. In-store communications in most retailers (and my experience with Wal-Mart indicates that they are no different) consists of a wide variety of vehicles (signage, kiosks, endcaps, in-store broadcast, etc), some produced in-house, the rest from various suppliers, offered up in no coherent manner, and presenting competing and often contradictory messages.

Is Wal-Mart, through Saatchi, going to try to impose some sort of discipline?

It won’t be an easy job (to put it mildly), but it will be interesting to watch. And manufacturers, who are trying to get their messages through the in-store confusion, need to watch carefully and adapt their trade promotion programs accordingly.

"Retailer of the Year" goes bye-bye

Tower Records is in Chapter 11. As we noted a couple weeks ago, they had been cut off by their distributors for nonpayment.

According to their press release, they are seeking a buyer:

"Tower Records has conducted an extensive sale process and this step will allow buyers to complete a sale in time for the holiday season while maximizing the value for stakeholders." In March of 2006, the Company retained Houlihan Lokey Howard & Zukin as its marketing and sales agent. The Company is evaluating Letters of Intent from parties interested in acquiring the Company. Mr. D'Amico stated, "Potential parties seeking to acquire Tower Records recognize the strength of the brand and its unique position within the marketplace, making it a very attractive opportunity."

The amusing part of the press release was this:

Last week, Tower was voted 'Retailer of the Year' (Large Division) at the 48th annual National Association of Recording Merchandisers (NARM) convention for the third consecutive year.

How bad are conditions in an industry when the "Retailer of the Year" is in Chapter 11?

Australian rumors: Coles Myer on the block?

Lots of speculation swirling Down Under. Coles Myer, the country's #2 retail chain, which recently spun off its Myers department stores to concentrate on supermarkets and discount stores, is reportedly being eyed for acquisition. Rumored buyers include Wal-Mart, Tesco, and a consortium of private equity firms.

The Times (UK) has an interesting take on the private equity possibility:

If Coles is bought by a private equity consortium it will be the second big supermarket group taken private this year. CVS and Cerberus Capital bought the US-based Albertsons chain for US$17.4 billion (£9.2 billion) in January.

The dominance of private equity bidders for both Coles and Albertsons demonstrates the difficulty that supermarket groups now face in growing by acquisition.

These retailers have become so big, and their supply chains so complex, that trade mergers and takeovers are becoming unattractive — as Wal-Mart’s recent difficulties in Germany and South Korea, as well as Morrison’s complicated merger with Safeway, demonstrate.

This is likely to mean that supermarket retailers will have to concentrate on organic growth in the future.

Quick Notes - Thursday

Just what we need: More advertising overload. No, media's not fragmented enough yet, consumers aren't already tuning everything out -- we need still more advertising, so what we ought to do is turn the checkout conveyor belt into an ad.

A bad week in Bentonville: "... on the same day that Wal-Mart has reported its first overall profit decline in a decade, second-quarter results for its U.K. business on Tuesday were also not quite the vote of confidence the company was hoping for. In a pre-recorded conference call, Wal-Mart said the cutthroat competition of Britain's grocery market had effectively gnawed into Asda's margins, leading to lower-than-forecast profits."

Newspapers to be $20b short

Editor & Publisher reports on a study that says the newspaper industry will face a $20 billion revenue shortage over the next five years, due principally to declining circulation.

The firm based its projection on the industry's reliance on paid circulation, which has been slipping at an alarming rate over the past several years. "The entrenched habits of using the Web will only deepen the circulation decline," wrote lead analyst Ken Doctor in the report. "Couple that change with less-meaty print products, more free daily and weekly competition, and newsprint pricing increasing in the 5% to 8% range, and the problems multiply."

On the advertising front, the report said that only the classified category has shown promise (and subsequently is the one category propping up revenue). Newspapers are feeling the consolidation of retail stores and national advertising is unlikely to spring back unless publishers can track results.

As we reported last month, the Federated-May merger alone, with its consequent change in Federated's ad strategy, may cost the newspaper industry $425m annually.

Off-Topic: Our condolences to Arizona

The local Krispy Kreme franchisee has gone Chapter 11 and all the stores in the state were closed. Sugar addicts are in a panic.

... Stefanie Brown had driven her three daughters to Krispy Kreme in Peoria on Friday morning. One of Brown's daughters burst into tears when she told the kids they'd have to go somewhere else to eat.

More seriously, condolences to the employees, who were given no warning.

Wal-Mart feeling the Houk Effect?

I hope this isn't an indicator of how his career is going to go, but on the very day my son was hired by Wal-Mart (in a high-level position responsible for the efficient removal of shopping carts from the parking lot), the company announced its first quarterly profit drop in ten years.

Odds are it had more to do with Germany and Korea, to say nothing of poor same-store sales increases (up 1.5%, compared to Target's 4.6%), but this sort of thing could blight a promising career.

Tesco will be #1 in non-food

The BBC reports that Tesco will soon be the UK's leading non-food retailer.

Tesco is set to become the UK's largest retailer of non-food goods by the end of the year, according to industry analysts Verdict Research.

Tesco will leapfrog ARG, owner of Argos and Homebase, by the end of 2006 as it sells more than £6bn of non-food goods.

It has expanded into most areas of the retail market, selling clothes, books, electrical goods and seasonal items such as barbecues and garden furniture.

The report also says that this will likely lead to chains folding:

Verdict said it expected some retailers to fold in the face of Tesco's growth.

"Compounded by the effect of rising costs and more demanding customers, casualties from almost every corner of the market are inevitable," the firm said in a study of trends in non-food retailing.

Although no names are mentioned in the context of going out of business, a couple major chains are brought up as being particularly hurt:

Boots and HMV are among retailers which have seen their sales eroded by supermarkets in recent years.

Can we cut syllables instead of prices?

According to a study, prices that have fewer syllables are more memorable than those with more:

... two seconds after taking a product from a shelf, the average person has roughly a 50 percent chance of remembering how much it cost. But few researchers have examined why some prices are more memorable than others.

According to a new study, it is a matter of syllables. Each extra syllable in the price reduces the chances of it being recalled by 20 percent, according to the study, which will be published in the September issue of The Journal of Consumer Research. In other words, someone faced with a $77.51 camera (eight syllables) and a $62.30 bookshelf (five syllables) is about 60 percent more likely to forget the camera’s price than the bookshelf’s, after half a minute.

The question I would have is: How important is it that the shopper remember the price?

Wal-Mart looking to Asia for growth

According to India's Economic Times, Wal-Mart is looking to India and China for major growth opportunities, as it licks its wounds from its Korean and German flops.

Wal-Mart is becoming more serious about its India game plans. The retail behemoth, which has decided to pull out of German and South Korea markets to concentrate on core markets, has identified China and India as its future growth drivers.

As the Arkansas headquarters of Wal-Mart gears up to fine-tune its India entry plans, Amy Wyatt, international corporate affairs spokesperson, Wal-Mart Stores, confirmed the development to ET.

In an email interview, Ms Wyatt said: “The divestitures will allow us to focus on our core markets and to search for new opportunities in growing consumer markets such as India. It will enable us to improve the overall financial position of our international business and focus on our continued growth.”

The problem in India is that Indian law still prevents multi-line retailing by foreigners -- leading to speculation that Wal-Mart will be looking for a local partner:

However, Ms Wyatt refused to comment on several rumours in the market about Wal-Mart entering into partnership with an Indian company. “We are still in the research phase in India and monitoring the Indian government’s policy on FDI,” she said.

Recent reports in the Indian media have, however, suggested that Wal-Mart has initiated discussions with companies like DLF, Bharti, Mahindra & Mahindra and Reliance Industries for possible tie-ups. Ms Wyatt, however, did not confirm this.

Ahold advised to exit US

Major shareholders are arguing that leaving the US market would increase Ahold's value:

The Amsterdam-based company would be worth more than 9 euros ($11) a share, 26 percent above the Aug. 11 share price, if it were restructured, Centaurus Capital Ltd. and Paulson & Co. said today. The hedge funds together own 6.4 percent of the retailer.

Among rumors about the company are that Centaurus may be leading a buyout. Other speculation says that parts might be sold to Super Valu.

Distributors cut off Tower Records

The major music distributors have cut off shipments to Tower Records, apparently because the company has stopped paying its bills.

The move comes just days after Tower Records named a new chief executive: crisis management and bankruptcy specialist Joseph D'Amico. Tower executives informed record companies this week that they would not pay outstanding invoices, according to sources familiar with the conversations.

Tower executives, including D'Amico, did not return phone calls. A Tower spokesperson declined to comment.

Industry insiders and analysts said it was unclear whether Tower Records had run out of money or was attempting to pressure the record companies to extend better terms.

If the music companies suspend shipments for long, Tower Records could be forced to shutter its 89 locations, including the famous store on Los Angeles' Sunset Strip, analysts said.

Tower Records confirmed Thursday that it was working with a Los Angeles investment bank to sell the company.

The retailer reportedly received at least five bids this year from private equity firms. When a sale failed to materialize, D'Amico was hired in what is the third management shuffle in four years.

We wrote on the long, sad decline of the music business in general and music retailers in particular a few months back, when Musicland went belly-up. The loss of music retailers is partially the result of conditions peculiar to that category (music downloading and piracy) and partially the result of conditions common to all of retailing -- the increasing concentration of power in the hands of a few retailers.

The problem is one consumers should be concerned about, because the closing of specialty outlets for music narrows choices dramatically -- a condition that will be repeated in other categories.

It should worry manufacturers, because the closing of alternative outlets reduces their marketing options and increases still further the power of the few remaining retailers.

McKinsey says: TV ad effectiveness dropping

Effectivessness is declining rapidly, and by 2010, TV advertising will be one-third as effective as in 1990.

That shocking statistic, delivered to the company's Fortune 100 clients in a report on media proliferation, assumes a 15% decrease in buying power driving by cost-per-thousand rate increases; a 23% decline in ads viewed due to switching off; a 9% loss of attention to ads due to increased multitasking and a 37% decrease in message impact due to saturation.

The Goldilocks Law

You can't set your prices too high or too low -- they have to be just right.

That appears to be the point of these two stories I came across in Convenience Store News. Today, they reported that gas stations in Kentucky were fined for price-gouging:

The five owners of 11 different gas stations owe the state of Kentucky $47,500 in fines for charging too much for gas in the time after Hurricane Katrina, reported the Courier-Journal.

"On average, for these particular stations, the gross profit margin increased anywhere from more than 33 to more than 100 percent," said Attorney General Greg Stumbo at a news conference. Profits for stations increased from 47 cents to $1 per gallon, he added. The investigation reviewed prices from September and October of 2005.

However, just a couple days ago, they had this item about a chain in Wisconsin that was in trouble for setting their prices too low:

Woodman's Food Markets, operators of 11 stores in Wisconsin and Illinois, has altered its gas discount program after it lost a lawsuit filed by Kwik Trip that stated the grocer was violating the state's law on minimum markup for gasoline, The Associated Press reported.

...

The minimum markup law for the state requires pump prices to be 9.18 percent higher than the wholesale price ...

Toyota passes Ford

Toyota posted bigger sales in the US than Ford in July -- the first time ever. Toyota and Honda showed strong increases while the Big Three (that term is getting outdated, isn't it?) all had decreases.

GM, the world's largest automaker, said its sales fell 22.2 percent, with trucks falling 31.2 percent and cars inching down 2.7 percent.

At Ford, sales of Ford, Lincoln and Mercury vehicles fell 35.2 percent. Truck sales tumbled 44.8 percent, while cars slipped 6.7 percent. Sales of F-Series pickup trucks, long the country's best-selling vehicle and the company's most important vehicle, shot down 45.6 percent.

DaimlerChrysler's Chrysler Group said its sales fell 37.4 percent, with truck sales off 40 percent and car sales off 23.5 percent. That change happened even though Chrysler, alone among automakers, has revived the employee price promotion that fueled sales last year.

Those are some scary numbers.

Smithfield buys ConAgra Meats

Smithfield Foods has bought the meats division of ConAgra, including the Butterball, Eckrich, and Armour brands -- they recently bought the European meat operation of Sara Lee.

[Smithfield will] combine the management of the Butterball turkey business, which it valued at $325 million, with Carolina Turkeys, a business it co-owns with Maxwell Farms Inc. Butterball is the No. 2 U.S. turkey producer, with sales of about $600 million annually. Carolina Turkeys is the fourth-largest turkey producer in the United States.

The combination is likely to pressure Hormel Foods Inc. and the turkey products it produces under the Jennie-O Turkey Store brand. Although Jennie-O currently is the largest, the combined sales of Carolina Turkey and Butterball will surpass Jennie-O.

"For Smithfield this is a big deal," said Greggory Warren, a food analyst with Morningstar Inc., a Chicago-based market research company. "This moves them up the value chain. They might actually make [profit] margins of 6 percent or 8 percent, and that's up from 3 percent to 4 percent."

The two deals add $2.9b in sales.

A cracker jack promo

A common putdown is to say that something's so cheap that it's given away as a prize in Cracker Jacks or a cereal box. So I wonder if this promotion conveys the proper image for Ford. They're giving away a car as a prize:

Ford Motor Co., in an effort to keep promoting its Fusion mid-sized car, plans to put 600,000 toy cars into Kellogg Co. cereal boxes starting Sunday.

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

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

Wal-Mart admits defeat in Germany

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

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

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

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

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

Another use for RFID

This is somewhat off-topic, but I'll post it since people here are interested in RFID.

Bob Lewis Automotive is using RFID-enabled car keys to automatically track test-drives, improve security and simplify key access for salespeople at its Volkswagen showroom in San Jose, Calif.

One of the things that is particularly fascinating about technology is the way it is adapted to uses far different from the original idea.

Chicago passes 'big box' wage bill

Chicago today approved the bill requiring large retailers (Wal-Mart and Target, principally) to pay a "living wage" to workers.

The measure only applies to companies with over $1 billion in annual sales and stores of at least 90,000 square feet, which means it primarily affects Target and Wal-Mart.

It requires them to pay at least $10 an hour in wages plus another $3 in fringe benefits by July 2010. The state's minimum wage is $6.50 an hour.

It's possible the mayor will veto the bill, which he opposed, but it passed by a wide-enough margin to override. It's also possible it might be declared unconstitutional (as was a recent Maryland bill mandating health benefits and aimed at Wal-Mart).

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

Update Thursday: Chicago Tribune has some response from Wal-Mart and info on their plans in the Chicago area:

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

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

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

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

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

Old Navy/Gap getting desperate

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

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

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

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

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

Bye-bye, TeenPeople

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

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

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

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

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

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

UK supermarket investigation going slowly

The UK Competition Commission's investigation of the supermarket industry is off to a slow start, with Tesco announcing that they will miss the deadline for responding to the commission's request for evidence.

Britain’s four largest supermarkets — Tesco, Asda, J Sainsbury and Wm Morrison — are believed to have concerns about the amount of information sought by the commission, which has asked for replies to 131 questions.

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

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

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

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

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

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

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

NPD Group, according to this Boston Globe article, says that the merchandise mix at mid-price stores is becoming increasingly heavy on private label.

The trend is expected to accelerate. Research firm NPD Group predicts that by 2010, 60 percent of the merchandise mix will be private brands and labels, up from 25 percent in 1975.

It seems like every retailer is looking to private label as the magic bullet. The contrarian side of me says anything that popular is certain to be overdone. Look for somebody to do very well by swimming against the tide, with a strong brand name approach.

1.2 billion impressions

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

And it doesn't hurt that everytime the infamous head-butt was replayed, there was the Adidas logo on Zidane's jersey.

Under a rundown of "how the Adidas apparel sponsorship became a success," Nielsen said: "The much talked about 'head butt' by France's star player Zinedine Zidane was shown repeatedly." That exposure continues with replays on Web sites, such as YouTube.

AMD v. Intel -- this time in Germany

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

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

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

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

Corruption at Carrefour China

Carrefour is trying to root out corruption among its buyers in China, some of whom apparently are taking bribes from suppliers, according to People's Daily.

Rapid expansion in China by the France-based retail giant has generated huge profits but also caused problems such as bribes and corruption in stores. The company's Shanghai headquarters yesterday sent a memo to its South China Office urging it to crack down on corruption in its purchasing process.

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

I wonder if the bribes are less than slotting fees.

Hispanic mall

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

In trouble a few years ago, with two of its five anchor locations empty and its cineplex closing, the mall went in a new direction -- reopening the cineplex showing movies with Spanish subtitles.

Today, Hispanic shoppers crowd a revitalized Desert Sky - now a mall with a Mexican accent. Moviegoers get salsa with their popcorn, salespeople are as likely to speak Spanish as English, and sneaker store Finish Line abuts Mexican bootmaker La Gran Bota, which was recruited from a swap meet down the road. Sales at the mall are up 15 percent annually since 2004.

While ethnic shops catering to Latinos and Asians have long existed in small strip malls, many larger malls have been slow to wake up to the Latino potential. "The malls got there before the market did, and some malls don't see the opportunity," says Michael Falkenstein, a senior vice president at La Curacao, a Hispanic-focused, Los Angeles-based department-store chain that plans to open a store early next year at Desert Sky, its first outside California.

It seems to be working:

National retailers that not long ago wouldn't touch the place are opening stores at Desert Sky - among them, the Children's Place and music retailer F.Y.E. - and owner Macerich is preparing to spend millions of dollars renovating the mall. But the transition has faced some resistance. When Mr. Valenzuela proposed putting in bilingual signage three years ago and encouraging bilingual hires, some retailers balked. Now almost all are on board but he says he still must walk a fine line in making sure the mall isn't "too Mexican," alienating the white and black longtime shoppers who still make up nearly 30 percent of customers.

Rhode Island outlaws mail-in rebates

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

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

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

Further down in the article, I learned something I hadn't heard about before:

Separately, Massachusetts filed suit against Young America to demand that it submit to an audit of $43 million in uncashed rebate checks. Bay State officials claim the company kept that amount over seven years in return for charging its clients lower fees. The arrangement could be an incentive to deny legitimate rebate requests.

I've heard before stories that some rebate fulfillment services were using uncashed checks as a revenue source (I have no way of knowing if it's true), but I wasn't aware that any states had taken action on it.

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

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

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

On the TV side, however, the news is little better: the first week of July was the networks' lowest-rated week ever. While the week of Independence Day is traditionally poor, never before was it as bad as this.

CBS, ABC, NBC and Fox averaged 20.8 million viewers during the average prime-time minute last week, according to Nielsen Media Research. That sunk below the previous record, set during the last week of July in 2005.

Rebates: Another one bites the dust

Dell has jumped on the bandwagon:

Dell joins several retailers who have cut back or eliminated mail-in rebate programs since last year.

In June, OfficeMax Inc., one of the nation's leading office supply chains, said it would offer immediate discounts on product pricing instead of mail-in rebates. And in April 2005, electronics retailer Best Buy Co. Inc. said it would abandon all mail-in rebates in two years.

If I were in the rebate-processing business, I'd be looking for some ways to branch out.

Target to pull out of Chicago?

Target is issuing thinly-veiled threats to pull out of Chicago if the City Council passes a "living wage" bill as expected on July 26th.

... Target becomes the second retailing giant to threaten to pull out of the lucrative Chicago market in a last-ditch effort to stop an ordinance championed by organized labor that breezed through the City Council’s Finance Committee by a vote of 15-to-6 and has attracted support from 33 aldermen.

Wal-Mart has threatened to cancel plans to build as many as 20 new Chicago stores over the next five years if retailers are required to pay employees at least $10 an hour by July 1, 2010.

I was amused by this comment by one of the aldermen: "If they want to lose the more than $3 billion that is not being captured in my ward, that’s a bad business decision for them.”

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

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

Macy's continues alienation campaign

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

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

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

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

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

Spinning the unspinnable

I love it when somebody tries to make a disaster sound good. Album sales are down 4.2% this year, this is the fourth year of the past five that sales have declined, and what's the industry spin?

The decline reflects in part a dearth of big hits compared to the same period in 2005, which saw Mariah Carey and rapper 50 Cent each release multi-platinum sellers.

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

Uh, I have news for you. Yes, it's bad.

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

Off-Topic: Brainstorming

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

Has anybody ever been part of a brainstorming meeting that actually accomplished anything? I haven't, and it was good to see that others share my skepticism about this particular manifestation of the groupthink culture.

John Clark, a former university dean of engineering, says brainstorming sessions come in handy to distribute blame in the event of failure. But in his experience, most often someone hijacks the topic at hand, tries to prove everyone else wrong, works to impress the superiors who are present, or just plain blathers for his own enjoyment. "I can't remember a single instance where a group produced a really creative idea," he says.

The article comes down hard on teamwork, as well. I have mixed feelings about that -- as far as ideas are concerned, my own experience has been that the best ideas develop through a mix of individual and team inputs. My best ideas have generally been things I come up with on my own, then take to someone else; we hash it out a bit, then usually s/he comes back to me a day or two later and says, "You know, I think it would work better if we ..." Then we might bring in a third opinion, who adds something or points out a flaw, and we go from there.

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

Korea fines Carrefour

The Korean Fair Trade Commission has fined Carrefour for pushing suppliers around.

The nation's No. 4 discounter was cited by the Fair Trade Commission (FTC) for unilaterally forcing manufacturers to cut prices on products they sell to Carrefour stores, returning products without due cause and intentionally delaying the signing of contracts with suppliers.

Carrefour Korea was recently sold to Eland, a Korean clothing manufacturer. I wonder if Eland was one of the suppliers Carrefour demanded special terms from?

China to regulate big-store expansion

The Chinese government is expected to issue rules limiting the expansion of large retailers. Although the rule will officially be directed at all retailers, clearly it will more strongly affect foreign firms.

Many local retailers have expressed concern over the growing influence of foreign store chains like Wal-Mart and Carrefour, which have made significant inroads into the Chinese market in recent years.

Weekend Quick Notes

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

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

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

More on the Kraft spin-off

Kraft is getting closer to a spin-off from Altria, after a favorable decision in a tobacco lawsuit. We mentioned a week or so ago that a spin-off was looking likely. Wall Street observers think it will be next year, apparently.

'I don't see them spinning off Kraft until sometime next year,' said Greggory Warren, an analyst with Morningstar Inc. He said Kraft's new chief executive needs at least six months to get a handle on the foodmaker's problems ...

OfficeMax eliminating rebates

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

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

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

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

Shocking news from China

Well, OK, not so shocking: Researchers have found that people in China think TV is boring.

Isn't this dog-bites-man sort of stuff? What would be shocking is if someone, somewhere thought TV was interesting.

Ominously for advertisers, 85% of Chinese stop watching TV during commercial breaks. More than half change the channel, while rest of them do housework, eat, chat or use the bathroom.

Again, not exactly a shock, especially since commercial breaks in China can last twenty minutes.

Mark your calendars: TPMA, September

It's early (three months), but not too early to set the time aside -- the Trade Promotion Management Association will be holding their annual meeting in Chicago, September 25-27. Info on the conference is here, and registration is here.

It looks like an excellent agenda, and you should plan to be there.