business news in context, analysis with attitude

We had a story last week about Netflix, and compared its approach to making recommendations to users based on past DVD rentals to an approach that we said more retailers ought to take (especially when it came to creating a market for lesser used, niche products that consumers might not even know about). This prompted several emails.

MNB user Tom Brown wrote:

Your closing paragraph struck a responsive chord. Obviously, it would be great to creatively sell new products to individual people based on past usage of a similar item. But there is something more basic out there. There are easily a dozen items that we use that our Stop and Shop no longer sells. The store is a large store generally with redundant brands in most categories. With the customer identification made possible by the loyalty cards, there would clearly be a way to find the users before discontinuing an item. But I suppose that it is too tempting not to take the new product money and discontinue established items to make the space. And there is a difference between discontinuing redundant items and unique items that is seemingly missed by retailers.

This is one of the issues that we believe NetGrocer's "endless aisle" technology is uniquely designed to address, though the problem is that retailers often institute such an initiative without doing the kind of promotional push for it that the service warrants. If we had a retail store that could provide customers with virtually any grocery product they want regardless of whether it is on our shelves, we'd be making a big deal about it…especially if we were facing off against tough competition.

We wonder how many people are doing that.

Another MNB user, quite rightly, asked the following question:

Isn't this the Trader Joe's model (without all the club-card consumer research)?

To a great extent, yes. It carries only the products that it can sell, tests and promotes new products all the time, and specializes in surprising and delighting the consumer. Not a bad way to run a business, really…

Not everyone agrees with us, though. One MNB user wrote:

Isn't there quite a bit of shopping difference out there when you are buying groceries, on which we live, and movies, which we mainly seek for enjoyment?

It is to me.

While admitting there are grocery items I buy from which I get, mainly, enjoyment, i.e., snack foods for example, but when it comes down to buying to sustain me and my DW, it's down to brass tacks; buying what we like to eat and live on.

Now, maybe this netflix method is a way for a new item to get on my shopping list, or hers, more than likely, as I'm a stick in the mud about adding new and, usually, strange looking food item to my plate, she's always open for something new and different.

Hey, there are two different kinds of people in the world - people who eat to live, and those who live to eat. (Anyone reading MNB knows where we fit into this continuum…)

At some level, many (not all) supermarkets may have to concede some of the "food as sustenance" shoppers to Wal-Mart, because competing at that level may be impossible. Which means, conversely, that many (not all) supermarkets should target everyone else by focusing on people who will be energized by a fresh approach to food products in all categories. And that doesn't mean, by the way, just targeting traditional female shoppers, but finding new and original ways to run promotions and provide resources that will appeal to men, senior citizens, kids, teenagers, whatever…

This is a dynamic business, and you have to be dynamic to succeed in it these days.

Now, to be honest, we have the advantage when writing all these things of not actually being as retailer…a point that MNB user Marv Imus made:

You have been a strong proponent for years, as have I, on the ability to “mine” customer data for target marketing. But your examples of current retailers do not have the volume issue our industry has. Let me be more specific … in one week’s time our ONE store has 45,000 items, we have 15,000 active customers, we sell 150,000 units, and 7 years of historical data on each customer, which over that period of time is over 25,000 customers, stored on a desktop PC. You can see the issue we have … 2,000 customers per day times 25 items avg per basket times 365 days per year is over 18 million records. And that’s per STORE ! No other industry has that kind of data. Today’s systems are better than even a year ago but still we can not get to the item level per consumer in a timely enough manner. That’s why you usually see marketing to the category level ( baby clubs ) or inside a category ( dog food ) just like your NetFlix ! They are NOT giving you detail suggestions but genre “similarities” … the other issue we have is in our data the consumer is NOT loyal ( we market her NOT to be ! ) Take the pasta sauce for example … we have 20 different “kinds” which runs to over 100 different sku’s ... each week we promote a different brand at prices levels that consumers can not pass up. So in the data a consumer in one year’s time has records of 10 different kinds and 20 different flavors. Which one is she loyal too ? This is in NO means a disagreement with your philosophical agreement about marketing to a consumer's preference … I agree COMPLETELY ! But we are no where NEAR there yet, and I do not expect anything much better in the next couple of years. That’s also why you see more programs in the Independent retail than in chains … we have less data so can manage it better. BUT we can not upgrade with every new system that is the hottest out there, either. We must wait a couple of years to get our ROI on that system. “We” ARE working toward this goal each and every day by building the databases of information to feed that wiz-bang program 5 – 10 years from now.

Regarding our story about addictive food, and the criticism that Dr. Barnard got for his radical views (as we discussed above in our essay), we got several emails:

So, let me get this straight: a scientist who chooses to belong to organizations dedicated to helping people live longer, healthier lives is now a political hack?

Perhaps Dr. Barnard's allegiances should have been mentioned in your original summary, but I strongly disagree that his case is the same as a physician in the "employ" of the American Meat Institute. Where, exactly, is the big financial payoff to Dr. Barnard for "getting everybody under the sun to stop eating meat?" Is "big veggie" (you know, those big evil broccoli conglomerates Eric Schlosser must be investigating right now) somehow behind him, financing his studies?

Besides, I think Mr. Hervey is "protesting too much." According to you, Dr. Barnard's study cast a much wider net, looking at meat, cheese, chocolate, sugar -- hardly the image of a doc with a fixated grudge. Whether or not one agrees with him, this sounds like a person who fits our old image of what a doctor is supposed to be: interested in keeping us healthy.

We rest our case about the problem with relegating such opinions to the fringe.

And another MNB user wrote:

I was at a natural products trade show a few years ago & attended a presentation featuring Dr. Barnard and another doctor whose name I have forgotten. They were discussing dietary protocol for cardiovascular patients. Dr. Barnard's approach included eliminating all meat and having the patient consume whole grains, vegetables, and fruits.

But the other doctor countered that after several decades of poor eating habits, the patient would probably be better off limiting certain favorite foods and increasing healthier alternatives, including using proper meds & dietary supplements, all under medical supervision. He suggested that forcing the patient to follow such a radical dietary routine, as Dr. Barnard was espousing, would cause the patient to become angry & frustrated and backslide into old habits. Dr. Barnard lashed out at him, saying that if the patient didn't follow such a strict routine, he/she would not see improvement. The other doctor said that the stress of such a radical change might hamper any improvement the diet provided! It was like watching a tennis match, each of them lobbing statements to counter the other!

The health-food crowd in the meeting room rallied around Dr. Barnard - he's made a positive name for himself with them. I was negatively impressed with him as a rabble-rouser & zealot. The natural products industry has created/increased awareness for foods processed with fewer questionable ingredients, better nutrition, cruelty-free personal care items, etc. Unfortunately, it has also given voice to people whose personal agendas take precedence over common sense, good nutrition, and good medicine.

We had a thought while reading this letter:

Who is to say that Dr. Barnard's approach is any more radical than, say, Dr. Atkins?


Responding to a story last week about moves that both Albertsons and Winn-Dixie were making on the private label front, MNB user Ellen White wrote:

How is it that Albertson’s thinks the customer will want a premium product…I guess my take on them is that they are trying to compete with Wal-Mart on so many fronts, it’s confusing to the customer to throw high priced competing product in the stores. Also, I hope this means they will abandon pricing their private label orange juice higher than Tropicana - I never got that.

Winn Dixie might get the margin it wants, but how can you drive sales enough to offset their lower prices? Top line growth is simply # units x price…they will have to sell a lot more units.

I continue to have concerns that all of the conventional competitors will cut service instead of beefing it up and that’s a problem in my book. I understand that the competitive environment is horrible, but Sam Walton even said “they need to avoid coming at us head-on, and do their own thing better than we do ours….it doesn’t make any sense to try to under-price Wal-Mart on something like toothpaste.” I’ll bet if you ask Albertson’s and Winn Dixie what “their own thing” is, they can’t tell you.

Another MNB user wrote:

Although I haven't bought the brand, it's been in the Albertson's near our house. It is priced higher that some frozen foods, though may not be more expensive per oz as I didn't look closely as we typically don't purchase/consume frozen prepared meals. However regarding your comment about upscale, the packaging is very clean (and white) with good food photography, which is more in alignment with more upscale brands....Coulda fooled me...

We made a crack the other day about misplaced priorities of school board, and how they often view education as a "cost" as opposed to an investment, prompting the following email from an MNB user:

I have no children and I agree with you on this subject. Children are our investment in the future. They are our future leaders, inventors, and caretakers of our society. Teachers are supposed to teach!! Not empty trash cans and sweep floors like some have to do in Oklahoma or even buy supplies out of their meager salary. (By the way I am not a teacher nor do I have a spouse that is a teacher.) How are we going to attract qualified people if we don't pay them a decent salary or supply them with the necessary tools to teach? If we continue to cut budgets and activities then the only way we can help make up that shortfall if the good folks don't want to raise taxes and get the taxpayers upset is to take corporate donations.

Parenthetically, we went to our 14-year-old's Babe Ruth game yesterday in Ridgefield, Ct., and saw that not only did the scoreboard have a Pepsi logo on it (which we thought was just fine), but each player's uniform had an enormous "PEPSI" written across the back where normally their own name would be.

Not sure what it cost Pepsi to get that placement. Nor what the greater cost was of being willing to offer Pepsi a group of 14 year olds as human billboards.

Responding to our continued support for Country of Origin Labeling (COOL) legislation, MNB user Robert Hermanns wrote:

I disagree with you on COOL, it is a real mess that will cost consumers in the end. There may be a compromise that works for consumers and the industry, but in its present form it will be a disaster to the supply chain that someone will have to pay for.

The question, we suppose, is whether consumers are willing to pay for it - and if they want it in the first place.

If they are, and if they do, should the industry be resisting?

However, if there is a compromise that is both efficient and effective, we would support it completely.

One consumer perspective on this was reflected in the following email:

When the food-basket today is made up of several items from the global village, it would be very foolish not to know about what precautions/measures/regulations where in place in the exporting country to assure the highest standards of food quality & safety.

COOL means to provide proof of trace-back & forth…the consumer will play the price, no one else, the pay back is we will not become ill for the sake of PROFIT. Think long & hard about this one.

We had a piece last week about how a couple of Ahold USA chains, including Giant down in Washington, DC, are hiring consultants to help them define their customers better and then market to them.

One MNB user responded:

Having lived in the Washington area in the 80's. I find it eye-opening that Giant has to pay someone to identify their customer. They sure had it right when I was there. Clean stores, with a lot of services designed to get the 2 income families that spent way too much time sitting in traffic in and out. Their customers didn't worry about clipping coupons or the price of hamburger. They never had an out-of stock (and as a vendor, I endured their wrath when our trucks were late or we shorted an item to them.) Have the principles of grocery retailing changed that much and/or has the Balt/Wash Giant consumer changed? (I'll tell them that and I won't charge them for it…)

Finally, at the risk of seeming immodest, we have a couple of other emails we'd like to share:

You are great for putting all the ranting of people like myself into your daily. Some of it is great for the morale. Some of it is closer to humor
and some makes one want to weep. (No comment on where I must fit into that picture please.) I'd love to see some of what does not get past the review

I did a little comparison on Krispy Kreme VS Shipley's glazed donut
and I vote for Shipley. I've yet to have the key lime variety so I now have
a mission for my next Donut splurge.

On a side note, after hearing about "Two Buck Chuck" and getting some research on sales trends of PL wines we have placed a similar product in our stores. The price is closer to 5.99 on a daily basis but the quality is better than the price suggest. Sales are picking up each week and we have
ad inquiries from a few restaurants who are considering the PL wine as a "House Brand" for the Bohemian crowds on Saturday PM. Granted, none of these restaurants are going to be serving royalty this week. It is valuable lesson
to learn how quality products can be purchased and sold if you willing to forgo the national advertising and take on most of the advertising in your market aimed at your customer. (promoting a product that is only in your store.) Never stop learning…

Enough of my rambling. Thank you for the great daily news and I'm glad to
see your sponsorship growing.

Keep up the good and informative commentary.

Thanks. These kinds of emails make our day.

And another MNB user wrote:

I think this is probably the best email I receive. Thanks for your opinions and comments.

When I started in this business, almost twenty years ago, it was fun. Now it is survival. The industry has taken a basically simple business and complicated it to the point were they can't understand how the competition is beating them at the business they established. I hear all of the catch phrases and industry programs, but they don't mean a damn thing unless the principle behind the program is genuine and real. It's about keeping your customers happy, selling
groceries for a fair price and not managing your category into sameness. When I go to stores today I can't hardly tell the difference between competitors.

There's a slogan there:


We'll have the t-shirts printed up straight away.
KC's View: