More reaction to the debate surrounding Michael Sansolo’s piece earlier this week about “giving away the store,” which questioned why so many grocers define value only in terms of price.
MNB user Lou Lister writes:
I cannot agree with you more. Being in a "penny business" (poultry) it seems that always - and I mean always - when talking about products the question always come up, 'how much is it"? Instead of value to the consumer and to my bottom line margins and profits.
When I talk about perceive value of the customer (i.e. Low Fat Poultry products) I get looked at with the "deer in the headlights stare".
Thanks for your insight. I don't think anything will change from a retailer’s point of view anytime soon. Instead they keep worrying about Wal-Mart!
Another MNB user wrote:
Based on yesterday’s comment, I have a bit of a “devil’s advocate” question for you.
Why is it that everyone is advocating the concept of raising prices on turkey for Thanksgiving but many of the same people get upset about higher prices in urban food stores?
Here’s my thought…The logic behind raising the price of turkey is basically economics 101…as demand increases prices should increase. In underserved urban communities, we face economics 101 again…limited supply = higher prices.
So based on the above simple equations we should just raise prices as much as possible wherever economics 101 says there is an opportunity to do so.
But in the real world of the food business, nothing is simple. People get very worked up when their food prices increase. After all, food is a basic necessity of life, airline travel is not. Thanksgiving turkey may not be a necessity to keep on living, but it sure is a part of enjoying being American! If supermarkets everywhere were to raise the price of turkeys, there would probably be a class action lawsuit accusing them of collusion and price-fixing.
It’s a complicated business to sell food. We have a responsibility to make sure the food is safe, widely available and reasonably priced. Not that turkey pricing is a big moral issue, but it is touching on a “grey area” that gets consumers pretty crazy…businesses profiting on what they need to survive.
MNB user Ken Wagar wrote:
In the words of Pogo. “We have met the enemy and he is us.”
There is nothing new here. Have watched this behavior for 40 years all across this industry. My opinion? The industry is risk averse and retailers continue to believe and act on the belief that promotion prices are the primary reason for customers selecting where to shop on a week to week basis.
There is a risk in being seen as not price competitive and very few retailers are willing to accept this risk and build a customer relationship strategy on other issues. The exceptions tend to be Publix, Wegmans and a few others who over the years have established clear sets of customer value positions other than simply price.
I have participated in hundreds of ad meetings where the driving force was to set ad prices that would “swing the doors.” The belief being that Hot feature prices on in demand products has a direct correlation with customer count and total store sales. However, in a major research initiative in the meat department I participated in a few years ago we could find no statistical correlation between any single meat ad and the corresponding weeks store customer count or store total sales.
I believe promotion pricing has a great deal to do with what our normal customers purchase from us weekly and very little to do with drawing non regular shoppers to our store or influencing weekly total store sales numbers. I suspect that store ads and ad pricing help to establish relative competitiveness over time but have little impact on day to day or week to week sales. I would further postulate that stores or companies with the greatest sales variability from ad to ad are likely stores offering the fewest reasons for a customer to shop the stores. In other words they are the most price dependent as well as the most vulnerable to competitors price promotions. This also suggests that if you are successful in swinging the door you have gained the shoppers least likely to become permanent and loyal shoppers unless you forever after always have the lowest price.
While proving it would be most difficult I believe the answer to your question regarding how many turkeys are sold at a significant discount to customers that would have shopped the store anyway is very, very high. In an oversimplified example think about how many regular Wal-Mart shoppers would switch to Publix for their Thanksgiving needs based on the price of Turkey’s and conversely how many Publix shoppers would likely switch their shopping to Wal-Mart just because of a lower turkey price?
It is difficult to find any retailer who does not have a great sales week at Thanksgiving relative to the other weeks of the year. If this was the result of their cheap turkey pricing shouldn’t other stores in the market show poor sales weeks?
Just some things to think about.
I think it was Stew Leonard Sr. who used to say that there is a difference between cherry pickers and cherry buyers…and that he’d always prefer to cater to cherry buyers.
MNB had a story yesterday about how the debate over genetically modified organisms (GMOs) continues in the European Union, even as the World Trade Organization (WTO) has postponed until January 11 the deadline by which it wants the EU to overturn a ban on GM products that was implemented by Germany, Austria, Belgium, France, Italy and Luxembourg.
I posed a question:
How long would it take for the US to violate or ignore international trade rules if our leaders believed that these rules violated US sovereignty? I’m thinking about 30 seconds.
The use of GMOs isn’t just a scientific issue. It also, for many people, is a cultural issue…and I don't see what is to be gained by forcing our attitudes down other people’s throats. Except, of course, anger at what will be perceived as American arrogance.
One MNB user responded:
I believe countries have the right to ban GMOs, just as others have the right to use them if they wish….my personal opinion is, so long as they are marked as such, so the consumer/end user can make an informed buying decision on whether they want to purchase a genetically modified product or not. I have the same opinion on food irradiation - the irradiated items should be marked.
I choose not to use genetically modified foods, as the science is far too new to understand the long range impact of such manipulation of our food supply.
Another MNB user chimed in:
We were discussing this issue over Thanksgiving dinner. My Dad has been a beekeeper for the past 40 years. He claims the Europeans have found that GM corn is killing the butterflies. Now they think it is also killing the bees. Watch out. If you think our food prices are going through the roof due to oil, the lack of bees will be unprecedented in its scope.
We had a story yesterday about how online sales during Cyber Monday – the first Monday after Thanksgiving, which has begun to rival “Black Friday” in terms of promotional juice – rose 21 percent compared to last year, reaching $733 million.
The Wall Street Journal reported that according to the comScore Inc., “44% of Internet users shopped online Monday, with 60% of dollars spent online that day coming from work computers, while the balance came from home and university computers … The number of Cyber Monday buyers rose 38% from a year ago, although the average amount spent per buyer declined 12%. That decline may be attributed to the steeper discounts offered by a broader number of online retailers this year and the fact that new buyers tend to spend less online than returning buyers.”
I commented: The number of shoppers may be up, but with words like “recession” and “economic correction” and “$100 per barrel oil” being bandied around in headlines, it is hard to believe that total sales for the coming holiday season are going to be much higher than in recent years. Though it is fair to suggest that online sales could see improvement because a lot of people may avoid getting into their cars.
MNB user Al Kober had a real problem with my analysis:
You are becoming more negative all the time. Part of your liberal agenda. Always looking for the worst, then of course you are part of the liberal media, what else can we expect?
Yikes!
One MNB user wrote:
If I were a business owner, I’d take note of that 60% figure of staff shopping when they agreed to be working…..
Another MNB user wrote:
It may not be so much that Big Brother is watching us on line, but rather that Step Brother Employer and (Evil) Step-Sister Marketer are watching. If the WSJ knows who’s shopping on line from work (hopefully during lunch breaks!), you can bet your employer does too! (And they know I’m writing to you right now! Uh Oh!) It appears to be quite an opportunity for marketing companies to target people at work rather than at home.
But on the bright side, since employee productivity is probably going down the toilet for the Monday after Thanksgiving as people shop, maybe they’ll simply make that a holiday too!
MNB also made note yesterday of the end of “Emeril Live! On the Food Network, which led MNB user Joe Fraioli to write:
Although I do not watch the show as often as I use to I too will miss it. It makes me wonder whether this is another company not knowing what they have until it is gone. If I am not mistaken I believe that Emeril was the main show that put the Food Network on the map and to let negotiations fall through or base them on some demographic they are going after could be costly in the future. After all when I think of the Food Network I think of Emeril…
In my commentary yesterday, I wrote: There also have been some rumblings that Lagasse may not have fit the audience demographics being sought by the Food Network, which may prefer to have hosts who look like Giada De Laurentiis and Bobby Flay than Lagasse.
To which David Hannaman responded:
And what is wrong with Giada De Laurentiis?
Absolutely nothing.
MNB user Lou Lister writes:
I cannot agree with you more. Being in a "penny business" (poultry) it seems that always - and I mean always - when talking about products the question always come up, 'how much is it"? Instead of value to the consumer and to my bottom line margins and profits.
When I talk about perceive value of the customer (i.e. Low Fat Poultry products) I get looked at with the "deer in the headlights stare".
Thanks for your insight. I don't think anything will change from a retailer’s point of view anytime soon. Instead they keep worrying about Wal-Mart!
Another MNB user wrote:
Based on yesterday’s comment, I have a bit of a “devil’s advocate” question for you.
Why is it that everyone is advocating the concept of raising prices on turkey for Thanksgiving but many of the same people get upset about higher prices in urban food stores?
Here’s my thought…The logic behind raising the price of turkey is basically economics 101…as demand increases prices should increase. In underserved urban communities, we face economics 101 again…limited supply = higher prices.
So based on the above simple equations we should just raise prices as much as possible wherever economics 101 says there is an opportunity to do so.
But in the real world of the food business, nothing is simple. People get very worked up when their food prices increase. After all, food is a basic necessity of life, airline travel is not. Thanksgiving turkey may not be a necessity to keep on living, but it sure is a part of enjoying being American! If supermarkets everywhere were to raise the price of turkeys, there would probably be a class action lawsuit accusing them of collusion and price-fixing.
It’s a complicated business to sell food. We have a responsibility to make sure the food is safe, widely available and reasonably priced. Not that turkey pricing is a big moral issue, but it is touching on a “grey area” that gets consumers pretty crazy…businesses profiting on what they need to survive.
MNB user Ken Wagar wrote:
In the words of Pogo. “We have met the enemy and he is us.”
There is nothing new here. Have watched this behavior for 40 years all across this industry. My opinion? The industry is risk averse and retailers continue to believe and act on the belief that promotion prices are the primary reason for customers selecting where to shop on a week to week basis.
There is a risk in being seen as not price competitive and very few retailers are willing to accept this risk and build a customer relationship strategy on other issues. The exceptions tend to be Publix, Wegmans and a few others who over the years have established clear sets of customer value positions other than simply price.
I have participated in hundreds of ad meetings where the driving force was to set ad prices that would “swing the doors.” The belief being that Hot feature prices on in demand products has a direct correlation with customer count and total store sales. However, in a major research initiative in the meat department I participated in a few years ago we could find no statistical correlation between any single meat ad and the corresponding weeks store customer count or store total sales.
I believe promotion pricing has a great deal to do with what our normal customers purchase from us weekly and very little to do with drawing non regular shoppers to our store or influencing weekly total store sales numbers. I suspect that store ads and ad pricing help to establish relative competitiveness over time but have little impact on day to day or week to week sales. I would further postulate that stores or companies with the greatest sales variability from ad to ad are likely stores offering the fewest reasons for a customer to shop the stores. In other words they are the most price dependent as well as the most vulnerable to competitors price promotions. This also suggests that if you are successful in swinging the door you have gained the shoppers least likely to become permanent and loyal shoppers unless you forever after always have the lowest price.
While proving it would be most difficult I believe the answer to your question regarding how many turkeys are sold at a significant discount to customers that would have shopped the store anyway is very, very high. In an oversimplified example think about how many regular Wal-Mart shoppers would switch to Publix for their Thanksgiving needs based on the price of Turkey’s and conversely how many Publix shoppers would likely switch their shopping to Wal-Mart just because of a lower turkey price?
It is difficult to find any retailer who does not have a great sales week at Thanksgiving relative to the other weeks of the year. If this was the result of their cheap turkey pricing shouldn’t other stores in the market show poor sales weeks?
Just some things to think about.
I think it was Stew Leonard Sr. who used to say that there is a difference between cherry pickers and cherry buyers…and that he’d always prefer to cater to cherry buyers.
MNB had a story yesterday about how the debate over genetically modified organisms (GMOs) continues in the European Union, even as the World Trade Organization (WTO) has postponed until January 11 the deadline by which it wants the EU to overturn a ban on GM products that was implemented by Germany, Austria, Belgium, France, Italy and Luxembourg.
I posed a question:
How long would it take for the US to violate or ignore international trade rules if our leaders believed that these rules violated US sovereignty? I’m thinking about 30 seconds.
The use of GMOs isn’t just a scientific issue. It also, for many people, is a cultural issue…and I don't see what is to be gained by forcing our attitudes down other people’s throats. Except, of course, anger at what will be perceived as American arrogance.
One MNB user responded:
I believe countries have the right to ban GMOs, just as others have the right to use them if they wish….my personal opinion is, so long as they are marked as such, so the consumer/end user can make an informed buying decision on whether they want to purchase a genetically modified product or not. I have the same opinion on food irradiation - the irradiated items should be marked.
I choose not to use genetically modified foods, as the science is far too new to understand the long range impact of such manipulation of our food supply.
Another MNB user chimed in:
We were discussing this issue over Thanksgiving dinner. My Dad has been a beekeeper for the past 40 years. He claims the Europeans have found that GM corn is killing the butterflies. Now they think it is also killing the bees. Watch out. If you think our food prices are going through the roof due to oil, the lack of bees will be unprecedented in its scope.
We had a story yesterday about how online sales during Cyber Monday – the first Monday after Thanksgiving, which has begun to rival “Black Friday” in terms of promotional juice – rose 21 percent compared to last year, reaching $733 million.
The Wall Street Journal reported that according to the comScore Inc., “44% of Internet users shopped online Monday, with 60% of dollars spent online that day coming from work computers, while the balance came from home and university computers … The number of Cyber Monday buyers rose 38% from a year ago, although the average amount spent per buyer declined 12%. That decline may be attributed to the steeper discounts offered by a broader number of online retailers this year and the fact that new buyers tend to spend less online than returning buyers.”
I commented: The number of shoppers may be up, but with words like “recession” and “economic correction” and “$100 per barrel oil” being bandied around in headlines, it is hard to believe that total sales for the coming holiday season are going to be much higher than in recent years. Though it is fair to suggest that online sales could see improvement because a lot of people may avoid getting into their cars.
MNB user Al Kober had a real problem with my analysis:
You are becoming more negative all the time. Part of your liberal agenda. Always looking for the worst, then of course you are part of the liberal media, what else can we expect?
Yikes!
One MNB user wrote:
If I were a business owner, I’d take note of that 60% figure of staff shopping when they agreed to be working…..
Another MNB user wrote:
It may not be so much that Big Brother is watching us on line, but rather that Step Brother Employer and (Evil) Step-Sister Marketer are watching. If the WSJ knows who’s shopping on line from work (hopefully during lunch breaks!), you can bet your employer does too! (And they know I’m writing to you right now! Uh Oh!) It appears to be quite an opportunity for marketing companies to target people at work rather than at home.
But on the bright side, since employee productivity is probably going down the toilet for the Monday after Thanksgiving as people shop, maybe they’ll simply make that a holiday too!
MNB also made note yesterday of the end of “Emeril Live! On the Food Network, which led MNB user Joe Fraioli to write:
Although I do not watch the show as often as I use to I too will miss it. It makes me wonder whether this is another company not knowing what they have until it is gone. If I am not mistaken I believe that Emeril was the main show that put the Food Network on the map and to let negotiations fall through or base them on some demographic they are going after could be costly in the future. After all when I think of the Food Network I think of Emeril…
In my commentary yesterday, I wrote: There also have been some rumblings that Lagasse may not have fit the audience demographics being sought by the Food Network, which may prefer to have hosts who look like Giada De Laurentiis and Bobby Flay than Lagasse.
To which David Hannaman responded:
And what is wrong with Giada De Laurentiis?
Absolutely nothing.
- KC's View:
