business news in context, analysis with attitude

Yesterday, MNB reported on a new Planet Retail study suggesting that CPG manufacturers need to be careful as they address what they perceive as the growing threat of private brands.

“In the recession, many brand manufacturers responded to the private label threat by launching their own value sub-brands. While these brands may have helped to retain shoppers from defecting to private label, they could do damage to the brand in the long-run,” said co-author Matthias Queck, who also serves as the company’s research director.

At the same time, the report says that CPG companies should be careful about their new direct-to-consumer models, such as the one announced by Procter & Gamble last week.

MNB-fave Glen Terbeek observed:

In this report, the following statement amused me; "The more successful and sustainable strategy is for retailers and manufacturers to work together in the form of joint planning, promotions and co-branding in certain cases."  That sounds sooo old model to me!  Isn't that what ECR tried to do, in the 90's?  It will never work in today's marketplace of product and store saturation; i.e. shopper clutter!  And for sure it doesn't understand that the shopper is now in control through their access to information and choice.

History demonstrates that the manufacturers have always followed the least resistance to reach the shoppers they want to target.  They moved from corner stores, to supermarket chains, to "alternative formats", (I love that definition), and now to consumer direct for "frictionless" connectivity with their shoppers for product information, marketing, and product distribution. Today, the retailer controls up to 40% of the retail price (gross margin, trade dollars) of an item. This is the same retailer that is competing with the CPG companies with their private label products, and "category rationalization".  Why would CPG companies keep funding their competitors when they could/can control 100% of the retail price by going around them? And through 100% control, they can convert their current  mass consumer marketing dollars into much more effective/efficient shopper marketing dollars with no interference by a middleman (retailer).

So the statement above should read as follows:  "The  more successful and sustainable strategy is for all manufacturers to work together in creating the (real) new model that recognizes the shoppers are in control, and which connects "frictionlessly" with them." No more buying, reselling of product with no value added. No more redundancy of inventory and logistics systems.  Much more effective marketing expenditures.  I believe that the real consumer direct model is not far in the future!  Market conditions and economics will make it happen!

Just FYI...Glen Terbeek wrote a truly prescient book on this entire subject called Agentry Agenda: Selling Food in a Frictionless Marketplace, which remains available on If the industry had adopted his suggested model a decade ago, the business might be very different - and far more effective - today.

We also quoted yesterday from a column by Gray Poehler in the Richmond Times Dispatch in which he discussed declining customer service levels. it generated a lot of response...

MNB user Bob Anderson wrote:

Customer Service is not dead or obsolete.  I firmly believe that retailers who believe that customer does not matter will ultimately fail.

Customer service takes many forms and it matters.  Any on-line retailer that has a difficult to navigate web site loses my business,  Likewise, brick and mortar retailers who do make customer service a priority also lose my business.  One thing I have noticed about this economic downturn, the first retailers to close down were those where customer service was lacking.

I live in the heart of Walmart country and I avoid them when possible. However, patronizing a Walmart is often the only choice.  When in that situation, I choose the Walmart with the best customer service.  Yes, the customer service level Walmart varies from store to store and ranges from downright awful to very good.

Mr. Poehler may believe that customer service is dead but I for one believe that in the long haul Customer Service will prove to be critical mark of measuring success.  Just having low prices will not guarantee success if customer service is lacking.

Kevin, most of the time your views are interesting and on target.  At other times, I just have to write your view off as not representative of those living in rural America.

We agree on customer service.  By the way, Manufacturer direct to Consumer will only be successful when they design the consumer to website with customer service foremost.

Another MNB user, Jeff Weidauer, wrote:

It seems that I’ve been hearing about how great customer service was in the “old days” for most of my life. And now that I’ve reached the point where I can talk about the “old days,” it seems to me that customer service is no better or worse than it ever was. Even in the days when you got a live person on the phone, it didn’t mean that person was necessarily going to be helpful or knowledgeable. You were taking your chances, and were as likely to be left on hold or transferred to who-knows-where as get someone willing and able to help.

We talk about “human connections” as if they were something magical, but based on the human connections I’ve had at the DMV, I’d prefer a soulless machine, thanks very much. Bad customer service has always been with us, and always will be. This means that for those who want to make customer service a point of difference, there is money to be made. But let’s stop waxing nostalgic about how good service used to be; customer service will always present opportunities for those looking for a niche, just as it’s always been.

MNB user Bob Vereen chimed in:

In my recently-published book about the postwar hardware industry, I point out that one of the main reasons thousands of independent hardware, lumberyard and home center retailers have survived, when other independent retailers have gone by the wayside, is that personal service and knowledgeable employees are the mainstays of their businesses.   In fact, the North American Retail Hardware Association, where I worked for many years, has offered product knowledge training courses for nearly 50 years--by mail and in personal training sessions--and now via digital methods.

On another subject, MNB user Mark Delaney wrote:

Ronald McDonald is now an "insidious force" that apparently tricks our kids into eating junk food - have we gone absolutely over the edge? On a recent trip to Disney, my daughter fell in love with Mickey Pops (vanilla ice cream on a stick - very high tech stuff) - she had to have one every day we were there - quick - string up the mouse!!! Are these people cracked! If these people believe their children don't have the backbone or ability to judge what's good or bad for themselves then that's what's really sad as it shows an utter lack of confidence in their children and lord knows we need some kids with self confidence when idiots like Miley Cyrus or Lindsay Lohan are being viewed as role models! Yes - my daughter had Mickey Pops on vacation - but this is the same 8 yr old that knows that ice cream (or McDonald’s) is a treat and isn't an everyday food group.

You know what the fundamental difference may be? If my wife or I saw one of our children gaining weight - the first place we'd turn is ourselves - what are we eating, why aren't we getting enough exercise, what's changed in their routine etc. The first place we would look is not "them" - "them" being you name it - the school, the fast food joint, the media, the government…. Be a parent, look in the mirror and take some responsibility! It's not "their" responsibility to make decisions for your kids - it's your kids' - and they're looking to their parents for that guidance. We're not the best parents by any stretch but we're certainly not going to assume that "they" will teach our kids how to eat properly - that's our job. it sucks to say no and be the bad guy sometimes but that's the job. I just can't help but think if these loonies spent half the amount of time they spend searching for scapegoats focusing on their own children - the world might be a little better off and mascots would not be fearing for their lives!
Thanks - I feel much better now!

In the broadest sense, I think that a lot of parents believe that their role is to win some sort of popularity contest with their kids. Which is utter nonsense, and is a belief that compels one to look for other people or institutions to blame when one has not done one’s job.
KC's View: