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Walmart is Right On with RFID - By George Anderson

An article on the RFID Journal website, written by Kevin Ashton, co-founder and executive director of the Auto-ID Center, claims Walmart has it right when it comes to its radio frequency identification technology program and all those who have questioned its implementation are working under three flawed assumptions including:

- Tag cost kills the business case for RFID with suppliers;
- There's not enough time for vendors to prepare;
- The technology is not ready for the real world.

On the first point, Mr. Ashton said that it was vendors including CHEP, Gillette, International Paper, Philip Morris and Procter & Gamble that adopted RFID first and not Walmart. The retailer started to see the promise of the technology after observing its use by suppliers. A key point was that the technology was able to help vendors lower costs, which could be passed on to the retailer. It would make no sense for Walmart to push a technology that increased costs for suppliers since it would eventually have to pick up the tab.

Companies have had since 2000, when Walmart first began to explore RFID, to get ready for its conversion. Even those who only got started when Walmart unveiled its mandate last year have had plenty of time, according to Mr. Ashton. "With few exceptions, companies that aren't ready for RFID have only themselves to blame," he wrote.

On the final point of whether or not RFID works, the author claims that numerous studies from "around the world have shown RFID is good enough now." The technology may not be perfect but the best way to improve on it is to create a mass market for it. Walmart is in the process of helping to create that market and, Mr. Ashton posits, so should its vendors.



Brain Trust - Are Holiday Sales a Ticking Time Bomb? - By Don Delzell

The most optimistic forecasts for this year's holiday retail sales start with a two percent increase, with many analysts now predicting a decrease. Yet none of those forecasts adequately factor in the impact of recent credit card practices: enormous upward adjustments in annual percentage rates (APR) and downward adjustments to credit limits for millions and millions of Americans. The impact of these two related practices threatens to turn the holiday into a disaster of unprecedented proportions.

Let's put this into perspective. The National Retail Federation estimates that credit/debit cards account for 40 percent of all holiday retail purchasing. We have no way of knowing what portion of that represents additional borrowing. We can infer that in today's climate, it would be substantial. Already, Walmart is seeing double digit drops in sales by credit cards...in September! Target, one of the few retailers who still own their credit facility, announced that credit terms had to be tightened in response to an estimated 10 percent loss rate on current accounts. What if 20 percent of holiday credit/debit purchases were going to be financed via new consumer debt? And what if that source dried up almost completely? It's possible that a net decrease in holiday spending of close to eight percent or more might result, on top of the existing downward trend. We may be looking down the barrel of a double-digit decrease in holiday retail spending.

And that bleak outlook may be the result of the unanticipated actions of banks, which if taken out of context, might actually be correct short-term business decisions. Credit card providers, including JPMorgan Chase and Citi, have over the last 30 days unilaterally increased the APR on a vast number of consumer accounts, in one case from 8.99 percent to 29.99 percent! Calls to those banks elicited this response: if you decline the new rate, we'll cancel your account.

Can we really criticize banks for taking these steps? If they know that consumers will have great difficulty servicing their existing debt (and these same banks hold mortgages, which indicate this is a fact), then isn't it an appropriate action to limit further borrowing? And if overall risk rates are climbing and expected to climb further, isn't it appropriate to increase "prices" to cover that risk?

BusinessWeek called attention to these trends in an article titled The Next Meltdown: Credit Cards. Yet that article failed to see either the impact these actions have on consumer spending nor the political implications in the context of this month's financial industry bailout. Consumer spending is at a tipping point and could easily withdraw to levels never seen before. The perspective needed here is the greater good. What happens when the average American sees their credit card interest rate double or even triple? What happens when the minimum monthly payment doubles in size just because of the higher interest? What happens when their available credit evaporates? What impact will this have on holiday?



Retailers Launch Careers - By Tom Ryan

Target ranked 14th out of 119 companies on BusinessWeek's Best Places to Launch a Career survey. Other retailers making the list included Amazon (33), Macy's (56), Walgreen's (79), Kohl's (94), Abercrombie & Fitch (98) and Sears (110). This was the first time Target participated in this survey, which recognized the company for providing jobs for recent college graduates.

According to BusinessWeek, Target recruited on 404 campuses in 2007-08, and made job offers on 355 of those. Target also had 1,773 internships in 2007. Of those, 63 percent of eligible 2007 interns received full-time job offers and 74 percent of interns with offers accepted. Overall, 19 percent of Target's entry-level hires last year were interns.

"We continuously strive to attract, retain and develop the best talent for our stores, distribution centers and headquarters locations," said Tim Curoe, vice president, talent acquisition at Target in a statement. "In today's challenging economic environment, graduates want to work for a strong company with a great passion for ongoing development and training - both of which they will find at Target. In addition, our strongly held commitment to community giving and sustainability further solidifies why many potential team members view Target as an employer of choice."

The Best Places to Launch a Career ranking is based on three separate surveys: a BusinessWeek survey of career-services directors at U.S. colleges; a survey of 40,000 U.S. college students conducted by Universum USA, a Philadelphia research company; and a BusinessWeek poll of the employers themselves.

Consumer goods vendors making the list included Anheuser Busch (19), General Mills (24), Nestle USA (45), Whirlpool (46), Kraft Foods (49) and Loreal USA (65). The top ten: Ernst & Young, Deloitte, PricewaterhouseCoopers, Goldman Sachs, KPMG, Marriot International, Google, Lockhead Martin, IBM, and J.P. Morgan.




CPG Brands and Retailers Focus on Shopper Marketing - By George Anderson

A new study conducted by Deloitte for the Grocery Manufacturers Association finds that consumer packaged goods companies and retailers are rapidly ramping up shopper marketing efforts even as many acknowledge they are in the early learning stages around such initiatives.

The report, Delivering the Promise of Shopper Marketing: Mastering Execution for Competitive, found that 60 percent of brands and retailers say they have significant shopper marketing organizations compared to only six percent who gave a similar answer in 2007.

The report defines shopper marketing as, "...the employment of any marketing stimuli, developed based on a deep understanding of shopper behavior, designed to build brand equity, engage the shopper (i.e., an individual in 'shopping mode'), and lead him/her to make a purchase."

"Nearly every major manufacturer and retailer in the industry is dedicating resources to shopper marketing," said Brian Lynch, GMA director of sales and sales promotion, in a press release. "This report outlines lessons learned to date and puts forth a game plan to help companies become more sophisticated in their operations and thus more fully realize the enormous potential of shopper marketing."

According to GMA and Deloitte, companies typically go through three stages as they develop shopper marketing organizations and programs:

Incubating - Beginning stage where some fall by the wayside by failing to develop the means to ramp up.
Scaling - Ramping up to carry programs off on a larger scale.
Embedding - Developing a culture of thinking and working around in-store marketing.
Only about 10 percent of companies involved in shopper marketing saw themselves as advanced in its practice.

Those who excel at shopper marketing have a clear competitive advantage, said Rob Holston, Deloitte's shopper marketing practice leader. "Retailers and manufacturers who are embracing shopper marketing and executing against a core set of principles are growing 50 percent faster than the categories in which they participate."

Retailers saw greater opportunities to drive return on investment (ROI) using shopper marketing. Nearly half of all retailers saw it as the most effective means for generating ROI while 19 percent of CPG companies agreed.
 



Transforming Retail with Portable Shopping Devices - By George Anderson

Research from Frost & Sullivan concludes that portable shopping devices, including those mounted on carts, may be on the verge of transforming retailing on a global scale.

According to the report, World Customer Shopping Device Markets, the portable shopping device market reached $59.2 million worldwide in 2007 and the technology is being adopted on a widespread basis in Europe and North America. The Pacific Asia and Latin American markets are also seeing the pace of adoption picking up.

"The primary driver behind the implementation of portable shopping devices or mobile self-scanners is the significant improvement in the customer's shopping efficiency and labor productivity," said Prasanna Prakash, a research analyst with Frost & Sullivan Research, in a press release. "Using these systems, customers can eliminate waiting time in queues, leading to faster checkouts while retailers can streamline operations and redeploy staff to other functions within the retail environment."

The use of portable shopping devices enables stores to move workers from the checkout to other areas of the store to "augment customer relationship management activities," according to the report.

Frost & Sullivan suggests that digital signage solutions can be incorporated into store environments to help improve interaction with consumers using portable shopping devices at the point of purchase.




Why Publix is So Darn Good - By Wareen Thayer, Editorial Director

Is there anything that Publix doesn't do extraordinarily well? Shoppers and vendors love it, it wins lots of awards and makes lots of money.

"There's nothing particularly over the top about the way they do things; they just do what they do very well," said Ken Harris, managing director, Cannondale Associates.

Mr. Harris, who authors Cannondale's annual Power Ranking Survey, noted that the stores have wide, clean aisles, brightly lit stores and friendly service. And while anybody can have wide aisles and good lighting, it's a real trick to have consistently clean stores and friendly associates.

"Being able to run stores that are pleasant to shop isn't easy," he said. "These are fundamental things they've been able to master. They do so many little things incredibly well that it builds into a store experience, and that makes people enamored of Publix."

The Lakeland, Fla.-based chain is the best supermarket in the country when it comes to satisfying its customers, according to the American Customer Satisfaction Index. It's been at the very top of the list since the National Quality Research Center, Ann Arbor, Mich., began the annual rankings back in 1994. This past year, it scored an 83 out of a possible 100, well ahead of Kroger (75), Supervalu (74) and Whole Foods Market (73), the next three on the list.

"Being associate owned and operated allows our associates to take a personal interest in our business and our customers' shopping experiences," said Maria Brous, director of media and community relations for Publix. "Our mission is to be the premier food retailer in the world. To that end, we will provide our customers with stellar customer service and quality products at competitive prices."

Kevin Janiga, president of Winsights Marketing, said Publix provides "a very pleasant shopping experience. Customer service is very good and the employees truly act like they enjoy working there. The stores are uncluttered, in-stock and clean." Said another observer, "Publix has used customer service as a major differentiator versus its competition. This includes being in stock at rates better than the competition as well as having more and better-trained employees. They are in stock, both case and features, and they have well-trained and committed employees.

"I think they have more full timers than the industry average, which means better commitment and knowledge. This is important when you are selling and merchandising more volatile sections like frozen and refrigerated foods. In a soft economy, I don't see them moving away from this (a strong service model) because, like Wegmans, it is part of the culture. They may have to focus a little more on price, but they have good perimeters and will find a way to maintain margins."




Target Needs to Put 'Pay Less' Before 'Expect More' - By George Anderson

The current state of the economy has consumers looking to save money. They know they can save at Walmart and the retailer has seen its same-store sales climb even as the economy has headed in the other direction. At rival Target stores, however, sales have been decidedly less than Target-like. Shoppers, a Reuters report suggests, have identified with the "Expect More" portion of the chain's tagline. What they have not bought into is the second half of that message that promises they will "Pay Less."

Recently, Target has begun to emphasize its discounter heritage more in its marketing with television ads, online and direct mail efforts promising consumers savings. Industry analysts say that price checks show that Target is competitive with Walmart on similar product pricing but that consumers have attached themselves more to the chic than cheap portion of the chain's value proposition.

"When economic times get hard and the business model is under strain, you need to find a way to refine your advertising to actually make it work harder, and I don't think they have yet," Zain Raj, chief executive of loyalty marketing firm Euro RSCG Discovery, told Reuters. Target's core middle-income consumer is looking for deals as disposable dollars get eaten up by higher fuel and food prices. The same shoppers, experts suggest, are less interested in getting a good deal on a new clothing item and prefer to save on the laundry detergent they use to clean the garments they already own.

Jeannine Befidi, a spokesperson for Target, said the company is emphasizing categories such as food and pharmacy over apparel to increase shopping frequency. That doesn't mean, she said, that the company plans "to change what we consider to be a proven, successful long-term strategy."

Ms. Befidi said Target is looking to strike the "appropriate balance" between "Expect More" and "Pay Less."

Joseph Feldman, a retail analyst at Telsey Advisory Group, told Reuters that Target needed to "change with the times" and do more "creative marketing and merchandising to convince the customers that prices are the same [as] Walmart."

Shelli Baltman, head of customer experience innovation at consulting firm What If, told the news service, "Walmart's done a really good job of letting customers know that they understand what it's like to tighten their belt."

Target, she added, needs to let its "customers know that we understand your suffering, and we are going to help you."




Monitoring Those Thieving Employees - By Tom Ryan

With billions of dollars being stolen from grocery stores by employees, retailers are increasingly having their security cameras aimed directly at cash registers. The monitoring is expected to ward against employees using a scheme called "sweethearting," which involves giving away merchandise usually to family or friends by not scanning it.

According to a CNBC report, sweethearting represents $13 billion of the $20 billion store employees steal in merchandise each year. Working with a person disguised as a paying customer, cashiers pretend to scan merchandise, but deliberately bypass the scanner, thus not charging the customer for the merchandise. StopLift Checkout Vision Systems is a provider of cameras that record checkout lines at grocery stores. CEO Malay Kundu said his company's software, which constantly monitors 100 percent of the security video, flags the transaction as suspicious and quickly reports the incident, identifying the cashier and the date and time of the theft.

"Our software watches the cashiers," Mr. Kunku told CNBC. "It analyzes the body motions of the cashier. It watches and analyzes how the items move across the scanner, or don't move across the scanner."

Mr. Kunku said supermarkets with already thin profit margins are particularly vulnerable to sweethearting, which accounts for an almost 35 percent profit loss industry-wide. Supermarket chains currently using StopLift include Safeway, Hannaford and Big Y. His goal is to have such security cameras become standard across retail.

"We actually have video in which the customer high-fives the cashier," said Mr. Kunku.




Walmart to Debut In-Store Network 2.0 - By George Anderson

Walmart is getting ready to roll out its second-generation in-store digital signage and television network.

While details are understandably scarce, the new Walmart Smart Network is expected to make use of moving digital signage, positioned closer to eye-level and incorporated into product displays, according to a report on AdAge.com. Walmart is expected to make use of "virtual assistants" that will give consumers access to product information or narrow down product choices based on a criteria set.

Walmart appears to be looking to increase the interactivity of its digital signage at a time when there is increased emphasis on measuring the effectiveness of in-store media. Nielsen is in the process of rolling out its Prism in-store media measurement system. Walmart, Procter & Gamble and Starcom MediaVest Group are among the supporters of the Prism system.
The retailer has sought to push the store as media concept, comparing the increasing foot traffic in its locations to smaller numbers of consumers watching network television. Advertising revenues for Walmart's in-store television network are estimated between $100 million to $150 million.

PRN, a Thomson company that operates Wal-Mart TV, is estimated to take roughly eight percent of the retailer's ad revenues, leaving the company with an added source of income and, as AdAge.com points out, "a corporate video network fully financed by suppliers."




Same-Site Sales Head North as Same-Store Numbers Go South - By George Anderson

Consumers were already turning in increasing numbers to shop online before gas prices went wild. Now that consumers across the country are looking at paying $4+ a gallon at the pump, even more are choosing to get on the computer rather than in their car to go shopping.

Major chains including J.C. Penney, Gap and Victoria's Secret have experienced healthy increases in their e-tail sales while store revenues have taken big hits. Penney, for example, saw same-store sales decrease 7.4 percent during the first quarter. At the same time, the company's internet sales were up 8.7 percent. Mike Boylson, chief marketing officer for J. C. Penney, said the company has found that mall-based sales are down more than off-mall locations and online outperforms both.

"We see more people turning to online because it's much more efficient in terms of time and money," Mr. Boylson told The New York Times. There's little doubt that online has moved from a tiny sales niche in retail to the firmly plant itself in the "worth counting" category. Online's coming-of-age was heralded recently when Moody's, the credit rating agency, began factoring retailers' online sales into its analyses.

"Online is starting to matter, and it is performing well," said Maggie Taylor, vice president, senior credit officer at Moody's Investors Service. "Now that it is big enough to matter, companies want to call it out."

A number of retailers, including Penney and Target, have started factoring online into company same-store numbers. Consumers, for their part, are looking for ways to cut gas consumption. Offers of free shipping are particularly attractive when consumers factor in how much it will cost them in gas to go shopping. Some merchants including Ebags.com have started using the high price of gas as marketing tool. In an email campaign to millions of members last month, the company sent the following message: "Paying too much to get from here to there? Skip the mall. We'll ship it to you for free."

Some consumers, the Times article points out, don't even mind paying freight charges. Jessica Delmar, a manager for a technology company in San Francisco, told the paper, "A lot of shipping costs are $3 and $5. That's even less than a gallon of gas now."




Off-Shoring/Outsourcing Customer Services Gets Dismal Grades - By Tom Ryan

A new survey finds that outsourcing customer service - whether to offshore providers or domestically - typically causes a "significantly negative" impact on customer satisfaction. But the study's authors still contend that despite widespread bad press, off-shoring customer service can work if done right.

The research, according to The Wall Street Journal, came from analyzing the off-shoring and outsourcing activities of 150 North American companies and business units from 1998 to 2006. The study's authors were Jonathon Whitaker, assistant professor of management at the University of Richmond's Robins School of Business; MS Krishnan, professor of business information technology at the University of Michigan's Ross School of Business; and Claes Fornell, a professor of marketing at the University of Michigan's Ross School of Business.

Writing in the Journal, the scholars offered a few steps companies can take to improve the quality of outsourced customer service yet still reap the savings from moving offshore:

- Make sure the provider has enough information and full authority to help customers. To protect customers, the customer-service provider often isn't given complete customer histories and profiles. The provider also may not be permitted to grant credits to customers to resolve complaints. The authors wrote, "Companies need to weigh their concerns about information security and financial control against the damage that such arrangements can do to customer satisfaction."

- Companies can take advantage of the technological innovations available to some foreign firms. According to the authors, "Some foreign outsourcing providers have offerings their domestic counterparts can't match in terms of technologies that help guide customer service by recognizing patterns in consumer behavior."

- Invest the money saved by outsourcing to improve the quality of the company's products or services, or to cut prices. The authors found that most companies are only pocketing the savings. "Among the companies we studied that had outsourced customer service, there was no increase in the perceived-value component of their overall customer-satisfaction score: Their customers didn't feel that they were getting any more for their money than they did before the company started outsourcing," the authors wrote.



The Store is the Medium - By Tom Ryan

Archive Article - At a session at last week's Advertising Research Foundations's (ARF) Re:think Conference and Expo in New York City, industry executives discussed the many promising developments of the P.R.I.S.M. in-store marketing project as well as the challenges in its successful implementation.
P.R.I.S.M. (Pioneering Research for In-Store Metric) is the retail industry's most significant initiative to establish a global metric for evaluating the in-store environment as a marketing medium along the lines of Nielsen's TV, Internet, Box Office and other audience metrics. The Nielsen Company is now spearheading the research. The project, a computer-linked system of cameras tied to infrared sensors and human counters at retail, is designed to let retailers know how many people are in a store, what time consumers shop most, and how effective advertising in stores is. P.R.I.S.M. will be launched nationwide in July in several stores.

Speakers at the session, entitled The Store is the Medium, were Joel Rubinson, chief research officer, The ARF; Ramon Portilla, senior director, communication insights, Wal-Mart; Peter Hoyt, president & founder, Hoyt Publishing Co.; George Wishart, global managing director, Nielsen In-Store; and Kelly Downey, shopper marketing director, Unilever. Panelists stressed the value of being able to measure in-store marketing efforts, especially since the media industry has become much more fragmented and consumers exert much greater control over the messages they take in. Better metrics around in-store marketing promises not only to improve the marketing messages aimed at consumers at retail but also help optimize store layouts. "You can't set objectives if you do not have a way to measure success," said Wal-Mart's Mr. Portilla.

Nielsen's Mr. Wishart noted that the key is gaining "closure rates" as shoppers walk the aisles in understanding "not only when they but also why they didn't buy." He said CPG companies can learn the value of their investments on in-store marketing programs, retailers can learn how their shoppers shop, and it enables advertising agencies to become a much bigger part of in-store media for the first time.

"The nice thing is that everybody wins," said Mr. Wishart. Unilever's Ms. Downey noted that with P.R.I.S.M., vendors will be able to look at week-by-week data to measure how closure rates vary among different marketing vehicles for different categories and different retailers. It can particularly help in launches to make sure the product is reaching the target customer. Improved score carding also help vendors measure in-store against other advertising media. "We can actually begin to see what we planned to occur in the store and then what actually happens," said Ms. Downey. "We can look across retailers and see how a specific merchandising program was actually executed."

For proper execution, according to Ms. Downey, the project will need a strong commitment from the senior management level since extensive dialog will be required among manufacturers, retailer and agencies. Marketers may have to develop distinct in-store consumer profiles, noting that consumers respond to messages differently inside the store than outside the store with other media. Finally, partners should be wary of "analysis paralysis" because the extensive data becoming available can become unmanageable. Many should even consider third party support to move faster. "This is going to come at us like a freight train," said Ms. Downey. ARF's Mr. Rubinson said part of the driver behind the PRISM project is that stores have become much more engaging experiences for shoppers.

"It's no longer just a place to buy things," said Mr. Rubinson. "It's a place where you derive satisfaction, where you're having fun, and where you're absorbing new information and absorbing messages." As such, the overall shopping experience has to reach shoppers at an emotional level. "The bottom line is shopping is therapeutic," said Mr. Rubinson. "Shopping is fun. It's an important part of people's lives. So let's not forget that the act of shopping often has as much emotional content for people as the thing they are buying and using."   



Letting Pricing Help Guide Assortments - By Tom Ryan

Tapping into the analytics and advancement capabilities of Cannondale Associate's RichMix assortment planning solution, DemandTec (a RetailWire sponsor) has come up with an assortment optimization solution providing enhanced functionality for retailers to understand shopper behavior. Specifically, DemandTec Assortment Optimization, used in conjunction with DemandTec's Everyday Price Optimization product, promises to enable pricing analysis to play a much larger role in driving assortment decisions. Marc Dietz, vice president of marketing at DemandTec, says price and assortment decisions are highly interrelated. For example, a retailer may be pushing a "good, better, best" strategy in assortment allocation, but analytic analysis shows the prices aren't sending that "good, better, best" message to consumers at the shelf level.

"The right assortment is right only if the prices are right," says Mr. Dietz in an interview with RetailWire. "And that's because if you start pulling items off the shelf or adding new ones, you change the relative price relationships or gaps between products left on the shelf. That could completely change how consumers make decisions around that category."

DemandTec's Assortment Optimization software service combines the demand intelligence and forecasting capabilities of DemandTec with the analytics and advanced capabilities of RichMix, the assortment planning product relied on by many CPG vendors. The goal, according to Mr. Dietz, is to measure the "incrementality" of adding or subtracting an item within a category mix. Typically, assortment allocation is guided by ranking best and worst sellers; and eliminating the worst. But eliminating one of the poorer sellers might not have the desired effect if it contributes to variety more so than other items.

"So if you have 100 items and you're delisting five items, the relative incrementality and importance of numbers 96 to 99 might change once you start removing items," says Mr. Dietz. "With the old way of using a ranking report approach, it's just static. Those bottom five just come off."

DemandTec's Assortment Optimization software enables retailers to explore these "What if" changes around the mix. The package also enables retailers to understand "transferable demand." Once an item is removed, for instance, a consumer may switch to a competing national brand, a private label product, or not buy any other brand in the category altogether. Overall, DemandTec sees a renewed interest in assortment optimization. On the one hand, retailers realize they have to understand whether mainstay brands are incremental versus duplicative parts of the mix. On the other hand, retailers are looking to add variety to the mix through new brands, brand extensions and private labels. Although this is helping the push toward more customization and merchandising assortments to local regions, retailers are looking for more sophisticated analytical tools to handle the significant increase in SKUs.

"You would never have a completely different assortment in every single store," notes Mr. Dietz. "But you might have an 80/20 rule, where 80 percent of all the merchandise in the store will be the same and 20 percent will vary based on local market demand. So how do you use that local 20 percent most effectively?"



Retailers Backing Out of Shopping Centers - By George Anderson

The combination of increased construction costs along with the prospect of slowing sales growth has led some retailers to pull out of planned shopping center projects. Others that continue to look for new locations are being more cautious before committing to undertake store construction, according to a report on The Dallas Morning News website. Two store sites approved for Home Depot stores have been canceled as the chain is going through what Hunter Stansbury, senior real estate manager for the chain, called a "cooling-down period."

John Weber Sr., president of Weber and Co., told an audience at an International Council of Shopping Centers event that commodity prices, not labor, have driven project costs up 20 to 25 percent so far this year. While others have backed off construction projects, crafts retailer Michaels Stores is planning to open 45 locations this year, roughly the same number it has opened each of the last 10 years. Even so, Karen Slayton, real estate manager for the chain, said the company is proceeding with caution in choosing new locations this year. "We're all expecting you to bring deals to us for 2010," she said.
J.C. Penney real estate negotiator Viral Patel said the company is looking to delay any projects "if the growth isn't going to be there." The department store chain scaled back its plans for 50 new stores in 2008 to 36.



Digital Signage Draws Attention - By Tom Ryan

According to a new study, digital signage catches the attention of more people than any other comparable advertising medium. It was also found digital signage to be more interesting than any other medium and more entertaining than every other one except TV. The survey of 900 adults in July 2007 conducted by OTX (Online Testing eXchange) found that digital signage - defined as videos of electronic images on LCD, plasma or normal TV outside of the home - "catches their attention" for 63 percent of respondents. That's higher than billboards (58 percent), magazines (57 percent), TV (56 percent), internet (47 percent), newspaper (40 percent), and radio (37 percent). SeeSaw Networks, a media company specializing in digital out-of-home media, commissioned the study.

Respondents said they noticed digital signage in an average of six locations over the past week. Among the places cited was airports, train stations, elevators, doctor's waiting rooms, casinos, health clubs, golf courses, restaurants, bars, gas stations, checkout lines and sports stadiums. Forty-four percent of respondents paid "some" or "a lot of" attention to digital signage. That rated below TV (52 percent) and close to magazines (45 percent). But it was higher than radio (40 percent), newspaper (40 percent), billboard (33 percent) and internet (32 percent). Asked which advertising medium they found to be "least annoying," only newspapers (23 percent) were less annoying than digital signage (26 percent). Billboards were also at 26 percent, followed by magazines (33 percent), TV (51 percent), radio (52 percent) and internet (67 percent).

The study also broke out digital signage awareness across 12 Life Patterns. Although all groups were highly aware of digital signage, young urban professionals, college students, mobile affluents, avid moviegoers, and Hispanic families skewed slightly higher.One clear difference was around text messaging. The survey found that 73 percent of college students and 68 percent of respondents between the ages of 18 and 34 used text messaging versus 50 percent to total adults. And of all respondents using text messaging, 53 percent said they are likely to "text a response" to an offer seen on digital signage.



Tesco Adjusts to Business in the U.S. - By George Anderson

Tim Mason, chief executive of Tesco's Fresh & Easy business, has learned that having lower prices than the competition is one thing; communicating that difference to consumers is something else altogether.

"People didn't get the prices as quickly as we thought," Mr. Mason told the Financial Times. "This egg price $1.58 for a dozen barn eggs are unbelievably cheap. At Trader Joe's they would be $1.58 but at a supermarket they would be $3.60." To get consumers' attention, Fresh & Easy has moved away from a strict everyday low pricing strategy. "When we first started we didn't have any high/low promotions at all, because we were doing EDLP," said Mr. Mason. "What we discovered, because we were the new kid on the block, was that people didn't get the price image." To drive home its price advantage, Fresh & Easy began running sales promotions. So far, according to Mr. Mason, it appears to be working.

"What we have done is a very few [promotions] across the entire store, probably 30 high/low promotions, which have dramatically improved the price image... We track [our price image] every week by exit surveys, and this has improved that by about 20 points," he said.



Kellogg Touts Collaboration to Optimize Shelf Prices - By Al Heller

Through a special arrangement, what follows is an excerpt of a current article from the monthly e-zine, CPGmatters, presented here for discussion.

Retailers considering any new pricing approach ought to first develop a clear strategic pricing plan with CPG suppliers before making dramatic changes. High-low retailers often surrender profits unnecessarily when they convert highly promoted or merchandised categories to EDLP or hybrid pricing on their own. They change their pricing strategy in the mistaken belief they can turn promotional volume into strong base sales and grow from there -- even in categories where promotions produce 50 percent or more of sales.

"Our research shows that EDLP might increase unit volume, but in almost every situation we studied we saw category dollar sales decline," said Michael Greene, vice president-customer marketing of morning foods sales at Kellogg, in an interview with CPGmatters. "When retailers decide they want to approach a highly promoted or merchandised category in a new way, they first need to realize that shoppers have been trained. They expect to see promotions in cereals, for instance, and these incentivize people to stock up, buy more and consume more."

He and Amjad Malik, senior director-business analytics and CRM at Kellogg, presented to a packed room at the recent Food Marketing Institute Conference on the topic, "Optimizing Shelf Prices for a Highly Merchandised Category." That's not to say EDLP wrecks category performance. According to Mr. Greene, retailers don't get strategic pricing input often enough from trading partners, either because they don't ask ("They believe their shoppers want lower prices, so they simply proceed.") or CPG fails to share a clear step-by-step approach which retailers could adopt.

To accurately project the impact of price changes within a category, Mr. Greene says it takes a deep understanding of the roles of specific brands and items within the shelf set. It also takes knowing the effect price changes would have on these brands and items (base-price elasticity), and the effect price changes would have on related items within the set (cross-price elasticity). "With our proprietary pricing methodology, Kellogg can help chains that want to get more aggressive on price, ask the right questions, choose the right approach for their objectives and their shoppers, and make effective fact-based decisions," explained Greene. "Retailers don't have to discount as deeply as they think they do. They can price within 4 percent to 5 percent of a competitor and be considered even. At a 5 percent to 8 percent difference, consumers start to notice, but still don't change their buying patterns. Above 10 percent may be the tipping point for people to buy elsewhere."

The Kellogg approach begins with the notion that every SKU in every store is different. Opening questions include: What is your price gap to the competition? Who do you compare yourself to? What is the role of the brand/item in the category? (If a traffic driver, price closer to the competition; if a cash generator, can price further away.) Equally important, says Greene, is for retailers to communicate any price drops they take, so shoppers are aware, can respond by buying more units, and give the store the credit due for making such a move. "If people didn't buy more products, are you accomplishing your goals?" he posed.



Mobile Device Users Want More and More  - By Tom Ryan

While some consumers vex about all the complex gadgetry on their cell phones, an IBM survey found 80 percent of consumers are looking for more applications and services - not only for entertainment but also for basic transactional and utility purposes.

For instance, 56 percent of the 700 consumers surveyed worldwide indicated they were "interested" - either somewhat or very - in banking via mobile devices. A whopping sixty eight percent indicated they were interested in using mobile devices for maps; 55 percent to get news; 52 percent for e-mail services; 56 percent for instant messaging; and 53 percent for browsing the internet. In more pure entertainment areas, 53 percent were interested in using their mobile devices to watch TV; 41 percent to play online games; 45 percent to buy music; 44 percent to buy videos; and 41 percent in buying games. In its survey, only 20 percent of customers indicated they were "very satisfied" with their current mobile internet services, while the remaining 80 percent were split among "somewhat satisfied (40 percent)," "somewhat dissatisfied" (12 percent), "not satisfied" (five percent) and non-users (23 percent).

Asked what's stopping them from using mobile internet more often, too expensive (50 percent) was the most cited reason. That was followed by connection too slow (40 percent); don't find it convenient (37 percent); tried but didn't find it useful (17 percent); never tried it, but never felt like using mobile internet (16 percent); don't know about it (eight percent); and don't know how to use it (six percent).

The study, titled Go mobile, grow from IBM's Institute for Business Value, estimates the market for mobile internet services will reach $80 billion by 2011, with increasing usage expected to fuel growth in both the provision of services and mobile internet advertising. At the same time, the number of mobile internet users worldwide is projected to approach 1 billion, a 191 percent increase from 2006 and a compound annual growth rate of 24 percent.

"Clearly the same market forces which empowered consumers to choose personal computers that were open and enabled them to customize their applications are at play in the mobile web marketplace," said Dr. Sungyoul Lee, global consulting leader, Electronics Industry, IBM, in a statement.



Steamed Up Shopping Centers - By George Anderson

It's becoming fairly common in retail development circles to hear about shopping centers looking skyward and using solar power to reduce energy costs. Soon, however, developers may be turning their gazes downward to the earth and geothermal energy to help them achieve even greater savings.

According to a Shopping Centers Today (SCT) report, the Atrio mall in Villach, Austria, developed by Spar Цsterreichische Warenhandels AG, uses geothermal energy to heat and cool the shopping center, which measures one million square-feet. Architekten Ingeieure, the architectural firm behind the mall, designed it to sit on 800 piles that descend between 20 and 70 meters below the ground. A total of 652 are water-filled "energy piles" that use temperature differentials at various depths to create energy and keep the property's temperature at comfortable levels for shoppers and workers. The piles are said to reduce carbon emissions by 500 tons annually.

The use of geothermal energy in the U.S. has maintained a steady, upward curve with increases averaging about 12 percent annually since the mid-1990s, according to the Oregon Institute of Technology's Geo-Heat Center. According to SCT, the biggest impediments to the use of geothermal energy in large development projects are high initial costs and a scarcity of contractors competent in the technology.  Architekten Ingeieure said the Atrio shopping center would realize a return on its geothermal investment within eight years.



GHQ: Food Lion Roars Down New Path - By John Karolefski

Through a special arrangement, what follows is an excerpt of a current article from Grocery Headquarters magazine, presented here for discussion.

Food Lion is a different company today than the one Rick Anicetti took over as president and CEO five years ago. Back then, the chain focused more on sales, profits and efficiency, and not enough on consumers, according to some observers. The retail philosophy was "one size fits all" in terms of operating stores to serve shoppers. Everything was the same - store size, layout, format, assortments, pricing strategy, and even the circular. Since then, Anicetti has methodically orchestrated and presided over a dramatic change of direction for Food Lion, a subsidiary of Brussels-based Delhaize Group. The latest results: Annual U.S. sales in 2007 for Delhaize improved by 5.1 percent to $18.2 billion, with a 3.8 percent comp increase called its best in more than 10 years.

Food Lion's recipe for success consists of a blend of "market renewal," multi-branding, consumer segmentation, and store clustering. Such a dramatic makeover made Salisbury, N.C.-based Food Lion an easy choice for Grocery Headquarters to recognize this chain as its Retailer of the Year.

"We've embarked on a very different path," says Mr. Anicetti. "We have really moved away from the sameness that described Food Lion for years." Mr. Anicetti describes the process of "market renewal" as "throwing a marketing ring around stores, renewing them completely, and then reintroducing ourselves to the consumer." In other words, when a Food Lion store is remodeled, it may re-open as another banner such as Bloom or Bottom Dollar - or it may remain a refurbished Food Lion.

"In 2006, we did our first multi-branded approach," he recalls. "We took 80 stores in the greater Washington, D.C. area, converted 40 of them to Bloom, 26 to renewed Food Lions, and 14 to Bottom Dollar." Along with this initiative is the company's focus on eight consumer segments that it has identified and leveraged to group its stores into clusters. The eight segments of distinct consumer behavior that collectively account for shoppers in the markets that Food Lion serves are Savvy Singles, Babies and Bills, Country Living, Comfortable Car-Pooling, Getting By, DINKS (Duel-Income No Kids), Wealthy Elites, and Golden Years.

"It's all about serving consumers based on their individual needs," Mr. Anicetti explains. "These segments informed our store clustering. We grouped look-alike stores into seven clusters across our 1,300 stores." Operating a company based on clusters affects format, design, assortments, fixtures, and promotional opportunities, according to Mr. Anicetti. Banners have their own attributes, personality, and strategy - even if they operate in the same trading area. For example, Food Lion is practical and dependable, Bloom is upscale and Bottom Dollar is value.

"That's what the last five years have been about," Mr. Anicetti explains. "First, it's been multi-branding. We were an operator of a single brand. Today we're an operator of five brands and our brands continue to grow. Every year we see the addition of new stores to our brand portfolio. Food Lion is still the engine, of course."


The High (Environmental) Cost of Bioplastics - By Bernice Hurst, Managing Partner, Fine Food Network

First the wonders of biofuel have begun to appear less wonderful. Now bioplastic material, created as an antidote to the oil-based plastics so many people have learned to hate, is being criticized for creating as many problems as it solves. The UK's Guardian has reported their own study's findings that plastics made from plants, particularly corn, "can increase emissions of greenhouse gases on landfill sites." Some, they say, "need high temperatures to decompose and others cannot be recycled in Britain."

Known as Pla, polylactic acid is made from corn and used for packaging by Wal-Mart, McDonald's, Del Monte and Marks & Spencer to name but a few. It is made by American company NatureWorks, jointly owned by Cargill, the world's second largest biofuel producer, and Teijin, one of the world's largest plastic manufacturers. According to The Guardian, the market for bioplastics, which are made from maize, sugarcane, wheat and other crops, is growing by 20-30 percent a year. Like biofuels, however, their production is said to be diverting land from food production.

The newspaper also maintains that Pla barely breaks down on landfill sites, and can only be composted in the handful of anaerobic digesters which exist in Britain, but which do not take any packaging. In addition, if Pla is sent to UK recycling works in large quantities, it can contaminate the waste stream, reportedly making other recycled plastics unsaleable. Proponents in the industry, The Guardian says, describe their products as "sustainable," "biodegradable," "compostable" and "recyclable," claiming that bioplastics make carbon savings of 30-80 percent compared with conventional oil-based plastics and can extend the shelf life of food. Quoting Peter Skelton of Wrap, the UK government-funded Waste and Resources Action Programme, the story went on to explain that "just because it's biodegradable does not mean it's good. If it goes to landfill it breaks down to methane. Only a percentage is captured. In theory bioplastics are good. But in practice there are lots of barriers."

Innocent drinks, one of Britain's best-selling smoothie makers, with a reputation for its environmental awareness and activities, has stopped using Pla because commercial composting is "not yet a mainstream option" in the UK. A spokesman for Sainsbury's, which will not be using Pla, said, "No local authority is collecting compostable packaging at the moment."



Mars and Wrigley in Big Candy Deal - By George Anderson

Two of the great family-run brands in the confectionary business are soon to become one (assuming regulatory approval) and the question is what will that mean for competitors in the candy and gum categories as well as the retail companies that sell their products. Mars, it was announced yesterday, will acquire the Wm. Wrigley Jr. Co. for roughly $23 billion with some funding assistance from Warren Buffett's Bershire Hathaway and Goldman Sachs. Mr. Buffett will become a stakeholder in the merged companies with a 2.1 billion contribution to the deal.

"Those of you who know me, know that I have been a big fan of Wrigley's business model for many years, and I love their products," said Mr. Buffett. "When you think of a business that's easy to understand, with favorable long-term economics, and able and trustworthy management -- you think of Wrigley. Bringing together these iconic, world-class companies combines Wrigley's strengths with the deep resources and proven brand-building savvy of Mars and will result in a powerful force for innovation and growth in the global confectionery marketplace."

Wrigley, which is primarily known as a gum company, has expanded into candies in recent years with the purchase of Altoids and LifeSavers from Kraft Foods. Mars, primarily known for its candy brands, also operates in other food categories including pet food, rice and coffee. In announcing the deal, Mars Global president Paul Michaels, said, "This is not about being bigger -- it's about being the best, and providing leadership and innovation across the full range of confectionery categories." According to a report on the Ad Age website, Wrigley will take control over Mars's non-chocolate candy business.

Wrigley's executive chairman, Bill Wrigley Jr., said having the "the opportunity to put great brands like Orbit, M&Ms, Skittles, LifeSavers and Snickers under the same umbrella" will provide the company with additional opportunities to leverage revenue growth opportunities.

Bill Perez, Wrigley CEO who plans to stay on when the deal is complete, said his company's "high level of expertise" in merchandising and marketing candy in the non-chocolate segment will give the new organization "increased leverage" in the marketplace. That new clout is likely to spur further consolidation in the industry, according to many.

"Hershey, Cadbury [Schweppes] and Nestle are all going to have to figure out what they're going to do," Mr. Wrigley told AdAge.com. "I would anticipate more consolidation in the future." Credit Suisse analyst Robert Moskow is also looking for more deals to come. "The Mars-Berkshire alliance is not the end of the potential combinations here," Mr. Moskow wrote in a report to investors. "Other alliances may form, perhaps with Nestle or Kraft. We think there is more excitement to come."



Where are the In-Store Implementation Best Practices - By James Tenser, Principal, VSN Strategies

The In-Store Implementation Sharegroup has just released its first work product, a working paper, titled In-Store Implementation: Current Status and Future Solutions. It is time for the retail consumer products industry to coalesce around a new set of best practices centered on merchandising. More than a year in the making, the 15,000-word document argues in favor of a collaborative, industry-wide initiative aimed at closing the implementation gap that today limits effectiveness of merchandising, promotion and category management in the retail consumer product industry.

The ISI Sharegroup was formed in 2007 by like-minded visionaries from consumer packaged goods, retail, merchandising services, technology and consulting firms. Member companies include Anheuser-Busch, Driveline, General Mills, Giant Eagle, Nestle-Purina, PepsiCo, Procter & Gamble, RetailTactics, Schnuck's, The Partnering Group, and VSN Strategies. [Editor's Note: James Tenser is the principal author of the ISI report.] In-store implementation, or ISI, refers to the collective physical and informational actions performed at retail to actualize merchandising, marketing and media plans in the store. ISI encompasses compliance, measurement and communications activities, and is defined by a Plan-Do-Measure process cycle that controls implementation plans and work and communicates implementation signals.

Sharegroup members estimate the available bottom line opportunities from improved implementation approach one percent of gross product sales, or $10 to $15 billion of the $1.5 trillion total U.S. annual volume across the food, drug, and mass channels. Contributing factors include an estimated $46 billion in excess shelf inventory in grocery, costing $3 billion in lost profits; the ever-persistent out-of-stock problem, reported at 8.3 percent of items overall, amounting to tens of billions of dollars in affected sales; and as much as $25 billion in ineffective promotional spending annually by CPG manufacturers.

"Excess inventory and out-of-stocks are results of inadequate shelf management and inability to manage and monitor shelf conditions," said Dr. Brian Harris, founder and co-chairman of The Partnering Group, who chairs the ISI Sharegroup. "No level of Category Management or supply chain process sophistication can fix these problems in the absence of an improved in-store implementation discipline." Sharegroup members are calling for an industry-wide culture of compliance to help resolve systemic merchandising challenges. The working paper proposes a path toward greater cooperation between retailers, manufacturers and third parties that would ultimately enhance the customer experience and industry profitability.



Once Again, Data Theft Occurs with an American Retailer - By George Anderson

And yet again, an American retailer and its customers go down the road of data theft. In this case, the retailer is Advance Auto Parts and the most recent hack affected 56,000 of its shoppers in eight states - Georgia, Indiana, Louisiana, Mississippi, New York, Ohio, Tennessee and Virginia. Luckily, the customers from the stores in question represent a small portion of the total shoppers that frequent the chain's 3,261 stores across the country.

The discovery of the breach, as with those at other retailers, has prompted Advance to reassess its security measures. Others, at the same time, are once again questioning if Payment Card Industry (PCI) compliance standards are either fair or effective. In a recent interview with RIS News, Dave Hogan, senior vice president and chief information officer with the National Retail Federation (NRF), expressed the view that more secure forms of payment such as "Chip & Pin" were available and proven in reducing fraud. He suggested that card associations should "provide (at no cost to the merchant) card readers that can accept these new types of cards."

Branden Williams, director of PCI practice for VeriSign Global Security Consulting, took issue with Mr. Hogan's position. Regarding "Chip & Pin," Mr. Williams told RIS News it "slows down the bad guys, but does not stop them. Besides, there is an issue with Chip & Pin in the United States - acceptance! What good is a reader if no one carries the card to use them? I seriously doubt that the card associations would pay for the terminals. Even if they did, retailers will likely have to do major alterations to their software to be able to handle both types of transactions in parallel. How about we just spend a little bit of time securing the data in flight?"
Mr. Hogan also took issue with the amount of data that merchants are required to keep by banks. He called on financial institutions to "state that 'Retailers have the option to no longer store credit card data and they will not be penalized for not keeping credit card data.'"


Friends and Family Seal the Deal - By George Anderson

If you want to influence a consumer's purchasing decisions, then it's almost always best to get to their family and friends first. If you can convince family and friends to recommend a product or service, then you're a long way down the road to making the sale. But how, just exactly, do you get friends and family to make a recommendation? That is the grail that most marketers seek and few find.

According to ZenithOptimedia, word-of-mouth (WOM), specifically those recommendations from family and friends, ranked highest in purchasing influences in the firm's Touchpoints ROI Tracker study. Scored on a grade of one to 100, recommendations graded out to an average of 84. The next closest influencers were TV ads (69) and internet searches (67). Magazine (60) and newspaper ads (55) were next followed by outdoor (45), radio ads (42) and banner ads online (41).

Bruce Goerlich, ZenithOptimedia's president of strategic resources, North America, told AdAge.com that marketers understand the importance of WOM but haven't figured out to make it scalable. "Word of mouth is incredibly powerful, but we as an industry are not doing as good a job as we could do in generating it," he said. Lawrence Feick, professor of business administration in the University of Pittsburgh's Katz Graduate School of Business, told BizReport, "The sea change is that for 40 years marketers knew that word of mouth was important, influential, pervasive. But they saw it as something to be described and hoped for."

"It is only in the last 10 or 15 [years] that they have thought about it as a communication tool that can (at least in part) be managed," he added.



Budweiser Offers Loyalty Credit Card - By Tom Ryan

Anheuser-Busch has partnered with U.S. Bank to offer a Budweiser Rewards Visa Platinum credit card in the U.S. While card members won't be redeeming six packs, they will be earnings points that can be used to redeem apparel, gifts and other items from Budshop.com and Budweiser Genuine Collection catalogs.

The Budweiser Rewards card allots three points for every dollar spent on Anheuser-Busch products - including online and catalog merchandise, brewery tours, as well as theme parks tickets and resort stays at Busch properties (SeaWorld, Discovery Cove, Busch Gardens, Adventure Island, Water Country USA, Sesame Place and Aquatica). One point is awarded for each dollar spent elsewhere. New customers receive 1,000 points as a first-purchase bonus. For every 2,500 points earned, card members are automatically sent a $25 Anheuser-Busch Merchandise Gift Card, which can be redeemed for the wide selection of apparel, novelties, culinary and sports items available at Budshop.com and through Budweiser's catalogs.

The cards will be marketed on both the U.S. Bank website and Anheuser-Busch sites. Card applications will also be available in U.S. Bank branches and in Anheuser-Busch brewery gift stores.

"We have an existing relationship with Anheuser-Busch," Jackie Sperl, assistant VP of retail payment solutions for U.S. Bank, told DMNews. "We have ATMs at [Anheuser-Busch property] Sea World currently, so it's just adding to our partnership with them. This is something that Anheuser-Busch wanted to do, and we jumped at the opportunity to partner with them." Mr. Sperl said direct mail and e-mail might also be leveraged to market the cards by targeting existing customers of Budshop.com and the brewer's merchandise catalogs.Most major retailers along with airlines and hotels appear to have rewards credit cards programs, as well as some niche smaller chains. But it's rare for a consumer brand to have one. Many of the sports leagues, particularly the NFL and MLB, have rewards cards around teams. Two of the most successful branded credit cards are from Starbucks and Walt Disney.