Days Like These
Tough times to be in business. Any business.
People in the food business, however, may be having it particularly tough because they are used to being in an industry traditionally called “recession-proof.” At the moment, it doesn’t seem that way, though there certainly could be an argument as to whether what we are dealing with right now indeed is a recession or some sort of larger transformation.
A highly regarded person in the food business who works on both sides of the Atlantic suggested to me that America is, in fact, “right-sizing” in a way that forces its citizens to deal with many of the same issues that Europeans have been dealing with for years. Higher costs for food and fuel, for example. During what turned out to be a long conversation, the words “Americans” and “rude shock” kept coming up, and I don’t think that was by accident.
There even have been reports of hoarding and food shortages, not in places like Haiti, where there actually have been riots, but in places like Northern California and Queens, N.Y., where, while there haven’t been riots at the local Costco, there certainly have been the seeds of concern.
Suddenly, words like “biofuels” ricochet around the media and political campaigns like errant ping-pong balls, though sometimes it seems as if people don’t really know what they are talking about. (Not that it should shock anyone that politicians and pundits aren’t always among the best-informed people on the planet.) I read the steady drumbeat of stories in newspapers and magazines, as well as on the Internet, and I find myself worried about all the food-related issues facing the country. Worried, but helpless and overwhelmed and remembering the words of the John Lennon song, “Nobody Told Me”:
“Everybody’s talking and nobody says a word, Always something happening and nothing going on, There’s always something cooking and nothing in the pot, Nobody told me there’d be days like these.”
Still, if I were in the food-retailing business right now, there are some very specific changes I’d make and programs I would adopt—actually, steal—that I would hope could differentiate me in a challenging marketplace.
One thing I would not do is emphasize price. I’d pay attention to it, I’d keep things as sharp as possible, but I would be careful not to hang my hat on the price hook. There simply are too many retailers out there that can do that and can do it better. Wal-Mart and Costco are two that come to mind, and there are plenty of others. I’d want to make sure that even in a time of economic turmoil, price is not the only attraction, because everybody and anybody can undercut you on price if they are willing to go low enough and underwrite inevitable losses.
No, it would be important to find other ways to distinguish myself and my stores. After all, even customers who are facing financial concerns have not lost the aspirational impulses that they enjoyed before the economy went to hell. They’re still looking for products and services that cater to these impulses, even if they know that they have to cut back. So the store that creates the illusion of aspirational marketing, or cleverly offers differentiating products and services that do not cost an arm and a leg, is one of the stores likely to win.
Here are the ideas I would steal from other retailers and institute ASAP:
1. I would immediately announce that my stores will be converting from all disposable bags, and will shortly be moving to cotton canvas reusable bags (that are, of course, plastered with my store’s name and logo). In addition, I would create an incentive program for people to make the switch—by keeping the bag prices low and maybe offering a nickel-per-bag discount for every one brought into the store by customers. (My big-ticket customers might get a supply of bags for free.)
I might also do what Stew Leonard’s has done—everyone who brings in a reusable bag gets to enter a contest with a cash prize, and the cashier who checks out each month’s winner gets a commensurate cash prize. (Great incentive for the checkout folks to get behind the program.) Finally, I’d do the most important thing—I’d post big signs in the parking lot saying something like, “Did you remember your reusable bags?” One of the big reasons that people don’t use them is that they accidentally leave them in the car, so I’d work to fix that.
The effect here would be good for the environment (I don’t care what anyone says—bags that don’t get tossed out are better for the planet than those that do), and good for the bottom line, since plastic and paper bags can cost a small fortune to keep in stock. And, my store’s image wouldn’t do too badly either.
2. I’d find creative ways to reward my best customers. I’d steal Hannaford Bros.’ concept that has store personnel handling all the checkout work for anyone with 20 items or more in the shopping cart. They’d take the items out of the cart, scan them, bag them and then walk the order out to the parking lot, where the customer is waiting in the car in a special bay. A quick swipe of the credit card, and the customer is on the way, all the more loyal for having been treated special.
And, I’d do what Norman Mayne of Dorothy Lane Markets has done so successfully for years—convert all of my marketing, advertising and promotion dollars to a loyalty program that actually rewards best shoppers with the greatest incentives. This takes courage—you have to be willing to say that people who spend less money get fewer rewards—but if benefits are tangible and treatment is special, people will yearn to get into the top tier of shoppers.
3. There are still food retailers out there that have not embraced the Internet fully—they have simple Web sites, but little ability to make sales and really create community with their shoppers. I’d change that as fast as possible. I’d create bulletin boards on which people could ask questions about health and wellness, and then I’d get local doctors to answer their questions. I’d create an online “genius bar” on which people could pose questions to cooks and nutritionists, and I’d use the forum to encourage dialogue among my customers. I’d offer the opportunity for customer reviews of my products and services, and while this can be dangerous, it also is utterly and completely transparent, and I’d make sure that every posting by my people reflects a deep and abiding concern for our customers’ health and welfare.
Finally, if I’m not doing e-commerce, I’d start the ball rolling to do so. Fast. And if it is beyond my abilities to do it myself, I’d partner with companies such as MyWebGrocer, Webstop and even Amazon.com , which has a robust grocery site only selling non-perishables, and could be a great partner to an interested bricks-and-mortar retailer. (Full disclosure here—I have and have had business relationships with all three of these companies. But I’d say this even if I didn’t, because I believe that companies not embracing e-commerce are risking irrelevance in the eyes of the next generation of shoppers.)
Thomas L. Friedman of The New York Times recently wrote a best-seller called “The World Is Flat” in which he predicted a world in which Americans might not always enjoy the advantages to which they have become accustomed. In a lot of ways, that seems to be what is happening at the moment—the world may be flat, but is filled with rocks and crevices, and even the occasional land mine. Navigating it is not easy.
For retailers, it is critical to get aggressive. This is the wrong time to simply wrap oneself in a warm blanket, cut costs as much as possible and run lots of sales to get people in the store.
When times are tough, you actually have to be tough enough to be aggressive and ambitious. To make sure that there’s always something happening, and lots of stuff going on.
Michaels comps down for the quarter
IRVING, Texas Michaels Stores reported that total sales for the quarter were $847 million, a 1% increase from fiscal 2007 first quarter sales of $839 million. Same-store sales for the comparable 13-week period decreased 2.9%.
Ceo, Brian Cornell, said, “While our overall comps for the first quarter declined 2.9%, we were very encouraged with the sales of our kids and specialty craft categories, scrapbooking and frame and art supplies. Sales in April showed a reversal of trend with same-store sales up 3.1% on a strong increase in transactions. This positive sales and transaction performance gives us confidence that our new marketing and merchandising programs are connecting with our Michaels customers.”
For fiscal 2008, the company expects same-store sales growth to be approximately flat given the current economic environment.
Kirkland’s 1Q sales up 2.1%
JACKSON, Tenn. Kirkland’s reported that net sales for the first quarter ended May 3 increased 2.1% to $84.1 million from $82.3 million for the first quarter ended May 5, 2007. Comparable-store sales for the first quarter of fiscal 2008 increased 4.3% compared with an 18.8% comparable-stores sales decrease in the first quarter of fiscal 2007.
The company reported a net loss of $2.6 million, or 13 cents per diluted share, for the 13-week period ended May 3, 2008, compared with a net loss of $7.5 million, or 38 cents per diluted share, in the 13-week period ended May 5, 2007.
Robert Alderson, Kirkland’s president and ceo, said, “The first quarter results reflect strong merchandising execution and the benefits of aggressive financial initiatives that have reduced our operating costs, improved cash flow and strengthened our liquidity. During the quarter, we experienced improved customer conversions as shoppers have reacted very favorably to our merchandise mix. The positive comparable-store sales and trimming of unproductive stores led to leveraging of occupancy and distribution costs. Combined with an improvement in merchandise margin and a year-over-year reduction in operating costs of almost $5 million, we were able to post a significant improvement in our pre-tax results.