Archive for the 'food retailing' Category

On Amazon’s bid for Whole Foods

Talk about breaking news: RetailWire panelists had a chance today to weigh in on the announcement of Amazon’s bid to acquire Whole Foods. While many panelists see it as a way for Amazon to gain a bigger toehold in brick-and-mortar retail, I view it differently:

First, the move can help grow Amazon’s brick-and-mortar footprint, but it’s more about taking the Whole Foods brand to every household in America that may order groceries from Amazon. It gives Amazon’s fresh food businesses (meat, produce, organics) instant credibility in homes without a Whole Foods location in sight.

As to the skeptics about whether Amazon can handle the logistics — can they deliver organic produce and Cheerios at the same time — this is the smartest logistics management company in the world that we’re talking about.

Finally, Amazon has a longstanding willingness to lose money in a new business where it is trying to grow market share. The days of “Whole Paycheck” may be over.

Target’s continued struggles with groceries and supply chain

I’ve combined a couple of recent RetailWire comments here — first about changes at the top of Target’s grocery business, and second about new hires on the logistics front — to reflect my concern that the company continues to have problems executing. First, about food:

It’s hard to judge Ms. Dament’s performance based on less than 18 months on the job and the possibly insurmountable challenge she faces. Maybe she underperformed, maybe it was a bad cultural fit or strategic clash –who knows? Anybody trying to turn this around quickly has not been dealt a winning hand.

Brian Cornell wrote off the Target Canada fiasco very quickly, but I’m not sure he can walk away from the grocery business so easily. The company spent billions on remodels and infrastructure to establish the business, and it doesn’t appear to have a replacement strategy waiting in the wings.

But how does Target fix it? It’s not a “top of mind” business and doesn’t have the critical mass needed to draw weekly shoppers. Perhaps Target should hire somebody from a more disruptive grocer (think Aldi or Trader Joe’s) who can offer up a more innovative, curated approach to the category.

Second, about logistics:

I’m no expert on supply chain management, but it’s clear that Target recognizes a logistics problem when it hires executives from two of the best in the business — first Amazon and now Walmart. I also don’t know whether Target has spent competitively over the years on logistics (compared to its competitors) but this is a longstanding issue. One of the biggest problems that doomed Target Canada was its inability to keep the store shelves filled, and anybody who shops Target regularly sees plenty of empty pegs on a regular basis.

Target has long pushed the idea of inventory turnover at the expense of satisfactory in-stock rates. If their new hires can accomplish both goals, more power to them….but the company needs to commit to higher service levels first, not just more speed and lower cost.

Walmart shows modest Q2 gains

Walmart stood out from most other retailers by reporting a comp-sales gain for the 2nd quarter, instead of a decline. (There continues to be strength in the off-price segment, too.) I think part of the reason is Walmart’s success at the food and commodity businesses while Target continues to struggle. Here’s my take from a recent RetailWire discussion:

Walmart veers from underperformance to overperformance over time, and the latest “overperformance” is really only in contrast to competitors like Target. A very modest comp-store sales increase is nothing to write home about when Walmart continues to lose share to Amazon, dollar stores, and other competitors. That being said, Walmart is doing a consistently better job drawing in regular food shoppers than Target, and some of its investments in store improvements are starting to pay dividends. But a 1.6% same-store increase isn’t cause for celebration, even in today’s tough environment for general merchandisers.

What’s a “chief innovation officer” to do?

SuperValu recently announced the hiring of a “chief innovation officer.” As discussed on RetailWire, I thought the job description sounded pretty vague. Here’s my comment:

This is a title (like “chief experience officer”) that only means something when the underlying value is embraced by the entire organization. It’s hard to impose “innovation” from the top down if it’s not part of Supervalu’s everyday culture. And the most innovative companies — in any industry — focus on innovation from the ground up.

When you read the job description from George Anderson’s article (“will work closely with the company’s various units to develop new business and cross-channel merchandising and promotions initiatives, while driving integration of logistical solutions for its retail customers”), does this sound like innovation? It sounds like Supervalu is aiming for better execution of omnichannel, multi-platform opportunities, and supply chain management. But “innovation”? We’ll see.

Kohl’s shuts down its coffee experiment

Kohl’s tested a coffee bar (in partnership with Caribou Coffee) in two of its Milwaukee-area stores. Based on the results, the company decided to kill the concept test. Here’s my recent RetailWire comment on the topic:

I shop the Kohl’s Menomonee Falls store often (disclosure: I worked for the company from 1982-2006), so I saw the coffee concept first-hand. The lack of a seating area was a handicap, and a typical Kohl’s store doesn’t have space to burn at the same time that it is expanding its beauty departments. So the typical Kohl’s shopper making the rounds of the store (with an armful or cartful of merchandise to check out) may not find it easy to balance a cup of coffee while checking her cell phone for the latest coupons.

Kohl’s has other ways to make customers linger and to make the in-store experience more compelling — and it has bigger fish to fry in terms of growth opportunities like Off/Aisle and Fila outlets.

Organics at Target and Walmart: Who has the edge?

A brief comment (from RetailWire) follows on the topic of organic foods, and the two giant discounters’ push into the business. As usual, Target and Walmart are taking different approaches toward the category:

“Healthy for you” positioning depends on the retailer: Panera yes, Burger King no. It’s valid for Walmart and Target to take diverging paths toward selling more organics and healthy food. One chain (Walmart) specializes in “We know what you want,” while the other (Target) practices “We know what’s good for you.” In defense of Walmart, pushing organics at price points meant to stimulate further demand is providing a consumer benefit even if the company isn’t using it as a branding tool.

Home meal delivery: Still an upside?

Restaurant delivery is an exploding business, but how much room for how many players? This is a question tackled recently by the RetailWire “braintrust” panel, including me:

Whether you’re talking about groceries, restaurant meals or anything else, there is only so much space in any given market for competitors before the weakest or most underfunded performers get squeezed out. Even bigger players like GrubHub (full disclosure: my son works there) face competition as Amazon and Uber move into these businesses. And there is always the threat from grocery or nonfood retailers who verticalize their own delivery instead of outsourcing it.

So — short answer — yes, there is likely to be fallout among the startups who fail to develop a compelling reason to be, other than wanting to jump on the bandwagon of a fast-growing category.