TPMtoday

UK supermarkets cheaper than discounters

2009-05-25T19:01:00.002-05:00

There's been an interesting development in the UK supermarket arena -- the major grocery chains are now priced at or below the level of discounters -- at least in Edinburgh. In test-shopping a range of products at the "big 4" chains and the Lidl and Aldi discount stores, a Scottish newspaper found:

Asda was the cheapest for the overall shop, at £42.90, narrowly beating Lidl by just 17p – the cost of a tube of value brand toothpaste. Only Sainsbury's (£48.16) was more expensive than Aldi, at £46.39.

The interesting turnabout was:

The no-frills stores have – perhaps turning popular preconceptions on their head – defended their prices, saying it is about value for money and shoppers have to take quality into account.

The juggernaut rumbles on

2009-05-25T13:55:00.004-05:00

When you're wrong it's best to admit it and move on. A couple years ago, it appeared that Walmart was struggling, especially overseas (closing operations in Germany and Korea, and posting poor performances in Japan and UK).

But things have changed. Actually, I admitted this last year, when I posted this, but now things are looking even better:

International operations Q1 underlying sales up 9.1 pct
International Q1 underlying operating profit up 7.8 pct
Says outperforming in almost every foreign country
"Stand out" quarter from Asda in Britain

Some of their growth of course must be attributed to the recession, but the improvement seems to have predated the worst of the downturn. It looks like Walmart's growth continues unchecked.

The continuing decline of the magazine biz

2009-05-25T13:03:00.002-05:00

I most often post about newspapers, and to a lesser extent about broadcast, when discussing media fragmentation, because those are the media most often used in advertising supported by trade promotion funding. Media fragmentation is creating problems for other media as well, of course, and the readers of this site are mostly marketers with interests beyond just trade promo.

Or at least that's the rationale I use when I get off-topic. In reality, I sometimes just use this blog to post about things that I find interesting that may have only a very tangential relationship to trade promo.

In any case, the magazine sector is continuing to have problems. Conde Nast killed off Portfolio recently, joining a number of titles that have disappeared. The survivors are dropping their circulation guarantees, as Newsweek and Time have done and as New York is now doing:

New York's circulation will fall to 400,000 from 425,000, while the magazine's introductory subscription price is jumping to $24.97 from $19.97.

While raising subscription prices may seem counterintuitive in the face of declining circulation, the idea (don't know if it works or not) is to make the remaining circulation more attractive to advertisers. And, of course, to cut costs.

Newsweek's efforts to survive are more drastic. They have loudly proclaimed their move away from straight reporting to "interpretation" of the news (I mentioned it last year in this post -- Newsweek wants to be The Economist when it grows up).

The makeover has recently hit the newstands, and I enjoyed reading this devastating review by Michael Kinsley:

The next page of content is headlined "Scope," with the explanatory subhead "news, scoops and the globe at a glance," which is pretty much what Meacham had said Newsweek was not going to cover anymore. But never mind the headline. Most of the page is a picture of Miss California in a white bikini. I know she's Miss California because of a quote from Donald Trump just over her right shoulder, with the added information that he had "allowed [her] to keep her crown." Her breasts are covered by a table of contents of the Scope section. These contents include "InternationaList" (short dispatches from foreign parts; no list that I can see); a source-greaser (flattering profile of a figure who may prove useful) about CIA director Leon Panetta; something called the "Indignity Index," described as "an unscientific appraisal of dubious public behavior" (comedian Wanda Sykes gets a 12 for a rude joke about Rush Limbaugh, Keifer Sutherland gets a 68 for some kind of unpleasant encounter at a party); a short, serious essay by Melinda Gates about building institutions in underdeveloped countries to help poor people save money; and so on.

I say "and so on" as if there is some pattern or similarity here. But the only thing these various features have in common is nothing more about Miss California. It's been said that the test of a newsmagazine is whether you would grab it if you'd been trapped in a coal mine for a week and had one hour to catch up. And after a week trapped in a coal mine, perhaps an hour with a picture of Miss California in a bikini will be more useful than any explanation of why she's in the news. But the new Newsweek maintains the same irritating practice as the old one of half-explaining, which is no use either to those who already know the story or to those who don't.

The newsweeklies, as I noted last year, have dumbed themselves down to the level of People. It doesn't appear that this makeover has changed much. My comment back then stands: "Newsweek trying to reposition itself as intelligent reading seems to me kind of like Lindsay Lohan trying to rebrand herself as Grace Kelly -- it's a worthy effort, but unlikely to succeed."

(As an aside: It's probably fair to note that Kinsley was writing in The New Republic, which is a left-of-center opinion magazine -- which is what Newsweek apparently is trying to be. So maybe there's some bias involved in his review.)

EU fines Intel billion-plus

2009-05-13T22:41:00.005-05:00

I've posted several times previously (most recently here) about the legal battles between Intel and AMD, and the related battles between Intel and various regulators (Korea, Japan, EU). Last June, Korea fined Intel $25 million for offering improper rebates to customers:

Intel offered about $37 million in rebates over 2 1/2 years to Samsung and Trigem on the condition that they wouldn't buy from Advanced Micro, according to commission's statement.

The EU has just handed down a fine that makes Korea's look like chump change:

The European Union fined Intel Corp. a record euro1.06 billion ($1.44 billion) on Wednesday, ordering the world's biggest computer chip maker to stop illegal sales tactics that shut out its Silicon Valley rival AMD.

The findings are detailed in the article linked, and are too lengthy to quote here, but they are similar to the Korean case:

Wrapping up an eight-year probe, the EU says Intel gave rebates to manufacturers Acer, Dell, HP, Lenovo and NEC for buying all or almost all their x86 computer processing units, or CPUs, from Intel and paid them to stop or delay the launch of personal computers based on AMD chips.

Intel has denied the validity of the findings and says they will appeal within the next sixty days.

I have no knowledge of who is right or wrong in this case, but obviously a fine of this size indicates the importance of reviewing your trade promotion policies carefully. For American readers who will try to draw solace from the fact that the fines have been overseas, I draw your attention to this part of the article:

[EU Competition Commissioner] Kroes said she hoped the administration of President Barack Obama would join Europe in subjecting corporations to closer anti-trust scrutiny.

This week, one of America's top antitrust officials, Christine Varney, signaled a return to tougher enforcement as the Obama administration dropped a strict interpretation of antitrust rules that saw regulators shun major action against monopolies over the last eight years.

Kroes said Varney's words gave her hope that current "close cooperation" and information exchanges with the Federal Trade Commission "could go in a very positive way" in the future.

"The more competition authorities are joining us in our philosophy, the better it is for it is a global world," she said. "The more who are doing the job ... and with the same approach then the better it is."

Walmart won't report monthly

2009-05-10T18:55:00.004-05:00

Walmart says that the purpose is to allow the chain to focus longer-term, rather than concentrating on justifying very short-term changes in sales.

I'm a bit of a crank on the subject of short-term thinking -- I blame it for a lot of the ills in American business (probably even more that it deserves). So I approve of Walmart's thinking -- having to justify sales blips to Wall Street every month probably motivates a lot of poor decisions.

A number of other retailers have moved in this direction recently (Eddie Lambert of Sears took heat for doing this a few months back, as I recall).

Over the past year, about a half dozen retailers have done so, but they mainly are specialty retailers such as AnnTaylor Stores Corp., Guess Inc., Bebe Stores Inc., Cache Inc. and Pacific Sunwear of California Inc. Analysts say many of the stores acted because their comparable-store-sales were deteriorating and it is more of a cost drain compared to better-capitalized large retailers.

Macy's Inc., among the biggest retailers in the nation, stopped dispensing same-store-sales figures in February 2008 but started again last October.

But what will all us nerds do if we can’t obsess over monthly sales figures?

International retail: Russia, Japan

2009-05-05T21:26:00.006-05:00

I've been ignoring developments outside the US a bit lately. There's been enough action here recently to keep us all focused.

But for retailers, the opportunities for growth may look better overseas. Carrefour is apparently in negotiations to buy one of Russia's leading grocery chains:

French retail giant Carrefour is negotiating to buy Russian supermarket chain Sedmoi Kontinent for 1.25 billion dollars (938 million euros), the daily Kommersant reported.

The paper, quoting an unnamed senior Western investment banker close to the talks, said Carrefour would formally submit its bid on May 15 under the terms of a preliminary agreement signed in April.

The paper said the French retailer would pay 1.25 billion dollars to acquire 75 percent of Sedmoi Kontinent and 100 percent of Mkapital, the firm managing the real estate holdings of the Russian supermarket chain.

Russia could be an interesting market to watch, since my first thought when I saw this article was, "Hey, didn't I see something a few weeks ago about Walmart planning to enter Russia?" As a matter of fact, I had:

Reports of out Russia suggest Wal-Mart Stores Inc. may be in negotiations to buy a controlling stake in one of the country's leading “hypermarket” big box retailers. An article in the Kommersant newspaper said the ownership stake in Lenta could approach 51%. This follows similar reports in July 2008.

As the quote indicates, Walmart has been looking at Russia for a while. Presumably they'll take the leap soon, especially now that Carrefour has gone first.

Meanwhile, in Japan, where Walmart, Tesco, and Metro are established, the Wall Street Journal thinks the action is going to be defensive consolidation by local chains, especially by the biggest of the locals:

Still, any efforts to push their presence out into the regions by Wal-Mart, Tesco or Metro may put them into competition with domestic heavyweight and serial acquirer Aeon.

"Aeon's strategy has been one of looking at M&A as a platform for sales volume expansion," says Larke. "It's seen what the large overseas competition have done and come to the conclusion that sales volume is the way to go."

In the past three years it - or its affiliates - have on average conducted a merger, private placement or capital tie-up with another retailer every two and a half months, according to data from CapitalIQ.

Carrefour pulled out of Japan a few years ago, and Walmart has struggled there.

Maryland outlaws RPM

2009-05-03T13:04:00.004-05:00

A bill passed by the Maryland legislature is intended to nullify the effects of the Supreme Court's Leegin decision in that state.

Under the new state law, retailers doing business in Maryland -- as well as state officials -- can sue manufacturers that impose minimum-pricing agreements. The law also covers transactions in which consumers in Maryland buy goods on the Internet, even when the retailer is based out of state. That could potentially affect manufacturers throughout the country.

The article says that several other states are considering such legislation, but I doubt there will be any need. Senator Herb Kohl's subcommittee begins hearings next month on a bill to overturn Leegin at the federal level, and that will preempt any state actions.

The invention of the supermarket

2009-05-03T12:33:00.003-05:00

An interesting story in Forbes on the founding of King Kullen supermarkets in 1930 and its effect on how we live. They describe the way people bought groceries before self-service stores were invented, with a clerk picking out the individual items customers wanted (with few or no brand choices).

The process was erratic, labor intensive and costly. In 1930, Americans spent 21% of their disposable income on groceries. By 1940, that percentage dropped to 16%. Today, that figure is less than 6%--thanks to innovations in food distribution, mass merchandising and price competition that began in the 1930s.

"Supermarkets made it possible to achieve economies of scale at a lower cost to consumers," says Leslie G. Sarasin, chief executive of the Food Marketing Institute. "Americans were able to spend more of their disposable income on cars, education, clothing. They effectively created America's middle class."

A sidelight not mentioned in the story is that supermarkets spread so fast and destroyed the existing small retailers so quickly that only six years later, in 1936, congress felt it necessary to try to save the small retailers by passing the Robinson-Patman Act. Didn't work, did it?

Off-topic rant: Remember paragraphs?

2009-05-03T11:41:00.004-05:00

Take a look at the article referenced in the previous post.

There are eleven sentences in the article and ten paragraphs.

I see a lot of articles written like this.

What is it with the current fad in newspaper writing of having only one sentence per paragraph?

Although there are two sentences in one paragraph. But they’re short ones.

It’s very annoying to anyone with a reading comprehension level beyond third grade level.

Is this something they teach at J-School now?

I was taught (in third grade or thereabouts) that several related sentences that form a thought should be combined into a single paragraph.

Is that no longer true?

Kroger not pushing back on pricing

2009-05-03T11:36:00.002-05:00

At least, not hard. But they warn their suppliers to watch out for the consumers pushing back.

"While we'll push back a little, what a vendor decides to do with pricing is their decision, but they also own the volume result," Kroger Chief Executive David Dillon said at a Barclays Capital conference.

Nietsen questions Twitter retention

2009-05-01T15:36:00.002-05:00

There has been a lot of celebrity-centered hype about Twitter lately, with Oprah sending her first tweet and a big race to be the first to have a million followers (won by Aston Kutcher, who I think is an actor).

Any communications vehicle is potentially a marketing vehicle, and a lot of marketers are giving thought to Twitter's potential. A study from Nielsen indicates that, while Twitter may be spreading like wildfire, the fire may burn out just as quickly:

Currently, more than 60 percent of U.S. Twitter users fail to return the following month, or in other words, Twitter’s audience retention rate, or the percentage of a given month’s users who come back the following month, is currently about 40 percent. For most of the past 12 months, pre-Oprah, Twitter has languished below 30 percent retention.

That doesn't mean that Twitter will not be successful. If thirty to forty percent of users remain active, and if the application continues its spread to the point that just about everybody tries, then it will be huge. If, however, the anti-hype from the Twitter Quitters begins to discourage new trials, then there will be a problem. We'll keep watching (and even tweeting).

Possibly big price discrimination decision

2009-04-29T13:34:00.004-05:00

Time will tell how big this is, but a food distributor in Pennsylvania won a Robinson-Patman suit against a supplier for discriminatory pricing and against Sodexho for inducing discriminatory pricing.

Feesers filed its complaint against Michael Foods and Sodexho on March 17, 2004, alleging price discrimination in violation of the Robinson-Patman Act. A three-week bench trial took place in early 2008 before Judge Sylvia Rambo in the federal district court in Harrisburg, which resulted in the April 27, 2009 decision.

At trial, Michael Foods and Sodexho argued that Feesers and Sodexho were not in "actual competition" for purposes of the Robinson-Patman Act because Sodexho provides food management services to its customers, whereas Feesers is a food distributor. The court found, however, that both Feesers and Sodexho procure and distribute food for the same institutional customers and, thus, are in actual competition for the same food dollar.

Although the injunctions issued by the district court are binding only as to Michael Foods and Sodexho, it is now clear that price discrimination by food suppliers against distributors such as Feesers and in favor of large-volume food management companies and GPOs such as Sodexho will not be tolerated by the courts.

This law blog quotes attorneys for the two sides, who disagree (no surprise) as to the importance of the decision:

Kessler [Feeser's attorney] told us Wednesday that the decision could have a major impact on the food distribution industry. In recent years, he explained, food management companies like Sodexo--which provide procurement and management services for cafeterias at schools, hospitals, and prisons--have used their large client base as leverage to extract better pricing deals from suppliers. That's hurt distributors like Feesers. "Sodexho [said to its clients], 'We don't compete with distributors so you can give huge discounts,' " Kessler told us.

Peggy Zwisler of Latham & Watkins, who represented Michael Foods at trial, disputed Kessler's view of Judge Rambo's opinon. She told us it's "very fact specific" and does not have broad implications. She also said that Michael Foods has "strong grounds for appeal" and it intends to do so.

The decision is here.

I am not an attorney, so take my opinions with several grains of salt, but it seems to me that the most significant point in the decision is that no proof of competitive harm is required, that harm can be assumed from the size of the price differential. My understanding is that this interpretation, if upheld, would make such suits easier to win in the future.

“Competitive injury” is established prima facie by proof of “a substantial price discrimination between competing purchasers over time.” In order to establish a prima facie violation of section 2(a), Feesers does not need to prove that Michael Foods’ price discrimination actually harmed competition, i.e., that the discriminatory pricing caused Feesers to lose customers to Sodexho. Rather, Feesers need only prove that (a) it competed with Sodexho to sell food and (b) there was price discrimination over time by Michael Foods. This evidence gives rise to a rebuttable inference of “competitive injury” under § 2(a). The inference, if it is found to exist, would then have to be rebutted by defendants’ proof that the price differential was not the reason that Feesers lost sales or profits.

Radio Shack brings us some good news

2009-04-28T20:18:00.004-05:00

Radio Shack is not exactly the coolest name in retail, and a couple years ago I couldn't resist posting this bit of satire from The Onion, purporting to quote the chain's CEO:

"I'd like to capitalize on the store's strong points, but I honestly don't know what they are," Day said. "Every location is full of bizarre adapters, random chargers, and old boom boxes, and some sales guy is constantly hovering over you. It's like walking into your grandpa's basement. You always expect to see something cool, but it never delivers."

Added Day: "I may never know the answer. No matter how many times I punch the sales figures into this crappy Tandy desk calculator, it just doesn't add up."

But Day may be having the last laugh:

Net income rose to $43.1 million, or 34 cents a share, from $38.8 million, or 30 cents a share, a year earlier. Revenue grew 5.6% to $1 billion.

Analysts had, on average, been expecting Ft. Worth-based RadioShack to earn 20 cents a share on revenue of $944.8 million, according to consensus estimates derived in a FactSet Research survey.

The numbers may be inflated by sales of digital converters, but anybody who's showing good increases right now is doing something right.

Pontiac: R.I.P.

2009-04-28T20:10:00.003-05:00

Old brands can be like old friends, I guess. When they die, we're saddened, we feel a void in out lives.

That's a bit of hyperbole, of course, but I will miss Pontiac, as I miss other brands that are gone, and as I will miss some others that appear to have one foot in the grave. I never owned a Pontiac, but it's a brand that I grew up with. It has always been there, and now it won't be.

Newspaper circulation falls -- even more

2009-04-27T16:39:00.004-05:00

Just when you think things couldn't possibly get worse for the newspaper industry ... things get worse.

The latest circulation figures just came in, and they are ugly. Of the top twenty-five daily papers, only the Wall Street Journal had an increase (less than 1%). Many of the others had double digit decreases -- the New York Post was down more than 20%, and New York Daily News, Houston Chronicle, SF Chronicle, Boston Globe, Philadelphia Inquirer, Cleveland Plain Dealer, Newark Star-Ledger, St. Petrsburg Times, Portland Oregonian, and Atlanta Journal-Constitution were each down between ten and twenty percent. Overall:

... for 395 newspapers reporting this spring, daily circulation fell 7% to 34,439,713 copies, compared with the same March period in 2008. On Sunday, for 557 newspapers, circulation was down 5.3% to 42,082,707.

Well, at least things can't get any worse than this. Right?

FTC's RPM workshops scheduled for May

2009-04-27T16:32:00.004-05:00

The Federal Trade Commission will hold workshops on resale price maintenance May 20-21:

The first panel will be moderated by Pauline Ippolito, Acting Director of the FTC’s Bureau of Economics, and will examine empirical evidence on the effects of RPM. Specifically, it will review existing empirical studies of RPM, or studies of other vertical restraints that might inform the thinking on RPM. The panel also will explore potential future research in light of possible testable hypotheses underlying the competitive effects of RPM.

The second panel, to be moderated by Laurel Price, Attorney Advisor to FTC Commissioner Pamela Jones Harbour, will examine the legal and business history of the use of RPM in the United States. It will explore how RPM has been treated in this country historically, as well as the legal and business management doctrines related to RPM.

The third panel, also to be moderated by Price, will examine “rule of reason analyses” after the Supreme Court’s landmark Leegin decision, and will assess guidance provided by the Leegin Court regarding the analysis of RPM.

The sessions will be of value to manufacturers who wish to establish minimum pricing rules for their resellers, although it's quite possible the rules might change again very soon.

Recessions get a bad rap

2009-04-25T22:50:00.003-05:00

Advertising Age had an article last week about the big increases being seen in private label, “Don't Blame Private-Label Gains on the Recession”.

Not only have private label brands been gaining share for the past decade, experts say these gains are the single-biggest problem facing branded packaged goods players. House brands, once a staple of lower-income households, now enjoy roughly equal penetration among demographic segments. Improvements in quality and packaging have helped removed the stigma attached to buying a no-name product.

The recession has accelerated the growth of private label, but it is a long term trend that was happening before the recession and will (presumably) continue, though at perhaps a reduced rate, when the recession is over. The increasing concentration of retail, and the increasing power of the surviving retailers, virtually ensures it.

That’s an interesting thing about recessions – they speed up trends that already exist, especially speeding up the effects of secular decline. Besides private label, we see similar effects from the recession in media and retail. (I did a similar post on this point almost exactly a year ago).

Some of the biggest (or at least most publicized) hits in this recession have been felt by the big media, especially newspapers. But media watchers have been warning about the effects of media fragmentation for the past few years (I did a presentation on its effects on trade promo at a TPMA meeting three or four years ago – and I wasn’t first), and newspapers have been in decline even longer. The recession has merely exacerbated existing problems.

In retail, department stores are hurting, and several chains (including Linens ‘n Things and Circuit City) have liquidated. But the consolidation of channels has been killing off the also-rans in each channel for years now, and department stores’ market share has been dropping for decades. Again, the recession has just sped up processes that were already in action.

It’s convenient to blame recessions for business problems. But often the recession merely exposed the problem, it didn’t create it.

Some brand marketers may want to believe that the recovery will solve their problems with private label, and media people and retailers may have similar dreams, but the recovery will solve nothing if the underlying problems are not addressed.

Google interview, part two

2009-04-25T21:34:00.003-05:00

A few weeks ago, I was interviewed by Brett Goffin of Google. The video from that interview is now available on the Google Retail Blog, in two parts. The first part, dealing with general trade promo issues and background matter, is here. Part two, dealing more specifically with trade promotion online, is here.

I’ll wait a few moments, while you click the links and watch the interviews … Okay, now that you’re back, I’ll expand a bit on what I said there.

I’m astonished, frankly, that online promotion has not yet attained a much higher percentage of trade spending. Our survey several weeks back indicated that it is under 5% for most programs. While our surveys are not scientific, the results comport with my observations. Given that online promotion offers both immediate sales opportunities at e-commerce sites (equivalent to in-store promotion), as well as brand-building opportunities (equivalent to print or broadcast advertising), and also customer education opportunities (equivalent to collateral material) – often serving these functions simultaneously – it seems retailers and their suppliers should be doing far more online promotion this many years into the internet age.

So why hasn’t it happened? There probably are multiple explanations, but it seems that the most likely reason is the usual one – money. Retailers make money off circulars and they make money off endcaps. They’re not going to get excited about online promotions until they can make equivalent amounts of money there.

When the internet first emerged, most of us looked upon it, in terms of trade promotion, as being analogous to broadcast or print, and therefore we tended to think of payment for it as being cost-based, as payment for those media (other than circulars) was traditionally arranged. But if we change the analogy to in-store promotion, then it is easier to think of payment as value-based.

The internet, of course, is both advertising medium and store (and more), and therefore both analogies are apt. But more to the point, there is no reason why retailers cannot charge what they see fit for online trade promotions, just as they do for an endcap in their store.

(A caveat: There are Robinson-Patman considerations concerning any trade promo payment that is not strictly cost-based – but value-based payments for internet promotions should be no more nor less questionable legally than value-based payments for in-store promotions. A second caveat: I am not a lawyer).

So what is needed for online trade promotion to advance beyond the level it is at today? Retailers need to see the opportunity to use it as a profit center, and then to present the value proposition to their suppliers; and/or, suppliers need to approach their channel partners with proposals to use online trade promotion that offer incentives comparable to in-store promotion; and/or, online media need to broker the deal.

The means exist to create online promotions that tie together search, banners, and “virtual endcaps”; promotions that build the brand, that sell, and that provide information to facilitate in-store sales. Retailers and their suppliers need to cut their ties to old models and move forward.

American Greetings gets out of retail, into distribution

2009-04-21T22:33:00.005-05:00

American Greeting s has pulled off what amounts to a trade with a privately-held card company, Schurman Fine Papers. AG sold their retail outlets to Schurman, which operates card stores under the names Papyrus and Carlton Cards, and simultaneously bought Schurman's distribution business, and a 15% share in Schurman.

American Greetings is selling its retail store operations to Schurman, which operates Papyrus card and gift retail stores. Schurman will operate stores under the American Greetings, Carlton Cards and Papyrus brands. Schurman paid American Greetings approximately $6 million for its retail business.

The card companies also announced that American Greetings purchased the wholesale division of Schurman, which supplies Papyrus brand greeting cards to specialty, grocery and other retailers. Following the close of the deal, American Greetings will become responsible for service to those accounts where Papyrus brand products are sold.

American Greetings paid approximately $18 million dollars as consideration for the wholesale division of Schurman.

American Greeting is a pretty well-known name -- I'm surprised to see that their retail business is worth only $6mil. But then, I also don't remember having seen any of their stores recently (if ever) -- which may be a clue as to why they are exiting the business. This would seem to be one of those "concentrate on your core business" moves.

Update 4/22: The Cleveland Plain Dealer reports that American Greetings closed sixty of its stores in February, leaving about 355. And this quote from AG's boss indicates that they looked at getting distribution rights to Papyrus as the focal point of the deal (and maybe the reason for the relatively low price for the stores):

“The addition of the Papyrus brand to the American Greetings family provides the opportunity to serve a consumer with distinct tastes—a consumer who appreciates the Papyrus approach to design and quality,” says American Greetings CEO Zev Weiss.

S&P downgrades Macy's and JCP to junk

2009-04-21T22:21:00.003-05:00

Standard & Poor's has lowered the ratings on pretty much the whole retail sector, it appears, with Macy's and J.C. Penney taking the biggest hits.

"The rating actions reflect Standard & Poor's deepening concern about the impact of the U.S. recession on the increasingly troubled department store sector," Standard & Poor's credit analyst Diane Shand writes in her reports, "which has felt the full brunt of the declining U.S. economy and weakening consumer confidence in 2008. We believe lower consumer spending and declining mall traffic will affect the sales and profits of the department store operators this year," Shand writes, "and that recovery will be slow."

I'm not a market analyst (as a glance at my portfolio would quickly prove), but I certainly agree that "recovery will be slow" for the department store sector, since their problems pre-date the recession and will continue after the recession is over.

When retailers suffer, so do mall owners

2009-04-19T19:45:00.002-05:00

General Growth Properties (ironic name), the second-biggest owner of shopping malls, declared bankruptcy this week, a victim of the ripple effects from the battering of their retail tenants. The company had $25 billion in debt, much of it coming due next year, and had bought out Rouse Company for $12.6 billion in 2004.

As more stores have closed, mall vacancies are at their highest point in almost a decade, according to Reis, a research company, which said the vacancy rate at the end of 2008 was 7.1 percent, compared with 5.8 percent at the end of 2007.

That has left many of the roughly 1,500 malls in the United States groping for a solution — any solution — to their woes. Some have converted retail space into office space. Others have drastically lowered rents for prized tenants, agreeing to cut deals to keep revenue flowing. Some have simply gone dark.

Shares in General Growth, which closed on Wednesday at $1.05, have fallen 97 percent over the past 12 months.

Down 97% -- sounds like some of my investments.

Mexican retailer enters US market

2009-04-18T22:29:00.004-05:00

A Mexican 'cheap chic' retailer with 64 stores in its home country, has opened its first store in the US. Shasa says the Houston store is just the first of 100 planned by 2012. Some might consider this an inopportune moment to be opening new stores:

Trendy vendor and possible competitor Wet Seal reported that its net revenue fell to $593 million last year from $611 million in 2007. Clothing retailers like Ann Taylor, Eddie Bauer and Gap have shuttered stores across the nation of late. And retailers like Meryvn’s and Steve & Barry’s declared bankruptcy last year.

But the store owners are undetered:

“It’s the best time to enter. From here, it’s all up,” Armando Dollero said as he toured the 6,300-square-foot store on opening day.

The recession is also forcing customers to exchange expensive name brands for cheaper retailers, Carlo Dollero said.

“We’re getting a market we didn’t have before,” he said, adding that sales in Mexico shot up 42 percent last year compared to 2007.

Good luck to them. I love that attitude.

Designers want to control their brands

2009-04-18T22:01:00.004-05:00

We've posted before about the havoc wrought by department stores, especially Saks, in taking panicky markdowns last fall, which many designers feel caused serious damage to their brand names.

Now some of the designers, according to this Wall Street Journal article, are seeking to regain control over their brands, and specifically over the pricing of their products. One tactics is to demand to be left out of "storewide" sales:

These days, many fashion brands are effecting their own pushback, demanding to be left out of department stores' sales. "All our brands are taking great care to ensure that what happened in November will not happen again," says Paola Milani, a spokeswoman for Gucci Group, which owns Bottega Veneta, Yves Saint Laurent, Gucci and other brands. "The idea is to maintain pricing coherence in the regions in which our products are sold regardless of channel of distribution." [ ... ]

Saks, which was a leader in last fall's discounting, declined to comment. But this week, notices for Saks's 25% off "Friends and Family" sale exclude, in the teensy fine print, more than 40 top luxury brands, including Gucci, Cartier, Chanel, Loro Piana, Oscar de la Renta, Zegna and Christian Louboutin.

One wonders if that will be legal if the Leegin decision is repealed, as Senator Kohl is demanding.

Other tactics include opening new stores, in order to reduce dependence on the department store channel:

Her company depends on department stores for 70% of its revenue, which was $273 million in 2008. But she would like to whittle that share down to 50%.

To that end, Eileen Fisher will open six new stores of its own this year in the U.S. -- slightly accelerated from an average of five new stores per year -- and is launching a costly new technology platform for Internet sales that will offer greater flexibility, allowing online customers to pick up items in stores, for instance.

Probably not a bad idea anyway, considering the current state of department stores. Another variation is opening leased departments within the d-stores.

And now ... private label cars?

2009-04-16T21:05:00.003-05:00

Saturn car dealers, faced with imminent closure, are looking for an opportunity to buy the Saturn brand name from General Motors. They plan to buy cars from foreign carmakers, tweaking the design, and sell them as Saturns -- effectively creating the world's first private-label automobiles.

Telesto Ventures said it would not build vehicles and would only keep a skeletal design crew on hand to adapt models from other automakers to a Saturn look. It also said it would focus future models on fuel-efficient and electric vehicles from other automakers.

While such a business model doesn't exist today, Telesto's backers say the global overcapacity among automakers and the growing number of start-up firms in China and elsewhere would give the reformulated Saturn several possible sources of new vehicles.

Finding automakers to work with "is not a tremendous concern," said John Pappanastos, a group spokesman. "It would allow manufacturers not in the United States to launch without incurring the largest expense they would otherwise face, setting up a distribution network."

I wish them well, and I find it fascinating to watch the concept of private label spread into areas where one could never have imagined.

Google interview

2009-04-15T16:25:00.002-05:00

Brett Goffin of Google interviewed me recently concerning trade promo, both in general and in regard to its utilization on-line. Part 1 of the interview is up now, with the second part to be posted next week. It's posted here. In this first part, we're discussing general principles, and we get more into on-line in Part 2.

I appreciate Google making this available, and I think it was a good interview (they edited out much of my mumbling and rambling).