David Merrefield

About David Merrefield

David Merrefield is principal of DRM Initiatives, Inc., a retailer consulting group. He is the former Vice President and Editor of trade publication Supermarket News. He is based in New York City.

Tiffany Sues Costco! What’s Up?

Brands_in_Danger_FinalIn the land of the brand, the Holy Grail, surely, is building a brand that’s universally known and is in constant mention by consumers.

Or is it?

There’s such a thing as too much familiarity. There are more than a few instances of brand owners losing legal possession of their own brand because they became generic descriptors of the product, sometimes with dire consequences for its erstwhile owner.

Now, in an interesting lawsuit filed in US district court of the Southern District of New York, Tiffany is in legal battle with membership retailer Costco about the appropriation of the Tiffany name by Costco. There’s some reason to believe that while the facts would seem to strongly favor Tiffany & Co, it may not be the victor, at least not in a narrow legal sense.

But first, let’s take a look at how brands can evolve into popular vernacular, to the degree that their ownership is snatched from their creators.

Among a number of examples of brands lost in legal action are thermos, escalator, linoleum, videotape, and yo-yo. In the last instance, the Duncan Toys Co. went bankrupt when it lost control of its trademark. Also in the litany of lost brands is aspirin. That brand was once owned by Bayer, a German company, but it was awarded as war spoil after World War I. So it became a generic term in the US, the UK and France. In other parts of the world, Bayer still defends the use of its Aspirin brand. Curiously, Bayer also lost the right to its Heroin brand under the same circumstances. It hasn’t seen fit to defend it. Yet.

Numerous other brands are teetering perilously close to becoming generic terms, brands such as Scotch Tape, AstroTurf, Jacuzzi, Band-Aid, Frisbee, Hoover, Taser and Rollerblade. [Read more...]

The Breakfast Champion Goes Down for the Count

BreakfastWhat Happens When an Entire Consumer Segment Suddenly Loses Interest in a Brand or Product Category?

Ugly results happen, that’s what. Just take a look at Abercrombie & Fitch, the retailer of upscale apparel to teens. Over the space of a year or so, teens have been abandoning A&F in droves as the retailer lost its design edge and cash-strapped teens found cheaper and more fashion-forward alternatives at other retailers. Maybe also, teens now self define status more by the mobiles they carry than the jeans they wear.

That’s powered sharp declines in A&F’s same-store sales, its net sales volume, and the fortunes of Michael Jeffries, its autocratic and gaff-prone chairman and chief executive — or to be more precise, its former chairman who is now chief executive only.

What that retailer experienced in a comparatively short period of time has been happening in slow motion in the food industry for a long time. For a decade or more, a huge consumer segment shifted away from a core supermarket category: breakfast. And the component of the breakfast category that’s taking the biggest hit is its former champion, cold cereal.

Let’s take a look at what’s going on. [Read more...]

Water Sales Swirl Brands Down the Drain

waterbottleIs water washing full-price mega brands down the drain? Well, maybe so, given that major bottlers have lost consumer credibility to the degree that they can’t market product under their own brand names.

But let’s start at the beginning. As has been postulated in the Robin Report lately, harbingers of the “death of mega brands” are on the horizon. Chief among them is the slippage of Tide laundry detergent at the previously unassailable “high performance, high price” end of the category.

How so? Procter & Gamble is poised to introduce “Tide Simply Clear” detergent. Simply put, it’s a Tide entry into the lower-price end of the market. It’s reminiscent of P&G’s introduction of Charmin Basics and Bounty Basics a few years ago as an off-price version of its high-end paper products.

These price moves are intended to fend off the increasing popularity of off-price products that consumers perceive as performing just as well, or well enough, in product categories that aren’t edible. Increasingly, many consumers now see no reason to pay full price. [Read more...]

Growth by Foreign Expansion

dm_hebLittle-Known H-E-B Shows the Way

As the post-recession era drags on, the dynamics of retailing are changing, adjusting to the new normal.

As we’ve seen lately in the pages of the Robin Report, some retailers that didn’t fare any too well in the recession are circling the wagons and shedding retail units. Opportunistically, those sites are being picked up by resiient retailers that survived the recession. What we’re seeing is the classic case of the big getting bigger and stronger, and the weak continuing on a downward trajectory. Is it simply survival of the fittest? Or poor strategic planning?

There’s another path to growth that’s increasingly being considered by clever American retailers, namely international expansion. Some retailers have long had a presence beyond America’s borders; McDonalds and Starbucks have led the way. Others are making the leap for the first time or expanding into more countries, including Bloomingdale’s, Urban Outfitters, J. Crew, Ralph Lauren, and Gap.

Yet, one strange anomaly persists in the world of retailing — and stranger still, it concerns the largest and most widespread retailing of all — food retailing, or, to be more precise, conventional supermarkets. [Read more...]

Delhaize’s New Way Forward – A Blueprint for Retailers?

logo_delhaize_67_cmykChanging markets and disruptive technologies have shaken many retailers to the core. Many are flailing about in all directions in hopes of chancing on a solution.

Barnes & Noble wanted to convert to a technology company, but couldn’t. JCPenney wanted to become a boutique mall, but couldn’t. Best Buy doesn’t know which way to turn.

So it goes for many retailers, including some in the food-retailing sector. Let’s take a look at one company in that industry – Delhaize. More than just about any retail company, it has tried out every conceivable model to reinvent and reinvigorate itself, but eventually decided to return to its core business. That move gave it two clear options for the future. Delhaize is an interesting case study in lessons that other retailers can learn from. [Read more...]

LIDL Defies Odds, Thinks America

Robin_Report_Sep2013_stock7Are they Nuts?

Could it be that that Lidl executives have taken leave of their senses? Maybe so. They’ve announced plans to plant a large number of stores in the US, notwithstanding its overseas industry peers’ wretched record of failure in the States.

Lidl is the mammoth discount food retailer based in Germany. There can be no doubt it’s a formidable force in European food retailing. With annual revenues of roughly $80 billion and about 10,000 stores in more than 20 countries in both Eastern and Western Europe, it’s probably the largest pan-European food retailer of all.

Yet, the failure of other European food retailers in the US surely must give Lidi executives pause. The most recent downfall came when UK-based Tesco threw in the towel and decided to cut short its five-year-old bid to establish its Fresh & Easy format in the western US. Tesco lost in excess of $3 billion in startup and operating losses. Tesco isn’t alone. Other European operators have tried to enter the US without any success. They include Carrefour, Auchan, Leclerc and 3 Guys. All are long gone. [Read more...]

Unintended Consequences: The Price Race to the Bottom

mysupermarketConventional supermarket retailers can’t catch a break — even sometimes.

Conventional operators — Kroger, Safeway and the like — face a vast array of competition developing on all sides. That includes food purveyors such as deep discounters, mass merchants, membership clubs and restaurants, just to cite a few. Competition is always evolving with new strategies and new players, but one constant is that shoppers demand good value for low prices, and are quick to change stores if they think that’s not happening.

Regrettably for supermarkets, the battle for the low-price prize isn’t in their favor, and not just because of increased competition. The looming threat is really information: thanks to increasingly sophisticated online price-comparison websites and mobile apps, it’s getting easier for shoppers to take a look at several retailers’ price lineups before leaving home, or while in the supermarket.

Up to now, most online services compared prices among competing supermarkets in a defined geographical area so shoppers could make a convenient shopping choice or decide to patronize more than one local store in their quest for low prices. [Read more...]

Agriculture Production Gone Wild: Safety, Shortages, Vanishing Workers

Salad ForkShould food retailers permit themselves just a little schadenfreude as they watch the tempest swirling around apparel retailers?

And quite a tempest it is: the apparel industry has a mammoth problem with manufacturing conditions. This was illustrated far too well with the sudden death of over a thousand exploited workers in Bangladesh when a factory building collapsed.

Food retailers may think they can rest easy because they have no such problem. Well, not so fast. Food retailers are in the business of selling product that has its own production issues, plus more.

Now, it may not be possible to defend apparel-manufacturing conditions, but at least T-shirts have never caused disease or death to their end users. Conversely, food retailers sell products that have the potential of causing disease and death to their customers, which is happening with alarming frequency. What’s worse, food-production processes are far from immune to situations that cause harm and fatalities among workers. [Read more...]

How Do Changes in Brand Loyalty Shift Marketing Responsibilities?

The Robin REportSupermarket retailers are facing a sea change when it comes to how the products they sell are marketed. That responsibility is going to migrate from manufacturers to the retailers themselves before too long.

Why? Because supermarket shoppers are a fickle bunch. And nowhere is that more evident than in their fast-changing attitudes toward brands and their loyalty to them — or, to be more precise, their lack of brand loyalty.

Of course, brand loyalty has been fading for a long time, but for the first time, surveys of motivations behind consumer buying decisions show that a large majority of supermarket shoppers have no brand preference at all. Instead, they are prone to swing between brands, or to opt equally for specialty or store brands. [Read more...]

How Trader Joe’s Lures Shoppers With Quirky Products and Brands

Trader Joe's Opening - 08Trader Joe’s is undoubtedly the nation’s most successful limited-assortment grocery chain; lines actually go around the block in New York City’s two outposts during the holidays.

So what’s really going on here? Trader Joe’s uses product and pricing strategies that could easily be emulated by other chains that sell quick-turn consumables. But Trader Joe’s is not just privately held, it is fiercely private, making every effort to fend off any effort to learn how it works.

We do know, however, that Trader Joe’s net sales-per-square-foot are roughly twice those of the similarly situated Whole Foods. And Trader Joe’s performs better in smaller selling spaces, with about a quarter of Whole Foods stockkeeping unit count.

That’s impressive, but the real secret formula is Trader Joe’s product lineup. More than 80% of Trader Joe’s 4,000 SKUs are private brands, most under the Trader Joe’s name, and others under offshoots such as Trader Jose’s (Mexican food) and Trader Josef’s (baked goods), and so on. [Read more...]

Tesco Felled By Hubris, Leaves USA

Quitting the country is the easy part. Now, what about all that infrastructure?

Chronicle of a Failure Foretold

Years from now, MBA students will be puzzling over how Tesco, the British food retailer, could have stumbled so badly in its venture in the United States.

Well, more than stumbled. As I predicted more than a year ago in a news feature in the Robin Report, Tesco has called it quits in the U.S., just five years now after entering the country. Tesco racked up a horrendous record: it managed to open about 200 stores in this county, most in California, plus a few in Arizona and Nevada. It burned through well in excess of $3 billion counting startup costs and cumulative losses during its time in this country. At no time did Tesco turn even a modest profit with its Fresh & Easy stores, as they were dubbed.

farewell_fresh

That dismal outcome stands in ugly contrast to its stated ambitions. Tesco predicted it would have many hundreds of stores in the U.S. by now. It envisioned a quick leap to the East Coast with fill-ins elsewhere yielding a network of 10,000 stores.

The reality of the situation has cost the career of Tim Mason, Tesco’s U.S, chief officer. When Tesco announced in December it was quitting this country, it also said Mason would immediately leave the company. Mason was a 30-year veteran of the company and at one time was seen as the next chief executive officer of all of Tesco. Mason gave it a good shot. He moved to California from Britain with his wife, Fiona, and three of their seven children to direct the fledgling Fresh & Easy empire. Fiona took up golf to wile away the hours while Mason toiled. To the good for Mason, he left with a huge buyout and an astoundingly generous pension.

Tesco now faces the challenge of how to withdraw from the U.S. without abandoning its assets here entirely. [Read more...]

Peapod’s New PUP: Doggone Poor Thinking

peapod_commuter_storePeapod has a new PUP. Unfortunately, it may be a biter.

Peapod is the big grocery delivery service with major operations in the Northeast and the Midwest. It has never been hugely successful, so it sometimes casts around in different directions to invigorate the business. The latest idea is to launch pick-up points, referred to in the industry as PUPs. Peapod now has three dedicated pick-up points in the suburban Chicago area in addition to one attached to a Stop & Shop supermarket outside Boston. (Peapod and Stop & Shop are commonly owned by Ahold.)

The click-and-collect model goes like this: Customers go online and order groceries on Peapod’s website. But instead of waiting for delivery, customers agree to go to a pickup place at a certain time to retrieve their order. This scheme may offer some consumers a vague advantage in that it eliminates waiting at home for delivery and it can reduce or eliminate fees charged for delivery.

Peapod isn’t alone with its PUPs. A number of conventional supermarket retailers have tried PUPs too, not all with success.

The difference is that for conventional retailers, PUPs make a modest amount of sense. It gives established retailers a way to cater to customers who really want to transact business online, but don’t want home delivery. It is also a low-risk proposition for an established retailer. The store itself can be the pickup point and existing personnel can probably be used to pick and package customers’ online orders. So retailers’ PUPs do little harm and if they fail, little is lost. Supermarket giant Publix in the Southeast is among the retailers that tried PUPs, and discontinued them for lack of consumer interest.

That exposes the real problem with PUPS: Many customers just don’t find there to be much convenience associated with ordering online, then picking up. Why not just shop a store and be done with it?

That a company like Peapod is trying PUPs is an especially odd development. Peapod’s core business is the offer of home delivery. If the delivery model is so flawed that it feels obliged to offer customers an alternative, doesn’t that mean that a major part of the business is a failing at some level?

Beyond that, Peapod is operating dedicated pick-up points in the Chicago market, so the cost of failure– if that happens — will be far from negligible. Failure may move closer if Peapod goes through with its plan to charge for pick-ups. The plan is to charge $2.95 for picking up against $6.95 for home delivery. Really? Another reason to use the pick-up service all but vanishes.

It’s time for Peapod to put the PUP on a very short leash.