Southeast snow, nationwide cold front could be a welcome blast
This post is part of the 10 Items or Less blog.
As the first week of the new year brought more lousy news for grocery – weakening demand sinking sales in December, and pessimistic forecasts for some of the industry’s biggest stocks – it likely comes as a relief to grocery retailers that a temporary solution was literally falling from the sky by week’s end.
And while the forecast snowstorm in the Southeast U.S. was sparking what looked to be enormous spikes in grocery store traffic for the obligatory bread-and-milk runs, things were actually improving all over as a nationwide cold front is motivating shoppers to seek “need-based” items in an otherwise quiet period for shopping, said Evan Gold, EVP of global service for Planalytics, the Berwyn, Pa.-based firm that forecasts demand based on weather.
“I think this is overall good news for grocery as the entire U.S. is facing below-normal temperatures this week,” Gold said Friday morning. “We’re in a post-holiday, post-gift-giving period where people are spending only on what they need. When the weather is like this, we see needs for items like hot drinks, rock salt, wiper blades and snow shovels go up.”
An Instagram photo of a busy pre-storm Kroger store in Atlanta.
Like the haircut, the snow shovel tends to be one of those purchases that can stand up to the threat of online retail. “People just don’t buy them until they absolutely need them and by then is often too late to order it online,” Gold noted. “It’s an item people wind up going to the store for.”
Gold said the grocery rush ahead of a storm tends to redistribute the pattern of traffic more than bring new customers to a store, so the opportunity for retailers in that space — in addition to managing labor and supply chains — is to grow the categories that accompany the weather.
This week, for example, Planalytics is forecasting ice melt sales up 63% vs. the same period last year; snow shovels will spike by 39%; and firelogs and hot chocolate will each see a 4% increase, nationwide. Retailers in Charlotte, N.C., can expect ice melt sales to jump by 200%. Atlanta grocery stores should see hot chocolate up by 17% this week, Gold added.
But even places like New York, where we awoke Friday to see an inch of snow had fallen overnight, should get a boost, he said. “A dusting is good because it’s not enough to keep you inside, but still enough to spark some demand.”
Attention Kmart shoppers
It’s hard to believe today, but there was a time when there was some debate about whether Wal-Mart or Kmart would win the supercenter war.
Kmart’s latest round of store closings include three casualties in its so-called “K-fresh” store test group: Roseville, Mich., Chillicoth, Ohio, and Uniontown, Pa. All of those stores were one-time Super Kmarts with full-blown grocery stores inside that were downsized in recent years to a smattering of fresh and staple items in a manner not unlike Target’s “p-fresh” stores. Liquidation sales begin Saturday. read more
There is a transformation happening in the food and beverage marketplace today. The fancy imported goods and gourmet products that were experienced on rare or special occasions once typically associated with premium quality are not exactly relevant to today’s modern consumer.
Because today’s definition and expectations of quality is being defined by the contemporary consumer. There has never been a time as now in which consumers have been more engaged. They have amazing access to information about food and drink, and food production more than ever before. For today’s consumers, food is now a cultural product to discover, share, make and trade. This reconnection with food and its origins is encouraging a new level of participation.
Think about this food cultural shift: not that long ago, chefs and their staff and all food production were kept in the kitchen, in the back off the restaurant out of view from diners. Today, it’s about open production and seeing chefs in action because food, cooking and the artisans behind the craft now take center stage. Now it’s hand-thrown pottery, having a front row seat to the magic in the kitchen and casual quality with hand-stitched aprons and plaid shirts.
In essence, America’s foodways are becoming more sophisticated and diverse as consumers increasingly aspire to higher quality food experiences they simply did not grow up with. With this consumer-driven redefinition of quality playing out in food culture today, what, then, does “premium” mean and how should brands express quality? This was the question at the heart of The Hartman Group’s A.C.T. (Anthropology. Culture. Trends.) Seattle symposium in September 2016: Deep Dive Into the Premium Food & Beverage Marketplace. Throughout the session, we engaged in a thought-provoking discussion to hone in on what today’s “premium” looks, smells, tastes and feels like. Here are some key thoughts about what premium means:
Winning in the new premium marketplace is as much about thinking differently about a category as much as it is about selling different products. Product quality is implicit, while being authentic, transparent and passionate are key building blocks. Consumers will increasingly bring premium into their households and premium will continue to evolve in meaning.
Marketers should pay attention to which products are showing growth in the natural and specialty channels and ask, “what attributes do they have that will mainstream in the next two to three years?” They should look to other categories for inspiration as well. Staying on top of what premium means will be essential. Food and beverage stakeholders should:
As an industry, we're increasingly more comfortable with who millennials are, and what they want. It's taken a long time, but most brands are now attuned to their likes, dislikes and behaviors.
But don't get too comfortable. Gen Z, born between 1997 and 2011, is now coming of age in large numbers, and marketers can't afford to take as long to come to grips with Gen Z as they did with millennials.
The first cohorts of this new generation, who are now 16 to 19 years old, are increasingly relevant to a wide variety of categories and products. Globally, they are huge too: around 2 billion of the world's citizens -- approximately 27% of the global population -- belong to Gen Z.
The danger for marketers is that Gen Z is not millennial-lite or even millennial-extra strong, but different in distinct ways.
Born and growing up at a time of financial crisis and institutional instability, Gen Z are frugal and brand wary. But they are also industrious and collaborative. Smartphone-first and impatient of brands that don't offer them connected experiences, they expect visual and technical excellence and transparency at their fingertips.
While millennials coveted personalization in their media and advertising experiences, attempts at hyper-personalization often come off to Gen Z as intrusive. Ironically, while Gen Z places a great emphasis on personal privacy, they expect brands to be fully transparent. In an age where everything is knowable, brand imagery and values have to be consistent and discoverable across all brand touchpoints.
This presents something of a conundrum for marketers. Gen Z not only challenge how brands communicate, they challenge the very notion of a brand's authenticity and transparency in digital.
Appealing to Gen Z's unique sense of self and the world around them will require brands to embrace three key paradigm shifts in 2017:
First, brands need to invest media dollars and focus activity in digital platforms that allow consumers to co-create a shared brand experience. Unlike the personalization coveted by millennials, Gen Z will be hands on -- they want to try it, take it apart and recreate it.
Lego Ideas, for example, allows audiences to submit ideas on new Lego products and let others vote and comment on them. Submissions showcase fully built Lego products. Products created from Lego Ideas include a Lego version of the Mars Science Laboratory Curiosity Rover.
Second, brands need to give their target consumers a deeper look inside the brand via owned media. Beyond simply offering products and services, brands need to share their story, their purpose and details about their production processes. Alongside owned messages, they also need to push such content strategically via sponsored content opportunities. Such openness will allow Gen Z to determine if the brand's values match their own.
Patagonia is a model brand using this strategy. In its new Fair Trade campaign, Patagonia challenges consumers to consider where their clothing was made, and shares video of the Patagonia production process and the people who make the clothes.
Finally, brands need to switch their creative and media focus. The internet is built on left brain, linear thinking and is factually based. Gen Z seeks a digital experience that is more right brain, with a focus on imagination through technologies such as Augmented Reality and Virtual Reality, nonverbal immersive formats, music and stronger visual imagery. The Under Armour "Rule Yourself" campaign (winner of the Cannes Lion Grand Prix) featuring Michael Phelps resonated with its young male target and has become one of the most-shared Olympic ads of all time.
Winning over Gen Z will not be easy, but it will make brands and their advertising better and more adaptive in the process. Starting now will ensure we don't see the deluge of "What marketers don't understand about Gen Z" headlines that were so common as the millennials came of age.
By Joline McGoldrick
Joline is director of research at Millward Brown Digital.
A new whitepaper discusses how the health of consumers is driving retail.
As consumers strive to live more healthful lifestyles, their purchasing behaviors are changing rapidly, driving every buying decision. More than ever, consumers want—and expect—retailers and manufacturers to assist them on their health and wellness journey inside the store.
“As consumers around the globe search for better, healthier and smarter solutions that fit their lifestyle, the motivation for brands and stores to meet these needs means modeling an experience they cannot achieve with e-com,” said Global Market Development Center (GMDC) President and CEO Patrick Spear, in a press release.
Within the $3.4 trillion global wellness market: $1 trillion annually is spent on beauty and anti-aging; $574 billion is spent on healthy eating, nutrition and weight loss; and $433 billion is spent on preventative and personalized health.
The macro-level trends driving the enormous spending are happening so rapidly. Consumers are taking back the power to decide and are immersing themselves in knowledge and facts through technology and shared learning from friends and family.
GMDC’s whitepaper, “Next Practices: The Health & Wellness Consumer, Helping Trading Partners Shape the Future…Today,” showcases the trends shaping the new consumer-driven health and wellness movement:
It’s clear that health and wellness are fueling all purchasing decisions—shoppers expect retailers and manufacturers to offer a holistic, healthful experience that inspires them and speaks to their aspirations—from the entrance to the checkout line. “Health and wellness is a foundational element in everyone’s daily lives,” said Mark Mechelse, GMDC’s director of research, industry insights and communications. “For consumers to change behavior, they must have the motive, means and messages to do so. That is the essence of opportunity for collaboration between trading partners.”Read More
On November 22, the National Retail Federation secured an important preliminary injunction against the Labor Department’s new overtime regulations. The ruling in the U.S. District Court for the Eastern District of Texas halts implementation and enforcement of the overtime rules nationwide until the court completes consideration of the underlying case brought by NRF, dozens of other business groups and 21 states. The ruling has since been appealed by the Department of Justice but the injunction remains in place while the appeal is under consideration.
The lack of certainty on the timing and outcome of a decision made it necessary for some retailers to begin the process of complying with the overtime rules, which had been scheduled to take effect on December 1. As a result, some employers have found themselves at different stages in the implementation process and need to evaluate what course of action is appropriate for their workforces in light of the injunction. The court-ordered timeout gives Congress a chance to reassess the impact of the rules and provides breathing room for retailers during the busiest time of year.
It is unknown whether the Labor Department’s appeal will be resolved by the time of President-elect Donald Trump’s inauguration on January 20. Trump has not taken a public position on overtime expansion but is not expected to support the regulations. His Labor Department could withdraw the appeal and allow previous overtime rules to remain in place, or draft a revised version that would be more acceptable to employers.
WHAT RETAILERS NEED TO KNOW NOW
With a temporary injunction in place, the new rules are put on pause. At the moment, retailers can halt any compensation and reclassification changes that were being made, in compliance with any applicable state and local laws. But since a final ruling has not been issued, employers should remain ready to comply if the injunction were to be reversed. NRF will closely monitor all legal developments and continue to be a resource for retailers needing guidance.
For retailers that may have already implemented changes, each company should evaluate which changes, if any, should be reversed considering the court’s ruling and the impact on employee relations.
NRF believes DOL’s overtime changes are too much, too fast for retailers and retail employees to bear without serious consequences for all. If implemented as written, the new rules would decimate the salaried workforce and deprive employees across the country of career advancement opportunities and workplace flexibility. NRF is hopeful that the courts will ultimately rule in retailers’ favor and permanently block the overreaching rules.
How far will ‘cashless’ go in retail?
What’s universal, convenient, anonymous, transferable and fast — and possibly becoming obsolete?
Cash, of course.
As other payment methods have proliferated, starting with credit cards and then debit cards, gift cards, prepaid cards and now mobile payment and digital wallets, good old-fashioned cash is increasingly getting a bad rap.
It’s far from a universal opinion, but some retailers want a cashless future, despite the virtues the dollar bill still holds. Perry Kramer, vice president and practice lead at consultant Boston Retail Partners, contends that as many as 80 percent of retailers today are already largely cashless — not necessarily by conscious decision, but through the proliferation of payment cards.
Retailers like the ease of reconciling electronic transactions and — while many retailers would disagree — Kramer claims the convenience is worth it despite skyrocketing swipe fees charged by banks for processing transactions.
“Retailers don’t really want to be banks. It’s not their sweet spot,” he says. “It is much less expensive to process credit and debit than it is cash, because cash has a lot of labor involved.”
One retail payments expert who disagrees is National Retail Federation Senior Vice President and General Counsel Mallory Duncan.
While he questions the 80 percent figure, Duncan concedes that plastic transactions “are probably the majority” in today’s retail world, boosted in part by the popularity of debit cards among Millennials. But cash still gives the retailer 100 cents on the dollar while banks take a cut of 2-3 percent on each credit card transaction — a fee that adds up to more than $50 billion a year industry wide and has been the subject of both litigation and legislation.
Credit and debit card “swipe” fees far outstrip the cost of handling cash, he says.
“Cash has long been the favorite and lowest-cost form of payment for most retailers,” Duncan says. “From a cost standpoint for most retailers of any size, cash is still king.”
Swipe fees are so high today that it would be “devastating to the merchant’s bottom line” to try to absorb them, Duncan says, leaving retailers with no choice but to build them into merchandise prices. Accepting cash — and hoping that customers use it as often as possible — helps mitigate the cost of swipe fees, he says.
The notion of a cashless society has been gathering steam globally. In Nordic nations like Sweden, Denmark, Norway and Finland, it is being pursued as governmental policy. Domestically, the Federal Reserve has forecast that cashless transactions will reach $617 billion in 2016, up from about $60 billion in 2010. In September, consultant Capgemini put the annual growth of digital payments at about 10 percent, or 426 billion transactions in 2015.
Such forecasts are piquing interest on numerous fronts, from financial advisers and retailers to policymakers and social-media prognosticators. Vancouver, B.C.-based clothing chain Kit and Ace has stopped accepting cash at its stores, and touts the move in its marketing. (read more)https://nrf.com/news/cashing-or-cashing-out?utm_source=NRFNews&utm_medium=12-12&utm_content=STORES_CashingInCashingOut&utm_campaign=SmartBrief
November retail sales grew a solid 5 percent year over year and 0.1 percent from an already-strong October as consumers found the deals they were hoping for both online and in stores and showed their purchasing power during the first half of the holiday season, according to calculations released today by the National Retail Federation. Online and other non-store sales grew 15.3 percent year over year, reflecting the growth of online shopping. The numbers exclude automobiles, gasoline stations and restaurants.
“Consumers were able to take advantage of low prices throughout the first half of the holiday season, checking out with full baskets but paying less even though purchasing was up,” NRF Chief Economist Jack Kleinhenz said. “The combination of job and wage gains led to solid holiday spending by American households.”
“Consumers have the wherewithal to spend but households remain measured and rational, which is no surprise given their history since the recovery began in 2009,” Kleinhenz said.
There were broad-based monthly increases across the majority of sectors with the exception of sporting goods.
November’s results indicate that retail sales for the holiday season will meet or exceed NRF’s holiday sales forecast, which anticipates an increase of 3.6 percent over last year’s level for November and December. For a look into the art of forecasting, read Kleinhenz’s article: The Art and Science of Economic Forecasting.
A few specifics from the report include:
The U.S. Department of Agriculture’s (USDA) Food and Nutrition Service’s final rule, released on December 8, 2016, changes the eligibility requirements for retailers participating in the food stamp program. The final rule makes some changes that were necessary to ensure people could get the food they need.
The USDA removed several problematic provisions from the final rule, which would have made it impossible for tens of thousands of retailers to meet its requirement. Those provisions included a ban on multiple ingredient items (such as vegetable beef stew); and an expanded definition of “accessory foods” that would have knocked out healthy grab-and-go items, such as hummus and pretzel packs from counting towards a retailer’s stocking requirements. USDA has also changed the provision that retailers stock six of every SNAP item on shelves at all times and now will require three of every item to be on shelves.