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Retailing forecasts predict growth, but at a trickle

BY Michael Johnsen

WASHINGTON, D.C. The National Retail Federation on Tuesday released its forecast for the upcoming 2008 holiday season, projecting that sales will rise 2.2 percent this year to $470.4 billion.

This gain falls well below the 10-year average of 4.4 percent holiday sales growth and would represent the slowest growth since 2002, when holiday sales rose 1.3 percent, the association stated.

“Current financial pressures and a lack of confidence in the economy will force shoppers to be very conservative with their holiday spending,” stated NRF chief economist Rosalind Wells. “We expect consumers to be frugal this season and less willing to splurge on discretionary items.”

A number of economic indicators point to a challenging holiday for retailers. A struggling housing market and rising unemployment accompanied by meager income gains will continue to hamper the consumer throughout the season.

Food and energy costs will remain high. With the current financial industry crisis continuing to chip away at consumer confidence, NRF does not foresee an economic turnaround until the second half of next year.

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Rite Aid brings can-do attitude to Brooks/Eckerd conversion

BY Michael Johnsen

BALTIMORE —The last time Rite Aid rallied its pharmacists and store associates around a “there’s-hard-work-ahead-but-we-can-do-it” message, the chain took its first step back onto the path to sustainable profitability.

That trek not only brought the core Rite Aid stores back into the black, it also enabled the drug chain to do what it’s been doing—successfully acquire a rather large East Coast pharmacy operation, assimilate that chain and improve upon that chain’s performance.

Now Rite Aid is mobilizing its store associates again around a similar rallying cry, “It’s My Rite Aid, and I Love It!” to infuse the one factor that’s most difficult to account for in any hard analysis of an organization’s Xs and Os, dollars and cents. Attitude.

Rite Aid’s brass has had it ever since they engineered the company’s first turnaround earlier this decade, as does the company’s rank and file—especially those who have been with Rite Aid through its entire turnaround journey. And now the year-old former Brooks/Eckerd associates are getting their first taste of it.

“We need to close the customer experience gap between us and our competitors,” Rob Easley, Rite Aid’s chief operating officer, told associates, speaking at his first management conference. “We will create an emotional experience with our customers that goes beyond their expectations every time they walk into a Rite Aid. Leaders, the cultural transformation has to start with us.… This is an exciting and transformative time for Rite Aid. Cultural transformation is just good business.”

“We dedicate ourselves to one another in an attitude of mutual respect and team-work,” Mary Sammons, chairman, president and chief executive officer of Rite Aid, told associates and vendors on the first morning of the event. “We realize that this undertaking will be a challenge full of obstacles and barriers.… We dedicate ourselves to the spirit of creativity with a respect for what has gone before, but a focus on the future.”

To help fuel that focus on customer experience, Rite Aid outlined some new programs that the chain has introduced. Rite Aid recently generated hundreds of thousands of new prescriptions in only three months out of its “Fill Up and Fuel Up” program—in which customers transferring prescriptions received a $30 Rite Aid gift card and a chance to win a year’s worth of gasoline.

And to help address the needs of the more than 44 million American caregivers, Rite Aid is launching its Giving Care for Parents program in September, John Learish, Rite Aid senior vice president of marketing, said. “At the center of our program is a comprehensive online [tool] where caregivers can access valuable information, resources [and] product offers that ease the discomfort in their lives,” he said. The program will include a dedicated caregiver endcap in each store.

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Pet food manufacturers focus on ingredients

BY Doug Desjardins

Still feeling the effects of last year’s massive pet food recall, manufacturers are changing the look of their pet food packaging to place more emphasis on the healthful ingredients inside.

Mars Inc. has altered the look of its The GoodLife Recipe line of dog and cat foods to highlight ingredients it said are better for pets. The new packaging features an illustration of the ingredients in the food, along with a clear, easy-to-read list.

“Fellow pet lovers are looking for fresh, quality ingredients for their pets prepared the way they would their own food,” said Margaret Mitchell, brand-marketing director for The GoodLife Recipe. “We use balanced, healthy ingredients to create our wholesome recipe, and we’re excited to share our updated product packaging that reflects this look and feel.”

Mars said its new strategy was motivated by a survey from research firm Impulse that showed more than two-thirds of dog and cat owners check the ingredients of pet foods before they even look at the price. The same survey showed that 60 percent of survey respondents said they prefer foods with natural ingredients for their pets.

Other manufacturers are taking the same approach to cater to health-conscious pet owners by making a list of healthful ingredients a prominent part of their packaging.

Purina One Natural Blends cat food features a list of key ingredients in large letters on the front of the package just under the label, highlighting such products as salmon, soy oil, brown rice and anti-oxidants. Purina also has a line of dog food called Naturally Complete that targets the same consumer and prominently displays the ingredients.

That attention to detail has become more important now that some manufacturers are considering a change in recipes to avoid products that have become too expensive. Pet food manufacturers are being hit hard as they try to strike a balance between keeping prices low and passing some of the added manufacturing costs on to consumers.

DelMonte Foods, which makes such pet foods as Meow Mix and Kibbles ‘n Bits, reflected that trend earlier this month when it reported a loss of $10.1 million for its fiscal first quarter, citing its pet food division as part of the reason. It said that pet products generated an 11 percent increase in revenue on the strength of price increases but suffered a 65 percent decline in earnings.

Menu Foods, a Canada-based distributor that was the source of the 2007 pet food recall, also is being affected by rising manufacturing costs. It initiated a price increase on wet pet food last month for its U.S, private-label customers that included mass merchant and supermarket retailers. In a release, it said that price increase would “enable Menu to recover, from private-label consumers, much of the cost increase it would otherwise be required to absorb.”

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