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Industry News - July 30th 2010



A&P Sales Drop 7% in Quarter, New CEO Takes Helm

Despite a new pricing policy that it hoped would improve results in its stores, The Great Atlantic & Pacific Tea Company had a disappointing first quarter of fiscal 2010, with sales of $2.6 billion for the period ending June 19, 2010 compared to $2.8 billion in sales for the same period in 2009. This 7.1% decline was accompanied by a 7.2% decline in comparable store sales for the same periods.

The company, which operates 429 stores under banners including A&P, Waldbaum's, Pathmark, Super Fresh and The Food Emporium, has initiated a turnaround strategy and installed a new President and CEO to carry it out. Sam Martin, a 30-year food retailing veteran, replaces Ron Marshall, a former Borders Group executive who has been in the A&P job only since January.
A&P executive chairman Christian Haub says the company's turnaround will consist of four key elements:

> Improve the company's customer value proposition through merchandising
> Enhance the customer experience and drive clear brand identity
> Lower structural and operating costs
> Implement new financing initiatives to augment first quarter liquidity of $253 million

During a recent conference call, Haub cited some progress the retailer has made, saying that A&P's recent price initiatives had enabled it to become price competitive in its legacy banner stores. "The new lower price project in A&P has been fully implemented in all key center store categories," said Haub. "We're seeing some very positive results and we're fine-tuning the program to increase its effectiveness. The next phase of the lower price project has now been launched in the perishable departments."

In its Pathmark stores, the company plans to introduce an entry price line of private label products during the second quarter.
Haub insists that even though the retailer is expanding its lower price initiatives, it is not changing its business model from high/low to EDLP (everyday low price). However, pricing remains a key part of A&P's strategy. Haub said the retailer's pricing investments have created "significant uplift in units" in certain categories, and that "traffic has improved already during the first part of the second quarter."

However, he acknowledged that there was much work that remained to be done: "There's a lot more we can do with assortments, with customer service, with in-stock and with all of those things."


Malicious Click Fraud Rates Rise 26%

Rates of attempted click fraud increased dramatically in Q2 2010 compared to the same period in 2009, increasing 26% year over year, according to the Anchor Intelligence Quality Report. Click fraud is the production of online clicks or impressions with malicious intent that have no value to an advertiser or e-marketer. Signs of click fraud include spikes in traffic that are not accompanied by similar increases in conversions.

The average attempted click fraud rate remained relatively unchanged in Q2 2010 compared to Q1, dropping slightly from 29.2% to 28.9% in the most recent quarter. Anchor Intelligence attributes the continued high attempted click fraud rate primarily to dramatic growth in botnet scale and volume around the globe, as well as the continued exploitation by malicious hosts of security vulnerabilities in the Internet infrastructure of countries such as Vietnam, Australia and the U.S.
Anchor reports traffic quality rates for the top 30 countries by traffic volume. Vietnam had the highest attempted click fraud rate, at 37.3%, followed by Australia at 36.4% and the U.S. at 34.0%. The majority of this traffic was the result of high-velocity botnet traffic and coordinated click fraud rings. India also recorded a dramatic upsurge in attempted click fraud, from 21.8% in Q1 to 31.7% in Q2.

However, the most active search engines and ad network customers--those processing more than one million ad clicks per day--experienced decreases in attempted click fraud rates during Q2. Anchor believes advertisers are recognizing improved ad performance on branded Anchor networks that effectively defend against fraud, and are therefore increasing spending with these companies.

"Click fraud attempts are not going to go away any time soon," says Ken Miller, CEO of Anchor Intelligence. "Cybercriminals will simply reallocate their attempts from well protected ad networks and search engines to those that do not have a fortified line of defense."


Liz Claiborne to Close Its 87 Branded Stores

The Liz Claiborne brands will live on at JC Penney and QVC, but the company's 87 Liz Claiborne branded stores in the U.S. and Puerto Rico will be history by early next year. The plan is expected to end operating losses from these brick-and-mortar locations.

Liz Claiborne will take a $7 million charge in its second quarter and expects additional charges for severance and lease terminations. Outlets for the company's Juicy Couture, Lucky Brand, Kate Spade and Kensie brands won't be affected by this decision, according to the company.
"A number of factors precipitated this decision," said William McComb, CEO of Liz Claiborne, Inc. "Our current fleet of Liz Claiborne branded outlets was originally designed to handle clearance for many brands in our portfolio--an outdated consumer proposition and one that no longer makes economic sense, given the vast changes we have made to our portfolio and business strategy over the past three years."

Next month, the company will launch its Liz Claiborne brand to JC Penney and its Liz Claiborne New York brand to QVC.


Brave New World of Retail Workforce Management

To get up to speed with leading-edge models for retail workforce management, innovative technologies and strategic leadership trends into increasing labor productivity and improving profits, a series of Workforce Management Leadership Summits will be held in major cities across the country.

The series, hosted by Workforce Insight, has already visited New York City and Columbus, Ohio. The next workshop will be held in Chicago on July 29.

Among the expert speakers lined up for the one-day events is John Russo, solution management, retail and distribution for Infor, where he offers strategic expertise regarding product direction to support key workforce initiatives.

Russo's topic will be "Amplify Brand Image by Balancing Service and Non-Service Labor with WFM," which examines the opportunity to enhance brand image with both old and new customers through improved execution and quality of service levels. In Russo's session attendees will learn how total workforce management solutions can help balance workforce allocation (and spend) to turn browsing shoppers into lifelong customers.

Other expert speakers include: Krista Elwell, Charming Shoppes director of store operations and concept initiatives; Beth A. Thomas, Sequent EVP/Managing Director; Scott Knaul, principal retail WFM consultant for Workforce Insight; and Larry Leibach, principal retail WFM consultant for Workforce Insight.

The Retail WFM 2010 conferences are aimed at C-level executives and senior leaders with functional oversight for labor cost control, profit improvement and workforce management systems and processes. 

The Retail WFM 2010 Conference will take place in six cities between July and August:

Chicago, IL - July 29, 2010
Dallas, TX - July 30, 2010
San Francisco - August 5, 2010
Los Angeles - August 6, 2010


Blockbuster Scoress Big New Movie Edge Over Netflix, Redbox

Beleaguered retailer Blockbuster has exclusive agreements to rent out some studios' new releases the same day they are made available for sale on DVD--a full 28 days ahead of competitors Netflix and Redbox. Blockbuster is rolling out a national television ad highlighting this four-week advantage in a 30-second ad created by Euro RSCG's Chicago office.

The ad shows people being told they'll have to wait 28 days for a table at a restaurant or for an airplane flight, with a voice-over saying "You'd never wait that long, so why wait 28 days for new releases?"
Earlier this year Netflix and Redbox agreed to the 28-day delay for releases from 20th Century Fox Home Entertainment, Warner Home Video and Universal Studios Home Entertainment in exchange for better copy depth and distribution terms, according to a report in Planet Retail.


Kroger's New Online Coupons Link Directly to Loyalty Cards

Kroger, the nation's largest traditional grocery retailer, has launched an online coupon site that allows shoppers to electronically "clip" as many as 150 digital coupons directly onto their loyalty cards, as well as the cards of other stores Kroger operates, including City Market, Dillons, Fred Meyer, Fry's, Jay C, King Soopers, QFC, Ralphs and Smith's. Kroger operates a total of 2,470 supermarkets and multi-department stores in 31 states.

The coupon center, located at www.kroger.com/digitalcoupons, combines manufacturer, Kroger brand and web-only coupons. Shoppers can also access the site through Kroger.com and the sites of each of its banners.
Coupons will be available one hour after they are loaded on a customer's card, and each coupon carries an expiration date, generally within six weeks of being "clipped." Participating manufacturers include major consumer goods companies such as Procter & Gamble, General Mills and Kellogg's.


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