The Undiscovered Market

Baseball legend Willie Keeler is widely remembered for a simple line of advice. “Keep your eye clear and hit ‘em where they ain’t,” he said. It’s as good a lesson for business as it is for baseball hitters.

Hitting them where “they ain’t” in baseball produces singles. For business it opens markets that others are neglecting to serve for a host of reasons. The Wall Street Journal Asia edition (spend a week in Japan and you see all kinds of new things) had a great take on this last week in a profile of an emerging part of the Indian economy. Now, most of the news we get out of India is focused on the burgeoning market power of the world’s second most populous country and its explosive business growth. This article was about the other India.

The other India is poor and simply looking to build a slightly better life. And in the spirit of true entrepreneurship, Indian business is finding a way to meet that need. As the article explained, engineers in India are finding ways to reinvent products by making them both simpler and more affordable to the poor. The products range from Tata Motors’ $2,200 car to a $43 water purification system or a $70 miniature refrigerator.

Not surprisingly, the products sell.

But hitting ‘em where they ain’t isn’t limited to the poor in a developing country; in fact, it’s a lesson in finding opportunity anywhere.

On Monday MNB reported on Aldi’s incredible plans for opening stores around the US. That’s a news item that no retailer or supplier should take lightly for one second. Because in so many ways Aldi is just like that simplified and cheaper refrigerator in rural India: It delivers what’s needed to a market that is usually overlooked.

For far too long the food industry has struggled with opening stores in low-income inner city neighborhoods, despite some extremely well-intentioned and well-publicized efforts to do so. The reasons for the struggles are very real and those who have overcome them deserve a huge amount of credit. But the bottom line is that there are far too many places in the US that remain underserved by food stores and those markets present a staggering opportunity.

A number of years ago, Harvard Business School did a study on the buying power of poor neighborhoods noting that frequently those areas are competitive diamonds in the rough. In poor neighborhoods, population density is higher and since food is the first item purchased, the spending potential per square mile is actually extremely high, but the retail choices are low. That study was done well before the onset of our current economic conditions, in which the relationship between price and value has become more tightly linked than in decades.

And that’s where Aldi comes in. One has to imagine that Aldi looks at these underserved areas and sees opportunity. Just like those engineers in India, Aldi has a simpler and more affordable offering that might fit the needs of a community very differently. Obviously, they’ll do it with a lot of private label.

But the questions this raises are big. Will anyone in addition to Aldi (and perhaps before Aldi) target these shoppers with stores and products? Will anyone else consider this, like those engineers in India, and start addressing the problems of poor neighborhoods and the growing emphasis on frugality? Will anyone start looking for dramatic changes to the current offerings or will we merely see incremental shifts?

And five years from now, will everyone be wondering how another “alternative format” managed to come in and seize such a large share of sales where no one else was looking?

It’s not like this hasn’t happened before.

Editor’s Note: Michael Sansolo, Aisle7 board member, Retail Food Industry Consultant and former SVP of the Food Marketing Institute (FMI), has a weekly column on MorningNewsBeat called Sansolo Speaks. You can read today’s news here MorningNewsBeat or reach Michael direct at msansolo@morningnewsbeat.com

Now serving breakfast

Cereals marketed directly to children have 85% more sugar, 65% less fiber and 60% more sodium than cereals marketed to adults. These were the headlines from a new study released this week from Yale University’s Rudd Center for Food Policy and Obesity.

Any parent who’s pushed a grocery cart down the cereal aisle won’t be surprised by this news. It’s also no secret that the industry spends a lot of money targeting young children with their advertising: $156 million on cereal TV advertising alone.

“The total amount of breakfast cereal marketing to children on television and computer screens, and at their eye-level in stores, combined with the appalling nutrient profile of the cereals most frequently marketed is staggering,” said Jennifer L. Harris, director of marketing initiatives at Yale’s Rudd Center for Food Policy and Obesity.

In addition, the other big news this week was around Smart Choices, the healthy food labeling program developed by some of the leading food manufacturers, as government and media scrutiny led to it being dropped by many of the same companies who brought it to life. While consumers and nutrition-industry leaders are still asking about the guidelines that allowed a Smart Choices logo on a box of Fruit Loops, it appears that this has finally led the FDA to begin developing regulations around nutrition labeling on the front of the package.

At the end of the day, this is all good news for consumers. We have a health crisis in our country, and specifically, we have a childhood disease crisis. Childhood obesity and diabetes rates are rising and parents need help to get their kids on track to a healthy future. They can’t do it alone, and they know this.

They’ll be turning to schools, restaurants, grocers, food growers and manufacturers. How will you help them make the smart choices they need to live better and be loyal customers? Of course, that is what we think about every day at Aisle7. For example, our article: Jump Start Your Family’s Day with Breakfast tells shoppers why the first meal of the day is important, especially for children, and offers meal suggestions like whole grain hot or cold cereals, smoothies and granola.

That’s the kind of unbiased, authentic and transparent help families will need to make informed choices for their family. Are you ready to serve that up?

Food Industry Insights: It’s all about the customer experience

While I admit to being something of an Internet junkie, I’m not completely convinced that web-based businesses are set to rule the world. That is until I get one of those great personal reminders of what an Internet business can be.

The latest reminder came courtesy of my steadily declining tennis game. In the process of getting run ragged on the court by my son, it became clear to me that I needed to improve quickly. The obvious solution of course was to blame my equipment. Ergo, I needed a new pair of tennis sneakers.

That shouldn’t be a hard call, except for one problem. Through the years I have managed to sprain my ankles so many times that I don’t feel comfortable playing tennis in anything other than what we used to call mid- or high-top sneakers. But as tennis has waned in popularity, these models have disappeared. Usually, I’m forced to buy basketball sneakers to make do.

Not any more.

A few months back I was hired to moderate a panel that included a representative from Zappos.com, the Internet shoe retailer. I had heard people rave about Zappos in the past, but I had no personal experience until I started doing my research. Immediately I was stunned. Certainly Zappos has shoes – tons of them to be exact. In fact, Zappos has way more than just shoes at this point. But Zappos offers something else: An experience.

I researched Zappos using my running shoes for guidance. (Please don’t ask why I have so many different sneakers. I don’t ask why you have so many pairs of black shoes!) Zappos showed me how to understand why my sneakers wore out and whether or not I pronate. It turns out I was actually buying the right running shoes, but didn’t know it nor did I know why. Zappos educated me.

The experience contrasted sharply with how I find most sneaker purchases (and, to be frank, most purchases in general) take place these days. At many sporting good stores I visit – Dick’s, Sports Authority and others – sales “help” is a misleading term. Mostly I pick out my own style, hunt in the stacks for the right size and make my own decision. If someone helps it is usually to dig through the piles of misplaced boxes.

Now, although I understand the challenges of cutting costs and finding engaged employees, the bottom line is the in-store experience stinks. At Zappos, I interacted with no employees, but the information listed with every pair of shoes helped me make the right choice. Paradoxically, Zappos managed to provide a superior customer service experience without any customer service.

That’s a situation that should concern any brick and mortar retailer. Sports Authority, for example, couldn’t and shouldn’t hope to match Zappos on my peculiar choice of tennis sneakers. In the long-tail world of Internet marketing, where small demand can be easily met, Zappos can build advantage by stocking less popular models, additional sizes and even “vegan shoes.” That’s where a dot-com should excel. (By the way, I have nothing against Sports Authority. In fact, put any retailers’ name in these sentences and the point should work.)

Building experience is where Sports Authority and other retailers should win. It’s not a matter of overwhelming customer service, but of offering the right kind of service to enhance the experience and provide the shopper enough value to come to the store. Certainly Sports Authority should certainly be able to match Zappos by having information to explain the products I’m buying. Sports Authority might even be able to offer me a catalog of unusual items that they can’t stock in stores. In short, take away the advantages held by the on-line retailer.

And then, Sports Authority – or any other brick-and-mortar retailer – should do something special that gives the added sense of value and makes me want to come back. In store excitement is essential, whether you are selling produce or sneakers. Without it, the dot-com wins.

Just like Zappos did.

The competitive landscape has changed. Forever.

For traditional retailers, the game plan must change too..

Editor’s Note: Michael Sansolo, Aisle7 board member, Retail Food Industry Consultant and former SVP of the Food Marketing Institute (FMI), has a weekly column on MorningNewsBeat called Sansolo Speaks. You can read today’s news here MorningNewsBeat or reach Michael direct at msansolo@morningnewsbeat.com

Food Industry Perspective: “Taking it to the tweets”

I have never really understood Twitter. I honestly can’t fathom who would care to hear my most banal thoughts spilled out in increments of 140 characters at a time. Now I think I was wrong.

We all have to consider what is happening in Iran and wonder what this means. Incredible as it may seem, web-based communication vehicles like Twitter, Flickr, Facebook and good-old web sites are fueling a revolution. There’s something extraordinary in the Tweets from Tehran, where the senders are constantly aware that their protests will likely result in a beating, arrest or even death.

While it’s impossible to imagine any group feeling that disenfranchised in the US, it has to make you consider what kind of power these websites could produce. On the positive side, Twitter and the like could become the ultimate connection to shoppers and associates; on the negative it could be used for organized retail theft, consumer protests and Lord knows what else.

Scoff for a second at that leap and then remind yourself of what’s happening Tehran. To quote my favorite line from Star Trek, “Things are only impossible until they’re not.”

As we try to understand the world of 140-character messages, let’s also understand its complexities. Noam Cohen wrote a brilliant piece in last Sunday’s New York Times on six lessons of Twitter from the Iranian barricades. Businesses need to learn from them all.

The six lessons include the inability of even a totalitarian regime to control discourse. It is a certainty that you will find objectionable material on Twitter or any social networking site, so determine what your policy would be to combat the activity. Obviously, censorship doesn’t work. Likewise, don’t downplay the medium because of the largely silly content in most messages. We now know that things can get much more serious.

Most importantly, Cohen’s article reminds us that Twitter is imperfect. It can include misleading or deceitful information. (In Iran, the ruling forces have tried to trip up the rebels with such messages and clearly have failed.) Businesses need a pro-active policy on social networking to build community in good times and to combat the wrong-headed messages that are sure to appear in times of trouble. Without the first, you cannot do the second.

And also heed Cohen’s advice that Twitter can be a power force for criticism and remember that criticism won’t always be targeted at a repressive regime. Sometimes business can feel the heat, granted in much calmer ways.

There were two clear reminders of this at last week’s CIES World Food Business Summit. (This was the same meeting where out of hundreds of participants only five said they were even infrequent users of Twitter.) First, the discussion of the environment was chilling. Supermarkets, like it or not, play a powerful role on topics like sustainable fishing and can demonstrate leadership by creating and communicating clear rules about the products they will sell. Shoppers can’t possibly demonstrate their concerns at every fishing vessel. Supermarkets are much easier to find.

Second, you cannot and should not ignore the palpable anger in Marion Nestle’s speech on nutrition and labels that she sees confusing the shopper. Anger fuels protest and as we are seeing, protest spreads easily these days.

The issues demand our attention and so does the method of communication. Ignore either at your own peril.

Editor’s Note: Michael Sansolo, Aisle7 board member, Retail Food Industry Consultant and former SVP of the Food Marketing Institute (FMI), has a weekly column on MorningNewsBeat called Sansolo Speaks. You can read today’s news here MorningNewsBeat or reach Michael direct at msansolo@morningnewsbeat.com