Dollar General Bucks Trend By Adding Jobs, Stores

Amid the dreary news about retailers closing stores and cutting staff (even Walmart has gotten into the act recently, cutting more than 11,000 staffers at its Sam’s Club unit) it was heartening to see one retailer announce that it plans to add 5,000 jobs to its payroll as it opens 600 new stores this year. In making its aggressive push, Dollar General looks to continue riding the popularity wave that dollar stores benefited from when the economy tanked in 2008. Stores like Dollar General and Family Dollar have served their core customer base well and managed to pick up market share from higher-income shoppers who traded down during the recession.

But, the recession is, technically, over and sales are picking up at department stores as middle-class and affluent shoppers let go of more discretionary dollars. Yet, consumers are still cautious and not entirely convinced that a significant economic recovery is around the corner, so there is continued opportunity for low-priced outlets. Dollar General is making a strong effort to solidify past gains and create new avenues for growth with its expansion plans. But, if it is to maintain long term growth, it will have to continue to identify with the new customers it picked up during the recession by providing merchandise they want while still appealing to its core low-income constituents. Not, a simple task, but one that can be accomplished if it can move from being simply a low-cost alternative to a format that offers shoppers real merchandise value. It has created a shopping habit for an increased number of consumers amid the downturn. The trick will be to reinforce this habit, or its expansion plans will lose steam. That said, Dollar General managed to grow significantly before the recession hit and will continue when the recovery picks up.

January Retail Sales Reveal Shifts in Consumer Behavior

Sales at nation’s major retailers were truly a mixed bag in January and the results deviated from what we’ve been accustomed to over the past year—signaling a shift in consumer behavior. Discounters, who fared best amid the protracted recession, seemed to lose steam, while many department and specialty apparel stores found their mojo. Overall, January sales were up at most chains due to easy comparison’s to last January (when the recession raged). Moreover, retailers carried limited assortments due to cost cutting efforts over the past year, which resulted in some missed sales, but fewer profit-draining markdowns. This enabled chains like Macy’s, Bon-Ton, Aeropostale, American Eagle Outfitters and Wet Seal to raise their 4Q profit forecasts. The International Council of Shopping Centers said its index of major retailers showed a 3% comp store sales increase in January, compared to a 4.8% decline in January 2009.

Affluent Starting to Splurge
While January is not a major sales month for retailers, the results point to trends that may impact sales as we move out of the Winter freeze and into the Spring. Middle-income to affluent shoppers are clearly more comfortable in boosting their discretionary spending, which is reflected in the improved results at department stores like Kohl’s, Macy’s, Bon-Ton and at luxury chains like Nordstrom, Saks and Neiman Marcus. However, discounters like Fred’s, Duckawll-Alco and even Target posted comps that were flat or down, offering a fresh reminder that low-income consumers remain under considerable pressure.

Walmart Puts Teeth in Shipment Delivery Demands

Suppliers are working closely with their carriers and 3PLs to ensure they meet shipping requirements under Walmart’s Supply Chain Reliability Program (SCRP) now that the giant retailer is enforcing the program with deductions for non-compliance.

Walmart announced the SCRP in a letter to suppliers last October, which said deductions would be levied for non-compliance starting February 1. It is the latest of several initiatives the retail behemoth has launched to improve inbound transportation efficiency and improve inventory management.

In the October letter, Walmart said it would take a “reimbursement charge” of 3% of the cost of goods sold to each case that is not delivered and entered into its database by its “Must Arrive By Date (MABD) delivery window. Walmart said it requires that orders be delivered in a four-day window, which includes the MABD on the purchase order and the three preceding days. It added that MABD delivery windows for certain business segments (e.g. perishables) are more stringent.

Walmart said the program, which it said was developed in partnership with U.S. suppliers, is necessary because it carries additional costs for handling shipments that arrive early and suffers lost sales on short shipments and shipments arriving late. Walmart said suppliers will need to work with replenishment managers to ensure lead times are set according to the DC to which the merchandise is destined. In cases when orders are incorrect and need to be canceled, any PO canceled by the replenishment manager prior to MABD will not count in the compliance calculation.

Suppliers should also work with carriers to ensure clear expectations are set and metrics are in place to hold carriers accountable for non-compliance. Moreover, since unforeseen circumstances, such as inclement weather, may arise, MABD compliance will be based on 90% or better of cases arriving within the delivery window. Also, collect LTL shipments will not be a part of the program.

Supplier compliance is evaluated on the basis of each Walmart business month and an explanation of any deductions will be provided. Suppliers are also encouraged to check their weekly and monthly scorecards on Walmart’s Retail Link, which report supplier performance, PO details and the potential or assessment of reimbursement charges.

The Walmart SCRP will be discussed at the next VCF Vendor Open Forum Conference Call on February 12. Suppliers should not miss out on discussing the challenges of complying with the Walmart mandate and learn what their peers are doing to avoid non-compliance. The call is free for VCF vendor members, while non-members are welcome to participate at a cost of $139. For more information, contact Evie Hooper at ehooper@vcfww.com, or visit www.vcfww.com and click on VCF Open Forum 2/12/10 under Upcoming Events.

Consumer Product Safety Commission Former Chief of Staff speaks at VCF Event

Former Chief of Staff to the U.S. Consumer Product Safety Commission (CPSC), Quin D. Dodd, will kick off VCF’s New Mandates in Retail Compliance, July 20-21 in San Francisco, CA. Mr. Dodd is Of Counsel in the Washington, D.C. office of Mintz Levin, practicing in the Antitrust and Federal Regulation Section.

Highly publicized product recalls for non-compliance have spurred increasing congressional action, enforcement, and fines. Manufacturers, retailers, and their overseas trading partners alike must respond more strategically and collaboratively to CPSIA, and to the growing number of changes of other retail and government requirements.

Mr. Dodd’s experience with the CPSC and his intimate involvement in crafting the Consumer Product Safety Improvement Act (CPSIA) position him to provide incomparable insight into CPSIA’s new provisions – on what companies must do to comply and avoid the potential pitfalls posed by the new law. You will find the needed strategies to successfully navigate through these changes within this recovering economy at New Mandates in Retail Compliance.

The program’s case studies and best practices will help you respond to:

-CPSIA
-Proposition 65
-"10+2" Import Requirements
-Overseas Consolidation and DC By-Pass
-Green Initiatives and Sustainability
-Additional changes in retail compliance and deduction management

To register, click here New Mandates in Retail Compliance.

From Kim Zablocky's Travels

I thought I would share some information gained from attending the AAFA’s 7th Annual International Sourcing, Customs & Logistics Conference this week in Norfolk VA.

First, the bad news: In October 2008 the U.S. steamship industry had 70 ships laid up; as of April 27th 2009 that number was 506. As for Air Freight, that industry predicts that by 2012, they should meet 2007 sales volume dollars. But things are getting better, starting now, right?

The good news, economically speaking, is that same store sales are getting closer to even, and the ICSC reported April department store sales up 0.7 percent. You can see the full report in the VCF Report on its way to you as I write.

In Consumer Products, the efficiency mantra had always been Cheaper, Faster, Better --as it is in nearly every industry. Our industry has changed dramatically over the last year or so, and what I heard at the AAFA conference was “cheaper, faster, better, safer and legal.” In the past we've always assumed safety and legality. Hot topic issues like CPSIA, 10+2, CT-Pat continue to gain momentum. VCF is addressing these very same topics at our July 2009 conference in San Francisco. Another hot subject is Sustainability, a word not really associated with the carbon footprint or any green initiative; in fact, and as it was discussed at the conference, sustainability really means Do the Right Thing, whether you’re talking excessive packaging, social compliance or any abuse related to the environment, the worker, or the trading partner relationship. It also relates to transparency, that you should know your supply chain, know who you do business with, understand who your suppliers do business with and so on. Some other take aways include:

• DC bypass, a hot topic two years ago, seems to be waning. Many U.S. DC’s simply aren’t at full capacity as they were back in 2006-2007, so there is less need to circumvent. In addition, Quality Control and packaging still seems to be a huge problem when shipping form Asia.


• Traceability: Another hot buzz word from the conference, meaning be forward thinking, What’s in your product? Where did you source all and or parts of your product……next hot regulation coming down the pike is the “Toxic Reform Act” simply look at Europe and its current requirements, than add 2-3 years, that’s where we’ll be.

Following the conference, I toured the APM Portsmouth Terminal in Norfolk, VA; truly exemplifying the art of engineering and technology, it is the only privately owned port in the U.S. Once you enter the gate, it take six minutes to have the system identify you and to begin the automated process of retrieving your container. Neat stuff.

A final note, just recently China raised its GDP forecast for 2009 from +6.7 to 7.2 and in 2010 raised it from 8.5 to 9 percent, things are starting to heat up over there, we can hope for residual effects for the rest of the world.

Business Will Get Better!

I was reading Bloomberg News this morning and saw some more positive signs for our industry. Wal-Mart reported sales for April that exceeded some predictions. Comp Store sales were up 5% at the world's largest retailer vs. the 3% projected. To read the story, click here.

Be on the lookout for the Bernard Sands General Merchandise Comp Store Sales Analysis later today for a full report.

Consumer Confidence at Highest Level since September

I saw this short note in the Bernard Sands Weekly Rankings Alerts from Wednesday, May 6 that I wanted to share...

Consumer Confidence at Highest Level since September
U.S. consumers felt more confident about the economy in April than at any time since the September failure of Lehman Brothers that triggered the financial collapse, a survey showed. The Reuters/University of Michigan Surveys of Consumers said its index of confidence climbed to 65.1 in April from 57.3 in March. That was the highest since September 2008 and the biggest one-month increase since October 2006. The index of current economic conditions rose to 68.3 in April from 63.3 in March. The index of consumer expectations climbed to 63.1 from 53.5. The survey found that most Americans believe the federal government’s economic stimulus package will boost the economy.