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    Published on: March 15, 2006

    Interesting piece in the Wall Street Journal about what it calls the “Starbucks Syndrome,” which it says is the willingness on the part of some consumers to spend more money than ordinarily would be acceptable on basic items. Spurred by Starbucks’ ability to get people to routinely spend three dollars or more on a cup of coffee, this trend can be seen in a number of other venues.

    For example, people will go to Whole Foods or other gourmet/specialty stores to spend far more on food than they might spend at a mainstream local supermarket. Or they’ll spend more on clothing or skin care products – though it tends to be situational rather than on an everyday basis.

    “It's not about champagne tastes on a beer budget; it's about pursuing beer tastes at champagne prices,” the WSJ writes. “But in the end, when you're driving home with $15 chicken breasts in the back seat, you can't help but wonder: Is going luxury worth the added cost when basic will do just fine?”

    Starbucks is the poster child for this trend, the Journal suggests, because it has changed the rules. “Starbucks has raised our expectations about what coffee should be. It's not just a beverage anymore. It's the feeling that you're treating yourself to an affordable luxury. It's about sitting in a comfortable coffee bar, listening to hip music while you read a book or work on your laptop.”
    KC's View:
    In the end, it is all about creating a compelling experience that actually allows the customer to transcend the banality of what normally would be an everyday experience.

    It seems to us that this trend can cut both ways, especially when it comes to the supermarket. A good store that creates a differentiated experience for the customer won’t necessarily get shoppers just to spend $15 on an item that ordinarily might cost $5. It also can get a customer to buy the $5 item…but also spend additional cash on accoutrements that might not have been top of mind.

    What we don’t understand is that so many stores seem willing to accept the notion that the food shopping experience is a banal, everyday occurrence, and that their job is to get people through it as quickly and painlessly as possible. Sure, it is sensible to make a fast, convenient trip possible…but if we were running at store, we’d want to eliminate anything that said “banal” about the experience. That just strikes is as smart retailing and smart marketing.

    Published on: March 15, 2006

    The Miami Herald reports that Publix Super Markets will spend $100 million to install 400 generators in stores that it has identified as being in hurricane-prone areas, including all 146 units in Miami-Dade, Broward and Monroe counties. The generators will be powerful enough to power the entire store, and the entire project should be complete by July 2007.

    “Publix executives say the generator installations are part of an effort to be good corporate citizens, but it's also a logical business decision,” according to the Herald. “The chain says it lost more than $60 million in food that had to be thrown out after four hurricanes hit Florida in 2004.”

    Publix is actually making the move in advance of a vote on a proposed ordinance in Miami-Dade that would mandate that all food stores larger than 40,000-square-feet have an alterative power source.
    KC's View:
    Generators are a good idea, and probably more responsible than the Jimmy Buffett approach:

    “Squalls out on the gulfstream
    Big storm's coming soon
    Passed out in my hammock
    God I slept till way past noon
    Stood up and tried to focus
    I Hoped I wouldn't have to look far
    Knew I could use a bloody mary
    So I stumbled next door to the bar…”


    More responsible. Though not necessarily as much fun.

    Published on: March 15, 2006

    Wegmans Food Markets announced this week that it has adopted new purchasing policies for farmed king salmon, policies developed in consultation with advocacy group Environmental Defense.

    According to a press release, “The policies include new production standards that are the first to publicly and cooperatively address the most pressing health and environmental concerns surrounding salmon farming. Among other changes, the purchasing standards set stringent criteria for levels of PCBs and other contaminants, require salmon producers to take unprecedented steps to reduce potential impacts on wild salmon populations and the marine environment, and reduce the dependence on wild-caught fish for use in salmon feed.”

    Carl Salamone, Wegmans’ vice president of seafood, said in a statement that “Wegmans is starting with king salmon, not usually available at all to our customers except during the wild salmon run. We will eventually expand these standards to all our farmed seafood. We want to offer our customers seafood that meets the strongest health and environmental standards of any U.S. retailer at an affordable everyday price.”

    KC's View:

    Published on: March 15, 2006

    The US Federal Trade Commission (FTC) said yesterday that it has completed its pre-merger review of the $9.8 billion acquisition of Albertsons by Supervalu, CVS and a consortium of real estate companies, and found that no divestitures are necessary for the deal to close.

    The various deals now are expected to be completed by early summer 2006.
    KC's View:

    Published on: March 15, 2006

    The Seattle Post-Intelligencer reports this morning on a speech by Microsoft COO Kevin Turner, the former COO of Wal-Mart’s Sam’s Club division, in which he told small business owners that they have to be ready to make fast changes when things aren’t working.

    "Don't ride a horse too long if it's not going to get you to where you need to get to," Turner said. "Change it out."

    Comparing his Wal-Mart and Microsoft experiences, Turner told the group, "I don't know if I'm the only one, but I'm certainly one of the few people in the world that has arguably worked for the two single most-successful small business entrepreneurs of our generation, in Sam Walton and now Bill Gates.” Turner said that both companies believe in corporate self-criticism, that they are similar “in both their styles and how they view things, and how they approach things, and how they've built their companies."

    Self-criticism was always characterized by Sam Walton as being a kind of “divine discontent” that allows for being self-critical without getting “demotivated.” And he said both companies are insecure about the need to reinvent themselves before the competition beats them to the punch.
    KC's View:
    We agree with Turner’s analysis, especially with this last point.

    We think that in all the news headlines we read lately you can see a real drive on the part of Wal-Mart to reinvent itself on a number of fronts, to redefine itself for the American consumers who have not yet made its stores a weekly habit.

    The challenge for Wal-Mart is that it is trying to redefine itself without alienating its customer base. Which is tough.

    Published on: March 15, 2006

    In a New York Times column this morning, writer David Leonhardt lobbies in favor of letting Wal-Mart become a full-fledged banker, on the ground that it will bring the same affordable consumer-driven focus to financial services that it has brought to retailing.

    “For all the criticism of Wal-Mart — much of it deserved — you simply cannot argue with the fact that the company saves its customers money, he writes. “It roots out inefficiencies, cuts the price on a product and forces its competitors to match. That is why it is easily the nation's most popular store.

    Now think about what would happen if Wal-Mart applied its legendary price cutting to banking. Because starting a new bank is quite difficult, banks have been able to get away with things that other companies just can't. They refuse to give you access to money for days after you cash a check, even though the money itself now moves within minutes. And they have long ignored low-income families, because the banks can make enough money elsewhere.

    “As a result, many of these families pay exorbitant fees to cash checks. They have credit card interest rates and mortgage rates that look as if they came out of the 1980's. It is not just poor people who are ill served by the financial-services business, either. More than half of American families still do not have their own retirement accounts.”

    Leonhardt writes that it is entirely conceivable that by allowing Wal-Mart into financial services, the government would create an environment in which products would become more accessible, prices would be driven down, and consumers would be far better served.
    KC's View:
    While we are worried about how much power is too much power, we think he’s right.

    The only people who will fight Wal-Mart’s entry into banking and financial services will be bankers who are trying to protect their own flanks, who want a kind of protectionist environment in which they can charge whatever they want, serving their own needs instead of the consumer’s.

    We live in a town where it seems like there are new banks going up on every corner, and in one case, the bank is being created by some of the local rich folks who have decided that they need their own financial institution. The scenario for this bank is inevitable, if unstated: the bank will open, and they will try to get new accounts by promising better, more personalized service. And then, once they have achieved a certain size, they will sell the bank to a bigger company, pocketing all the profits and leaving the customers who were promised personalized and localized service in the lurch.

    The only reason we can think of to start up a new bank these days is so it can be sold off for a profit – these are not long-term plays, but rather short-term initiatives that exist to serve the owners, not the customers.

    Wal-Mart would be the rare exception to this. Sure, it would make money on the deal…but it also would provide real value.

    A system that prevents it from doing so is not a system that exists to serve the consumer.

    Published on: March 15, 2006

    There are reports that the nation’s school districts are not moving very quickly in adopting “wellness policies” that would lay out how they will teach personal strategies in developing responsible lifelong approaches to food and exercise. In fact, federal law - the Child Nutrition and WIC Reauthorization Act of 2004 – mandates that school districts develop wellness policies…but a new study by the School Nutrition Association, the Child Nutrition Foundation and the National Dairy Council reveals that fewer than six percent of the nation’s districts have actually developed policies, while only about 38 percent of districts have started drafting policy recommendations. Forty percent of districts said they were in the early stages of policy development, while almost 16 percent said they’ve done nothing in this area.

    The reasons for foot dragging were variously given as lack of funding, lack of student support, and lack of administration support.
    KC's View:
    It is interesting to us that these kinds of initiative soften are viewed as a needless government intrusion into people’s personal lives, but we have a different view.

    School districts, at least in this area, should reflect the priorities of the parents sending their children to public school. Educating kids about the importance of eating better food and getting more exercise seems like a pretty good priority to us.

    Published on: March 15, 2006

    • In its search for trendier fashion designers who can rehabilitate its approach to clothing and its image with consumers, Wal-Mart reportedly is negotiating with a company called Designers Management Agency, which represents some of New York’s hippest designers.

    • The AFL-CIO has released a new study suggesting that Wal-Mart has more of its workers enrolled in public healthcare programs than any other company in at least 17 states.

    • Wal-Mart reportedly will open its 2,000th supercenter later this month – in Beaumont, California, about an hour east of Los Angeles.
    KC's View:

    Published on: March 15, 2006

    • Wild Oats announced that it will open its first store in the Tampa market on April 5, a unit that it describes as a “first of its kind” prototype that will feature “a state-of-the-art, interactive shopping experience that is the latest in natural, organic and epicurean food retailing.

    “Based on extensive customer research, the new store will offer an exciting layout and design that is fun, friendly and educational, and represents the new Wild Oats prototype. The store will be alive with the sights and smells of chefs actively preparing recipes in the Wild Café and abundant storewide samples of the highest quality natural and organic food and household products available.”

    • The Columbus Dispatch reports that Giant Eagle plans to open three new stores in the central Ohio market, with more to come. "Columbus is one of our fastest-growing (areas) and we plan to do more than just keep up with the market," said Kevin Srigley, Giant Eagle’s senior vice president of marketing.

    • Folgers is scheduled to launch Folger’s Simply Smooth coffee, which it says is a low-acid coffee that is engineered to reduce the irritants that can cause stomach discomfort during the coffee-drinking experience.
    KC's View:

    Published on: March 15, 2006

    • The Wall Street Journal this morning reports on a new trend in online retailing – so called “click to call” services that allow shoppers to pose questions to customer service representatives, give them a phone number, and then get a call back via telephone. Shoppers can ask for a call back “right now,” or in five, 10 or 15 minutes times.
    KC's View:
    This is a smart service to offer, in part because it forces customer service folks to actually deliver real customer service. It’s even better than a “sunset policy,” which requires that all customer service questions be addressed or resolved by end of day, every day.

    Published on: March 15, 2006

    …will return.
    KC's View: