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    Published on: August 2, 2007

    To hear Kevin Coupe’s weekly radio commentary, click on the “MNB Radio” icon on the left hand side of the home page, or just go to:

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    Hi, I’m Kevin Coupe and this is MorningNewsBeat Radio, brought to you by Webstop, experts in the art of retail website design.

    Sometimes, I’m amazed when a study comes out that seems to state the obvious, and the results seem to surprise people.

    One such study has been published by Information Resources Inc., and it says that the center of the bullseye for retailers ought to be trying to be more relevant to their best shoppers. And that instead of trying to be all things to all people, retailers looking to compete in a cutthroat environment ought to instead try to be more meaningful to the most meaningful shoppers.

    Wow! What a concept.

    Now, I want to be clear about this. I’m not being mean to IRI. I’m sure I could find plenty of studies done by its competitors in which the central conclusions seemed equally obvious. This just happens to be the one that crossed my laptop most recently.

    And, in fact, I think it probably is good that IRI is doing studies about such things, and trying to bring it to the attention of the food industry. Because while it seems like an obvious conclusion – that to compete in 2007 and beyond it is critical to do something different from everyone else – there are too many retailers who don’t believe it or act on it effectively.

    The IRI study notes, quite correctly, that there are different kinds of consumers and, therefore, different kinds of consumer behavior…and that to be really effective, retailers have to have an intimate, granular understanding of the people who walk into their stores. That means doing a better job of collecting and analyzing data, but I think it also means hiring store managers who have as their highest priority connecting with customers, identifying best shoppers, and developing relationships with these customers that evolve and grow over time. It means developing business leaders, not just store managers.

    And, it means giving these leaders the ability and wherewithal to create store experiences that are most relevant to their top shoppers … and that demonstrate to these consumers that the store is loyal to them.

    Again, it seems obvious. But as Arthur Conan Doyle once wrote, “There is nothing so deceptive as an obvious fact.” In this case, the obvious is elusive. But it also is one of the highest priorities that retailers can set for themselves.

    For MorningNewsBeat Radio, I’m Kevin Coupe.
    KC's View:

    Published on: August 2, 2007

    The New York Times this morning reports that the US Food and Drug Administration (FDA) has backed off plans to close more than half its field testing laboratories, a move that it had said would allow it to be more efficient but that others had criticized as being more focused on cost-saving than effectiveness.

    However, the move by FDA is just temporary until a working group appointed by President Bush can report back on how better to guarantee the safety of imported foods. FDA Commissioner Dr. Andrew C. von Eschenbach said his decision was contingent on getting feedback from the panel, which is due to report by mid-September.

    Congressional investigators already have charged that if the plan to cut the number of testing laboratories in half is implemented, the FDA will be unable to ensure the safety of the nation’s food supply.
    KC's View:
    My abiding cynicism about the presidential working group – which is made up of Cabinet secretaries and other senior government officials – has been made clear in this space before, and I see no reason to feel more confident now.

    It isn’t like the FDA made the decision to close those plants in a vacuum – it had to be vetted by the White House. I fear that the working group is just a political effort to put some of the criticism to rest, and that these lab closings are going to happen eventually.

    If nothing else, closing these labs sends entirely the wrong message.

    Published on: August 2, 2007

    The New York Times reports that the South Korean government has suspended the acceptance of US beef imports into the country after banned “risk material” was found in shipments of imported meat.

    The risk material – believed to be cattle bone and brain matter – is not supposed to be any shipments because it is believed it could carry bovine spongiform encephalopathy (BSE), better known as mad cow disease. After having banned US beef in late 2003, South Korea finally opened its markets to US beef last year, but with stringent conditions that now appear to have been violated.
    KC's View:
    Sorry to say that this new case isn’t at all surprising.

    And it just further reinforces my belief that the US is incredibly lax in the area of BSE testing, almost to the point of being negligent. The bad news is that we’re probably all going to find out how negligent the hard way.

    Published on: August 2, 2007

    The Bellingham Herald reports that bankrupt supermarket chain Brown & Cole, may be able to emerge from Chapter 11 later this year, having filed a reorganization plan with the court overseeing its finances and being in negotiations with a California company that could invest up to $40 million in the company.

    Craig Cole, CEO of the chain that bears his family name, says he would like to stay on, and it looks like the investment group would be interested in him doing so.

    “In my discussions with this company, I’ve been impressed with the wholesome values they’ve displayed,” Cole tells the paper. “They are the kind of company that I would want to partner with, but it has to be a deal that makes good economic sense to them.”

    However, to this point the investor group has not been identified, and the finalizing of a deal may be depend on Brown & Cole being able to work out a revised salary and benefits package with employees.

    Brown & Cole went into bankruptcy last November, and has subsequently closed seven of its 27 stores.
    KC's View:
    I like Craig Cole enormously, and always have found him to be both smart and candid. But if Brown & Cole is to survive, he will have to find myriad ways in which he can differentiate the company’s stores. It isn’t just a matter of cutting costs; the company has to invest some of that money in products and services that will clearly establish a unique position – any unique position – in the marketplace.

    Published on: August 2, 2007

    The Los Angeles Times writes this morning that “in California, giant British retailer Tesco is carefully cultivating an image as a socially responsible grocer with good paying jobs, fresh organic foods and the latest in environmentally friendly technology. But the firm's new Fresh & Easy Neighborhood Market chain, due to open here this fall, is a far cry from the Tesco flagship stores in Britain, where the vast supermarkets are more like Wal-Mart in size, selection and controversy.”

    Some of the comparisons seem jarring: “To prove its green credentials, Fresh & Easy adopted a baby elephant in Kenya, it roofed its Disneyland-sized distribution center in Riverside with solar energy arrays and will use a polar bear as a corporate symbol to remind people of global warming. Workers will start at $10 an hour and get health insurance. Internationally, however, Tesco has come under fire for the decapitation of live turtles at stores in China, alleged purchases of sweatshop goods from Bangladesh and unfettered expansion in England that is driving small shops out of business.”

    However, Tesco spokesman Greg Sage rejects the premise that Tesco is being inconsistent. “It is unfair to suggest our statements about our planned business in the U.S. are not genuine by picking a handful of isolated issues that have occurred around the world over the past few years," he says.
    KC's View:
    There is no question that Tesco is seen in many countries as similar to Wal-Mart in its approach to business, though I’d suggest that it has a somewhat more aspirational approach to the shopping experience than Wal-Mart has.

    While Tesco is going to have to be conscious of the image thing in the US, in the end I think the most important thing will be what kinds of stores does it operate, are they really different from traditional US stores, and are they relevant to the US consumer.

    If it achieves these goals, then Tesco will be successful. If not, it may end having more in common with the turtles than it would like.

    Published on: August 2, 2007

    • The Wall Street Journal this morning reports that Wal-Mart’s “push into higher-end consumer electronics” – which has focused on well-known brand names and sharp pricing – has turned out to be a far more successful strategy for the retailer than trying to offer “cheap chic” clothing or upscale home furnishings.

    These days, Wal-Mart is second only to Best Buy in the consumer electronics business; it already has zipped past Circuit City. And experts expects the company to continue strengthening its competitive position in the category.
    KC's View:
    Wal-Mart’s biggest problem in the consumer electronics business, from my point of view, is the lack of credible, educated and engaged sales help. Until they get that licked, I’ll be shopping for these items elsewhere.

    Published on: August 2, 2007

    • The Kroger Co. announced that it will complete the transition of milk it processes and sells in its stores to a certified rBST-free supply by February 2008. Kroger said in a prepared statement that its decision was based on customer feedback in the markets it serves.

    "Our customers' increasing interest in their health and wellness is the basis for our decision," said William Boehm, senior vice president and president of manufacturing for Kroger. "We appreciate the willingness of dairy cooperatives across the country to work with us to make this transition in the next six months."

    • Springfield, Missouri-based RPCS Inc. announced that it has acquired and re-branded nine supermarkets and three fuel centers in Oklahoma that formerly were run by Albertsons. The new banner – Food Pyramid – takes effect this week.

    According to a statement released by the company, “customers at Food Pyramid markets will notice several immediate changes, including reduced prices on approximately 10,000 items & an upgrade in beef quality from USDA Select to include USDA Choice and USDA Prime. Other improvements will be gradual—there are plans for full-service Starbucks®, $3 prescriptions program in all store pharmacies, expanded bakery and deli departments, a larger selection of natural, organic, and international foods, and fresh sushi.”

    • Home Depot announced that it has fired four employees for unethical behavior – in this case, according to reports, for taking kickbacks from flooring manufacturers to ensure preferential placement in the chain’s stores. Those slotting allowances….er, kickbacks… may have totaled more than $1 million.
    KC's View:

    Published on: August 2, 2007

    • Publix Super Markets reports that its second quarter sales were up 5.9 percent to $5.7 billion, with earnings for the period up 16.1 percent to $306.4 million. Q2 same-store sales were up four percent.

    • Starbucks Corp. said yesterday that its third quarter earnings rose nine percent to $158.3 million, from $145.5 million during the same period last year. Revenue was up 20 percent to $2.36 billion, from $1.96 billion in the year-ago quarter.

    • Kraft Foods has posted second quarter net income of $707 million, up 3.7 percent from the $682 million in revenue that it reported during the same period a year ago. Q2 revenue was up 6.8 percent to $9.21 billion from $8.62 billion a year ago.
    KC's View:

    Published on: August 2, 2007

    …will return.
    KC's View:

    Published on: August 2, 2007

    SEATTLE – The Seattle Post-Intelligencer reports this morning that Amazon.com has begun testing a pilot program called Amazon Fresh that will deliver perishable groceries to consumers, including organic and non-organic fruits and vegetables, dairy products, ice cream, meat and seafood.

    The program, under development since at least earlier this year by Amazon’s grocery development team, expands upon the gourmet grocery business and non-perishables business that the company already has in place. “With a dozen Amazon Fresh refrigerated trucks, the company for the first time is delivering products directly to the doors of customers instead of relying on a third-party service such as UPS or the U.S. Postal Service,” the paper writes.

    According to the Post-Intelligencer, Amazon started delivering groceries here “directly to consumers' doorsteps on Mercer Island as part of a pilot program that's expected to include pickup service in Bellevue and Kirkland.” Craig Berman, a spokesman for the company, tells the paper, “"It's just starting out, and it's very small. We are in the early-stage beta test, and it's a better way to serve our grocery customers. We are offering a great selection and great prices at a really convenient experience."

    The paper reports, “The program lets customers order online and then have the products delivered the next day during a one-hour time slot of their choosing. There is also a ‘sleep tight’ service that delivers goods in a temperature-controlled tote by 6 a.m. Customers eventually will be able to make same-day orders and retrieve goods at pickup locations, with the first sites at yet-to-be announced locations in Kirkland and Bellevue.”

    And, the Post Intelligencer writes, “It's not entirely uncharted waters for the Seattle-based Internet giant. Amazon.com in 1999 invested $42.5 million in HomeGrocer.com, the Kirkland online grocery business that was eventually sold to Webvan and imploded in July 2001 during the dot-com bust. Amazon.com also reportedly pumped $60 million into Kozmo.com, an online delivery service whose bicycle messengers and scooter drivers buzzed soda pop, movies and other items to consumers in less than an hour. Kozmo.com abruptly shut down service in nine cities in April 2001 after burning through about $280 million.”
    KC's View:
    I happen to be sitting in the Seattle airport at the moment, and was on Mercer Island yesterday …and I’m trying to remember if I might have seen one of Amazon’s trucks and it didn’t really register. Ah, well…

    I know from my sources that Amazon is bullish on the grocery business. I wouldn't be surprised to see them roll this out in a big way if they're successful in Seattle.

    Kudos to the Post-Intelligencer for this story, which Amazon probably would have liked to keep under wraps so as not to raise expectations. (Not to mention annoying the analysts, who will probably find all sorts of idiotic reasons to drive down its stock price and question Jeff Bezos’ sanity.) The company has long been a favorite of mine, and this is a fascinating strategic move because it takes the company outside its traditional business model but allows it to build on strengths and consumer relationships already in place. It will be interesting to see what kind of infrastructure it will need to develop to expand the service, how the economics work, and what kind of ratings it will get from customers.

    I think that Amazon is living up to the gospel of Bruce MacInnes, as quoted here from time to time – it is when you get outside your comfort zone that you really make time and generate speed.