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    Published on: July 7, 2009

    by Michael Sansolo

    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.

    Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com .
    KC's View:
    Let me take a moment to offer a follow-up thought to Michael’s column.

    If there are brick-and-mortar retailers out there under the impression that imposing a sales tax on Internet sales will somehow level the playing field, they are sadly mistaken.

    Stories like Michael’s take place every day. If Internet retailers can appeal to middle aged guys like us, just imagine the appeal they have to an entire generation of shoppers with little if any loyalty to the traditional shopping experience.

    Published on: July 7, 2009

    AdWeek reports on a new study by Starcom and Nickelodeon suggesting that “72 percent of those polled said they agreed with the statement, ‘It's no longer important to keep up with the Joneses,’ while 48 percent said that as a result of cutbacks in the family budget ‘we have redefined what's truly meaningful in our lives.’

    “Over 60 percent of those polled said they were buying more store brands than previously, while 73 percent said they had started using coupons more. Almost half (46 percent) said they would take a ‘staycation’ and spend time at home as opposed to traveling.”

    The study’s conclusion: “Frugality is cool, or the new black.”
    KC's View:
    I thought green was the new black. I’m soooo confused…

    Seriously, though, while I believe that this is how people feel today, I remain unconvinced that this is necessarily a permanent attitudinal shift that will pervade how people think and feel in all circumstances. I just don't think it is that simple. When they can, people will spend money on indulgences…for example, large flat screen TV sales are up, probably because people want a better TV/movie viewing experience while on their “staycations.”

    There are no absolutes – ever - and marketers who believe there are run the risk of making a big mistake.

    Published on: July 7, 2009

    There is a fascinating piece in the Seattle Times this morning about Australian Hagen Stehr, who over four decades owned a fishing fleet that “helped empty the seas of the bluefin tuna used in sushi restaurants from New York to Tokyo.” In many circles, he has been positively reviled for almost wiping out “the two species of bluefin — northern and southern — while also threatening the yellowfin and bigeye tuna.”

    Now 67 years old, Stehr has spent a small fortune to breed bluefin tuna in captivity - something never before accomplished. And apparently he is close to the finish line; according to the Times, “Stehr aims to produce at least 250,000 bluefin by 2015 — a number that would almost equal the total bluefin catch of Australia's fishermen in a single year.”

    This isn’t just altruism, the Times notes: “Bluefin sell for as much as $20,000 a fish at Tokyo's Tsukiji, the world's largest fish market,” and Stehr stands to add to his considerable wealth if he is successful. But he also stands to be remembered as a man who helped rescue a near-extinct species, which is no small feat.
    KC's View:
    Additional proof, I suppose, that one can do well by doing good.

    One interesting note in the Times piece is that one of the challenges in increasing the world’s bluefin tuna population is that this fish is an aggressive predator – it eats its young, which makes propagating the species a little difficult.

    Published on: July 7, 2009

    The Jamestown Post-Journal reports this morning that western New York-based Tops Friendly Markets “has completed its 16-month transition to being completely locally operated.” The process began in December 2007 when the company was acquired by Morgan Stanley Private Equity and the decision was made to have a shared services agreement with Ahold, the chain’s former owner. Now, however, the company’s marketing, merchandising, IT and accounting functions have been returned to local control.

    "We cannot stress enough the importance of being locally operated," Frank Curci, CEO of Tops, tells the paper. "We live here, we know our customers and the products they want and service they need. Making those decisions locally is of the utmost importance so we can best serve our customers in Western New York, Central New York, Rochester, and in northwest Pennsylvania."
    KC's View:

    Published on: July 7, 2009

    The New York Times this morning reports that “the owners of two supermarkets in Bushwick, Brooklyn, agreed to pay more than $1.1 million in restitution to more than 50 employees to settle charges that the stores violated state wage laws, New York State’s attorney general, Andrew M. Cuomo, announced Wednesday.
    In a separate criminal action brought by Mr. Cuomo’s office, two owners of one of the supermarkets, the Associated Supermarket at 229 Knickerbocker Avenue, have pleaded guilty to failure to pay wages and failure to maintain payroll records, both misdemeanors. The Associated Supermarket, along with Pioneer Supermarket (formerly a C-Town supermarket), at 1115 Pennsylvania Avenue, will pay restitution totaling $1,125,000, as well as state penalties.”
    KC's View:

    Published on: July 7, 2009

    • The Los Angeles Times reports that Hershey Co. has decided to shut down its online gift service at the end of the month, saying that the business model was not sustainable.

    According to the story, Hershey is “looking into other e-commerce options, including strategic partnerships and licensing agreements.” For the time being, the company says, customers will have to find other options to order its products online.
    KC's View:
    Interesting that at a time when some manufacturers are looking at the Internet as a way of disintermediating retailers, Hershey is looking for ways to reintermediate these middle men into the business.

    Doesn’t make ‘em wrong. Just maybe swimming upstream.

    Published on: July 7, 2009

    • Arizona-based Sprouts Farmers Markets announced that it is opening three stores in California this month – two to open on July 10, in Brea and Riverside, and another to open in Orange at the end of the month.

    The new stores bring Sprouts’ fleet to 36 in Arizona, California, Texas and Colorado, with further expansion planed for later this year in Colorado (Boulder and Aurora) and Texas (Austin).

    Bloomberg reports that PepsiCo and the Pepsi Bottling Group plan to invest $1 billion in Russia over the next three years, bringing their total investment there to more than $4 billion. “This investment reflects very clearly our great confidence in Russia and our long-term commitment to this very important market,” said PepsiCo CEO Indra Nooyi in a prepared statement. “We are optimistic about the future of Russia, and we look forward to continuing to build our business here.”

    • A news organization called Transport Topics Online reports that one of the ways that Safeway plans to inflate the truck tires in its fleet with nitrogen instead of compressed air, which apparently keeps them at a more consistent pressure, which improves productivity.

    • The Puget Sound Business Journal reports that Starbucks is using Facebook to give away coupons that will, through July 19, result in 280,000 pints of Starbucks-branded ice cream, made by Unilever, being given away for free.
    KC's View:

    Published on: July 7, 2009

    Robert S. McNamara, who served both President John F. Kennedy and President Lyndon B. Johnson as Secretary of Defense during the Vietnam War, and who is described by the New York Times this morning as the “architect of a futile war,” died yesterday at age 93.

    McNamara was recruited by JFK from the presidency of the Ford Motor Company. After his eight years at the Department of Defense, McNamara went on to become president of the World Bank.
    KC's View:
    If you’ve never seen it, rush right out and get a copy of the Errol Morris documentary, “The Fog of War: Eleven Lessons from the Life of Robert S. McNamara.” It is one of the best documentaries I’ve ever seen, and a contextual look at the controversial decisions made by Kennedy and Johnson, spurred on by McNamara, during Vietnam.

    Published on: July 7, 2009

    MNB had a piece yesterday about continued debate over proposed Internet sales taxes, and I admitted that I was conflicted on this issue – I want to be fair to all involved, but I also hate to do anything to hurt the online retailing industry … though I’m not entirely sure that sales taxes could do that at this point.

    Lots of response…

    MNB user Jerry Sheldon wrote:

    Nobody likes taxes except states needing the revenue. I like you am torn on this one. People shop online due to costs and convenience, not for sales tax avoidance. I see states like CA, though with problems that go far beyond a loss in revenue due to Internet sales, are certainly losing much needed revenue. One of the many things that make it onerous is the different taxes by area. For large companies, they already have the software to help them manage that, though probably not for your smaller mom and pop shops. It would be nice if everyone could work and play well together and have a flat tax if we’re headed that way, making it much easier to manage and administer for all concerned. I’m sure there is some interstate commerce law that I don’t know about preventing it.

    Another MNB user wrote:

    I recently purchased from the HP website and they added my Wisconsin tax. Most websites don’t (I’m also a huge fan of Amazon for the reasons you mentioned and would pay taxes if I had to, as I usually order enough to get the free shipping). I keep wondering why eBay seems to be Teflon-coated. I think if people had to collect and report sales tax eBay would go under (I may have answered my own question there). They should at least hit the “stores” on eBay.

    MNB user Geoff Harper wrote:

    You finally got me very upset (I usually agree or mildly disagree with your positions). The fact that online retailers have to pay shipping as an equalizer is nonsense. What about rent, retail labor, etc. etc. ? If online retailing is the way of the future (and it may well be) it should stand on its own and not be subsidized/nurtured by the lack of sales tax. Let the online retailers compete (a verb)!

    Another MNB user wrote:

    I understand the your livelihood is the web, but why should all bricks and mortar business subsidize Internet business by paying all the sales tax. On-line selling has been around for years and shouldn't be subsidized by other businesses. Your comparison to shipping charges is comparing apples to oranges, just doesn't make sense as a rational for whether they should pay sales tax.

    As I work for a company that has both bricks and mortar and on-line, why should one side of the business subsidize the other. Of course most everybody thinks somebody else should pay taxes, rather than themselves.

    While I frequently agree with you, I think you've got this all wrong. Not that, I have a problem with lower taxes and less government spending, let's just make it fair and equitable.


    MNB user Kristen Northrup wrote:

    For what it's worth, I moved in 2006 to one of the five states where Amazon already applies sales tax (North Dakota) and the impact on my buying habits was nil.

    I admitted yesterday that “I benefit greatly by the fact that I do a large percentage of my shopping online, and do not pay sales taxes on those items acquired in this fashion.”

    Which led one MNB user to write:

    Ouch! I see a state tax audit in your future. In many states, including Ohio, there is a line on the income tax form where you are required to report such non-taxed out of state purchases and ante up the sales tax. Very difficult to enforce of course . . . UNLESS someone makes a public confession.

    Oops.




    MNB took note yesterday of a story saying that in North Carolina, Walmart “has no objections to a ban on single-use plastic bags in the beach areas of three counties and expects to comply fully with the measure now that it’s become law,” and even will use the experience to see how it might facilitate such a shift in other areas.

    MNB user Mitchell Clifton wrote:

    Walmart supporting the ban on plastic bags is beneficial to them on many fronts, not just from the corporate social responsibility standpoint. By supporting reusable bags, it trades a huge sourcing expense for a profitable sale. This sale also heavily ties into their marketing campaign they have been running lately, heavily featuring their blue and bags in advertising. It really is a win-win-win-win strategy for the company.

    Precisely.

    Another MNB user wrote:

    I find it interesting how all of the major retailers love to continually state that they are huge leaders in the green initiative to limit the use of plastic bags. Of course they are...less plastic bag usage cuts their costs and drives sales of reusable bags! Do you really think they would feel the same way if customers had been paying for their plastic bag usage all this time?

    Not sure what your point is. Sure, moving to reusable bags is good for the bottom line. But is also reduces litter and a lot of junk going into landfills. In my view, this is a win-win…for both industry and consumers. Nobody should object to this.

    MNB user Jim McConnell, who, it should be noted, works for Whole Foods, wrote:

    I applaud Wal-Mart for taking a stand on eliminating plastic shopping bags from its stores. It’s something we did in April 2008 in all stores.

    And Whole Foods deserves a lot of credit for doing so.




    Finally, I admitted yesterday that I actually went to a McDonald’s while on vacation and tried one of the new $4 Angus Burgers, which I thought was pretty good. Not great, but pretty good.

    To which MNB user Marilyn Phillips responded:

    On your recommendation I purchased and enjoyed the new McDonald's Angus burger for lunch today., After licking my fingers, I looked at the calorie count. Arghh! 760 ! So that's going to be an infrequent treat. I should have known better. Thanks. (no really)!

    I’m with you one thousand percent on this.

    To be honest, I never checked the calorie count…and I’m equally appalled. You’re right – it should be an infrequent indulgence.

    And it is another example why calorie counts should be on fast food menu boards.
    KC's View:

    Published on: July 7, 2009

    Yesterday, we took note here of the five set Wimbledon match in which Roger Federer defeated a resurgent Andy Roddick to take the men’s singles championship.

    Well, we can't please all the people all the time.

    MNB user Phyllis Palmer wrote:

    Don’t forget about the Tour de France…. Lance Armstrong (7 time winner) is holding his own at 3rd place in the Overall Classification (GC in TdF lingo). This is a stunning achievement as he’s been out of racing for 2 years and is one of the older riders in the peloton. He’s beating guys a decade younger than he is…. and CLEAN, too!

    And MNB user Al Kober wrote:

    You have got to get into golf.

    Tiger Woods won the AT&T National - his own tournament, (and) donated the one million dollar-plus prize money to his foundation.

    KC's View:
    Maybe I’ll get more into golf this week. Sansolo and I are speaking at the Iowa Grocers Association annual meeting this week, and I was persuaded to play in Thursday’s golf tournament…even though I’ve never played a round of golf in my life. (We’re hoping the other two guys in the foursome have a sense of humor.) But I’ve got my golf glove, I’ve been visiting the driving range, and am waiting for lightning to strike me on the way to Damascus. Or Lake Okoboji. Wherever.