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    Published on: January 5, 2010

    by Michael Sansolo

    It’s going to sound blasphemous to say this on an Internet site, but technology has its limits and we had better understand that sooner rather than later. During the recent one-week break here at MNB, three events had me focused on this position.

    First, as you probably all read, there seemed to be a spate of drivers getting lost in Oregon while in really difficult places thanks to faulty directions from the GPS systems in their cars. Honestly, I love GPS systems, especially their ability to adjust directions when I constantly ignore my Tom-Tom’s advice. (There needs to be a system for native New Yorkers that has a much harsher voice reminding me what a jerk I was for missing a specific turn. Then I’ll listen)

    But truth be told, I’m not a slave to my GPS. Before any trip of length, I’ll still look at a map (on Google, of course) to familiarize myself with the basics of the trip. The folks who ended up in the wilds of the Oregon mountains clearly didn’t think of this step. They should have.

    Second, there was a marvelous interview in Newsweek with Secretary of State Hilary Rodham Clinton and one of her more renowned predecessors, Henry Kissinger. As well as discussing the incredibly complex nature of the job, Clinton and Kissinger talked about the rigors of almost non-stop travel. Clinton said the travel surprised her because she expected to visit more places and people virtually. That hasn’t been the case at all.

    “In fact it’s almost as though people are more desirous of seeing someone in person,” Clinton said. In other words, in a time when an electronic chat is so simple, the power of a face to face meeting takes on an even greater sense of importance. It’s almost counter-intuitive, yet it makes a stunning amount of sense. The more electronic and casual we get, the more the power of a more difficult form of communication, like a handwritten letter, a personal visit or a face-to-face chat at a conference.

    (Kissinger also offered an incredible thought on priorities. He said one of the biggest challenges is making certain urgent issues don’t crowd out important issues. The latter are the key part of the long-term strategy, he said, even while the former require immediate attention.)

    What brought this all together was, of course, a trip to the local supermarket with my discerning wife. The recently remodeled store now features three ways to checkout: with a cashier, self-scanners or wand scanners shoppers can cart around the store. After completing our trip with the wand, my wife asked me exactly why that technology is a good thing.

    As you might expect, I launched into a review of all the benefits in costs, in changing the experience and even in the growing number of shoppers who simply like to play with new cool gadgets. (One friend of ours has become wildly enthusiastic about this store simply because of the scanner wands.)

    What’s more, I explained, many shoppers no longer like to interact with the cashiers. And that’s where my wife turned the argument. In her opinion the cashiers in this store are actually great and the single best reason to shop the store. The cashiers tend to be experienced, knowledgeable and helpful. With the wands she sees the store surrendering its single biggest competitive advantage.

    And just like that, my wife explained the complex relationship we need to strike with technology. We need technology for so many reasons, but only if we remember technology is still a tool to enhance what we do, just as Secretary Clinton has found with personal visits and no doubt the drivers in Oregon wished they had thought of earlier.

    For years, futurists and sociologists have talked about the need to meld high tech with high touch. The more enamored we get with our gadgets, the more we need to remember that.

    Michael Sansolo can be reached via email at . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: January 5, 2010

    Reuters reports that some experts speaking at the annual meeting of the American Economic Association seemed to be fairly pessimistic about the prospects for the coming decade, suggesting that “U.S. gross domestic product would expand less than 2 percent per year over the next 10 years. That stands in sharp contrast to the immediate aftermath of other steep economic downturns, which have usually elicited a growth surge in their wake.”

    A major problem, according to the report, is that the decline of the housing market will continue to impact the wealth of many Americans: “One reason is that U.S. consumers remain heavily indebted. Consumer credit outstanding has fallen from its mid-2008 records, but still stands at some $2.5 trillion, or nearly one-fifth of total yearly spending in the U.S. economy.

    “Another is that many of the country's largest banks are still largely dependent on funding from the U.S. Federal Reserve and the implicit backing of the Treasury Department.”

    Meanwhile, the Wall Street Journal reports that “in the short term, recent news suggests a continuing rebound for consumers and retailers, albeit a modest one. Last week, the U.S. Labor Department reported that overall personal income rose 0.4% and wages and salaries rose 0.3%, while savings rates stayed steady at 4.5% ... Another sign that sales will pick up is that cargo volume at U.S. ports in February is expected to rise 16% from last year's level, followed by further increases in March and April,” following 30 months of steady decline.
    KC's View:
    The larger point made by the Journal story is that for the short term at least, consumers are going to be thinking and acting differently than they have in the recent past, with more of an eye for value...though I would suggest that “value” won’t always be seen as the lowest price. It is entirely possible - and I think likely - that educated consumers will have a broader and more sophisticated understanding of what value means, and will integrate it into lifestyle approaches that could include such things as “experiencer consumption,” as noted in yesterday’s MNB.

    What makes this harder for retailers is that they no longer can simply calculate, but rather must triangulate...figuring out what categories in which they need to focus on price, and in which segment they should pay more attention to value as it is variously defined.

    Published on: January 5, 2010

    The New York Times has a long front-page story this morning about the fees charged by Visa and MasterCard for the use of credit and debit cards at retail, concluding that “billions of dollars are at stake” and explaining both the strategies that have allowed the card companies to dominate the retail landscape and how and why retailers are fighting back in the courts.
    KC's View:
    It would be my guess that the Times story won;t contain many surprises to people in the retailing business, but it does serve an important function if it manages to inform consumers about the costs every time we open our wallets and use one of those cards.

    But let me say again what I have said before. If retailers are successful in getting the card companies to lower their costs and be more transparent, they have to respond by showing that the result to some extent is lower prices. That’s been the argument to consumers - that the costs result in higher prices.

    Retailers have to deliver on the implied promise.

    Published on: January 5, 2010

    Good interview in Advertising Age with Rick Braddock, CEO of the pure-play e-grocery service operating in the New York metropolitan area, and that has something of a success story in a segment in which there have been some notable failures. In business since 2002, FreshDirect claims to have annual sales of about $250 million, and has expansion plans that will take it northeast into Westchester County and Connecticut, east into Long Island, and west into New Jersey.

    Some excerpts:

    On the sometimes painful growth process... “We broke a ton of eggs. And we had a lot of late deliveries. If you look backward, you see some really painful moments we had in our past and on a variety of fronts. Learning to fix things once so they stay fixed is a very hard management challenge. We've managed to do that. But I can still to this day show you some comments from customers who were very upset with us for things that we do. We're ashamed of them when they happen. We just try to be better every day.”

    On customer service... “It starts with the view that you start with your customer and you work back to the business. The needs that we are fulfilling -- and certainly convenience is one, but there are several others -- you have to understand what that means to your customer, how they define what those various attributes and benefits are, and then deliver on it and measure to be sure you're effectively doing it. You also have to marshal the voice of the customer in a way that is very timely and can be spread throughout the organization. By keeping that customer in front of us every single day, it gives us a chance to understand what we need to accomplish to really do our job well.”

    On maximizing the potential of the Internet... “Marketing in today's world is broadly sub-optimized when it comes to the internet. A lot of people know that the internet is a free distribution channel, and in other respects, a way that you have to distribute your product. Because if you're not there, someone like Amazon is going to steal your business. But most people don't focus on the fact that the internet is the greatest marketing aid that we've ever had. You are able to know your customers in great depth on the internet, deeper than you've ever been able to know them before. And you're able to operate at a real-time pace. That word ‘pace’ takes many big companies out of play, because the marketing processes in these companies are sort of leisurely. There is still a major opportunity for businesses to rethink their approaches to both marketing and management using these internet values and really inculcate them in the way they should be doing marketing.”
    KC's View:
    Hats off to Fresh Direct, which has persisted and succeeded. Expansion can be perilous, and I wish them luck.

    Published on: January 5, 2010

    In Milwaukee, the Journal Sentinel reports on how Roundy’s is utilizing its Super Pick ‘n Save format - described as “a 100,000-square-foot format that has elements of a wholesale club” - as a way to stave off increased competition from the likes of Woodman’s Food Market, as well as the expanded presence of both Walmart Supercenters and Super Target stores.

    Woodman’s, the story notes, “operates huge stores, encompassing 225,000 square feet. About half of that is selling space, with the back of the store devoted to warehousing. The company uses each of its stores as a warehouse for certain product categories and does not operate a central distribution center. Woodman's offers low prices on brand names, with large assortments, in a no-frills format. The stores do not offer full service bakeries, delis, meat counters or floral departments. A 15,000-square-foot liquor store boasts a wide selection of beers and wines.”

    Roundy’s market share has seen some slight decline in market share over the past year, and its CEO, Robert Mariano, has pledged to be aggressive in fighting for share. "We want to earn their business, and we want to work to keep it," Mariano tells the paper.

    The Journal Sentinel reports that the Super Pick ‘n Save format “evokes memories of the chain's early warehouse stores” and “has Pick 'n Save's traditional full-service bakery, deli, meat counter and floral department. It also has a salad, soup and sushi bars, as well as a cafeteria with a menu that includes fried and roasted chicken, macaroni and cheese, hush puppies, onion rings and hot vegetables. Shoppers can buy a meal and eat it in the seating area near the prepared food counters, or carry the food out.

    “The Super Pick 'n Save also has a substantial offering of large-size products, including 20-pound bags of Riceland rice, 20-ounce boxes of Triscuit crackers, baby diapers and cleaning products.” The story notes that the format is looking to be locally oriented, aiming “to serve varied ethnic tastes. The produce area has a counter filled with greens that appeal to African-American cooks: mustard, collard and turnip. In the store's huge packaged meat section, Mississippi hot sausage sits next to kielbasa. The frozen food area includes large bags of pierogi, a Polish dumpling.”
    KC's View:

    Published on: January 5, 2010

    Reuters reports that Walmart-owned Asda Group in the UK has announced its most recent offensive in the ongoing British grocery price wars, cutting prices on 3,600 products by an average of 13 percent.
    KC's View:

    Published on: January 5, 2010

    • The Wall Street Journal this morning reports that Nestle has decided not to launch a bid to acquire British chocolate manufacturer Cadbury. Meanwhile, Kraft, which put Cadbury into play by making a $16.4 billion bid for the company, said that it would sweeten the offer by enlarging the cash portion of the offer by about 20 percent, while not increasing the overall size of the offer. reports that Big Y Foods has decided to close one of its Springfield, Massachusetts, stores, saying that the decision was influenced by slower than expected population growth in the neighborhood and increased competition from the likes of Aldi, Walmart, and Stop & Shop. Big Y also has another store in the proximity that it hopes will pick up sales from the closed unit.

    • Market research firm Dunnhumby, which has Tesco as its majority owner, reportedly has acquired KSS Retail, a US price modeling company. Terms of the deal were not disclosed.
    KC's View:

    Published on: January 5, 2010

    • Curtis Allina, the New York Times reports, died last month in Washington State at the age of 87. Allina’s contribution - he turned Pez into a children’s product and popularized it by creating the character dispensers that featured the heads of pop culture icons sitting on top of slim plastic candy containers.
    KC's View:

    Published on: January 5, 2010

    We continue to get email about the pending acquisition of Ukrop’s by Ahold USA:

    This reader grew up in Richmond, Virginia, and is very familiar with the Ukrop's extreme loyal customer base.  As Ahold makes changes, they better be darn sure of getting consumer reaction before they make any merchandising or store operational changes.  The Ahold negative history of takeovers should be proof enough to the Ahold management that "if it ain't broke, it don't need fixin"!   There are plenty of other food retailers in the Ukrop region just waiting to take away Ukrop's/Giant's cookies.  Let's hope they get it right this time as there are certainly many lessons to be learned but only if Giant of Carlisle gets the message!

    Agreed. But let’s be clear about one thing - most people seem to believe that Ukrop’s, long a legendary presence in the supermarket industry, has not be firing on all cylinders of late. Still a strong, community-focused company, to be sure, but not what it once was.

    So, sure, Ahold has to be careful not to throw out the baby with the bathwater...but it also has to be sure to drain all the dirty bathwater.

    Regarding some of the efforts being made at the Obama White House regarding food policy, MNB user Karen Shunk wrote:

    I read your mention about the Assistant Chef at the White House and his efforts to publicize and support organic gardening and farmers’ markets.  People outside the beltway have no idea how big this is for Washington.

    The children who helped plant and care for the organic garden at the White House attend Bancroft School in my neighborhood.  An extremely large proportion of the children at this school and the one my children attend qualify for free or reduced-price meals at school and there are more all the time it seems; many of the parents in these families work two or three jobs each to make ends meet.  Many parents don’t have the time or energy to learn about cost effective, healthy cooking or to pass on the wisdom of their own parents ... In addition, Sam Kass has been directly responsible for the opening of additional farmers markets in the District.  These markets take food stamps and other forms of food assistance and make fresh food available where it needs to be.  There is a long-standing farmers' market in my neighborhood that continues to thrive even though we now have a supermarket and a Target.

    As a last comment, when I first moved to the District from California, I was shocked at the poor quality of grocery stores here.  While things have improved considerably, there are still entire wards of the District as well as close-in poorer suburbs that have one supermarket, or even none!  And the quality of the produce in these stores is absurdly low, even in more affluent areas, while being absurdly expensive.  DC needs Sam Kass. Plus, I am really pleased that the Obamas consider themselves to be citizens of the District – really living here and not just marking time until they can get back “home.”

    I was happy yesterday about the NY Jets making the playoffs, but got the following cautionary email from MNB user Bill Welch:

    Your Jets made the playoffs because two teams (Colts and Bengals) laid down.  They are a two and a half point underdog this week in Cincinnati.  The smart money knows they are one and done.

    True...and to be honest, I’m glad I have don’t have the pick in my small football pool. (My son does, as he marches to what likely will be the eighth season in a row that he has kicked my butt in our pool.)

    But allow me to luxuriate in the moment, will you?  (You can gloat next Monday if things go your way.)
    KC's View: