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    Published on: August 5, 2010

    Now available on iTunes…

    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 MNB Radio, available on iTunes and brought to you this week by Webstop, experts in the art of retail website design.

    It has been a bad week for old world business models.

    Yesterday, Barnes & Noble announced that it is up for sale, and that the board is reviewing its various options. The move came after a series of quarters in which the chain of 270 brick-and-mortar stores failed up keep up with the growth of Amazon.com, even as it tried to compete both online and with the introduction of the Nook, which was designed to serve as a rival to the Amazon Kindle. It isn’t like Barnes & Noble is going away anytime soon; among the possible bidders of the company are founder Leonard Riggio, who could take the company private, and investor Ron Burkle, who owns close to one-fifth of the company and has been loudly questioning the firm’s corporate governance. However the story turns out, the possible sale of Barnes & Noble is, as the New York Times put it, “the latest sign of trouble for brick and mortar retailers.”

    Meanwhile, Newsweek which has had its own financial troubles as it struggled to redefine the meaning and relevance of a print newsmagazine, was sold this week by the Washington Post Company to 91-year-old audio tycoon Sidney Harman, who reportedly had to write a check for one dollar to take over the company, along with assuming responsibility for some $70 million in debt. Harman’s goal is to get to break-even over the next couple of years, and maybe he’ll do something radical like move the whole thing online and figure out a viable economic model. He’ better figure something out, because in a world dominated by online communications, Kindles and iPads, it is hard to see how a traditional magazine business model will work.

    However...there are contrarian success stories out there.

    The Wall Street Journal this week about two small, independent bookstores that have opened on the eastern end of Long Island and actually are finding some success. At one, the owner has taken to delivering books to customers himself because, as Michael Shatzkin puts it, “I have to compete the way I can.”

    In addition, a man named Jack McKeown opened his own branch of the Miami-based shop Books & Books on Main Street in Westhampton Beach. H explains his decision this way: “With Borders struggling, Barnes & Noble no longer building new stores and Amazon focusing on the Kindle, we saw an opportunity that if you really understood who was buying here, you could reinvent the book store.”

    I love that. Even though I’m an online guy with an unhealthy addiction to Amazon.com, I love the idea that there are entrepreneurs out there who are looking for opportunities and challenging conventional wisdom - and they are doing it by knowing their customers as well as they can, and delivering personalized service that they believe compares well with the competition, whether it is Amazon or Barnes & Noble.

    That’s what successful retailers have to do these days. They have to work against the conventional notions of retailing, color outside the lines, and find new and innovative ways to identify and cater to their customers.

    Along the same lines, there was a story in the Seattle Times the other day that read like this:

    “The store in downtown Portland, with its Ikea-esque furnishings and big flat-screen monitors, has a sleek, streamlined look. At three computer stations, young people sip coffee as they surf the Web or check e-mail; a local florist's promotional display occupies the center of the room, next to the logo T-shirts and coffee mugs.

    But this isn't a coffee shop, an electronics store or even a florist. It's a branch of Umpqua Bank, and from the free coffee to the free cookies to the free Internet access, it reflects the determinedly untraditional image Umpqua has striven for more than a decade to create.”

    I’m hard-pressed to write nice things about any bank, but Umpqua’s story is an interesting one in terms of how it positions itself as part of the community, how it caters to small businesses, and how it has been careful about its own balance sheet to insure that it would not fall into the same chasms that have swallowed up so many other banks.

    It means being different by doing different ... and making the requisite changes before it is too late to be meaningful.

    Being different by doing different. Not a bad mantra for how to succeed these days.

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

    Published on: August 5, 2010

    Credibility has taken it on the chin this summer.

    Whether it has been BP’s awful communication efforts from the gulf, Apple’s arrogant response to iPhone problems, Toyota’s constant misery or on-going examples of governmental officials behaving like three-year-olds; trust has been shaken.

    But I didn’t realize how cynical I was becoming until I thought about Brett Favre and his newest retirement statement. Now, I am a football fan and I always liked Favre even though he never played for my team. I liked his leadership, his bravado and his way of rising to the moment. I don’t know when he wore me out, but it happened.

    As I walked past a television in my gym showing ESPN’s breathless coverage of Favre’s latest retirement, it occurred to me that ESPN really gets off easily. All they have to do each year is simply add some footage to last year’s retirement show and the broadcast is ready. In fact, they probably have an editorial calendar that includes advertising opportunities each August geared to Favre’s retirement announcement and, of course, his decision to return two weeks later.

    That’s cynical and sad. I am, after all, years beyond putting much faith in athletes as their behavior tends to disgust more than inspire these days. But Brett Favre has really pushed it. Couldn’t we try honesty for one moment? If he wants more money, then say it. If he doesn’t want to attend training camp, say that. And please, ESPN, stop covering his third retirement as if it were shocking news. Your own correspondents are greeting the news with skepticism.

    For the rest of us, let’s learn a lesson that credibility and trust are fragile. Choose your words and how you use them carefully because trust doesn’t come back easily.

    That’s my Thursday morning Eye-Opener.

    - Michael Sansolo
    KC's View:

    Published on: August 5, 2010

    There have been a couple of stories this week pointing to shifting priorities among US consumers, as the economy enters what might be called “the new abnormal”

    The Wall Street Journal writes that “Americans are spending more on electronics like iPads and flat-screen televisions and less on durable goods like furniture, washing machines and lawn mowers, according to government data released Tuesday.

    “The shift reflects a change in priorities for American consumers. After pouring money into all aspects of their homes during the previous decade, consumers are redirecting their purchases to eye-grabbing technology and socking away more of what's left over into savings.”

    Meanwhile, Bloomberg frames the shift this way:

    “The new abnormal has given rise to a nation of schizophrenic consumers. They splurge on high-end discretionary items and cut back on brand-name toothpaste and shampoo. Companies such as Cupertino, California-based Apple, whose net income jumped 94 percent in its last quarter, and Starbucks Corp., which saw a 61 percent increase in operating income over the same time frame, are thriving. Mercedes-Benz is having a record sales year; deliveries of new vehicles in the U.S. rose 25 percent in the first six months of 2010. Lexus and BMW were also up. Though luxury-goods manufacturers such as Hermes International SCA and Burberry Group Plc are looking primarily to Asia for growth, their recent earnings reports suggest stabilization and even modest improvement in the U.S.

    “In such an environment, optimism about the economic future ebbs and flows constantly, with far-reaching consequences for a nation in which consumer spending accounts for 70 percent of the gross national product. It’s an economy that suggests an EKG- shaped recovery -- a sequence of mini booms and busts as consumer fads and pent-up demand drive sales, until the impulses fade.”
    KC's View:
    Referring to current trends as an “EKG-shaped recovery” is apt, since it is likely to give a lot of retailers heart attacks.

    A constant refrain here on MNB has been the belief that even in tough times, aspirational customers do not lose their aspirations - they just have to find new ways to satisfy those impulses. I suspect that is what is going on here, to some degree; an iPad or a latte or a BMW say something about a consumer’s aspirations ... they are perceived as being a reflection of the shopper’s personality and self-worth. (The recession, apparently, hasn’t made us any less shallow.) And so marketers, even in tough times, would do well not to always cater to the lowest common denominator, and to find new ways to appeal to aspirational shoppers.

    Published on: August 5, 2010

    The Los Angeles Times reports that a group of chefs and restaurants has sued a number of retailers charging them with selling olive oil misleadingly labeled as “extra virgin olive oil.”

    According to the story, “The group filed a complaint in Orange County Superior Court this week claiming that several retailers and olive oil producers, including such varied outlets as Wal-Mart Stores Inc. and Bristol Farms, have misled Californians for years about the actual quality of the olive oil on sale ... Plaintiffs are seeking an injunction preventing the questionable oil from being distributed and may also request hundreds of millions of dollars in restitution for ‘fraudulently obtained profits’.”

    The Times writes that “the slew of defendants also includes Gelson's Markets, Kmart, Target Corp. and others, who are accused of charging a high premium for impostor oil. The suit doesn't name several retailers such as Trader Joe's and Costco because, attorney Daniel Callahan said, their olive oil products aren't adulterated.”

    The suite comes on the heels of a report conducted by the University of California, Davis Olive Oil Chemistry Laboratory and the Australian Oils Research Laboratory that found that almost 70 percent of imported extra virgin olive oils and 10 percent of domestic extra virgin olive oils did not meet the International Olive Council and U.S. Dept. of Agriculture taste, smell and chemical standards for extra virgin olive oil.” All of the brands tested were bought in a variety of US supermarkets.

    The results of the report have been challenged by both the International Olive Council (IOO) and the North American Olive Oil Association (NAOOA), which have argued with the report’s methodology and the size of its sample.
    KC's View:
    I am not sure that suing retailers is necessarily the best move, if only because one could argue that they have been as much a victim of deception as the people who bought the EVOO from store shelves.

    However, I made this argument a few weeks ago, and I stand by it. Whether or not retailers can fairly be blamed, they do have some responsibility because they sold the olive oil. They are seen by consumers as being the last line of defense against a food chain that some see as being rigged against the shopper. And so they are going to take a hit on this.

    Any retailer selling private label EVOO ought to immediately send it out for testing, and ought to be up front with shoppers about this controversy. I might even pull all questionable brands off the shelf until the issue is resolved. At the very least, I’d do everything possible and necessary to insure that I retained the confidence and trust of my shoppers.

    Published on: August 5, 2010

    The New York Times writes that “Americans are continuing to get fatter and fatter, with obesity rates reaching 30 percent or more in nine states last year, as opposed to only three states in 2007, health officials reported on Tuesday.

    “The increases mean that 2.4 million more people became obese from 2007 to 2009, bringing the total to 72.5 million, or 26.7 percent of the population. The numbers are part of a continuing and ominous trend ... The nine states with obesity rates of 30 percent or more are Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and West Virginia. The highest rate, 34.4 percent, was in Mississippi."
    KC's View:
    It isn’t like this trend has snuck up on us. It is hard to think of a cultural trend in the US that has gotten more publicity than the obesity crisis over the past half-decade or so. But either people aren’t hearing the warnings or simply don’t care ... or, perhaps, the food acquisition machinery is so stacked against them that they don’t have a chance. (Though I reject this last scenario, for the most part. We almost always have a choice.)

    Either way, it isn’t good for consumers’ health, for the nation’s health, or even for the health of the health care system that eventually will have to take care of them.

    Published on: August 5, 2010

    • Pennsylvania-based Weis Markets announced this week that three new stores it is building will incorporate technologies and systems reducing store refrigerant charges (usage) to 50% less than a typical supermarket, thus decreasing their impact on the ozone layer and climate change. The stores are all in Pennsylvania - Bellefonte (Centre County), West Lawn (Berks County) and Fork Township (Northampton County).

    • Fresh & Easy Neighborhood Market has embarked on an ambitious plan to reduce water consumption in its stores by 30% through the use of EnviroTower water conditioning technology. The EnviroTower system has already been installed in 37 Fresh & Easy locations and will be incorporated into all new stores, including the nine Fresh & Easy stores opening in California next month.
     
    Reducing energy and water usage has been a major goal for Fresh & Easy. On average, Fresh & Easy stores use 30% less energy than a typical supermarket and the company’s refrigeration systems were using roughly 850,000 gallons of water per year. With the installation of the EnviroTower system, that usage has dropped to less than 600,000 gallons per year. Similar refrigeration systems typically use 2 to 3 million gallons of water per year. The EnviroTower system also helps with energy efficiency, reducing the amount of energy Fresh & Easy uses on refrigeration by up to 5 percent – helping save customers money while helping the environment.
    KC's View:

    Published on: August 5, 2010

    • Walmart said yesterday that it has opened its third cash-and-carry store in India, in Jalandhar in the northern Indian province of Punjab. Bharti Wal-Mart - a joint venture between Walmart and India's Bharti Enterprises Ltd.

    Walmart cannot open retail stores in India on its own because of laws there that limit the operations of non-Indian companies.
    KC's View:

    Published on: August 5, 2010

    Crain’s New York Business reports that New York-based online retailer FreshDirect continues to fight unionization efforts. According to Crain’s, “More than a dozen maintenance workers who maintain the conveyor belts, refrigeration systems and other machinery at the company's Long Island City, Queens, warehouse filed for union status with the National Labor Relations Board.

    “They will need to take a formal vote within a month or so to determine whether they will be represented by two unions which have joined forces to organize the online grocer's workers. The Teamsters and the United Food and Commercial Workers are hoping to sign a contract with the company's 1,000 warehouse employees and see this as a first step toward that goal.”

    However, Crain’s writes that “FreshDirect said it doubts that the union has the support of a majority of the maintenance workers.”

    Crain’s notes that there is history here:

    “Nearly three years ago, the company was embroiled in a labor dispute and public relations fiasco when Immigration and Customs Enforcement agents turned up at its headquarters to investigate whether it employed undocumented immigrants.

    “Shortly before the ICE investigation, hundreds of warehouse workers submitted cards to authorize a National Labor Relations Board vote. The unions accused the company of causing the investigation in an attempt to scuttle their organizing efforts. The company fiercely denied the accusations. In the end, at least 150 employees were afraid to return to work because of the ICE raid and when the NLRB vote took place the remaining employees voted against joining the union.”
    KC's View:

    Published on: August 5, 2010

    • Beginning August 2, Brookshire Grocery Co.-owned Super 1 Foods stores began offering a few more options with the “Super Fun Lunch” box value meals. Taking a cue from the store’s NuVal Nutritional Scoring System, three lunches have been assembled to give parents a variety of nutritious items. The meals are prepared and sold in the store’s deli and are built to offer a nutritional lunch based mainly on NuVal scores.

    The lunches, which retail for $2.59, are displayed next to a sign informing customers of the NuVal score of lunch components.

    The NuVal system rates every food in the supermarket on a scale of 1-100 - the higher the number, the healthier the food.

    • The Associated Press reports that “Kombucha maker Vibranz said its fermented tea is back at Whole Foods stores, marking the first return after the grocer pulled the products from shelves over worries they contained too much alcohol.”

    Whole Foods removed all varieties of Kombucha from its stores in mid-June after concerns were raised that some of them had more than 0.5 percent alcohol, more than the legal limit for non-alcoholic beverages.

    • The Wall Street Journal reports that “J.M. Smucker Co. plans to increase prices on an array of products in its coffee lineup sold in the U.S., specifically a majority of those under the Folgers, Dunkin' Donuts and Millstone brands. On average, prices tags on the affected products will see a 9% increase, the company said.”

    The higher prices are a reflection of higher costs for unroasted coffee beans, which have gotten to be more expensive because of harsh weather conditions in Central America.
    KC's View:

    Published on: August 5, 2010

    ...will return.
    KC's View:

    Published on: August 5, 2010

    Alex Rodriguez of the New York Yankees hit his 600th home run yesterday, becoming just the seventh major league baseball player to reach that level of production.
    KC's View:
    It is amazing what you can do when your career gets a steroid-induced boost.

    He cheated. The record ought to have an asterisk...because it is tainted beyond credibility. And I’m not even sure A-Rod gets into the Hall of Fame, certainly not on the first ballot.