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    Published on: February 11, 2011

    by Kevin Coupe

    There was a confluence of stories yesterday that went to the very heart of competition.

    USA Today reported on how small bookstores are trying to survive in a climate that seems to favor the likes of Amazon.com, even to the point that Borders seems to be on the brink of bankruptcy and Barnes & Noble also is trying to be figuring out how to be relevant and effective. “Years after the rise of such mega-chains - and the explosive growth of Amazon.com's discount book business - helped kill many small bookstores, e-books are sparking another shake-up,” the paper writes.

    According to the story, “Traditional bookstores (independents and the chains, including Books-A-Million) accounted for less than half of the book market last year, Greco says. The majority of books were sold by a variety of other retailers including Amazon, Price Clubs, supermarkets and convenience stores.

    “The long-term economic effect of a shift from print to digital on both publishers and booksellers isn't clear. But whether the shift is dramatic or more gradual, the number of bookstores is declining.”

    Michael Cader, founder of “Publishers Lunch,” a digital newsletter, tells USA Today that he “sees room for bookstores to experiment with digital-delivery kiosks, on-demand printing and self-publishing services: ‘Maybe we'll come to think of them as reading stores, or readers' stores, or publishing stores, or idea stores, more than simply bookstores’.”

    In other words, they need to rethink their entire approach to the business, and recast the bookstore business in the image of the future, not the past.

    • At the same time, the Wall Street Journal looked at the competitive issues facing independent video rental stores, and how “the rise of Netflix, and especially its newer streaming movie service that lets subscribers watch videos instantly online, has put growing financial pressure on independent stores,” even in places like San Francisco where people are passionate about the cinema.

    According to the story, “Le Video, a 4,000-square-foot shop near Golden Gate Park with upward of 60,000 titles available for rent, is trying to adapt. The store recently lengthened its rental periods to reduce the hassle of returns. (Owner Catherine Tchen) also made management changes to improve Le Video's service after some former staffers - ‘movie snobs,’ she says - developed a ‘flip attitude’ with customers.

    “She also is expanding the inventory of specialty films at Le Video, which features sections on Quebecois, Algerian and Swiss movies. Ms. Tchen also plans to start a Netflix-like DVD mailing service.”

    If I had to bet, I think that I’d probably put my money on independent bookstores surviving longer than independent video rental stores. After all, bookstores can offer a specific experience - reading an actual, physical book - that is different from the e-book experience. So, if they can find a niche and exploit it by intimately understanding their customers, they’ve got a shot.

    Whether you download a movie or rent a DVD, the physical act of watching it is the same - there’s really no difference, other than the delivery method.

    But both businesses, if they have any hope of surviving, have to think hard about what they are selling and how they are selling. Because it is tough being an endangered species.

    Even smart businesses that don’t seem in danger of immediate extinction need to do the same thing.

    And that’s our Friday Eye-Opener.
    KC's View:

    Published on: February 11, 2011

    FastCasual.com reports that “according to a new survey by Technomic, more consumers are sourcing prepared meals from a wider range of retail foodservice operations than they were two years ago, and they’re doing so in lieu of restaurants. Traditional supermarkets, convenience stores and mass merchandisers have been able to grow their share of the food-away-from-home market as they expand their foodservice platforms and build upon consumer desire for convenience, quality and variety of offerings in retail locations.”

    Other notes from the story:

    • “About two in five consumers said they usually consider nutrition when purchasing prepared foods, compared to only about a quarter who say they consider nutrition when ordering food at restaurants.”

    • “Forty percent of consumers who visit mass merchandisers and convenience stores for RMS (retail meal solutions) purchases, do so at least once a week from those locations.”
    KC's View:
    However, one area that study suggests that supermarkets are missing might be called the “happy meal segment,” noting that “kid appeal stands out as the primary concept attribute that consumers think RMS programs are lacking. The attribute related to RMS’ appeal to children ranked among the bottom three for each type of retailer as compared to both limited- and full-service restaurants.”

    That’s a little surprising ... but an area that retailers ought to be able to address.

    Published on: February 11, 2011

    Interesting piece from Bloomberg about CEO turnover, noting that after three years of declining “churn,” “the rate of corner-office shakeups has picked up as more boards replace veteran CEOs with younger leaders with different résumés. Many new chief executives have international experience and a track record in marketing or sales rather than finance or manufacturing, the specialties of CEOs two or three decades ago. They also haven’t necessarily spent their careers at one company or in a single industry.”

    One example cited in the article: “Campbell Soup Co. Chief Operating Officer Denise Morrison. She will become CEO in August, after zigzagging from Procter & Gamble Co. and PepsiCo Inc. to Nestlé SA, Nabisco Inc, and Kraft Foods Inc., before joining the soup maker eight years ago.”

    According to the story, “ The rush to change corporate leadership is a turnabout from the management standstill that set in during the financial crisis. CEO turnover declined from 12.7 percent in 2007 to 9.4 percent last year, according to a study of Standard & Poor’s 500 Index and Fortune 500 companies by executive search firm Crist/Kolder Associates in Chicago. One likely reason: Boards were reluctant to change leadership during the recession, concerned that if a CEO left, investors might think the company was coming unglued ...   Boards today want CEOs who have run an international business, traveled extensively overseas, and have connections with executives and government leaders around the world -- experiences they need to oversee big companies that often can derive as much as half, or even more, of their revenue from foreign markets. Being a director of a public company also counts in an era of heightened corporate governance when CEOs must work more closely with their boards -- and often report to a nonexecutive chairman.”

    The story goes on: “With the economy recovering, Crist/Kolder is predicting a return to double-digit corner-office turnover at big companies in 2011 and 2012, according to Chairman Peter Crist. ‘We’re going into a 24-month cycle of CEO volatility,’ he said. ‘Since companies are now compared to competitors on proxy statements, there’s heat on boards to change leaders who aren’t getting results.’

    “New corner-office occupants have fewer gray hairs; recruiters say executives approaching 60 are today often bypassed in favor of younger candidates. They also expect to serve shorter tenures: six to eight years versus 10 to 15 years a generation ago, according to a Booz & Co. study of CEO succession from 2000 to 2009.”
    KC's View:
    I’m sure the analysts are right, but does it strike anyone else as worrisome that CEOs are going to be judged on the basis of short-term financial results rather than long-term equity building? Isn’t this, in part, how the economy got into trouble to begin with - people and companies focused on short-term profits rather than long-term viability and credibility?

    Published on: February 11, 2011

    The New York Times reports this morning that Walgreen will “begin the first national advertising campaign for Walgreens branded health and wellness products on Sunday. The campaign is the first time Walgreens has gone beyond Sunday newspaper circulars and in-store signs to advertise its own brand.

    “The campaign emphasizes the affordability and quality of the Walgreens brand products and uses the store’s 26,000 pharmacists as a central theme. Kim L. Feil, the chief marketing officer at Walgreens, said that while the ailing economy had spurred an increase in the number of people buying store-brand products, ‘It’s equally important that we elevate the Walgreens brand and product not just on the basis of lower cost’.”
    KC's View:

    Published on: February 11, 2011

    • Tesco-owned Fresh & Easy Neighborhood Markets announced that it has broken ground on a new store that will be opened at the corner of Crenshaw and Jefferson Blvds., which it said was part of its effort to open stores in neighborhoods not served by traditional grocery stores.

    “We want to continue to be part of the solution in providing greater food access and healthier food options to all types of communities,” said Fresh & Easy Vice President Mary Kasper. “We’ve found everyone wants access to the same types of foods – fresh produce, quality meats and poultry, and family staples like eggs and milk – at prices they can afford, right where they live.” 

    One year ago this month, Fresh & Easy opened its first South Los Angeles store at Central & Adams as part of a mixed-use development that it said “has already started to transform the neighborhood.”
    KC's View:

    Published on: February 11, 2011

    The Food Marketing Institute (FMI) has praised  U.S. Senator Kay Bailey Hutchinson (R-Texas) and Congressman Erik Paulsen (R-Minn.) for introducing important legislation to repeal certain provisions of the Patient Protection and Affordable Care Act.

    “We strongly urge the U.S. Congress to repeal provisions in the law preventing consumers from using their flexible spending account (FSA) debit cards to purchase over-the-counter medications (OTC),” said FMI President and Chief Executive Officer Leslie G. Sarasin.  “This law represents a new tax on consumers who currently use their FSA debit cards to purchase OTC medications and it is contrary to the goals of reducing health care costs and improving choice.  Equally important, it is disruptive to families who will need to schedule a costly appointment with their physician to get a prescription for cough and cold medicines if they want to purchase these commonplace products with their FSA cards.”

    According to the FMI statement, “Less than three years ago, retailers spent extensive time and resources on technology investments that would allow eligible and non-eligible FSA products to be distinguishable at the point-of-sale. Upgrading the technology and point-of-sale equipment to support FSA debit payment transactions has cost the supermarket industry millions of dollars.

    “The new law also impedes the ability of supermarket retailers without in-store pharmacies to allow FSA debit card customers access to OTC medicines with or without a prescription.”
    KC's View:

    Published on: February 11, 2011

    • The Austin American-Statesman reports that Whole Foods CEO John Mackey said yesterday that the company will test “wellness clubs” in five major market stores around the country this year, saying that these clubs will endeavor to raise consumers’ consciousness about healthy eating and healthy living initiatives.

    • Walgreens is taking its in-store health clinic business to the next level, offering sports and camp physicals for $35 apiece at its Take Care Clinics around the country.

    • Roundy’s-owned Mariano’s Fresh Market said yesterday that it will begin using the NuVal Nutritional Scoring System in its stores. The NuVal approach uses a proprietary system to rate every product in the store on a 1-100 scale ... with 100 being the best to eat.
    KC's View:

    Published on: February 11, 2011

    The Contra Costa Times has an interesting story about a medical marijuana store in Vallejo, California, where the owner is hoping to build business to a new high - by expanding the selection to include Trader Joe-style groceries.

    “While creating a mini-supermarket may be rare among pot dispensaries, others have reportedly sold pot-laced edibles, and one, in Mammoth Lakes, operates a yoga studio on the premises,” the Times writes.

    Owner Matt Shotwell says that his goal is to prove to his detractors that "there's nothing crazy going on" in his pot dispensary, and he said he thinks the addition will “improve his popularity among other downtown merchants by increasing foot traffic from which they'll benefit,” the Times reports.
    KC's View:
    Got the perfect name for the store when it expands - Munchies & More.

    Published on: February 11, 2011

    Got a number of emails responding to yesterday’s commentary about the rooster that stabbed the guy running a cockfight, severing an artery and killing him - a great “you reap what you sow” moment that I thought was a good metaphor about the importance of long-term strategic thinking.

    One MNB user wrote:

    What a happy ending that would have been to the Michael Vick story.

    That was a common theme. From another MNB user:

    All I can say to the cock fighting story is "touché" and too bad that Michael Vick's dogs didn't get a piece out of him when they had a chance. I will say that  Vick seems to be keeping his nose clean so far, and playing some great ball, but I will never be a fan, will never forget what he did and I'm not sure that I'd forgive him either.  His brand is permanently damaged as far as I am concerned.  I wonder how much he donates to the ASPCA on an annual basis? That might help his image with me and scores of other pet lovers.  Abusing animals and kids - no excuse, ever and no punishment sufficient (save, perhaps, the cock story).

    I ended the commentary with the following phrase: “As Jimmy Malone might say, here endeth the lesson.”

    Which led MNB user Alex Drew to write:

    Love the call out line for The Untouchables! I guess you could say the chicken listened to Jimmy pretty well.  "He sends one of your guys to the hospital, you send of of his to the morgue!"  "Now that's the Chicago way"!

    This is why I love the MNB community....




    On another subject, one MNB user wrote:

    Concerning the comment from the Walmart opponent that stated that "Walmart should not be built because all the stuff it will sell will make poor kids want to shoplift, ruining their lives from criminal records". This is the same attitude that keeps poor kids and parents poor. The inability to take responsibility for their own actions. It's always "someone else's fault" - Walmart, local governments, federal governments, local grocers, take you pick. It's a destructive mindset that needs to be challenged.

    And another MNB user wrote:

    Somehow, you find a way to make news truly entertaining. I couldn't help but to let out a belly-laugh at the quip about local kids being coerced into shoplifting by Wal-Mart, especially with your follow-up comment about how that ranks high on your list of dumb statements. You get the important news out, but also make it fun to read.

    My pleasure. If we didn’t laugh, we’d all go insane.



    MNB yesterday took note of a Miami Herald report that Whole Foods is trying to take advantage of a growing trend - Community Supported Agriculture (CSA), which allows people, for $20 to $40 a week, to “buy ultra-fresh food straight from the farm at prices similar to the grocery store. And their contribution helps small farmers remain in business.”

    MNB user Lisa Malmarowski responded:

    Seriously -  Whole Food 'invented' the idea of using their stores as CSA drop off points? Um, no.  Food cooperatives have been doing this for YEARS, decades in fact. Some co-ops even help buying clubs. I guess that will be Whole Foods next 'new' idea.

    Our three locations have been drop off points for various CSA's over the years. We hosted a 'farmers market' at our last annual meeting where our owners (shoppers) could buy directly from the farmers and suppliers without us taking any cut whatsoever. If you think this is innovative, is not - Local cooperatives are the true innovators. 

    Large retailers watch the smaller retailers and present ideas as new. And this is nothing new to those of us that have been quietly building communities, supporting local farms, educating people about authentic foods and healthier eating all while keeping dollars genuinely local by being community owned. 

    I've watched your blog and other news services give large national and multi-national companies the credit for innovation when the fact is smaller, locally-owned and community based retailers have been doing these things for years. We just don't have that shiny brass megaphone to shout about it the way these companies do. 

    This isn't sour grapes - I just want the record to show, this idea and others like just ain't new.


    Fair enough.

    For the record, I only wrote that Whole Foods was embracing the concept - not that they invented it.

    But you’re right - people like me tend to focus on these innovations when people with megaphones draw our attention to them. And CSA is largely a new concept to me - I’ve hard of it, but have no personal experience with it.

    Thanks for raising my consciousness.



    And, regarding the Chick-fil-A story, more email.

    (The privately held fast food chicken chain, well-known for a conservative religious culture that goes so far as to close its stores on Sundays, has come under fire from some gay rights groups for having contributed food to an anti-gay marriage group. The company says it is not anti-gay, though it does believe in the “biblical view of marriage.” And analysts say that the company’s culture may make it difficult to expand to national proportions, where its beliefs will be seen as unacceptable by some.)

    MNB user Tom Redwine wrote:

    Most of your commenters talking about Chick-fil-A were referencing their store & food experience, but the ramifications of their decisions are deeper than serving chicken to their customers. Chick-fil-A could lose out on getting some valuable talent in other fields, like Logistics, PR, Accounting, Marketing, Construction, IT, Operations, and more. There may be vendors that take a second look at supplying Chick-fil-A because of their public support (yes, it's food that's donated, but that counts as support) of causes and groups that don't align with the vendor's culture. That's just two areas, and I'm sure your readers can imagine many more. It is Chick-fil-A's decision, but it goes a lot farther than the drive-thru.

    And another MNB user wrote:

    In the continuing discussion of religious morality and secular ethics as regards the Chick-fil-A stand on gay rights, you began a comment today with the phrase "I also believe that if there is a God, ...".  You then went on to make a point about the presumptive position a God would hold regarding personal behavior & personal choices about who to love.

    Your statement about "if there is a God", however, seems very much like what someone might say if they wanted to make a point about morality, but were not themselves a believer in God.  Sort of an illegitimate misuse of the God entity, in a sense, if in fact you are a non-believer.  [Here's a metaphor, in fact, from a past experience of mine, since you brought up metaphors in an earlier article today: about 15 years ago, I was called to be a juror in a traffic case in Southern California involving a defendant who was charged with committing some sort of relatively minor traffic offense while driving.  The defense lawyer's case to the jury basically amounted to two propositions, and he indicated to us that if we were satisfied with either one, then we would need to find his client not guilty.  The first proposition: my client was not even in the car in question.  The second proposition: even if my client was in the car, he wasn't driving it; his brother was. ... We found the defendant guilty.] Your "if comment" comes across as if you had said: "While I don't believe in God myself, here's what I think, hypothetically, God's position on the issue would be, if (s)he existed...."  To which Gertrude Stein might reply, "there's no there there."

    Would you be open to revealing for the record whether you are a believer or not? The "if" in your response to the letter writer casts a significant shadow over your subsequent comments about how and what a God would presumably feel about the issues under discussion.  (For the record, I myself have become a believer, only in rather recent years, after several decades of being a non-believer.  And also for the record, I have a daughter who is gay and, wow (!), I still love her.) Thanks for your consideration.


    Nope.

    I hate to disagree with you or Gertrude Stein, but I actually think belief in God is besides the point.  My real point is that mere mortals ought not presume to speak for whatever deity they happen to believe in.

    My specific beliefs are my own, though people are free to draw conclusions.  (I think I'm about as "out there" as anyone could be ... I'm the only person who doesn't get to hide behind "an MNB user.")

    I prefer to take the approach that Humphrey Bogart did in Casablanca.  When asked by Major Strasser what his nationality is, he replies:  "I'm a drunkard."

    In other words, it really isn't anyone's business.
    KC's View:

    Published on: February 11, 2011

    Somehow, it turned into religion week here on MNB. Not exactly sure how it happened, but I don’t think it is bad thing, even though the occasional person suggests that I am venturing into dangerous territory by commenting and posting other people’s comments on the subject of religion and how it sometimes intersects with commerce and culture.

    Dangerous? Sure. Maybe a little bit.

    But first of all, nothing ventured, nothing gained. If MNB actually is going talk about stuff that other sites and people don’t talk about, then we actually have to talk about stuff that other sites and people don’t talk about. (At a site I worked for during a past life, they used to threaten to fire me when this kind of stuff came up.)

    Just as important, the conversation this week has largely been both passionate and respectful about a tough subject. And, hopefully, thought provoking.

    “Sunlight is the best antiseptic,” US Supreme Court Justice Louis Brandeis once said. I agree.




    Speaking of sunlight - and religion - I cannot recommend highly enough a terrific piece in the February 14-21 issue of The New Yorker that examines Scientology. Lawrence Wright has written an exhaustive article looking not just at the religion’s beliefs and history, but also at its impact on a variety of people, some from the religion’s hierarchy and some now viewed within Scientology as apostates. Fascinating stuff. And more than a little scary.




    And one more on the religion front...

    There is a new application available for the iPad and the iPhone that allows Catholics to go to Confession.

    According to an Associated Press story, “The text-based app takes the user through the Ten Commandments, with a slew of questions attached to each, a process known as an examination of conscience, which penitents undergo before confession ... Once that's done, the app lists the user's sins and displays a written act of contrition, a prayer recited by the penitent. From there, it walks the user through the rest of the steps of confession and even advises when to say ‘amen’.”

    The app was created because American Catholics go to confession less often these days than they used to, and the developers believed there was a market for a virtual confessional.

    The only downside is that the application doesn’t give absolution - for that, you actually have to go a real, live priest.

    The cost of the application: $1.99.

    (If they’d charged more for absolution, it would have been like the old days, when the Church used to charge people for indulgences. Of course that didn’t work out so well, since it led Martin Luther to begin the Protestant Reformation.)




    Another wonderful piece in this current issue of The New Yorker is a short article about motherhood by Tina Fey of “30 Rock” fame; it further cements my feeling that Fey is simply one of the funniest people out there.




    Do you have movies that, if you happen to come upon it while flipping channels, you immediately settle in to watch until it’s over, even though you’ve seen it a bunch of times and almost know some of the scenes by heart?

    I do. And one of them popped on the other night, and reminded me how much I like it - About A Boy, with Hugh Grant - a wonderfully heartfelt movie about growing up based on a Nick Horny novel and directed by Chris Weitz and Paul Weitz. I came in about a third of the way through, and stayed until the credits ... and if you’ve never seen About A Boy, I heartily recommend it.




    Until a week ago, if I had a vote I probably would have cast mine for The King’s Speech to win this year’s Best Picture Oscar, and Colin Firth to win Best Actor.

    And then I saw 127 Hours. And was completely blown away by the direction by Danny Boyle (Slumdog Millionaire), the script by Boyle and Simon Beaufoy, and the starring performance by James Franco.

    127 Hours is the true story of Aron Ralston, a hiker who, while trekking through a remote Utah canyon, is trapped when his arm is caught under a boulder and finally has to cut off his own arm in order to escape. It sounds like tough stuff, and is - there are about 5-10 minutes toward the end of the movie that are extremely hard to watch and listen to.

    But 127 Hours is easily the most powerful, life affirming movie that I’ve seen a quite some time - it ultimately is about hope and, as cliched as it sounds, the triumph of the human spirit. Boyle gives the movie enormous energy, finding visual ways to get inside Ralton’s head and heart. And Franco, who plays Ralston, may be the only person who could have played this part - he is energetic and magnetic, idiosyncratic and driven - and he delivers an entirely original and compelling performance.

    There’s even a business lesson in 127 Hours. (You knew I’d find one in there somewhere.) Ralston has enormous talent and skill as a hiker and climber, and he has all the right equipment. But in the end, these alone are not enough for him to escape. It is his passion for life, and his enormous heart and will, that ultimately are his salvation. The lesson is this: you need top talent, you need great technology, but ultimately it is only in combing these things with strength of character that you can achieve a winning and transformational performance.

    This is not to diminish any other Oscar-nominated movie or performance. This actually was a pretty good year for movies (and I’ve now seen nine of the 10 Best Picture nominees). But 127 Hours is a miraculous achievement - even though I knew what the movie was about and how it would end when I walked into the theater, I was completely and utterly surprised by it. And thrilled by its achievement, from beginning to end.




    My wine of the week is a great one - the 2009 Black Pig Albarino, from the Galicia region of Spain. If you’ve never had Albarino, it is time to try it - and this is a tasty example of a great white wine that is wonderful with spicy seafood dishes.




    That’s it for this week. Have a great weekend.

    Until Monday ... Slainte!
    KC's View: