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    Published on: March 11, 2011

    by Kevin Coupe

    This morning, the eye-opener is at looking at today’s stories in context ... and seeing how the competitive landscape is shifting.

    Walmart is ramping up its online business at the same time it starts talking about hundreds of small stores all over the country, in rural and urban markets, that could serve as delivery depots for many of its goods. At the same time, you have Amazon under persistent pressure from state governments that see its burgeoning coffers as a source of badly needed tax revenue. All of which means that what could be the ultimate retail smackdown - Walmart vs. Amazon - may just be beginning.

    At the same time, you have some e-grocery investment coming to the US from the UK. And you have a Congress that seems intent on doing something about online privacy, which could affect how marketers deal with their web customers.

    Paying attention yet?

    What’s the line from the lottery advertisements? “You can’t win if you don’t play.”

    Increasingly, to be relevant to an evolving customer base, you have to play. Because traditional business models are changing.

    That doesn’t mean there won't be a role for great brick-and-mortar grocers like Oregon’s New Seasons Market, about which there also is news this morning. Or that brick-and-mortar stores won't find new kinds of locations where they can ply their wares.

    But it does mean that we are heading for some kind of new world retailing order.

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

    Published on: March 11, 2011

    Bloomberg reports Bill Simon, who runs Walmart’s US business, said yesterday in an investor conference that the company plans to add “hundreds” of small format stores over the next three years, including through acquisition, as it seeks to spark sales growth in its home market.

    The company originally had said it planned to open 30 or 40 small stores this year in both urban and rural locations.

    According to the story, “The new stores will include mid-sized Neighborhood Market locations of 30,000 to 60,000 square feet, and the rest will be smaller. Simon said today that the Neighborhood Market format will be renamed ‘Walmart Market.’ The company also will introduce more stores on university campuses, he said.

    The Wall Street Journal writes that “the mini Wal-Marts will begin to open in the second quarter of this year in urban and rural locations, including some near the company's headquarters in Bentonville, Ark. The company plans to test different mixes of products in the initial stores as it fine tunes the new convenience-style formula.”

    And the Boston Globe quoted Simon as saying: “The aim here is to get the right model so that we can rapidly roll these things out. At our peak, we built about 350 supercenters in a year, so when we get this thing right, these are going to come real fast, and we're real excited about this format.”

    As for acquisitions, Simon said, “We don't like anybody else's business enough to acquire it right now; what we really want to do is to get our business in the right shape so that we can roll it out with gusto. And once we've got it in the right shape, an acquisition could certainly be a way to accelerate that."
    KC's View:
    There are some who say this is a combination of ambition and aggression. But I do get the occasional email suggesting that there is a tinge of desperation about some of Walmart’s recent moves ... as if management needs to create the illusion of movement so nobody will notice a stagnant culture that has wandered too far from its core.

    I have no idea which reading is true. But I do know that it almost doesn’t matter - because Walmart is a danger to any retailer that competes with it. And now, almost everybody competes with the Bentonville Behemoth, one way or the other.

    Published on: March 11, 2011

    The New York Times reports this morning that Walmart plans to introduce a national roll-out of its “Pick Up Today” program, which allows customers to order products online and then pick them up at a nearby Walmart store a few hours later.

    The program covers as many as 40,000 SKUs - but not groceries. At least, not yet.

    According to the Times, “In Wal-Mart’s program, which is expected to be nationwide by June, customers can select from among 40,000 items online. They will receive a text message or e-mail alerting them when the order is ready, which usually takes about four hours ... Wal-Mart has been testing the program since October in about 750 stores, and Mr. Nave said that both traffic and sales in those stores got a ‘meaningful’ lift. Wal-Mart has been trying to get more people in its stores: traffic to Wal-Mart’s stores in this country declined in 2010, and sales at stores open at least a year in the United States. have been declining for seven quarters.”
    KC's View:
    Anybody who thinks that this is not going to include groceries - sooner rather than later - is just deluding themselves. They’re as bad as Mayor Vaughn in Jaws, trying to keep the beaches open because its the tourist season, ignoring the fact that tourists’ body parts washing up on the beach won't be good for business.

    The rest of Walmart’s strategy, focused on small stores that can kick-start its sales, seems to be focused on food and convenience. No reason to think that the “Pick Up Today” model won’t expand to that as well.

    Published on: March 11, 2011

    Bloomberg reports how how some mall owners around the country are using groceries as a lure for shoppers. Westfield Group, for example, will open an Aldi store in one of its Chicago-area malls; Macerich Co. plans to open The Market in the newly renovated Santa Monica Place mall. And the story notes that “in other malls, the owners are aiming upscale and establishing farmers-market-style food courts with a cornucopia of artisanal products ... Mall owners are luring supermarket chains to a range of locations, from middle- to up-market. Macerich, which in December opened a Hispanic market at its Desert Sky Mall in Phoenix, has signed leases with Costco Wholesale Corp. (COST), SuperValu Inc.’s Albertsons and Trader Joe’s.”

    According to the story, “By 2020, stores selling groceries will account for as much as 5 percent of the square footage at U.S. enclosed malls and lifestyle centers, according to an estimate by Craig Johnson, president of Customer Growth Partners, a New Canaan, Connecticut-based retail consulting firm. Today, they represent less than 1 percent of square footage, he said.”

    The reason is simple. People visit supermarkets as often as nine times a month, but only go to the mall three times a month - and so mall owners hope that these stores can drive traffic and generate higher sales for other tenants.
    KC's View:
    I suspect the success of this concept, which has been common in other countries for years, will largely be situational. If the mall has the right kind of customer base that matches up with the food retailer’s target demographic, and the physical layout is right, then these kinds of ideas can work. But just adding any grocery store to a mall won’t add up to success, and I’m not sure that the food shopping trip will necessary get people to visit Gap or Victoria’s Secret or Brookstone more often.

    Published on: March 11, 2011

    The Wall Street Journal reports that Sen. John Kerry (D-Massachusetts) and Sen. John McCain (R-Arizona) are circulating a legislative proposal that “would require companies to seek a person's permission to share data about him with outsiders. It would also give people the right to see the data collected on them. The bill is expected to be introduced ahead of a Senate Commerce Committee hearing next Wednesday on online privacy ... The Kerry-McCain bill would cover data ranging from names and addresses to fingerprints and unique IDs assigned to individuals' cellphones or computers. It would also establish a program to certify companies with high privacy standards. Those companies would be allowed to sell personal data to outsiders without seeking permission in each instance.”

    According to the story, in the House of Representatives, Rep. Cliff Stearns (R-Florida) has said “he would introduce draft privacy legislation soon, although his approach would largely allow the industry to continue many current practices.”
    KC's View:

    For companies that trade in consumer information, privacy issues may become a much bigger deal in the near future, and attention needs to be paid.

    My suggestion is that companies need to get ahead of the legislation, to be better and more vigilant about privacy than their competitors, and to do more to reassure their customers than even the government requires. In the end, this could be a real competitive advantage.

    Published on: March 11, 2011

    Crain’s Chicago Business reports that Illinois Gov. Pat Quinn has signed into law a bill “designed to make it easier to collect taxes from sales on the Internet, outraging Chicago's Web retailing community but pleasing conventional brick-and-mortar stores. Enacted into law was a measure requiring any non-Illinois seller to collect the state's sales tax if that seller acquires their customer via a link on the website of an Illinois firm.”

    According to the story, “the bill was widely dubbed the ‘Amazon tax,’ in honor of the big Web retailer that has avoided paying much Illinois sales tax because it lacks a physical presence, or nexus, in the state.” The Illinois Retail Merchants Assn. released a statement saying that “the bill merely will take away Amazon's unethical advantage”

    Almost immediately, Amazon reacted.

    Bloomberg reports that Amazon is immediately severing its ties with all its Illinois affiliates, which are websites that send customers to Amazon through links.

    “We had opposed this new tax law because it is unconstitutional and counterproductive,” Amazon said. “It was supported by national retailing chains, most of which are based outside Illinois, that seek to harm the affiliate advertising programs of their competitors.”
    KC's View:
    I cannot help but feel that at some point, Amazon is going to have to bite this bullet.

    Published on: March 11, 2011

    The New York Times reports this morning that Britain’s William Morrison Supermarkets has bought a 10 percent ownership interest in FreshDirect, the New York-based pure play online grocer, for about $50 million.

    According to the paper, “For Morrisons, the transaction is as much about what it can learn as it is about the investment. The company has lagged behind competitors like Sainsbury on the Internet front. Morrisons is hoping to open its online ordering-and-delivery platform in the next two years.”

    FreshDirect, which started up about a dozen years ago, says it is profitable and has double digit comps. It recently has begun expanding out of New York City and into the suburbs of Connecticut, New Jersey and New York.
    KC's View:
    Does this mean that FreshDirect is worth $500 million at this point?

    Yikes.

    Published on: March 11, 2011

    Bloomberg reports that the US Food and Drug Administration (FDA) is saying that at least some at-home DNA testing kits - which allow people to collect saliva samples and get it tested for genetic predisposition to certain diseases - may have to be provided by doctors, and not sold through retail stores.

    According to the story, the FDA is taking the situation on a case-by-case basis, depending on what claims are being made by manufacturers and what diseases are being tested for. The concern is that use of the tests by consumers could lead to self-diagnosis and mistreatment of certain disease states by consumers.

    Bloomberg notes that “Executives from Mountain View, California-based 23andMe and Pathway Genomics Corp., both closely held, said they are working with the FDA to bring their gene tests into compliance with agency rules. Walgreen Co., the largest U.S. drugstore chain, halted plans last year to carry gene tests made by San Diego- based Pathway after regulators said the kits appeared to be medical devices subject to agency review.”
    KC's View:
    It strikes me as inevitable that at some point, we’re going to be using DNA testing to make healthcare decisions, and even dietary decisions, a lot earlier than we’ve been able to in the past. Which probably is a positive step...if a little scary.

    Published on: March 11, 2011

    San Francisco Weekly reports that Safeway is suing the city of San Francisco “over a law banning tobacco sales in stores containing pharmacies, claiming that the law gives an unfair advantage to markets that don't sell prescription drugs.

    “The lawsuit calls the tobacco ban ‘arbitrary and capricious,’ and "a denial of Safeway's due process rights under the 14th Amendment to the U.S. Constitution."

    The original San Francisco law only banned pharmacies from selling tobacco, but it was overturned after a suit by Walgreen successfully made the point that it was discriminatory because it did not ban supermarkets with pharmacies from selling tobacco. So the city then included supermarkets and club stores in new legislation, which is now being challenged by Safeway.

    City officials called the suit “frivolous,” and said they expect to prevail.
    KC's View:
    By the time this is over, the only people who will really win will be the lawyers.

    Published on: March 11, 2011

    Bloomberg reports that Wal-Mart Watch, an advocacy group that says it works on behalf of the retailer’s employees, is calling for Supreme Court Associate Justice Antonin Scalia to recuse himself “when the U.S. Supreme Court considers the company’s bid to derail a gender bias suit on behalf of potentially 1 million employees.” The Supreme Court is scheduled to hear arguments in the case on March 29, and will be considering the retailer’s efforts to decertify the case as a class action.

    The group said that “recusal was warranted because Scalia’s son Eugene has represented the world’s largest retailer in other cases. Eugene Scalia is co-chairman of the labor and employment practice group at Gibson Dunn & Crutcher LLP, the Los Angeles- based firm representing Wal Mart in the discrimination case.”

    The story notes that this is by no means a slam-dunk. According to the piece, “Justices generally don’t disqualify themselves from cases involving a family member’s law firm.” In addition, “Scalia was one of seven justices who in 1993 signed a policy that said they wouldn’t withdraw from a case unless there was some ‘special factor,’ such as a relative’s status as lead counsel.”

    At the same time, the Wall Street Journal reports that “more than 20 major U.S. companies, ranging from General Electric Co. to Costco Wholesale Corp., have lined up to support Wal-Mart Stores Inc. ahead of a March 29 Supreme Court hearing on one of the largest sex-discrimination suits in history ... The company's corporate supporters argue in their briefs to the high court that allowing the suit to proceed as a class action would ‘open the floodgates’ for similar suits and force big firms to settle ‘even meritless claims because the potential exposure is too high’.”
    KC's View:

    Published on: March 11, 2011

    • A Weis Markets store team reportedly is giving away 4,000 bags with more than $50 worth of free store brand products and coupons, with a combined value of nearly $220,000, in the neighborhoods near its store on Bumble Bee Hollow Road in the Upper Allen Township section of Mechanicsburg, PA

    The Weis Brand Giveaway is part of the Grand Re-Opening celebration for its Bumble Bee Hollow store, which has been extensively remodeled and now has expanded service departments. The Giveaway will take place over the next ten days.

    • The Deseret News reports that Salt Lake City-based Associated Food Stores Inc. “announced Thursday that the company will close the Fresh Market located at 6989 South 1300 East in Cottonwood Heights on March 25 ... According to the statement, the location had underperformed since the previous owner opened the facility years ago and store sales continued to lag. The store closure is part of the company’s strategic consolidation efforts aimed at benefiting the entire membership group of Associated Food Stores, the release stated.”

    • Starbucks announced that it plans to open as many as 1,500 stores in China by 2015, a move that will mean entering “second- and third-tier cities.”

    "We do not grow just to grow. We grow in a way so that we protect our brand and culture," said John Culver, president of Starbucks Coffee International.

    • The Wall Street Journal reports that “Judge Burton R. Lifland of U.S. Bankruptcy Court in Manhattan approved procedures for the auction of Blockbuster, with a $290 million initial offer from a group of senior bondholders led by hedge fund Monarch Alternative Capital.”

    • Green Mountain Coffee Roasters Inc. announced a deal with Starbucks Corp. yesterday that “will put single-serve Starbucks packs for Green Mountain’s Keurig brewer in grocery stores, drug stores, and retailers such as Wal-Mart, Macy’s, and Bed Bath & Beyond in the fall. Next year, Starbucks K-Cups and Keurig brewers will be sold in Starbucks stores across North America.

    “With the addition of Starbucks, including K-Cups for its Tazo tea brand, Green Mountain has secured partnerships with almost every major coffee brand in the country, including Canton-based Dunkin’ Donuts, a deal that was announced last month.”
    KC's View:

    Published on: March 11, 2011

    • Portland, Oregon-based New Seasons Market announced that it has hired Pat Brown, the former director of operations for HEB’s Central Market chain,to be the company’s new COO. He succeeds Lisa Sedlar, who was promoted to the CEO position late last year.
    KC's View:

    Published on: March 11, 2011

    I got a number of interesting responses to yesterday’s “Face Time” commentary about things to be learned from Apple and Steve Jobs.

    MNB user Andy Casey wrote:

    Maybe the best example of the synergy between on and off line stores is video above regarding Apple. Seems to me they are very close to getting it right.

    By the way, I've always been a "PC" as the commercials say, mostly because i considered Apple just too expensive.  But I recently got an iPad and I have to say it is the most impressive "computer" I have ever used. Further, I just returned from the Apple store where I went to have my daughter's iPod fixed.  It was an easy, pleasant experience which started with troubleshooting online and when that couldn't resolve it, the ability to easily schedule an appointment at a local store.  I could have been in and out in about 10 minutes if I hadn't stopped to look at some other products.

    The bottom line?  Over the years, I have owned copies of literally every version of Windows (and before that, DOS) on a couple of dozen PCs (at least) but I am so impressed with Apple I will probably never buy another Windows based machine.


    Paul Doty wrote:

    Apple is very good at not only creating new markets out of thin air as they did with the iPad but also at generating excitement which is evident with tomorrow's launch.  As you may have noticed, they did not offer a pre-order for the iPad 2 surely because they want the huge lines at their stores thus generating them lots of free press.

    Here's a similar example of generating excitement in our world:  Recently I've been posting on our Facebook page whenever there is an interesting food holiday and I try to either ask a question about that particular food or try to tie it in with something we have on sale.  I am amazed at the number of responses I've received on these completely trivial and most likely made up holidays and we're not selling anything right then and there but we're getting people thinking about food and making them hungry and that's what matters!


    And, from Jeff Gartner:

    I just read your opening about Apple. I may also be biased as I've used Macs for years, and also have an iPhone and will soon be getting one of the new iPads (I always wait for the second year of a new Apple product, and have never been disappointed, as there are significant improvements from the first one). Apple simply understands it's about the customer experience, not the technology. Sure, their products are closed systems and not for the geeks who like to customize everything, but Apple products work in your everyday life, at home and at work (for me, it's the same place).

    And they work simply, you don't have to be a geek to understand what to do. It's as if their new product concept focus groups were comprised entirely of 2 year-olds and 80 year-olds. Back when I worked in ad agencies, we always had both PCs and Macs in the offices, and everyone always wanted to get one of the Macs.

    And their retail stores and tech support further enhance the customer experience. They help you select the product and options you need based on how you work and how you live, what you're going to do with it, not because it has a higher clock speed. The rare persistent problem of a corrupted file or software or permissions are easily taken care of at an Apple Store. If I have a problem with my ATT U-Verse, I call Apple's tech support to diagnose and solve the problem because I have an Airport Extreme router in the mix and we always seem to have one laptop or other product in our family still under an Apple Care extended warranty. A few years ago, my wife (a university professor) was given the option to get a Macbook or a PC laptop, and she wanted the Macbook. Because everyone else in her department had a PC, we called the university's IT staff to reaffirm it was ok to get the Macbook. And they replied, "yes, get the Macbook; we never have to take care of them" (viruses, network issues, etc).

    So yes, it's reasonable for you to urge food retailers to think it's about the customer experience with food rather than just be distribution points.


    MNB user Richard Kochersperger wrote:

    You don't need to apologize for your enthusiasm for Apple.

    They lead by being visionaries, choose where to compete by being first to the marketplace; and execute their action plans better than most.

    Mobile connectivity 24/7, 365 turns many current economic models upside down in a wide variety of industries.

    The impact of this concept is just beginning and will revolutionize retailing, education, healthcare, finance, logistics and supply chain as well as personal relationships.

    Unfortunately, most food retailers don't get it because there is a significant leadership void who struggle with change and are very uncomfortable with technology.





    On another subject, I have to say that I’m always amazed how the littlest thing can generate so many responses ... like yesterday, when I responded to MNB user Hortencia Espinoza’s email about St. Patrick’s Day and Lent by noting briefly that I planned “to give up Catholic guilt for Lent,” and asked, “Can I get an Amen?”

    Well, the number of people who sent me emails saying, simply, “Amen!” was staggering.

    There also were a bunch of emails pointing out that the Church does not require giving up alcohol for Lent ... what to give up for Lent is a highly personal decision not dictated by the hierarchy.

    (My recollection, going back to before I was a “Catholic in recovery,” was that the Church then was preaching a more positive approach to lent, focused on service rather than denial. I have no idea if this has changed or not.)

    But I also got another email from Hortencia Espinoza:

    AMEN!!!!!!

    LOL! Loved your response to this. OMG it made me laugh so hard I got V8 all over my keyboard.

    Last night at Ash Wednesday mass our priest said he was giving up swearing, money, clothes and fancy cars for Lent (he always does an  icebreaker joke to start the homily) I BURST into laughter while everyone else sat there and he goes “She got it, so she’s going to heaven,” which made me laugh even louder.


    Laughter in church? Wow. (Last time I laughed in church I got hit. Hard.)

    So it goes.
    KC's View:

    Published on: March 11, 2011

    I’ve been going to Las Vegas for years, probably a couple of dozen times if you add up all the trips.

    Last weekend, was different, though. I was going to Vegas for a speech, but because my 21-year-old son was on break from his final semester of college, I invited him to join me. He’s always been intrigued by gambling, is a pretty fair card and poker player, and always wanted to go to Vegas. Better with me than with someone else, I figured. Besides, he’s good company.

    Now, you have to understand something. As many times as I’ve been to Las Vegas, my experiences have been pretty mundane. I don’t gamble, aside from a few bucks put into the slots from time to time, and I’ve never won anything. And because I’m usually working on MNB, I don’t spend a lot of time enjoying the nightlife. Mostly, I like the restaurants, which have improved vastly over the years.

    With my son, however, things were a little different.

    We walked up and down the strip, checking out the different casinos, letting him soak it all in. It was fun. And then, he stepped up to the roulette table and put down $20 on a few of his favorite numbers. And won $145. Then played a little blackjack, and was up to $200 in winnings.

    A little while later, we were strolling through a different casino. We were approached by two slightly drunk, self-described "22 year old naughty girls from California" who wanted to party with us. We politely declined, and I resisted the urge to ask them if their parents knew where they were and what they were doing. I knew where my son was and what he was doing, and that was good enough for me.

    Tell you what made me proud of my son.

    After he won the $145 playing roulette, he gave the guy running the table a $5 chip, like he’d done it a thousand times before. Which was just so cool.

    And then, when we went out for dinner at Mesa Grill one night, he dove into the Blue Corn Pancake with Barbecued Duck and Habanero Chile-Star Anise Sauce, as well as the Lamb Shank Posole served with Red Wine-Red Chile Broth, Cabbage Hominy and Cotija. I almost wanted to cry - it seems like yesterday that he was just a little kid with a finicky palate. And now, he was a man, trying different foods, absorbing different experiences, and just soaking it all in and handling it well.

    Made me feel good.




    The Adjustment Bureau is a curious film, sort of like “The Twilight Zone” meets Inception. Based on a Philip K. Dick story and written and directed by George Nolfi, who worked on the screenplays of both The Bourne Ultimatum (good) and Ocean’s Twelve (not so good), Adjustment is essentially about the power of free will vs. the inevitability of predestination. The story concerns an up-and-coming New York politician named David Morris, played with ease and appeal by Matt Damon, who apparently has great things ahead of him. However, he meets a young woman, played by Emily Blunt, who threatens to derail those achievements, and he connects to her in a way that he simply cannot let go.

    The problem is, he wasn’t supposed to meet her. It was an event that was supposed to be prevented by a group of “adjusters” who keep humanity on track. (They’re sort of like angels cross bred with insurance agents.) When they try to put things right again, Damon’s character sees behind the curtain, which sets up the core struggle of the film. Should he accept their version of how the future should play out? Ot should he endeavor to exercise the free will that they say he doesn’t really have?

    Nolfi has a light enough touch to make The Adjustment Bureau work, and he is aided by a terrific cast. Damon continues to be some of the best work on the screen today, and Blunt makes you fall in love with her the moment you see her. Anthony Mackie, John Slattery and Terence Stamp play adjusters on a sliding scale from compassionate to menacing. And New York City looks as beautiful as you can imagine, becoming a character in the script as it unfolds.

    I’m not sure that The Adjustment Bureau is entirely successful; movies about angels interfering in real life can be problematic. (Warren Beatty’s Heaven Can Wait is the best of the lot.) But The Adjustment Bureau is diverting and thoughtful, two qualities not always found in Hollywood movies.




    The other movie I saw last week was Blue Valentine, which features a couple of extraordinary performances by Ryan Gosling and Michelle Williams as a couple seen at both the beginning and end of their relationship, moving from being enticement to despair as they move from being young to almost middle-aged.

    That said, I found Blue Valentine, as directed by Derek Cianfrance, to be awfully depressing. It’s almost hard to watch in certain spots - not so much because of the sex scenes, which can be pretty raw, but the emotional nakedness of the actors and characters. Blue Valentine has a lot to recommend in it, but I’m not sure I would.

    However, it did make me want to delve into my DVD collection to watch a movie about marriage that I haven't seen for years - Shoot The Moon, with Albert Finney and Diane Keaton. I remember loving that movie, despite the fact that it made me question whether I even wanted to get married. So it goes to the top of the stack, but one of those rainy spring nights when there is nothing else to do.




    By the way, you know another reason why I love the MNB audience so much? It’s because I can throw in a reference to Mr. Creosote while writing a commentary, and I get back all sorts of Monty Python reflections and “little thin mint” jokes. You folks are the best.




    My wine of the week: the 2008 “1583” Albarino de Fefinanes, a Spanish wine that is ripe and silky and perfect with a spicy seafood-and-pasta dish I made the other night. Enjoy!




    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    Slainte!
    KC's View: