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    Published on: March 23, 2011

    by Kevin Coupe

    There is a scene in Pirates of the Caribbean: Curse of the Black Pearl in which Johnny Depp’s Captain Jack Sparrow defeats Will Turner (Orlando Bloom) in a sword fight, and Turner says, “You;’d never beat me in a fair fight.”

    To which Captain Jack responds, “Hardly an incentive for me to fight fair.”

    Such is the case with the new film rental service Zediva, which is trying to challenge Netflix and Redbox - which themselves have made Blockbuster virtually irrelevant - by playing the game in its own way.

    According to the Hollywood Reporter, “Zediva, which just went live to a broader audience after a year-long beta trial with what it says were a few thousand beta users, allows users to watch movies, which are newly released on DVD, via the Internet - on computers and select Internet-connected TVs, Blu-ray players and other devices - without the delays of other services.”

    The story goes on: “The company’s operation depends on a data center full of DVD players that play the movies ordered on its site. Users control playback via the site and get DVD functionality, including subtitles and the like ... The company's use of physical DVDs and DVD players in the Silicon Valley appears to be at the core of Zediva's argument that it is working within the copyright rules of the so-called first sale doctrine, which applies to DVDs, but not streaming content. That doctrine allows a purchaser to sell or lend a lawful copy of a copyrighted work without permission once it has been obtained ... The low price point ($1.99 per rental, $10 for a package of 10) is possible because the company looks for a high enough number of rentals to bring in enough revenue to turn a profit, according to the CEO. Plus, since users of the online service don't need to physically return DVDs like in the case of Redbox, the company sell more rentals per day.”

    Traditional streaming services have signed distribution agreements with Hollywood studios that are designed to delay availability in a way that protects DVD sales numbers, which have been waning in recent years. But Zediva, up to this point, seems to not be playing fair, or at least not by the other guys’ rules ... though it certainly is possible that there could be a lawsuit challenging its approach.

    But this is a good example of how all retailers need to approach their businesses - not just identifying opportunities, but looking for the places in which they can change the rules and not fight fair, and in doing so give themselves a differential advantage. It is an ongoing process - there is no end game here - but it is an approach that actually can give a business some measure of sustainability.

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

    Published on: March 23, 2011

    In Milwaukee, the Journal-Sentinel reports that Willis Stein & Partners, owners of Roundy’s Supermarkets Inc., has put the chain up for sale.

    According to the story, Willis Stein bought Roundy’s for $750 million in 2002, and originally planned to sell it in 2007. However, the financial meltdown and recession put those plans on hold.

    Neither Willis Stein nor Roundy’s commented on the report.

    The Journal-Sentinel says that “the new sale effort for Roundy's is in an early stage, according to Deal Pipeline. The report lists three competitors as likely bidders for Roundy's: Schnuck Markets Inc., a family-owned chain based in St. Louis; Cincinnati-based Kroger Co.; and Supervalu Inc. of Minnesota. Several industry experts said, however that Supervalu isn't likely to take on another acquisition, since the chain is struggling with a debt burden from its $17.4 billion purchase in 2006 of Albertsons.” Safeway also is mentioned as possibly having interest in Roundy’s.
    KC's View:
    I’d agree with that last comment; Supervalu seems to be in “sell” mode, not “buy” mode.

    It also may not be as easy to sell the company as ownership might hope; Roundy’s has been under pressure from both ends of the market, and its market share in Wisconsin has not been moving in the right direction.

    Published on: March 23, 2011

    Despite a month of bad news stories that could make even the most optimistic person a little skittish about the future, Bloomberg yesterday had a piece suggesting that there is indeed a silver lining to a black cloud that has included tsunamis, earthquakes, nuclear plant meltdowns, political unrest in the Middle East and yet another armed conflict, this one in Libya.

    And it reportedly was the most-viewed story yesterday on Bloomberg:

    “Global markets are signaling that sustained economic growth will more than make up for Japan’s worst disaster since World War II, rising commodity prices and uprisings throughout the Middle East and North Africa.

    “Interest-rate derivatives, bond sales by the riskiest borrowers and rebounding benchmark stock indexes all show increasing confidence in the economy. New York-based JPMorgan
    Chase & Co. is putting up $20 billion of its own money in a short-term loan to finance AT&T Inc.’s $39 billion bid for Deutsche Telecom AG’s T-Mobile business.

    “Manufacturing strength from the U.S. to Germany and China is giving economists more confidence that the recovery from the worst financial crisis since the Great Depression will continue. Goldman Sachs Group Inc. forecasts a global expansion of 4.8 percent this year, while JPMorgan calls for 4.4 percent. The average over the past two decades is 3.4 percent.”

    The various shocks to the world’s political and economic systems are called “black swans,” because they are events that cannot be predicted by trend gurus; according to the story, the term refers to the fact that at one time, it was believed that there were only white swans, until black swans were discovered in Australia in 1697.
    KC's View:
    All together now...

    Some things in life are bad
    They can really make you mad
    Other things just make you swear and curse.
    When you're chewing on life's gristle
    Don't grumble, give a whistle
    And this'll help things turn out for the best...

    And...always look on the bright side of life...
    Always look on the light side of life...

    Published on: March 23, 2011

    The Wall Street Journal reports on new bagging procedures being adopted and aggressively promoted throughout Supervalu’s various banners, “part of a training program that Supervalu Inc. believes will save it millions of dollars a year by putting more items in each bag or skipping the bag altogether. Plastic bags cost about two cents apiece and paper bags cost five. The Eden Prairie, Minn., operator of Albertsons, Acme Markets and Jewel-Osco stores uses more than 1.5 billion plastic and paper bags a year at about 1,100 stores, not counting its Save-A-Lot discount stores, where customers bring or pay for their own bags.”

    According to the story, “Some of the Supervalu guidelines reinforce familiar bagging rules, such as starting the packing at the corners and moving from the outside in. But others break with common practices: No double-bagging. No bags for large items or items with handles, like one gallon orange-juice containers. Never ask, ‘Paper or plastic?; just use plastic bags. The rules can be broken, but only on request.”

    The Journal notes that Supervalu’s banners have “struggled amid the recession as many customers migrated to rivals for discounts. But it's hoping to reverse 11 consecutive quarters of sales declines at stores open at least a year by plowing bagging and other savings into lower prices for bread, frozen shrimp and other items.”
    KC's View:
    I have mixed emotions on this one.

    On the one hand, I happen to believe that the little things make a difference, and that pennies saved on bagging here and there can add to up to big savings that can have an impact on the bottom line. And so on that level, Supervalu’s approach makes sense.

    But there is a tone to the story - and this may be the way the Journal wrote it, and not the way Supervalu is enacting it - that suggests that Supervalu believes that what it wants and needs is more important than what its customers want and need.

    The only thing that, in the long run, will help Supervalu turn around sales declines is offering a better store experience, which means different things with different formats and in different locations. And that means making the customer’s priorities their own.

    Published on: March 23, 2011

    The News & Observer reports on a speech given by Fred Morganthall, president of Harris Teeter, at the N.C. State University Poole College of Management. Some excerpts:

    • "We may not know you by name, but we know you by your VIC card number, and we sure know you by what you buy. ... When the recession hit, we started seeing sales of pot pies, TV dinners, peanut butter, and macaroni and cheese spike. We were able to make our decisions pretty rapidly. We had to concentrate not on dollar sales but on unit sales - on customers and what they purchased."

    • "We measure everything. We mystery shop ourselves and our competition because we want to know what kind of service you get at Food Lion. We measure time in line. We do Web surveys. We do phone surveys. ... When you're a new associate with us, as a bagger, you get 30 hours of training."

    • "Even though we're emerging from the recession, we're still not seeing much of a change in consumer confidence. When we poll shoppers, only 1 percent say they're going back to their old spending habits. So we have to change."
    KC's View:

    Published on: March 23, 2011

    Yesterday, Michael Sansolo’s column focused on how the banks are pushing the US Senate to delay or overturn legislation that limits the swipe or transaction fee banks can charge retailers when credit and debit cards are used, and he called for retailers to get busy trying to counteract the lobbying efforts of the financial services industry.

    MNB got a number of emails yesterday asking for specifics about how best to have an impact, and so we turned to the Food Marketing Institute for suggestions about what to do. Senator Jon Tester (D-Montana) will be looking for any and all opportunities to offer an interchange delay amendment on the Senate floor in the coming weeks, and so the time to make these contacts is now. 

    1) Call the U.S. Capitol Switchboard at (202) 224-3121 and ask to speak with your Senators' and/or Representative's office. When you call, tell them you oppose (S. 575/H.R. 1081), which would delay the implementation of debit card swipe fee reforms set to go into effect this year - reforms that are extremely important to you, your business and ultimately your customers.
     
    2) Write your Senators and Representatives through FMI's letter writing campaign, which is available by clicking here.
     
    3) Please feel free to contact Jennifer Hatcher (jhatcher@fmi.org) or Liz Garner (egarner@fmi.org) for any additional information.
    KC's View:

    Published on: March 23, 2011

    Advertising Age has an interview with Dwayne Chambers, senior VP-CMO at Krispy Kreme, in which he describes the company’s current strategy for supporting the brand. Some excerpts:

    • “What was word-of-mouth in 2000 has really become social media today. If we have 1,000 people who love your brand in 2000, they could tell two people who could tell two people who could tell two people. Today, if you have 1,000 who love your brand, they could immediately tell 100,000 people who could tell 100,000. We're in the fortunate position to be a brand that people love. It will play more of a part now. The ability for us to connect with our team members and guests in the store is important. We're going to continue to spend as much as 50% of time and effort internally turning every team member we have into a brand marketer.”

    • “We're definitely continuing, from a global standpoint, to expand. We have nearly 650 stores in 21 countries. Almost two-thirds of those are international. It's interesting to watch the expansion internationally, because there are some components that are much like what people saw here in that there's this incredible excitement. But it's not just about something being new -- there's definitely some excitement about Americana, and Krispy Kreme has a very Americana image that people grasp onto like they do Coke and Disney.”

    • “Ultimately our message has continued to be that we don't expect people to be in Krispy Kreme every day. What we've heard from our guests is that when they come to Krispy Kreme, it is a treat for them, and they understand that. But we're also offering up and testing a few things to see if there are other items our guests want to engage in. We just recently in our Philadelphia store started offering some alternative items -- yogurt, oatmeal, Naked juices, soy milk. We haven't seen the final results, but they seem to be accepted by our team and our guests.”
    KC's View:
    There are few companies that squandered their brand equity as badly as Krispy Kreme did - moving from a company that offered a differentiated and highly valued product to one that was virtually a commodity, with closed stores all over the country. It happened because it over-expanded, putting its doughnuts everywhere and not focusing on quality. (The Atkins craze didn’t help, either.)

    They may be able to maintain that illusion overseas, but I fear that here in the US, it will never regain its patina of old.

    Published on: March 23, 2011

    • The Associated Press reports that “media and entertainment company World Wresting Entertainment Inc. and Vivendi Entertainment said Tuesday that they have signed a deal that makes Wal-Mart Stores Inc. the exclusive retailer for WWE Studio's films.”
    KC's View:
    Which allows Walmart to dispute any suggestion that it may be getting too highbrow...because there is nothing more lowest common denominator than professional wrestling.

    Published on: March 23, 2011

    • The New York Times this morning reports that the US Food and Drug Administration (FDA) is halting “ imports of dairy products and produce from the area of Japan where a nuclear reactor is leaking radiation.

    “The F.D.A. said those foods will be detained at entry and would not be sold to the public. The agency previously said it would step up screening of those foods. Other foods imported from Japan, including seafood, will continue to be sold to the public but screened first for radiation.

    • The Washington Post reports that stores and restaurants throughout Asia are stopping the sale of Japanese food because of concerns of radiation contamination related to the nuclear reactor accidents in Japan.

    In addition, Bloomberg reports that the Japanese government has instructed people living near the stricken nuclear reactors not to drink tap water.

    • The Los Angeles Times reports that “investment firm Leonard Green & Partners said in a filing Tuesday with the Securities and Exchange Commission that it was considering buying BJ's Wholesale Club. Leonard Green, which holds 9.3% of BJ's outstanding shares, said it was examining confidential information from BJ's.”

    Reuters reports on a new study from - go figure - the National Coffee Association saying that young people are drinking more coffee than ever - 40 percent of 18-to-24 year olds say they drink coffee daily, compared to 31 percent in 2010.

    And, the story says, “Daily coffee drinking also increased in 2011 for those aged 25 to 39, to 54 percent of those surveyed from 44 percent last year. Overall, 58 percent of those surveyed said they drank coffee in the past day, up from 56 percent in 2010 but down from 60 percent in 2009.”
    KC's View:

    Published on: March 23, 2011

    We had a story the other day about how a senior Walmart exec said that “sustainability and some of these other initiatives can be distracting if they don’t add to every day low cost.”

    Which led one MNB user to respond:

    What a sad commentary. I am no fan of Walmart but I had some hope that their interest in sustainability was driven by more than a desire to jump on the green bandwagon. Apparently not the case if this person has any say in the matter. That’s not to mention the myopic view that sustainability initiatives can’t contribute to efficient operating cost; they can, if one is willing to consider the longer term and define stakeholders as anything other than the company’s shareholders.

    It does seem at odds with the image the company has been trying to communicate of late. But seven quarters of stagnant same store sales can have that kind of impact.



    Got the follow email responding to Michael Sansolo’s piece about interchange fees:

    Thanks to Michael, Kevin and MNB for yet another great article.

    Being on the side of how these fees affect retail, not only from working for a retailer but also having family in the restaurant business, a thought occurred to me after reading today’s MNB.

    I wonder how the banking industry and consumers would react if an alternative to the reform was offered up.

    Instead of the current reforms to reign in the increasing cost of fees, what if the reform law was changed so that all the fees were imposed on the consumer instead of retail.

    Yes, there are fees charged to the card user now but what if they also got hit with the additional charge the retailers are hit with now?

    Perhaps then, through transparency, consumers would react and change their habits and use cash and pass the fee savings directly on to themselves.
     
    But then again the banks would probably just start charging retailers for cash handling fees.


    Another MNB user wrote:

    Transaction fees are not where you start. You start by taking America back from corporatist. You do this by reducing corporations from citizens to citizen servants. Separating government from business and reconnecting citizens back with their government. Then business serves the citizens of this country or they are dissolved, and issues like transaction fees become non-issues.




    On the subject of concerns about energy drinks, one MNB user wrote:

    Kevin, you make a fine point,

    "It has been the long-held, oft-stated position here on MNB that these energy drinks are a disaster waiting to happen. Retailers who sell them and manufacturers who make them ought to be prepared for a potential backlash when some high-profile incident occurs that throws the long-term future of this category into serious doubt.”

    But sales of alcoholic beverages continue to grow (particularly in times of recession), & there are few who have not been touched by an alcohol-related tragedy in their lives, be it family or friends.  It's all about the money & the desire for people to consume.


    The difference in how I view it is that energy drinks seem to be primarily marketed to kids, and alcohol largely is not. I think that intelligent, responsible consumption of alcohol is very different from what is being encouraged with energy drinks.




    Regarding Amazon.com and the online sales tax debate, one MNb user wrote:

    Amazon and its “you bought this and we thought you might like” e-mails, generally result in my responding about 60% of the time.  With one-click and Prime it is so easy and their “picks” fit well.
     
    Their key is convenience and relevancy; the sales tax doesn’t figure into my equation but I don’t blame them at all for their hard stand against the multiple sales taxes regimes.


    I don’t blame them, either ... but I also recognize that fiscal reality may have caught up with Amazon on this one. (I think you also could argue that the nation’s financial straits also mean that you have to take a hard look at all the subsidies paid to corporations in this country - especially those paid to corporations making hundreds of millions of dollars or more in profits.)

    On the same subject, MNB user Rosemary Fifield wrote:

    I was surprised to see 60 cents added to my $9.99 Kindle book, since there was no indication on the website that this might occur. However, living in a taxable state (Vermont), I'm used to it and I don't purchase online to avoid tax. It's going to help my state's coffers.



    I wrote the other day about The Daily, the e-newspaper created for the iPad that I view as an unmitigated disaster editorially sand creatively. To which MNB user Frederic Arnal responded:

    Good commentary, Kevin.  Too many traditional journals feel that all they have to do to deliver their content is to copy it on a website.  They couldn't be more wrong.  Traditional formats were designed to be functional in print not web.  One of the best applications I have seen is from the New York Times.  They provide a daily digest (8 pages) to subscribers as well as a software application called "The New York Times Reader".  Brilliant use of graphics and navigation.  It's a pleasure to use.  It truly is news content designed for the web platform.

    I prefer the Washington Post for the iPad, which is fabulous.

    MNB user Rick Rector wrote:

    It strikes me as odd that Murdoch would get the iPad app so right for the WSJ site and so wrong for the Daily. Maybe the cos. should talk to each other!

    Another good lesson for businesses.




    On the subject of the new Jack in the Box food truck in Los Angeles, which I said I wished had been available on hangover mornings back when I went to school there, MNB user Doug Madenberg wrote:

    I’m sure many of your readers are Cornell food alums… what you describe was the niche held by Johnny’s Hot Truck which rolled up to West Campus nightly at 10PM and stayed until the wee hours.  That was the original French bread pizza.  Coming back from bars and parties, nothing could beat a PMP pep-mush, hot-n-heavy (“Poor Man’s Pizza” with pepperoni, mushrooms, and hot sauce).  Or grease-n-garden (with mayo and lettuce, not kidding).  But delicious!  How many calories was that right before crashing for the night?
    KC's View:

    Published on: March 23, 2011

    Elizabeth Taylor has died of congestive heart failure at age 79.

    The actress who had an enormously tumultuous private life (eight marriages, including two to Richard Burton) and was a tireless advocate on behalf of AIDS sufferers. But she also was an actress of surprising range - her movies included National Velvet, Courage of Lassie, Little Women, Father of the Bride, A Place in the Sun, Cat on a Hot Tin Roof, Butterfield 8, Who’s Afraid of Virginia Woolf?, and, of course, Cleopatra.
    KC's View: