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    Published on: July 25, 2011

    by Kevin Coupe

    A billion dollars here, a billion dollars there, and pretty soon you;re talking about real money ... and money that can help one of America’s great retail stories become more of an economic power and competitive threat.

    Reuters has a story this morning about how Amazon.com’s cloud computing unit, Amazon Web Services (AWS) - which counts among its customers organizations like NASA, the U.S. Department of State, Siemens, Pfizer and Nasdaq - may be its next billion-dollar business.

    According to the story, “Amazon doesn't disclose AWS results. However, a spokeswoman said the business has hundreds of thousands of customers in more than 190 countries.

    “Analysts and investors get a sense of how fast AWS is growing by looking at how many pieces of data, or objects, are stored by the unit's S3 service, which sells storage on off-site servers, which is known as the cloud.

    “At the end of the second quarter, S3 held more than 449 billion objects, up 71 percent from the end of last year, according to the official AWS blog.”

    Last year, AWS generated revenue of about a half-billion dollars. But, as fast as it is growing, Reuters notes that it remains just a small part of the overall Amazon picture; on Tuesday, it is expected to report that second quarter revenue of more than $9 billion.

    But the bigger it gets, and the greater economic power it has, the more of a competitive threat that Amazon becomes to other companies that sell the same stuff it does. And these days, that’s a big group. So big, that it is Eye-Opening.
    KC's View:

    Published on: July 25, 2011

    Not surprisingly, Walmart’s plans to open its first Market store in Massachusetts, in a suburb of Boston, is running into political opposition, as well as resistance from organized labor.

    The Boston Globe reports that Somerville Mayor Joseph Curtatone says that he has “deep concerns” about Walmart’s labor practices; Curtatone has some leverage, since Walmart needs a zoning change in order to be able to sell food in a building formerly occupied by a Circuit City electronics store.

    And, according to the Globe, “Russ Davis, executive director of Massachusetts Jobs With Justice, is organizing opposition to Wal-Mart openings in the state, hoping to pressure the company into improving its compensation practices. Wal-Mart’s goal, Davis said, ‘is to make as much money as it can and it does that by squeezing workers and suppliers.’.”
    KC's View:
    It probably was inevitable that there would be resistance to Walmart in the place that some people call the People’s Republic of Massachusetts, and that others call the Athens of America.

    I do think it is interesting to watch how Walmart deals with these kinds of domestic disputes, especially since it seems to be far more accommodating than it used to be when it works to expand globally, in places like China and South Africa.

    Published on: July 25, 2011

    The Boston Globe takes note of an interesting nugget that is in filings made with the US Securities and Exchange Commission (SEC) regarding the acquisition of BJ’s Wholesale Club by Leonard Green & Partners LP and funds advised by CVC Capital Partners for $2.8 billion, or $51.25 per share.

    According to the story, “Another strategic buyer, described as Party A, expressed interest in acquiring BJ’s at a price of $55 to$60 per share. But BJ’s decided not to pursue this deal because of antitrust concerns and business risks related to sharing sensitive competitive information with Party A, which was not identified in the filing.”

    BJ’s essentially competes with two other, larger wholesale club chains - Costco, and Walmart-owned Sam’s Club.

    So the question is, who was interested in acquiring BJ’s for even more money than was eventually spent on the 190-unit chain?

    In other news from the filings, the Globe reports that BJ’s CEO Laura Sen “will receive nearly $15 million in compensation in a golden parachute arrangement if she is terminated by the private equity firms that are acquiring the Westborough chain, according to a securities filing today.

    “Other top executives stand to earn more than $4 million in their own golden parachute agreements as part of the proposed takeover deal with Leonard Green & Partners LP and funds advised by CVC Capital Partners. If Sen continues to lead the company, she will earn roughly $9.2 million, according to the filing with the Securities and Exchange Commission.”
    KC's View:
    Beats me which one it was. If I had a gun to my head, I’d probably guess Walmart/Sam’s, though ...

    Published on: July 25, 2011

    The Pittsburgh Post-Gazette reports that Delhaize-owned Food Lion plans to open 14 of its Bottom Dollar Food discount supermarkets in the Pittsburgh and Youngstown, Ohio, markets, with most of them expected to be up and running by early next year.

    There currently are 47 Bottom Dollar stores operating in North Carolina, Virginia, Maryland, New Jersey and Pennsylvania; Bottom Dollar entered the Philadelphia market last year.
    KC's View:
    My understanding is that Food Lion is moving some of its best people around to run these market expansions, as it looks to give itself the best chance of success in the marketplace.

    Published on: July 25, 2011

    Bloomberg reports that Walmart has agreed to give women planning to sue the company for gender discrimination an extra 90 days to file their cases, after the USSupreme Court ruled that a class action suit on behalf of more than one million female companies was too broad to be given class action status.

    According to the story, “Theodore Boutrous, Wal-Mart’s attorney, told a federal judge that the company isn’t opposed to ‘start the clock fresh’ on potential gender-bias claims that were blocked from being filed while Wal-Mart challenged the legality of the group lawsuit, the largest private gender-bias case in U.S. history. Lawyers for workers are seeking to extend the filing deadline by 120 days.”

    Lawyers for women in the case are looking to file new class action suits for smaller groups of women, but say they need more time to get their ducks in a row after the Supreme Court ruling.

    Reuters reports that South African lawmakers are “not seeking to overturn competition regulators' approval of Wal-Mart buying control of local retailer Massmart,” but do want “the antitrust authority to increase potential penalties for the companies if jobs are lost or local products are swamped by a surge in imports.”

    There had been speculation that lawmakers would try to undo the acquisition, which closed last month.
    KC's View:

    Published on: July 25, 2011

    • The Financial Times reports that Tesco “is poised to offer customers a free WiFi internet service in its stores, in what is thought to be a first for a British supermarket ... Providing WiFi, which enables wireless connectivity to the internet for smartphone and laptop users, means customers will be able to compare prices and read product reviews as they shop.”

    FT notes that the “move comes as Britain’s biggest retailer seeks to embrace customers’ changing shopping habits, but also reinvigorate its domestic business, under new chief executive Philip Clarke.”
    KC's View:
    Better to embrace and enable the conversation that resist it. (MNB Rule #7.)

    Published on: July 25, 2011

    The Wall Street Journal reports that the US Department of Agriculture (USDA) wants meat labels “to make it more obvious to consumers when the meat they buy has been injected with solutions containing water, salt or other ingredients.” The information is on current packaging, but is viewed by USDA as being less prominent than it should be.

    “The USDA proposal was lauded by the consumer group Center for Science in the Public Interest,” the Journal writes. “who said too often shoppers are cheated by products that are pumped up with sodium water solutions.”

    And, the change is supported by companies likes Mississippi-based Sanderson Farms, the Journal reports, which “says it doesn't inject any of the poultry it sells with salt water. Sanderson, along with other companies, has been asking the government for years to change labeling rules.”

    Center for Science in the Public Interest says that “about 30% of poultry, 15% of beef and 90% of pork contain ‘added solution’.”
    KC's View:

    Published on: July 25, 2011

    Bloomberg reports that global retailers such as Walmart, Carrefour and Tesco may soon be able to own majority interests in retail stores operating in India and selling multiple brands, if the Indian government follows the recommendation made by a panel of experts.

    According to the story, the ability to own 51 percent of a retail chain in India would be dependent on a minimum $100 million investment by an outside company.

    There’s a lot at stake here. All of these retailers would like to have access to a market with 1.2 billion people and where, the story says, experts say that “retail sales may almost double to $785 billion in 2015 from $396 billion in 2011.”
    KC's View:

    Published on: July 25, 2011

    • The San Francisco Chronicle reports that Australian authorities are considering setting a minimum age of 18 for people there to use Facebook, which would be a response a string of teen suicides that resulted from online bullying. Australia currently has a minimum age of 13 for people to use Facebook.
    KC's View:
    I have no idea how you enforce this. But I have to admit that it may not be the worst idea in the world.

    Published on: July 25, 2011

    USA Today reports that the "Food at Home" component of the recent consumer prices report “surged almost 5% on an annual basis as grocers passed on to consumers the 12-month jump in corn, rice, sugar and oats.”

    According to the story, “The measure, defined by the Bureau of Labor Statistics as ‘total expenditures for food at grocery stores,’ rose 4.8% during the 12 months ending in June. That's up from a 4.4% annual increase from May's report. Plus, not counting the temporary spike in inflation during the aftermath of the credit crisis, this is the biggest price increase by grocers since 2004.”

    • The Chicago Sun Times reports that Trader Joe’s ill open a store in Chicago’s South Loop on September 9; it will be across the street from a Jewel-Osco store, and will be the fourth Trader Joe’s operated in the city.

    • The Arizona Republic reports that Starbucks customers in Arizona “will be among the first in the nation to try the company's new line of cold beverages, called Refreshers. The iced beverages initially come in two flavors and are being rolled out this month in Arizona and Southern California for a market test through Sept. 5 ... If the test is successful, Very Berry Hibiscus and Cool Lime Refreshers could be rolled out at Starbucks' 17,000 stores nationwide.”
    KC's View:

    Published on: July 25, 2011

    Regarding Tesco’s plans to make certain changes in its Fresh & Easy US operation, including rolling out a loyalty card based on its successful UK Clubcard, MNB user Kurt Erickson wrote:

    One of the most significant obstacles that Tesco has yet to attack is a more thorough understanding of the demographics in the neighborhoods where they have built their Fresh & Easy stores, especially in Southern California. Many of their location choices appear to have been identified at random, lacking proper analysis of income, location and exactly what customer base they are trying to attract. We all realize they (Tesco) have the wherewithal to make significant market penetration, but certainly not with the current retail model.




    We had a story last week about a study suggesting that people are using credit cards more these days for purchase of necessities, which does not speak well for the economy. MNB user Bill Jensen wrote:

    Kevin, I am not sure if the study Bloomberg cited factored the heavy marketing being done by cc companies to encourage folks to charge for basic necessities. The increased use may be by cash strapped consumers, or it may also be savvy consumers using the 1% cash back/rebates/flight bonuses tied to certain cards when used for a charge. By charging most items instead of using a debit card, you get one month of “float”. May not mean much with interest rates so low, but it is still one month that the money is in my account, and not theirs. With gas prices higher than last year, just the charges for that necessity would be larger.

    Bottom line, I am not sure the statistic of increased charges means that much on its own. If the balances on their monthly cc bills that are not paid off each month grew by a significant percentage, that would be a more meaningful number.


    MNB user Neil Brown wrote:

    In our tiny little corner of the GDP, our switch from using debit cards to credit cards for virtually all transactions was due to pricing changes and a sneering attitude by what had been our main bank.

    JPMorganChase eliminated its rebate program for debit card purchases recently, blaming the Dodd-Frank bill instead of its industry's transgressions.  So, we now use our Citi credit card, and enjoy the rebates on all purchases.   Our transactions will not increase or decrease in volume, but a macroeconomist could reasonably look at the stats for the transition month and believe we are spending (borrowing) more as a family.

    We don't pretend that we are typical, but there is a lot of room for misinterpretation in any economic statistic.

    In closing, please keep up your great work.  Of the 50 or so marketing newsletters I receive daily, yours is the one which I most enjoy reading, and which usually has the most useful information.


    Thanks. For the information and the endorsement.




    And, on another subject and from another MNB user...

    Kevin, I look forward to my daily fix of MNB!

    From Friday, 7/22/11, you had a mention about News Corp and Paul Carlucci.  You failed to mention that besides a $29.5 mm settlement with Floorgraphics, Carlucci and Team also lost over $500 mm vs Valassis.

    Now their ethics are being questioned and possibly Senate hearings are forthcoming?  Also, this week, they had a page one article in the NY Times business section along with same lines.

    These are the same people that own Smart Source coupons with floor advertising and shelf signage consumers see in their grocery/drug stores across America.

    As the saying goes, if it smells like a rat...


    There would appear be a number of rats running around in the Murdoch/News Corp. universe. (Watching Jon Stewart and Stephen Colbert riff on this stuff has made the summer heat bearable...)




    Finally, we had an email last week that identified Feargal Quinn, founder of Superquinn, as an example of the fact that, contrary to conventional wisdom, there indeed are indispensable people. This led MNB user Glenn Cantor to write:

    In reading the sentiment written about Feargal Quinn, about how no one man is bigger than the company, I thought back to Jim Donald’s reign as President and CEO of Pathmark.  Jim excited Pathmark’s associates, suppliers, and customers as no one else could. Those would partnered with Pathmark during those days will remember the Turtle Awards, earning for getting ahead by sticking out one’s neck. It was truly magical to see optimism from a chain like Pathmark.  It is a shame that this kind of passion is so fleeting.

    You’re right. Absolutely.

    Full disclosure: It is one of the great pleasures of my professional and personal life that I am privileged to count both Feargal Quinn and Jim Donald as my friends.
    KC's View:

    Published on: July 25, 2011

    Australian Cadel Evans won the 2011 Tour de France, who in six previous attempts had twice been the runner-up in the world’s most famous bicycle race.
    KC's View: