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    Published on: September 19, 2011

    by Kevin Coupe

    Interesting story the other day in Advertising Age about a new program developed by one of the nation’s largest DIY retailers, especially because it seems to have implications for retailers in other segments.

    The Lowe’s initiative is called “Never Stop Improving,” and according to the story, “at the core of that offering will be the ability for consumers to easily access records of everything they've purchased at Lowe's, including information such as owner's manuals, warranties and extended protection plans. Consumers will also be able to personalize the application with dimensions of rooms in their homes and colors used in those rooms, for example. Eventually, there will be ‘envisioning’ tools that allow consumers to virtually view various configurations of colors and flooring for their homes, as well as develop wish lists.”

    The goal of the program is to firmly establish what Lowe’s sees as its differential advantage in the marketplace, and by being more user-friendly, create a stronger connection between it and its shoppers that will end up in more business.

    All of which strikes me as really smart ... and hardly confined, in theory, to the DIY business.

    Even in recessionary times - or perhaps especially in recessionary times - retailers need to find a way not just to be a source of product for shoppers, but a resource for information. Providing greater amounts of data - whether it is a record of products bought, as well as detailed and contextual information about how to use them and what impact they will have on users - can end up being a competitive edge for companies that do it well.
    KC's View:

    Published on: September 19, 2011

    Published reports say that in Southern California, even though all obstacles have been cleared for a strike of three region’s three major supermarket chains, the two sides continue to negotiate. At the same time, Kroger-owned Ralphs has said that if there is a strike, its first step will be to close all it stores.

    The Los Angeles Times writes that Ralphs spokeswoman Kendra Doyel said in a statement Friday that “during a strike, it is difficult to create a good shopping experience for our customers and a good working environment for our employees. We will evaluate the situation as it progresses.”

    Albertsons followed that announcement with a statement that it could shutter some of its stores if there is a strike. Safeway-owned Vons has said that it will keep its stores open.

    Late last week, the United Food and Commercial Workers (UFCW) informed management at the three major chains that it was giving them the requisite 72 hours notice that the ongoing contract extension would not be renewed.

    The most recent contract expired on March 6, but has been renewed daily until now. The UFCW was obligated to give the three chains 72 hours notice that it would not be renewing. Once the 72 hours pass, the unions can walk out at any time.

    And, the Times writes, the impact of another strike could be devastating for the chains:

    “With the door now open for a strike, and management and the labor unions at Ralphs, Vons and Albertsons preparing for another potential work stoppage, one thing is clear: The true winners would be competing grocery stores.

    “Since the last strike and lockout in 2003-04, which lasted 141 days, the three big grocers have hemorrhaged market share. As of 2004, the chains held nearly 60% of the Southern California grocery trade, according to the research firm Strategic Resource Group in New York. The share of Ralphs, Albertsons and Vons/Pavilions today: about 23%.

    “Farmers markets, discount shops, high-end specialty stores, small independents and big warehouse clubs have eaten into their business. New rivals such as Target Corp. are coming on strong. The discounter known for its hip fashions and home decor is attacking the grocery business with a vengeance. In Southern California, 140 of its stores now carry fresh groceries, a change that's happened in just 15 months.”
    KC's View:
    Those are extraordinary numbers - 60 percent to 23 percent in less than a decade. And now, with even more competitors than ever, the landscape could get even more unfriendly for the major three chains if there is a strike. Meanwhile, you’ve got working people in a recessionary environment who could face being out of work if there is a strike.

    Hard to imagine that they can’t find any common ground, because there is a lot to lose for both sides if there is a strike.

    Published on: September 19, 2011

    It was pointed out to MNB over the weekend that while this site has continually pointed to’s growing grocery business as a potential threat to the mainstream industry - not to mention a category in which the online pioneer is likely to do battle with Walmart for the hearts, minds and wallets of the tech-savvy next generation of shoppers - Yahoo Finance ran a piece the other day about things you should never buy from Amazon.

    Number one on the list: Groceries.

    Here’s what the story said:

    “You can now order everything from cereal to canned salmon through Amazon Grocery - but filling a virtual grocery cart can cost more and force you to buy more than you need. If you have children, then yes, you may go through a lot of Heinz Ketchup — but that's all the more reason to be price conscious. A 20-ounce bottle costs $2.85 on FreshDirect and $2.39 on Peapod, but more than twice as much — $5.99 — on Amazon via an external vendor. A 28-ounce can of Bush's Original Baked Beans sells for $ 1.84 a can (sold in a four-pack) at regional grocery chain Meijer, but $2.75 a can on Amazon — and you have to buy a dozen. And aren't your reusable shopping totes far better for the environment than all those cardboard shipping boxes?”

    However, the story did suggest that there is one grocery category that people should shop for on Amazon:

    “The demand for gluten-free foods is growing rapidly as an increasing number of people are diagnosed with celiac disease, and told to avoid eating the protein ... The gluten-free section at Amazon Grocery offers thousands of such products, including breakfast items, baking goods, baby food, and boxed meals. Amazon began offering the goods in 2004 and has seen sales triple in the past two years, according to Anya Waring, a spokesperson for Amazon.” The piece goes on to suggest that Amazon has a broader and deeper gluten-free section than many stores.
    KC's View:
    It strikes me that the broader criticism of Amazon’s grocery business seems to use a fairly small sample. I know that in the grocery categories I buy from Amazon, I save money ... even compared to the likes of Costco and Walmart.

    I would be the first one to concede that buying groceries on Amazon isn’t for everyone - it is ideally positioned for people who have lots of kids, plenty of job responsibilities and a shortage of time. And it also is ideal for people who want to provide groceries for their kids away at college and their infirm parents. (I’ve used it for both.)

    Is it always the most environmental choice? Probably not. But a lot of us are just doing the best we can, trying to juggle a lot of different priorities. For us, Amazon is a terrific choice.

    Published on: September 19, 2011

    In an email to subscribers this morning, Netflix CEO and co-founder Reed Hastings apologizes for what he concedes was a badly handled fee increase announcement a few months ago, and then announces that he is completely separating the company’s DVD rental and streaming businesses - including renaming the DVD business “Qwikster.”

    Here’s what Hastings has to say:

    I messed up. I owe you an explanation.

    It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

    For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldn’t have changed the price increase, but it would have been the right thing to do.

    So here is what we are doing and why.

    Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

    I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

    So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

    It’s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to “Qwikster”. We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

    Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the and websites will not be integrated.

    There are no pricing changes (we’re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the website is up and ready.

    For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

    I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

    Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

    KC's View:
    I think it is often reassuring for people to think that the problem wasn’t so much the message, but how it was delivered. While I credit Hastings for his “I screwed up” mea culpa, I’m not buying it. Not for a second.

    I continue to think that a 60 percent price increase was hard to swallow for a lot of people. And I don’t think that separating these two businesses - which as a consumer, seemed perfectly integrated to me - makes a whole lot of sense.

    These decisions seem completely focused on business processes and priorities, not on consumers’ interests. And I’m honestly not sure that Hastings’ email makes it any better. In fact, it sort of ticks me off even more than before, because it shows hubris, not humility.

    “Qwikster”? Give me a break.

    This could be the dumbest idea since FedEx decided to dump the Kinko’s brand name, which had enormous equity.

    Published on: September 19, 2011

    USA Today carries an interview with Walmart CEO Mike Duke in which he talks about the economy and the “perpetual machine” that he calls Walmart. Some excerpts:

    On the economy... “I'm not an economist, so I always qualify any forecast with a simple approach of how I hear customers talking in our stores. And customers today are concerned. If we could start to see improvements in unemployment or lower fuel prices, then I could see that lead to more positive consumer confidence and consumer spending ... Probably the single biggest topic of concern is unemployment and jobs. This lengthy period of high unemployment is causing that cycle of consumer confidence to really be down. Increases in fuel costs really take from the consumer's spending ability. The U.S. consumer is under a lot of pressure.

    “Meanwhile, we have large businesses in China and Brazil, and that's a different story. Those markets have recovered faster. There's more optimism. A strong consumer and emerging middle class is leading to faster rates of growth in the emerging markets around the world.”

    On corporate taxes... “We need to lower the corporate tax rate as much as we can, make the tax base as broad as we can make it, and we need to move to a territorial system as quickly as we can. Corporate tax reform is one of those real structural issues that face American companies ... Wal-Mart has an effective tax rate, and pays it, of about 34%. A very large international retailer based in the U.K. would have an effective rate in the range of 20%. When we are looking at expansion in markets around the world, we would be bidding for real estate or potential acquisitions against another competitor that has a much lower effective tax rate. So this competitor could afford to outbid us and be able to grow their company when Wal-Mart would kind of have one hand tied behind our back.”

    On Walmart’s priorities... “Wal-Mart U.S. is our largest segment, and the high priority on growing comp sales or existing store sales in the U.S. is the very, very top priority. The key to that is driving the productivity loop. At Wal-Mart it goes back to Sam Walton and the foundation and business model that we simply operate for less, or everyday low cost. We're known for operating in a very efficient way and then giving those savings to customers. That's why everyday low price is the second part of the productivity loop. Having low prices ends up driving traffic to our stores and increasing sales, which allows us then to lower expenses again and lower prices. A third would be global e-commerce and multichannel. Customers today are using technology to shop. Today in the world of the new technology, the way that customers are using social media is just fast changing. We are in a great position to be serving customers in this new age.”
    KC's View:
    Is it just me, or does Duke’s reference to advantages enjoyed by UK retailers suggest a certain sensitivity to Tesco’s growth?

    Published on: September 19, 2011

    The Wall Street Journal reports that even though “the online business of serving up daily deals has attracted millions of dollars in venture capital and spurred dozens of clones of market leaders Groupon Inc. and LivingSocial Inc.,” there is beginning to be a shake out.

    “Nearly one-third of all daily-deal sites nationwide - or 170 of 530 - have shut down or been sold so far this year, according to daily-deal-site aggregator, including sites with names such as Scoop St. and RelishNYC. Even big operations such as Facebook Inc. and Yelp Inc. that could capitalize on their large audiences to build a daily-deals business have recently pulled back on the service.”

    According to the Journal, “At the heart of the winnowing is the shifting economics of the daily-deals business. Setting up a daily-deals site—in which the site takes a cut of the online coupons it offers consumers—requires just a website, some emails and local merchants willing to offer a discount. But as the industry has started maturing, the costs of running such a business have soared.

    “In particular, the cost of acquiring subscribers who redeem a daily deal has skyrocketed during the past two years, said executives at daily-deal websites. While snagging early adopters who were curious about daily deals initially required little marketing, it now takes more spending to get to remaining consumers and to cut through the noise created by so many competitors.”
    KC's View:
    And yet, this very morning I got an email from the Charlotte Observer announcing a new daily deal site.

    There may be some shake out, but the recent success of the LivingSocial/Whole Foods daily deal also could attract some new players to the segment, or at least a lot of new interest.

    Published on: September 19, 2011

    USA Today reports that a new study from the US Centers for Disease Control and Prevention (CDC) suggests that not enough children and teenagers are consuming low-fat milk, but rather are drinking the higher fat whole milk, which gives them “unnecessary fat and calories.”

    According to the story, the new study shows that “about 73 percent of children and teens drink milk, but only about 20 percent of them say they usually drink low-fat milk (skim or 1 percent).”

    Conventional wisdom says that once children reach two years of age, they should switch over to lower fat milk.
    KC's View:
    Not to take this lightly, but it seems to me that on the scale of things that we should be worried, too much consumption of whole milk falls pretty far down the list. There are so many other things that kids could be ingesting, I find it hard to get all worked up about this.

    I may be wrong, but it seems to me that this is one of those cases where, as a parent, I probably ought to be more focused on getting my kids plenty of exercise and making sure that they eat there fruits and vegetables. If whole milk is what they prefer - and this often is the case - then it would not be my inclination to fight this particular battle.

    Published on: September 19, 2011

    MSNBC has a story about how the “extreme couponing” phenomenon “has an ugly side” and is “sparking a backlash,” as “Sunday newspapers are being stolen, manufacturers and retailers are getting frustrated and shoppers are clashing with store managers over their loads of coupons and carts of items.”

    The trend has been popularized by a cable TV show of the same name, which “depicts bargain-obsessed people coupon-clipping for hours, and in some cases even Dumpster diving for more coupons.

    “The shoppers then fill their grocery carts with hundreds of items, occasionally clearing out store shelves in the process. Then they present their overloaded carts and hefty stacks of coupons to a cashier, who rings up hundreds of dollars in savings.

    “Afterwards, it’s back to the couponers’ homes, where they can show off full-to bursting storage rooms piled high with diapers, soap and other products bought in bulk at bargain prices.”

    The story goes on: “Manufacturers and retailers say they want people to use coupons — after all, it’s a way to encourage people to use new products and inspire loyalty. But Miller, of Coupon Information Corp., blames TLC’s show for making people think they can flout coupon rules in the pursuit of a big bargain, or see their bill reduced to practically nothing.
    KC's View:
    There’s a shock. So-called “reality TV shows” encourage people’s worst instincts, or actually show them onscreen.

    Published on: September 19, 2011

    The Financial Times reports that “top US fast-food restaurant companies are beefing up their hamburgers to keep up with an onslaught of competition from “better burger” chains, which have been gaining market share by offering premium meat and high-quality toppings.

    “McDonald’s started offering Angus beef hamburgers on fluffy buns, promising more thickness and juiciness. Rival Wendy’s now sells an eight-ounce hamburger, made from North American beef that is never frozen. And Burger King, trying to capitalise on greater health consciousness, is cooking ‘California’ Whoppers, topped with fresh guacamole and ripe tomatoes.

    “The more expensive premium burgers, which in some markets exceed $5, show that the quick-service restaurant industry is moving beyond value menus to lure customers who strayed to “fast casual” or better burger chains.”
    KC's View:

    Published on: September 19, 2011

    Reuters reports that Costco has won a court decision that prevents 600 current and former female employees from suing it for gender discrimination, as the judge in the case cited the ruling earlier this year by the US Supreme Court that 1.5 million women could not sue Walmart on similar grounds.

    According to the story, the women in the Costco case wanted class action status for their suit that claimed the retailer “made it harder for them to be promoted to general manager or assistant general manager, in part because it failed to post job openings.”

    The 9th U.S. Circuit Court of Appeals in San Francisco said that upon review, the judge who originally granted the case class action status had not used the correct legal standard - especially in view of the Walmart decision - though the possibility remains that the district judge in the case could once again rule, using the correct standard, that the cases have enough in common to qualify as a class action.

    The original case had been filed in 2007, but was put on hold while the Walmart case worked its way through the courts.
    KC's View:

    Published on: September 19, 2011

    CNN reports that the US Bureau of Labor Statistics says that “the consumer price index for food at home increased by 60 basis points year-over-year to 6% versus the 10 basis point gain in food away from home CPI inflation to 2.7%.”

    In plain English, that means that food inflation is hitting the supermarket industry harder than the restaurant industry.

    • The New York Times reports that the Food Marketing Institute (FMI) and the Grocery Manufacturers of America (GMA) are engaged in an alliance that “is planning a three-year initiative to reduce the tremendous amount of food that Americans still throw in the garbage even as they grow somewhat more conscientious about recycling paper and yard trimmings. The effort ... aims both to reduce the amount of food sent to landfills and to increase donations to food banks for the poor.”

    • Rite Aid and OptumHealth announced that they are introducing a new online care program in the Detroit market.

    According to the announcement, “NowClinic offers Rite Aid customers real-time access to convenient medical care, information and resources from doctors and OptumHealth nurses. Rite Aid and OptumHealth are the first to provide a virtual clinic in a retail pharmacy setting.

    “Through private, face-to-face consultations using the Internet, Rite Aid customers can see and speak directly to doctors who are able to discuss symptoms, provide guidance, diagnose and prescribe certain medications when appropriate. Customers can also interact with OptumHealth nurses, who are able to address a range of health care needs such as basic health care education, information on common acute issues and assistance in identifying appropriate provider options for care. A customer record is automatically captured at the end of each interaction and is available for immediate sharing with a customer's primary care provider, maintaining continuity of care.”
    KC's View:

    Published on: September 19, 2011

    On Friday, MNB took note of an Associated Press report that Apple has decided to remove an application available to its customers in France because of accusations that it “violated France's strict laws banning the compiling of people's personal details without their consent.”

    The app was called “Juif ou pas Juif?,” which translates to “Jew or not Jew?”

    That’s right. There was an application on the iTunes store that you could buy for about a buck, that would allow you to enter the name and determine whether a well-known person was Jewish or not. And that application still exists on the US iTunes service.

    I wrote:

    Now, I suppose that there is a defense for this. Apple can say that the app meets its own standards of acceptability, and that it is not necessarily a negative use of technology. And I suppose that some will accuse me of being too “politically correct” in my reaction to this.

    But that does not change the fact that I am gobsmacked.

    I checked, and iTunes does not have an application called “Gay or not Gay?” Or “Irish or not Irish?” Or “Smart or not Smart?,” which could make people’s IQ public.

    This just seems so wrong. I know a lot of this information can be found on the internet, but it seems misguided to institutionalize the search through a smart phone application.

    I’m not just gobsmacked. I’m disappointed.

    MNB user Jan Fialkow wrote:

    I understand the queasiness this ap can cause, but it actually has a pretty benign history. "Jew or not a Jew" — or some variation thereof — was an ongoing "game" in many Jewish households of the 50s and 60s — I remember my parents pointing out all the "landsmen" when we watched TV. And in 1988, Tom Hanks hosted a version of the game on SNL.

    So yes, "Jew or not a Jew" could definitely become something ugly in the wrong hands, but it started out as a way to instill pride by recognizing one's own.

    Another MNB user wrote:

    As a Jew I must say that no matter how “well intended” the app might have appeared to be when it was developed, it’s segregating and therefore demeaning.

    I feel it’s unbecoming of what I expect from a company as smart, and usually rightfully revered as Apple.

    MNB user Bob Crawford wrote:

    You are right on, in your eye opener this morning !!!! I love Apple but this is just wrong !

    From another MNB user:

    If I recall correctly, there was an SNL sketch years ago called "Jew or not a Jew".  The only thing I remember about it was a discussion of whether Bruce Springsteen was Jewish.  Perhaps some bored iPhone developer was watching SNL reruns one day and created the app from there.  Still it is a weird and inappropriate app and I can't imagine how many people would shell out $2 for it.

    Still another MNB user wrote:

    I think the more interesting app would be “Married or not?” as an aid to all those singles who ponder this question when they meet someone.

    MNB user Ron Rash wrote:

    I am not exactly sure what "gobsmacked" means, but I am pretty darned sure I agree with you.

    It would be a wonderful world indeed if something like this was offered, and no one ever downloaded the app.

    But why encourage the nefarious uses of such ilk?

    And MNB user Denis Zegar wrote:

    It never ceases to amaze me how  people have become so inured to history and to the sensitivities of others. I keep reminding myself that these are innocent trespasses that have no underlining agendas.  But it is difficult because I am also reminded that my father lost his mother to a pogrom killing and his father and 8 brothers and sisters to the holocaust.  Antisemitism is still alive and well.  Let’s not give the disenfranchised high tech tools further discriminate.

    On the subject of Borders’ final demise, MNB user Elizabeth Archerd wrote:

    Borders management chose its own death.  Your business will die when you fail to understand the business you are in, fail to see what the competition is doing right and fail to innovate.


    Responding to last Friday’s “OffBeat” celebrating a variety of foods, wines, and beers, MNB user Jason Tuffli wrote:

    Kevin, you are the only person I know that can make me want a glass of red wine before 9 in the morning.

    Sorry about that.

    And, I got the nicest email from MNB user Mike Franklin, responding to last week’s piece about a new ranking of companies with brand loyalty:

    I would need to check how they came up with valuations of those other brands But for my money, should be #1…even though its customer base has vastly divided opinions on a range of topics (well, all topics) and even though the management pushes its customer base’s hot buttons on a daily basis…most readers come back day after day, month after month…now that’s loyalty.

    That’s really kind. You made my weekend. Thanks.
    KC's View:

    Published on: September 19, 2011

    In Week Two of National Football League action...

    Oakland 35
    Buffalo 38

    Chicago 13
    New Orleans 30

    Tampa Bay 24
    Minnesota 20

    Seattle 0
    Pittsburgh 24

    Arizona 21
    Washington 22

    Dallas 27
    San Francisco 24

    San Diego 21
    New England 35

    Kansas City 3
    Detroit 48

    Cleveland 27
    Indianapolis 19

    Green Bay 30
    Carolina 23

    Baltimore 13
    Tennessee 26

    Jacksonville 3
    NY Jets 32

    Cincinnati 22
    Denver 24

    Houston 23
    Miami 13

    Philadelphia 31
    Atlanta 35
    KC's View: