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    Published on: September 20, 2011

    by Michael Sansolo

    Last Thursday marked an anniversary that seemed to get a shockingly low amount of attention. And while it pales in importance to the much-deserved attention to September 11th, all of us in business should never move past September 15th lightly.

    Incredibly, it was only three years ago that Lehman Brothers failed. It was hardly the first or last company of its type to suffer that fate, but for a host of enormous reasons Lehman’s collapse was different. Somehow it was the spark that landed on the tinderbox of economic weakness and it set the world’s economy ablaze.

    If you haven’t noticed, that fire is still raging. You see it constantly in the endless reports on unemployment, underemployment, rising poverty rates, falling manufacturing rates, foreclosures, and more. September 15, 2008, was the day that launched the world into the new economic realities that we continue to battle daily.

    Yet, looked at another way, it was the start of a period of incredible opportunity, but only if you examine it correctly. Bloomberg recently quoted Stephen Sadove, the CEO of Saks department stores, as saying that he is not letting “a good recession go to waste.” It’s a quote you should write down and think about daily.

    What Sadove was talking about was how Saks, a luxury department store, managed to grow sales solidly in tough economic times. (Re-read that last sentence. No one has ever confused Saks with a discount store and it is growing sales solidly in the current economy!) All of this goes beyond the very significant discussion we’ve had here on MNB in the last week of the increasingly hourglass shape of the American economy, with growth at the richer and poorer ends of the spectrum.

    For Sadove, not wasting this recession focuses on how to make the tough decisions to make his company leaner and more competitive than ever. He’s done it by tightening inventory, increasing store brands and exclusive items, improving sales training while reducing overhead and even cutting back poor performing stores. In the process he made Saks a significantly better company that it was before.

    In a perfect world, companies and business leaders would make the hard decisions daily and well before the storms hit. However, we don’t live in a perfect world and frequently key decisions wait until there is a burning platform of new tough competition, changing shopper needs or a global economic crisis. As we all know, it’s hard to find time for all the topics that must be addressed and in good times there are always so many other things to think about or work on first.

    But we aren’t in good times and haven’t been for a while. What’s worse, the predictions from whatever economist you trust seem to indicate that the good times aren’t around the corner - no matter what any or all politicians say.

    So ask yourself the Stephen Sadove question: how are you making certain this recession doesn’t go to waste? Inside your company, your team or wherever, ask the question today of what you have changed in the last three years? How have you altered your cost structure, your value equation and your offering to shoppers? You know the world has changed around you, so the question is: what have you done about it?

    And then ask: what should I do next? Because the odds are that your customers’ needs continue to change and your competitors are going to a higher level to meet them. Like it or not, you need to change, too.
    KC's View:

    Published on: September 20, 2011

    Management and labor in Southern California reportedly have come to a tentative deal that avoided a strike by some 65,000 unionized employees of the region’s three major supermarket chains - Albertsons, Kroger-owned Ralphs and Safeway-owned Vons.

    Of course, it took a decision by the United Food and Commercial Workers (UFCW) to inform management that it was giving them the requisite 72 hours notice that the ongoing contract extension would not be renewed, which made a strike a much greater probability. The most recent contract expired on March 6, but had been renewed daily until last weekend.

    Details of the new three-year deal have not yet been disclosed.

    Ralphs, Vons and Albertsons said in a statement: "We are pleased to have reached a tentative settlement agreement with the union that continues to preserve good wages, secure pensions and access to quality, affordable healthcare — while allowing us to be competitive in the marketplace."

    "The agreement protects grocery workers' jobs and healthcare, and keeps the employers profitable," said Rick Icaza, president of UFCW Local 770 in Los Angeles. "We think it shows that when workers stand up for ourselves, we can get things done and protect good jobs."

    The Los Angeles Times writes that “in the end, Southern California's big three grocery chains and their unionized workers settled their labor fight because of this economic reality: Another strike would have severely damaged both sides.”

    As noted on MNB yesterday, the Times reported over the weekend that “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%.”
    KC's View:
    The shame is that it takes a down-to-the-wire, right-to-the-edge approach of negotiations to come to a common sense agreement that is in both sides’ best interests. That’s too bad ... and does nothing to help companies already struggling to keep market share to create a sustainable model.

    Published on: September 20, 2011

    by Kevin Coupe

    Did you see the story the other day about how in the UK, Tesco threatened to have a reporter with the Guardian arrested because he was writing down prices as he walked the store?

    Of course, writing down prices isn’t actually illegal. Not even in the UK. Just against store policy, according to the store manager.

    Now, let’s be clear. Tesco certainly is within its rights to ask that journalist to leave. They can ask anyone to leave. However, in doing so, the company has demonstrated a tone-deafness that is, to my mind, surprising ... and not just because if everybody did what it did, I’d have an arrest record as long as my arm.

    Tesco - or at least that store manager - forgot about the fact that technology makes it possible for everybody not just to record prices as they walk a store, but compare prices with those of other stores, instantly order from Amazon if you prefer its prices, take pictures of products and aisles, and post all of that information and more on the internet where millions can see it. These are the tools that are at the fingertips of all customers. In lots of ways, every customer has become a journalist of a kind.

    Are they next going to object to people using their smart phones?

    Maybe it would easier to just ban anyone from the store who is carrying any sort of communications device. Of course, that would have its own consequences...

    Objecting to some guy scribbling down prices just seems so old world.

    Of course, it is almost as old world as some guy wandering around the store writing down prices on paper using a pencil. Who is this guy? Can’t someone get him some 21st century technology?

    Interestingly, there was a piece on the other day that addressed this issue from a different perspective, reporting:

    In-aisle smartphone usage is here to stay. One in four Americans taps into the mobile Internet (or about 75 million, according to Forrester’s Melissa Parrish). That number is roughly equivalent to the population of the U.S. eastern seaboard. Most of them own smartphones, and the vast majority of them (84%, according to our own recent survey) use those devices to help them accomplish at least one kind of activity related to shopping, such as searching for product information, taking photos as memory aids, checking prices, or “checking-in” to a location-based service. Barcode scanning and QR, or Quick Response, code scanning is not only popular but sticky: 85% of people we surveyed use their phones to scan products today at least as often as when they first tried it out.

    So if there is no chance at all that this is all going to blow over, how come more brick-and-mortar retailers aren’t exploiting this new medium -- say, to drive sales?

    The point is simple. The technology exists. Usage is gaining steam, whether retailers like it or not. They have a choice ... but, to my mind, the only real choice is to embrace these shifts as opportunity. To figure out a way to make it work for them. Not usher people who use them from the store.

    Retailers need to get real and open their eyes. This is the new world.
    KC's View:

    Published on: September 20, 2011 reports that while Netflix yesterday announced that it was splitting the company’s brands in two - using the Netflix name for its streaming service and inventing a new “Qwikster” brand for its DVD rental service, the company did not do all its due diligence.

    According to the story, “Netflix, naively, has neglected to pin down the @Qwikster Twitter account before launch. The account is currently owned by somebody who chooses to best represent themselves as Elmo smoking a joint,” and who posts comments laced with profanity.

    “What’s most problematic about this lack of foresight is that the first thing many tech pundits do upon hearing industry news is check a prominent brand’s Twitter account to see if it’s active and on message,” TechCrunch writes. “@Qwikster, obviously, is not representing Netflix at its finest at this point and time,” though it seems likely that Netflix probably is going to spend a pretty penny buying the account name.
    KC's View:
    Dumb. We got a lot of email on this yesterday, and you can read them in “Your Views,” below.

    I just hope that we’re not watching the rapid and irreversible decline of what has been a strong American brand.

    Published on: September 20, 2011

    Marketing Daily reports that more companies than ever “are making social-good and cause-marketing efforts central to their core brand identity and consumer marketing” and that “consumers now expect greater accountability from nonprofits and brands involved in cause marketing. Consumers now want to know where the money is going and the impact it has. More transparency will mean a greater focus on effecting real change.”

    The story says that a trend report from JWTIntelligence and EthosJWT says that these companies are “integrating social issues into their core strategies. The idea is to create ‘shared value,’ meaning that generating a profit and achieving social progress are not mutually exclusive goals.”

    Tony Pigott, global director of EthosJWT and president and CEO of JWT Canada, says, “By reconsidering products and target demographics, forging partnerships with local groups and improving productivity in the value chain, companies can become a force for positive change while enhancing their long-term competitiveness.”
    KC's View:

    Published on: September 20, 2011

    The Wall Street Journal reports that Costco plans to open stores in France, has begun filing the requisite applications, and hopes to have its first unit open there by the end of 2012.

    According to the story, Costco “would like to be present in all major cities such as Paris, Lyon, Marseille, Lille, Toulouse, Bordeaux, Nice, and Rennes.”
    KC's View:

    Published on: September 20, 2011

    The Seattle Times reports that People for the Ethical Treatment of Animals (PETA) plans a protest today at the city’s waterfront to suggest to people that “fish are intelligent, sensitive animals that feel stress and pain when they are hooked or hauled up in nets,” and that people should stop catching and eating them.

    "Parents aren't thinking that when they go fishing they're sending their kids a dangerous message that it's fun to torment animals," said Hayden Hamilton, a PETA campaigner.

    The Times notes that PETA won’t be in friendly territory for its message, since “commercial fishing accounts for thousands of jobs and generates billions of dollars” for the region.
    KC's View:
    I’ve actually been in Seattle for almost a week, which is sort of my definition of heaven. And one of the things that has made in heavenly is the fact that I’ve been consuming seafood pretty much every day. And it has been wonderful.

    Granted, not so much for the seafood. But for me, it’s been great. And while people can make whatever personal decisions they like about what they eat, I’m really getting tired of PETA trying to ruin my appetite.

    Published on: September 20, 2011

    • The New Hampshire Union Leader reports on how Ahold-owned Stop & Shop has been implementing a new promotional program designed to to reward customers buying private brands. According to the story, “members of the company's Brands Patrol Team hit stores across Massachusetts, Connecticut, Rhode Island, New Hampshire, New York and New Jersey from Aug. 19 through Oct. 9, randomly selecting customers to receive the discounts in the form of gift cards towards a future purchase. Up to $40,000 will be awarded to customers during the promotional period.”

    • The San Antonio Business Journal reports that the Environmental Protection Agency has “named Sprouts Farmers Market  and Whole Foods Market as the nation’s two top winners in the government’s GreenChill Partnership. Sprouts and Whole Foods, grocery stores with operations in San Antonio, are being recognized by the government for reducing harmful refrigerant emissions.”
    KC's View:

    Published on: September 20, 2011

    • The Food Marketing Institute (FMI) has hired Joe McKie, the former vice president of Own Brands at Winn-Dixie as well as a former executive at Daymon Worldwide, to be its new vice president of private brands.

    • Family Dollar Stores announced that it has named Trey Johnson to the newly created position of Senior Vice President – Food.

    Johnson comes to Family Dollar from Sears Holdings where he created a limited assortment food concept for K-Mart; he also was Chief Merchandising Officer for Walmart’s Marketside format, and previously worked at Supervalu, Albertsons, and American Food Stores.
    KC's View:

    Published on: September 20, 2011

    Lots of reaction to yesterday’s story about how Netflix CEO and co-founder Reed Hastings apologized for what he concedes was a badly handled fee increase announcement a few months ago, and then announced that he is completely separating the company’s DVD rental and streaming businesses - including renaming the DVD business “Qwikster.”

    I commented:

    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.

    One MNB user responded:

    Spot-on with the Reed Hastings note comments.  Despite his apology, he clearly still doesn’t get it, as evidenced by his word choices. It’s full of self-centered phrases, the opposite of customer-centricity ... If he was ever anywhere near his customers, he’s gotten way too far from them. And he’s getting really lousy PR/marketing support.

    MNB user Sharese Alston wrote:

    You are so right!  I have been a Netflix customer since 2002, and have brought MANY new customers to them as one their very first advocates.  Though I was totally ticked off by the price hike, my loyalty to brand made me stay, and I justified it by telling myself “Yes, I pay a bit more now, but it’s still less than one movie on DVD.”  So, I got the email this morning and now I am ultra annoyed!!  Qwikster??!  I don’t even like the name, and could swear it’s been used before.  And I’m not sure why they think I want to log in to two different websites to manage my Netflix account.  (I say Netflix because that’s what it IS and will always be to me)

    It’s bad enough that the Netflix Android app doesn’t let you manage your DVD queue!  …Which is inconvenient and insane in my opinion, since I can download several other 3rd party apps that WILL let me manage my queue.  And about the two charges on my bank statement…regardless of what they add up to, it will in fact SEEM like more money.  With all of that said, I hope they do improve the streaming service with more movies, better quality and subtitles (while they’re at it) because I WILL be canceling my DVD subscription after 9 years, and will become solely dependent on instant streaming via Netflix, Hulu, YouTube and any other instant viewing website I can get my hands on.  And if they keep pushing their luck with me, I won’t be a customer of any kind soon enough.

    MNB user Mike Overschmidt wrote:

    When I received the Netflix email this morning I immediately hit reply and sent the following message back:

    "You don't get it.  Your streaming service is sub par and not worth what the dvd service charges.  Together they were a nice combination but apart, not a great value.  As a customer, I'd be perfectly happy to use only streaming service and eliminate all your costs for physical DVD's BUT only if you can get the entire dvd catalog on streaming.

    That's what I don't get is why a movie can be available on dvd but not streaming.  Seems like it would be more efficient the other way around because you don't have to physically keep a copy in inventory of a dvd 3 people in the united states want to rent.  You listening?

    I don't want to hear about negotiating deals with studios (aka Starz, blah blah blah).  Your problem.  You created the original model, time for you to create another.  It's like the library, create a place were every/any movie can be accessed on demand and I'll gladly pay.  Deep catalog unlimited access would be worth $20-$25 per month to me."

    I figured if he can send me an email I can send him one.

    Ironically, I wasn't the least bit surprised when it was returned undeliverable.  Tone deaf or brain dead, not sure which they are.

    And, from another MNB user:

    Yeah - I read that email this morning and my BS meter was twirling. And don't flatter yourself, many of us don't get weak in the knees when we see that red envelope in the mail. It's just a convenience, not the second coming, Mr. Hastings.

    MNB user Karyn Chenoweth wrote:

    Sooo….not only was the original Netflix communication arrogant, and not only do I now pay more money, but I also now have to go to 2 websites to manage my account?  So basically, in 2 months, Netflix taken away my trust, my value and now my convenience.  Woo-hoo! Thanks, Netflix!

    From yet another MNB user:

    I had the Hastings communique in my email box this morning.  I read it and had to wonder just what the hell was going on.  So let me see if I get this straight: I had a reasonably priced service that allowed for me to receive entertainment that I selected in a variety of formats.  Choosing what I wanted and how I wanted to get it were done through a single portal that was fairly easy for me and my family to use.  Then Netflix chose to increase the price.  I could deal with that because there was still value in the offering.  Then Hastings lets me know that he was going to double the effort required by me to make my selections by fracturing his model and forcing me onto two websites.  Congratulations to this decade's New Coke effort.

    MNB user Dian Tucker wrote:

    By separating the DVD services from the steaming technology, Netflix is now setup to dump the old technology and move forward. There’s probably a market for the DVD direct mail business, but only if they unload it fast. The real equity is in the name Netflix. It certainly looks like a strategic business move, rather than a consumer convenience.

    I’m not sure it is very strategic if all it manages to do is tick off your customers.
    KC's View:

    Published on: September 20, 2011

    In Monday Night Football action, the New York Giants defeated the St. Louis Rams 28-16.

    And, earlier in the day, Mariano Rivera of the New York Yankees became Major League Baseball’s all-time save leader when he notched his 602nd save, passing Trevor Hoffman’s record, as the Yankees defeated the Minnesota Twins 6-4.
    KC's View: