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    Published on: January 26, 2012

    This commentary is available in text and video form. The content is similar, but not word-for-word. Enjoy both, or either...

    Hi, I’m Kevin Coupe and this is FaceTime with The Content Guy.

    I’ve been giving a lot of thought to a couple of stories that appeared recently on MNB, how they connect and what they mean.

    First, we had the story about how Target was circulating a memo to its suppliers, essentially saying that it needs a new strategy as it faces off against a wide range of competitors, especially online retailers. The big problem, Target seems to feel, is what is known as “showrooming” - where consumers go into stores, check out merchandise, and then order it online for a lower price. And so, from my reading of the memo, it seemed like Target was looking for help from its manufacturers ... mostly in terms of equivalent pricing and differentiated products.

    Seemed reasonable to me.

    At pretty much the same time, we heard from several manufacturers that Amazon also was circulating a memo among its grocery suppliers, demanding an incredible discount that will both lower its prices and help its own margins, to the extent that at least some suppliers, big and small, are walking away from Amazon.

    Which seemed pretty unreasonable to me.

    Now, I was pretty content with this assessment ... but then I read a piece in Retailing Today, which I was immediately attracted to because it made a movie reference. Just as Tom Hanks said “there’s no crying in baseball” in A League of Their Own, this piece said that “there’s no whining in retailing.”

    The thing is, I’m not sure that Target was whining. (Anyone with kids knows what whining is, and this wasn’t whining.) What Target was doing was recognizing a new reality, and grappling with what to do about it. That’s not easy, and it is all new territory.

    That’s how it is these days. Brick-and-mortar retailers are competing with online retailers, and everybody is looking to manufacturers for whatever help they can get. They’re not on a level playing field - they’re often not even really playing the same game. Everybody is looking for a differential advantage, trying to figure out what they can bring to the table that will make the difference in terms of where people shop and what they choose to buy.

    Is Target whining? No. It is searching. To use another movie metaphor, it is trying to make sure that it does not make the same mistake as the guys in Jaws, who face off against the shark despite the fact that they really need a bigger boat. The guys at Target are trying to figure out what kind of boat they need and what kind of ammunition to use.

    Same goes for everybody. Walmart. Best Buy. And yes, Target. And because these are brick and mortar stores, they have certain legacy systems and traditional priorities that are hard to shake. They want to embrace online shopping, but old ways of doing things keep getting in the way.

    Meanwhile, Amazon - which does not have those legacy issues - smells blood in the water. Just like any good shark. But because it is a shark, all it knows how to do is move forward, eat, poop and make little sharks. Which is why it apparently has decided to put pressure on suppliers.

    How does one compete? Beats the hell out me.

    You can’t whine. You can’t complain. You can’t retreat. And you can’t really play Amazon’s game, in the same way that retailers competing with Walmart can’t really play Walmart’s game.

    You have to play your own game.

    You have to find those differential advantages - those products and services - that you can deliver in inimitable style, and then you have to do it again and again and again, while all the while seeking the next advantage and the next one and the next one, knowing that all advantages are assailable.

    Can suppliers help? Sure they can. But they can’t do it all, no matter how much pressure applied to them.

    These may be unreasonable expectations, but it is an unreasonable world.

    That’s what is on my mind this morning, and as always I want to hear what is on your mind.

    KC's View:

    Published on: January 26, 2012

    Bloomberg reports that Walmart has decided to remove greeters from the late shifts at its stores all over the country, saying that the move will save money and help it better regulate staffing levels.

    According to the Bloomberg story, the move is seen as “chipping away at a 30-year tradition of making sure all shoppers are welcomed to the store,” and diluting the legacy of founder Sam Walton, who “added greeters in 1980 to make his giant low-price stores friendly and welcoming. Cutting back, even during the early morning hours, shows Wal-Mart is rethinking longheld traditions to boost profit margins and guarantee low prices, said David Strasser, an analyst with Janney Montgomery Scott LLC in Philadelphia.”

    Walmart has been under financial pressure in the US because of a long string of quarters in which its domestic operations had stagnant same-store sales; after nine such quarters, the retailer finally broke the unfortunate streak last October with a quarter showing a 1.3 percent same-store sales increase.
    KC's View:
    The reality is that this probably won’t have much of an impact on the late-night shopping experience at Walmart; at that hour, people probably are thinking more about getting in and out, and not about being welcomed at the front door. (And I have to be honest here. Greeters at Walmart stores are a mixed bag. I go to a lot of Walmarts, and sometimes the greeters are effervescent, sometimes they grunt at you, and usually they are somewhere in between. Not a lot of consistency, in my experience.)

    The larger problem may be the fact that this story is being reported in a lot of places, creating a perception issue for the company. And, in each of these stores, employees also are aware of the greeter cuts ... which could have them wondering where the next cuts will be. it is hard to charge forward when you’re spending time looking over your shoulder.

    We always argue here on MNB for defining and exploiting whatever your differential advantages are, and whatever you think of Walmart and however inconsistent its greeter program may be, the fact that it had greeters at every front door during every hour its stores were open was one of the company’s defining differences.

    One steps away from such differences at one’s own peril.

    Published on: January 26, 2012

    The US Department of Agriculture (USDA) yesterday announced new nutritional guidelines for lunches subsidized by the federal government and served in the nation’s public schools, rules that will mean pizzas made with healthier ingredients, the elimination of trans fats, reduction over a 10 year period in the use of sodium, and calorie caps for entire meals. In addition, schools now will have to provide low-fat milk, and flavored milks will have to be non-fat; more whole grains, fruits and vegetables also will have to be made available.

    The new guidelines were laid out yesterday by Agriculture Secretary Tom Vilsack in an elementary school visit made with First Lady Michelle Obama and celebrity chef Rachael Ray. Stories on the guidelines note that they are not as stringent as those first sought by the Obama administration, which wanted more dramatic cuts in the serving of pizza and french fries. Under pressure from lobbyists, the US Congress also passed a bill establishing that tomato paste - used in pizza - is classified as a vegetable.
    KC's View:
    I know there is substantial disagreement with me about this in the MNB community, but I believe that this is good public policy. If people a lot smarter than I are convinced that the nation’s obesity crisis is a national security issue, not to mention an enormous problem for the nation’s health care system, then it has to be addressed.

    It won’t mean anything if parents don’t feed their kids in a responsible way. I get that. But since this is public money being used to subsidize these lunches, I think that a common sense public policy approach is justified.

    Published on: January 26, 2012

    by Kevin Coupe

    Perhaps it is because enough time has passed since Steve Jobs died. Perhaps it is because Apple continues to generate ever-greater sales and profit numbers.

    But the cost of the products that are generating these sales and profits increasingly is coming under scrutiny, with experts saying that CEO Tim Cook may be forced to do something to improve both the reality of how Apple’s products are built and the perception of the company’s human rights record.

    Here is how the New York Times frames the story:

    “In the last decade, Apple has become one of the mightiest, richest and most successful companies in the world, in part by mastering global manufacturing. Apple and its high-technology peers — as well as dozens of other American industries — have achieved a pace of innovation nearly unmatched in modern history.

    “However, the workers assembling iPhones, iPads and other devices often labor in harsh conditions, according to employees inside those plants, worker advocates and documents published by companies themselves. Problems are as varied as onerous work environments and serious — sometimes deadly — safety problems.

    “Employees work excessive overtime, in some cases seven days a week, and live in crowded dorms. Some say they stand so long that their legs swell until they can hardly walk. Under-age workers have helped build Apple’s products, and the company’s suppliers have improperly disposed of hazardous waste and falsified records, according to company reports and advocacy groups that, within China, are often considered reliable, independent monitors.”

    To be sure, Apple is not the only company profiting because of such conditions. And, the company says it has made efforts to improve conditions an, as the Times notes, it often is the first place to report transgressions.

    But that does not excuse what often are deplorable conditions, and the conflict at Apple headquarters - executives there are said to be concerned about conditions, but not so much so that they want to do anything to disrupt an efficient and cost-effective supply chain - rings hollow when you read the story (A HREF=http://www.nytimes.com/2012/01/26/business/ieconomy-apples-ipad-and-the-human-costs-for-workers-in-china.html?hp > here.

    As a diehard Apple user, I have to say that this is distressing. Not so distressing that I will turn in my MacBook Pro, iPhone, iPod, iPad, Apple TV and various other products for other models. But as a devotee of the company’s technology efforts, I expect more of Apple, and I suspect I am not alone. Attention will be paid.
    KC's View:

    Published on: January 26, 2012

    There have been numerous published reports saying that Amazon.com is planning a stand-alone, subscription-based video streaming service that would compete directly with Netflix.

    Amazon currently has a video streaming service, but it is part of the company’s $79 Prime service.

    Interestingly, Netflix seems to enjoying a rebound from last year’s troubles, when a price increase and an aborted effort to separate its DVD and video streaming business resulted in consumer dissatisfaction and widespread subscriber defections.

    The New York Times this morning reports that Netflix enjoyed a 47 percent increase in revenue for the fourth quarter, though profit was down 14 percent - in part because the company spent more to get new subscribers. CEO Reed Hastings said that he was “encouraged” by the number of people signing up for video streaming, which is where he sees the business going in the long-term.
    KC's View:
    This is worth paying attention to, if only because it illustrates how fast these businesses are changing, and how intense the competition is likely to become. The move from VHS tapes and DVDs available via Blockbuster to DVDs available via Netflix and Redbox to movies and TV shows streamed and downloaded via the Internet has not taken all that long.

    For anyone selling anything to consumers to think that this kind of speed and these kinds of trends won’t affect them is, IMHO, delusional.

    Published on: January 26, 2012

    Internet Retailer reports on a new study from The NPD Group saying that “books, stationery and office supplies stands as the most common product category consumers shop for online, with 48% of survey respondents reporting that they have shopped for those items within the last year ... Apparel and consumer electronics follow closely behind, with each of those categories at 46%. Additionally,  34% of consumers say they have shopped for shoes and boots online and 25% shopped for fashion accessories, such as scarves.” The story goes on to say that “of consumers who shop for clothes online, 73% not only research and browse but also buy, the survey found.”
    KC's View:

    Published on: January 26, 2012

    The Nielsen Co. is out with a new global study about food labeling and healthy eating, with some interesting findings:

    • Almost six out of 10 global consumers say they have trouble understanding food labels.

    • Fifty-three percent of consumers say they are overweight, and 48 percent say that they are trying to lose weight.

    • More than three-quarters of consumers say they are trying to lose weight only through diet.

    • Almost half of consumers say that fast food restaurants should feature prominent calorie counts.
    KC's View:

    Published on: January 26, 2012

    The Scotsman reports that Walmart-owned Asda Group is going the franchise route with its George budget clothing brand, licensing it to Lebanon-based Azadea to open stores in the Middle East, and SandpiperCI to open stores in Jersey and Guernsey.
    KC's View:

    Published on: January 26, 2012

    • Wakefern Food Corp. announced that it has been chosen by New York City-based Food Bazaar Supermarkets to fulfill its dairy, frozen food, grocery, health and beauty, non-foods and specialty grocery product needs for its 16 locations throughout New York, New Jersey and Connecticut. Additionally, Food Bazaar has been approved to carry the ShopRite private label line of products, including its Specialty Imported items, in all of its stores.

    • The Wall Street Journal reports that a bankruptcy judge has approved a $750 million financing package for the Great Atlantic & Pacific Tea Co. (A&P), which the company hopes will help it exit Chapter 11 protection.

    According to the story, “The money is a linchpin of A&P's bankruptcy-exit proposal, a final hearing on which is set for next month.” The judge also said that “A&P could close an additional 14 of its stores, bringing the number of stores it has closed or plans to close to near 50.”

    • The Los Angeles Times reports that “as sales of electric cars begin to pick up, retailers nationwide are installing electric vehicle charging stations in their parking lots so customers can plug in and juice up their vehicles while browsing inside.” Among the retailers cited in the story: Walgreen, Macy’s, Kohl’s, and Best Buy.
    KC's View:

    Published on: January 26, 2012

    • The Food Marketing Institute (FMI) announced the hiring of Lucas Darnell, a long-time employee of the American Frozen Foods Institute (AFFI) and a former interim executive director of the National Frozen Pizza Institute, as a director of member services, charged with helping to deliver on FMI’s retailer and wholesaler benefits, and grow FMI’s member-base by cultivating new interest and involvement.
    KC's View:

    Published on: January 26, 2012

    Nicol Williamson has passed away. Published reports say that the Scottish actor died just before Christmas in Amsterdam of oesophageal cancer. He was 75.
    KC's View:
    The name may not be familiar to everyone, but it is a pretty good bet that you saw him in something. In the movies, he was a cocaine-addicted Sherlock Holmes in The Seven-Percent Solution. Merlin in Excalibur. Little John in Robin and Marian. He played Hamlet and Macbeth, numerous times each. He acted in the plays of Tom Stoppard, Anton Chekhov, John Osborne, and Neil Simon. And he was noted for being a tempestuous, mercurial, erratic and often inebriated performer who once, while playing the ghost of John Barrymore in a play called “I Hate Hamlet,” he stabbed one of his fellow actors with a sword, prompting the other actor to walk off-stage mid-performance and quit.

    In short, you couldn’t take your eyes off him when he was performing - sometimes it was going to be a gorgeous artwork, and sometimes a car wreck. At least, I couldn’t ... and I saw him a couple of times on stage, and Robin and Marian is one of my favorite movies.

    Published on: January 26, 2012

    ...will return.
    KC's View: