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    Published on: May 31, 2012

    "The Lesson" - Part 11 in a 12-Part Series

    Today: What retailers need to do strategically to effectively compete in an Amazon world.

    This morning, MNB continues a series of videos culled from a presentation that I did at the recent Food Marketing Institute (FMI) 2012 Show in Dallas. The session, entitled "From Amazon to Zipcar: Innovations from the E-Revolution," featured an extended conversation with Tom Furphy, CEO of Consumer Equity Partners and the guy who helped get into the grocery business.

    This series has been made possible by MyWebGrocer, the leading provider of digital grocery and CPG solutions.

    KC's View:

    Published on: May 31, 2012

    by Kevin Coupe

    In response to Tuesday's Eye-Opener, in which we took note of a case in which a Chicago man is suing United Airlines, saying that in the wake of its merger with Continental, the company has diluted his benefits as a Million Mile flier; at the same time, there are criticisms of the company for believing that some of its frequent fliers are "over-entitled," which we thought illustrated a somewhat corrupted approach to loyalty marketing.

    We got a lot of responses to this story ... and yesterday, an MNB user sent along a link to a MarketWatch story suggesting that that there is an almost institutional approach among the airlines to diminished loyalty.

    It is something called "status match," described in the story as "a long-standing but little known program in which you can use your elite level on one airline to get a like status on another in an abbreviated time period ... The programs are simple in their approach but stubborn in their procedure. You must show documented proof that you are a frequent flier in good standing on another airline. Generally, they require a 90-day 'challenge' period in which you must fly, at a puffed-up fare, a certain amount of miles or segments, which are stops between one destination to another. Switching is most beneficial for those in the unappreciated ranks if they’re planning a cross-ocean vacation voyage that will build clout fast.

    "Requests, however, are mostly handled individually and only given once in a lifetime. They could also cost anywhere from $200 to $600 to apply, dependent on the carrier and the status level you’re seeking."

    I found this fascinating - for a number of reasons.

    For one thing, I've been traveling on business for something like thirty years - and happen to be a United Million Mile flier - and had no idea such programs existed.

    I have no idea if they are worthwhile as currently constituted, but we may see more of this as business fliers - by very definition the most profitable customers that airlines have - become disenchanted with the loyalty programs they've been using for years.

    It could be a turning point for airlines. Not that long ago, frequent flier programs were considered the gold standard of loyalty schemes - they were easy to understand, and for the most part, everybody accepted the notion that the better customers got the better service. (Try that in a supermarket, where the best customers get to wait on long lines and the small-transaction shoppers get the express line.)

    Now, the gold seems to be tarnished and losing value. And if it happens, I suspect that we'll be able to say with some credibility that the airlines have nobody to blame but themselves, as they institute changes and create cultures that seem to favor themselves instead of the customers.

    It is a shift to which every marketer should pay attention.
    KC's View:

    Published on: May 31, 2012

    The Wall Street Journal reports that Walmart began its annual meetings in Arkansas yesterday with a session for international employees in which top executives urged them to be ethical in their behavior.

    “Football, soccer, cricket, the one thing that’s always important is playing by the rules,” said CEO Mike Duke.

    The comments came without a specific reference to an April New York Times story that provided an inside look at Walmart’s Mexico division, suggesting that its fast growth was fueled by bribes, and that top management - including Duke and former CEO Lee Scott - may have known about the bribes and covered them up.

    According to the story, "Wal-Mart didn’t directly address the bribery allegations at the meeting, but its executives stressed ethics and compliance throughout ... International division chief Doug McMillon emphasized that despite pressure to grow, everyone needs to comply with government laws even 'when no one is watching'."

    The Reuters story says that Walmart executives yesterday "sidestepped specific mention of the allegations in Mexico, the company's first and largest international market. They referenced integrity as one of the core values at a company where employees cannot even accept a free cup of coffee from a vendor. They also underscored the importance of complying with local laws and told employees to report any possible wrongdoing."

    Scot Rank, president and CEO, Walmart Mexico and Central America, alluded to the scandal when he said yesterday: "Over the years we have faced difficult and challenging times in Mexico and Central America. These events have united us even more, they have motivated us to continue, to continue pursuing excellence, and work with respect and integrity."

    Meanwhile, the Chicago Tribune reports that in response to the bribery scandal, "the Illinois State Board of Investment said it is voting against all 16 members of Wal-Mart's  board."

    The board of the Massachusetts state pension fund, the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System have all reached similar decisions - though experts note that these will be largely symbolic protest votes since the bulk of the company's stock is controlled by insiders, including the Walton family.
    KC's View:
    If I were a Walmart shareholder - or an employee, or business partner - I think I'd be less concerned with unethical behavior in the ranks than I would be with such transgressions at the highest levels of the company. They can make it sound like rogue employees wandering around Mexico handing out bribes, but the Times story suggested that the bribery was both systemic and systematic, and that they were covered up in Bentonville. That's what top execs will have to answer for.

    One other thing.

    In pretty much every story I have done on the bribery scandal since it was first reported, I have tried to, in about 100 words, explain the essence of the story and the fact that the corruption may have reached up into the highest levels of Walmart leadership.

    Yesterday, one MNB user wrote in to complain about that:

    Given that most of your readers probably consume your blog on a daily basis, is there really justification for repeating this same story - in almost the same words - over and over and over?  I think you should focus on reach rather than frequency.

    A legitimate point. I try never to assume that everybody reading MNB knows what I'm talking about, and so I've reiterated the allegations whenever I've done a piece about one news organization or another advancing the story. In addition, I think it is important to stay focused on the Bentonville component. There are those at Walmart who would like people to think that all the ethical transgressions took place south of the border, but to me, that seems unlikely...

    Published on: May 31, 2012

    The Newark Star Ledger reports that has promised "to build two huge distribution centers in New Jersey, creating what Gov. Chris Christie said today will be 1,500 full-time jobs.

    "But New Jerseyans intent on buying a big-screen TV or laptop computer should act quickly: Come July 2013, Amazon will start collecting a 7 percent state sales tax - whether or not the sprawling warehouses are built."

    At the same time, the paper reports, "the Seattle-based company plans to apply for tax incentives from the state Economic Development Authority, but its officials did not say how much they would seek."

    After the announcement, Sandy Kennedy, president of the Retail Industry Leaders Association (RILA), issued the following statement: “We applaud Governor Christie for successfully fighting to level the playing field for New Jersey retailers ... Today’s announcement ends the practice of giving out-of-state retailers like an unfair advantage over those retailers who are an integral part of communities across New Jersey.

    “Today New Jersey joins 13 other states including California, Texas and Virginia, who have taken action to close a decades-old loophole that hurts Main Street retailers.  Finally, Governor Christie today joined a broad range of governors who have called on Congress to pass a comprehensive federal solution that gives states the power to enforce their tax laws and ensure that all retailers play by the same rules.”
    KC's View:
    I would refer you back to the discussion that Tom Furphy and I had on this subject on one of our MNB TV videos ... and I would argue that anyone who believes that Amazon's competitive advantage is linked mostly to the state income tax issue is making an enormous miscalculation.

    Published on: May 31, 2012

    The New York Times reports this morning that NYC Mayor Michael Bloomberg wants the city's Health Department " to enact a far-reaching ban on the sale of large sodas and other sugary drinks at restaurants, movie theaters and street carts, in the most ambitious effort yet by the Bloomberg administration to combat rising obesity."

    According to the story, "The proposed ban would affect virtually the entire menu of popular sugary drinks found in delis, fast-food franchises and even sports arenas, from energy drinks to pre-sweetened iced teas. The sale of any cup or bottle of sweetened drink larger than 16 fluid ounces — about the size of a medium coffee, and smaller than a common soda bottle — would be prohibited under the first-in-the-nation plan, which could take effect as soon as next March.

    "The measure would not apply to diet sodas, fruit juices, dairy-based drinks like milkshakes, or alcoholic beverages; it would not extend to beverages sold in grocery or convenience stores."

    The Times notes that while the ban has to be approved by the city's Health Department, that is a foregone conclusion because all of its members are appointed by Mayor Bloomberg. The initiative is also consistent with the Mayor's approach to public health since he took office, as he has "championed a series of aggressive regulations, including bans on smoking in restaurants and parks, a prohibition against artificial trans fat in restaurant food and a requirement for health inspection grades to be posted in restaurant windows."

    "Obesity is a nationwide problem, and all over the United States, public health officials are wringing their hands saying, ‘Oh, this is terrible,’ ” Bloomberg told the Times yesterday. "New York City is not about wringing your hands; it’s about doing something. I think that’s what the public wants the mayor to do."
    KC's View:
    This is certainly not what retailers and the beverage industry want the Mayor to do, and I think it is fair to expect a lot of wailing and gnashing of teeth on the part of industry over the proposed rules.

    As for me ... it strikes me as reasonable to say that people would be better off if they didn't drink those enormous sugary beverages. But it also strikes me as reasonable to say that people ought to be able to make that decision for themselves.

    I have agreed with most of Bloomberg's public health initiatives, especially those having to do with smoking - New York is a far more habitable city now that office buildings and restaurants and bars and even sports stadiums have banned tobacco usage. And while I think it is demonstrable that too much consumption of sugary drinks can help cause health problems, and that health problems put stresses on the nation's health care and economic systems, I'm not sure this rises to the level of government intervention.

    Published on: May 31, 2012

    The New York Times has a front page story this morning about a new study saying that for some people, exercise actually could be unhealthy.

    According to the story, "By analyzing data from six rigorous exercise studies involving 1,687 people, the group found that about 10 percent actually got worse on at least one of the measures related to heart disease:blood pressure and levels of insulin, HDL cholesterolortriglycerides. About 7 percent got worse on at least two measures. And the researchers say they do not know why."

    The Times story notes that "authors of the study say people should continue to exercise as before, but might also consider getting their heart disease risk factors checked on a regular basis. No intervention, including drugs, works for everyone," the story says.
    KC's View:
    I just hope I'm not in that particular 10 percent. If I'm going to go, I want to go quickly, and in one of two ways - I want to go while out for a jog, or while sitting at the laptop.

    (Well, there's a third way in which I would not mind going quickly ... but it's probably not suitable for a family website...)

    Published on: May 31, 2012

    The Associated Press this morning reports that "the Food and Drug Administration on Wednesday rejected the Corn Refiners Association's bid to rename its sweetening agent 'corn sugar.'

    "Given the sweetener's bad reputation in recent years, the association submitted an application to the agency in 2010 to have the product renamed on nutrition labels. But the FDA said that it defines sugar as a solid, dried and crystallized food — not a syrup."
    KC's View:
    Good. I'm no scientist, but this sounded like a kind of corporate three-card monte to me. Move the ball, change the name, and eventually maybe you can fool most of the people most of the time. The opposite of transparency.

    Published on: May 31, 2012

    The Associated Press reports that "workers at one of Northern California's largest supermarket chains are moving closer to a possible strike after the supermarket declared an impasse in talks over a new contract. Local 5 of the United Food and Commercial Workers International Union, which represents the majority of Raley's supermarkets' 7,750 unionized workers, has already authorized a strike. Local 8 of the Food and Commercial Workers union plans to hold a strike authorization vote soon.

    "Officials at Local 8 said they decided to seek the vote after Raley's declared an impasse Friday following months of talks over a new contract."

    According to the AP, "Raley's spokesman John Segale said the two sides were in a stalemate after union officials refused to recognize the company's financial challenges and proposed changes that would increase operating costs."
    KC's View:

    Published on: May 31, 2012

    • Dollar Tree Inc. announced yesterday that "its Board of Directors has approved a 2-for-1 stock split in the form of a 100% common stock dividend. The new shares will be distributed on June 26, 2012, for shareholders of record as of the close of business on June 12, 2012. With the stock split, the number of outstanding shares of the company's common stock will increase from approximately 116 million shares, pre-split, to approximately 232 million shares, post-split.
    KC's View:

    Published on: May 31, 2012

    ...will return. (Today is another dentist day for the Content Guy.)
    KC's View: