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    Published on: January 4, 2013

    by Kevin Coupe

    There are two Eye-Opening questions to be posed this morning, based on things I've been hearing...

    • Why, with the impending retirement of Safeway CEO Steve Burd, did the company not have a succession plan in place that would have immediately named the company's next CEO? More than a few people suggested to me that this is not generally the way things would be done ... that at any comparable company, a CEO of two decades tenure would have had a succession plan established, if only for continuity's sake.

    • What major east coast regional grocery chain is fairly bursting with rumors that it is about to be acquired by a major national grocery chain?

    No conclusive answers to either ... yet.
    KC's View:

    Published on: January 4, 2013

    The Wall Street Journal reports this morning that a number of retailers - including Best Buy, Toys R Us, and several regional supermarket chains - have filed complaints with the attorneys general of a half-dozen states, saying that Walmart was guilty of misleading and deceptive advertising.

    The chains say that Walmart "cites inaccurate prices and compares differing products, such as laptop computers with separate specifications." The chains also say that Walmart advertised price for products that it knew it did not have sufficient supplies to meet demand, which forced competitors to lower their own prices and lose expected profits.

    "We know competitors don't like it when we tell customers to compare prices and see for themselves," responds Walmart spokesman Steven Restivo. "We are confident on the legal, ethical and methodological standards associated with our price comparison ads."

    According to the story, "Wal-Mart began the radio and television ads in 31 U.S. cities last spring as part of a broader campaign to regain its reputation for rock-bottom pricing, after it suffered a two-year sales slump in the U.S. following the recession. It launched an additional national ad blitz targeting Best Buy and Toys R Us during the holidays."
    KC's View:
    Really? The ads meet Walmart's "legal, ethical and methodological standards"?

    Love to know what those are, exactly.

    Because I have a feeling that when exposed to, say, my "legal, ethical and methodological standards," they might have to settle for one out of three.

    Then again, nobody has named me king. Or emperor.

    Published on: January 4, 2013

    The New York Times reports this morning that "after a year spent signaling its commitment to build its business through its Nook division, Barnes & Noble on Thursday announced disappointing holiday sales figures, with steep declines that underscored the challenge it faces in transforming from its traditional retail format."

    Without deep-diving into the numbers, essentially the problem is this. Sales in the Nook division - which includes actual e-readers as well as digital content - were down 12 percent from a year earlier, suggesting that what Barnes & Noble hoped would be the solution to its competitive problems in dealing with Amazon.com may not be a panacea.

    The biggest problem seems to be that while critics have liked the Nook, consumers are largely locked into Amazon's Kindle system or Apple's iPad ... and the Nook becomes almost irrelevant to the conversation. Or, at least, not relevant enough to save a company desperately looking for a digital solution so that it won't turn into Borders.
    KC's View:
    Not good news for Barnes & Noble, and somehow I'm not really surprised by this. They came fairly late to the party, and most people I know (admittedly not an extensive sample) had either Kindles or iPads. (I have both, but mostly use the Kindle app on my iPad.) It was just hard to imagine Barnes & Noble being able to crack that market with any enormous level of success.

    Now, it is back to the drawing board, figuring out how to deal with the legacy business and how to craft a digital strategy that will work ... all the while, hoping that the ghosts of Borders past don't come knocking on the door.

    Published on: January 4, 2013

    The Seattle Times reports that Tully's Coffee has been acquired by an investment group fronted by actor Patrick Dempsey, for $9.15 million. The deal includes the chain's 47 stores, as well as franchise rights.

    Dempsey plays Dr. Derek Shepherd (nicknamed "McDreamy") in the TV series "Grey's Anatomy," which is set in a fictional Seattle hospital.

    In acquiring Tully's, the Dempsey group beat out a number of competitors, including Starbucks, which reportedly bid for half of Tully's stores.
    KC's View:
    The crossover merchandising and licensing potential is enormous.

    Published on: January 4, 2013

    On the evening of Monday, January 14, during the annual National Retail Federation (NRF) Show in New York City, MNB will be hosting a special retailer-only reception that is sponsored by Balance Innovations and WorldPay. (Michael Sansolo and I can promise terrific wine and beer, splendid food, and sparkling conversation...and maybe even a cameo appearance by Mrs. Content Guy.)

    If you are a retailer attending NRF, please let me know ASAP (email me at kc@morningnewsbeat.com . There are just a few slots left on our retailer-only guest list, and we’d love to have you join us.
    KC's View:

    Published on: January 4, 2013

    ...with brief, occasional, italicized and sometimes gratuitous commentary...

    • Hormel Foods said that it will buy the Skippy peanut butter business from Unilever for $700 million in cash.

    Experts say that not only does this reflect Hormel's growing interest in non-meat brands, but also gives it a major card to play in China, where peanut butter is a small but fast-growing category.

    • Starbucks announced that it will open its first store in Vietnam next month. It will be in Ho Chi Minh City, and will be operated by Hong Kong Maxim's Group.

    • Smithfield Foods announced that at the end of 2012 it had "successfully transitioned 38% of pregnant sows on its company-owned farms in the United States from individual gestation stalls to group housing systems," and remains on-track "to
    finish its conversion to group housing on all company-owned farms in
    the U.S. by 2017."

    • Small and medium business owners in Ireland have voted Feargal Quinn - who turned Superquinn there into one of the most admired retailers in the world, and who now serves in the Irish Senate - the "most admired entrepreneur," according to a story in the Irish Examiner.

    In addition to his Senate duties, Quinn hosts a TV program called "Retail Therapy," in which he goes to the aid of communities and retailers seeking to define and develop differential advantages.

    Forget just being an entrepreneur. In my book, Feargal Quinn is one of the people I admire most in the world in any category ... and I've met a lot of people doing my job over the past 30 years or so. He's smart, innovative, charming ... and just a nice guy.

    Every once in a while, some boob will write me an email and suggest that I'm wrong for describing people in the industry as being "nice," because nice people rarely make great business leaders. Feargal Quinn is one of the people who prove this to be wrong - that nice people actually can finish first.

    KC's View:

    Published on: January 4, 2013

    • Walmart International announced that it has named Lev Khasis, the former Russian retailer, to be its new president/CEO of new formats.

    • Coinstar CEO Paul Davis said yesterday that he plans to retire, and will be succeeded by CFO Scott Di Valerio.
    KC's View:

    Published on: January 4, 2013

    A man named Bill Huebbe passed away this week at the age of 85. Huebbe was an artist, a craftsman, and a designer of enduring talent. He made things, lasting things, and in today's world, that is no small contribution.

    Bill Huebbe loved his wife and kids. And he brought a Hemingway-esque sensibility to his work and life, which made him a figure of considerable magnetism. He was a good guy.

    Bill Huebbe was married to my wife's sister. And I just thought that, for a brief moment, attention should be paid.
    KC's View:

    Published on: January 4, 2013

    MNB took note yesterday of a Bloomberg BusinessWeek report on how a National Retail Federation (NRF) survey suggests that "return fraud cost retailers an estimated $8.9 billion in 2012, with nearly 30 percent occurring during the holiday season alone. Overall, the survey shows that about 4.6 percent of holiday returns are fraudulent ... Of the 60 retailers surveyed, 96.5 percent reported being ripped off by criminals who collected refunds for stolen items this year, and almost half said they’d received counterfeit receipts. Nearly two-thirds of the retailers said customers had returned items they’d worn or used."

    My comment:

    I have to admit to being surprised that one survey said that while 10 percent of people admitted to buying something, wearing it and then returning it, 25 percent of people say they know people who have done it.

    Really?

    It is things like this that make me worry about society and the tearing of our cultural and ethical fabric. It is just plain and consciously wrong, and yet people do it.


    MNB user Kathleen Whelen wrote:

    My aunt used to work in the ‘Dress Salon’ department of Saks Fifth Ave in White Plains.  Patrons thought nothing of buying extremely expensive outfits, wearing them to a gala or party, and then returning them.  And not once, but over and over!  No one said ‘boo’ to them because they dropped a lot of $$ on the garden-variety overpriced stuff.

    One MNB user responded:

    Does that 10% of people who admit to returning worn items include folks who bought a pair of shoes, wore them once and returned them because they were remnants of the Spanish Inquisition? I write this nursing a blister caused by shoes that were comfortable in the store but somehow morphed in torture implements in my closet. I think I'm about to become a statistic.

    I don't think so ... because returning those shoes does not constitute fraud.

    From another reader:

    The fraud committed by the consumer certainly is large and unethical however the story doesn’t mention the fraud committed by the retailers to the manufacturers.
     
    And from another:

    Give me a break. Does anyone in the vendor community believe that retailers suffer the losses caused by return fraud. In my over thirty years of experience retailers deduct all returns off invoices and make you challenge their claims.

    I find these last couple of emails fascinating.

    I have no doubt that some retailers commit some version of fraud against manufacturers when it comes to various links in the supply chain.

    But that does not justify consumer fraud against retailers.

    It is a cliche, but two wrongs don't make a right.

    These responses strike me as a rationalization.

    Of course, remember this exchange from The Big Chill...

    Jeff Goldblum: "I don't know anyone who could get through the day without two or three juicy rationalizations. They're more important than sex."

    Tom Berenger: "Ah, come on. Nothing's more important than sex."

    Goldblum: "Oh yeah? Ever gone a week without a rationalization?"





    On the broader subject of competition, MNB user Frederic Arnal writes:

    Adding to the squeeze being felt by small and e-retailers is the across the board increases being taken every January by the major carriers.  UPS just raised rates more than 5%.  Five years ago, the average ground shipping cost for a normal package was $7.95.  Today it’s more than $12.95.  Free shipping means we must absorb these costs.  And, adding to injury, large corporations get much more favorable rates in their shipping contracts because of their tremendous volume.  So, priority rates are totally out of balance for the small player making them even more uncompetitive.

    You're right.

    Life ain't fair.
    KC's View:

    Published on: January 4, 2013

    Sitting here this morning, as usual, drinking coffee and writing MNB ... but with some extra distractions.

    During her time home from college, my daughter is "socializing" two puppies that are in a Guiding Eyes program, and that hopefully will end up with a blind person. We've done this before with puppies, and even raised a Guiding Eyes dog for almost two years. As you can see, they are unbelievably cute ... even if they keep cuddling up on my lap and tapping the keyboard.




    A brief recap of some of my favorite things from the recent Christmas holidays...

    • "The Black Box" is the latest Michael Connelly novel about his resolute Los Angeles detective, Harry Bosch. It has been 20 years since the first Bosch novel, "The Black Echo," and Connelly has decided to celebrate the moment with a mystery that goes back two decades to the riots that followed the Rodney King beating. A woman was found murdered in a back alley, and Bosch suspected that there was something involved other that urban discontent. Twenty years later, the mystery has not been solved, but Bosch continues to probe the cold case, pulling at various strings and hoping that he can unravel the mystery. 'The Black Box" is Connelly at his best - strongly plotted, with great characters and crisp writing that makes the City of Angeles come alive through a compelling noir prism.

    • "The End of the Line: Romney vs. Obama: the 34 days that decided the election: Playbook 2012," may have a long and clumsy name, but it is one of those unique products of the e-reader age - a short, journalistic e-book about a recent event that is able to offer a second draft of history. "The End of the Line" goes farther than political reporters were able to go during the heat of the election, though not as far as more extensively researched books will be able to go when they are published in coming years. Still, this book from the publishers of Politico.com is a fast and interesting read ... though more than anything, it makes me hungry to read the inevitable "Game Change II."

    Jack Reacher is the Tom Cruise movie based on "One Shot," by Lee Child, which is one of 17 Reacher novels. It actually is a pretty good movie, except for one thing. Reacher, in the books, is several inches over six feet tall, 250 pounds of muscle, blonde, not very good looking, and extremely relaxed except for those moments when he takes action, at which point he is fearsome.

    Cruise is a lot shorter, lighter, prettier and he seems to use constant intensity to compensate for all the characteristics that he is lacking. What that means, for those of us who have enjoyed the books, is that he's not playing the character. So while the movie may work on a lot of levels, especially for people who have not read the books, for me, Jack Reacher is sorely lacking.

    • I liked a lot about Les Miserables, but one thing kept occurring to me during the movie, which runs almost three hours. Why are almost all the songs in this "epic musical" shot in close-up, to the point that I'm looking up the singers' noses and down their throats? (My second question: How come almost everyone in 19th century France sings in such a high register? Are their costumes too tight?)

    The one time it really works is when Anne Hathaway, as the victimized Fantine, sings "I Dreamed A Dream." After a series of scenes during which the camera has been moving frenetically, suddenly it stops and simply lets her sing the song. And she kills it.

    Les Miserables is an interesting movie about misplaced obsession and redemption. It isn't perfect, and I'm not even sure it comes close to being great. But I enjoyed it for what it was.

    The Hobbit: An Unexpected Journey is another almost three hour movie, the first of three Peter Jackson-directed prequels to his estimable Lord of the Rings trilogy. As expected, it is beautiful to watch with its mix of New Zealand scenery and CGI-produced effects. The acting is expert. And there are tons of "how the hell did he do that?"" moments.

    But while I was caught up in it, I couldn't shake the feeling that I'd seen it all before, and that the new Hobbit trilogy could end up being a classic case of returning to the well once - or maybe three times - too often.

    Hyde Park on Hudson has a lot going for it, mostly a lovely performance by Bill Murray as FDR. It is a fictionalized depiction of an actual trip taken by England's King George VI and his wife, Queen Consort Elizabeth, in June 1939 to the Roosevelt estate in Hyde Park, New York. It was the first time an English monarch had come to the US, and King George VI was hoping to rally US support for the coming war against Hitler's Germany.

    When the film is looking at US-British tensions and relations as reflected in this visit, it is terrific. It is less so when exploring FDR's various infidelities, especially that with Margaret Suckley (Laura Linney), his sixth cousin - not because this pales next to the more serious global issues at stake. (I've always thought that the difference between the movies of yesteryear and those of today is simple. In Casablanca Humphrey Bogart's character says that his personal problems aren't worth a hill of beans, and he leaves the love of his life to help the war effort. Make that movie today, and Bogart's character would say that global problems aren't worth a hill of beans compared to his love life, and he'd go off with Ingrid Bergman.)

    That said, Hyde Park on Hudson is probably the movie I enjoyed most over the holidays ... and if you want a business lesson in how to handle people, just watch the lovely scene in which FDR talks to a nervous and insecure King George, encouraging him, nurturing him, sensing that this is a man of great character but little confidence, and knowing precisely how to build him up. I just wanted to see more of that FDR ... I wanted to see how he showed leadership and purpose in the rest of his public life.

    • For Christmas dinner, my son the wine merchant brought home a 2009 O'Shaughnessy Mount Veeder Cabernet Sauvignon, which is one serious wine - elegant and balanced, smooth and powerful. It was wonderful.

    Also over the week, we enjoyed a 2010 Pascual Toso Reserve Malbec ... which is spicy and lovely.

    Not a bad way to spend 10 days off...

    That's it for this week. Have a terrific weekend, and we'll see you Monday.

    Slàinte!
    KC's View: