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    Published on: February 28, 2013

    This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this FaceTime with the Content Guy.

    A new national advertising campaign for Amazon's Kindle Paperwhite e-reader is yet more evidence of how much the world has changed, and how retailers may want to think differently about the consumers they are trying to attract into their stores.

    The setup is simple.

    There's a hot woman in a bikini and and a good looking guy at a resort. The woman is reading a book on a Kindle Paperwhite, while the guy is using what appears to be an iPad. She's having no problem, but he can't make out the words because of the reflection. (This is, by the way, an enormous shortcoming of the iPad.)

    They talk about the two products, and he orders a Kindle online. Then, he suggests that they should celebrate ... and she points out, not unkindly, that her husband has gone to the bar and is bringing her a drink. He smiles: "So is mine."

    You can see the commercial here.

    The thing is, there are, in addition to the District of Columbia, nine states where same-sex marriage is legal. I have no idea whether it will become legal in all 50 states, but it certainly can be said that momentum and many public opinion polls seem to be on the side of same-sex marriage.

    What this commercial does, experts say, is bring a conversation that is going on in much of America into the light, and making it mainstream.

    Amazon, by being in the lead, will accrue a lot of brand equity because of this commercial. You don't think that there are plenty of gay people around the country who are seeing this ad and thinking to themselves,"Wow...a company that is speaking not just about me, but to me."

    In addition, the ad speaks to people for whom gay marriage is a non-issue. One expert says that what is important about this ad is that it shows gay marriage in a clear yet incidental way.

    Amazon's entire value proposition, since the company began almost 20 years ago, has been that it sees an American shopper that nobody else sees, and that it will provide a retailing experience that nobody else provides.

    In this commercial, it seems to me, Amazon has done that yet again.

    To be sure, the company is hardly alone. Other companies, such as Gap and Crate & Barrel, have featured gay couples in ads and catalogs.

    Some day, I think, such ads will be commonplace, and we'll have gotten to a place where commenting on them will be unnecessary.

    But for the moment, I think it is important for marketers to look at the Amazon ad and think about what it says not just about the country, but about their customers. We don;t live in an "Ozzie & Harriet" world anymore ... it is a lot more like "Modern Family," filled with people who are diverse and divergent in terms of attitudes, preferences and orientations.

    For me, it makes me want to buy a Kindle Paperwhite in time to go to the beach this summer. Some people will respond to the ad by swearing that they'll never again do business with Amazon.

    But here's the thing. I think the number of people who feel that way are dwindling ... and that there are a lot more people like me than them.

    It is good business to pay attention.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: February 28, 2013

    The Seattle Times has a story this morning about how "a new study by Seattle startup Placed identifies home-goods chain Bed Bath & Beyond as most at risk of becoming a showroom for Amazon, followed closely by PetSmart and Toys R Us.

    "The survey - based on responses from nearly 15,000 U.S. consumers, as well as an analysis of their movements through the physical world - also puts Issaquah-based Costco Wholesale on notice that its customers have no qualms about showrooming.

    "While it’s unclear how many Costco customers use the chain to test-drive products before buying them from Amazon, Placed believes there’s enough overlap to raise the warning flag."

    The story goes on:

    “'There are categories critical to Costco’s success that are in Amazon’s cross hairs, like consumer electronics — the flat-panel television sets you see as soon as you walk in the front door — as well as jewelry,' said Eric Best, CEO of Seattle-based Mercent, which helps businesses with their online strategies. At the same time, Costco sells some things not likely to take hold online because their shipping costs are high relative to their price tags, he said, citing lawn fertilizer as one example."
    KC's View:
    I think that every bricks-and-mortar retailer has to be concerned about the showrooming issue. Some retailers and categories are more vulnerable than others, but we live in a world where not only do marketers have more information about consumers, but shoppers have access to far more information about the products they buy and the companies they patronize. Which puts the shopper in the driver's seat.

    Deal with it.

    Published on: February 28, 2013

    Bloomberg has a story this morning saying that at a February 1 internal Walmart meeting, US CEO Bill Simon said that keeping shelves stocked has become a big problem, is "getting worse," and is a "self-inflicted wound" that is the company's "biggest risk."

    According to the piece, "Once a paragon of logistics, the world’s largest retailer has been trying to improve its restocking efforts since at least 2011, hiring consultants to walk the aisles and track whether hundreds of items are available. It even reassigned store greeters to replenish merchandise. The restocking challenge emerged as Wal-Mart was returning more merchandise to shelves after a previous effort to de-clutter its stores.
    Wal-Mart’s inability to keep its shelves stocked coincides with slowing sales growth."

    While Bloomberg reports that Simon's comments are taken from official minutes of the meeting, company spokesman David Tovar said they were "personal notes from one participant in the meeting and are not official company minutes," and said that "there are a number of significant misinterpretations and misleading statements that do not accurately reflect the comments by Bill Simon or any other participant in the meeting."

    Tovar said that Walmart is happy with its in-stock positions.
    KC's View:
    No disrespect to Walmart, but I believe Tovar about as far as I can throw a supercenter.

    I've gotten a number of emails from folks in recent months suggesting that out-of-stocks has become a growing problem for Walmart, one that it has a hard time dealing with. So I was not at all surprised to see the Bloomberg story ... though I would sort of like to know how it got hold of the official company minutes.

    Published on: February 28, 2013

    The Albany Times Union reports that "the settlement of an investigation into coupon policies at Price Chopper stores resulted in a war of words between state Attorney General Eric Schneiderman's office and the Capital Region-based supermarket chain."

    According to the story, Price Chopper agreed to a finding by the Attorney General's offices that it needs "to clarify its coupon rules to customers and pay $100,000 in penalties and costs," because its double coupon promotions "were limited by 'material restrictions' that were not made clear in its advertising, and varied by region."

    But what Price Chopper really objects to is a line from the announcement press release quoting Schneiderman as saying that Price Chopper used "deceptive business practices to mislead price-conscious consumers and extract hard-earned money from them by hindering their ability to shop competitively and save on groceries."

    Price Chopper spokeswoman Mona Golub tells the Times Union that the company was "appalled and disappointed by the inflammatory press release distributed earlier today... as its portrayal of Price Chopper's conduct is false, misleading and inaccurate in significant respects." She adds that the settlement "makes no assertion that Price Chopper acted intentionally to harm consumers or that its practices caused any losses..."

    Golub goes on: "Our decision to sign this agreement was reached after considering the likely cost of alternative actions and because settling the matter will allow us to focus on serving our customers, including offering double coupons up to (99 cents) in all 130 of our stores." She tells the paper that the company has accepted accountability, but that "the matter involved nothing more than a failure to consistently apply and communicate the chain's policies."

    The New York Attorney General's office said that the statements from the announcement press release will stand.
    KC's View:
    Listen, I think it is entirely possible that Price Chopper's coupon policies were inconsistent, hard to understand and even misleading to the uninitiated. Frankly, I think that whenever any chain gets into the weeds of double coupons and zone pricing, it is possible for consumers to get confused. I also think it seems likely that Price Chopper believes that the NY Attorney General may be applying unfair standards.

    But I've gotten to know the folks at Price Chopper reasonably well over the years, and while I'm sure that they apply hard-nosed business practices to every deal, transaction and promotion, and look for every possible advantage, I also think that they would not do anything that would lead customers to believe that they were being ripped off.

    And so I understand why they're annoyed by the NY Attorney General's position.

    The reality is that in today's environment, one has to fight back against such assertions, because they live on. When I was a very young daily newspaper reporter, I remember doing a particularly critical story about a local politician, who called me in to berate me ... but then finished the conversation by noting that "today's newspaper story would be used to wrap tomorrow's fish," and so he wasn't really going to worry about it. (That was his way of letting me know that in his mind, I was insignificant.)

    That's not true anymore. Today's news stories live forever. And so Price Chopper has to fight back.

    Published on: February 28, 2013

    The BBC reports that Tesco CEO Philip Clarke said yesterday that the retailer will buy and sell more British beef, in the wake of the horse meat scandal that has created real food safety and labeling questions about beef sold throughout Europe.

    The story notes that a recent survey suggested that 78 percent of british citizens want to buy more British products.

    Clarke also said that the company has instituted a new testing process designed to ascertain that products are what the labels say they are.

    "Speaking to the BBC, Mr Clarke said he could not guarantee 'right now today' that all of Tesco's products contained exactly what was on the label, but 'that is our objective', he added. 'I'm sure that we will be able to say that in the future, once the testing regime is completely in place'."
    KC's View:
    I am more convinced with every passing day that this problem is going to pop up in the US, and soon ... and that it will almost certainly involved products being imported from elsewhere. (Let's see how that changes the whole "country of origin labeling" discussion...)

    BTW...I was fascinated to see a report in Ireland's Independent saying that the Irish company that originally found horse meat in beef products had as one of its original investors Feargal Quinn, the iconic Irish retailer and current a member of that nation's Senate.

    According to the story, "Newly-released Seanad documents show he has been an investor in Identigen – which carried out the DNA testing on frozen beef burgers for the Food Safety Authority of Ireland.

    "Mr Quinn said he had come across the company more than a decade ago during his time in charge of Superquinn.

    "He said he had been so impressed with its DNA tracing system for the supermarket's fresh beef that he decided to invest in the firm."

    However, Quinn sold his shares in the company last year, the story says.

    Published on: February 28, 2013

    Yesterday, as JC Penney announced that it suffered Q4 losses that were more than 10 times worse than expected and more than six times worse than the Q4 losses a year earlier, the company's CEO, Ron Johnson, conceded that he made "big mistakes" in his efforts to turn around the retailer.

    The New York Times story says that "in his quest to 'be the favorite store for everyone,' Mr. Johnson said the retailer had gotten some areas wrong, including marketing and an assessment that customers wanted simple pricing without constant sales."

    The story goes on:

    “'I had a personal conviction to deliver everyday value beginning with truth on the price tag,' Mr. Johnson said. 'We worked really hard and tried many things to make the customer understand that she could shop anytime on her terms. But we learned she prefers a sale, at times she loves a coupon, and always, she needs a reference price,' he said, referring to items like 'compare to' prices on price tags.

    "He said the company would be running sales 'each and every week' going forward, along with offering coupons.

    "He also said that the company’s marketing last year 'failed to communicate our unique value proposition,' but that new ads, which started last week and focus on price comparisons, led to an immediate jump in traffic and sales.

    “"We are highly confident that as we return to some level of promotion, we’ll get the customer back in the store,' Mr. Johnson said."

    That will take some work. As the Times notes, "In the year since the chief, Ron Johnson, introduced his ambitious new strategy, the company has lost $4.28 billion in sales and its stock is down about 55 percent."
    KC's View:
    If JCP is going back to the old way of promoting, with sales and coupons, why do they need Ron Johnson?

    Published on: February 28, 2013

    Reuters reports that Flowers Foods will acquire Wonder Bread and some other brands - including Nature's Pride - for $360 million, "giving the No. 2 U.S. baking company a bigger slice of the fast-consolidating bread business."

    Assuming that the deal is approved by the bankruptcy court judge overseeing Hostess''s financial affairs, Wonder Bread "will go to Flowers after no other bidder stepped up to make a competing offer ... Hostess, which is liquidating its business after 82 years, was set to run an auction on Thursday for the brands, but there will be no auction since there were no other bids."

    According to the story, "Hostess expects to run two more auctions next month. One would be for the Hostess snack cake brands, including Twinkies and Dolly Madison, for which private equity firms Apollo Global Management LLC and C. Dean Metropoulos & Co set the bidding at $410 million ... The other auction would be for its Drake's cake business and additional bread brands. So far, McKee Foods, maker of Little Debbie snack cakes, offered $27.5 million for Drake's, which includes Ring Dings, Yodels and Devil Dogs."
    KC's View:

    Published on: February 28, 2013

    • The Toronto Globe and Mail reports that Target is expanding on its original plans to open stores in Canada as "it will pour money into expanding 40 of the 124 stores that it will roll out in this country this year, adding 600,000 square feet of retail space to its footprint here – and potentially stealing more business from rivals."

    Target is scheduled to begin opening Canadian stores in April.

    Fast Company reports that Starbucks made a deal with the New York Times, allowing its customers using Wi-Fi to access up to 15 Times stories - three from each of five sections - per day without charge.

    Normally, most Times stories reside behind a paywall.
    KC's View:

    Published on: February 28, 2013

    Tom Mars, the chief administrative officer at Walmart and a decade-long veteran of the company, will leave Walmart in two weeks.

    The Wall Street Journal notes that no reason has been given for his departure, "as the Bentonville, Ark., retailer's general counsel from 2002 to 2009, Mr. Mars was involved in an investigation into bribery allegations regarding a Wal-Mart store built near the Mexican pyramids, according to company e-mails released earlier this year by members of Congress."

    And, the story says that in a 2005 email to CEO Mike Duke, Mars wrote: "The attached memorandum summarizes an interview conducted with a former WalMex in-house lawyer. The lawyer asserts in some detail the alleged corruption by various WalMex associates, including senior people. You'll want to read this. I'm available to discuss next steps. PS: Welcome to Wal-Mart International."

    No replacement has been named.
    KC's View:
    I can see it now.

    Months from now, Mars will be called by Congress to testify about bribery allegations facing Walmart, and he will be prepared to name names and lay out dates and strategies. But, like Frankie Pentangeli, when he gets to the stand he will see Mike Duke and Lee Scott sitting in the audience, and between them will be his brother, Vincenzo. And he will say that he knows nothing about any bribery, and that Walmart has only behaved in a socially acceptable and legal fashion.

    It'll be an offer he can't refuse.

    Published on: February 28, 2013

    Got the following email from Gary Hawkins, weighing in on the issue of targeted promotions and why broad-based print advertising and FSIs are not long for this world:

    Kevin, your coverage of Safeway’s Just for U program and their desire to stop printing a weekly ad seems to have generated some good feedback. Thought I would join the fray...

    As I called out in the recent NGA workshop, shopper data has been weaponized, often by the largest retailers able to employ teams of data analysts and sophisticated technology. Shopper insights, precision targeted promotions, and shopper-intelligent merchandising, are the weapons of choice. Safeway is ramping up digital engagement with their shoppers, driven by personalized savings, so as to finally drive a stake through the heart of the printed weekly ad flyer. The analogy is apt: Weekly ad flyers are the walking dead of the advertising world, marketing “zombies”.

    If you overlay ad flyer distribution with actual shopper data from most any store you will find a shocking disparity between the number of flyers printed and distributed and the number of shopper households coming into the store in a given week. Retailers pay great attention to waste and shrink in their stores, the same attention and concern should be brought to the waste involved in flyers.

    Going further, overlaying shopper data with most any given promotion in a retailer’s ad flyer shows how few shoppers in the store that week actually purchase the promotion. If you extend the analysis and consider the universe of shoppers in a retailer’s market that may receive or see the promotion and then calculate what portion of them actually come into the store and purchase the promoted item it is even more eye-opening.

    Personalized marketing - like Safeway’s Just for U program, Kroger’s efforts, and the initiatives of many other big retailers that leverage shopper insights and precision targeting - is highly effective in driving significant gains in basket size, trip frequency, and retention over time. Giving each shopper savings on products he or she wants to buy and finds relevant is simple in concept, challenging in execution - but always powerful.

    The results are well-proven; simply look at Kroger’s performance over the past decade since their partnership with dunnhumby, at Safeway’s statements, and what other retailers are doing. One need not look further than how brand manufacturers are spending their marketing funds: An increasing focus on digital, leveraging shopper data, and the ability to direct the right promotion to the right shopper at the right time and in the right place. The world is not changing - it has changed. Retailers today must drive digital engagement with their shoppers and leverage digital to provide relevant savings to each of their shoppers.

    Regarding allegations that Anheuser-Busch InBev has been watering down its beer to save money, MNB user Jason Cunningham wrote:

    I think that drawing parallels between the current Budweiser lawsuit, alleging criminal and intentional deception, and Maker's Mark 'test' of watering down their product is unfair.
    Maker's Mark announced their change and allowed consumers to weigh in with their opinions.  One could argue that Maker's Mark should have had that discussion prior to actually making a change to their product, but to their credit, they switched back to the original formula and thanked their consumers for their valued input.
    Budweiser, it is alleged, covertly decided to increase profits by deceiving their consumers and may have violated some labeling laws in the process.  As you often write; in today's world transparency is required.  No matter what, I'm sure Budweiser will struggle to regain the trust of its customers.

    From another reader:

    I agree that ABI is a reputable company.  I have a feeling that disgruntled employees that were let go are stirring the pot.
    Marker’s Mark, was upfront about a recipe change. (this could have increased their profits per unit, since they would have paid less FET (Federal Excise Tax)
    And, the alcohol excise tax is based on ABV (alcohol by volume) and the excise tax would be lower if there was less alcohol in the product.

    And another:

    ...As to Maker’s Mark, correct me where necessary, had the good labeling sense to a priori identify the proposed reduced alcohol content. I don’t think it ever got beyond  Maker’s declaring their intention before  the public outcry forced them to come back to their senses.  I agree with you, I can’t believe AB would be so stupid as to not correctly identify alcohol content.

    I said yesterday that it seems to me that a simple lab test could resolve this question, which led one MNB user to write:

    Kevin, if people are actually suing -- hiring lawyers, preparing complaints, filing suit -- then they've already done the simple lab test you suggest.

    You'd think so. But if you're right, and A-B is circling the wagons and just hoping to minimize the damage, then they're in bigger trouble than they realize.

    From another reader:

    I think honest beer drinkers should sue any one that drinks an A-B brand beer for defamation to true beer lovers…

    And another:

    I am outraged…… if this is proven to be true…..we’ll have to drink more beer to get the same effect!

    To be clear about something I wrote yesterday, when I said the following...

    I'm not ready to believe that A-B has done this ... Though I might have said the same thing a few weeks ago about Maker's Mark.

    ...I was not drawing a direct comparison between the actions between the two companies, but rather that sometimes my beliefs are challenged by reality, and that I need to keep an open mind that even big and great companies can screw up. I just used Maker's Mark because it was convenient, and water also was involved.

    We had a piece yesterday about how consumer confidence is improving, according to the Conference Board, which led one MNB user to write:

    Consumer confidence improving? …… Who are these people surveyed? Do any of them even fill their gas tanks or go to the grocery store? Have they looked at their paycheck stubs since the first of the year?

    Maybe they're invested in the stock market...

    And from MNB user Mark Heckman:

    "Ignorance is bliss" I suppose.  

    The more aware and engaged I am politically and with the economic fundamentals that drive our GDP and employment, this more pessimistic I become.  Perhaps I should learn to "whistle" and join the other confident consumers as we stroll past the graveyard!!

    Remember...When you're chewing on life's gristle, don't grumble, give a whistle...

    And finally, MNB user Dale Tillotson wrote:

    I opened up MNB Wednesday and thought it was the daily racing form, from watered down Clydesdales, to the horse meat beef scandal, and then of course Kevin adds in his view the over/under of when horse meat will be found stateside.

    Off to the track.

    I feel a song coming on...

    I got the horse right here
    The name is Paul Revere
    And here's a guy that says that the weather's clear
    Can do, can do, this guy says the horse can do
    If he says the horse can do, can do, can do.

    For Paul Revere I'll bite
    I hear his foot's all right
    Of course it all depends if it rained last night.

    Likes mud, likes mud, this X means the horse likes mud
    If that means the horse likes mud, likes mud
    Likes mud...
    KC's View: