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    Published on: May 16, 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, I'm Kevin Coupe and this is FaceTime with the Content Guy.

    Today, we're going to reach outside the business world for an example of how an institution seems totally out of touch with modern reality.

    In this case, the institution is Ohio Wesleyan University. Now, I'm not picking on OWU for any reason other than the folks in the alumni department there dumped a great example of irrelevance into my lap.

    The other day, my son, Brian, who graduated from OWU several years ago, got one of those standard letters from the college looking for money. As a sort of premium, or just as a way of making Brian feel connected, they sent him a sheet of return address labels that had his name and address on them, along with various OWU logos.

    Now, Brian, who is about to turn 24, looked at the labels and said: "What exactly am I supposed to do with these?"

    Now, he knew what they were. He just didn't have any use for them ... because he never, ever sends a piece of mail that goes out via the post office. Nope. He pays his bills online, communicates via text messages and emails, and it could take him 50 years or more to go through this sheet of 60 address labels.

    It does not speak well of any organization that is supposed to be tune with how young people communicate that it could be so far off the mark.

    In some ways, it is not a big deal. Just a bunch of labels.

    But in many ways, it is a very big deal. Because it is about a lot more than a bunch of labels.

    So here's the question I would pose to you...

    In your organization, what are the address labels that you are sending out? What are the things you are doing that, while they might have had value at some point, now speak to a kind of growing irrelevance and lack of connection to what your consumers actually think and how they actually act?

    I'll bet there are some. All organizations have them. in fact, I'll bet they aren't even that hard to identify.

    But then comes the hard part - shaking off the dust, killing the sacred cows, and finding ways to get rid of the old stuff and bring in new insights and fresh innovations that can contribute to a more vital and relevant future.

    And then, doing it again and again, every day.

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

    KC's View:

    Published on: May 16, 2013

    by Kevin Coupe

    We've had some discussion here on MNB over the past week about the comments made by Mike Jeffries, CEO of Abercrombie & Fitch, who essentially said that he does not want heavy and/or unattractive people wearing his clothes because it diminishes a brand that he wants to be only for "cool" people, and that the A&F brand is designed to be exclusionary.

    These statements have caused a firestorm on the internet, with much of the reaction being negative - not because of Jeffries' desire to do a kind of niche marketing, but because his language seemed both obnoxious and inelegant. (There also was a lesson to be learned from the fact that he made the comments in 2006, which demonstrates yet again that nothing disappears once it is on the internet.)

    Now, there is a video out there that is making the rounds - I got links to it from more than a dozen MNB readers yesterday - that is worth a look, because it demonstrates how consumers can exercise their power and give voice to their outrage in really effective ways. Some people will find the language to be a little rough, but I think it is definitely worth watching ... it challenges the brand in some fundamental ways.

    Plus, it's pretty funny.

    You can watch it here.

    Oh, and one more thing.

    This video, as of this posting, has been viewed more than 4.2 million times.

    It is an Eye-Opener.
    KC's View:

    Published on: May 16, 2013

    The Los Angeles Times reports on what is called an anaerobic digester system operated by Kroger at a Compton, California, distribution center, that actually serves to "transform moldy chicken and stale bread into clean electricity ... Though many grocery stores have tried to cut down on food waste and experiment with alternative energy, Kroger says it's the first supermarket company in the country to do both simultaneously."

    Here's how it works, according to the Times:

    "Several chest-high trash bins containing a feast of limp waffles, wilting flowers, bruised mangoes and plastic-wrapped steak sat in an airy space laced with piping. Stores send food unable to be donated or sold to the facility, where it is dumped into a massive grinder — cardboard and plastic packaging included.

    "After being pulverized, the mass is sent to a pulping machine, which filters out inorganic materials such as glass and metal and mixes in hot wastewater from a nearby dairy creamery to create a sludgy substance ... From there, the mulch is piped into a 250,000-gallon staging tank before being steadily fed into a 2-million-gallon silo. The contraption essentially functions as a multi-story stomach.

    "Inside, devoid of oxygen, bacteria munch away on the liquid refuse, naturally converting it into methane gas. The gas, which floats to the top of the tank, is siphoned out to power three on-site turbine engines.

    "The 13 million kilowatt-hours of electricity they produce per year could power more than 2,000 California homes over the period, according to Kroger.

    "Excess water from the digester is pumped out, purified and sent into the industrial sewer. Leftover sludge becomes nutrient-rich organic fertilizer, enough to nourish 8,000 acres of soil."

    The story goes on:

    "The program helps Kroger reduce its waste by 150 tons a day. The trash otherwise would have been sent to Bakersfield to be composted, hauled away six times a day by diesel trucks traveling 500,000 miles a year.

    "Kroger won't say exactly how much it spent on the anaerobic digester but estimates that it will offer an 18.5% return on the company's investment. The project, over its lifetime, could help the grocer save $110 million. The supermarket giant is considering similar technologies for its La Habra and Riverside facilities and other Kroger locations nationwide."

    The company says that "the system will provide enough renewable biogas to offset more than 20% of the energy demand of the Ralphs/Food 4 Less distribution center. Combining the use of renewable energy power with more than 150 zero emission fuel cell fork lifts, the Ralphs Food4Less distribution center is now one of the greenest and most efficient, advancing the City of Compton as a leading sustainable community."
    KC's View:
    I don't want to compare apples to oranges here, but as I read this coverage I found myself thinking about how this sort of initiative differentiates Kroger's stores in the marketplace, and in an entirely positive way. And then I found myself thinking about how a very different sort of public posture seems to be eroding the brand equity at Abercrombie & Fitch.

    And while they are not competing, in reading all this coverage I found myself thinking that this would make me happy to shop at a Kroger store, and that I will never walk into an A&F store ever again, and that I will urge my children (who are both younger and more attractive than I) never to patronize the chain. Some retailers make you feel good about doing business with them, and others make you feel like you want to take a shower.

    The great Robert B. Parker once wrote that it isn't hard to know the right thing to do. But actually doing the right thing is an entirely different matter.

    So true.

    Published on: May 16, 2013

    The San Francisco Business Times reports that Robert Edwards, the new CEO of Safeway, says that while the company is still testing its Fast Forward payment system, and it will be "many months" before it is rolled out to the entire company, he is already getting calls from other retailers hoping to license the technology.

    Fast Forward allows customers to link their Safeway loyalty cards to their checking accounts, which enables them to make payments while bypassing traditional credit card and debit card transaction fees.

    ""We've been working for a number of years on payment technology that provides efficiency," Edwards says. "We're embracing the technology that we can use throughout the system and make available to partners who have expressed interest ... When people think of innovation, they think of Silicon Valley. At Safeway, we're always looking for innovation and best practices."
    KC's View:
    When I first read about Fast Forward, I thought that this seems like the kind of technology that could be developed and then spun off in much the same way that Safeway grew its Blackhawk gift card business. And the Business Times seems to agree with this speculation, suggesting that just such a spinoff could be in the cards.

    I think we're going to see a lot of these kinds of programs in coming years, as companies see that helping consumers and retailers avoid high transaction fees can be a sweet spot for business growth.

    Published on: May 16, 2013

    Delhaize-owned Food Lion announced yesterday that it has made significant investments in 178 stores in five states - Delaware, Maryland, Pennsylvania, Virginia and West Virginia - that are designed to "offer customers lower prices on 6,000 items throughout the store and access to quality store brand products at new lower prices, including the company's my essentials products." In addition, Food Lion says that it has improved its produce offering, created a faster checkout system, and is now offering a double-your-money-back guarantee. 

    The company says that now "more than 800 Food Lion locations have received these investments, representing nearly 80 percent of its store base."

    To celebrate the launch, Food Lion says, it "is holding grand re-opening festivities at the 178 stores, including providing the first 50 customers at each location a bag of free groceries today through Saturday, May 18."
    KC's View:

    Published on: May 16, 2013

    The Cincinnati Business Courier reports that Kroger CFO Michael Schlotman told an analysts meeting this week that while the company is shopping for acquisitions, it is only going to make deals that are an ideal fit.

    In addition, Schlotman said, the company is looking at ways of developing a grocery delivery business: "We’ve had folks spend a lot of time in Europe lately trying to understand some of depot businesses and ideas like that where you can essentially have a great big drive-thru where you call in your order and the order’s ready for you and you put it in your trunk. Those potentially have merit."
    KC's View:

    Published on: May 16, 2013

    The Wall Street Journal reports that Walmart "has acquired two Silicon Valley tech startups. The deals are the latest in a string of more than a dozen small investments to boost its e-commerce operations ... The retail giant has been scooping up small internet companies for the past two years in a bid to catch up with rival Amazon.com, which currently racks up nearly four times the online sales in the U.S. as Wal-Mart."

    According to the story, "Tuesday’s acquisitions include Tasty Labs, a software application development company started by former Google and Mozilla employees and was backed by venture capital giants Andreessen Horowitz and Union Square ventures, as well as OneOps, a cloud computing company started by a group of eBay veterans."

    The Journal writes that "the startups will become part of @WalmartLabs, the technology arm of Wal-Mart’s Global e-commerce division."
    KC's View:
    These strike me as very smart moves, but the big challenge, as I've written in the past, is that Walmart seems genetically engineered with antibodies designed to fight off any challenge to the traditional supercenter business.

    It seems to me that Walmart has to simultaneously understand that a) the bricks-and-mortar business and online business have to be integrated in a way so that consumers perceive Walmart as being a seamless shopping experience, and b) its online business will be competing not just with other retailers, but also with supercenters for the consumer dollar.

    In essence, Walmart has to be comfortable with disruption from within. I'm not sure we've seen that yet from the Bentonville Behemoth, but my sense is that this is the goal, at least in some quarters.

    Published on: May 16, 2013

    Internet Retailer has a fascinating piece about a new survey from Bizrate Insights saying that "50.93% of online shoppers had paid sales tax on their most recent online purchase, leaving 49.07% who said they had paid no sales tax."

    Two other interesting passages from the story, which can be read in its entirety here:

    • "74.94% of respondents said price was a determinant in their decision to complete a purchase online; 60.27% said the purchased item was offered at a discounted price; and 79.01% said the retailer where they completed the purchase offered the best overall price, online or offline."

    • "Just over half, or 53.57%, said they had received free shipping in their most recent online purchase."
    KC's View:
    This is important, because it suggests that all the folks who think that sales taxes on internet purchases will "level the playing field" and suddenly bring Amazon crashing down to earth are, in a word, delusional. And that's because smart e-tailers will continue to offer sharp pricing where it matters, and services like free shipping that will affect consumer behavior.

    Published on: May 16, 2013

    • The National Grocers Association (NGA) yesterday released a formal position paper calling for comprehensive immigration reform that will include the following principles:

    1) "US Borders must be secured and the rule of law must be enforced."

    2) "NGA supports mandatory E-Verify of new hires for all employers, at no cost to the employer.  Employers must be afforded a strong safe harbor of protections in exchange for good faith compliance of E-Verify."

    3) "Expand guest worker program to include workers with skills such as bakers, butchers, food service in addition to other low-skilled workers important for the supermarket industry."

    4) "Clear path that allows the estimated 11 million undocumented immigrants to come out of the shadows with background checks and penalties."
    KC's View:

    Published on: May 16, 2013

    Responding to yesterday's story about a study suggesting that imports are healthier for the US economy than made-in-the-USA products, and my criticism of the study as being short-sighed, one MNB user wrote:

    Kevin, I loved your observation about how overseas manufacturing stifles innovation.  And look, I’m not some flag waving protectionist, but it does have an impact.

    Case in point: A decade ago my wife, who is a Certified Hand Therapist and avid gardener, hatched an idea for a therapeutic garden glove.  I was in my MBA program and did a thorough marketing plan, and with the aging population this was sure to be a home run.  I was fully supportive and excited.  My wife assembled a mockup of the product and we went about looking for a manufacturer with excess capacity.  We met with Honest Abe glove company, with good ole Abe Lincoln’s picture on their packaging.  And guess what - they don’t make their own gloves much less make them in the US.  As the man we spoke with in Chicago explained it, Honest Abe is a glove marketing company not a glove manufacturer.  Just like Nike is a brilliant shoe marketer that doesn’t make their own shoes.  He explained how very few textile manufacturers are left with everyone in China, although even that is changing as even cheaper labor is being found elsewhere.
     
    We tried to obtaining a patent but was told by our patent attorney after a thorough patent search that it was not patentable, similar to how you can’t patent a chair.  So with an easily stolen design and not speaking Cantonese, we ditched the whole idea.  Had there been somebody, anybody who could have helped us get to market we probably would have risked it and gone for it.
     
    A big part of the American dream is steeped in working hard, to think of an idea or a product, start a business, and with a strong work ethic and treating people fairly you have the opportunity to do well.  I still believe that!  But in this global economy it has gotten much harder to pull off.  When you can’t source the material for what a finished import product costs it’s a little discouraging.
     
    So Imports are good huh?  Maybe for Suzie Homemaker but not for the innovative glove entrepreneur.  And if it isn’t obvious the world isn’t a fair marketplace, and it’s too bad it took the deaths in Bangladesh to point that out once again.  But what are companies here like Walmart supposed to do?  Walmart didn’t build the factory building that collapsed, they weren’t in charge of the building inspections.  Why aren’t people as quick to blame Bangladesh and their lack of inspections for this horrific accident as quickly as some are to go after Walmart.  Then there are labor standards, wage standards, environmental standards…none of which match up to the same level as that in the US.  Every time an item is made somewhere else “that could have been made here,” it isn’t without breaking some US regulation or standard of some kind.  Savings don’t come out of thin air, and with fuel prices so high it had better be a substantial savings at that.  Damn it, now I am sounding like a flag waving protectionist.


    MNB user Mike Franklin wrote:

    The statement, “Increasing US standard of living by making cheap goods available" ... So our US standard is so low that by buying cheap goods we are better off?  If anything, the last 5 years should have taught us that the “Great American Dream” needs to be redefined. Maybe we should think about the cost of rampant consumerism in relation to global sustainability…maybe we should think about the cost, in human misery, of cheap goods…maybe we should think about the decline of the middle class and the need for cheap goods because discretionary money has disappeared…maybe we should  think!




    Of course, any discussion of global sourcing these days inevitably leads back to a conversation about factories in places like Bangladesh that often are substandard, paying employees poorly, and generating the cheap goods that somehow don't seem so inexpensive when a factory collapses or catches fire and hundreds of people are killed.

    One MNB user wrote:

    Having had experience with contract factories in Asia…very few contract factories…or their sub-contract factories are utilized without a pre-contract signing inspection/audit. Ex-pats are on the ground inspecting product quality, introducing new products to management, resolving production issues, placing orders, etc. on a weekly…monthly… seasonal or at least once a year. They know what is going on.

    I've always believed that the companies that say they have no idea what is going on in some of these countries are like Major Renault in Casablanca, who says he has no idea that gambling is going on at Rick's Cafe Américain ... just before he is handed his winnings.

    And, on a related subject, one MNB user wrote:

    Hi Kevin, just read your column and saw that China wants pork imported from the US to be tested for a certain additive. There's a tinge of irony here in this, given the news reports from China about tainted baby formula and pork dumplings filled with rat "meat" or paper pulp.

    Yeah. I got that, too.




    It was a tangential discussion, but I made the comment the other day that while I am uncomfortable with the idea of the morning-after pill being made available over-the-counter to 15 year old girls, I'm not sure that my comfort is the issue ... while I'd like to think that my daughter and I have the kind of relationship that would allow for conversation if such a product were needed, there probably are a lot of girls out there who might not feel that way about their parents.

    Which led one MNB user to write:

    Nobody wants to think their daughter wouldn't come to them to have "the conversation" before the fact.   Are you kidding me?   Wake up, people!!

    In 2010 the average age of onset of puberty in girls was 10.5 years old!!!  (Google it!)   And really, no matter how great your relationship, as a 15-year-old would you have told your mom before you went to buy condoms?


    You could fill volumes with the stuff that I would not and could not have told my parents when I was 15. Hell, you could fill volumes with the stuff that we can't and wouldn't talk about now - and I'm 58.




    On a political note, one MNB user observed:

    Whenever I hear or read words like “where mature, non-ideological conversations and negotiations can take place,” it’s from somebody expressing a political viewpoint and means, “where people agree with me.” It seems to be an attempt to shame people into going along.

    I absolutely understand why you feel that way. Because that's the way things seem to be these days. But that's not how I meant them. Believe it or not.




    The other day, in a conversation about the Abercrombie & Fitch controversy, we had an email from an MNB user who said, in essence, that the company was entirely justified in its approach - that pretty girls make everything more salable, and that this is just the way the world works.

    My response:

    I do know this. When I go to a restaurant, I pay attention to the food and the service. When I stay in a hotel, I'm more interested in the speed of the internet, the comfort of the bed, the force of the shower and the thickness of the towels. On a flight, I want an aisle seat and a safe landing. And I don't go to Hooters, because a) the food sucks and b) I wouldn't want my daughter working there. And so on.

    It is attitudes like these, and people like you, who create an often unfriendly and often even hostile work environment for a lot of women. I know, based on previous exchanges, that you say you hire a lot of women for different functions and that they are thrilled to often take less money because you are "tolerant" of the fact that they have different work-life balance needs than men.

    But I cannot imagine why any woman with a shred of dignity would want to work for you. Nor why any woman with a shred of common sense would ever want to hire you.


    One MNB user wrote:

    A huge thanks for your logical/progressive/21st century stand-up statement on women in response to David Livingston.  I’ll go you one better - not only would I never consider hiring him, working with or for him, in reality - I wouldn’t accept the guy’s “connection request” on LinkedIn.   In fact, I took some true pleasure in denying it.  As a slight tangent, sometimes I think male leaders are more accepting of  the concept of women in the C-suite if they have daughters.  For some reason you seem to “get it.”  Maybe it’s because you’re a really thoughtful, smart person, but maybe it’s partly because you have a daughter….Just a thought.

    I have more than a daughter. I also had a mom, and still have four sisters and a wife, and I've worked for women several times in my life. All strong women who generally have been smarter, savvier and even tougher than me. (Two of the best people I ever worked for were a woman named Jeanne Glynn very early in my career, and Lindsay Hutter, much later.)

    I'm not the smartest guy around. But most of the time, I know enough to pay attention.

    From another reader:

    I am reaching out to commend you for your comments in response to David Livingston’s “pretty girls” commentary. I am absolutely disgusted by Mr. Livingston’s comments and believe wholeheartedly, like you, that it is people and attitudes like this that ultimately prevent workplace diversity from moving forward. I believe these attitudes are also what prevent our society from growing & advancing, as well. With individuals like this, it is no wonder that we continue to battle racism, sexism, and overall discrimination in this country. It is sad that individuals like Mr. Livingston, with his shallow thinking, feel the need to voice their ridiculous opinions, however twisted and idiotic their beliefs are.

    And, from MNB user Robin Russell:

    My friend, you continue to rise in my estimation!   There is hope for the species!!

    Don't get too hopeful. I'm as capable of male stupidity as the next guy.
    KC's View: