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    Published on: January 10, 2014

    by Kevin Coupe

    There was an interview yesterday on National Public Radio's Morning Edition that I think is worth listening to.

    The interviewee was Hedrick Smith, former Washington bureau chief for the New York Times and author of a book entitled "Who Stole the American Dream?" And the subject was stakeholder capitalism vs. shareholder capitalism.

    Specifically, Smith was talking about a labor agreement reached in Seattle between Boeing management and organized labor that will result in Boeing keeping its operations in Washington State for the next decade. However, while the deal is seen as being critical to the Washington economy, it also included steep cuts in health and retirement benefits for tens of thousands of workers, which Smith suggested could have an impact on the area's middle class, and is emblematic of a broader trend in America that heightens economic inequalities. Smith suggests that while the skilled Boeing workforce had to swallow benefit cutbacks, top execs engineered for themselves benefits that came in the form of stock, and then, essentially, pursue strategies that are designed to increase the company's stock price.

    Smith says that this illustrates a shift from stakeholder capitalism to shareholder capitalism, and while he says that both are forms of American capitalism, one is a more traditional view, and the other has gained greater traction in the new economy.

    This struck me as relevant to the issue I raised yesterday regarding the decision by Macy's to lay off 2,500 employees even after having a relatively strong holiday shopping season, because of what the company described as a desire to improve efficiency. The company also said that it would have no discernible impact on service levels.

    I wrote yesterday, in part:

    When I see a story like this, I find myself wondering if it is really about efficiency, or is it about making cuts that will drive up the stock price, because in the end, the company sees shareholders as more important than customers?

    Here's what I know - there are now 2,500 people who, at least in the short term, have had their ability to buy anything (much less from Macy's) seriously curtailed. Not good for the economy as a whole, and maybe not even good for Macy's.

    I'm not saying that Macy's is or isn't living up to its responsibilities here. I'm just wondering how the company defines its priorities … and suggesting that the bigger question - about efficiency vs. effectiveness, and profitability vs. productivity - deserves discussion within this context.


    I'm not suggesting here that a company's stock price has no importance, though there are those who would suggest that too many companies are too focused on Wall Street while paying too little attention to Main Street. But I think that the question bears consideration … whether success is being defined in ways that creates an economy that is more of a house of cards than it needs to be, or ought to be. And whether, in the long run, such an approach is sustainable.

    As I say, the Hedrick Smith interview is worth listening to. And thinking about. You can hear it by clicking here.
    KC's View:

    Published on: January 10, 2014

    The Indianapolis Business Journal reports that Marsh Supermarkets announced plans yesterday to close eight stores, five of them in the Indianapolis area, by the end of January. The move leaves Marsh with 78 stores in Indiana and Ohio.

    The company released a statement saying, "Customers have spoken and we are reacting to the realities of the markets and making difficult decisions to address the long-term health of the company. This action is the first part of a three-year plan we are implementing this year to position Marsh Supermarkets for growth and profitability. Our strategy is to remodel, rebuild and re-banner our properties."

    Marsh is owned by investment group Sun Capital, which bought the chain in 2006 and unsuccessfully tried to sell it in 2009.
    KC's View:
    In addition to competitive realities, Marsh also has been dealing with negative name recognition related to headlines made by the company's founder and former CEO, Don Marsh, who was charged with defrauding the company by using corporate funds to finance extravagant trips to places like China, Russia and Cuba - allegedly to check out products and investigate the possibility of exporting his own private label products - as well as to hand out gifts to family and friends, including several mistresses that he was keeping on the side, including one in a New York City apartment. Don Marsh was a poster child for executive malpractice and greed, and it cannot have been pleasant for the company to have his sins exposed to the sunlight.

    Published on: January 10, 2014

    The Boston Business Journal reports that Instacart, the personal shopping service that launched last year in San Francisco and then expanded to Chicago and then Boston, is now expanding its Boston footprint.

    According to the story, Instacart is moving beyond the communities of Boston, Cambridge and Somerville to Brookline, Jamaica Plain, Dorchester and Mission Hill. In addition, the company will offer delivery from Whole Foods there, in addition to Shaw's.

    Unlike other e-grocery services, where the selection and delivery functions are handled by the retailer, Instacart serves as a third-party facilitator, collecting its fees from customers for doing their shopping for them.

    Instacart says that its Boston sales have grown by 30 percent a week since its launch there.
    KC's View:
    I've never quite bought the Instacart business model. But I'm completely comfortable about being proven wrong on this.

    Published on: January 10, 2014

    Interesting piece in Advertising Age suggesting that the coming year could hold "dramatic changes for some of the world's most recognized brands, as more millennials, the influential consumers who already value transparency and social consciousness, become parents and expect more from brands as a result."

    The samples range from the National Football League to the food industry, and gauges how Millennials perceive them - and themselves.

    "Marketers make a dangerous mistake when they look at millennials as one cohort," the column says. "They are a diverse group, falling on a wide spectrum of tastes, behaviors and income levels. Brands ignore these differences at their peril.

    "Millennials are often incorrectly thought of as being drawn to only prestigious, high-value brands. In reality, many are struggling financially. It's also important to note that millennials don't view luxury the way other generations do. They consistently report that all brands, including high-cost brands, still need to be functional and affirm their world-view."

    You can read the entire piece here.
    KC's View:

    Published on: January 10, 2014

    Mobile Commerce Daily reports that Ford's SYNC AppLink, which is being installed in many of its new cars, will include a link that will "let consumers navigate mobile applications such as Domino’s via their voice … Before placing pizza orders, consumers will have to set their profile, including their favorite toppings, crusts and other selections on Domino’s mobile app, as well as the Ford Sync system."

    Domino’s Pizza has more than 10,500 stores in more than 70 international markets.
    KC's View:

    Published on: January 10, 2014

    Bloomberg reports that the French Senate has voted unanimously "to curb discounts by Amazon.com Inc. and other online retailers, seeking to support local bookstores." If it becomes law, as expected, the law "blocks online stores from offering free shipping on top of a 5 percent maximum discount on books. It calls for waived delivery costs to be included in the rebate limit."

    According to the story, "The bill is an attempt by France to support both its struggling bookstores and titles that aren’t immediate bestsellers."
    KC's View:
    This is the same country, if I'm not mistaken, that has the 35-hour work week. Which is to say, out of touch with the way business is done in the 21st century.

    Published on: January 10, 2014

    Walmart went public yesterday with a series of management changes that build on the retirement of CEO Mike Duke, his replacement by Doug McMillon, and McMillon's replacement as head of Walmart International by David Cheesewright.

    The City Wire reports:

    • "Tony Rogers, senior vice president of marketing for Walmart U.S. has been named chief marketing officer-Walmart China, reporting to Sean Clarke, chief operating officer-Walmart China."

    • "John Welling, senior vice president for supply chain management, information systems and global business process for Walmart Japan, will move to Canada, assuming the role of SVP of operations for Walmart Canada."

    • "With Welling’s move to Canada, Geoff Sease, vice president of replenishment, planning and space for Sam’s Club has been named as Welling’s replacement in Japan as SVP for supply chain management."

    • "Brett Biggs, will replace Cathy Smith as chief financial officer for Walmart International as she has accepted a leadership position elsewhere. Meanwhile, treasurer Jeff Davis will takeover as CFO for Walmart U.S., a position being vacated by Biggs. who is now serving as EVP and chief financial officer for Walmart U.S."

    • "Claire Babineaux-Fontenot has been promoted to treasurer, and will retain the chief tax officer responsibilities while she assumes additional responsibilities for investor relations, capital markets and treasury operations."

    • "Lisa Wadlin, VP of international tax was promoted to VP over global tax and she will report to Fontenot."

    • "Steven Zielske, chief audit executive, will be the new the Senior Vice President, Finance Capital Markets, reporting to Claire."

    • "Lori Flees will join Walmart on Jan. 13 as senior vice president of corporate strategy. She leaves Bain & Co, where she was a partner in the consulting firm. Prior to that she held roles at Intel and General Motors."

    • "Jamie Iannone is joining Wal-Mart … as the new president and CEO of Samsclub.com, effective immediately. The entire Sam’s Club eCommerce team will report to Iannone, who will be based in San Bruno, Calif., reporting to Neil Ashe, president and CEO of Walmart Global eCommerce, as well as Rosalind Brewer, CEO of Sam’s Club."

    • "John Boswell, SVP of marketing and member insights will leave Sam’s Club in May to lead an international mission for his church. With Boswell’s departure, Racquel Harris is being promoted to SVP for member strategy and marketing for Sam’s Club."

    • "Sonya Gafsi Oblisk, senior marketing director for Sam's Club, will succeed Harris as VP of marketing. She joined the company in 2008 working with private brands."
    KC's View:

    Published on: January 10, 2014

    Chicago Grid has a piece about HarvesTime Foods, a one-store Chicago independent grocery store currently going up against increased competition from Whole Foods and Mariano's, stores that have a similar food-driven orientation. According to the story, "Since 2011, the space occupied by independent grocers like HarvesTime has dropped 27 percent citywide, according to a recent study by Mid-America Real Estate. In the same period, gourmet grocery stores — a category that includes Whole Foods and Mariano’s Fresh Market — increased their floor space by 60 percent, the study found."

    The key to HarvesTime's continued growth, the story says, has been a relentless emphasis on local and specialty foods. "Increasingly, the product mix is a significant factor in that growth," the story says, adding that "the Coke products that once dominated an entire aisle in the store now take up a few feet of shelf space, replaced by a diverse array of local and niche products. There’s the gourmet ice cream made just a few blocks away. Searing-hot scorpion pepper sauce … Sweets from Greece, Turkey, and Bulgaria." And the company is hoping that enduring relationships - former with both suppliers and customers - will provide apathy to sustainability as competition gets tougher.


    • The US Securities and Exchange Commission (SEC) has charged Diamond Foods and two former executives with the company - former CEO Michael Mendes and former CFO Steven Neil - for what it said was "an accounting scheme to falsify walnut costs in order to boost earnings and meet estimates by stock analysts. Diamond Foods reportedly has agreed to pay $5 million to settle the SEC’s charges.
    KC's View:

    Published on: January 10, 2014

    • The St. Louis Business Journal reports that Todd Schnuck, 55, will become president/CEO of Schnuck Markets in March, succeeding his older brother, Scott Schnuck, 63, who will become chairman. Todd Schnuck has been serving as COO since 2009.

    Older brother Craig Schnuck, 65, who was CEO for 17 years until 2006, will retire and become chairman emeritus.

    Anthony Hucker, the former Walmart and Aldi executive who joined the company last September as chief strategy officer, will step into the COO role.


    • Family Dollar announced yesterday that Jason Reiser has been promoted from Lead Merchandising Officer to Executive Vice President - Chief Merchandising Officer.
    KC's View:

    Published on: January 10, 2014

    Some responses to my piece yesterday about the Macy's layoffs, which I further explored in this morning's Eye-Opener.

    One MNB user wrote:

    Regarding Macy's Wednesday announcement to cut 2,500 jobs in light of Terry Lundgren's revelation that the company has "identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers", you seem to have already concluded (in your customers-versus-shareholders importance observation) that the job cuts are all about beefing up the company's bottom line, and are about nothing else.  Now, the company's comment that the cuts were made in order to "sustain profitability" could be interpreted as simply a heavy-handed vehicle to take all the expense savings right to that bottom line.  But that would be "improving profitability", not merely "sustaining" it, wouldn't it?

    If we take Lundgren's statement at face value, I think it could be interpreted as foreshadowing a strategic company plan to flow these expense savings back to customers in the form of lower prices, thus materially enhancing Macy's value proposition to the consumer; that would seem to me to be entirely consistent with a strategy designed to "sustain profitability."  Maybe even at the expense of shareholders; who can really say for sure at this point?

    Myself, having kicked around retail corporate HQ offices for many years, I can say absolutely without hesitation that the idea of reducing expenses -- often through job cuts -- then flowing the realized savings over to the consumer via price reductions is a very, very common theme; witness Supervalu, for example.  So, to seemingly conclude from Lundgren's statement that the job cuts are simply about ruining people's (now-former employees') lives simply to pass along their salaries to shareholders in the form of a higher stock price closes off the possibility that the job cuts really are, in fact, the funding for lowering shelf prices; and that is a very customer-centric strategy, it would seem to me.  Possible you're manifesting a little epistemic closure on this decision?


    Maybe.

    I'm not sure I was suggesting that anyone was deliberately ruining people's lives as much as I was suggesting that this can be the inevitable result of a system that places a priority on the wrong things.

    From another reader:

    The newspaper story I read indicated that they will be closing a handful of store locations, but otherwise the article was not specific about the nature of the rest of the 2,500 jobs being cut.  May I point out that Macy’s (and most other retailers and e-tailers) hire temporary holiday help, most of whom do not stay on after the Christmas and After-Christmas rush.  I suspect that a large portion of the job cuts are these short-term workers and that the announcement of cutting jobs was, shall we say, overstated to sound good to Wall Street.  This is not to say that there aren’t some people in that number who are losing their actual jobs, nor is it to say that some of the temporary workers may have been hoping to be kept on after Christmas, but for most, they will go back to school, or back to their day jobs, having made some extra money for the holidays and gotten an employee discount to boot.

    Maybe. But maybe not.

    And another:

    I visited two different Macy's  in the Minneapolis area a few times during the holiday shopping frenzy, and all I can say is that I will never return to one of their stores.  Every employee I encountered was rude and grumpy.  Help was nowhere to be found.  During one visit, I was returning some items with tags removed, yet I had the receipt, and they made me feel like a criminal.  Maybe something else is happening with the culture over there.

    And still another:

    I thoroughly understand your points and argument in your commentary on Macy's. For the last several years, Macy's has won our choice for Christmas shopping at least for mall stores, department stores, or those we now know as brick and mortar retailers. Prior to that, it had been Eddie Bauer. They won not on their advertisements of celebrity products, but on their overall store experience. Others may have found different, but at least in our area, their two locations provide exceptional service in all areas. Each of the last couple years we've had associates at both locations go above and beyond to help us.

    So, will this decision impact that? It is hard to say. Our two locations have been transformed from J.L. Hudson's to Marshall Fields, and now Macy's. Each transition has actually substantially improved the shopping experience. I might not have expected that to be the result, but it has been the case.

    From the reporting of the announcement, they plan also to close eight locations and open eight this coming year. While slightly above flat, they will grow their stores. The total in the report said it would bring them to 884 locations. In simple math, their reduction equates to less than three associates per location. While the overall number in total of 2,500 seems and is a lot of associates, the number by store seems negligible. Nevertheless, to paraphrase General Norman Schwarzkopf, "It is hardly negligible to the associates lost".

    Businesses have to make difficult decisions about their operations - true. It does seem all to often the first decision is to cut people. Like you, I'm not sure that efficiency is gained in all cases of reducing a workforce. In addition, there are other impacts when things like this occur like the impact to those that remain and they can have customer facing results.

    Can three associates per location make a difference? My guess is yes. Would the difference be better for the company if they were gone or retained and more wisely utilized. My guess is the latter. It also makes a retail mind wonder if simple attrition could have reduced head count while efficiency is gained by best utilizing associates to further enhance the overall customer experience. That, of course, would be top line thinking rather than the opposite.

    If asked, I'm sure there would have been enough ideas out of 2,500 that would have tripled the savings that may have been gained by not having them at all.

    This may be an excellent example where your resolution thoughts on an ombudsman asking "What are you thinking" would be best applied.

    As with any retailer, Macy's will have to live with the decisions they make. Time and experience will determine the result.




    Also got some reaction to my "if I ruled the world" list.

    MNB user Ken Wagar wrote:

    1. You don't.

    2. Welcome to BGOM: the Brotherhood of Grumpy Old Men.


    Actually, I don't think I was being particularly grumpy.

    MNB user Tom DeMott wrote:

    I enjoyed your rules in ruling the world, but I have one suggestion to add; "everyone should be required to do something nice for at least one person each day, totally unexpected, a surprise." This applies to everyone including members of Congress who would not be exempt.

    MNB user Rex Lieurance wrote:

    Concerning your resolution for baseball and PEDs, I would like to add a provision that when it's discovered a player has been using PEDs, every game he participated in will be retroactively forfeited by the team.   That would make the teams more proactive in testing and awareness.

    And from another:

    I liked most of what you proposed in your FaceTime article. Too bad it only reaches a relatively small number of people and companies.The congress should pay close attention to your comments. They need to do something to earn the right to represent us. Keep reminding us what is "the right thing to do". We all need instant reminders. Thanks for your daily MNB.

    And finally:

    As I read your Thursday FaceTime story, the thought that went through my head was the Coca-Cola song “I want to teach the world to sing”....  It strikes me you have achieved great balance in your life, Kevin. May we all go into 2014 feeling such peace in our own lives.

    You often refer to Ms. Content Guy and her role as a teacher of our youth. I was surprised that you didn’t include any suggested change about education, reform or otherwise, given how much admiration you have for her contribution to our youth.


    I'm not done.

    But I also don't want to get her fired.
    KC's View:

    Published on: January 10, 2014

    I was completely and utterly caught off guard by Nebraska, the new film from Alexander Payne. I loved his last film, The Descendants, and while I figured I ought to see to see his new one, I didn't expect to love it - a black-and-white movie about a father and son sharing a road trip from Montana to Nebraska just didn't sound like my thing.

    But not only did I love Nebraska, but it quickly became one of my favorite movies of the year - a charming, beautifully performed, tender movie about family ties that transcend even tough times and barren emotional landscapes. Bruce Dern plays Woody Grant, an elderly Montana man who appears to be suffering from some form of dementia; he's received one of those letters about how he may have won a million dollars, but he's convinced he's actually won, and is determined to go to Nebraska to pick up the cash - even if he has to walk. While his family isn't sympathetic, one son, played by Will Forte, decide to humor his dad and take him to Nebraska.

    I really don't want to tell you more than that, because you should have the pleasure of discovering its pleasures the same way I did. I will offer the observation that Dern is superb as is June Squibb, who plays his long suffering wife, and Stacy Keach, as a friend from his past. Will Forte is excellent, as is Bob Odenkirk, who plays another son. And the whole supporting cast is wonderful.

    One of the things that I found most interesting about Nebraska is that I'm too young to relate to Dern's character, but too old to relate to Forte's. It is one of the achievements of Nebraska that I ended up relating to both … and finding enormous satisfaction in the connections therein. Go see it.


    Having watched Dern with so much pleasure in Nebraska, for some reason I wanted to see a movie from his earlier career … and so I turned to Black Sunday, one of my favorite thrillers. I'm happy to report that it has held up very well, and in some ways the plot - about a planned terrorist attack on the Super Bowl using the Goodyear blimp - is more timely than ever. Robert Shaw is outstanding as the Israeli agent tasked with taking down the terrorists, and Dern is equally strong as the troubled American who aids them. John Frankenheimer directed; the original book was by Thomas Harris, who later wrote "The Silence of the Lambs." Great stuff.


    Having gotten a taste from movies I loved in my youth, I next turned to The Big Fix, a nifty little mystery starring Richard Dreyfuss as Moses Wine, a former campus radical turned LA private eye. Based on a book by Roger L. Simon, The Big Fix is an under-appreciated film … and if you watch carefully, you'll see a very young Mandy Patinkin in a tiny role, playing opposite F. Murray Abraham … with whom he later acted in "Homeland." And Dreyfuss never has been better.


    And then, because I was on a roll, I then watched another LA private eye film - The Long Goodbye, directed by Robert Altman and starring Elliot Gould as Philip Marlowe, Raymond Chandler's iconic private detective. The Long Goodbye was somewhat controversial when it was first released, with some saying it violated Chandler's essential vision. But it doesn't seem that way to me now - in fact, I think that had Chandler lived to see the seventies, he might've adjusted his vision somewhat, if only because the mean streets got a lot meaner.


    I won't go into it now, simply because I've only three episodes into season two … but I have to mention that I'm captivated by "Downton Abbey." It took me a while to put my toe in the waters of this highly successful period drama, which also didn't seem like my thing. But now, I'm totally hooked. Thank goodness for iTunes.



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

    Slàinte!
    KC's View: