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    Published on: January 27, 2014

    by Kevin Coupe

    Longtime MNB readers know that around here, we find every excuse to bring up Star Trek. Whether it be quotes from Captain Jean Luc Picard ("Everything is impossible until it is not") or comparing the management styles of Picard and Captain James T. Kirk, the general feeling here is that there are many things in Star Trek that offer business lessons and metaphors that can guide behavior and decision-making.

    Which made it particularly encouraging to reading a story in the Los Angeles Times that started out this way:

    "Isaac Newton, Albert Einstein and Stephen Hawking are playing poker together.

    "No, this isn’t a bad physics joke. It’s a scene from 'Star Trek: The Next Generation.' It takes place in a holodeck, a simulated-reality room in the fictional Star Trek universe. The three scientists — or at least computer-generated versions of them — have been transported to the 2300s to play cards with Lt. Cmdr. Data.

    "'I don’t even know why I’m here in the first place,' Newton says.

    "While the show is set in the future, some scientists and researchers say we could have something like holodecks by 2024. If you have enough money, you could even buy one today, though it would be crude compared to the holodecks on Star Trek.

    "This is all part of a quest by computer companies, Hollywood and video game makers to move entertainment closer to reality — or at least a computer-generated version of reality. Rather than simply watch movies, the thinking goes, we could become part of the story. We could see people and things moving around our living rooms. The actors could talk to us. Gamers who today slouch on the couch could step inside their games. They could pick up a computer-simulated bat in computer-simulated Yankee Stadium while a computer-simulated crowd roared around them."

    Wow.

    To begin with, the Times gets the science a little bit wrong. The computer-generated versions of the scientists are not "transported" to the holodeck. Rather, matter is both transported to and reassembled in the virtual reality system to create their images. It also is worth noting that the real Hawking played himself in the scene - he happened to be a "Star Trek" fan.

    This Eye-Opening piece in the Times suggests more than the fact that, in fact, "everything is impossible until it is not." It also suggests ways in which retail could change in the long term. Instead of simply stocking and displaying merchandise on shelves, racks, coolers and cases, there may eventually be ways in which retailers can create immersive experiences that will allow people to interact with products in different and compelling ways.

    Perhaps one could be virtually"transported" to a vineyard while in a store's wine department, where they could interact with a winemaker. Or could find themselves in virtual kitchen, getting educated by a trained chef, when trying to decide whether to buy this cut of meat or that piece of fish.

    All of which will create new challenges, and new opportunities for differentiation, for retailers trying to compete in a world that seems to change in fundamental ways every day.

    True, it all sounds impossible. Until, of course, it is not.
    KC's View:

    Published on: January 27, 2014

    by Kevin Coupe

    SCOTTSDALE — Here at the 10th annual StorePoint networking and education event, things got rolling last night with a presentation entitled "What Can First World Merchants learn From Emerging Markets?" delivered by Paco Underhill, CEO/founder of Envirosell, the behavioral research and consulting firm. "The cutting edge of modern retail is not here," he told the audience of store designers, planners, real estate executives and suppliers.

    In essence, Underhill argued for a more experience-based marketing approach that "understands the architecture of design" with a real and tactical appreciation for how people live their lives and do their shopping.

    Underhill used a variety of examples from around the world to make his point. Among them:

    • A mall that uses the top floor of its parking lot as a drive-in theater, not just filling it at night with people who want to watch movies, but turning itself into a community center with broader appeal.

    • Retailers that drop converted shipping containers into locations, knowing that these movable stores can be expanded if they work, and relocated if they do not. "Why is retail about getting them to come to us, as opposed to us going to them?" he said.

    • Stores that have heightened security in parking lots, even searching suspicious cars, as mass shootings like the one last year in Kenya have created anxiety about the safety of public places. (This isn't just a third world problem, as recent shootings in Maryland and Indiana have shown, he said.)

    • Stores in Asia that actually slaughter chickens, ducks and pigs on the premises so customers have real confidence in how fresh and local they are. (This may be the ultimate in retail theater, but in this country, the US Department of Agriculture and Food and Drug Administration might have something to say about it.)

    • A department store that has "no men" sections, so that women looking for a blouse, for example, don't have to go to the dressing room to try one on - they can just do it right at the rack.

    Underhill suggested that since as much as 80 percent of supermarket purchases are "routine," retailers have to find new ways to present products, since at some level it will be the ability to break those routines - to curate products in effective ways - that will allow retailers to generate new sales dollars.

    The ability to "give good store," Underhill said, is more than just a function of design. "It is easy to change design," he said. "It is much harder to change a corporate culture." And ultimately, design ends up being a reflection of corporate culture.
    KC's View:
    While I am hesitant to disagree with someone of Underhill's stature, there is one statement he made with which I would take issue.

    At one point, he said that "if the operative word for the 20th century was strategy, the operative word for the 21st century is tactics."

    While I think I understand the point he is trying to make, I think he's wrong.

    Tactics are what make a great strategy work. But without a strategic vision, it seems to me, tactics usually end up being unfocused. To be an effective marketer, you can't have one without the other. And, you have to know the difference … that there is a difference between a tactic and a strategy.

    On Day Two of StorePoint 2014, it'll be my privilege to speak to the conference. And then, on Day Three, it'll be Amber MacArthur - the entrepreneur and social media expert - who will be wrapping things up.

    Published on: January 27, 2014

    Walmart announced on Friday that it is laying off 2,300 employees in its Sam's Club division, an effort that the Wall Street Journal said was designed "to help thin the ranks of middle managers in its weakest stores, marking the club chain’s biggest round of job cuts in four years … Nearly half the job cuts at Sam’s Club will target salaried assistant managers, and the remainder will be hourly employees at underperforming stores." The cuts represent roughly 2 percent of its total employees; Sam's Club represents about 12 percent of Walmart's overall revenue.

    Sam's Club CEO Rosalind Brewer tells the Journal that she is trying to get away from atop-heavy management structure.

    The Journal writes that "the cost-cutting moves come as Ms. Brewer aims to better compete with brick-and-mortar rival Costco Wholesale Corp. as well as to take on online membership clubs like Amazon.com Inc.’s Prime service. She seeks to double revenue and turn it into a $100 billion business, roughly the size of Costco.
    KC's View:
    It is hard to tell from the public statements, but it seems to me that if these efforts make the people on the front lines and the stores more responsive to customers, that's a good thing.

    As interesting to me are Sam's efforts to integrate its online initiatives into its broader operations … which is absolutely essential to begin relevant in the 21st century.

    Published on: January 27, 2014

    The New York Times reports that Michaels Stores, the arts and crafts retailer, is "investigating a potential security breach involving customers’ credit card information.

    On its website, CEO Chuck Rubin writes:

    "We recently learned of possible fraudulent activity on some U.S. payment cards that had been used at Michaels, suggesting we may have experienced a data security attack.

    "We are working closely with federal law enforcement and are conducting an investigation with the help of third-party data security experts to establish the facts. Although the investigation is ongoing, based on the information we have received and in light of the widely-reported criminal efforts to penetrate the data systems of U.S. retailers, we believe it is appropriate to notify our customers that a potential issue may have occurred."

    Rubin said that the company will provide updates as they become available, and urged customers to review statements for unauthorized charges.

    Michaels would be the third major retailer - Target and Neiman Marcus were the first two - to report a credit/debit card security breach.

    The Federal Bureau of Investigation (FBI) reportedly has warned retailers around the country to expect more cyber-attacks on their customers' financial data.
    KC's View:
    This is going to be an ever-present and evolving story over the next few months and years, and it is going to get worse before it gets better. And there seems to be a growing conspiratorial nature to the breaches that is extremely worrisome.

    Published on: January 27, 2014

    The Financial Times reports that "two thousand litres of purple tomato juice, pressed from genetically modified fruit grown in Canada, are heading for Britain to be tested for their health-promoting properties. The tomatoes, developed by UK scientists at the John Innes Centre and Sainsbury Laboratory near Norwich, are the latest in a new generation of plants designed to take GM into consumer applications.

    "Their promoters hope that these will be more acceptable to environmental campaigners than the herbicide resistant and insecticidal crops that have dominated the GM market so far."

    The story notes that "the purple fruit are designed to be superior to conventional tomatoes in two ways. First their high levels of purple anthocyanin pigments, normally found in blueberries and blackberries, provide health benefits. Tests on mice showed that these have anti-inflammatory and anti-cancer effects, and a clinical trial will start soon with UK heart patients drinking the Canadian-grown juice, which is likely to arrive within the next two weeks.

    "Second, the purple tomatoes have a longer shelf life, because the anthocyanins slow down the formation of rot and mould. This will enable growers to keep the fruit on the vine for longer, allowing a better flavour to develop."
    KC's View:
    To me, the important thing about this development is the fact that in the UK, the Food Standards Agency (FSA) has a rule saying that "if a food contains or consists of genetically modified organisms (GMOs), or contains ingredients produced from GMOs, this must be indicated on the label."

    I have no problem with the juice. I might even buy it and drink it. (The idea of it having anti-cancer properties seems like a compelling argument.) But since I also support transparency and consumer choice, it ought to be labeled as GM.

    Published on: January 27, 2014

    The Irish Independent has an interview with Chris Martin, CEO of Musgrave, the company that acquired the iconic Irish supermarket chain Superquinn in 2011 and currently is in the process of rebranding its stores with the SuperValu banner.

    While eliminating the Superquinn name has been seen as being a controversial decision, Martin says that it was both inevitable and necessary - that Superquinn was expensive to run, had niche appeal, and of a different ism and place.

    "You've got to go back to Feargal Quinn, who was a world-class operator, but operating in a completely different world six or seven years before we bought the business," Martin says, noting that the chain "languished" after Quinn sold it in 2005.

    "We went in and we stopped the rot," Martin says. "We've gone back and worked with colleagues to really improve service and engagement. We're getting tremendous mystery shop scores. The reality is that Superquinn as a standalone business didn't have access to the sort of own-brand range that we're able to give."

    Martin goes on to say, "People say it won't be the same. Well it won't. It'll actually be better … We can really bring a good alternative into the Dublin market. Our loyal Superquinn customers have remained loyal. I'm also really excited about bringing SuperValu to customers who wouldn't have considered those shops at all."
    KC's View:
    No argument here that Superquinn may have been of a different time, and it certainly is true that Ireland has gone through a financial tsunami in recent years.

    That said, count me among the people who are nostalgic for the levels of service and innovation that Feargal Quinn pioneered. His stores help to shape and change an entire industry, and were held up as a paradigm of excellence throughout the world.

    I don't think the approach is obsolete. Just not the business that Musgrave wants to be in.

    Published on: January 27, 2014

    The U.S. convenience store count increased to 151,282 stores as of December 31, 2013, a 1.4% increase (2,062 stores) from the year prior, according to the 2014 NACS/Nielsen Convenience Industry Store Count.

    According to the report, "The link between fuels and convenience retailing continues to grow. Overall, 83.7% of convenience stores (126,658 total) sell motor fuels, a 2.7% increase (3,369 stores) over 2013. The growth of convenience stores selling motor fuels is double the overall growth in the industry, as fuel retailers add convenience operations and convenience retailers add fueling operations.

    "Convenience stores account for 34.3% of all retail outlets in the United States, according to Nielsen, which is significantly higher than the U.S. total of other retail channels including drug stores (41,378 stores), supermarket/supercenter (37,459 stores) and dollar stores (24,853 stores)."
    KC's View:

    Published on: January 27, 2014

    Starbucks CEO Howard Schultz tells CNBC in an interview that an online "sea change" is taking place that will continue to encroach on traditional bricks-and-mortar retailing.

    "We are navigating through what I believe to be a significant sea change," Schultz says. "We're going to be talking about this for quite some time. I would not want to be a traditional brick-and-mortar retailer that did not have mobile payments, that did not have social and digital media. Those companies are going to find themselves significantly challenged in 2014 and beyond."
    KC's View:
    That sea change has been taking place for a long time, but Schultz is reacting to the fact that Starbucks did not quite meet analyst expectations for the final quarter, in part because of the migration away from traditional stores, which affected even it.

    I agree with him. if you don't have an omni-channel strategy, you risk being irrelevant. And if you don't, you sure better have a compelling store experience to compensate for it.

    Published on: January 27, 2014

    Last week, for the first time in MNB's history, we did a little pop-up survey. Just a couple of quick questions, meant to be low-stress for you and informative for me. And when we put it together, one of the things we agreed on was that it would be programmed so that you'd only see it once, whether you answered it or not. (That seemed like the least we could do because, let's face it, we all hate pop-up surveys.)

    On Day One, I got a bunch of emails suggesting that by offering people the ability to only choose one answer instead of clicking on "all that apply," I was being unhelpful. So I asked for the terrific folks at Webstop to reprogram it, which they did … but of course, I didn't think about the fact that by reprogramming it we also were hitting the "reset" button on the whole "see it once" thing.

    That was my first mistake. My second mistake was not realizing that a percentage of you have set your computers not to accept cookies … and so, of course, our system did not recognize that you'd already seen the survey. Which meant you keep seeing it, over and over. Which made me a liar, albeit unintentionally.

    All my fault. By the end of the week, once I realized what was going on , we took the survey down.

    The good news is that we got a ton of responses, even more than I expected. For which I am grateful.

    The bad news is that something happened on MNB that I didn't want to have happen: I abused your good nature.

    For which I apologize. Mea culpa, mea culpa, mea maxima culpa.
    KC's View:

    Published on: January 27, 2014

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

    • The Detroit Free Press reports that PepsiCo is eliminating the use of the world "natural" on many of its products, replacing it with the word "simply."

    According to the story, "the food and beverage giant says the name changes, which took place last year, are the result of it updating its marketing. But they come at a time when PepsiCo and other companies face legal challenges over their use of the word 'natural'."

    According to the story, "PepsiCo Inc. isn't alone in retreating from 'natural.' The owners of Ben & Jerry's and Breyers ice cream agreed to change its packaging in 2012 to settle lawsuits over its use of 'all natural.' Campbell Soup was sued in 2012 for describing its Pepperidge Farm Goldfish crackers as natural, with the suit noting they contain genetically modified ingredients."

    I've always sort of worked on the premise that "natural" is one of the most abused words in the food business … but it also isn't hard to imagine that "simply" can be abused as much. Companies should be careful if they describe something as "simply" this or that, if they aren't.


    • The Pittsburgh Post-Gazette reports that Giant Eagle "has signed an agreement to put one of its upscale Market District grocery stores along with a GetGo convenience store in Carmel, Indiana." It is Giant Eagle's first foray into Indiana, and is expected to open in 2015.

    Giant Eagle currently operates more than 400 stores in Pennsylvania, Maryland, West Virginia and Ohio.

    It would be my perception, having spent a little time in Market District stores, that any community that gets one is awfully lucky.


    • The Sacramento Bee reports that beef prices in the US could see big increases in the coming year, owing to an enormous drought in the western US that is having an impact on grazing lands, causing some ranchers to scale back or diversify their operations. It is a problem, the story says, that could take years from which to recover - it won't just be a matter of a few weeks of rain.
    KC's View:

    Published on: January 27, 2014

    On Friday, MNB took note of a Los Angeles Times report on the case of Mike Seay, an occasional customer at OfficeMax, who got a promotional email from the retailer last week addressed to: "Mike Seay, Daughter Killed in Car Crash."

    In fact, Seay's 17-year-old daughter was killed in a car crash with her boyfriend last year. And this case seems to be one of target marketing going completely off the rails., with no good explanation for how or why this happened.

    It prompted an email from MNB reader John Rand:

    Boy does this hit a nerve. I have been at a slow burn about the insensitive nature of untargeted/targeted marketing, especially by mail, since 1981, which just happens to be the year my infant daughter died of SIDS. At age 10 weeks by the way. Needless to say, this was a low point in the lives of myself and my wife.

    I have received marketing addressed to her or purported to be related to her pretty much every month for 32 years now. Some of the marketing  companies “aged” her in their databases from an infant, to a toddler, to a teen, to a prospective college student – each life-stage, a little piece of useless pointless irritating pain from a magazine, or a sales company, or a toy company, or a credit card company…some by snail mail, some even by phone (on the line that is registered on the Do Not Call list of course).

    More recently I receive regular messages for my deceased father, who passed away in 2010. And frankly, the worst offenders are charities and charitable find raisers – each one of whom has received notices from me that he is deceased but the marketing never stops.

    I make it a point NEVER to do business with any company that does this, never to contribute to any organization that does this. But I dearly wish there was a “Deceased – Do Not Market” list somewhere, required by law, with a real penalty for companies that just leave names on mailing and marketing lists, pass them along, and keep introducing useless and avoidable distress in other people’s lives.

    I doubt we could ever get Congress to actually penalize them for it – but unless they do, it will never stop.


    I've never really thought about this before, but I think you make an excellent point. There ought to be consumer protection legislation about this issue, and I cannot imagine why any lawmaker would oppose it.




    We had a piece last week about how Walmart says it believes it can have an online offering as robust as Amazon's in two years, which led one MNB reader to write:

    I might believe that Walmart can be where Amazon is now in 2 years.  The bigger question is "Where will Amazon be in 2 years?"  If they are always 2 years behind, they will never catch up.  Amazon, like the shark, is always moving.

    Always.
    KC's View:

    Published on: January 27, 2014

    Over the weekend, in the Australian Open, Stanislas Wawrinka of Switzerland defeated Rafael Nadal in the men's singles finals, 6-3, 6-2, 3-6, 6-3.

    And, in the women's singles finals, Li Na of China defeated Slovak Dominika Cibulkova in straight sets, 7-6, 6-0.
    KC's View:
    Two things about Li Na. One, she won her championship at age 31 and is the oldest women’s champion in Australia in the Open era. Which somehow I find heartening.

    Second, her post-game speech was one of the funniest I've ever seen. You can see it here.