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    Published on: February 10, 2014

    by Kevin Coupe

    There's a new Starbucks in the Los Feliz neighborhood of Los Angeles. Except that it's not actually a Starbucks.

    The sign over the door actually says "Dumb Starbucks," and there is a "Dumb Starbucks" menu board, and there are Dumb Starbucks cups - Dumb Grande, Dumb Venti and Dumb Tall - as well as a drinks list that include “Dumb Vanilla Blonde Roast,” “Dumb Chai Tea Latte,” and “Dumb Caramel Macchiato."

    In fact, if the owners are to be believed, the Dumb Starbucks isn't even a coffee shop. it's performance art.

    “Although we are a fully functioning coffee shop," a statement by owners says, "for legal reasons Dumb Starbucks needs to be categorized as a work of parody art. So, in the eyes of the law, our 'coffee shop' is actually an art gallery and the 'coffee' you’re buying is considered the art. But that’s for our lawyers to worry about. All you need to do is enjoy our delicious coffee!”

    Apparently the Dumb Starbucks did land office business the first weekend it was open - the coffee was free.

    The Wall Street Journal writes that a Starbucks spokesman says that the company is "aware" of the parody, "and looking into it." However, that is unlikely to be the end of it, in view of the fact that Starbucks can be litigious when it comes to its copyrights - it was just a month ago that its lawyers sent a cease-and-desist letter to a small brewery in Cottleville, Missouri, that was selling a beer called "Frappicino."

    Satire, playwright George S. Kaufman once famously said, "is what closes on Saturday night." We'll see how long Dumb Starbucks can last.
    KC's View:

    Published on: February 10, 2014

    The Washington Post reports that experts say that "the rash of attacks against Target and other top retailers is likely to be the leading edge of a wave of serious cybercrime, as hackers become increasingly skilled at breaching the nation’s antiquated payment systems."

    According to the story, hackers are using "malicious code aimed at specific targets" or, in some cases, "inexpensive hacking kits" that can be acquired online, to attack US systems that increasingly are antiquated.

    The story says that "nearly two dozen companies have been hacked in cases similar to the Target breach and more almost certainly will fall victim in the months ahead, the FBI recently warned retailers, according to an official who was not authorized to speak publicly. The names of all of the compromised firms have not been revealed, nor is it clear how many shoppers have had their credit card numbers and other personal data stolen." And, the Post points out, "only 11 percent of businesses have adopted industry standard security measures."

    "Industry standard," by all accounts, is not good enough: "Experts say that reversing the rise in major data breaches would require expensive upgrades, including the adoption of end-to-end encryption, the walling-off of the most sensitive data on separate networks and the adoption of newer credit card technology that holds customer information on an embedded chip rather than the familiar black magnetic tape now on most American cards … An industry group including the major American credit card issuers are pushing for widespread adoption of chip cards by October 2015. Consumer groups want Washington to mandate a faster and more complete shift, but federal regulators have balked at forcing the politically influential banking industry to invest in new technology, especially if there is a chance that it might not thwart future attacks."
    KC's View:
    Yikes. I think it is the phrase about how even new technology might not "thwart future attacks" that really caught my eye … because that's a sobering thought.

    There seems to be no question that in order to stay ahead of the bad guys - and the bad guys seem to be both well-funded and highly motivated - government and industry have to work together and spend together to create innovative security systems that continue to evolve and stay ahead (or at least keep up) with criminal forces.

    Published on: February 10, 2014

    Crain's New York Business reports that Fairway - the New York-based retailer than went public less than a year ago amid predictions that it could challenge Whole Foods around the country and eventually could operate as many as 300 stores nationwide - hit a rough patch last Friday when it reported a quarterly net loss of $31 million and said its quarterly same-store sales were down 1.7 percent. Those numbers sent its stock price down by almost 30 percent, and raised questions about its strategic direction.

    And, as MNB reported last Friday, Herb Ruetsch retired as CEO of Fairway Markets after 15 years with the company. He has been CEO for two years. Fairway's president, William Sanford, now will serve as interim CEO. Crain's notes that "Sanford is a former operating partner at Sterling Investment Partners, the private equity firm that acquired a controlling stake in Fairway in 2007 from the founding Glickberg family."

    The Crain's story notes that Fairway's management plans to cut $4 million in annual overhead as a way of reaching profitability, but also plans to continue opening stores and expanding its NY-area footprint. But, the story also points out that Fairway faces increased and improving competition - Whole Foods, for example, recently opened a store in Red Hook, Brooklyn, not far from a Fairway store.
    KC's View:

    There is a lot to like about the Fairway format, but almost from the beginning of Fairway's expansion efforts a few years ago, I couldn't help but feel that there was a degree of arrogance and hubris infecting company leadership. The folks there often seemed disrespectful and condescending about the competition, wildly impressed with their own brilliance, and highly focused on the big payday that would come with finding private equity investment and, eventually, an IPO. Growth seemed to be fueled by a desire to drive up the company's financial value, not by a desire to bring value to local neighborhoods.

    Now, the company has as a CEO someone who appears to have little retail experience, is talking about cutting its way to profitability (never a good sign), and, one assumes, is thinking more about satisfying the NY market than expanding elsewhere in the country.

    Maybe they can turn things around, but to do so, I'd suggest that they start enlisting really solid merchants and marketers who can keep the company focused on the right things. Like taking care of Main Street, not Wall Street. But I wonder how much patience the private equity group will have … and how many quarters it will take before they start thinking about shopping Fairway around.

    Published on: February 10, 2014

    There is an interesting piece on the Stanford University Graduate School of Business website that looks at the practice of market research, suggesting that "there’s a growing feeling that something is not working with market research, where billions are spent every year but results are mixed at best. Some of the problems relate to the basic challenge of using research to predict what consumers will want (especially with respect to products that are radically different). But marketers face one additional key problem: Study participants typically indicate preferences without first checking other information sources — yet this is very different from the way people shop for many products today."

    One example: a respected study done in 2007 that indicated that consumers in affluent countries really had no need of or interest in a device that would bring together the functionality of a cell phone, MP3 player and camera. In other words, the study suggested that many people would not spend money on an iPhone.

    The story goes on: "Indeed, trying to predict where things are going has become more challenging. While traditional consumer research can still tell a marketer if their next toothpaste will do better with purple or black stripes, it is not of great help for more radical, unfamiliar changes. There is no effective way to use market research to predict consumer reaction to major changes. When assessing new concepts, consumers tend to be locked into what they are used to and believe today, which makes them less receptive to very different concepts and more receptive to small improvements over the current state. Similarly, experts who try to predict the success or failure of radically new products are unlikely to be much more accurate than consumers … What marketers are often left with is trying to quickly figure out where things are going and what consumers and competitors appear to follow. And then try to offer a better solution."

    The piece is adapted from a book entitled "Absolute Value," by Itamar Simonson and Emanuel Rosen. You can check it out on Amazon here.
    KC's View:
    It shouldn't be a wild revelation that traditional market research tools may not be effective in the 21st century. Steve Jobs, the legend goes, didn't worry about market research … he just tried to figure out what people wanted that they didn't know they wanted. Now, the problem with this model is that you need a Steve Jobs to make it work …

    I was watching several YouTube videos over the weekend in which novelists were being interviewed about their approaches and work habits, and one of the things they kept emphasizing was the importance for writers to not lick their fingers and hold them up to the wind … that they have to write from the heart to be effective, focusing on the things that interest and move them, not on what they think will interest and move others. Because, the theory goes, good writers, when passionate about a subject, will find a way to interest other people in what interests them.

    It is not an apples-to-apples comparison, but I think the same thing goes for great and compelling retailing.

    Published on: February 10, 2014

    The Nielsen Company is out with a new study suggesting that there is a chasm between the spending power of the African-American community in the US and the amount of money spent against it.

    Currently, the study says, the nation's 43 million African-American consumers "have unique behaviors from the total market. For example, they’re more aggressive consumers of media and they shop more frequently. Blacks watch more television (37%), make more shopping trips (eight), purchase more ethnic beauty and grooming products (nine times more), read more financial magazines (28%) and spend more than twice the time at personal hosted websites than any other group."

    In addition, "African-Americans make an average of 156 shopping trips per year, compared with 146 for the total market … African-Americans also have distinct digital and mobile behaviors, as they spend 44 percent more time on education and career websites, and 71 percent of blacks own a smartphone, compared with 62 percent for the total U.S."

    But here's the kicker: "While 81 percent of blacks believe that products advertised using black media are more relevant to them, only 3 percent ($2.24 billion) of $75 billion spent on television, magazine, Internet and radio advertising was with media focused specifically on black audiences."
    KC's View:

    Published on: February 10, 2014

    Excellent piece in the Washington Post over the weekend pointing out that many of the economic forces challenging the aristocrats portrayed in "Downton Abbey," the hit British TV series that gets enormous audiences in the US on PBS, presage the forces facing many businesses and industries today.

    In the end, it all comes down to one essential question: Can old-world enterprises reinvent themselves for a new economy? This is a question both pertinent and universal, and the story drills down to consider issues such as how businesses should adapt to new technology, the role workers can play in driving innovation and adaptation, and the importance of constant reinvestment in a company, as opposed to sucking it dry.

    It is a great story … and you can read the whole thing here.
    KC's View:

    Published on: February 10, 2014

    Fitch Ratings, one of the big three ratings agencies, last Friday said that "the sharp reduction in Supplemental Nutrition Assistance Program (SNAP) payments may dent the operations of food companies when the Agriculture Act of 2014 (farm bill) becomes law … The new law's reductions in SNAP (formerly known as the Food Stamp Program) payments will further constrain spending for already cash-strapped consumers. The bifurcation of consumers continues, with higher income consumers faring well but middle to low income consumers remaining severely cost conscious and searching for food products on promotion. Packaged food companies have already reported weakness in growth for packaged foods in the center of the store where shelf stable foods are sold."

    The report goes on to say that "Fitch believes spending on non-essential foods such as snacks could be hit hard and that basics such as milk will be also be affected, possibly causing a slight shift toward lower priced private label foods. We note that branded packaged food companies generally have the ability to manage their capital structures to maintain metrics appropriate for their current ratings.

    "There may also be a slight shift toward farmers' markets, as the farm bill allows the doubling of food stamp benefits at these types of markets to encourage the consumption of more nutritious foods."
    KC's View:

    Published on: February 10, 2014

    • Associated Grocers of New England announced that it will now offer its independent grocery retailers a state-of-the-art digital platform, including interactive digital circulars, personalized shopping lists and recipes in both a desktop and mobile format. Each retailer will have a unique web and mobile site that offer a fully connected shopping experience powered by Webstop.

    Full disclosure: Webstop is a longtime MNB sponsor, and also powers the MNB website.
    KC's View:

    Published on: February 10, 2014

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

    Bloomberg reports that "Nestle SA is exploring ways to reduce its $30 billion stake in L’Oreal SA and has signaled its intentions to the management of the world’s largest cosmetics maker …
    Any move to gradually reduce the 29 percent stake could take years, several of the people said, citing the size of the holding and the close, complex nature of the relationship between the companies and the Bettencourt family behind L’Oreal."

    Executives for both companies are not commenting on the report.

    Reuters reports that "online shopping and a lucrative deal with online retail giant Amazon to deliver packages on Sundays in some U.S. cities" seems to have been an enormous help to the US Postal Service (USPS), which said that it lost $354 million in its fiscal first quarter. That sounds awful, except when you compare it to the same period a year ago - when the USPS lost $1.3 billion.

    While the improvement was notable, officials at the USPS said that it cannot achieve long-term stability until the US Congress reduces the onerous payments that it must make for its future retirees' health benefits.

    That's been the longtime argument around here - that for the USPS to be effective, it had to expand into relevant services, not try to cut its way to prosperity.

    • The Chicago Sun Times reports that "shoppers from New York to Seattle have witnessed a reboot of the food court experience, as sumptuous farmers markets-slash-gourmet eateries become increasingly common."

    Some examples:

    "In Washington, D.C., retail developer Edens revived a vintage venue to create Union Market, a 40-artisan food hall that is just over a year old. In Seattle, a high-end 'shellfish deli' and other local vendors reside in Melrose Market, a four-year-old project housed in a renovated auto garage that smacks of cool. In Chicago, the French Market brings together more than 30 vendors, from a crepe shop to a kosher deli and a bakery from Top Chef veteran Stephanie Izard."

    It always is a positive development when people and places focus to a greater extent on good food, rather than settling for the lowest common denominator.
    KC's View:

    Published on: February 10, 2014

    Responding to last week's FaceTime piece about the importance of challenging, fulfilling work and why, in my view, retirement is death, MNB user Jennifer Taylor wrote:

    I whole-heartedly agree your views in today’s “Face Time” article. It seems like my Dad as well did not start to age until he retired.  He worked for the same company for many years and even followed them when they moved out of state while enduring a grueling 3 hour drive each way.

    Also, the Dylan Thomas poem will forever remind me of Rodney Dangerfield’s recitation in “Back To School”.  One of the greats!

    I used Jay Leno as an example of someone with a strong work ethic, and how he will continue doing standup despite leaving the "Tonight Show." Which prompted MNB reader Carole Christianson to write:

    Read MNB today…FYI for as long as I can remember, Jay Leno has been doing stand-up almost every Sunday night at the Comedy & Magic Club in Hermosa Beach. I am pretty confident that he will continue that gig.

    From another reader:

    You wrote:  "Now, I've never been a Leno fan..."

    Well, you must have missed his TV specials about the cars and motorcycles he collects.  These shows provide a view of Leno that reveal him to be funny, able to relate to and comfortable with us average Joes, willing to get his hands dirty, and passionate about classic vehicles and their owners.  That the Tonight Show gave him the wherewithal for this collection is one of the best benefits you can identify about the show.

    I didn't miss them. I just had no interest in watching them, because I'm not a Leno fan. (Watching his final "Tonight Show" just reinforced my opinion, by the way - it seemed utterly joyless, as he did the same jokes he was doing for 20 years. Compare that to Jimmy Fallon, who seemed utterly inspired in his last "Late Night" show on Friday.)

    MNB user Frank Urbaniak wrote:

    Excellent Face Time today.  As I approach 62 I find I enjoy the consulting work as much as ever, but do not have quite the same desire to work 7am-10 pm Mon-Thurs and be gone from home 4 nights a week.  My brain recharges better with downtime.  I have always been a drummer, although I haven’t been very active the past 5 years.  Last year I met some guys online from the Netherlands who were writing tunes and had posted a few on another band’s website.  I commented that the music was good, the electronic drums were bad.  We decided to try ‘transatlantic’ recording using Dropbox and Facebook for our chats about musical direction, and after some frantic practicing, recorded a CD which sounded good enough to release so we formed the band Fractal Mirror.  Strange Attractors was released in November, was well-received in Europe and will be released in the US on iTunes and Amazon March 18.  So here we are a year later with a band, a CD, a second one written and soon to be recorded, a label signing, 2 Youtube videos and the realization of a dream I had abandoned in my early 20’s in order to finish college and make a living.  I feel creatively energized and have new energy for both work and play. I hope Father Time allows a couple years of this fun before the arthritis takes over!

    Good for you. And I'm going to check out your album on iTunes…

    MNB reader Steve Sullivan disagreed with my conclusions about retirement:

    But who sez ya can’t do that on a beach in Antigua, with a cold drink in your hand and your loving woman next to you?  I had hoped to retire by now.  I’ve always worked to live, not lived to work.  But somehow that $2 million that was supposed to be in my 401K by age 64 is not there.  So we’ll wait until 66 and at least get full Social Security (I hope) and drive the kids nuts with the crazy things the old folks are doing.  1 year, 11 months to go.  AND COUNTING!

    To each his own. I love going to the beach as much as the next guy, but I'd get bored pretty quickly …
    KC's View: