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    Published on: February 18, 2014

    by Michael Sansolo

    It hard to imagine any level at which a discussion of Victoria’s Secret underwear and the Affordable Care Act offer similar insights. That is, until something happens that ties creative ideas on the two topics together.

    The result is a pair of lessons in the power of examining a problem from a new angle.

    Let’s start with the simple problem and the underwear. I’ve got a good friend, who is both a leading light in the food industry and a really sharp dresser. Recently, I asked him how he manages to pair pocket square so well with whatever shirt he is wearing.

    The answer is the reason I cannot give you his name and a very good reason not to ask too much about pocket squares any more. A few years back my friend discovered that he, like me, was unable to correctly fold a pocket square to provide the little color accent sticking out of his jacket. Somehow he learned that Victoria’s Secret seamless silk panties are the perfect solution. No matter how they are folded or stuffed into his jacket pocket, they always create the perfect look. And the choice in colors is staggering.

    The added benefit, he says, is walking into a Victoria’s Secret store in a blazer to look for colors and practice. The salespeople simply cannot believe what’s going on.

    But here’s the thing. My friend ends up with an easy solution to a problem by simply approaching it in an unexpected way. It’s the essence of creativity, innovation and a really, really good inside joke.

    In contrast, there’s little to joke about when it comes to the Affordable Care Act (ACA), better known as Obamacare. Ever since it was proposed four years back it has been a lightning rod in politics, an incredibly divisive issue and, for many businesses, a headache for both known and unknown reasons.

    Yet for a second let’s try to look beyond the politics and examine the issue from another point of view: that is, how to best cope with the law in hopes of containing costs, improving employee performance and gaining competitive advantage.

    At least, that’s how Dennis Lindsay, the CFO of Nugget Markets is looking at it. At the recent National Grocers Association (NGA) convention, Lindsay talked briefly about ACA during a panel on industry financial issues. His offbeat take on the issue led me to ask him to further explain his position.

    Lindsay’s rationale is 180 degrees opposite from what is usually discussed. Rather than talk about cutting hours to get associates under the required coverage in the law, Lindsay suggests retailers need move in the other direction and convert more part-time jobs to full-time.

    From a pure financial standpoint, he explains that health care costs are fixed per worker. So the more hours an associate works, the smaller the benefit costs as a percent of their compensation. By converting two part-time jobs to one full-time job, a company reduces the number of people who must be covered.

    In addition, there are benefits to more full-time staffers. “Hopefully (they are) better trained, more skilled, more satisfied, making guests happier and selling more groceries,” he says. Better employees lead to a better customer experience, which in turn can produce competitive advantage.

    Nugget’s example may not be perfect for you. It’s a nine-store company frequently ranked by Fortune as one of the 100 best companies to work for, which makes anything they do enviable. Nugget is also based in California, where local employment laws require an extra level of innovation.

    Challenges, as we know, up the premium for innovative solutions because necessity is still the mother of invention.

    And that’s why Lindsay’s comments intrigued me, especially because they come on an issue that seems to draw nothing but immediate and angry responses. Nugget looked beyond politics (and I have no idea what Lindsay’s or the company’s politics are) to find a solution that could be both cost-effective and produce better customer service.

    It just like how my friend looked to a lingerie store to find a solution to a wardrobe issue. Thinking out of the box can take you all kinds of places.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
    KC's View:

    Published on: February 18, 2014

    by Kevin Coupe

    The Boston Globe had a story the other day about how Virgin America is trying to go United Airlines' "friendly skies" concept one better, by "launching the first in-flight social network at 35,000 feet."

    According to the story, "this new, customized technology will allow Virgin fliers to connect directly with other travelers. It works by isolating the unique IP address of each Virgin America aircraft and its location in the sky, so that – for the first time in the U.S. skies – travelers can see and connect with guests (via the LinkedIn API) on their specific flight, guests on other Virgin America flights in the air, or fellow travelers at their destination airport."

    The Globe quotes Luanne Calvert, Virgin America’s Chief Marketing Officer, as saying that the airline's business travelers pushed for this particular innovation: "When we surveyed our business travelers, we were surprised to learn that the ability to connect with other Virgin America travelers in-flight or en route to a destination was a frequent request. The best business connections often happen unexpectedly, and we’ve heard many stories of partnerships and start-up ideas being born on our flights."

    Speaking of partnerships born in the air…

    Time has a story about another mind of flight-oriented app. This one is called Wingman, and it is designed to allow people on airline flights to connect with each other so that they can together join the Mile High Club. (In this case, if by some chance you don't know what the Mile High Club is, the best alternative is to Google it. I don't really want to have to explain it here.)

    The story says that the app, still in development, allows users to "scroll through photos of potential 'travel buddies' aboard their flight and swipe right or left to indicate 'yes' or 'no.' The idea is that most planes nowadays offer in-flight wi-fi, but the app will also be bluetooth-ready."

    This is what I call an Eye-Opener. (Though I don't think I'd want to have to explain to Mrs. Content Guy why I had Wingman installed on my phone.)

    That said … these stories suggest that just when you think that people can't get any more connected, technology innovators come along and find a new way to get people together. And, as the Virgin America story indicates, companies that traditionally would specialize in one thing (like getting people from one place to another) are morphing into companies with other skill sets (like enabling personal and business connections).

    That may be the real lesson of these stories. In the new economy, you may not want to define your role too traditionally or too narrowly, but rather may want to see yourself within the context of your customers needs and wants.
    KC's View:

    Published on: February 18, 2014

    Forbes has an online piece suggesting that of current Amazon Prime members paying $79 a year for two-day guaranteed delivery on products, as well as complimentary access to a selection of videos and e-books, "three in ten (29%) … would be willing to pay an additional $10 to $20, while a very limited percentage (8%) would accept a rate hike of $30 or more."

    The good news is that the customers who would spend the most on prime memberships are the cream of the crop - male, young, with a high level of disposable income and a willingness to spend it on Amazon for things like major electronics. The bad news is that "these Prime members represent the extreme minority" of its customer base.

    The solution? "Maybe it’s time for Amazon to introduce Prime membership levels: a base level for free shipping alone and an upgrade for access to Amazon’s digital media content," Forbes suggests. "Or perhaps they should incentivize a higher Prime rate with a rewards system, such as a percentage earned back on purchases à la Costco’s Executive Membership. Ramped up Prime benefits may take the sting out of a higher fee for some as well, because, let’s face it, while Amazon Instant Video is nice, it’s no Netflix – yet."

    Meanwhile … the Seattle Times has a story suggesting that Amazon doesn't have much to worry about if it raises Prime memberships, in the same way that Costco has not experienced a loss of members when it has raised fees.

    Indeed, the Amazon-Costco comparison may be valid … especially because Costco probably has maintained membership levels by offering improved benefits, such as two percent cash back on purchases made by those with executive memberships. And Costco apparently actually has found that such members spend more when when rates have gone up, because they want to justify the cost.
    KC's View:
    This will be an interesting process for Amazon, but if I had to guess, it'd be my feeling that an increase in Prime rates probably won't membership levels too much, and will even increase spending by Prime members, at least in the short term. Because I'd also guess that if they can engineer it, Amazon will offer improved benefits at the same time as they raise prices, which will take some of the sting out of it.

    Here's my suggestion for an improved benefit, by the way. How about cutting Kindle e-book prices by 10 percent - or one dollar - across the board for anyone who is a Prime member? That would certainly have a positive impact on my book purchasing behavior…

    Published on: February 18, 2014

    In Minnesota, the Star Tribune reports on how Roundy's "is at the confluence of two trends that are reordering the U.S. supermarket industry."

    According to the story, Roundy's "conventional grocery stores, including Rainbow Foods in the Twin Cities, have been hit hard by low-price competitors from Wal-Mart to Target to Costco. Once the Twin Cities’ No. 2 grocery chain, Rainbow is now fourth, and in the past 13 months it has targeted 15 percent of its stores here for closing.

    "At the same time, a shift toward higher-end, niche stores has created opportunity elsewhere. Roundy’s is attacking the Chicago market with a new kind of store, Mariano’s Fresh Market, that mixes the best of a Rainbow with higher-end touches more associated with chains like Whole Foods or Lunds and Byerly’s."

    Indeed, the Chicago Tribune has a story noting that "the first of 11 former Dominick's stores acquired by Mariano's is set to reopen under its new banner" today in in Park Ridge. "Launched in 2010 by former Dominick's executive Bob Mariano, his namesake chain opened its 14th Chicago-area location this month in Lake Zurich, with four more new stores planned for this year. The Dominick's acquisition will give it 29 stores by the end of 2014."
    KC's View:
    Or, to put it another way, the middle is shrinking, as competition gets tougher…which means that some companies - Roundy's is a prime example - decide that the upper end of the marketplace might be a more fertile place to play. And I see very little evidence that the trend of the vanishing middle is itself going to vanish anytime soon.

    Published on: February 18, 2014

    There are a couple of interesting notes about last week's release by Netflix of the second, 13-episode season of "House of Cards." (The first season of the political drama, released last year, proved to be a game-changer for Netflix, solidly establishing its positioning as not just a distribution competitor to the likes of Redbox and iTunes, but also a content competitor to HBO and other cable and broadcast networks.)

    Reports are that 16 percent of Netflix subscribers using at least one cable operator streamed at least one episode of of "House of Cards" last Friday - a significantly higher number than the two percent that did so when season one debuted a year ago. (Final numbers should be available in a few days.)

    Meanwhile, Marketplace on National Public Radio (NPR) had a story about how Netflix is able to tell exactly how many people are watching "House of Cards" on a variety of devices … and , in fact, believes that one of its advantages over HBO in the long term will be its analytics.
    KC's View:
    One interesting side note. Netflix's ability to analyze its "House of Cards" audience in almost real time allowed it to know last year that it has one "super binger" - a person who actually watched all 13 hours of season one in 13 hours and three minutes.

    This is the situation in so many segments of business … the companies with the most actionable information, and then act of it, will be the ones with the greatest advantage.

    Published on: February 18, 2014

    The Container Store has announced that it is contributing $100,000 to the launch of an Employee First Fund, described as "an employee assistance fund that will provide grants to employees experiencing unforeseen emergencies, a major medical situation, are suffering from a catastrophic event, or facing other challenges in life which they are not financially prepared to handle."

    The retailer said that "employees and other stakeholders have the opportunity to make donations." The retailer announced the new fund "as part of its annual National We Love Our Employees Day – a day it created five years ago to show appreciation for all that its employees do for the company, their colleagues, customers, vendors and communities."

    The Container Store traditionally has scored very high for its employee culture, including an annual ranking on the Fortune Best Places to Work list.

    “We’re so thrilled to launch our Employee First Fund, which exists to support our company’s commitment to an employee-first culture, ensuring all employees feel well taken care of, safe, secure and warm,” Kip Tindell, chairman/CEO of The Container Store., said. “It’s a culture that’s driven by our seven Foundation Principles and results in an environment where the lives of everyone connected to our business are enriched and brimming with opportunity."
    KC's View:
    This sort of thing might not be for every company, but it does speak volumes about a corporate culture that says that the people on the front lines are the most important people in the organization.

    Which strikes me as a highly evolved and absolutely correct position.

    BTW….there will be some who will ask how this is any different from Walmart taking up collections for employees who cannot afford to feed or clothe their families, which is something that was done in at least one store during the holidays. The difference, as I see it, is that Container Store is offering aid for extraordinary circumstances, not for feeding your family on an everyday basis. I don't think it ever has been accused of paying people so poorly that they have to work two or three jobs just to survive.

    Published on: February 18, 2014

    Groupon may know the daily deals business. But the folks there may lack a basic understanding of American history.
    Last Friday, the company launched a promotion offering $10 off any deal of $40 or more. And, it said that the promotion was in honor of President Alexander Hamilton.

    But wait. Hamilton never was president. The nation's first Secretary of the Treasury, yes, but never president.

    The San Francisco Chronicle reports that "asked via e-mail if 'President Hamilton' was a mistake or publicity stunt, Groupon spokeswoman Erin Yeager responded 'yes'."

    This morning, however, the company seems to have changed its tune.

    The Chicago Tribune reports that a Groupon spokesman now is saying that "most Presidents' Day promotions make people fall asleep, so we wanted to do something different that was in line with our brand and sense of humor that got people talking and writing about Groupon." As such, the "President Hamilton" promotion was "an overwhelming success."
    KC's View:
    Maybe so.

    But I'm not so sure that this isn't a case of Groupon trying to turn lemons into lemonade.

    But either way, it got the company a lot of attention and buzz. Not sure it will make me use its services any more often - in fact, it almost certainly won't - but it got the company's name in the news.

    Which I guess is a good thing.

    Published on: February 18, 2014

    • The Wall Street Journal is reporting that IT security staffers at Target Corp. were warning the company that its payment systems were vulnerable to hackers at least two months before tens of millions of its customers' personal and financial information was illegally accessed in the weeks leading up to the Christmas holidays.

    • The Atlanta Business Chronicle reports that Kroger "said it will release its weekly ads and specially priced items online and in stores on Wednesdays instead of Sundays, effective March 5.

    "The new schedule will give customers more time to plan their weekend shopping trips. Shoppers can also take advantage of weekly discounts before the weekend. Weekly specials will be valid on a Wednesday through Tuesday schedule, the company announced."

    • Costco has announced that it plans to open its first two stores in Spain later this year. The initial unit will open in Seville this spring, with another to open in Madrid this summer.

    The membership club chai currently has 25 stores in the UK, 33 in Mexico and 18 in Japan.

    Reuters reports that "sodas and most other sugar-sweetened drinks sold in California would be required to carry warning labels for obesity, diabetes and tooth decay under a bill introduced in Sacramento on Thursday and backed by several public health advocacy groups … The first proposal of its kind would put California, which banned sodas and junk food from public schools in 2005, back in the vanguard of a growing national movement to curb the consumption of high-caloric beverages that medical experts say are largely to blame for an epidemic of childhood obesity."

    However, it hardly is a foregone conclusion that the legislation will become law. As the story points out, "Business groups such as the American Beverage Association, which represents industry leaders such as Coca-Cola Co, PepsiCo Inc and Dr Pepper Snapple Group Inc, have a track record of fighting off efforts to clamp down on high-calorie beverages."

    • The New York Times has a story about the rash of gluten-free products hitting the marketplace and the companies that have always made gluten-free items that are jumping on the bandwagon to promote this particular product characteristic.

    "And consumers are responding with gusto," the Times writes. "The portion of households reporting purchases of gluten-free food products to Nielsen hit 11 percent last year, rising from 5 percent in 2010.

    "In dollars and cents, sales of gluten-free products were expected to total $10.5 billion last year, according to Mintel, a market research company, which estimates the category will produce more than $15 billion in annual sales in 2016."
    KC's View:

    Published on: February 18, 2014

    • Weis Markets on Friday announced that Jonathan Weis, the company's vice chairman, will be adding to his responsibilities the roles of president/CEO.

    Weis, who joined the company in 1989, is the son of Robert F. Weis, who remains chairman of Weis Markets.
    KC's View:

    Published on: February 18, 2014

    • William Davila, the former president of Vons in Southern California who also served as the chain's high-profile spokesman, has passed away of complications related to Alzheimer's disease. He was 82.

    The Los Angeles Times notes that he was "a first-generation Mexican American who worked his way up from sweeping floors at a Vons market to being president of the supermarket chain," and that "he pushed initiatives during his tenure to boost the company's standing among Latino consumers, including opening several specialty supermarkets. At a Mexican American Grocers Assn. convention in 1986, he grew frustrated with food companies that still seemed reluctant to expand into neighborhoods with large Latino populations."

    After taking early retirement in 1990, Davila "established an educational foundation that gives scholarships to Latino students who intend to work in the grocery industry," the Times writes.
    KC's View:
    In so many ways, it seems to me, Davila was ahead of his time - recognizing the importance of the Latino market long before many others did, and helping to create a format - Tianguis, a Hispanic-themed superstore crated by Vons that operated in the late eighties and early nineties - that to this day remains of the industry's more memorable attempts to cater to that market.

    Published on: February 18, 2014

    MNB took note of a Pew Research study last week that reported on how a) women were "marrying down" at greater rates than ever, which means, by their definition, marrying men who are less educated. The same study noted that even better educated women often make less than their husbands.

    None of which surprised me. Still, I thought it worth reporting.

    One MNB reader responded:

    Correlation does not imply causation…

    Education only opens the door, compensation is tied to getting results. (unless you work for Government).

    Just having a MBA or CPA has yet to come up on my wife’s annual review as an Accounting manager, she is compensated for her contribution not her degrees.

    True. Correlation does not imply causation.

    However, I think it has been pretty well documented that in this country, when men and women are working equivalent jobs, there are an awful lot of cases where the men makes more money for no apparent reason other than gender. It is changing, but it remains a fact of life with which many women have to deal.

    We also had a story the other day about PillPacks, described as "an end-to-end pharmacy and delivery service for pharmaceuticals that is using design to vastly simplify the process of swallowing pills each day. You don't have to worry about pillboxes, reminders, or refills; PillPack takes care of all that for you. All you need to do is tear off the latest M&M Fun Size packet and swallow what's inside when it tells you to."

    One MNB user wrote:

    I’m amazed such things as the PillPacks aren’t more broadly available and haven’t been for years.  Pfizer started providing just such a product for horse supplements at least a decade ago.  All the supplements were included in one pouch, and there was a pouch for each day.  Just peel off the top and mix with the horse’s daily feed.  If this was being done for horses ten years ago how did it take so long to be broadly available for humans!

    Don't get me started.

    I think that pharmacies that begin offering such services will have themselves a differential advantage.

    Of course, some probably will charge an arm and a leg for the service, putting it in the same category as offering to flavor liquid medicines so they are more easily drinkable, and then charging for that. I've always felt that there is something perverse about that … you'd think pharmacies would want to make every medicine more pleasant tasting, and that this would simply be part of the service. But nope …

    On another subject, MNB reader Doug Madenberg wrote:

    Kevin, wanted to challenge something you reported about Walmart’s mobile app, as it relates to the recent MNB discussion about the merits of market research.  Not sure who concluded that the effort is “a clear sign that the retail giant’s efforts to use mobile to improve its business in the digital age is working" – if it was Fast Company or the material they received from Walmart’s camp.  But just based on the facts provided, this conclusion is flawed.  And it’s a great example of how research findings can be misapplied, to your earlier point.  It goes back to the old saying that “correlation is not the same thing as causality.”

    It’s no surprise that those who use Walmart’s app “make twice the shopping trips per month and spend 40% more than non-app users.” But is app usage CAUSING those customers to spend more and shop more often than non-users?  It’s possible but highly doubtful.  It would indeed be impressive if those app users spent 40% more than they USED to spend… that would be a better comparison to make the case.
    To me it seems far more likely that more frequent Walmart usage and spend are predictors of app usage.  After all, frequent customers and heavy spenders benefit the most from making it easier to plan their trip, organize their list, access savings, etc (whatever the app does).  That’s fine, there’s nothing wrong with pursuing a mobile initiative if it makes your heavy customers more engaged and committed; but this is of course different than the suggestion that Walmart can/will vastly improve its business simply by pursuing these mobile efforts.

    And, on another subject, from another reader:

    Two of your recent articles caught my eye and converged - - about consumers not immediately flocking to 'better' grocery stores in food desert areas, and also about Chick-fil-A making changes to its chicken supply after consumer pressure.

    I was lucky enough to go to a regional IFT meeting where Dr. Michael Jacobson of CSPI was the featured speaker.  One of his main points to the food technologists in attendance was that food science can make products healthier while still tasting good -- these products exist today (albeit sometimes at higher cost and more limited availability) and it's only up to consumers to adopt them.

    He also commented on how difficult and lengthy it has been over the years to effect changes in reducing fat, sodium and sugar levels by working through government agencies and corporations who have profits at stake.   Dr. Jacobson showed that after decades of effort, there have been only modest overall improvements in consumers' eating habits (excepting reduced sugared soda consumption) - - fat, sugar and sodium intake remain sky-high, fruit and vegetable consumption is down per capita, and foodservice offerings are not making great strides forward in nutritional content.

    Two observations:

    First, to your point of 'you can lead a horse to water', consumers are highly resistant to: change to their habits, increased cost, or perceived change to their products' taste.  Trying to get consumers to go to another store or try healthier products will run up against one or more of these barriers and it would be very difficult to effect large-scale change quickly.  The landscape is littered with grand ideas that landed with a thud by expecting too much of consumers too soon.

    I would differ a bit from your prescription to "employ the exact same marketing and merchandising techniques that are used to get people to buy $5 cups of coffee, luxury automobiles, and high-definition televisions".  In the case of adopting healthier eating habits, it's more than just up-selling to a more expensive version of what people are already using.  Coffee, cars and TVs are well-established habits (and remember, Starbucks is now 40 years old).

    Changing food habits requires a program of continued education, simple tips/recipes that are culturally and demographically relevant to the target consumer, combined with regular incentives and reminders to start the process of change - - and a lot of perseverance.

    On the other hand, the pendulum of influence in the food supply is quickly swinging toward the consumer.  What might have taken CSPI (or equivalent watchdog group) months or years to get action through lawsuits or lobbying is being accelerated by consumer advocates like the Food Babe (who knew?) who are mobilizing via online petitions and applying direct public pressure to corporations.  Witness recent changes in formulations at Subway, Kraft Mac and Cheese, Gatorade, etc due to consumer campaigns.

    Once again, misjudge consumer behavior at your own risk.
    KC's View: