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    Published on: February 28, 2014

    by Kevin Coupe

    It has been well chronicled here on MNB how Blockbuster, once a ubiquitous presence in communities throughout America as the primary source for renting videos, fell into irrelevance, decline and finally obsolescence by not recognizing and capitalizing on technological and cultural changes that were taking place. It was a classic case of a business model being disrupted from the outside, by companies ranging from Netflix to Redbox, and being unable to recover.

    But a story on the National Public Radio (NPR) program Marketplace makes clear that this may in some ways have more to do with Blockbuster than the video rental store concept.

    Family Video, the story says, remains the biggest player standing: "Based in the Chicago suburb of Glenview and operating across the Midwest and parts of the South, the chain has 779 stores — a number that continued to grow in 2013, even as Blockbuster closed up its last company-owned shops."

    The story makes clear that Family Video has been judicious about choosing locations, is known for customer service, and prices movies carefully - charging $1 for two movies in the case of older films. And, while business continues to be good, management understands that technologies such as streaming cannot help but have an impact … so they "recently became the largest franchisee of a pizza chain called Marco's. The company already has more than 50 stores, with plans for almost 200 more in the next two and a half years." Family Video is putting the new pizza parlors next to its video stores … figuring that pizza-and-a-movie is something that Netflix can't offer.

    Call it a differential advantage. And an Eye-Opening example of how to remain competitive even in a tough environment.  
    KC's View:

    Published on: February 28, 2014

    The Wall Street Journal reports that Walmart-owned Sam's Club "is quietly testing a new subscription service that allows customers to order items like diapers and printer cartridges online, a sign that Web retailers are posing a threat in areas of retail that were once considered relatively safe."

    The "My Subscription" service is being positioned as a direct competitor to Amazon's highly successful "Subscribe & Save" service.

    According to the story, "Until now, warehouse clubs like Sam's had been mostly insulated from the onslaught of online retailers like Amazon. Their main traffic drivers are fresh food, groceries and basic consumer products, which Amazon either didn't sell much of or sold at higher prices than the discount clubs.

    "But that is changing as Amazon expands into those areas and builds similar customer loyalty. The Web giant's $79 yearly Prime membership has grown to 35 million to 40 million households, according to estimates from analysts at Sanford C. Bernstein—rivaling the more than 47 million-strong membership base at Sam's Club."

    One difference between the two programs - Sam's is offering free shipping but no additional discounts on the 700 items it includes in the program, while Amazon offers both free shipping and discounts on the thousands of items in "Subscribe & Save."
    KC's View:
    First of all, this is very smart. I've never been able to fathom why more retailers haven't tried to crack the code on the consumer auto-replenishment model, since it has the potential to be a game changer in terms of sales and loyalty.

    But one of the reasons it becomes so important is that Amazon isn't standing pat with Subscribe & Save … it continues to look for ways to drive more sales in the CPG segment.

    Published on: February 28, 2014

    NamNews reports that Ahold-owned Peapod is building a 300,000 square foot distribution facility in Jersey City, New Jersey, that it says will double its current capacity and help it gain further "traction" in the metro New York area.

    The new semi-automated warehouse, according to CEO Dick Boer, will “clearly focus on the demands of the New York City market." Boer says that the company is "optimistic about our ability to continue to expand the growth rates on online. At the moment, we're in an investment phase and will continue to invest as we see the growth opportunities."
    KC's View:
    Peapod has been very up front about the fact that it needs to expand its service footprint if it is to compete in an Amazon world. This is part of that process.

    Published on: February 28, 2014

    MNB had a piece last week about legal battles taking place over the rights of businesses to deny service to people with whom they disagree on religious grounds - specifically, people engaged in same-sex relationships and marriages - and when this becomes the kind of discrimination forbidden by the US Constitution.

    The flashpoint was a bill in Arizona that was passed by the legislature that would have allowed business owners to cite religious beliefs as legal justification for denying services to same-sex couples. Gov. Jan Brewer vetoed the bill this week, at least in part because of pressures from business interests that were concerned about the impact of the decision, including the possibility that next year's Super Bowl could be moved out of the state to another location.

    Just this week, I got an email from Cowboy Ciao, a Scottsdale restaurant (I'm on their email list), that referred to Arizona being "once again the national butt of jokes thanks to politics from the 1800s," and added, "To recap, we are apparently against immigrants, gays, lesbians, transgenders, drinkers, people of color, female golfers – did I leave anyone out?  Trombonists?" 

    The point that we've been making all along here on MNB is that this is a business story - that companies need to think about how these various scenarios are playing out in their stores, because it could have major implications for how they are perceived in the community. And, it is not just an Arizona story; there also have been highly publicized similar cases in Colorado and New Mexico.

    Politico this morning has a story about how, when Brewer was making up her mind about the Arizona bill, "business went DEFCON 1," lobbying furiously for a veto.

    It is worth reading here.

    An excerpt:

    "What Arizona proved, as much as any other in recent American politics, is that there’s currently no more powerful constituency for gay rights than the Fortune 500 list.

    "The corporate community’s engagement in the fight over S.B. 1062 was overpowering: American Express wrote to Brewer on Tuesday asking her to veto the law, according to a spokesman for the credit card company, which has a large presence in the state. JPMorgan, with its 11,000-odd employees in Arizona, said on Wednesday that the legislation 'does not reflect the values of our country or the State of Arizona and should be vetoed.' The national bank Wells Fargo also opposed it, along with Apple, Marriott and other big corporations with significant Arizona-based investments."

    The story goes to say that "business leaders in Arizona and Washington called the campaign to kill 1062 a moment of triumph for the corporate world, and a reflection of how the need to attract talented employees and project a tolerant image to consumers has overridden virtually any other political imperative businesses face in a state like Arizona."

    Check it out.
    KC's View:
    Go figure. Tolerance is good business.

    Published on: February 28, 2014

    The Nielsen Company is out with a new study of how US businesses market to older consumers, concluding:

    • 38% of Americans say they don’t see advertising that reflects older consumers.
    • 44% say it’s difficult to find product labels that are easy to read.
    • 43% can’t find easy to open packaging.
    • 34% say they can’t find smaller portion sized food packaging.
    • 31% say products are not clearly labelled with nutritional information.
    • 25% can’t find products geared towards their special nutritional needs.
    • 60% of Americans don’t feel that they were financially set for retirement.
    • 53% fear losing their self-reliance such as the ability to drive, cook, and shop.
    • 57% fear having enough money to live comfortably and an equal number fear losing their mental and physical agility.

    "The findings serve as a wake-up call to manufacturers, retailers and other marketers that need to bolster efforts to better reach and cater to an aging demographic," says Todd Hale, senior vice president, Consumer & Shopper Insights, at Nielsen. "Improvements such as using larger fonts on product labels and signage, arranging age-related products in one place and at arm’s length for easier accessibility, and offering friendly customer service can go a long way in building loyal patronage."
    KC's View:
    This surprises me a little bit, especially because I have the TV on in the background, and in the last half hour I think there have been commercials for AARP and a cereal that will make people more sexually potent in their 80s.

    I also think, at some level, there may be a change taking place in when people start defining themselves as "older consumers." I'm 59, and I figure it'll be about 20 years before I start thinking of myself that way.

    If then.

    Published on: February 28, 2014

    It goes without saying that there's a certain amount of enthusiasm for e-commerce here on MNB … not because it is intrinsically better, but because many of its iterations represent the kind of business disruption that seems so common in the 21st century economy.

    And it is interesting to find out about companies that are engaged in e-grocery that haven't necessarily gotten a lot of publicity, but seem to be getting it done. For example, we got this press release yesterday:

    "Winder Farms, a home delivery grocer that provides all-natural products directly to consumers’ doorsteps, announced today it has reached a company milestone of 10 million products delivered in 2013 throughout Utah, Southern Nevada and Southern California.  Known as the 'farmers market on wheels,' Winder Farms expanded this year to health-conscious Orange County, Calif., which proved to be a major boom for its business.  Since its Orange County, Calif. launch, the company that prides itself on its offering of high quality delicious fresh farmers market quality products surpassed its goals and enlisted more than 10,000 new customers in that market."

    The release goes on to say that Winder Farms believes it has solved the "last mile challenge" by using "unique grass roots marketing tactics and high volume of customer referrals, which builds incredible customer density within its target neighborhoods. On average, one Winder Farms truck delivers to more than 150 houses a night … While other companies have hefty annual charges and delivery fees, Winder Farms charges less than five dollars per delivery, based on a weekly delivery subscription.  This model provides families a simple and economical way to keep healthy foods and weekly staples in the house.  Customers sign-up online to receive weekly deliveries of the farmers market quality products they use most, including all natural milk, fresh produce, eggs, prepared meals, bakery items,  bacon, fresh juices and more."

    And here's the kicker:

    "With more than a century of experience, Winder Farms has mastered its home delivery service.  The company began its delivery service in 1880, delivering fresh milk and dairy products from its own dairy with a horse-drawn cart.  Today, Winder Farms utilizes modern methods with online orders, mobile apps, route optimization software and an expanded product offering, but the company still carries on its long-standing tradition of delivering farm fresh all-natural products."
    KC's View:
    I love this stuff … a company that's been in the delivery business for more than a century, that is adapting to the new economy, and that is differentiating itself in the marketplace and growing.

    Disruption can be found in a lot of places.

    Published on: February 28, 2014

    Fortune is out with its annual list of "most admired companies," described as "the definitive report card on corporate reputations" based on nine criteria ranging "from investment value to social responsibility."

    In the top ten, in order: Apple, Amazon, Google, Berkshire Hathaway, Starbucks, Coca-Cola, Walt Disney, FedEx, Southwest Airlines and General Electric.

    The next ten: American Express, Costco, Nike, BMW, Procter & Gamble, IBM, Nordstrom, Singapore Airlines, Johnson & Johnson, and Whole Foods.

    Among retailers, McDonald's is #22, Walmart comes in at #28, Target at #29, and Home Depot is #40.
    KC's View:

    Published on: February 28, 2014

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

    Fast Company has a piece reporting that Chipotle, for the first time in its two decades of doing business, is adding an entirely new item to its menu - Sofritas, described as "shredded organic tofu braised with roasted poblanos, chipotle chiles, and spices." (The story notes that Chipotle has tweaked its menu, adding brown rice and burrito bowls, for example. But this is the first entirely new menu item.)

    According to the piece, the product was ingredient driven. But, "beyond its tastiness factor, the inclusion of soy also fits in neatly with Chipotle's branding strategy. The chain's last few marketing pushes have highlighted its commitment to sustainable farming. Which is great, despite the unfortunate reality that Chipotle can't always get the ingredients it wants and often serves commodity meat. Adding tofu to the menu might reduce that problem." Chipotle execs say that in tests, even non-vegans and non-vegetarians seem to like the item, either on its own or mixed with chicken.

    Reuters reports that Belgium-based Delhaize has sold its Bulgarian business - consisting of 54 stores - to AP Mart. Terms of the deal were not disclosed.

    The story notes that Delhaize "has said in the past that it wanted to focus its resources on areas where it has leadership positions and has also sold its operations in Albania and Montenegro."

    Not to mention certain sections of the US South….

    • Call it yet another retail casualty of the digital economy…

    ZDNet reports that Sony is closing 20 stores around the country, laying off 1,000 people, a move that will leave it with just 11 units "scattered across California, Florida, New York and Texas."

    The story says that "Sony's retail presence has been dwindling like a slow bleed over the last few years as many consumers have moved online for tech purchases -- not to mention other brands dominating the mobile world for personal gadgetry."
    KC's View:

    Published on: February 28, 2014

    I am traveling this morning, with not a lot of time to get to all the emails … but I did want to post an email I got from an MNB reader describing herself as part of Gen X, who wanted to respond to two stories we had yesterday.

    First, regarding the new proposed nutrition labels, she wrote:

    A Pint of Ben and Jerry’s isn’t a single serving? Hmmm…. Who knew…?

    And then, about the demise of Moviefone:

    What is Moviefone? Not even spell check recognizes this…

    Points taken.

    Consumers work on one set of assumptions.

    Marketers often work on another.

    It strikes me as not hard to figure out that businesses would be more successful if they could make marketing assumptions more accurately reflect consumer assumptions.

    If we don't, we're practicing Epistemic Closure. And risking irrelevance.

    KC's View:

    Published on: February 28, 2014

    I feel like I'm in an unusually good position to comment on the Academy Awards this year, since I've seen every film nominated for a major award except for August: Osage County, which just doesn't seem like my cup of tea. (And man, has it been a great fall and winter for movies, after one of the worst summers ever.) Not that my predictions will be correct, since this is all a matter of taste. But here are my best guesses at the likely winners, plus the votes I would cast in the major categories.

    Best Picture
    Will win: Either 12 Years A Slave or American Hustle
    I'd vote for: Probably Gravity, though I'd be tempted to vote for Nebraska

    Best Actor
    Will win: Matthew McConaughey, Dallas Buyer Club
    I'd vote for: Matthew McConaughey … it was an fully realized and totally nuanced performance.

    Best Actress
    Will win: Cate Blanchett, Blue Jasmine
    I'd vote for: Judi Dench for Philomena

    Best Supporting Actor
    Will win: Jared Leto, Dallas Buyers Club
    I'd vote for: Jared Leto … another astonishing performance in an exceptional film.

    Best Supporting Actress
    Will win: Lupita Nyong'o, 12 Years A Slave
    I'd vote for: Probably June Squibb for Nebraska, but I have no issue with a Nyong'o win.

    Best Director
    Will win: Alfonso Cuaron, for Gravity
    I'd vote for: Alfonso Cuaron

    Best Original Screenplay
    Will win: American Hustle
    I'd vote for: Her or Nebraska or Dallas Buyers Club (I can't make up my mind … I just hope they don;t give the award to Blue Jasmine)

    Best Adapted Screenplay
    Will win: 12 Years A Slave
    I'd vote for: Philomena

    MNB will have a recap on Monday…

    It won't be winning any awards, but I also want to pass along my opinion of 3 Days To Kill the new entrant in the "middle aged, world-weary guy finds himself in a foreign city having to beat up and kill people for a good cause genre, starring Kevin Costner in the role that normally would be played these days by Liam Neeson. (He played the same kind of role in only slightly different movies such as Taken, Taken 2, and "Unknown.)

    Costner plays a CIA killer-for-hire who finds himself in Paris with dual responsibilities - he has to kill a dangerous terrorist while simultaneously having to reconnect with the teenaged daughter he's lost touch with because of the demands of his job. The clock is ticking on both … and I think it is fair to say that the movie is pretty ludicrous. And, as it happens, lots of fun, mostly because Costner brings movie star charm and charisma to the role.

    I can best explain my reaction to the movie this way: There is a semi-elaborate set piece in the film in which Costner, on a bicycle, has to take out two enormous SUVs and a bunch of bodyguards, while kidnapping a terrorist's bookkeeper. Watching the whole thing unfold from a nearby bus is a small boy who, when it is over, claps his hands in delight.

    I sort of felt like that boy.

    And I'll probably feel much the same way tomorrow night when I go to see Non-Stop, an airplane-in-jeopardy thriller starring … you guessed it … Liam Neeson.

    Can't wait.

    (One of the reasons I think I like these movies is that from time to time, while sitting around the dinner table, my kids have advanced the theory that, in fact, I am an assassin. They can't imagine that being the "Content Guy" is a real job, plus I travel a lot by myself, and they suggest that while I may say that I'm in Chicago, who is to say that I'm not actually in Paris killing terrorists? This is not the case, of course, though I admire their imaginations and appreciate their belief in my non-existent abilities. At least, that's my story and I'm sticking to it…)

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

    KC's View: