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    Published on: March 7, 2014

    by Kevin Coupe

    To me, this morning's Eye-Opener lies in the confluence of a bunch of stores today that speak volumes about the changing retail landscape.

    Albertsons buys Safeway. Costco looks to expand its traditional appeal. Staples closes 225 stores. Fresh Market closes four units. And meanwhile, consumer attitudes about things like the appeal of the suburbs and the safety of credit card usage continue to undergo significant change, even as bricks-and-mortar stores do more and more business online.

    Can you feel the tectonic shifts taking place? (If not, better get a physical, because there's something wrong with your nerve endings.)

    The Washington Post this morning has a headline saying that traditional grocery shopping is dead … which I find amusing since I'm not sure what "traditional" means in 2014, and what many people think of as being "traditional" has been dying for years. The problem, I think, is that not enough people have yet figured out what "traditional" should be replaced with.

    And I think that's the real point.

    Albertsons can acquire Safeway, but the real magic will be in how their banners and stores change to become relevant to a consumer class with fast-changing needs and wants (which are not the same thing). And the same goes for Costco, Staples, Fresh Market and pretty much anybody else in the retail game.

    So read these stories, but don;t think of them only in terms of what is happening to those businesses. Think about how the changes in the retail landscape has forced these shifts, and then think about these stories in the context of your business.

    Because nobody is immune.
    KC's View:

    Published on: March 7, 2014

    Cerberus Capital Management, parent company to the Albertsons chain, said yesterday that its AB Acquisition LLC group will acquire all of the banners controlled by Safeway Inc., in a deal valued at $9.2 billion.

    The Bloomberg story about the acquisition notes that both Albertsons and Safeway "are seeking to cut costs and expand their reach amid mounting competition from Wal-Mart Stores Inc. and warehouse clubs, as well as online food sellers and delivery services."

    The new entity will have 2,400 stores, 27 distribution facilities, 20 manufacturing plants and between $55 billion and $60 billion in annual revenue. No store closings are expected to take place.

    In a prepared statement, Albertsons' CEO Bob Miller said, "This transaction offers us the opportunity to better serve customers by adapting more quickly to evolving shopping preferences in diverse regions across the country. It also brings together two great organizations with talented management teams. Robert Edwards and his team have done an outstanding job in positioning Safeway's core business for success, by investing in its stores and creating innovative strategic marketing programs that contribute to shareholder value. Working together will enable us to create cost savings that translate into price reductions for our customers. Together, we will be able to respond to local needs more quickly and deliver outstanding products at the lowest possible price, more efficiently than ever before."

    And, Safeway CEO Robert Edwards added, "This merger will improve our competitive position. Our customers will benefit from significant cost saving synergies and a stronger management team.”

    Edwards will become president and CEO of the new combined company, and Miller will be the executive chairman.

    The announcement says that the deal does not change Safeway's "previously announced plan to distribute the remaining 37.8 million shares of Blackhawk stock that it owns to its shareholders in mid-April," before the completion of the sale.

    Bloomberg notes that there is a 21-day window built into the deal during which other companies - such as Kroger, which has been reported to have an interest in at least some of Safeway's assets - have the right to make competitive bids. There also have been reports that Kroger could acquire some of Safeway's assets from Albertsons after completion of the deal.

    In a related story, the Chicago Tribune reports that Albertsons' Jewel-Osco banner is acquiring five closed Dominick's locations in the region, bringing to nine the total number of former Dominick's stores it has bought.

    Safeway shuttered its Dominick's division late last year. There remain 28 store locations that have not been accounted for.
    KC's View:
    To me, there is a central core challenge in deals like these.

    The deal turns two companies into one, turns two really big companies into one giant company.

    But it takes place at a time when, I believe, retailers have to be more focused on the individual shopper, and have to create stores that are increasingly customized in terms of both products and services. Bigness does not always allow for such focus. It can, but it often does not. Bigness usually focuses on efficiency and cost savings and finding commonality and reaching lowest common denominator solutions.

    These days, though, I'm not sure that this kind of focus leads to real and sustained effectiveness.

    And so, when the deal has been finalized and a new behemoth has been created, job one ought to be drilling down to the local store and understanding the individual shopper. At least, IMHO.

    Published on: March 7, 2014

    The Seattle Times reports that while Costco traditionally has catered largely to an older demographic, the company now is saying that it is "taking incremental steps to draw in a younger demographic — a key strategy in an increasingly competitive, digitized environment rife with rival membership programs such as Amazon Prime … These ventures don’t mean the Issaquah-based retailer is going out of its way to cater to millennials. But they mean that Costco acknowledges shifting patterns in retail consumption, as online retailers increasingly invade the turf of brick-and-mortar giants."

    According to the story, "Costco has partnered with Google to conduct a same-day-delivery experiment in the San Francisco Bay Area, and has dabbled some in social media even as it strengthens its information-technology systems and its online commerce site.

    "Costco is also marketing more organic products. Chief Financial Officer Richard Galanti said on Thursday’s earnings call that organic beef and 'giant packs of kale' help drive in younger customers."
    KC's View:
    One of the things that the story makes clear is that one of the bigger obstacles to Costco's looking for Millennial appeal is geographic - younger people tend to be in urban environments, and most Costco stores are in the suburbs. Which is why, the story points out, Costco probably will have to focus more on e-commerce when appealing to the young, at least until these younger people decide that it is in their best interests to get married, have lots of kids, buy houses and lease minivans. (Not that this necessarily is in their best interests, but they could be persuaded…)

    Published on: March 7, 2014

    The Nielsen Co. has a new study saying that "breaking from previous generations’ ideals," Millennials' vision of the "American Dream is undergoing a dramatic change, "transitioning from the white picket fence in the suburbs to the historic brownstone stoop in the heart of the city … Millennials like having the world at their fingertips. With the resurgence of cities as centers of economic energy and vitality, a majority are opting to live in urban areas over the suburbs or rural communities. Sixty-two percent indicate they prefer to live in the type of mixed-use communities found in urban centers, where they can be close to shops, restaurants and offices. They are currently living in these urban areas at a higher rate than any other generation, and 40 percent say they would like to live in an urban area in the future. As a result, for the first time since the 1920s growth in U.S. cities outpaces growth outside of them."
    KC's View:
    I have two reactions to this study.

    On the one hand, I'm thrilled that I seem to have attitudes that are younger than my age, because I can't wait to get out of the damned suburbs … and I believe that thinking young is key to living a long and healthy and happy life.

    On the other, I'm worried that all these young people are going to increase real estate prices before I actually get to move to the city…

    Published on: March 7, 2014

    Staples said yesterday that it plans to close as many as 225 stores in North America, with a goal of cutting its annual costs by up to a half-billion dollars.

    The announcement comes as the office suppliers retailer said that its Q4 sales were disappointing, its Q1 sales are projected to be lower than the same period a year earlier, and the company is focusing to a greater extent on online strategies that it hopes will allow it to compete more effectively with the likes of Amazon.
    KC's View:
    It is simple. Change or die.

    Published on: March 7, 2014

    Fresh Market said yesterday that it will close three stores in the Sacramento, California, area and one store in Houston, Texas.

    The closings, which are taking place immediately, are said by the company to be "in the best interest of the company and its future profitability."

    According to the Sacramento Bee story, the 151-store Fresh Market "has two other California stores, in Palo Alto and Santa Barbara … Last year, it opened 20 stores and has signed leases for another 25 future locations. On its website, two of the pending locations are Laguna Hills and Yorba Linda in Southern California."

    However, the story also notes that in a recent earnings report Fresh Market management said that it believes that a “greater number of new store opportunities exist in markets east of the Mississippi River."
    KC's View:
    I wonder if these days, with all the increased competition, it makes more sense than ever to cut off diseased and dying limbs as fast as one can. Can't be sitting there for very long with distractions that also are hurting the bottom line.

    Published on: March 7, 2014

    There is a new survey out saying that 39 percent of consumers are "very confident" that using a credit or debit card is safe, while 49 percent say that they are only "somewhat confident." 

    The survey also says that "while 59 percent of shoppers have not made any changes in payments methods used, 32 percent plan to use cash more often." And, "only 30 percent of shoppers age 50-64 said they were very confident about using a credit card at their primary grocery store. Younger shoppers (18-24) were more trusting (48 percent), but 46 percent say they do now use cash more often."

    The survey goes on to say that "consumers' food safety confidence (49 percent "very confident") exceeds their trust in payment security (39 percent)."

    The survey was commissioned by Balance Innovations, and conducted by 210 Analytics.

    Full disclosure: Balance Innovations has been a member of the MNB family of sponsors.
    KC's View:

    Published on: March 7, 2014

    Internet Retailer has an interesting piece about the growth of online sales by bricks-and-mortar stores: " Toys R Us, for example, derived 13.5% of its total sales from the web in 2012, up from 9.1% in 2010. Wal-Mart Stores Inc. brought in 2.9% of total revenue from online shoppers in 2012, up from 1.6% in 2010."

    The story goes on to say that "the Bureau of Labor Statistics’ American Time Use Survey shows that between 2004 and 2012, the average amount of time consumers 15 and older spent shopping in bricks-and-mortar stores for consumers goods on weekends dropped 14.3%; on weekdays, it dropped 11.8%."
    KC's View:
    Anybody surprised?

    Published on: March 7, 2014

    • The Associated Press reports that McDonald's plans to expand an initiative allowing customers to build their own burgers, as opposed to order directly from the menu board.

    The effort has been tested at one California unit and has been found to be a "huge driver" of business, the company says. And so it will be expanded to more than five stores but fewer than 100, it says - all in Southern California, where the initial test was conducted.
    KC's View:

    Published on: March 7, 2014

    • New Albertson’s, Inc. (NAI) announced that Shane Sampson, currently the President of Boston-based Shaw’s and Star Markets Division, has been appointed President of the Jewel-Osco Division based in Chicago.

    At the same time, Jim Rice, who has been serving as Interim Division President of Jewel-Osco, is being promoted to President of Shaw’s, replacing Sampson.
    KC's View:

    Published on: March 7, 2014

    Remember ... for most of us in the US, this weekend marks the end of Standard Time and a return to Daylight Savings Time. On Sunday, March 9, at 2 am, it will be time to turn your clocks forward an hour. (Assuming, of course, you have clocks that require manual changing.)

    Most of us can only hope that with the advent of Daylight Savings Time will come some relief from the cold and snow…
    KC's View:

    Published on: March 7, 2014

    I've finally finished watching "House of Cards" - all 13 hours of the second season - and at this point, I'm exhausted.

    Not because of all the time I put in, but because the second season of "House of Cards" once again has been a roller coaster of a viewing experience - a little bit of Shakespeare's "Macbeth," a little bit of Robert Caro's multi-volume biography of Lyndon Johnson, and a little bit of "The West Wing" if it had been written by Quentin Tarantino.

    It's great.

    Now, to be honest, there is not much I can tell you about it. The second season, like the first, has plenty of plot twists and turns. And I'm a fanatic about spoilers - I'm religious about not reading anything about any film or TV show that I might watch and that might ruin any surprises for me, and I don't want to ruin anything for anyone else.

    Suffice it to say that Kevin Spacey remains omnivorous and charismatic as Frank Underwood, the House Majority Whip turned Vice President with a pure and unrelenting hunger for power; Robin Wright is all cold calculation as Claire Underwood, his wife,who seems to have a black hole where her heart ought to be; and Kate Mara is excellent as the Washington reporter who is investigating Underwood but may have bit off more than she can chew. The rest of the supporting cast is equally strong and highly watchable, the writing is incisive and the direction is mostly by movie directors such as Jodie Foster and James Foley who clearly find the "House of Cards" universe to be a compelling place to spend some time.

    I know exactly how they feel.

    Remember, to watch "House of Cards" you have to stream it online via Netflix, and all 13 episodes were made available at the same time … so you can watch it in one binge, or you can take your time and make it last as long as you like. The biggest problem is now that I'm done, I have to wait another year for season three.




    I mentioned last Friday that I was looking forward to seeing the new Liam Neeson movie, Non-Stop, which is his latest "middle aged guy kicks the crap out of much younger guys and saves the world" effort.

    It ends up that Non-Stop is one of his best, at least for the first 90 minutes, which are suspenseful and filled with plot twists that are highly satisfying. Neeson plays Bill Marks, an Air Marshall who, on a flight from Ny to London, gets a text message telling him that a passenger on the plane will die every 20 minutes until $150 million is wired into a specific account. Then, he's told by the airline that when they checked the account, it was in his name … and so Neeson finds himself simultaneously trying to defend himself against accusations that he is the murderer and find the culprits actually responsible.

    It all falls apart a little bit during the last 20 minutes, when the person and rationale behind the murders is revealed … but before that, it is actually what I'd call a first-rate B movie. Strong performances, good writing … "Non-Stop" is a fun evening at the movies.




    A final thought, if I may.

    One of my great pleasures is having the opportunity to go around the country - and sometimes, outside it - to talk to various kinds of meetings. Often, I can't really write about where I've been and who I've spoken to, simply because it isn't fair to the companies that invited me.

    That said, I want to say "thanks" this morning to a group that brought me in because the vast majority of their folks read MNB each day … and then, when I got there, I found in my hotel room a gift basket largely filled with Pellegrino water and a bottle of red wine, making it abundantly clear that they've been paying attention when reading MNB. These are, after all, the things I love to drink. (I felt for a moment like one of those rock stars who gets a jar of M&M's with all the blue ones taken out … except that I hadn't asked for anything.)

    So thanks, Megan and Kelly and the whole gang. You made my week.




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

    Slàinte!
    KC's View:

    Published on: March 7, 2014

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    KC's View: