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    Published on: March 10, 2014

    by Kevin Coupe

    The Washington Post over the weekend reported that Bank of America seems to be pulling the plug on the traditional check, having just "rolled out a new checking account with all the traditional trappings--mobile payments, ATM use, access to call centers--sans the nifty booklet of paper checks we've all come to know and kind of love."

    The reason? here's how the Post frames it:

    "Cutting paper checks out of the account experience makes sense. Americans wrote 28 billion checks in 2009, 5.3 billion less than 2006, according to the most recent data from the Federal Reserve of Philadelphia. At that pace, researchers at the Philly Fed expect checks could disappear all together in 12 years.

    "A 2003 change in the law on how banks process checks hastened their demise. Before then, banks sorted, then carted checks off onto airplanes for delivery to other banks. When the FAA grounded planes after the 9/11 terrorist attacks, lawmakers passed legislation to let banks use electronic images of checks to process payments.

    "Philly Fed researchers estimate that the electronic switch is saving banks $1.2 billion a year. Between the electronic processing and the rise of mobile banking, the days are numbered for paper checks. You might want to save one to show your grandkids some day."

    Forget grandkids. For the most part, while my kids are familiar with the look and concept of a check, they never use them … everything is done online. They have checking accounts that are checking accounts in name only.

    Add it to the list of things that used to be regular parts of our lives that are fast become obsolete and irrelevant.

    It is an Eye-Opener.
    KC's View:

    Published on: March 10, 2014

    Well, that didn't take long.

    The Seattle Post Intelligencer website reports that the WashPIRG Foundation is heading up a campaign to get Safeway and its new corporate parent, Albertsons, "to label its store-brand products for ingredients derived from genetically modified organisms (GMOs)."

    The call comes a year after Whole Foods announced that will adopt GMO labeling for all the products sold in its stores.

    “Whole Foods took a big step, and it’s time for Safeway to deliver for its customers,” said Chris Esh, Program Associate with WashPIRG Foundation. “Consumers have real concerns about GMOs, including the way they lead to increased pesticide use, and they have a right to know what’s in their food.”

    To dramatize their point, the PI reports, members of the UW WashPIRG chapter held a rally at the Capitol Hill Safeway in Seattle.
    KC's View:
    I'm in favor of GMO labeling of some sort … but my suspicion is that there's no way that Safeway or Albertsons engage in any sort of behavior that they think might hurt sales or limit traffic. Which is what they'll see GMO labeling as doing, at least in the short term.

    Published on: March 10, 2014

    Tech Crunch reports that Amazon has "quietly" developed and launched a new application designed for use by third-party businesses that sell via Amazon Marketplace. Called Amazon Sellers, the app is said to offer "a suite of mobile tools that allow sellers to search and scan barcodes of items, check prices, sales ranking and reviews, list items, as well as communicate with customers … In addition to product search and customer communications, Amazon Seller lets merchants create listings and estimate the profitability of their items before they sell. To do so, merchants enter in the cost of the items, then the app will show the potential profit, less Amazon’s selling and fulfillment fees."

    And, the story says, the use of the Seller app by Marketplace businesses means that "all activity is routed through Amazon’s servers."

    The Tech Crunch story also notes that until now, the lack of such an app from Amazon was considered to be a "missing piece" in the Marketplace ecosystem, that retailers could use outside apps like one developed by SellerMobile to accomplish such tasks, but it added to the cost of being a Marketplace seller.
    KC's View:
    This is important, because the Amazon Marketplace, allowing third party sellers to be a vibrant and organic part of the Amazon experience, is one of Amazon's real advantages in terms of consumer perception and driving sales. So anything they can do to make that experience more seamless for the third-party retailer and shopper, the better.

    Published on: March 10, 2014

    The Business Standard reports that MasterCard and Visa are leading the formation of a new cross-industry group - which will include banks, retailers, POS device manufacturers and trade associations - that is designed "to further ramp up security of payment systems, in a bid to ensure more secure transactions for consumers, retailers and financial institutions."

    The move comes in the wake of data breaches at companies like Target and Neiman Marcus that put consumers' financial information at risk.

    According to the story, "The group will initially focus on adoption of EMV chip technology in the US in addition to addressing other security-related topics like tokenisation and point-to-point encryption … MasterCard and Visa expect this group to complement and engage with other efforts across the industry, including proprietary risk councils, EMV task forces and the standard management bodies."
    KC's View:
    I've said it before and I'll say it again … addressing payment systems security issues requires private enterprise and the government to work together and to understand that this is an ongoing challenge, not something that can be solved and then shelved. The bad guys are going to be ahead of the game when it comes to developing ways to hack into systems, and so vigilance and investment and innovation all will be required just to keep up.

    Published on: March 10, 2014

    Bloomberg Businessweek has a story suggesting that for Safeway to succeed post-acquisition by Cerberus Capital Management, the company "would be wise to focus sharply on simplicity and shift away from the grocery chain model of cramming 60,000 different products—or stock keeping units, in industry jargon—inside each location. A narrower list is smart strategy."

    Why? Well, the story suggests four reasons.

    • Customers more and more want retailers to curate their product selection: "Most shoppers don’t want 20 brands of hummus or yogurt. They want experts to narrow that down to the best two or three, each offering distinct flavors and characteristics.

    • No supermarket should depend on big brands, which have largely become commodities: "Heck, if it’s sealed, you can buy it off the back of a truck. No chain is going to differentiate itself with a heavy reliance on these staples, unless it trims margins to the bone and hopes to make money on volume. That’s not a battle regional grocers can really hope to win.

    • Private label has become a brand statement, representing products that cannot be bought elsewhere … and it will behoove Safeway to concentrate more on them.

    • And there ought to be a greater focus on local: "Buying locally produced food appeals to consumers on multiple levels. It’s more eco-friendly than shipping organic yogurt from New Zealand. It turns national retailers into community players that support local businesses and artisans in our increasingly entrepreneur-driven economy. And it seems healthier, as the food typically is fresher and more in tune with the seasons."
    KC's View:
    ending on big brands for growth when those same brands are carried by virtually all your competitors. But I also remain convinced that the biggest challenge and opportunity for Safeway is to drill down as deeply as they can go when it comes to understanding specific customer needs and wants, and marketing to people in a highly specific fashion.

    It's this simple: Make sure that dog people never get cat food coupons. Never.

    Published on: March 10, 2014

    The Associated Press reports that LL Bean, "coming off record profits and four years of revenue growth," is preparing to invest $100 million "into its website, retail expansion and business systems" - including an eight percent bonus paid to every full-time employee with the company.

    The new investment, the story says, will be "the biggest single-year capital investment in the retailer's 102-year history."
    KC's View:
    I love the idea that management is sharing the wealth a bit, making the people on the front lines feel like they are stakeholders, not just employees. And BTW….I suspect that this is why pretty much everyone I've ever dealt with at LL Bean, in stores or on the phone, has been first class.

    Published on: March 10, 2014

    • Bi-Lo Holdings announced last Friday the decision to convert seven existing Harveys stores to Winn-Dixie stores and three existing Winn-Dixie stores to Harveys stores. - moves that are all part of the pending acquisition of 134 Sweetbay, Harveys and Reid’s stores from Delhaize Group.

    Bi-Lo has gotten Federal Trade Commission (FTC) approval of the acquisition, pending the divestiture of 12 stores by Bi-Lo Holdings and Delhaize Group retaining two stores and converting them to the Food Lion banner.


    USA Today speculates that Netflix customers may be about to see a price increase. In part, the move could come because Netflix has had to spend money on a deal with Comcast that assures that subscribers will be able to access high-speed internet when streaming content; the concern has been that Comcast and other cable providers will be able to slow down internet connections that allow people to watch Netflix and Amazon programming, for example, which also happens to be competitive with the cable providers' content.

    Another reason for a price increase could be the rising cost of content. "House of Cards," the series that has been exclusively available to Netflix streaming customers, will have a third season, but that will likely require various negotiations that will increase the cost.


    • The Economic Times reports that "Bharti Group, which runs India's largest mobile operator by both revenue and subscribers, is in talks with two global retail chains — French major Carrefour and Japan's largest retailer Aeon — with the intention of forming a new joint venture with one of them, said two people familiar with the negotiations." Bharti's goal is to find a partner to replace Walmart; the two companies severed their strategic relationship last year.

    The story says that "regardless of its eventual choice, Bharti's retail venture will be structured along similar lines" as the original Walmart deal. "Bharti and the foreign retailer will form joint ventures for the cash & carry segment, which caters to wholesale traders, and for the back-end of the retail chain selling to individual consumers.

    Walmart's Indian operations were engulfed by allegations of bribery in 2012, which put an unflattering spotlight on its business and culminated in senior-level sackings" and at least a temporary suspension of its plans for stores there. Late last year, Walmart broke up with Bharti, dissolving the joint venture originally set up so Walmart could have retail interests in India; Walmart currently has sole ownership of 20 wholesale stores in India, while Bharti has, among many other interests, a chain of Easy Day-brand convenience stores.
    KC's View:

    Published on: March 10, 2014

    • The Minneapolis/St. Paul Business Journal reports that two members of Supervalu's board of directors - Mark Neporent and Lenard Tessler - have stepped down, effective immediately. The reason - both men have links to Cerberus Capital, which has just acquired Safeway, one of Supervalu's major rivals.

    The story notes that "Neporent is chief operating officer and general counsel for Cerberus Capital Management," and "Tessler is co-head of global private equity and a senior managing director for Cerberus." It was a Cerberus-led investment group that last year "bought several chains from Supervalu in one of the biggest M&A deals of the year. Neporent and Tessler took several board seats on Supervalu in that deal."


    Bloomberg reports that Michael Calbert, the head of retail investing at KKR & Co. the private equity firm where he he was involved in the leveraged buyouts of Dollar General and Toys R Us, has left the company after 14 years. He is being replaced by Nathaniel Taylor, a partner in the firm, the company said.
    KC's View:
    I wonder if we're going to see a lot of this kind of movement, because it sounds like we can expect to see a lot more action at private equity firms interested in getting into the retail action. Upheaval at all levels seems to be likely.

    Published on: March 10, 2014

    This has nothing particularly to do with business, but…

    The Wall Street Journal had a interesting piece over the weekend about the popularity on college campuses of courses having to do with death - the premise being that it is valuable in our society to be able to think and talk opening about death, in part because it often results in the ability to think and talk differently about life.

    At Kean University in New Jersey, for example, students "leave the campus … to visit a cemetery, a maximum-security prison (to meet murderers), a hospice, a crematory and a funeral home, where they pick out caskets for themselves. The homework is also unusual: Students are required to write goodbye letters to dead loved ones and to compose their own eulogies and wills."

    It is an intriguing story about a captivating subject … and part of the reason I wanted to tell you about it is that one of the best classes I ever took at Loyola Marymount University back in the mid-seventies was a course called "The Philosophy of Death," which not only looked at how different cultures and societies thought about death, but also brought us to places like UCLA's medical school, where we watched an autopsy being done, and the Los Angeles morgue, where we were allowed to walk into the cooler where corpses from the evening's street violence were being kept. That was 40 years ago, but to this day I can vividly remember seeing a young African American man, maybe in his early twenties, on a gurney. There was a single bullet hole in his neck, and his eyes remained wide open, apparently surprised at what had happened. I vividly remember reaching out to touch his arm; I'd never felt a dead body before.

    It was an extraordinary class, and the Journal story frames the current trend as having real societal value.

    If you're interested, you can read it here.
    KC's View:

    Published on: March 10, 2014

    This one sort of got by me on Friday, but I did want to come back to it…

    Dr. Frank Jobe, who developed something called ulnar collateral ligament reconstruction surgery, died on Thursday at age 88.

    As for ulnar collateral ligament reconstruction surgery, it is better known as Tommy John surgery. Tommy John was the Los Angeles Dodgers pitcher who in 1974 tore an elbow ligament, which at the time almost certainly was a career-ending injury. (It was a similar injury that ended Sandy Koufax's career.) But Jobe came up with the idea of, as the New York Times writes, "transplanting an unneeded tendon from John’s right wrist into his left elbow, where it functioned as a new ligament. John went on to win another 164 games over 14 seasons, retiring from the game at age 46."
    KC's View:
    It is a great business lesson, I think, to be willing to not accept traditional answers and conventional wisdom, and to come up with new solutions to old problems.

    I have two thoughts about this. For one thing, it seems to me that Jobe ought to be in the Hall of Fame, because he has changed the game in a fundamental way.

    And there's this: How come they don't call it Frank Jobe surgery?

    Published on: March 10, 2014

    Regarding the Target CIO who is leaving he company in the wake of the major data breach there, one MNB user wrote:

    As the CIO of a retailer during a frighteningly similar credit card breach, I have some empathy for the ousted CIO at Target.However the latest breach clearly demonstrates that retailers have learned NOTHING about data security in the past several years. I'll try to help.

    PCI compliance is no barrier to a hacker. It's about as useful as antilock brakes on black ice; a false sense of security that is deadly dangerous. My company was re-certified as PCI compliant the same day our breaches started. Retailers need to go WAY beyond PCI.

    There is no such thing as a secure network. Assume bad guys are in your network already and take steps to minimize exposure/damage.This is the same advice I would have given the Trojans.


    On the same subject, another reader chimed in:

    I’m sure someone had to be the fall guy for this, but please, if you read what has been written on this its clear that several years ago the CEO and board didn't approve the funds to update their system to the new chip that they are now doing. So to throw the CIO under the bus…… well, the Board and CEO need to go as well. Maybe all need to give back their bonus for the oversight here….

    Now you're talking crazy talk.




    We had a story then other day about what it takes to appeal to Millennials, which led MNB reader Rich Heiland to write:

    To add to your Millennial post...when working with managers on managing in 2014, I point out we have, maybe for the first time, the potential for five generations in the work place, creating a new world for how to manage.

    When it comes to Millennials another maybe staggering stat came from an Atlantic article a few months ago. We use automotive and housing as our traditional economic engines that will pull us out of down times. Yet the article pointed out that not only are Millennials going to the city, as you noted, they are opting for "small" as in housing of 1,000 sqf, sometimes less. But, they are filling that space with really cool stuff. And, they don't buy cars in urban areas, which could be why ZIP and its relatives are the biggest growth sector in urban automotives. So, impact on our economic engines?

    I'm also wondering about your field - is there a rebirth of the corner green grocer going on or coming on as a part of this, ala European neighborhoods where limited space means smaller Fridges (old fart talk) which means more daily buying of groceries?

    Finally, I have seen studies that forecast that as these urban millennials wed, have kids they will move to larger housing so maybe you and Mrs. Content Guy can work out a housing swap at some point. 🙂


    One can hope.

    Related to this story was a piece about how Costco is trying to appeal to Millennials online, since increasingly they are not living in the suburbs where the Costco clubs are. Which led MNB user Glenn Cantor to write:

    As a long-time Costco member, it seems to me that Costco generates profit by selling 1) memberships and 2) all of the expensive, impulse stuff in a retail warehouse that people did not originally intend to buy.  They need shoppers to pay for memberships and then regularly shop in their retail locations.  It is a destination outing, rather than merely a shopping trip.  Their dilemma in attracting a younger demographic lies in attracting these people to their warehouse locations, rather than irregular web purchases.  Costco should be asking themselves what can we offer, in our warehouse locations, that no one else offers.

    For me, it is the price of normally expensive, but high quality, products.  For example, the quality of their meat is unsurpassed, especially for the value.  Another example is bountiful sampling- we call it the “geezer buffet.”  Costco’s unique proposition lies in getting their members to leave the house and experience their stores.    Retail solutions cannot always be about the web.  Internet shopping is a complement and not always a replacement.





    On another subject, from another reader:

    I recently went to a Staples store for a printer cartridge.  It was obviously a popular cartridge as they had an entire shelf dedicated to it, but the shelf was empty.  After searching for nearly 10 minutes, I found an employee (Assistant Manager) that took me to the empty shelf (I guess he didn’t believe me).  He then went into the back of the store and brought out a ladder – minimum 12 feet – and climbed a wall on the side of the store to get to the extra stock of these cartridges.  He then proceeded to bring exactly 1 down the ladder to give to me, instead of brining a box or two down to refill the shelf.  Sadly, he was very proud of himself for the good work he had completed.  If this is the type of quality service the store is providing, maybe Staples will be better off as an online retailer.




    Regarding the sale of Safeway to Cerberus/Albertsons, one MNB user wrote:

    As a long-time follower of the CPG industry, this “news” could have been ripped from a mid-‘90s press release:

    “this merger will improve our competitive position.” (we’ll be bigger)

    “our customers will benefit from significant cost saving synergies” (we can make more money on the ‘buy’ and pass a bit of that savings to consumers)

    "a stronger management team” (we’ll see who survives a more political corporate office in the short term)

    There is no mention of focusing on store-level staff (training, hiring, etc.) to enhance the shopping experience. The only time they mention customer service is in the context of "adapting to shopping preferences”. I read that to mean crunching the numbers to focus on store level assortment, a largely corporate and technology-driven exercise. They do, however, plan to focus on creating marketing programs that “contribute to shareholder value”.  So we know where their primary focus is.

    I may be wrong (have been many times), but this feels like a short term investment to freshen a few banners, then a relentless focus on squeezing every bit of profit out of the enterprise. Not a long-term bet in my book!


    MNB reader Don James wrote:

    Go back to Michael Porter, HBS Distinguished Professor - there are only 3 Strategic Options…

    Low Cost - Wal-mart.

    Differentiation - Kroger (trying).

    Niche - Whole Foods or Regionals like Brookshires.

    Safeway will probably remain - Stuck in the Middle - a losing proposition.
    KC's View:

    Published on: March 10, 2014

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    KC's View: