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    Published on: March 11, 2014

    by Michael Sansolo

    Change is afoot.

    Kevin captured it beautifully in his Eye-Opener last Friday, a day the news was filled with stories about retail. It was everywhere: store closing announcements from Staples, Radio Shack and Fresh Market, and, of course, the discussion of the Albertsons-Safeway mega-merger.

    Inevitably it led to the usual conclusion that retail, as we know it, is dead and gone.

    It reminded me of a moment from the 30-year-old movie Mask, when a doctor somberly tells Cher’s character that her chronically ill son is going to die. Cher replies, “If I had dug his grave every time you geniuses told me he would die, I’d be eating (expletive) chop suey in China by now.”

    No doubt she’d buy it at a supermarket because somehow, despite the endless obituaries written for supermarkets, there are still an awful lot of them around.

    The simple truth is that there is no simple truth. Yes, retail is under assault in every way possible. There’s the endless channel blurring, the on-going pressure on price and economizing, and the expected onslaught from on-line retail.

    It would be foolish to ignore any of this. The challenges of the times (and the times to come) are as strong as ever.

    But we also have to recognize that the reason stores and companies have survived is by changing with the times. With the exception of the rare conventional store that somehow has lived on in a piece of protected geography, the world has been constantly changing and, in virtually every case, improving.

    Think about it. Supermarkets have been written off and eulogized constantly. It started with the price formats at the 1970s that were a response to the economic conditions of the times. When the economy improved, super warehouse stores with their blend of low prices and high service levels would end things as we knew it.

    Then came supercenters, clubs, natural food stores, category killers, drug stores, dollar stores and, well you get the picture. (Keep in mind, that not long ago, Staples was a category killer, feared for the changes it made in its market and blamed for disrupting the status quo. Now Staples is scrambling.)

    In the midst of all that, supermarkets as we knew them both survived and perished. Those that survived did so by getting stronger, more focused and better able to serve customers and beat competition than ever before. Those that perished somehow largely missed or misread the changes and fell by the wayside.

    So yes, all these announcements tell us a lot. They tell us that some companies are in big trouble, having failed to make the changes. And they tell us that others are radically shifting course, hoping to find a better way to survive.

    Which is exactly what should be happening.

    As I’ve written before, back in my days at the Food Marketing Institute (FMI), our food safety specialist, Dr. Jill Hollingsworth, once helped me compare competition to the endless array of bacteria and viruses that food scientists study endlessly. As Jill explained, the bugs always find a way to mutate, in the process surviving whatever challenges have been thrown their way.

    Businesses might not like the comparison to bacteria, but it does work. You continue to survive by finding the right way to change.

    It’s called survival of the fittest. It works in biology and it works in business. Plus it beats the daylights out of digging to China.

    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: March 11, 2014

    by Kevin Coupe has a story saying that Amazon needs to "start looking over its shoulder" now that Walmart has begun testing its Walmart To Go concept in Denver, Washington, DC, and some other metro areas.

    The argument is that "Walmart To Go will work for the very simple reason that Walmart is not really a retailer. It is a logistics company that simply owns a lot of stores. Walmart's success is built on its ability to move a lot of merchandise to its stores quickly and efficiently." And because "Walmart To Go customers don't have to pay a membership fee, and the service currently offers free shipping or a small delivery charge," suggests that Walmart's offering will be a feisty competitor to Amazon's Prime membership service, which has an annual fee.

    In addition to being able to stand up to Amazon, the story says, Walmart's online offering will have an even greater impact on other, more traditional retailers:

    "The most likely scenario would be that Walmart To Go will speed up the retail apocalypse. The most likely victims of Walmart home delivery are drug store chains such as Walgreens, dollar or small box retailers, Kmart, category killers such as Toys R Us and Best Buy, and, of course, Target. Target could be the biggest loser because Walmart to Go and Prime are aimed squarely at its core customers: hip middle class shoppers … The wild cards in this equation are Costco Wholesale, eBay, and grocers such as Kroger Co. and Safeway. Costco, eBay, and Kroger are all experimenting with home delivery services of their own. Any of these companies or a combination of them could pose a challenge to Walmart. One interesting possibility is that some of these retailers might form a home delivery alliance to challenge Walmart and"

    But, the analysis seems to favor Walmart: "Walmart To Go could change the retail landscape completely," the story says. "Instead of being a dinosaur facing extinction, Walmart might be the monster that dominates the online retail market just as it dominates the big-box category."

    Or not.

    I'm tempted to leave my commentary there, but I think the blatantly pro-Walmart perspective requires something a little bit more. (I am self-aware enough to realize that many folks in the MNB audience believe that much of my commentary is blatantly pro-Amazon. While I'd prefer to argue that a simple analysis of the facts supports any pro-Amazon conclusions, it's probably simpler and easier to just plead guilty and move on…)

    Listen, all those things could be true about Walmart's online adventures. It could prove to be an e-n e-commerce game changer, and certainly the Bentonville Behemoth is investing a ton of money in its Walmart Labs initiatives. But the Daily Finance analysis presumes that Amazon's offering is somehow going to remain static, and I don't think history supports any such conclusion. In addition, there are a ton of legacy issues that Walmart must surmount in order to become "the monster that dominate the online retail market." They can be dealt with, but not easily.

    (I was in a Connecticut Walmart over the weekend that was dirty, badly merchandised with loads of empty shelves, and with a front end that was a nightmare … in fact, the only thing that the store seemed to have going for it was a full parking lot and crowded aisles. While this suggests to me that Walmart has a strong and highly defensible market position in the lowest-common-denominator retail segment, it does not auger well, IMHO, for a leap into state-of-the-art, progressive, innovative 21st century online retailing.)

    I do think that the suggestion that some of the bricks-and-mortar competitors to both Walmart and Amazon could come up with an alternative service option is an intriguing one, and such an effort might well be supported by a supplier community that may be looking for ways to reduce the clout exercise by the Amazon and Walmart.

    The argument that Walmart will dominate online because it essentially is a logistics company that happens to own a bunch of stores is an interesting one, especially because you could just as easily argue that Amazon is a logistics company without a lot of stores weighing it down. Amazon, without the legacy issues with which Walmart must deal, can be more nimble and more focused on the customer, as opposed to a bloated business infrastructure. Note that I write can be. Not is.

    We're still in the early innings when it comes to e-commerce, and there are a lot of ways this could play out. Any and all of these companies are capable of coming up with innovative and sustainable business strategies that will be gamer changers for them and their shoppers. Just as any and all of them are capable of screwing up and missing the next great tectonic marketing shift, leaving them adrift and irrelevant.

    I know where I'd place my bet, if I were going to make one. Others are free to places their bets wherever they like.

    I do think this: Bricks-and-mortar retailers don't have to worry that e-commerce is going to take over the world and make all of them irrelevant and obsolete. But they need to behave as if it will.

    Let's not forget that in placing our bets, we're all gambling. Because, as the great screenwriter William Goldman said in a different context, "Nobody knows anything."
    KC's View:

    Published on: March 11, 2014

    Advertising Age reports on a new campaign for Mondelez International-owned Honey Maid Graham Crackers that features "real-life stores" and focuses on "interracial and gay couples, a tattooed punk rock musician and a single father."

    In addition to featuring these American families in TV ads, the company also is giving them further attention via a YouTube campaign.

    "We recognize change is happening every day, from the way in which a family looks today to how a family interacts to the way it is portrayed in media," says Gary Osifchin, senior marketing director for biscuits at Mondelez, noting that the company wants to be "part of everyday moments of connection in a world with changing, evolving family dynamics."

    The tagline for the campaign: "This is wholesome."

    You can watch it here.
    KC's View:
    Well, I suspect that the tagline, not to mention the entire campaign, will stick in some people's craw.

    But largely, it reflects the greater reality from which nobody can escape - that traditional definitions are becoming less relevant, and are being replaced by a different reality in which words like "traditional" and "wholesome" mean something different. Most people, I think, are making the adjustment … and the vast majority of our kids will look back at some of the tsouris felt by some folks at such ads and wonder what all the fuss was about.

    Published on: March 11, 2014

    New York Times food writer Mark Bittman has an excellent piece running on the paper's website about how there seems to be ample evidence of late that the US is moving in the right direction when it comes to food and health, and that the evidence points to a simple lesson, that intelligent food-related public policy works.

    In his op-ed piece, Bittman argues that the glass is more than half-full, and that while this is good news, it is not so much case for celebration as a reason to double down our national efforts to improve the nation's eating habits.

    You can read the entire piece here.
    KC's View:

    Published on: March 11, 2014

    The Associated Press reports that Sbarro, the pizza chain that is largely found in shopping mall food courts, has filed for Chapter 11 bankruptcy protection for the second time in three years, saying it needs to slash debt and improve its quality if it is to regain profitability.

    The AP notes that the bankruptcy filing "comes after the company shuttered 155 of its U.S. locations last month." Sbarro still has about 800 locations around, half of them in North America.
    KC's View:
    I'm pretty sure I argued at the time of the first bankruptcy filing that Sbarro's long-term interests would be best served by serving s quality pie that didn't leave so much grease on the paper plates on which it serves its pizza slices. But maybe that's just crazy me … always arguing that in the end, lowest-common-denominator food is never the way to build a business.

    Published on: March 11, 2014

    The Los Angeles Times reports that CVS Caremark "could face as much as $29 million in fines for allegedly losing track of prescription painkillers at four of its California stores, from which authorities said thousands of pills may have been sold on the black market."

    Meanwhile, the story says, "CVS pharmacists in Southern California said they've been instructed by the drugstore chain to get their paperwork in order so that no other prescription meds are found to be missing.

    According to the Times, the US Drug Enforcement Administration (DEA) and the California Board of Pharmacy are looking into allegations that "more than 37,000 pills were apparently taken from CVS stores in Modesto, Fairfield, Dixon and Turlock … CVS faces 2,973 possible violations of the federal Controlled Substances Act for alleged discrepancies between the company's records and its inventory of prescription drugs."
    KC's View:

    Published on: March 11, 2014

    Apple Inc. reportedly is pushing major record companies to offer their newest releases digitally through the iTunes store for a period of exclusivity before making them available via streaming services or as physical CDs sold in stores or online.

    According to the Chicago Tribune story, "Apple executives contend that on-demand music services have begun to cannibalize download sales, and its representatives are demanding the labels create a period reserved for digital purchasing.

    "Music industry insiders, who spoke on condition of anonymity for fear of reprisals from the industry's dominant retailer, said Apple's push for a new release window — similar to the one that some Hollywood studios impose for films newly released for home viewing — shows the Cupertino, Calif., tech giant is scrambling to retain its competitive advantage in an evolving digital music market."

    The story notes that "Apple's iTunes online store accounts for about 80% of all download sales in the U.S. But after a decade of uninterrupted growth domestically, digital song and album sales began to slump in 2013 and continued to slide this year." A bright spot for Apple last year came when Beyonce released a studio album exclusively through iTunes last December, though it was a move not without controversy - it "also provoked a backlash from retailers Target and, which refused to carry the CD when it was released."
    KC's View:
    This is an interesting story, not least because can you imagine how Apple would react if the record companies decided to give the likes of Walmart and Target and Amazon an exclusivity on records by allowing them to sell physical versions for a period of time before making them available digitally? Not well, I expect .. but then again, when you have changed and dominated an industry to the extent that Apple has changed and dominated the music business, you get to make greater demands.

    The broader lesson that every retailer needs to learn, I think, is the importance of having products and services that are unique, that provide differential advantages, that are not identical to what the guy across the street or down the road is selling. And the secret sauce, I think, comes when a retailer can combine those unique products and services with the ways in which they define each of its customers as being unique entities, thereby creating a far more sustainable and compelling connectivity. If you have the same products and services as everybody else and treat all of your shoppers as if they were the same as everybody else, you risk getting this lowest-common-denominator business model that is entirely undifferentiated, and therefore at risk.

    Published on: March 11, 2014

    Rite Aid Corp. yesterday announced a new program, the Rite Aid Health Alliance, described as "a pioneering health management collaboration among various healthcare providers that provides comprehensive care and support to individuals with chronic and poly-chronic health conditions and helps them achieve health improvement goals established by their physicians."

    The program is said to leverage "the combined expertise of community pharmacists, who are one of the most accessible and trusted resources among healthcare providers, along with specially trained in-store healthcare coaches … Through Rite Aid Health Alliance, patients with chronic and poly-chronic conditions, like congestive heart failure, COPD, high cholesterol and diabetes, are recommended to the program by their primary care physician. Rite Aid pharmacists and specially trained care coaches, located in Rite Aid pharmacies, work with the physician and patient on an on-going basis to improve the patient’s overall health and self-management abilities. The care team members collaborate with the patient to establish health goals, eliminate barriers and create a personalized health care action plan in coordination with the patient’s physician."
    KC's View:

    Published on: March 11, 2014

    NBC News reports that Greek yogurt manufacturer Chobani is looking to sell 20 percent of the company to either another CPG manufacturer or a private equity group. The goal is to raise money that can help it compete in a segment where competition seems to be growing every day.

    The initial discussions value the whole company at around $2.5 billion, the story says.

    • The New York Times reports that Chiquita Brands International is acquiring Fyffes, an Irish company that distributes fruit throughout Europe, in an all-stock deal worth about $526 million. According to the story, "the combined company, to be named ChiquitaFyffes, will have about $4.6 billion in annual revenue, shipping about 160 million boxes of bananas a year."

    The Times notes that "the deal will potentially give Chiquita some sway over prices. According to the Department of Agriculture, bananas account for more than a quarter of all the fruit eaten in the United States. This country imports 3.8 million to 4.1 million tons a year."

    • A just-released report by Kantar Retail reveals that "Target’s database breach in December not only affected the retailer’s fourth quarter comparable store sales but also contributed to plummeting shopper penetration post-holiday.  Kantar Retail ShopperScape data indicates that just 33% of U.S. households reported shopping at Target or SuperTarget during January 2014, the lowest penetration number for Target in the past three years, and a 22% decrease in penetration versus January 2013."

    According to the report, "The overall trend in Target’s past four-week shopper penetration has been on a downward trajectory for the past several years.  The retailer’s confirmation in mid-December of a major breach of its guests’ payment information proved a critical moment in exacerbating that decline."

    • Ahold has announced that it is acquiring Spar's business in the Czech Republic - 50 stores doing annual sales totaling $607 million (US) - in a move that is described as "in line with Ahold's strategy to expand its geographic reach in both current and adjacent markets, and focus on leading market positions. Ahold has had a presence in the Czech Republic since 1991 and has developed the business under the Albert brand name to become one of the best known food retailers in the country."
    KC's View:

    Published on: March 11, 2014

    I've often expressed the opinion that when retention bonuses get handed out, there ought to be money reserved for the folks on the front lines, who ultimately are responsible for whether a retail turnaround can be achieved. (As opposed to just giving the bonuses to people in the executive suite.)

    One MNB user wrote:

    I agree with you 100% regarding the bonuses for the front line people. The people who are at the “bottom” generally are the ones supporting the ones at the “top”. Personally, I think the ones on the front lines who deal with the customers every day should be given something as well for their hard work and effort. Every company is made up of people – both executives and sales associates (and every role in between). I think everyone should get a slice of the pie, even if some slices are bigger than others.

    Regarding yesterday's piece about Amazon's Marketplace and how it is an enormous advantage in the e-commerce wars, MNB reader Herb Sorensen wrote:

    Absolutely agree.  However, as good as Amazon is, as long as shoppers live in bricks houses they will be shopping in bricks stores.  Their expertise ALWAYS puts the shopper first.  I'm not aware of any other retailer that does that.

    To reiterate something I wrote above: My premise is that ricks-and-mortar retailers should not be concerned that they all will be replaced by internet shopping.  However, they should absolutely behave as if this is going to happen.

    It's good to get up in the morning as if your hair is on fire.

    Last week, I got roundly criticized by some folks for a position I took on global climate change, with some folks suggesting that if I continued taking such positions - and criticizing people who I think are misguided on the subject - I was at risk of losing a substantial portion of my readership and, eventually, my business. (The subject came up when Chipotle said in an SEC filing that global climate change could create conditions in the future that might impact some product availability, forcing it to make menu changes.)

    My short answer to that was that if I were going to worry about alienating people with my opinions, I'd probably have to choose a different business model.

    Got a number of emails in response to this discussion…and while I don't want to belabor this point for too long, I did not want to leave the impression that the only people writing in were the folks who disagreed with my take on the subject.

    MNB user Steven Ritchey wrote:

    I have to weigh in on this “debate” that is going on over global warming.

    Who do I want to believe, scientists who’ve spent years pouring over data, taking readings and studying history, or  political ideology spouted  by a talking head?

    Now, no one is going to accuse me of being a tree hugger, but, I do feel some responsibility for the care of the  planet we live on.  If the scientific community has reached a consensus that we, people, mankind has engaged in behavior that is contributing to an unnatural climate change, we need to at least investigate why.  We need to at least take it seriously, instead of saying it doesn’t fit with our political agenda and say because it doesn’t fit our ideology it’s not true.

    BTW, I love the quote, “You can have your own opinion, but not your own facts.”  Problem is, too many take opinion as fact.

    From another reader:

    “The reason we have been in such gridlock the last five years is that the art of compromise for the better good is nonexistent in government; apparently compromise is now equated with weakness.  You have a higher than average intelligence base among your readers, but when it always comes back down to the left side of the aisle as the root cause of all that is wrong with our great nation, they lose me.  I have been voting for 40 years, and I have always registered as no party or independent for precisely this reason.

    We are all in this together.

    We get it that weather goes through cycles, but people a lot smarter than me have real concerns regarding the changes that are experiencing.  We can either choose to ignore it, or address it.  If it is a “cycle” like the Dust Bowl, then things will improve; if this is a sign of more radical changes in our global climate and by changing what we burn to keep the lights on or commerce moving reverses these changes, what does it hurt to explore it?

    It’s a jungle out there, kiddies; have a very fruitful day!

    As always, keep bakin’, Kevin; keep bakin’…

    Extra credit for quoting a Jimmy Buffett song…

    And by the way, I agree with you. Liberals have plenty for which they can be legitimately be blamed. Not sure it is productive or accurate to blame them for everything.

    MNB reader Ron Pizur wrote:

    Good for you for bringing this debate up. I can agree with your detractors that the environment goes in cycles, like the economy, and we just have to ride it out. However I also agree with you that the speed at which the climate is changing and that it is happening at the same time as man's industrialization is just too coincidental to ignore.  The solution to nature is just not going to be solved by the U.S. alone, if at all. That being said it just makes good sense to mankind to be more responsible in how we treat our environment. 

    I was just reading about Easter Island and how that civilization died out because they completely deforested the island. So not acting responsibly and not thinking about how your actions today will impact future generations is just shortsighted and silly. Eventually we will run out of coal, oil and natural gas and then what is the option. Why wouldn't we think about better solutions and try to move in a more responsible direction?

    I think the people who are sticking their heads in the sand and criticizing anyone who is making money by trying to do something better for all of us are just modern day Easter Islanders.

    From another reader:

    Very well written and quite fun to read the entire debate.  It amazes me that someone would stop reading your posts because they don’t agree with you on a few points.  Stop reading when they get to Your Views, there is still a ton of information about retail and business.

    MNB reader Peter Lee wrote:

    Just wanted to say thanks for today’s MNB.  Today was one of the best.

    Thoughts coming from today’s article that I had to share:

    I’m amazed by how stupid, or more appropriate, ignorant some people can be.

    I’m also amazed by how many ignorant people there are in the world.

    And finally, realizing there are so many ignorant people in the world, it makes me tremendously nervous for my children’s future.

    But I’m sure we will find a way to come to a consensus on how to face our biggest problems… or I hope we can…

    I'm probably going to tick off a bunch more people with this, but I actually feel a lot of compassion for folks who find it difficult to deal with so much change in so many societal, cultural, religious, political, and even scientific areas. ("Don't pity us! We're right and you're wrong!" I can hear them saying.)

    But change is hard to deal with, especially if you've been raised to believe that things are and ought to be a certain way, and that there is no room for compromise or discussion, because that way darkness falls. ("Damn right!" they're saying.)

    But I guess that somehow I've been trained (by the Jesuits, though I cheerfully offer them plausible deniability) to believe that there are actually very few immutable laws, and pretty much everything else is open to change. ("That's your problem!" is the cry from those who disagree with me.) I think you're supposed to make the most of your own talents and abilities, to be true to yourself, to behave in a kind and ethical manner towards everybody, to be loving and supportive to your spouse, loving and nurturing to your children. For some, all of this involves a relationship with a deity, and for others, it means just being the best human you can be, and teaching your kids to do the same.

    And that's pretty much it. Which I think maybe allows me to be more open to the idea that the climate seems to be changing and maybe we ought to do what we can on the off chance that we're contributing to the problem, or any of the other so-called radical notions that seem to challenge political/religious/cultural orthodoxy.

    Interestingly, the discussion seemed to dovetail with a bunch of other stories, leading MNB reader Gary Loehr to write:

    Wow, a lot of strong opinions coming out on a variety of topics.  What I don't get is the "if you disagree with me, I'll stop reading you" threats.  Part of the reason I read you is because I might learn something.  You don't learn from reading only those opinions that you already share.   The thing that makes an opinion an "educated opinion" is understanding all sides of the issue, then coming up with a position.   People need to loosen up a little.

    And from MNB reader Andrew Turpin:

    I’ve drafted a couple of messages before to send to you, in the spirit of the healthy debate, to challenge an opinion.  I’ve never sent because I felt that in the end, they wouldn’t add a ton of value.  But in reading your posts for the last few months, I’ve been constantly surprised by the diversity of your followers.  And while there are many T-rex (perhaps a bit older, not ready to accept new reality, and more than likely pretty conservative) types out there, I hope they see your side of the coin and can accept the difference of opinion without the vitriol that is often spewed.  It helps that I think I’m philosophically more aligned with your social views than I am say for your undying love of the ‘River’ (it’s a fantastic company that is totally game changing, but there are other interesting developments in retail and e-commerce that may warrant coverage).  Keep up the good work and stir the debate.  If nothing else it’s an entertaining way to be vicariously involved.

    As I wrote last week, I fully expect that only 50 percent of the MNB readership is going to agree with me as much as half the time.

    I'm okay with that. In fact, I embrace it, because that's what makes it worthwhile to get up in the morning and write the stories and read the emails.

    Ultimately, I just want to keep the conversation lively, entertaining and illuminating.
    KC's View: