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    Published on: March 21, 2014

    by Kevin Coupe

    The American Banker has a story about the recent Retail Banking 2014 conference, at which "top bank executives repeatedly invoked Amazon's name as an example of what they aspire to become."

    That's right. Amazon.

    Specifically, the executives seem enamored with Amazon's use of customer data and ability to create a positive customer experience. (This appears to be before it raised its annual Prime membership fee from $79 to $99.)

    According to the story, "Banks are slowly improving the technology they offer, but they are still struggling to figure out how best to use the massive amounts of data that they have on their customers. Meanwhile, competition is fierce, low interest rates are squeezing the profits they can make from those customers, and most banks don't know how to get more business from people who, after all, only need a limited number of checking accounts or mortgages."

    Sound familiar?

    For bankers, the story says, the notion of finding or creating algorithms that will help them understand when people are ready to buy and what they are interested in buying is akin to finding the promised land - it simply is not being done to any significant degree within the banking industry. And so they are looking to the "Amazon model" for inspiration.

    Now, let's put aside for a moment the sense that many people have that banks' problem is not being unable to know when and what people are interested in buying, but rather selling too much stuff that nobody understands, that once sent and again could send the nation into an economic tailspin, while simultaneously rewarding the industry's senior executives with sums of money beyond the dreams of avarice. (Whew. Glad I got that out of my system.)

    The comments by the bankers seem very similar to those that might be made by executives in virtually any industry - to succeed in the modern economy, it is critical to know who your customer is, what the customers' wants and needs are, and then interact with the customer in a way that is both relevant and appropriate.

    To do less is to run the risk of obsolescence.

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

    Published on: March 21, 2014

    In Minnesota, the Star Tribune reports that Supervalu plans to "consolidate its distribution business from three regions to two, forming new east and west teams. They will be located in Hopkins, where Supervalu has a large distribution center, and in Mechanicsville, Va. Supervalu will significantly downsize its regional office in Pleasant Prairie, Wis., 35 miles south of Milwaukee near the Illinois border.

    "The changes will reduce operating costs and lead to an immediate loss of 200 positions throughout Supervalu’s wholesale operations, about 160 of which will be in Pleasant Prairie, said Jeff Swanson, a Supervalu spokesman. The jobs affected are office positions, not warehouse jobs."

    According to the story, "The head of the Pleasant Prairie office, Bill Chew, will become president of the wholesale region based in Hopkins. The current Hopkins leader, Mike Stigers, will become president of Cub Foods, the Twin Cities’ largest supermarket chain. Brian Audette, a Supervalu veteran who’s been head of Cub for the past two years, will become senior vice president of merchandising, marketing and sales for Supervalu’s wholesale division."

    The story notes that the moves are designed to make Supervalu's wholesale business, which represents almost half the company's revenue since it sold off four retail chains last year, more efficient and effective.
    KC's View:
    While I'm always a little dubious when companies equate efficiency and effectiveness - they are not the same thing and usually cannot be achieved the same way - these moves seem to make sense. After all, back when I was working in the men's clothing business, when someone came in with a suit after they'd lost weight, we'd have to take it in, making sure it fit the person's new shape … which seems to be what Supervalu is doing here.

    Published on: March 21, 2014

    The Wall Street Journal reports that FedEx CEO Fred Smith blamed "sloppy shipping practices" for at least some of the problems during last year's holiday shopping season that caused some customers not to receive packages on time and FedEx to see its Q3 profit shaved by $125 million.

    Retailers, Smith said, "claimed that packages had been tendered to FedEx and rival United Parcel Service Inc. or delivery to their customers before they actually were. In addition, labels were often affixed incorrectly or items weren't properly packaged and subject to damage, the executive added, sounding like the Marine Corps veteran that he is, while speaking on an earnings conference call with analysts."

    The Journal writes that "retailers' shortcomings on their side of the delivery equation 'is a big part of the e-commerce business that really didn't get enough publicity last year because they were an integral part of the problem even more than the weather and the carrier performance,' the FedEx chief said.

    The story notes that Smith did not name the prime offenders, and major e-commerce companies including Amazon and Walmart did not comment on the accusations.
    KC's View:
    A couple of thoughts here…

    First of all, it is important to remember that Smith is criticizing his customers … which is not always a good way to go. I'm not suggesting that the customer always is right, but taking shots at them isn't always the best way to cement positive relationships.

    In fact, I'm sure that there were plenty of cases in which the retailers screwed up. But I'm also reasonably sure that this is precisely why we're hearing a lot of speculation about Amazon wanting to use its own fleet of trucks to service the nation's top 20, 30, even 40 markets … so it has greater control over the process. We'll only have Amazon to blame, and Jeff Bezos no doubt thinks that he can do it better.

    Published on: March 21, 2014

    Give credit where credit is due … with this web video, part of its "Work is a Beautiful Thing" campaign, Walmart has hit a home run. (As has the agency that produced the video, Saatchi & Saatchi.

    Tangentially, this video is designed to promote Walmart's declared commitment to buy $250 million in US products over the next 10 years and support US factories and the people who work in them.

    But this video is a lot more than that … and it communicates something both simple and profound in less than two minutes.

    Enjoy. This is a "Wow!"

    KC's View:

    Published on: March 21, 2014

    The Philadelphia Business Journal reports that Instacart, the personal shopping service that started there in February, "has expanded its services both in Philadelphia proper and to the outer suburbs, as well as adding big-name supermarkets to the list its customers can order from."

    Instacart began its Philadelphia incursion by shopping only at Whole Foods for its customers, and then added Super Fresh. This week, it announced that it is adding BJ's Wholesale Club to its roster of stores.

    According to the story, "Normally, customers would need a membership with BJ’s, running between $50 a year for a personal membership, to $100 a year for a rewards membership. With Instacart, customers won’t have to deal with any of those annual fees. The company’s 'personal shoppers' — those working on commission who go out and complete customers’ orders — will use the company’s business account to fulfill orders from the wholesale club’s locations in South Philadelphia."

    And, the story says, "The company also expanded its coverage area. In February, Instacart expanded its service area to include Fishtown, Kensington and Port Richmond. Now, a month later, the company has expanded even further, reaching the Main Line to include Gladwyn, Ardmore, Haverford, Bryn Mawr, Villanova, Havertown and parts of Upper Darby."
    KC's View:
    I remain skeptical of Instacart's ability to create a sustainable business model. In a time when disintermediation seems to be a key business strategy, it is actually adding a level of cost and mediation. But I'm a lot less skeptical of Instacart's ability to stay in business until someone writes a big check to acquire its assets and integrate them into another business.

    Published on: March 21, 2014

    Reuters reports that as Lidl plans to follow its arch-rival Aldi into the US, with expectations that it could open at least 100 stores beginning next year, the company announced that its chairman, Karl-Heinz Holland, has left the company over "unbridgeable" strategic differences.

    The story notes that Holland has been with the company for 23 years, the last five as chairman, but that nobody has been named to replace him.

    The story says that Dawid Jaschok, head of buying and marketing for Lidl, "would also be leaving the company for the same reason," though the specifics remain unstated.
    KC's View:
    The story also notes that Tesco failed with its Fresh & Easy chain in the US, and hints that differences over the US excursion may be what caused the parting.

    Hard to say whether Lidl will be successful here, but I do have a sense that in the right markets, with the right offering, it may be successful … but I'm not sure that the company should be coming to town with the same exact concept that has been successful in Europe. The US is not the same market, and should not be treated the same.

    Published on: March 21, 2014

    TechCrunch reports that Amazon is expanding even further into the supermarket business, as its Quidsi division relaunches its Vine website, which traditionally has focused on healthy and eco-friendly foods, as VineMarket, which also caters to the "roughly 15 million Americans suffering from food allergies, or those who have other restricted diets."

    According to the story, "The new site has been redesigned specifically to allow shoppers to find and filter allergen-free products, that are not just peanut-free, but also dairy-free, tree nut-free, soy-free, gluten-free and more.

    "Other sections cater to those with special diets, like kosher, vegan, or organic. The site also offers a set of guidelines to help them shop, which explain how product meet the company’s natural or organic criteria. In addition, none of VineMarket’s inventory will include specific Banned Ingredients, the company explains, meaning those with high fructose corn syrups, bleached or bromated flour, artificial fats, trans fats, artificial colors, artificial flavors, artificial sweeteners and preservatives; and more than 20 chemicals, heavy metals, animal byproducts, phthalates and parabens."

    The Quidsi press release notes that "VineMarket.com customers can also look forward to a shared shopping cart with Diapers.com, Soap.com and wag.com," all of which it also owns, "as well as fast and free 1-2 day shipping on orders of $49 or more and 24/7 customer care."
    KC's View:
    The key learning here, I think, is the fact that e-tailers can segregate and categorize their sections much more easily than bricks-and-mortar retailers, and then target their promotions to appropriate customers who will find these offers to be relevant to their lifestyle choices.

    This is a big deal, the strategic efficacy of which cannot be underestimated.

    BTW … I think the next thing you'll see these e-tailers doing is creating "made in the USA" sections. It just makes sense at a time when this categorization seems to be gaining consumer currency.

    Published on: March 21, 2014

    • In Colorado, the Gazette reports that Trader Joe's will open its first store in Colorado Springs in 2015.

    The move is part of a broader expansion into Colorado: Trader Joe's has opened three stores in the state already this year, in Denver, Greenwood Village and Boulder; another Denver store, and one in Fort Collins, are scheduled to be opened before the end of the year.
    KC's View:

    Published on: March 21, 2014

    • Tim Fenton, COO at McDonald's Corp., said yesterday that he plans to retire later this year. The company said it has no plans to replace him, but rather will split up his responsibilities among two senior executives: CFO Pete Bensen will now also oversee the global supply chain, development and franchising functions, while Steve Easterbrook, global chief brand officer, will take on oversight of McDonald's restaurant solutions group and corporate strategy.
    KC's View:

    Published on: March 21, 2014

    ….will return. I promise.
    KC's View:

    Published on: March 21, 2014

    Just to follow up on Thursday's FaceTime … I'm gratified to have received all the email I got yesterday, with stories about your parents, your children, and the importance of having the right priorities and making the best memories. (And yes, you're right … my wife and brother are terrific.)

    And so, rather than belabor the point that so many of you already got, I thought I'd share this photo with you.

    Have a great weekend. I'll see you Monday.

    Slàinte!



    KC's View:

    Published on: March 21, 2014

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    KC's View: