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    Published on: March 24, 2014

    by Kevin Coupe

    The "Corner Office" column in Sunday's New York Times had an interview with Clorox Co. CEO Don Knauss, in which he talked about an issue dear to our hearts on MNB … specifically referring to lessons he learned in the Marines about the importance of convincing employees and associates that you care more about them than yourself.

    "The first day I was actually in a line unit — after 15 months of school and training — was on Hawaii, the Big Island," Knauss says. "There’s a big Army base there where artillery units train and shoot live rounds. They helicoptered me over and I took a jeep to join 120 Marines in this artillery battery. They’d been out in the field for several weeks, and the commanding officer had ordered hot food from the base camp because they’d been eating C rations [canned food] for several days.

    "I had been up since 5 in the morning, and I was pretty hungry. I started walking over to get in front of the line, and this gunnery sergeant grabbed my shoulder and turned me around. He said: 'Lieutenant, in the field the men always eat first. You can have some if there’s any left.' I said, 'O.K., I get it.'  That was the whole Marine Corps approach - it’s all about your people; it’s not about you."

    This is a scenario, by the way, that plays out in corporations all over the country and the world. I've spoken to people who have attended lunch meetings where the CEO is first on line to get their meal, and people who have attended similar meetings where the CEO holds back, waiting for everyone else to eat first. This may be a small example, but I'm told that the differences in atmosphere and culture are tangible…

    Knauss goes on: "If you’re going to engage the best and the brightest and retain them, they’d better think that you care more about them than you care about yourself. They’re not about making you look good.  You’re about making them successful. If you really believe that and act on that, it gains you credibility and trust. You can run an organization based on fear for a short time. But trust is a much more powerful, long-term and sustainable way to drive an organization."

    And, he adds: "One of the things I’ve learned is that as you move up in an organization, you’re given more power. The less you use the power you’ve been given, the more authority people give you, because they think: 'You know what? This guy’s O.K.' Persuading people to do things — come along with me because we’re going in the right direction — is much more powerful over time."

    Some people lead by creating an atmosphere of fear, and others by understanding that the real power in any organizations from the front lines, and from people up and down the org chart who are empowered, committed and engaged.

    What continues to amaze me - in 2014 - is that there are boards of directors and senior executive teams that don't get it … that believe in old-fashioned notions of hierarchical and dictatorial management. I'm not saying that CEOs should not be tough and demanding … just that they need to understand that the music of leadership is not played with just one note.

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

    Published on: March 24, 2014

    The Great Atlantic & Pacific Tea Co. (A&) said last week that it has named a new president/CEO to succeed Sam Martin, who was hired to turn around the company and got it through a bankruptcy filing, but who departed last January.

    The new CEO: Edward John Smith.

    No, check that. The actual new CEO is Paul Hertz, who has been serving as the company's COO, is a former executive vice president at OfficeMax, and previously held executive positions at Wild Oats Markets, Shopko Stores and Frey Meyer.

    The Bergen Record reports that "A&P also announced the promotion of Christopher McGarry,the former executive vice president and general counsel, to chief administrative officer, and the promotion of Nirup Krishnamurthy,the former chief information officer, to chief strategy officer."

    Martin, the former COO of Whole Foods, joined the company in July 2010, when Ron Marshall, the former Nash Finch CEO who was dismissed after just seven months at the helm. Marshall replaced Eric Claus, who had been brought down from A&P’s Canadian operations in 2005 and was fired without apparent warning in 2009.

    The Record writes that "Martin's departure was seen in the supermarket industry as the result of friction between him and Greg Mays, who was appointed executive chairman of the company a year ago.

    "Mays, a member of the A&P board since 2007, was appointed executive chairman in March, 2013, in a move seen by many in the industry as a sign that the former chairman, supermarket investor Ron Burkle, was preparing for Martin's departure. Burkle's company, Yucaipa Cos., and other investors, put together the consortium that helped A&P emerge from bankruptcy."
    KC's View:
    Forgive me for the Edward John Smith reference. That was just my way of having a little fun. Smith, of course, was captain of the Titanic.

    This is not to suggest that Hertz is steering A&P toward an iceberg. Though it seems often like A&P is a ship without a rudder or a map, and with a crew that is trying to go in different directions.

    It is also not to suggest that Hertz cannot fix the company's problems. Though I have to wonder why it took the board of directors two months to decide that the guy who was number two in the company was the right person to become number one. (Who did they really want? And is it any surprise that it was hard to lure anyone from the outside to join A&P?)

    This is a disaster. Short of a miracle, it is hard to imagine what Hertz can do to make A&P viable and credible again.

    Published on: March 24, 2014

    Bloomberg reports that a federal court has "upheld a Federal Reserve rule that banks can charge them as much as 21 cents to process debit-card transactions," saying that the rule is consistent with federal law.

    According to the story, "The ruling resulted from the Fed’s appeal of July decision by a federal judge who threw out the fee cap, saying the central bank added in costs it wasn’t allowed to consider under the Dodd-Frank law, inflating debit-card transaction fees by billions of dollars. The retailers argued that under the law they were entitled to a lower cap."

    Leslie G. Sarasin, president/CEO of the Food Marketing Institute (FMI), made the following statement in response to the ruling: "Today we learned the disappointing news that the D.C. Circuit largely upheld the U.S. Federal Reserve’s debit card interchange fee rule and network non-exclusivity rule, reversing the decision of the U.S. District Court that had previously held for the merchants.

    "We await the input of counsel on their interpretation of this tremendously perplexing ruling and the opportunity to put together our longer term goals. We will determine our next steps after we have time to review the decision more thoroughly. FMI remains dedicated to pursuing marketplace competition for our food retailer and wholesaler members. The food retailing industry, unlike the banking industry, is highly competitive and has maintained a net profit margin of less than one percent for the last two decades."

    And Henry Armour, NACS' president/CEO, said, "It is unfortunate that the D.C. Circuit Court of Appeals misread the law and the Federal Reserve’s rule on debit swipe fees. Any rule that would allow profit margins of more than 1,000% and raise fees on many transactions clearly violates the letter and intent of the law Congress passed. Congress did the right thing by trying to make debit swipe fees more competitive and the law did that in spite of the Fed’s mistakes. We intend to review all of our options for upholding what Congress did and ensuring that debit swipe fees become more reasonable for convenience retailers and their customers."
    KC's View:
    It would appear that banks are being given a lot more consideration than consumers and retailers … which somehow is not surprising.

    I still think that retailers ought to get a lot more aggressive in creating a public relations/advertising campaign that makes the case to consumers about why this is important, and why they should be making their voices heard in the public square. I'd develop public service messages that stress the retailers' case, and explain why this should be important to consumers. It can't be that hard to turn banks and credit card companies into bad guys, and generate some public pressure to beat them back.

    Published on: March 24, 2014

    The Associated Press reports that Walmart "has rolled out an online tool that allows shoppers to compare its prices on 80,000 food and household products to those of its competitors. The world’s largest retailer began offering the feature that’s called 'Savings Catcher' on its website late last month in seven big markets that include Dallas, San Diego and Atlanta."

    The tool is designed to show consumers what they have saved at Walmart after having made a purchase there, by comparing its prices with those advertised by competitive bricks-and-mortar stores, but not online retailers. The company says that Walmart is "hoping the online tool will build more confidence among Walmart shoppers that it has the best price whenever they shop in stores."

    The AP goes on to describe how the "Savings Catcher" works:

    "A customer has to set up an account on Wal-Mart.com, then logs onto the Savings Catcher page on www.walmart.com/ and type in the number on their receipt. Shoppers need to register the number within seven days of purchase. Savings Catcher compares prices of every item on the receipt to a database of advertised prices of competitors. The database is provided by an undisclosed third party that analyzes retail ads.

    "The prices at Walmart stores are matched to competitive stores based on geographic location, but not online retailers. For example, in Atlanta, Wal-Mart compares prices to nearly 20 rivals, including Aldi, CVS, Food Lion, Target and Dollar General. The tool doesn’t include purchases on store-label brands or those made online. The tool also doesn’t apply to general merchandise like clothing or electronic gadgets, but does include groceries and things like detergent.

    "The savings are issued on a Wal-Mart online gift card and the customers can accumulate savings or use the credit immediately. Shoppers can use the credit in stores or online by printing out the gift card receipt."
    KC's View:
    I think that any tool that creates price transparency is potentially powerful, but I have to admit that I am less than overwhelmed by the description … because the comparison is taking place after the Walmart purchase, not before. Plus, not comparing prices to online retailers seems a little disingenuous, since that's where some significant price competition comes from.

    Published on: March 24, 2014

    There is an excellent story on the Quartz website about an initiative at Chipotle that stresses people development within the ranks, and the belief that its success is dependent on a "culture as distinct as its food … As more than 1,000 stores opened across the US, the company focused on creating a system where promoting managers from within would create a feedback loop of better, more motivated employees. That year, about 20% of the company’s managers had been promoted from within. Last year, nearly 86% of salaried managers and 96% of hourly managers were the result of internal promotions."

    The goal is make sure that the restaurants remain at the core of Chipotle's culture - in the same way, for example, that Feargal Quinn's old Superquinn chain defined its corporate offices as a "support office" rather than as a "headquarters."

    The story says that Chipotle wants to create what it calls "gravity" at the managerial level, "to make sure that great managers are given the chance to make individual stores great. They stay involved training excellent people instead of leaving to become less effective middle management at the corporate level."

    Cool story, and you can read it in its entirety here.
    KC's View:

    Published on: March 24, 2014

    The Wall Street Journal reports this morning that Apple and Comcast are in discussions about creating "a streaming-television service that would use an Apple set-top box and get special treatment on Comcast's cables to ensure it bypasses congestion on the Web, people familiar with the matter say … the deal, if sealed, would mark a new level of cooperation and integration between a technology company and a cable provider to modernize TV viewing.

    "Apple's intention is to allow users to stream live and on-demand TV programming and digital-video recordings stored in the 'cloud,' effectively taking the place of a traditional cable set-top box."

    It was just two months ago that the Journal had reported that Amazon had "approached big entertainment companies about licensing their television channels for a possible new online pay-TV service, in what would be a significant expansion of the company’s online video efforts." Amazon then denied those reports.
    KC's View:
    When the Amazon story ran two months ago, I got a ton of email from people who were ready to sign up, if for no other reason than they hate their cable providers.

    I think Comcast is smart to understand the levels of antipathy that exist out there, and to disrupt its own traditional business model from within … and Apple is smart to try to make its set-top box even more vital. (Especially since Amazon is said to be ready to start selling its own set-top box.)

    This kind of competition is taking place in every category and industry, and it is worth watching to see how it plays out, because there are lessons to be learned.

    Published on: March 24, 2014

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

    • The Associated Press reports that "Wendy’s is rolling out a program that lets customers pay using their smartphones after a similar plans unveiled by Burger King this week … The move reflects a push by fast-food chains to court younger customers by tapping into the attachment they have to their phones."

    According to the story, after a year of testing, Wendy's says the payment system is now available in a majority of its 5,800 US locations."


    • The Washington Post reports that the rapid sales decline of the Skinnygirl line of diet alcoholic drinks suggests a broader problem - that "diet liquor just doesn't have much appeal."

    The story says that "it's true, of course, that Americans have long sought to cut calories through consuming 'light' beer -- but that segment has been losing steam faster than most, as drinkers move into craft brews with higher alcohol contents. And besides, beer is something you might actually drink in large quantities. Vodka, on the other hand, is difficult to consume in the kind of volume that might make somebody fat in the first place. Meanwhile, wine is already supposed to be good for you, and the diet version just tastes bad."

    I'll never forget going out for drinks with friends, and I asked the waitress for a margarita. She said, "Regular or Skinnygirl?" I looked at her in disbelief. "Do I look like the kind of person who would order a Skinnygirl margarita?" I said. Even the name sounds like it wouldn't taste good.
    KC's View:

    Published on: March 24, 2014

    James Rebhorn, the well-known character actor who most recently played Claire Danes' father on "Homeland," and who famously played the district attorney prosecuting Jerry, George, Elaine and Kramer in the "Seinfeld" finale, has passed away after a long battle with skin cancer. He was 65.
    KC's View:
    My favorite James Reborn moment is in Independence Day, in which he plays the Secretary of Defense. There's a moment in the film when Judd Hirsch's character is ranting about aliens held captive in Area 51, and Bill Pullman's President tells him that "there is no Area 51."

    And then Rebhorn says, "Uh… excuse me, Mr. President? That's not entirely accurate."

    Wonderful little moment. Great character actor.

    Published on: March 24, 2014

    We had a story the other day about retailers shutting the most stores, which prompted one MNB reader to write:

    I  for one would be sorry to see Radio Shack go down with the ship.  They are the only place you can go to get unusual parts and connectors for the various electronic devices we have.   There have been several  times I wanted to connect one type of device to anther only to find the cords are not compatible.  You can be sure that Radio shack will have a solution.  Sure, you can find some of the connectors at other places but no one seems to carry as wide a selection.   As far the other eight go, other than Sears for Land’s End items, I can’t remember the last time I shopped at one.

    MNB reader Mark Raddant wrote:

    Of the stores listed, the only one I would miss would be Barnes and Noble.  I still love walking around the store and finding random books by total accident.  I don’t limit my browsing to any department, so have found terrific reading in surprising areas:  The Physics of Economics, The Genesis Enigma, the poetry of Robert Merwin, and George Will’s baseball books, and many, many more.  I use my Kindle—how else to take a library when you travel?--but the random accident of discovery is a joy not yet found at Amazon.




    Regarding the new Walmart To Go convenience store being tested by the company, one MNB reader wrote:

    I live just miles from this new store, the funny thing is that it's been built on land that was a former hotel that Walgreens bought then sold and now bought the gas station across the street to build their new store. What I don't get is why? Why another format? Why do a “test” in your own back yard? Seems Mr. Simons thinks that small is the way to go, express stores, c-stores, neighborhood markets, etc. … To me, it seems Walmart is just throwing stuff on the wall to see if it will stick and to keep Wall Street happy.

    And another wrote:

    Does anyone really think that a format launched in a retailers Head Office city is scalable?  Since every shopper has a vested interest in Wal-Mart’s success, I can’t fathom that the learnings are that replicable. Now, when Wal-Mart opens the next vintage in Minneapolis, Charlotte or even in California then we’ll see what Wal-Mart has learned about how to compete in convenience retail.




    Had a story about Tesco the other day, which prompted MNB reader Steve Citarella to write:

    Now that Tesco has left our shores is it really relevant to have a Tesco segment every day?  Maybe they should be replaced with Loblaw’s who is a bigger factor in North America.

    I actually don't think I have a Tesco story every day … but I would point out that Tesco remains the world's third largest retailer. Plus, the story was about an ad campaign for dairy where they used pictures of beef cows instead of dairy cows, which allowed me to make an "udder" joke.

    Under those circumstances, there's no way I'm not doing that story.




    On another subject, one MNB reader wrote:

    I felt compelled to comment on your post about another rise in the cost of food and food products.  As a retailer who spends a lot of time on the front lines, I see a lot of customer behavior which greatly contributes to the rising cost of food prices.

    Early mornings, especially after busy weekends,  I come in to clean shelves, do “reshops”--put back nonperishable items that customers displace, AND shrink all of the perishable goods that customers leave on shelves or eat part of and leave behind.  When customers inconsiderately leave perishable items on shelves because they no longer want them, the store absorbs the cost; but it comes back to the customer via higher prices.  In addition, the amount of labor hours spent on employing young people to put nonperishable items back in their proper location is quite significant.

    If shoppers would be considerate enough to put back products they no longer desire, they would help keep store costs, and prices, stable…





    Amazon's increase in the cost of a Prime membership - and a survey suggesting that Amazon as a result is losing brand equity - prompted MNB reader Hung Nguyen to write:

    Just a quick-ish question/comment regarding the last few items you've posted focusing on the impact on Amazon's brand of raising prices for their Prime membership … I've been a Prime member for a long time (7 years or so) and most of my family's normal (& abnormal) purchases, as evidence by the number of credit card items that have 'Amazon, llc' on them, have been through Amazon.  You simply can't beat the combination of price, service, & convenience!  But with the news recently of how Amazon distribution center employees are paid & treated (extremely poorly), the impact on the overall economy (revenue per $ added to economy is low vs. more traditional retailers), and to a lesser extent, the Prime price increase, my perceptions about Amazon are definitely more negative now than they were a year ago.  I've actually made it point to renew my membership at Costco (who we all know treat/pay their employees a fair wage) and have even started taking advantage of ShopRunner's free subscription offer for Amex members.

    Point is, at least for this longtime Prime member, Amazon has slipped more than a few notches on the list of 'best retailer brands', and my dollars are slowly shifting to other retailers, both online & off.


    Another reader wrote:

    Surveys … it all depends on who you talk to and when and how the question is written & formatted.

    From another reader:

    I was in a CPE course yesterday and this topic came up during a discussion of “Admired Companies” vs. “Dying Companies”.   Amazon was the first company mentioned under the “admired” category, while Sears was first under “Dead and Dying”.

    The response from the audience of about 40 finance and accounting folks was, “Amazon raised their Prime membership fees – so what?  It’s still worth it.”

    Your “Amazon-bias” is widely shared by marketplace.


    And another:

    Admittedly, I too have had an Amazon bias for many years, still do to a large degree.  Perhaps partly because I lived in Seattle and an early adopter of the little known (then) company in the early days.  I too was an early adopter of Prime, great concept, appreciated it now for many years.  However, over the past few months I have noticed in many cases that Amazon pricing (even with the Prime shipping that is not free) has been edging upwards when compared to those competitors mentioned.  Also, eBay, Overstock and Wayfair have not stood idle over the past decade either.  In fact, I was pleasantly surprised by significant improvements in variety, pricing, delivery and customer service at each of these, especially eBay.  Add to that, what may be perceived as a 'modest' price increase from Amazon by some and It really could give folks the reason (and opportunity) to take the blinders off for a bit and shop around.  Hey, I did it before the Prime increase notice!  Not to say there will be huge leakage, but it certainly opens the door…

    Finally, I got the following email from a reader:

    You're obsessed. I bet you couldn't write a day, let alone a week, without commenting on Amazon.

    I would argue that since Amazon is a compelling and ongoing retail story, I would not be doing my job if I didn't write about it when warranted. Which is to say, constantly.

    Maybe I'm obsessed. But I don't think so … I think I'm just paying attention.
    KC's View:

    Published on: March 24, 2014

    The Major League Baseball season has officially begun, with a two game set between the Los Angeles Dodgers and Arizona Diamondbacks played over the weekend in Sydney, Australia.

    The Dodgers won both games, 2-0 and 7-5.

    The games were played at the Sydney Cricket Ground, which last hosted a baseball game in 1914, when the Chicago White Sox played an exhibition game there. More than 76,000 people attended the two games.

    The season resumes in North America next Sunday, March 30.
    KC's View:

    Published on: March 24, 2014

    Cornell University Food Executive Program

    July 13-18, 2014 … Ithaca, New York

    Celebrating 50 Years of Excellence in Food Industry Executive Education.

    Who Should Attend?

    Retailers, Wholesalers, CPG Suppliers, Service Providers. The program prepares middle- and upper-level executives for their next promotion and beyond, and is well-suited for high-potential leaders being prepared for broader general management responsibility.

    “The Cornell Food Executive Program will not only be a great learning experience, you will also develop industry relationships that will last throughout your career.”  - Ed Crenshaw, CEO, Publix Supermarkets, Inc.

    For more information and to apply online, click here.

    KC's View: