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    Published on: May 8, 2014

    This commentary is available as both text and video; enjoy both or either. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

    I'd like to take a moment to weigh in on the CEO discussion that we've been having on MNB this week, and there seems to be no better place to do so than from Main Street.

    It seems to me that one of the real challenges for people like the new CEO of Target, whoever he or she ends up being, is to make sure that they pay as much attention to Main Street as they do to Wall Street.

    That won't be easy. CEOs - especially new CEOs at companies in trouble, and really especially new CEOs trying to dig their companies out of revenue and profit holes - are almost duty-bound to pay attention to the short-term numbers. To find ways to satisfy the investor class, who, it is a pretty good bet, already have drawn blood (because there is a new CEO dealing with the problems). And they generally know they don't have a lot of time - the average Fortune 500 CEO lasts just 4.6 years in the job, and the average CEO overall lasts just 8.1 years. Almost from the moment they take the job, the clock is ticking. And the sharks are circling.

    I'm not here to suggest that investors aren't important. Clearly, they are. They help to fund companies' growth and evolution, so they cannot be ignored.

    But CEOs, especially these days, have to pay attention to the long-term, and in the retail business, that means paying attention to Main Street. Retail companies need to hire CEOs that are merchants who understand how to balance effectiveness and efficiency. Sure, they have to find a way to generate profits, but they have to be equally focused on developing a sustainable, long-term business plan. Because if they pay attention to short-term revenue and profit issues, there almost certainly will be problems around the corner that they won't see and prepare for. And their companies won't be engineered to respond to the bigger trend and competitive challenges that can come from nowhere.

    To return to an example I often cite, this is what Amazon's Jeff Bezos is doing. I believe he recognizes that if he slows down for even a quarter or two, he gives the competition a chance to catch up. He's lucky, of course - few investors are going to call for the head of Jeff Bezos. So he can do something a lot of CEOs cannot - keep reinvesting profits and pay attention to the long term.

    The reality is that in a 21st century economy, maybe we have to adjust how we measure and benchmark corporate and executive success. Investors have to adjust. Boards of directors have to adjust. Pundits have to adjust. And this will allow CEOs to adjust.

    It's like the difference between seeing a movie on a 27 inch TV and seeing it on an Imax, 3-D screen … in the current climate, you have to look at the biggest picture possible.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: May 8, 2014

    by Kevin Coupe

    FedEx is throwing a hand grenade into the e-commerce business.

    The Wall Street Journal this morning reports that FedEx is changing the way it charges to ship products: "Instead of charging by weight alone, all ground packages will now be priced according to size. In effect, that will mean a price increase on more than a third of its U.S. ground shipments … The change in pricing could dramatically affect either online shoppers or retailers or both. Someone will have to swallow the estimated hundreds of millions of dollars in extra shipping costs." And shipping already is one of the fastest-growing budget lines for most online retailers.

    The story suggests that it seems likely that UPS will follow with a similar policy, rather than seek a competitive advantage by keeping its charges the way they are: "If so, that would likely greatly affect bulky but lighter weight items like toilet paper and diapers, which many people have delivered on a regular basis, as well as Zappos.com shoes, which ship for free, including free returns. Indeed, shoe shoppers are encouraged to buy multiple pairs, keep what fits and return the rest. Avid Web shoppers do the same with sweaters, dresses, and jackets at retailers like J. Crew, Banana Republic, and Macy's."

    According to the Journal, "E-commerce retailers will be affected by differing degrees, depending on their ability to negotiate pricing with FedEx, analysts say. The biggest companies, like Wal-Mart Stores Inc., Walgreen Co. and Saks Fifth Avenue, will likely attempt to grandfather in current pricing rules when they renegotiate contracts. During a similar price increase in 2011, many retailers negotiated a phase-in of the new rules."

    This strikes me as yet another reason that Amazon is likely going to invest even more into developing its own shipping service, with trucks in as many as 40 major markets. That way, it can exert even more control over costs and service … it suffered something of a black eye during the past holiday season when FedEx and UPS were unable to live up to the promises that Amazon (and other e-tailers) were making, and that's not something it wants to happen again.

    I'm a little surprised that FedEx (and UPS, if it makes the same decision) would risk accelerating the process of losing Amazon's business. And as I think about it, I wonder if there is anything that would prevent Amazon from amortizing the cost of doping more of its own deliveries by offering that service to other e-tailers. After all, it already provides an e-commerce backbone to many e-commerce companies … why not offer expanded supply chain solutions as well?

    Just a thought. And maybe a potential Eye-Opener.
    KC's View:

    Published on: May 8, 2014

    Bloomberg has a piece about how "packaged-food giants are facing a prospect they’ve dreaded for years: a state law requiring them to label products containing genetically modified organisms."

    Suddenly, the prospect is a real one: Vermont is expected to shortly become the first state in the nation to require the labeling of products containing GMOs. California and Washington residents both have defeated referendums calling for such labeling, while Connecticut and Maine have passed laws calling for GMO labeling contingent on enough other states passing similar laws. The Vermont law would take effect in 2016.

    According to the story, "Kraft, Monsanto Co. and DuPont Co. are among the food makers that have lobbied against stalled GMO labeling legislation in California, the most populous state. They argue that labeling laws could increase food manufacturing and retail costs for processors and grocers. The Washington Research Council, a Seattle-based group that opposed the labeling bill in that state, estimated it would add as much as $520 to the annual food bill for a family of four … Kraft, General Mills and Mondelez International referred questions on GMO labeling to the Grocery Manufacturers Association in Washington. The organization calls the Vermont bill 'critically flawed' because GMO crops are safe, according to a statement on its website. Brian Kennedy, a spokesman for the association, declined to say whether GMA would sue if Vermont’s governor follows through."
    KC's View:
    A few thoughts here.

    I agree completely that dealing with this issue on a state-by-state basis is a mistake. It requires a federal policy … but, because the feds are (IMHO) doing the bidding of big biotech companies, states are being forced to make their own regulations.

    I'd bet a beer that GMA will sue. It has done a ton of fund raising on this issue, and it cannot afford to let the GMO labeling movement get any traction. (Betting a beer doesn't mean that I doubt my position. I'm just not a bettor .. and a beer, for me, is high stakes.)

    The continued focus on this subject makes me very happy that next Tuesday I will be moderating a panel discussion on the subject of GMOs at the Portland State University (PSU) Center for Retailing Excellence annual Executive Forum. Should be entertaining. (Come say hi.)

    I would argue that the GMA position is itself "fatally flawed" because labeling does not equate condemnation. it is just information. And I have a problem with organizations of any kind that are anti-information sharing.

    BTW … on a different but related subject, check out the TED speech by General Stanley McChrystal on the importance of sharing knowledge, vs. silo-style thinking. You can see it here.

    Published on: May 8, 2014

    Mark Bittman, the estimable New York Times food columnist, has an interesting piece about the importance of understanding nuance, even though people holding various opinions about the food supply often prefer to rely on buzzwords.

    "I think we — forward-thinking media, progressives in general, activist farmers, think-tank types, nonprofiteers, everyone who’s battling to create a better food system — often send the wrong message on both of these," Bittman writes. "If we understand and explain them better it’ll be more difficult for us to be discredited (or, worse, dismissed out of hand), and we’ll have more success moving intelligent comments on these important issues into the mainstream."

    And that means rethinking how we think and talk about things like organics and GMOs.

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

    Published on: May 8, 2014

    The CityWire reports that the Bentonville, Arkansas, Planning Commission has approved - the story uses the phrase "rubber stamped" - Walmart's request for three waivers that it needs to build a drive-in grocery pickup depot that will be use/test in conjunction with its e-commerce initiatives.

    The 15,000 square-foot retail warehouse facility will have 52 parking places — 33 for customers driving through to pick up grocery orders and 19 for employee parking: "According to the plan the consumers will drive up to the kiosk and get a parking slot number where they will park and wait on the delivery of their groceries. Early descriptions of the drive-in facility were Sonic-like, a closer examination of the plans look to be more like a cross between a Boomerang Car Wash and a Sonic. The consumer drives up to the kiosk similar to Boomerang and then instead of pulling through the carwash they drive into a parking space and wait on the delivery, said Jon Stanley, city planner."
    KC's View:
    Once again, this is about creating a path of least resistance between e-tailer and e-shopper. It will be very interesting to see if this delivery depot concept plays out … and how it affects how other companies react. Amazon already has its lockers, but I think there is a lot of potential here.

    Published on: May 8, 2014

    The Seattle Times reports that Instacart, the online personal shopping service, launched yesterday in Seattle.

    According to the story, "Unlike Amazon Fresh, online-retail giant Amazon.com’s grocery-delivery service, Instacart has no inventory or trucks. Rather than hiring a huge staff and paying them benefits, Instacart contracts with 'personal shoppers.' The contracted workers shop for cereal, diapers, produce and more from local grocery stores and deliver them to customers. They work for commissions and pay for their own gas. Instacart plans to employ just two people in Seattle to manage its operations … In Seattle, Instacart will start with 20 or so shoppers who will select items from QFC and Costco stores. Instacart has no formal relationship with either store. And because Instacart has purchased Costco memberships its shoppers can use, its customers can select grocery items from the warehouse club even if they aren’t Costco members."

    The story goes on to say that in Seattle, "one-hour delivery costs $14.99; two-hour delivery is $3.99. And the minimum order size is $10. Customers can also buy a $99 annual membership to Instacart Express that eliminates delivery fees for orders over $35. Instacart also marks up prices on some items in order to make money."
    KC's View:

    Published on: May 8, 2014

    In Milwaukee, the Journal Sentinel reports that Roundy's - as it said that it had a quarterly net loss - announced that it "is exiting the Minneapolis market as it continues to focus on growing in Chicago and revitalizing its southeast Wisconsin stores." Roundy's said that it is selling 18 Rainbow stores in Minnesota for approximately $65 million, plus inventory.

    According to the announcement, the sale includes 13 Rainbow pharmacies and three Rainbow liquor stores in Minnesota. Jerry’s Enterprises, Haug Enterprises, Lund Food Holdings, and Radermacher Enterprises have joined Supervalu in executing these acquisitions. Once completed, the acquired stores are intended to be operated by Supervalu, a Cub franchisee or an independent retailer as 10 new Cub Foods locations, two new Byerly’s locations and six locations are expected to be operated under the Rainbow banner … Of the 18 stores, Supervalu will have 100 percent ownership in three Cub stores, majority ownership in two Cub stores, minority ownership in three Cub stores and 100 percent ownership in two Rainbow stores as well as 100 percent ownership interest in eleven pharmacies.
    KC's View:

    Published on: May 8, 2014

    The Food Marketing Institute (FMI) announced yesterday the 10 finalists in its annual Store Manager Awards contest. Four of them - one from each category - will earn grand prize honors, which will be awarded at the annual FMI Show in Chicago next month.

    The finalists are:

    • Category A (1 – 49 Stores): Larry Hack, Martin’s Super Markets #16 in Granger, Indiana; Jeffery Iwamuro, Potash Markets on Clark Street in Chicago, Illinois; David Tutorow, Martin’s Super Markets # 17in Elkhart, Indiana.

    • Category B (50 – 199 Stores): Kate Allred, Lowes Foods #161 in Clemmons, North Carolina; Chris Turner, Brookshire Grocery Company in Ruston, Louisiana; John Wild, Family Fresh Market - SpartanNash in River Falls, Wisconsin.

    • Category C (Over 200 Stores): Randy Kruse, Ames No. 2 Hy-Vee, Inc. in Ames Iowa; Dough Malenoski, King Soopers, a division of The Kroger Co. in Littleton Colorado; Ray Waldrop, BI-LO in Rock Hill, South Carolina.

    • Category D (International retailers – companies operating outside North America): George Katsifolis, Alfa Beta Kalamata 3, a company of Delhaize Group in Kalamata, Greece.

    All the finalists are getting free trips to the FMI s Show. The winners will earn a $1,000 prize, plus a crustal trophy.
    KC's View:
    This might be a good time to mention that I'm thinking of maybe hosting a little wine tasting at FMI next month … and so if you plan to be in Chicago from June 10-12, let me know via email. I'll get back to you with details.

    Published on: May 8, 2014

    The Associated Press reports that Amazon is expanding its Sunday delivery program - facilitated by the US Postal Service to 15 new cities.

    Originally implemented late last year in New York and Los Angeles, the new cities served will include Lexington and Louisville, Kentucky; New Orleans and Shreveport, Louisiana; Cincinnati and Columbus, Ohio; Oklahoma City; Philadelphia; Dallas, Houston, San Antonio, Austin, Waco and College Station, Texas.

    According to the story, "The Seattle-based online retailer does not disclose the percentage of its packages that are delivered on weekends, but said since the service launched it has delivered millions of packages on Sunday to its customers … Sunday delivery is available to all Amazon customers for no extra charge. If it is available in a customers' region, notice of the service will appear at checkout."
    KC's View:

    Published on: May 8, 2014

    • In Toronto, the Globe and Mail reports that Loblaw Cos. is acquiring Arz Fine Foods, described in the story as a "Toronto-based grocery store and bakery" and "Middle Eastern food specialist.

    According to the story, Loblaw is "betting that it can expand the Arz standalone retail business in Canada and stock Arz products – ranging from pita breads to baklava and manaeesh – in its mainstream supermarkets in the battle for the multicultural customer … The move underscores the race by retailers to try to capitalize on the burgeoning New Canadian grocery market as well as a growing interest among other consumers in more exotic and foreign foods. Merchants are trying to capture more multicultural business from small, independent grocers and bigger players that are ramping up their ethnic-food aisles."

    Bloomberg reports that Subway, which has more than 26,600 locations in the US, said yesterday that it has the potential of opening as many as 8,000 additional stores here.

    CEO Fred DeLuca said yesterday that "maybe it will take 10 years or so … If we do a good job building consumer demand, that number might change and be higher."

    The statements come as there is increased competition among fast food chains to increase US revenue, and as Subway expands its menu in test markets to include hummus, which it believes will help "maintain its appeal among health-conscious consumers."


    • Published reports say that J Crew CEO Mickey Drexler is pushing back against stories that he plans to open a budget-version of the chain, called J Crew Mercantile, in an effort that would be similar to Gap creating Old Navy when he was CEO there.

    New York magazine writes that Drexler says that while the company owns the name, it hasn't gone much farther than that. "Mercantile is a name we own," Drexler says. "There’s not much beyond that. It’s a name that was available and we liked. The way we run the company, we are always thinking creatively, innovating, and managing our assets. We have secured names and trademarks with either loose ideas or intentions, or with our imaginations. Sometimes things come of it, or they don’t … It’s kind of been distorted beyond the reality of what it is."


    Reuters reports that "fast-food workers plan strikes in 150 cities across the United States and protests in 33 other countries on May 15 to demand higher pay and better working conditions, organizers said in New York on Wednesday. It is the latest in a series of protests over the past 18 months in the United States that have targeted fast-food chains including McDonald's Corp, Burger King Worldwide Inc, Wendy's Co and Yum Brands Inc's KFC chain."
    KC's View:

    Published on: May 8, 2014

    …will return.
    KC's View: