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    Published on: May 12, 2014

    So, let me tell you a little story about how retail can work really well…

    My daughter Ali has just completed her sophomore year of college, studying law and criminal justice at Quinnipiac University. She lives at home and commutes, and one of the things that keeps her going is Starbucks coffee … she'll often pick up a cup after a long night of studying and before driving up to school, and I think she'd say that for her, it has helped her make the most of the college experience. (She gets terrific grades, so I'm happy to absorb the cost of $4 lattes. Seems like a small investment compared to tuition.)

    In fact, she goes to the local Starbucks, in Darien, Connecticut, so often that many of the folks who work there know her by name, and know what she'll be ordering as soon as she walks through the door. Recently, though, just because of how her schedule has worked out, she's been going to the Starbucks closer to school, in Hamden.

    The other day, I was in the Darien Starbucks getting a cup of coffee. One of the folks who works there, a woman named Nikki, recognized me from having been in with my daughter from time to time, and asked how she was doing. "She's great," I said. "Her schedule has just been crazy, and now she's taking her finals. But I'm sure she'll be in one of these days."

    What I didn't know when I said that was that Ali stopped by the local Starbucks on her way to school a few hours later, and when Nikki saw her, not only did she make her coffee, but she put a little note on the lid of the coffee cup: "Good luck on finals!"

    Ali said that the note made her day. And I thought that this was really special - that this one employee connected with one of her customers in a way that transcended the usual. That's what smart retailers do. Sometimes they need computers and data and all sorts of software. But sometimes, all they need is a smart and savvy employee like Nikki, working with her eyes open and making a difference one customer at a time.

    This may seem like a small thing. But it made a difference.

    KC's View:

    Published on: May 12, 2014

    The Grocery Manufacturers Association (GMA) has announced that it plans to file suit in federal court to overturn the new Vermont law that requires the labeling of foods containing genetically modified organisms (GMOs).

    Vermont has 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.

    In its statement, GMA said that the law was "critically flawed and not in the best interests of consumers.  It sets the nation on a costly and misguided path toward a 50-state patchwork of GMO labeling policies that will do nothing to advance the safety of consumers."

    And, GMA went on: ""GM crops are safe and have important benefits for people and our planet.  They use less water and fewer pesticides, reduce crop prices by 15-30 percent and can help us feed a growing global population of seven billion people.  The FDA, World Health Organization, American Medical Association and U.S. National Academy of Science have all found that foods and beverages that contain GM ingredients are safe and materially no different than conventionally produced products.

    "Consumers who prefer to avoid GM ingredients have the option to choose from an array of products already in the marketplace labeled 'certified organic.' The government therefore has no compelling interest in warning consumers about foods containing GM ingredients, making this law's legality suspect at best … We encourage policymakers in Vermont and across the nation to support alternative legislation that would ensure that food labels are accurate and consistent for consumers. Bipartisan federal legislation, the Safe and Accurate Food Labeling Act, HR 4432, would require a label on foods containing GM ingredients if the FDA - our nation's foremost food safety authority - determines there is a health or safety risk. Any labeling of GM ingredients would therefore be based on science, not fear or the varying politics of the 50 states."
    KC's View:
    I think I said last week that I'd bet a beer that GMA would sue.

    Easiest beer I've ever won.

    I always find it interesting when people say that they are concerned about "the varying politics of the 50 states,: because what they really mean is that they are concerned that the "varying politics of the 50 states" won;t go their way.

    Published on: May 12, 2014

    The Cincinnati Business Courier has a story about how Lynn Marmer, Kroger's group vice president of corporate affairs, last week told an industry conference in Brazil how Kroger "uses customer loyalty as a gauge of how much its customers trust it … If they don’t trust Kroger to keep fresh food in the store, to offer fair prices and to provide great customer service, they won’t come back, Marmer told the audience. So it measures all of that."

    "“We relentlessly use this data in every area of our business to get better,” Marmer said. “Store operations, technology, transportation, merchandising, manufacturing all focus on responding to the customer based on what we learn from them in surveys and other listening methods.”
    KC's View:
    Perhaps the best weapon that Kroger has in the competitive wars is its ability to analyze customer data, and to actually act on actionable information. Not everybody does that … and Kroger is about as granular in its analysis as any big company out there.

    Published on: May 12, 2014

    The New York Times reports that Amazon is being accused by some authors of being an "oppressive regime" and a "bully" and running a "near monopoly," as it continues to discourage customers from buying books published by Hachette and some of its imprints, allegedly because Hachette was no knuckling under to its demands for better prices and/or higher margins.

    Hachette has said that it is keeping Amazon supplied with books in a timely fashion, but the accusation stands that Amazon is delaying shipment of its books and suggesting that shoppers buy other books instead.

    "On both sides, the stakes are high," the Times writes. "Amazon controls about a third of the book business, which means big publishers cannot live without it. But Amazon risks alienating readers as well as authors."

    The Times goes on to say that "for at least a decade, Amazon has been very aggressive toward publishers. One publisher, who declined to be identified because of fear of Amazon, said negotiations with the company resembled a chef deboning a chicken — by the end, everything of value had been sliced off."

    And: "One reason for Amazon to pursue Hachette and other suppliers is that the mood on Wall Street is changing. For years, Amazon’s program of investing all its profits in new businesses was applauded. Revenue soared, and so did the stock. But shares are down sharply this year and analysts are cutting earnings forecasts. The pending stock exchange debut of Alibaba, the highly profitable Chinese e-commerce company, has underlined the notion that Internet retail does not have to be a break-even game."
    KC's View:
    Here's the line from the Times story that resonated with me…

    If Amazon needs to improve its bottom line, it is a dangerous game to make things harder for its customers.

    You got that right.

    I got a number of emails after we had this story on Friday, saying that Amazon is simply doing what every other big retailer does - exert pressure and throw its weight around. But Amazon is not supposed to be like other retailers … and these efforts seem specifically anti-consumer to me.

    Published on: May 12, 2014

    There is an interesting piece in the New York Times that essentially suggests that Walmart has been cooking the books - not in any sort of illegal way, but enough to allow senior executives to qualify for bonuses that they might not otherwise have received, based on company performance.

    An excerpt:

    "Each year, when measuring top executives’ performance for pay purposes, the company says it makes various 'adjustments' to its recorded financial results. In 2014, those adjustments resulted in better performance than reported in the audited statements. That enhanced performance meant higher incentive pay for executives."

    What makes this interesting is that the executives seem to be doing better at a time when the company's stock price has "flatlined," its customers seem to looking for alternatives (such as Aldi) for lower prices, and its employees say that their hours are being cut because of the tougher times.

    To be clear, Walmart says it has done nothing wrong. And the Securities and Exchange Commission (SEC) seems to be on its side.

    But there is at least a legitimate question being asked here about corporate governance, and you can read all about it here.
    KC's View:
    One thing I found fascinating about the Times story was this quote from Walmart spokesman David Tovar, who said that the adjustments were intended to encourage executives to make the right decisions for the business. “For example, we don’t want a delay in restructuring or store closings to be influenced because management could take into consideration how it might impact their bonus,” he said.

    Really?

    Because if you didn't make the adjustments, and an executive made a decision so that his or her bonus would be protected rather than for the good of the business, wouldn't that be a firing offense? If that is the degree to which Walmart has confidence in its executives - that it has to juggle the books to protect their bonuses as a way of defending against a corporate environment in which executives manage only to serve their own personal needs - then I think they have some serious soul searching to do in Bentonville.

    Published on: May 12, 2014

    The Washington Post over the weekend featured a story about how some DC farmers markets are "increasingly wooing new patrons with eclectic street foods, serving up dumplings, tacos, heaping barbecue sandwiches and the promise of open-air noshing."

    The goal is to no longer just be a market, but a place where patrons can find food trucks and stands that offer eclectic and unusual cuisines - and even rotate them in and out so that each week, the offering is just a little bit different. The goal is to attract more customers, and get them coming back week after week with the promise of culinary surprises.
    KC's View:
    Which is what every food retailer should be doing.

    Published on: May 12, 2014

    Netflix has informed its customers that it is raising prices by $1 per month for its video streaming service - but only for new customers. The company's 36 million existing US customers are grandfathered with existing prices for at least two years.

    The Associated Press writes that "the price increase, Netflix's first in nearly three years, isn't a surprise. The Los Gatos, California-based company disclosed its plans to raise its rates last month without specifying the precise amount." The price of DVD rentals remains unaffected.

    The sense is that Netflix is excluding existing customers from the price increase as a way of avoiding the backlash it face din 2011 when it simultaneously tried to raise prices and separate its streaming and DVD rental businesses. The result was the loss of 800,000 customers and a plummeting stock price.

    Now, however, Netflix has recovered and says it needs additional revenue as a way of producing more original content like "House of Cards," which it uses to differentiate itself not just from other rental and streaming services, but also from companies like HBO and the broadcast networks.
    KC's View:
    It is all about value. From my perspective, I find the value I get from Netflix - especially when it comes to streaming movies - to be extraordinary. I'm happy to pay more, even though they're not asking me to. (Not yet, anyway.) I find the differential advantages they provide to be worth every penny I pay, and more.

    That's a good lesson. Provide real value, exceptional content and great service, and maybe your customers will worry a little less about what you charge. Maybe not always, but sometimes … and enough to give you a sustainable competitive advantage.

    Published on: May 12, 2014

    The New York Times reported over the weekend about how BurgerFuel, a New Zealand fast food chain, "is undertaking an ambitious expansion plan in the crowded American market through a partnership with Subway restaurants, an industry giant … BurgerFuel hopes to use Subway’s scale in the United States by signing up some of its franchisees to open BurgerFuel stores. The company has already been taking registrations from interested Subway franchise owners."

    BurgerFuel is reported to be a very small company, in comparison to Subway: it generated just $10 million (US) in revenue last year, compared to Subway's more than $12 billion. But it is thinking big, having already seen some success in franchising its format in the Middle East.

    According to the story, "In January, BurgerFuel signed a partnership with Franchise Brands, based in Connecticut, a company set up by the Subway founders Frederick A. DeLuca and Peter Buck to support small and midsize companies. Franchise Brands is aiming to support BurgerFuel’s expansion efforts in the United States with business mentoring and legal advice. Franchise Brands has also bought a 10 percent stake in the New Zealand company for 8.05 million New Zealand dollars, with the option to expand its holdings to 50 percent over the next eight years."
    KC's View:
    I'm a burger guy, so I'd probably be willing to try BurgerFuel, and I'm intrigued by the notion that, as the Times writes, "burgers are marketed as having high-quality ingredients, including fresh vegetables and aioli sauce, New Zealand beef from grass-fed cows and vegetarian options. Recently the company announced it would use only free-range chicken in its New Zealand restaurants," though it has not committed to maintaining these same standards in the US.

    The company says it offers an adult fast food experience, with a slightly more expensive burger, as opposed to a "kiddie" oriented experience. Which also works for me. But no matter what all the financial permutations happen to be, I'd have to say that BurgerFuel is going to need something else to be successful, or at least worth going to. And that's terrific, and differentiated, food.

    Published on: May 12, 2014

    The US Postal Service (USPS) said on Friday that its Q1 losses reached $1.9 billion, its 20th loss in 22 quarters … and the USPS says that its $64 billion in liabilities exceeds its $22 billion in assets. "First-class mail volume fell 4.1% in the period. Standard mail volume grew slightly, and shipping and package volume rose 7.3%," the Wall Street Journal reports.

    According to the Journal, the USPS, "which is mandated by Congress to prefund health benefits for future retirees, again pleaded for broad, comprehensive assistance from lawmakers. Without it, the Postal Service said, it won't be able to pay the required $5.7 billion retiree health benefit payment to the Treasury due by Sept. 30."
    KC's View:

    Published on: May 12, 2014

    • The Chicago Tribune reports that "Jewel-Osco has decided to wait to ask job applicants about their criminal histories until the final stages of hiring, a practice that many other Illinois business would have to adopt if a bill pending in the legislature is approved … House Bill 5701, known as the 'Best Candidate for the Job Act,' would bar businesses with 15 employees or more from inquiring about, or requiring applicants to disclose, their criminal records before offering the individual a job interview or a conditional offer of employment. After an interview is offered, the employer would be free to conduct a background check."


    USA Today reports that McDonald's is testing a new seasoned french fry, called Shakin' Flavor Fries, in Northern California and St. Louis. The seasonings are Garlic Parmesan, Zesty Ranch and Spicy Buffalo, the paper writes but "you don't buy the fries pre-seasoned. Instead, they come with special packets of seasoning that consumers are advised to open, pour and shake into a specially made mixing bag."

    The story notes that Burger King tried a similar concept about 10 years ago, and it didn't take. But McDonald's seems to be willing to try anything as it looks to generate fresh sales and profits.


    • Barnes & Noble, seeking to identify ways in which it can turn around what has been a depressingly moribund sales and profit trend, plans to open as many as 300 bookstores on college campuses over the next five years, which will bring its total to about 1,000.

    Of course, to do that it has to convince "more schools to outsource their bookstore operations with the lure of nicer, higher-grossing stores and by poaching accounts from larger rival Follett Corp, which runs 940 stores."

    The story suggests that the ultimate goal for Barnes & Noble may be to add some sales to its bottom line so the company looks healthier if management tries to sell it.
    KC's View:

    Published on: May 12, 2014

    …will return.
    KC's View: