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    Published on: May 20, 2014

    by Michael Sansolo

    There are few things more annoying than people who don’t agree with me. After all, who wants to waste time explaining things to people who for countless reasons don’t see what I see.

    Only the truth is that dissent is incredibly important because I’m not always right.

    That’s the reason we talk here on MNB about epistemic closure or the failure to accept any information that differs from what we already know. It’s why in nearly every presentation I urge audience members to seek out co-workers, trading partners and consumers who are different from them. Only that way can we see the other side of a story.

    Diversity of opinions, experiences and ideas make us stronger and challenge us to see what’s new.

    I offer up that sermon on dissent in large part because of the strange response I got to last week’s column. I used the example of irradiation to make the point that industry must learn how to explain complex topics to increasingly overwhelmed consumers to have any chance of acceptance.

    (You can read it here.)

    As I might have expected, I got responses that essentially fell into two different categories:

    • Irradiation is fine, but the name is terrible so let’s change it. (Best suggestion: zapadoodle.)

    • Are you nuts? Irradiation is horrible.

    Which goes right back to the reason I wrote that column: there are complex issues that require educated and reasoned discussion in the marketplace and I don’t think either of the two kinds of responses I got understood that.

    First, we should not ever change the name. Consumers have too many tools to see through such things these days. Transparency is what works; Orwellian name changing foments distrust.

    If we want a new science to gain acceptance we need to demonstrate safety and benefit, not diversion. No matter how good a name Zapadoodle may be, it won’t work.

    Second, I understand people have divergent views on irradiation as well as countless other topics. I also know that I am no expert in science. (A chemistry teacher in college made this very clear.) But I think those few comments told us an awful lot.

    As those passionate folks demonstrate, there are many divergent feelings when it comes to new science. What one group says is a breakthrough another might see as an abomination and this happens on an increasing number of topics. Far too many of us don’t know enough to understand the difference between good and junk science.

    We merely hope that others are doing the right thing or that someone more capable than us is checking.

    And this is why education and good science matters. This is why we need to understand the importance of trying to talk about complex topics to shoppers because there is no lack of information out there - some right, some wrong. We need to demonstrate benefit and clearly address concerns.

    Lastly, I want to thank those folks who said I had parted from reality with that last column because dissent and divergent views are what we welcome and champion here.

    It’s been painful to witness the incredible array of graduation speakers uninvited from universities this year because various groups objected to their mere presence. It’s as if we can no longer even hear anyone who disagrees with us.

    That’s what causes epistemic closure and that’s what leads to failure.

    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: May 20, 2014

    by Kevin Coupe

    Forbes has a piece questioning whether Starbucks is making a mistake by offering beer and wine in some locations during the evenings.

    "On the surface it sounds like a sound move," the story says. "Alcohol is a high margin item and sells in the evening when coffee traffic evaporates. Nonetheless, the smell of alcohol that may end up on the tables and floor may be carried on to the next morning … Simply put, Starbucks cannot turn from a third place to everyone’s place, without risking loss of focus and fractionalizing of its market."

    The story compares the move to when Starbucks got heavily into the breakfast sandwich business, which was profitable but sometimes overwhelming to the stores' coffee offerings. The move was smart in terms of revenue, but bad in terms of long term strategic value, and so Starbucks eventually backed away from it.

    The question is whether Starbucks is making the same kind of mistake all over again.

    I'm not sue about this one. I suspect it will work on a case-by-case basis, more effectively in urban markets than in the suburbs.

    But I think the broader question is a good one. Are there cases when one walks away from revenue for broader strategic reasons?

    The reason, I suspect, should be "yes" more often than it is.
    KC's View:

    Published on: May 20, 2014

    The New York Times reports on how various retailers are seeking alternatives to traditional payment options, at least in part because they'd like to save on billions of dollars in transaction fees, and also because worries about data breaches like the one that hit Target late last year. Among the choices cited in the story:

    "The most immediate change will occur with EMV, the technology that uses an embedded chip to protect against counterfeit cards, and can also require a PIN to keep thieves from using stolen cards. " Target is speeding up the introduction of the technology (after having pretty much abandoned it several years ago), and both " Visa and MasterCard are pushing EMV technology, and have instituted new rules that say retailers will bear more fraud liability by the end of next year if they do not have the capability to process such cards. Some retailers are hoping that the move to EMV cards would lessen interchange and other processing fees, with more competitive and potentially cheaper networks that process PINs instead of signatures, or eventually from savings if fraud rates declined."

    Starbucks is cited as an example as how a shift to mobile technology might work. "There," the Times writes, "customers can use their phone to pay for a latte or biscotti by loading money via the company’s app onto a Starbucks rewards card. The app entices customers to return with free drinks, and it keeps the lines moving quickly, all of which is good for business. It also saves Starbucks money, a spokeswoman said. Instead of paying for 10 cups of coffee individually, say at $1.75 each, customers can put $17.50 on their phone just once - which means Starbucks has to pay only one transaction fee, not 10."

    Finally, "Several leading retailers, including Walmart, Target and Gap, have also banded together to form a group called the Merchant Customer Exchange, known as MCX, which aims to come up with a mobile payment system of its own. MCX would allow retailers to circumvent the credit card companies, tapping directly into customers’ bank accounts. Retailers said they would also then retain control of their customer data, rather than having to share it as they might if customers paid with a service like Google Wallet … But MCX, which was announced nearly two years ago, has yet to unveil a working product. MCX declined to comment or to provide an updated timeline."
    KC's View:
    One note … there is a Bloomberg BusinessWeek story saying that new poll suggests that only seven percent of shoppers plan to reduce shopping at Target in the coming year because of concerns about the breach. These results, the story says, "suggest Target may be able to regain the loyalty of customers after the theft of 40 million payment-card numbers by hackers."

    This may be true. But I have to admit that I find myself thinking about the Target breach every time I slide my debit card, whether in a supermarket or at a gas station. I am not entirely persuaded that I'm the only one.

    Published on: May 20, 2014

    In the UK, the Telegraph reports that Walgreen is expected to acquire the 55 percent of British retailer Alliance Boots that it does not yet own; it has an option to buy the rest of the company between February and August 2015.

    According to the story, "The deal is attractive to Illinois-based Walgreens because it would enable the business to move its tax domicile to either the UK or Switzerland, making annual savings of billions of dollars." (The US corporate tax rate is 37.5 percent, compared to 20 percent in the UK.) Walgreen, the story says, "is reportedly accelerating the full takeover option following pressure from a cabal of activist hedge fund investors, including the US funds Och Ziff, Jana Partners and Corvex, who have amassed a 5 percent stake in Alliance Boots in recent months."
    KC's View:
    Got a lot of email from MNB readers when the possibility first came to light that Walgreen could move its HQ to Europe to save on taxes … mostly from folks who said they would then begin shopping at an American retailer like CVS, or local options. Don;t know how widespread this would be, but they have to take this into account in the decision-making process.

    Published on: May 20, 2014

    The New York Times reports that former Target CEO Gregg Steinhafel saw his compensation drop last year from $20 million to $13 million, with a regulatory filing suggesting that the significant reduction "resulted from shareholders’ complaints that Mr. Steinhafel made too much money relative to the company’s performance."

    Steinhafel's base salary was $1.5 million in both years.

    The story notes that while the data breach affecting millions of Target shoppers was cited as the main reason for Steinhafel's departure, the company also was struggling with substandard performance, especially in its new Canada expansion.

    Steinhafel reportedly leaves Target with a severance package of about $15.8 million.
    KC's View:
    That's a lot of money, especially when things aren't working. coming after yesterday's story about executive compensation issues at Chipotle, I wonder if there's something in the air, if salary issues are suddenly becoming a lot more front and center.

    Published on: May 20, 2014

    • The Wall Street Journal reports that Google Shopping Express - which is looking to create an alternative to Amazon by bringing together a number of retailers in a single shopping portal, and then picking up products and delivering them from stores - is now serving New York City's borough of Manhattan, with plans to expand soon to Queens and Brooklyn.

    Among the companies that are part of the NYC effort (the program already has been in place in several California markets) are Fairway Markets, Costco, Babies R Us, Staples, Target and Walgreen.

    • The Chicago Sun Times reports on the expansion of Drizly into Chicago, after early forays into New York City and Boston, as it seeks to become "the Amazon for alcohol."

    According to the story, Drizly, having raised $2.3 million from investors, "specializes in filling orders for beer, wine and liquor," and pledges to delivery within 20-40 minutes … Drizly is available for download on iPhone and Android. Delivery drivers authenticate and validate IDs using Drizly technology."
    KC's View:

    Published on: May 20, 2014

    Reuters reports that "the China operating arm of U.S. retailer Wal-Mart Stores Inc said on Tuesday it planned to invest 580 million yuan ($92.99 million) to remodel 55 existing stores in China this year to enhance store operations and optimize customer experience.

    "Wal-Mart China also said it will open about 30 high-quality stores and additional distribution centers in China this year as part of its three-year growth plan announced last October."

    CityWire reports that Walmart has scoured "the nation’s top business schools and offers paid summer corporate internships to 19 students in graduate business (MBA) programs. This year’s crop of finance and strategy interns were chosen from 300 candidates and are set to begin their 12-week stint in Bentonville on May 28.

    "The MBA interns selected hail from prestigious business schools including, Northwestern University, Harvard, Massachusetts Institute of Technology, University of North Carolina, Dartmouth, University of Texas and Duke."

    “Walmart doesn’t hire interns to do busy work," Colby Webb, senior manager of corporate finance, tells City Wire. "Across the company we can have 250 interns working and every one of them is assigned a project to work on that will add value back to the company. Whether it’s something in consumer insights, logistics or merchandising, they work on their project and they are involved in other daily tasks. They have access to top executives through the company’s executive leadership speaker series. We look to provide our interns with a blended experience that gives them a real taste of what it’s like to work here full-time."
    KC's View:

    Published on: May 20, 2014

    • Kraft Foods said that it has recalled 1.2 million cases of cottage cheese tat was sourced from a California manufacturing facility, saying that it had concerns about improper storage that could cause the product to spoil and sicken consumers. No illnesses have been reported.

    • The Subway fast food chain has announced that it plans to open 3,000 locations worldwide this year, adding to its existing fleet of 41,800 stores in 105 countries.
    KC's View:

    Published on: May 20, 2014

    • The Associated Press reports that Chris McCormick, the first non-family member to serve as CEO of LL Bean, has announced his planned retirement in 2016. He said that he was making the announcement early so that there can be a smooth transition. The company, which has announced that it plans to accelerate its expansion plans, is coming off its four consecutive year of strong growth.
    KC's View:

    Published on: May 20, 2014

    …will return.
    KC's View: