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    Published on: August 12, 2014

    by Michael Sansolo

    There’s a good reason why so much attention is being paid to the future of extreme value merchants such as those in the dollar store channel. In many ways, those companies are likely to experience a long period of growth.

    Last week the Federal Reserve released a startling report on the extremely limited amount of savings large numbers of Americans have or are amassing for their retirement years. The results suggest the trend toward frugality that sprung from the Great Recession won’t end anytime soon.

    The Fed found that 31 percent of Americans surveyed have zero money saved for retirement. You read that right: ZERO money.

    Now for many of those folks the picture could improve in years to come. It’s hardly a shock that among 18 to 29 years olds, slightly more than 40 percent pay little to no attention to retirement. After all, who among us at that age really planned for what may happen 40 years later.

    It’s more alarming that nearly 20 percent of those aged 55 to 64 find themselves with nothing saved for retirement, even though age-wise they are on the cusp of that decision.

    The Fed explained that a big part of the problem is that in recent decades Americans have been given more control over their own retirement planning as company sponsored pensions have largely disappeared. In addition, many of these non-savers are challenged by low resources and little awareness or access to the planning they needed to do.

    The results of these findings portend all kinds of challenges for the food industry. Most obviously, these resource strapped shoppers will need to continue to pursue extreme value shopping in every way possible. That sounds like great news for merchants targeting this segment, which means all others will have to consider how to successfully win over this market.

    After all, 30 percent of the American population is a segment far too large for any company to ignore.

    In addition, many of those interviewed in the Fed survey acknowledged that they will need to work far past the traditional retirement age of 65, with 25 percent saying they plan to work as long as possible. For companies that might mean a new supply of experienced labor for all parts of business, yet it also means confronting the unique challenges that can come from an aging workforce.

    However, as is always the case, the challenges come with opportunities. Many companies may decide to enter the extreme value market with new formats, in much the way ShopRite has launched its PriceRite division. And those that already have established themselves as value operators could expand into new markets: below, Kevin reports on the apparent decision by WinCo to move into Oklahoma City. (When you think about it, if the folks at Market Basket could just get their act together, this would be a perfect time for that brand to expand its footprint.)

    While older workers may bring specific challenges, the life experiences of these employees could serve as an asset to employers in years to come. Programs like job sharing and mentoring could receive significant benefits and could help in the training of younger associates. One hopes that retirement planning and the pitfalls of not starting soon enough might be one of the key topics to discuss.

    Clearly there are countless other issues to consider, but the bottom line is that smart businesses always race to find ways of serving large and emerging demographic groups. Based on the Fed’s findings, the elder poor might soon become an enormous group and sharp companies will learn how to serve it.

    After all, planning ahead - or the lack thereof - is what caused this in the first place.

    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: August 12, 2014

    by Kevin Coupe

    I've heard of brand extensions, but this one is an Eye-Opener.

    The Washington Post reports that eHarmony, the online dating site, "wants to become a 'relationship company' that matches users with everyone from the right employers to the best-suited investment advisers to even better friends."

    According to the story, the company "is planning its first big move: a careers platform called Elevated Careers by eHarmony, which it expects to launch by December.

    "The company aims to distinguish itself from other online job boards and recruiting services by applying what it's learned about playing cupid to the workplace, using algorithms and assessment tools to match applicants with the right corporate culture and the right personalities of future bosses and colleagues … The hope, of course, is that companies will pay up for that promise of better-suited employees (and, therefore, lower turnover)."

    While I'm not sure that the notion of matching employers to employees is as unique as eHarmony may think it is - every good search executive does precisely that, in my experience - the idea of giving it a "matchmaker" veneer makes marketing sense. (Though I'm not sure I'd want to trust my career to the same company setting me up on dates…)

    There's also some good economic sense at play here. eHarmony says that the online dating business is a $2.5 billion industry. The career matching business is an $80 billion industry. And eHarmony wants a piece of that larger pie.
    KC's View:

    Published on: August 12, 2014

    The Oklahoman reports that WinCo, which only recently expanded into North Texas with three Dallas stores, now is planning to open as many as four stores in the Oklahoma City market.

    WinCo - which has 95 stores and five distribution centers in Washington, Idaho, Nevada, California, Oregon, Arizona, Utah and Texas - is not commenting on the report.

    According to the story, "In its midyear retail market survey, Price Edwards & Co said that WinCo is negotiating to lease space for three to four new grocery stores in the area. WinCo is eyeing locations in northwest and west Oklahoma City, Moore and Midwest City, said Jim Parrack, senior vice president of retail for Price Edwards … WinCo stores are larger than traditional supermarkets at about 90,000 square feet and focus on a lot of bulk products. While Walmart still controls about 60 percent of Oklahoma City’s grocery market, WinCo is the latest of several competitors to try to change that, Parrack said."
    KC's View:
    This is not surprising. Once you are in North Texas, expanding up to Oklahoma City makes a ton of geographic sense.

    I cannot imagine that the folks at Walmart see this as good news, since I've long been told by Bentonville folks "in the know" that WinCo is one of the companies that tends to keep Walmart executives awake at night. It is, in fact, a terrific retailing machine, with an employee-owned structure and strong value promise that make it a formidable competitor.

    Published on: August 12, 2014

    The US Postal Service said yesterday that it lost $2 billion during its second quarter - more than the $1.9 billion it lost during the first quarter, and far more than the $740 million it lost during the same quarter a year ago. The increased losses came despite improved service offerings (including Sunday delivery) and price increases that it hoped would improve its financial condition.

    According to the Reuters story, "The jump in losses was largely due to a $1.5 billion increase in operating expenses as a result of workers compensation payments, the agency said. USPS blames much of its financial troubles on a 2006 mandate to stow away billions of dollars for its future retirees' healthcare. The Postal Service already defaulted on three of its payments into the fund and does not expect to make the next $5.7 billion installment due September 30."
    KC's View:
    It is possible, as I've said here before, that the Post Office simply has outlived its usefulness and should be disbanded and completely reimagined. Though I have to admit that by expanding its service - rather than cutting service, which it also considered - the USPS was making intelligent and competitive moves.

    So let's assume that its criticisms of the Congressional mandates is at least partially accurate. It is time for the US Congress to get off its collective fat rear end and do something that allows the USPS to be more competitive rather than less so. You don't ask someone to swim a mile and then throw an anchor around his neck just to make it more challenging.

    Published on: August 12, 2014 has a piece about Walmart suggesting that the company no longer is "the most efficient, well-run retailer on the planet." And it has numbers and graphics to back the argument up - especially one video and five photos that illustrate merchandising lapses in Walmart stores.

    While it cannot be argued that these problems exist in every Walmart store, the suspicion is that it happens a lot more than anyone in Bentonville would like to admit … and that these represent some of the fundamental - if unsexy - challenges facing new CEO Doug McMillon.

    You can see the story, the video and the photos here.
    KC's View:

    Published on: August 12, 2014

    Clearly frustrated by charges of collusion with other publishers, accusations that his company is trying to keep book prices artificially high, and suggestions that publishers bring declining value to the table, Hachette CEO Michael Pietsch is firing back at Amazon, which has been making these charges as it prevents consumers from buying Hachette books from its site.

    Salon reports that Pietsch is responding to emails about the dispute with the following message:

    • Hachette sets prices for our books entirely on our own, not in collusion with anyone.

    • We set our ebook prices far below corresponding print book prices, reflecting savings in manufacturing and shipping.

    • More than 80% of the ebooks we publish are priced at $9.99 or lower.

    • Those few priced higher—most at $11.99 and $12.99—are less than half the price of their print versions.

    • Those higher priced ebooks will have lower prices soon, when the paperback version is published.

    • The invention of mass-market paperbacks was great for all because it was not intended to replace hardbacks but to create a new format available later, at a lower price.

    As a publisher, we work to bring a variety of great books to readers, in a variety of formats and prices. We know by experience that there is not one appropriate price for all ebooks, and that all ebooks do not belong in the same $9.99 box. Unlike retailers, publishers invest heavily in individual books, often for years, before we see any revenue. We invest in advances against royalties, editing, design, production, marketing, warehousing, shipping, piracy protection, and more. We recoup these costs from sales of all the versions of the book that we publish—hardcover, paperback, large print, audio, and ebook. While ebooks do not have the $2-$3 costs of manufacturing, warehousing, and shipping that print books have, their selling price carries a share of all our investments in the book.

    This dispute started because Amazon is seeking a lot more profit and even more market share, at the expense of authors, bricks and mortar bookstores, and ourselves. Both Hachette and Amazon are big businesses and neither should claim a monopoly on enlightenment, but we do believe in a book industry where talent is respected and choice continues to be offered to the reading public.

    Once again, we call on Amazon to withdraw the sanctions against Hachette’s authors that they have unilaterally imposed, and restore their books to normal levels of availability. We are negotiating in good faith. These punitive actions are not necessary, nor what we would expect from a trusted business partner.

    KC's View:
    I have some thoughts about this … but I'll save them for "Your Views," which has a number of emails on this subject.

    Published on: August 12, 2014

    • The Wall Street Journal reports that "discount supermarket chain Grocery Outlet Inc. has attracted a number of private-equity suitors, including Bain Capital, Hellman & Friedman LLC and Roark Capital Group, according to people familiar with the matter.

    "These are among the firms duking it out for the Berkeley, Calif.-based grocery retailer as the company enters its second round of bidding in a sale process. Suitors with first-round bids under $1.1 billion weren't asked back to the second round, people familiar with the matter said. The company could fetch as much as $1.2 billion in a sale, one of the people said."

    There are no traditional retailers in the bidding process, the Journal reports.

    • The Philadelphia Inquirer reports that Acme Markets employees will vote today on a new contract that will cover 3,000 employees who have been working without a deal since February 2012. The new deal was reached between the United Food and Commercial Workers (UFCW) and Acme's parent company is New Albertsons Inc., last Thursday. If approved, it will run until February 2018.

    • The Associated Press reports that "Chiquita Brands has received a buyout offer worth about $611 million from investment firm Safra Group and the Brazilian agribusiness and juice company Cutrale Group … The unsolicited bid disclosed Monday comes as Chiquita and Fyffes of Ireland were working on their own transaction. The two companies agreed in March to merge in a stock-for-stock deal to create the world's biggest banana supplier. If a transaction were to occur between Chiquita and Fyffes, Chiquita's headquarters would move from Charlotte, North Carolina, to Dublin, a more tax-efficient corporate base.
    KC's View:

    Published on: August 12, 2014

    • Sears Holdings Corp. said yesterday that it has hired Alasdair James, most recently commercial director for Tesco’s global business unit, to be the new president and "chief member officer" at Kmart, which puts him in charge of Kmart’s financial performance and merchandising, marketing and price strategies for its free loyalty program, Shop Your Way.
    KC's View:
    Certainly James's Tesco experience gives him knowledge and credibility in the loyalty sector, though the company he's now running ought to worry less about loyalty and more about keeping the life support systems going.

    One suggestion, though, to the Sears folks. If James says he has an idea for a small, fresh and easy concept that might work on the west coast, deport him. Immediately.

    Published on: August 12, 2014

    Robin Williams, one of the most energetic and innovative comedians of his time - and perhaps of any time - has died at age 63. Reports are that he committed suicide yesterday at his Northern California home after years of battling severe depression and wrestling with substance abuse.
    KC's View:
    Williams was not just a wonderful comedian, but also a terrific actor who could mine deep pain and compassion for darker roles - think The World According To Garp, or Good Morning, Vietnam, or Dead Poets Society or One Hour Photo. He even talked about his personal demons in his comedy; referring to a return to rehab in 2007 after years of sobriety, he said, "I was violating my standards quicker than I could lower them."

    All I could think about yesterday, after hearing about Williams' apparent suicide, was how this was a guy with access to every possible resource, and with the proven love and respect of his industry and millions of fans … and he could not climb out of that emotional hole in which he found himself. There must be so many people out there who are suffering to the same degree, but who feel that they have nobody to talk to, no options, no prospects for happiness, nobody cheering them on. Many of us know such people, and this reminds us how tenuous a hold they have on life.

    Published on: August 12, 2014

    On the subject of Amazon, MNB reader Steven Ritchey wrote:

    I wonder if Amazon isn’t feeling like it’s too powerful.  This is just an observation from an ignorant bystander.  But, Amazon needs to remember, with the exception of the content it generates itself, there’s not a thing they sell I can’t get elsewhere and frequently do.  Sure, I shop there sometimes for the convenience, but I’m not someone who has to have it there, now, so I’m perfectly willing to go elsewhere.  I can remember a few times when Amazon didn’t have the book I wanted, but Barnes & Noble did, so I bought from them.

    I’m someone who’s not tied to Amazon and doesn’t use its subscription  program for staples, I’m an Amazon Prime member, but I don’t use it weekly or even more often as some do.  I use it when it makes sense for me to.  I could completely cut my ties with Amazon, and it wouldn’t bother me that much, though it would cause some moderate inconvenience.  If I perceive Amazon as using its power to bully its suppliers, I may do just that, and I wonder how many people there are who feel as I do, and if there’s enough to make a dent in Amazon’s bottom line.  Whenever you start playing on people’s loyalty, you’re playing a dangerous game, I wonder if they realize that.

    From another reader:

    I too am a big Amazon fan - Kindle owner, reader, etc.  But I don’t know why Amazon would have put themselves into this battle of the big guys.  A better approach would be to price Hachette’s books at a higher price than others, and explain why - they charge more.  Consumers could then decide if the books are worth it or not.  Because, in the end, isn’t it really about consumer choice?  Or has Amazon forgotten?

    Just don't forget - Amazon is a "big guy," too.

    MNB reader Steve Sullivan wrote:

    Do you ever get the feeling that Jeff Bezos is strapped to a gurney somewhere, unconscious, while evil minions are running the company?

    Your two today articles are pointing out things that seem so un-Bezos-like.  In other words, DUMB.  I am an Amazon user, although not to the extent that SOME people are (KC!).  However, if I want to buy something, I don’t care if Amazon has a lower price IF I CAN’T GET IT FROM THEM.  I will go to a local store. OR ANOTHER ETAILER.  The arguments, which come across as petty spats in the customer-read media, go back and forth and the one’s getting hurt either way are the consumers.  I won’t even get into that bit about Prime customers getting credit if they agree to slower delivery.

    Who needs soap operas no TV.  We have Amazon.

    And from another:

    I don't follow the Amazon organization anywhere near like you do. However after 20 years I don't get how they are not on a path to having a reliable steady stream of profits. They appear to be caught up in a draining, never-ending cycle of investing to stay ahead of the "tech" curve.

    At some point there needs to be an end game in sights when you are counting on a reliable stream of financial returns. No business can be in the adolescent phase forever.

    Amazon had destroyed several other business models as they move forward. This is more than okay if what is lost is replaced with a viable financial business model. When the dust settles ( if that ever happens) will we just be left with retailing in many forms that is unprofitable for no one.  Over the long-haul, consumers will not be served properly if the retailers they turn to for goods and services are not profitable.

    And, from MNB reader Mona Dolyle:

    You're right about Amazon's appeal being more about convenience than price.  The power is in the combination of one-click ordering, prime shipping, having whatever users need whenever they think of ordering it, low prices, and easy-open packages when they get it.

    As I read these emails and think about this issue, it occurs to me that Amazon may be making one specific, key and highly uncharacteristic error - it is opening the door for highly loyal customers to try an alternative source for the products we want. In today's highly competitive environment, that's the last thing you want to do … once you have a customer, you want to keep and nurture that customer as long as you possibly can, not give him or her an excuse to try someone else.

    Jeff Bezos strapped to a gurney somewhere? Probably not … though it would explain a lot.

    But the more likely explanation is that maybe the folks at Amazon are suffering from a little bit of hubris
    KC's View: