business news in context, analysis with attitude

Published on: August 21, 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, I'm Kevin Coupe and this is FaceTime with the Content Guy, coming to you this morning from the beautiful Napa Valley. (Life is good.)

I've been spending a lot of time driving the last few weeks, which always gives me time to think. What I've been thinking about lately is the whole "how to compete with Amazon and win" thing. I think I've come up with a metaphor that may work…and I found it, go figure, right on my dashboard.

Think of your GPS system. Most of us find that the GPS is an invaluable part of our car - it uses data and algorithms to determine the fastest way to get from point A to point B, navigate around traffic, find a nearby gas station, Starbucks or whatever. They work, and they are efficient. Now, think of Amazon as the GPS of retailing.

To compete with Amazon, I think, you have to be the opposite of that. You have to be the guy with the map, who puts his arm around the shoulder of the traveler and says, 'Here's how to get from there from here. But if you go this way, about an hour out there's a really good place to stop for coffee and doughnuts. Then, here's a really good place for lunch - make sure you try the apple pit for dessert. Here are all the places you need to stop on the way, because the views are spectacular. And when you get there, I have a terrific place for you to have dinner, and they have a wonderful beer and wine list. Now, it may take you a little longer to get there, but I can guarantee you the trip will be more rewarding and more fun." (I recognize that my "points of interest" reflect my personal preoccupations, but you get the idea…)

Now, sometimes people will want to get from point A to point B in the fastest possible time. They'll opt for efficiency, and there's nothing you can do about that. But if you make yourself the guy with the map, offering advice and suggestions and ideas - being a resource of information, not just a source of product - you create for yourself a differential advantage that can and, I believe, will work.

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

Published on: August 21, 2014

by Kevin Coupe

MNB's Eye-Openers often tend toward the whimsical.

But this is no joke.

The state of New Hampshire has declared a state of emergency because of a series of overdoses from people who have ingested a synthetic drug called "Smacked," that is described by CBS News as "a packaged mixture of spices sprayed with a synthetic drug similar to the active ingredient in marijuana. It’s usually smoked to get a high," though it is sold as potpourri.

The New Hampshire Grocers Association says that "this designer drug began showing up in Manchester in 2011. It became illegal in New Hampshire on Aug. 18, 2012, but continues to be sold because the chemical content is constantly changed by the manufacturers so that it falls within legal limits."

But a bad batch has apparently found it way into the marketplace, and "police and EMT’s have been responding to medical emergencies at several parks this week. In Manchester at least 41 people have experienced serious medical reactions since August 11, at least 20 taken by ambulance to local hospitals."

CBS News reports that "the state of emergency from Governor Hassan will help police confiscate the drug from the stores and raise awareness. Manchester police have already shutdown three stores they say have not cooperated."

New Hampshire’s Attorney General Joseph Foster said, "We are strongly recommending that merchants who have similar products remove them from their shelves and destroy their current inventory. Retailers that continue to knowingly sell these dangerous or illegal products are placed on notice that they could be held responsible for harm caused to a user of the product.”

A criminal investigation has been launched.

I'd want to know this as a retailer. I'd want to know this as a parent.

Published on: August 21, 2014

Bloomberg reports that as Staples announced disappointing sales and profits for the second quarter, it said that it would close about 140 stores this year as part of its broader plan to reorganize the business and place greater emphasis on e-commerce.

Eighty of those stores were closed down during the second quarter. As many as 225 stores in total may be closed through next year, as the company looks to reduce costs by a half-billion dollars.

The move to e-commerce reflects competition from the likes of Amazon, as well as the consolidation taking place in the office supply business; Office Depot and OfficeMax, Staples' two major competitors merged earlier this year.

"We're accelerating growth in our delivery businesses as customers turn to Staples for more products beyond office supplies," says chairman/CEO Ron Sargent. "At the same time, we have more work to do to stabilize our retail business, and we're taking action to improve customer traffic, reduce expenses and close underperforming stores."

The Wall Street Journal writes that "Staples is also looking to downsize locations as several products, such as tablet computers, take up less space than the usual sort of office supplies, such as filing cabinets and desktop computers."

Published on: August 21, 2014

The New York Times this morning reports that Nestlé "is adopting animal welfare standards that will affect 7,300 of its suppliers around the globe, and their suppliers.

"The move is one of the broadest-reaching commitments to improving the quality of life for animals in the food system, and it is likely to have an impact on other companies that either share the same suppliers or compete with Nestlé.

“In the digital world, everyone has a smartphone and they want to know where things come from and share that information,” Kevin Petrie, chief procurement officer for Nestlé in North America, tells the Times. “Is it good for me? Is the quality good? Has it been responsibly sourced?”

The new policy, Petrie says, is "another step in Nestlé’s efforts to address risks in its supply chains like child labor and palm oil, the production of which is damaging to forests. Consumers today know far more about how components in their food are made — and they are far more willing to share that knowledge to stir up a fuss on social media, he said."

Published on: August 21, 2014

Advertising Age reports that McDonald's is working with Kraft Foods to "roll out McCafé bagged coffee at grocery, mass merchandise, club and drug stores nationwide after testing the product last year … The brand is expected to be positioned as a premium product, in keeping with McDonald's long-held positioning of McCafé in its restaurants and the test in select markets last year."

The story continues: "The chain originally rolled out McCafé in 2009 with a massive marketing push for coffee and espresso drinks. It has since rolled out seasonal drinks from time to time, along with smoothies and frappes.

"The move comes at a time when McDonald's is struggling to reverse a sales slump. Last year, the chain said among its main areas of concentration for 2014 would be coffee and improving operations and the customer experience."

Published on: August 21, 2014

There is a piece in the New York Times Magazine on Sunday about the resurgence in delivery start-ups.

An excerpt:

"In the tech crash of the early 2000s, on-demand delivery services like Kozmo and Webvan weren’t just among the most colossal failures. They also became a sort of grim joke, symbolizing the excess that portended the bust. Afterward, conventional wisdom hardened: Web-enabled delivery was not a good business because it simply cost too much to build warehouses, manage an inventory and pay drivers. There was too little opportunity to recoup expenditures in delivery fees; people will pay only so much for toilet paper to be delivered before they decide to fetch it themselves.

"But something is in the air of late, making hindsight blurry …

It is worth reading, here.

Published on: August 21, 2014

• The South Florida Business Journal reports that with the closing of its $280 million acquisition of Vitacost, Kroger has taken "another step into online grocery retail, where it has the potential to grow in South Florida." (Vitacost has a website that sells more than 45,000 health-related products.)

The story goes on: "When it comes to brick-and-mortar space, Kroger won't be able to snap up the spaces that stores like Publix, Winn-Dixie, Target and Wal-Mart have claimed. But the company may fair better virtually as Kroger has room to move into an online ordering and express lane pickup services role. The company is currently employing those services in Denver.

"Kroger also acquired 212 stores of Charlotte-based company Harris Teeter in a $2.5 billion deal in addition to its online grocery ordering service in July 2013, which added to speculation that Kroger aimed to compete with online grocers."


• The Financial Times reports that "Amazon, the US ecommerce group, plans to ramp up its business in China by setting up operations in Shanghai’s new free-trade zone, allowing it to sell more imports more cheaply to better compete with domestic rivals Alibaba and JD.com."

Published on: August 21, 2014

• The Salisbury Post reports that Delhaize-owned Food Lion has unveiled its newest store format in North Carolina, with 31 stores that it says have been remodeled to focus on its "easy, fresh and affordable" positioning strategy.

The Post writes that "Food Lion is working to overcome recent struggles and battling for market share. The company in 2012 closed 126 underperforming stores and shut down its Bloom brand. Last year, parent company Delhaize sold 155 stores under the Harveys, Sweetbay and Reid’s brands to rival Bi-Lo.

"But good momentum at Food Lion helped Delhaize post positive results in the United States at the end of the second quarter, which marked the seventh consecutive quarter of improved sales at Food Lion."


• The Wall Street Journal reports that Southeastern Grocers, parent company to both Winn-Dixie and Bi-Lo, has decided not to go ahead with a planned IPO.

The story says that the company "filed for an IPO of up to $500 million back in September and said that it was looking to repay debts and build working capital."


• The Associated Press reports this morning that The UPS Store is saying that customers at 51 of its units in 24 states may have had their credit and debit card information breached by hackers. According to the story, "a spokeswoman for UPS says the information includes names, card numbers and postal and email addresses from about 100,000 transactions between Jan. 20 and Aug. 11."


• MarketWatch reports that Dollar General CEO Rick Dreiling is saying that entreaties from his company to acquire Family Dollar, which took place before Dollar Tree put in a bid for Family Dollar, were rebuffed because Family Dollar CEO Howard Levine did not want to lose his job.

Earlier this week, Dollar General made an $8.9 billion bid to acquire Family Dollar, a bid that is significantly higher than the $8.5 billion offered for Family Dollar by Dollar Tree.

In fact, Dollar General says, "Levine failed to reveal that he was entertaining another offer from Dollar Tree when Dreiling met with him in mid-June to talk about a potential merger."

Published on: August 21, 2014

• Advertising Age reports that McDonald's has hired Julia Vander Ploeg, most recently general manager and senior VP at Ticketmaster's Resale division, to be its first VP of digital.

Published on: August 21, 2014

…will return.

Published on: August 21, 2014

As is my custom at this time of year, I'm going to be taking off the last days of summer … MNB will be on hiatus (except for the archives, of course, which always are open) through what we here in the US celebrate as Labor Day.

I'll be back on Tuesday, September 2 with all new stories and commentaries …

Slàinte!

Published on: August 21, 2014

The Associated Press is reporting that Family Dollar has rejected the $8.9 billion bid by market leader Dollar General to buy the company, and will instead move forward with announced plan to be bought for $8.5 billion by Dollar Tree.

Management cited antitrust concerns as the reason for the rejection, saying that it seemed unlikely that regulators would let the deal be consummated on the proposed terms.

As reported below, Dollar General CEO Rick Dreiling is saying that entreaties from his company to acquire Family Dollar, which took place before Dollar Tree put in a bid for Family Dollar, were rebuffed because Family Dollar CEO Howard Levine did not want to lose his job.