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    Published on: December 18, 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.

    Tomorrow will be the last MNB of 2014, as I'll be taking off the two weeks around Christmas and New Year. And so I wanted to take advantage of the moment to wish you and yours a happy holiday season.

    It has been an interesting and challenging year on all sorts of levels. I lost a younger sister to cancer, but in a strange sort of way, that actually drew me closer to my surviving five younger brothers and sisters. It seems like a high price to pay, but at some level, it instills hope.

    Doing MNB for all these years has created in me an odd combination of hope and cynicism. When you read as many newspapers and see as many headlines as I do, you can't help but wonder sometimes about the nature of the human condition. Let me tell you, there are some really sketchy people in this country doing some incredibly skeezy things.

    But often, when I get most skeptical about the culture and more convinced than ever that the fabric society is being pulled apart, I'll see or read something that gives me hope.

    Not always. But often.

    I'm not big on New Year's resolutions, but I think that for 2015 my goal is to make my own hope. To try to be positive rather than negative. (Though the nature of my job means that sometimes I have to be negative, I'll try to be constructively so.) To get the most out of my somewhat limited skill set. And to try to see things with fresh eyes, rather than cynical and tired eyes.

    "The best is yet to come," Frank Sinatra once sang. But that doesn't just happen on its own. we have to make it happen.

    Which is what I'm going to try to do it 2015. And beyond.

    And so, once again, I wish you a Happy Holiday. Let's have a great New Year together.

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

    KC's View:

    Published on: December 18, 2014

    by Kevin Coupe

    The New York Times this morning reports on a new study by the Pew Research Center saying that "the wealth gap between the country’s top 20 percent of earners and the rest of America had stretched to its widest point in at least three decades.

    "Last year, the median net worth of upper-income families reached $639,400, nearly seven times as much of those in the middle, and nearly 70 times the level of those at the bottom of the income ladder."

    The story notes that the wealth gap and income inequality (which gets a lot more attention, especially in the political world) are related but not the same thing. Income refers to wages, while wealth encompasses all of one's assets accumulated over time. "While those at the top have managed to recoup much of the wealth lost during the economic downturn," the Times writes, "middle-income families have not made any gains."

    The Times goes on to say that "the report on Wednesday is the second in recent days from Pew detailing how different groups of Americans are faring financially more than five years after the recession ended. The earlier study found a growing racial and ethnic wealth gap, with whites registering a median wealth of nearly $142,000, 13 times the net worth of blacks and 10 times that of Hispanics. The evidence from the report, Pew said, 'could help explain why, by other measures, the majority of Americans are not feeling the impact of the economic recovery, despite an improvement in the unemployment rate, stock market and housing prices'."

    Indeed, there was a poll a few weeks ago that revealed that the public is more pessimistic even than it was at the beginning of the Great Recession about the ability to work hard and become rich - to achieve the American dream.

    Sobering numbers, I think. They all have an impact on marketers who are looking for ways to grow their businesses and sell their products. And they are an Eye-Opener.
    KC's View:

    Published on: December 18, 2014

    Amazon this morning announced the creation of Prime Now, which it said "offers one-hour delivery on tens of thousands of daily essentials through a mobile app. Prime Now is powered by Amazon's growing network of fulfillment centers that utilize high-end technology to speed up order delivery times for customers. Now, Prime members can get products like paper towels, shampoo, books, toys and batteries delivered right to their door in an hour or less."

    The company said in the announcement that it "is launching Prime Now in select areas of Manhattan today. All Prime members can immediately download the Prime Now app, available on iOS and Android devices, and will be notified when the service is available in their local area. Prime Now is available from 6 a.m. to midnight, seven days a week. Two-hour delivery is free and one-hour delivery is available for $7.99. A portion of Amazon's new building on 34th Street in Manhattan will serve as a hub for delivery of Prime Now orders."

    And, the company said, "We cannot wait to roll out Prime Now to additional cities in 2015."
    KC's View:
    Amazon has its share of problems these days (see our "Worth Reading" story, below), but it continues to find ways to innovate and improve its services. There may be questions about its economic model, but from the consumer point of view, the value proposition continues to evolve. The question, I suppose, is whether this puts Amazon in a stronger or weaker overall position in the long run.

    Published on: December 18, 2014

    The Portland Business Journal reports that Green Zebra - the health-oriented convenience store format created by Lisa Sedlar, former CEO of New Seasons Markets - is partnering with Instacart to offer delivery services from its single store in the Kenton neighborhood.

    Instacart will make deliveries for Green Zebra in Portland, Beaverton and other local neighborhoods. The first delivery is free, and users can then either pay for each delivery or an annual user fee of $99.
    KC's View:
    I think it is very smart for Green Zebra to adopt a delivery model at this point in its development. Since the first store opened in 2013, Lisa Sedlar has wanted to open at least two other stores, but for a variety of reasons it has proven tougher than she thought. (She gave a terrific Ted talk on the subject, which you can watch here.) This allows her to expand the format's perceptual footprint while she lines up the funding to get those two additional stores open, and continues to work toward having as many as 20 stores open by 2020.

    I've always liked the Green Zebra format, and admire Lisa for having the chutzpah to try to create something new and fresh and innovative. (Plus, she keeps a picture of Jean-Lic Picard on her night table, something she told MNB in an interview several years ago.) I'm glad to see that she's hanging in and making progress.

    That said … I hope that the alliance with Instacart does not create a high price perception for Green Zebra that will create difficulties for her down the road. For more about Instacart's high prices, see our next editorial story…

    Published on: December 18, 2014

    GeekWire has been testing and comparing three different e-grocery services - AmazonFresh, Instacart and Safeway, ordering the same 11 items and having them delivered to a home address in Seattle, and has reached some conclusions. According to the story, "We compared factors including product prices, quality and condition of produce and meat, ease of ordering, delivery process, convenience and general experience. Eleven items do not represent a comprehensive study, but replicating the order across the three services taught us a few things about the new world of grocery delivery."

    Among the conclusions are that Instacart was significantly more expensive - charging"$70.42, before tax and tip, without a delivery fee. That compared with a $50.41 subtotal for the same 11 items on Amazon Fresh, and $55.65 on Safeway.com. Instacart’s higher price resulted from a significant markup on the products it picked up and delivered to us from our neighborhood QFC grocery store." (Instacart said that it is working to eliminate these upcharges.)

    However, the study also found that the Instacart personal shopper was the best of the lot, and that Safeway provided the greatest flexibility in terms of making changes to existing orders. And the question that remains to be answered is whether Amazon's plan to change the economics of the system so that an AmazonFresh membership in Seattle costs $299 a year - until now, it has been free - will be perceived as onerous by consumers.

    You can read the whole GeekWire story here.
    KC's View:

    Published on: December 18, 2014

    Canadian department-store operator Hudson's Bay announced yesterday that it has hired Gerald Storch to be its new CEO, beginning next month.

    The Wall Street Journal reports that it will be Storch's job to "keep up the retailer’s momentum and unlock more value in the company’s real estate."

    Storch is the former CEO of Toys R Us, as well as former vice chairman of Target. He succeeds Richard Baker, who will stay on as executive chairman
    KC's View:
    My recollection is that when Storch was at Toys R Us, the company had uninspiring results. Plus, he used to say things like he thought big box stores would survive e-commerce because eventually people would decide that it was bad for the environment to order things online and have them delivered.

    I think he got that one wrong.

    My other recollection is that at the time, Storch struck me as someone who should be running Fort Courage, Kansas, not a major 21st century retailer.

    I hope that he brings a more enlightened sensibility to Hudson's Bay.

    Published on: December 18, 2014

    Interesting piece about Amazon's future in the New York Times, suggesting that "despite fears of Amazon’s growing invincibility, the company’s eventual hegemony over American shopping is not assured. It might not even be likely … Like many of the local and big-box retailers it has displaced over the last decade and a half, Amazon could itself become increasingly vulnerable to the threat of technological upheaval."

    You can read the whole analysis here.

    BTW … Business Insider has a story saying that "Amazon is still cheaper than Wal-Mart, but that's changing fast.

    "Deutsche Bank recently compared prices for 65 identical items from Amazon.com, Walmart.com, and Target.com.

    Amazon prices were 5% lower than Wal-Mart in the most recent analysis. But in the same study two weeks ago, Amazon's prices were 8.3% lower than Wal-Mart's. Wal-Mart has a renewed focus on offering cheaper merchandise amid a slowdown in its US business.
    KC's View:

    Published on: December 18, 2014

    • Greg Foran, president/CEO of Walmart US, has circulated an internal memo announcing that "Scott Neal, Senior Vice President, Produce, Meat, Seafood and Quality Control – Walmart U.S., will transition to a new role leading the meat category’s long-term sourcing strategy."

    At the same time, Shawn Baldwin has been named to the newly-created role of Senior Vice President, Fresh – Walmart U.S.

    In other merchandising moves. Foran wrote that "in order to create better strategic alignment around customer behavior and supplier partnerships, we are also sharing that the Frozen business will move to Ashley Buchanan, Senior Vice President, Dry Grocery – Walmart US."

    In addition, Jack Pestello has been promoted to the role of Senior Vice President, Private Brands – Walmart US … "With previous experience supporting private brands for our International business, we are eager to see the new perspectives he will bring.

    As we continue to expand our sourcing efforts across the globe, we have asked Tom Leech, Senior Vice President, Global Food and Consumable Sourcing – Walmart US, to lead the efforts in accelerating our progress on sourcing and strategic upstreaming initiatives … Annie Walker, Vice President, Merchandise Execution – Walmart US, is named Vice President, Health and Wellness, Over the Counter – Walmart US."
    KC's View:

    Published on: December 18, 2014

    • Dollar General has announced "free shipping on all purchases made online at www.dollargeneral.com on Thursday, Dec. 18, 2014, with the guarantee all in-stock purchases will arrive on or before Dec. 24, 2014. No minimum purchase is required."
    KC's View:

    Published on: December 18, 2014

    • The Los Angeles Times reports that "edEx projections pegged the number of packages flowing through its system Monday at 22.6 million, up from 22 million parcels on the busiest day in December 2013. The record-breaking day came on the heels of FedEx's busiest week of the year, Dec. 7 to 13, which saw about 83 million packages moving through the company's global network.

    "And FedEx wasn't alone; both United Parcel Service Inc. and the U.S. Postal Service braced themselves for a whirlwind of mail before the holidays, partly the result of the unrelenting growth in online shopping. Nearly 127 million shoppers browsed online for bargains on Cyber Monday alone, the National Retail Federation said, signaling that Web sales were once again a driving force during the holiday season.

    "The Postal Service's peak mailing day coincides with FedEx's, with more than 640 million cards, letters and packages processed, compared with 607 million on last year's peak day. From Thanksgiving to Christmas Eve, the Postal Service expects to deliver 12.7 billion letters, cards and packages."
    KC's View:

    Published on: December 18, 2014

    • The Coca-Cola Co. has named Julie Hamilton, currently executive assistant to chairman/CEO Muhtar Kent, as its new chief customer and commercial leadership officer, effective April 1. The story notes that "the position of executive assistant to the chairman and CEO traditionally has served as a training ground for promotions at Coke."

    The responsibilities being taken on by Hamilton "currently are split between Coca-Cola North America president Sandy Douglas, who is also chief customer officer, and Chief Marketing Officer Joe Tripodi, who is also chief commercial officer." The move was prompted by Tripodi's impending departure.
    KC's View:

    Published on: December 18, 2014

    Responding to Michael Sansolo's column earlier this week about innovation, MNB reader Doug Harris wrote:

    It was a bit ironic that two of three companies Michael cited as insufficiently innovative were Kodak and A&P -- since the former got its start in the 'black & white" era and A&P, in a giant innovative leap, some years ago came up with a store concept where everything BUT the products was black & white. The so-called 'Future Store' was a rather odd idea, and didn't roll out into many markets. But not only did A&P take the innovate idea a bit far with that concept, they were, almost at the same time, experimenting with several other radical (read non-traditional) formats.Had they reined in the 'let's innovate' urge, and focused on one major change rather than several, their future might have been different.

    I guess that if you live long enough, you'll see everything … in this case, a suggestion that A&P's problem was that it innovated too much.

    I'm not sure I agree. I think one of the lessons of the past decade or so is that businesses have to continue to innovate on a variety of levels, and in different ways at the same time. They're not all going to work, timing is everything, and companies have to have a real, intimate knowledge of the customer so that the innovations are relevant.



    Reacting to my piece about the decision by the French government to create a law that will protect taxi drivers from disruptive influences such as Uber, one MNB reader from France wrote:
    I agree with you when you say that delaying the inevitable is a big mistake.

    But I also think that this story has another eye opener: US companies often forget when they go abroad that each and every country has its own culture and vision of how the world should be.  You need to deal with it if you want to start doing business there. In France, we consider that cultural content (books, music, movies etc…) must not be considered as a product but has a “non-profit food for your brain”, highly sponsored by the government. We call it the “French cultural exception”. So we try to protect independent bookstores. It’s not bad, it’s not good, it’s a different point of view and this is the #1 rule when you start doing business in a foreign country: You won’t convince a whole country telling them they are wrong, even if they are.

    And regarding taxi services, we might have the worst service in the world but our strike addiction can crush anything… Uber might have underestimated this French cultural aspect. Try to disrupt to fast and you will be kicked out.


    You're right … but I guess the question that French consumers will have to answer at some point is whether the French cultural exception can survive in a flat world environment where technology makes disruption possible, and disruption threatens traditional business's ability to survive.




    On another subject, an MNB user wrote:

    I don’t think you have looked at the ramifications of forcing folks to put GMO labeling on their product.  I personally happen to be all for transparency in labeling and letting the public know if you have anything genetically modified. However, I live in Colorado where this bill was defeated.  The reason for the defeat in my eyes was the fact the surrounding states would not be forced to label their product and therefore hurt Colorado sales in neighboring states.  The advertising pointed this out dramatically therefore swaying the vote against it.

    I will usually arch my back at more legislation from the Federal Government but in this case I think maybe a Federal Law would be the best way to go. This would make every State liable for their correct labeling and not just a few states.





    We had a story the other day about a Harvard professor who went to war - ill-advisedly, as it turns out - against a local Chinese take-out restaurant over what he viewed as fraud. (He got charged $3 more than he should have according to the site's prices, but it ended up the site was out of date, had a caveat to that effect, and the owner offered to refund the money. But the professor made it a social media issue, ended up looking foolish, and eventually had to back down.)

    One MNB user wrote:

    We’ve all had irrational reactions to silly situations—myself included. What makes the Edelman situation fascinating, as demonstrated in the email exchanges, is his need to be ‘right.’ Stuff happens in operating any business. Mr. Edelman, given what he does for a living, should know that small businesses often don’t do what they should for many valid reasons, including just not having the time when you’re trying to produce a great product.

    And, from another reader:

    Some people just feel entitled and most come from academia!

    I actually think that I have a pretty good read on this. I spend a fair amount of time with academics, and even more time with business people. And it would be my experience that there is no greater percentage of academics that feels entitled than folks in the business world …
    KC's View: