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    Published on: January 26, 2015

    by Kevin Coupe

    It seems like people may have to look in new places to buy crap that they can't possibly need.

    The New York Times reports that Xhibit, parent company to SkyMall, has filed for bankruptcy protection.

    That's right. SkyMall. The Times rather poetically describes SkyMall as "the National Enquirer of shopping catalogs," and goes on: Thumbing through its pages — on the tarmac before takeoff or at 35,000 feet — you would find products that seemed too weird to be true: An indoor pet-relief system called 'Piddle Place,' a helmet that promised to regrow your hair using lasers, a glass Christmas tree ornament designed to look like a pierogi, a solar-powered cooling hat."

    The reason for SkyMall's apparent demise? Well, when it started back in 1990 people who boarded airplanes were fairly limited in terms of entertainment choices. They could read whatever they'd brought on the plane with them, or listen to whatever music or watch whatever movie the airline was providing. But these days, the growth of technological media consumption options - laptops, tablets, cell phones, all enabled by in-flight Wi-Fi - means that people have very little need to thumb through SkyMall.

    Or, as the Times puts it, "Who needs SkyMall when you can log onto Amazon?"

    Of course, it may be entirely over for SkyMall. The Times notes that "Xhibit will be auctioning off its assets in a couple of months. Maybe some young entrepreneur with a plan for a mobile app and who knows what else will enter the bidding."

    It is yet another Eye-Opening example of how disruption works ...
    KC's View:

    Published on: January 26, 2015

    Notes and comments from the Content Guy...

    MIAMI BEACH -- As a major winter blizzard cut its way toward New England and Mid-Atlantic states, senior retail and supplier executives were fortunate enough to be here, at the Food Marketing Institute (FMI) Midwinter Executive Conference, a place where the worst things likely to happen this week are a cool breeze advisory and perhaps a shortage of sunscreen.

    But that's not say that people weren't working...

    • In the Sunday afternoon session sponsored by the Network of Executive Women (NEW), the focus was on what the 14-year-old organization is calling a new movement with a shift in focus. "We have been focusing on the wrong issue," said NEW CEO Joan Toth. "We do not need to change women — we need to transform our organizations.

    "When we try to make women conform to a male leadership style, we lose the benefits of women’s leadership — and we lose female talent. Women in our industry are voting with their feet. Dissatisfied with their prospects, unable to make a difference, they are going elsewhere, often starting their own businesses.

    "Gender diversity does not mean switching from a male leadership culture to a female one. We need an inclusive work culture that values the unique strengths of everyone to make our organizations strong." And one of the reasons that this inclusive work culture is important is that it is not just women who are the beneficiaries. "Millennials share the same workplace priorities as women," Toth said. "They want balance between work and life. They want a flexible work environment. And they want to make a difference. When you create a workplace that attracts and retains women, you create a workplace that attracts and retains Millennials, too."

    Lisa Walsh, SVP at PepsiCo Sales and a member of the NEW board, put it this way: "It’s time for a new leadership culture. One that’s less rigid and more flexible. Less authoritative and more collaborative. Less conformist and more diverse. More authentic and less impersonal.

    "Women need it. Millennials want it. The times demand it." And the goal is to build "a new model for workplace transformation."

    That strikes me as critically important. I had the opportunity to facilitate the session, and one of the things that really grabbed my attention was research showing that since 2008, there has been virtually no increase in women executives in the retail business - it haas gone from 18.5 percent to 18.6 percent of the total. The research shows that women comprise the more educated half of our workforce, that they excel in leadership traits and demonstrably improve the performance of companies they lead, why isn’t the share of women leaders in our industry soaring? NEW's new challenge is to turn this dichotomy into opportunity for growth, and create a workplace that works for everyone.

    It strikes me as a noble cause that makes excellent business sense. I look forward to the conversation - and the movement - continuing on MNB.

    • The Food Marketing Institute also used the weekend to announce "a September marketing initiative with the nation’s grocers aimed at highlighting food retailers’ unique family meal programs and their commitment to bringing families back to the table, one meal at a time. Numerous studies have underscored the long-term health, academic and societal benefits of eating together as a family, yet, according to a 2013 Harris poll, about 30 percent of American families share dinner every night."

    The announcement went on: "With family mealtime at a critical intersection, the FMI Foundation is calling upon the industry’s collective voice and influence to launch “National Family Meals Month.” This month-long FMI member communications campaign will give the grocery industry a unified theme and turnkey promotional tools to encourage consumers to lean on their local supermarket to prepare one more family meal per week at home."

    FMI said that it will "offer its members a free downloadable toolkit featuring customizable promotional and social media materials that enable grocers and consumer product brands to easily integrate National Family Meals Month marketing into their existing promotional schedules."

    Smart idea ... and, to be honest, one that we've been arguing for in this space for a long time. FMI has been part of a "Family Day – A Day to Eat Dinner with Your Children" effort for a number of years, but the feeling here always has been that one day hardly seems like enough - that this should be a core value of the nation's food retailing industry, with a much broader marketing effort behind it than just a single day.

    • Also this weekend, FMI presented its highest honor, the Sidney R. Rabb Award, to David B. Dillon, former chairman of the board of directors for The Kroger Co., recognizing him for excellence in serving the consumer, the community and the industry.

    In addition, IGA, Inc. Chairman Dr. Thomas S. Haggai received FMI's Herbert Hoover Award, recognizing Dr. Haggai’s longtime humanitarian service in the food retail industry.

    And, FMI awarded ConAgra Foods, Inc. Chief Executive Officer Gary Rodkin the William H. Albers Award, recognizing his exemplary business partner relations within the retail food industry.

    The Grocery Manufacturers Association (GMA) also announced that Steve Smith, president and CEO of Food City, today received the Grocery Manufacturers Association (GMA) 2015 Industry Collaboration Leadership Award, recognizing him for being "an industry leader who has demonstrated excellence in fostering collaboration among consumer packaged goods (CPG) industry trading partners."

    • It should be noted that while the sun was shining here, there was concern expressed by many about the blizzard conditions expected to drop several feet of snow.

    As for me, I simply pointed out to Mrs. Content Guy, who marveled at my good luck not being at home for the blizzard, that in fact snow may be the least of anyone's worries ... since there will be an enormous asteroid that is about one-third of a mile in size that is scheduled to pass within 745,000 miles of Earth ... which, in galactic terms, is really, really close. It is not likely to hit us, but then again ...

    KC's View:

    Published on: January 26, 2015

    The San Diego Union-Tribune has a story about how the value-driven Grocery Outlet " is expanding its natural, organic, specialty and healthy food offerings after watching those categories fly off the shelves over the last four years ... It's not what most people would expect from a grocer that started out selling canned foods straight from the box and targets frugal customers. But it's what the chain's shoppers are clamoring for: healthy and specialty foods that they might find at Sprouts Farmers Market or Whole Foods Market, for less."

    The company says that growing this segment is one of its major priorities for 2015.

    The name for its initiative: NOSH, or Natural, Organic, Specialty and Healthy foods.
    KC's View:
    First of all, let's be clear - NOSH is one of the best acronyms I've ever heard for a food-oriented initiative. If Grocery Outlet is as clever about delivering on the NOSH initiative as naming it, they're going to be in good shape.

    I have to believe that one of the reasons that Grocery Outlet is moving in this direction is that the folks at Sprouts - a chain that delivers organic and natural foods at discount prices - haver gotten their attention. We had a story recently about how comments by Whole Foods co-CEO Walter Robb suggested that they've also gotten that company's attention. And what I'm hearing from a number of people is that Sprouts is one of the retail companies to watch over the next few years ... they are a potential threat not to be underestimated.

    Published on: January 26, 2015

    The Boston Business Journal reports that Instacart, the food delivery service, is testing a partnership with Petco in the Boston and San Francisco markets that has it providing same-day delivery of pet food.

    According to the story, "The cost for delivery of groceries and pet food is $3.99 for orders above $35 with more than two hours lead time."

    Instacart has been providing personal grocery shopping services in a wide variety of markets, partnering with chains such as Whole Foods and Costco and up-charging, in most cases, for the items ordered. The company has gotten some $275 million in venture capital finding as it has grown.
    KC's View:
    While I remain skeptical about Instacart's long-term sustainability as a business model, I think this is a good idea for Petco ... nothing shouts "e-commerce!" like a 40 pound bag of dog food.

    It is interesting to watch as Instacart seems to be shifting its revenue model a bit, moving from up-charging for the products it delivers to a fee-based system.

    Published on: January 26, 2015

    The United Parcel Service (UPS) said late last week that its investment in people and infrastructure designed to make sure that delivery problems that plagued its customers during the 2013 holidays were not repeated in 2014 cost it so much money that it was reducing its earnings estimates for the fourth quarter and entire fiscal year.

    The company has said that it spent millions to improve its shipping capacity late last year.
    KC's View:
    Here's a fact of life about e-commerce. The more people order products online, the greater the infrastructure it will take to deliver those items, which means it will require more investment by shipping companies and higher charges to consumers. If e-tailers decide to offer free shipping, as so many have, those costs will have to be applied somewhere.

    None of this makes me less enthusiastic about c-commerce. But it does cost money, and, as I've always suggested, the main lure can't just be price. Because all this stuff costs money.

    Published on: January 26, 2015

    Forbes has an interesting column about how Walmart has managed to succeed in Canada while Target did so badly there that its new CEO, Brian Cornell, decided to shut down its operations there.

    Among the reasons cited in the piece, by FierceRetail's Laura Heller:

    Walmart got there first - in 1994. Target waited until 2011, and then picked locations that had underperformed for the retailer from which it acquired them. Plus, the earlier move meant that Walmart was able to establish a beachhead with less intense competition.

    Walmart actually started out small - opening its traditional discount stores there before moving on to the larger and more ambitious supercenter format.

    Third, "Walmart brought its everyday low price strategy to Canadian shoppers with a consistent assortment. Target priced items higher in the Canadian stores and failed to bring its signature brands and style to the new market, enraging customers who had previously driven across the border and were not just familiar with Target, but had keenly anticipated its arrival."

    Even as Target was licking the wounds wrought north of the border, Walmart Canada announced last week that it "will grand open 11 supercentres by January 29 completing its expansion for the company's current fiscal year ending January 31, 2015. These completed real estate projects bring Walmart Canada's total store count to 394 stores, including 280 supercentres and 114 discount stores ... These stores are part of the 35 Supercentre projects planned for the company's fiscal year ending January 31, 2014. The projects include building new stores and expanding, remodeling or relocating existing stores. Including investments in its distribution network and ecommerce, the projects represent an investment of more than $500 million in the Canadian economy. For the first time, both PEI Walmart locations will offer a full complement of fresh groceries."
    KC's View:
    The question, for me, about Target's failure in Canada is whether it was a failure of leadership, a failure of vision, a failure of execution, or, most likely, some combination of all three.

    Published on: January 26, 2015

    The New York Times writes that McDonald's has reported "one of its worst financial performances in the last decade ... further evidence of the impact of tough competition and changing consumer tastes on one of America’s biggest and best-known restaurant brands." And, the company said, there is no light at the end of the tunnel.

    According to the story, "McDonald’s is testing a number of new concepts, including a kiosk in four stores in Southern California and one in Australia that allow customers to design and order their burgers from a menu of meat patties, buns, condiments and toppings ... It even has quietly opened a sandwich and salad shop in Australia, a bit of a hybrid of Panera and Starbucks, with no sign of a golden arch or Ronald McDonald anywhere."

    McDonald's also has simplified its menu, tweaking both its "value meal" and "dollar menu' designations, hoping it can get customers to come back into its stores with a better defined value proposition and by challenging perceptions that its foods are unhealthy.

    And, making a point that Michael Sansolo recently made here in his column, the Times writes: "The problem, though, is that it will take time for any of those changes to pay off significantly — it took McDonald’s two years to roll out its premium wraps. In the meantime, chains like Chipotle and Five Guys have consumers in thrall, and McDonald’s more traditional competitors, like Burger King and Wendy’s, have stepped up their game. Sonic, for instance, recently announced that sales in its stores open at least a year rose 8 percent."
    KC's View:

    Published on: January 26, 2015

    Bloomberg has a interesting piece about UK regulators who seem ready to extend plain packaging laws - designed to make unhealthy products less enticing - to junk food and alcohol.

    An excerpt:

    "Plain packaging laws for cigarettes have thrown the Marlboro Man off his horse in Australia and now the U.K. is set to follow. Junk food and alcohol could be next. The U.K.’s plan to force tobacco companies to sell their wares in standardized packs starting next year has revived concern among consumer-product makers that other goods deemed unhealthy by health campaigners could face similar legislation."

    While this may fall into the "it could never happen here" category, it is worth reading ... because we live in a world where things that could never happen seem to happen all the time.

    Check it out here.
    KC's View:

    Published on: January 26, 2015

    CNBC has an interview with Rosalind Brewer, president/CEO of Walmart-owned Sam's Club, in which she says that the chain has seen the decrease in oil prices result in higher transactions inside the warehouse clubs.

    "We saw the turn just before the holiday. We saw the oil prices moving and gas prices moving at the same time. We saw traffic tick up," she says.

    In addition, Brewer says that e-commerce is seen as a direct competitor to the warehouse club concept. "There are some online membership concepts that you wouldn't traditionally think were competitors. I do view Amazon Prime as a competitor," she says.
    KC's View:

    Published on: January 26, 2015

    CNN reports that "NBC will allow viewers to watch 11 hours of Super Bowl coverage online for free, including the game and halftime show." The story notes that NBC "typically requires online viewers of its shows to prove that they have have a subscription with a pay television service (cable or satellite).

    "But by allowing online viewing of the most popular day of programing without proof of a subscription, NBC is hoping to encourage more viewers to sign up for cable service in the future in order to watch NBC programming both on cable and online."

    CNN notes that this amount of Super Bowl programming "being streamed is more than has been made available in previous online offerings. "
    KC's View:
    This is such a vivid example of how the whole notion of consumption has changed, and continues to change ... here is something that traditionally has been the biggest TV event of every year, and it is migrating to the new technological infrastructure.

    Published on: January 26, 2015

    • The Washington Post has a story about Starbucks' mobile advantages; while we've already referenced the phenomenon here on MNB, it is worth mentioning it again because of the degree to which the mobile strategy has been successful...

    "The company said this week that, on average, customers pay for a purchase using smartphones 7 million times per week, with mobile payments now accounting for roughly 16 percent of total transactions ... Critical to the success of Starbucks's mobile payment platform is its integration with the My Starbucks Rewards program, which allows shoppers to earn special discounts and freebies." The story goes on to say that "Starbucks has bigger ambitions for mobile shopping in 2015. This year, customers will be able to place orders through their mobile app, a feature that the company believes will cut wait times at the counter."

    However, the Post also makes the entirely legitimate point that this experience may not be transferrable to other kinds of retail: "That's because it's a business that often is deeply entwined with its customers' daily routines: Maybe it's their first stop in the morning before they drop the kids off at school, or maybe it's the place they go at 3 p.m. when they need a pick-me-up at the office. Much like a grocery store, customers go there often and can clearly see the upside of joining the rewards program.

    "A retailer that gets less frequent visits, such as an electronics or furniture store, is going to have a more difficult time luring customers into its smartphone and loyalty program ecosystem, simply because it has so many fewer chances to do so."

    • The Pittsburgh Post-Gazette reports on how Giant Eagle plans to cross the border from Pennsylvania into Indiana this fall, with a Market District store as well as a GetGo convenience store, in the Indianapolis area.

    The story suggests that the Market District format is a strong one for Giant Eagle to lead with: "The Market District stores with their special offerings have become a destination, drawing shoppers from a wider area than the company’s traditional supermarkets, said Tom DeVries, senior vice president of the O’Hara grocer’s Market District division. He expects that magnetic ability will help the new store find its customer base in the competitive Indianapolis market, where the local newspapers have been reporting on a wave of store openings by grocery chains."

    • The New York Times reports that "some McDonald’s workers who say they were fired because of their race are suing the company, accusing it of dodging responsibility for the discrimination and harassment they say they endured. The workers said in a federal complaint filed on Thursday that about 15 African-American employees of some southern Virginia restaurants run by Soweva were fired last May after several white employees were hired."

    What makes the lawsuit interesting from a national perspective is that the lawsuit attempts to cast McDonald's as a co-employer with the franchised unit, a designation that the corporation resists. The National Labor Relations Board (NLRB) agrees with the employees making the claim, and if the lawsuit is resolved in favor of that co-employer concept, it creates a whole new world of issues for franchising companies and franchisees alike.
    KC's View:

    Published on: January 26, 2015

    • Sears Holdings announced late last week that Phil Keough, most recently president/CEO of Millennium Pharmacy Systems in the run-up to its sale to PharMerica, has joined the company as senior vice president and president, pharmacy, with responsibility for Kmart's pharmacy business.
    KC's View:

    Published on: January 26, 2015

    • Ernie Banks, the eternally optimistic member of Chicago Cubs, has passed away. He was 83.

    Banks, despite never winning a World Series in his 19 years in the major leagues, never seemed to lose his sunny disposition, passion for the game, and a "it’s a beautiful day, let’s play two” attitude. It resulted in his being elected to the Baseball Hall of Fame, and receiving the Presidential Medal of Freedom, and being known, perhaps forever, as Mr. Cub.
    KC's View:
    It sometimes is forgotten with the passage of time that Banks was the first black player to play for the Cubs organization, in 1953, six years after Jackie Robinson broke the color barrier in baseball with the Brooklyn Dodgers. Which in some ways makes his demeanor all the more remarkable...

    Published on: January 26, 2015

    Got the following email from MNB reader Bob Vereen about all the activity taking place in the dollar store segment:

    I recently drove nearly 300 miles through the Midwest on non-Interstate highways, and was amazed to see how many Dollar General stores there were in the small cities and towns I passed through.  In a surprising number of cases, they were the ONLY modern store.   Saw far fewer Family Dollar stores and no Dollar Tree units, which I think are mainly in urban centers or suburbs.

    DG offered consumers in those communities a reasonable assortment of basics, and all seemed to have a number of cars in their parking lots.

    In metro markets, DG is just another option.  In those towns, the ONLY option.

    I had exactly the same experience recently, driving from Omaha to Norfolk, Nebraska ... other than McDonald's, Dollar General seemed to be the most ubiquitous retailing name. (There were no Starbucks, by the way.)

    Following up on an exchange I had last week with s reader about GMO labeling, another MNB reader chimed in:

    I recognize that your position on transparency is set in stone but I think Mr. Grimaldi's point at it's essence was that if GMOs are widely distrusted and need to be labeled then anything that over the year's has been crossbred for certain traits should also be mistrusted and labeled and that incorporates the vast majority of fresh food in the world as well as medicines, inoculations, and the pets we so often love. I read his point to be that it is NOT a distrust of companies but in fact a distrust of science and technology! Just my opinion!

    Regarding the hiring of an Australian retailing executive to run Bi-Lo - either to turn it around or get it ready to be sold, I suppose - MNB reader Richard Lowe wrote:

    I was very impressed wit the retail food stores in Australia and New Zealand. They are a step up for us! This should be an interesting good move!

    I got criticized last week for showing interest in the new Red Velvet Oreos that are about to go into limited distribution, but an MNB reader came to my defense:

    I, too, am an Oreo addict and will be searching for the new Red velvet flavor, I haven’t been so excited since they released chocolate chip cookie Oreos (not my favorite). To date my favorite LTO flavor is the one with strawberry flavored crème filling. I have tried most of the flavors and classic Oreos is hard to beat. It really doesn’t matter what is added Oreos are not meant to be health food, they are a nice indulgence, bring on the red 40 and more artificial flavor, I am ready.

    And, an illuminating email from MNB reader Gary Loehr:

    I had to call Delta today to rebook a return ticket.  When I first called, they asked me if I would be willing to take a one question survey.  I liked that they let me know it was only one question, so I said yes.  I had to wait a minute for the customer service person and it took a few minutes to get the changes to take in their system, but the service person was pleasant and kept me updated on what she was doing.  I got the flight I wanted and didn't have to pay any fees.  A pretty good experience as airline calls go.

    The one question they asked in the survey was this: "If you owned a customer service business, would you hire the person you spoke to today?".

    I thought it was a great question, because isn't that the ultimate test of how I viewed my experience today.  I am on the way to a client meeting this morning.  When it's over, I think I will ask myself if that client would hire me for a job based on the experience.  In many ways, every interaction is kind of like an interview.

    Excellent point.
    KC's View: