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    Published on: February 12, 2015

    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, Kevin Coupe here, and this is FaceTime with the Content Guy.

    I was talking to a guy the other day about something that I think is a consistent part of the narrative here on MNB - my conviction about the increased desire on the part of consumers for trackability, traceability and transparency.

    And this fellow pointed me to a story from late last year that I had not seen - how a complaint was filed with the Federal Trade Commission (FTC) against a company called Element Electronics, which has been selling televisions through major retailers such as Walmart and Target, televisions that are said to be assembled in the USA. The Alliance for American Manufacturing (AAM) has complained that Element's definition of "assembled" is, to say the least, deceptive - apparently the TVs are built in China out of largely Chinese parts, and then, when they get to the US, workers take off the back of the TV, insert a Chinese-made motherboard, and then close it up.

    Now, this complaint is under review by the FTC ... but it seems to me that even as this stage in the process, it serves as a cautionary note for both retailer and supplier companies.

    Through the supply chain, companies need to know where their products come from, need to be able to track and trace them as they move through the system, and then have to be completely transparent about origin, ingredients and components during the selling process. If you don't provide the accurate information, you're going to get caught. If you don't have the accurate information, it is going to come back to bite you. It is that simple.

    This cuts across so many areas. It can affect "made in the USA" claims. It can be related to organic and GMO-related claims. It certainly is part of the changing food safety rules. And as we saw this week, the issue of transparency clearly is playing out in New York State's actions against the nutritional supplement industry. (Hell, I think you can argue that at some level, this is what was playing out in the Brian Williams controversy.)

    Trackability, traceability and transparency. Retailers and suppliers that fighting against these new demands strike me as foolhardy, because it is a battle that you can't win. There simply are too many sources of information out there, too many divergent voices looking to weigh in about your business. You might as well be up front about the products you are selling, and vigilant about where they come from and how they are constituted.

    It may seem like a lot of work, but it comes down to preserving the integrity and brand equity of your business.

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

    KC's View:

    Published on: February 12, 2015

    by Michael Sansolo

    If there is a single must-read leadership lesson in the world this week, it came from Sunday’s Washington Post in a tribute to famed basketball coach Dean Smith, who passed away last weekend.

    In the article, writer John Feinstein detailed the many ways Smith had influenced his sport, his adversaries and especially his players during his long and storied tenure.

    But he did something so much more. Early in his career, Smith actively worked in the cause of integration. Feinstein only learned one specific story from Smith’s pastor and once asked Smith about his reluctance to discuss all he did.

    “Dean, you should be proud of doing something like that.” Feinstein asked.

    Then Smith “looked me in the eye and said, ‘John, you should never be proud of doing the right thing. You should just do the right thing.’”

    That's an Eye-Opener.
    KC's View:

    Published on: February 12, 2015

    Bellingham, Washington-based Haggen Inc. said yesterday that it has begun the process of acquiring "146 stores as part of the divestment process brought about by the Federal Trade Commission’s (FTC) review of the Albertsons LLC and Safeway merger. The FTC approved the divesture on Tuesday, January 27, 2015, and the merger of Albertsons and Safeway Inc. was completed on Friday, January 30, 2015."

    Haggen began taking ownership of the stores this morning. The agreement mandates that it must take ownership within 120 days.

    "With this acquisition," the company said, "Haggen will expand from 18 stores with 16 pharmacies to 164 stores with 106 pharmacies; from 2,000 employees to more than 10,000 employees; and from a Pacific Northwest company with locations in Oregon and Washington to a major regional grocery chain with locations in Washington, Oregon, California, Nevada and Arizona."

    The company said it "will convert the stores moving from north to south, with a few exceptions. The first conversion begins on Thursday at the former Albertsons located at 19881 SR 2, Monroe, WA. Soon after, another 18 stores in Washington will be converted during February and March, with the final seven Washington stores scheduled in June. The 83 stores in California will be converted from March to May. The 20 Oregon stores will transfer to the Haggen brand throughout the months of March, April and May. The Nevada and Arizona stores will be the last to convert in the late spring. Each week, between one and 12 stores will be converted ... The amount of time it will take for a conversion will vary store by store. Some stores can be converted within two days after the change of ownership, while others will take longer. Both interior and exterior signage will change at all locations."

    Bill Shaner, who will serve as CEO of Haggen's Pacific Southwest division, has pledged that “Haggen is still small enough to be very nimble and responsive to each store's customers. What you find in a Bellingham store will differ from what you’ll find in a store in San Diego. Being locally focused is a core value of Haggen."
    KC's View:
    As I've said before, this strikes me as an enormous undertaking in which everything has to go right for it to work. They seem to have a plan, and they certainly have smart people at the helm ... but they're reinventing these stores in some pretty tough competitive markets, and will have to give consumers a great first impression of they are going to disrupt existing shopping patterns. Nimble is good. Being extraordinary is better ... and probably a requisite for success.

    Published on: February 12, 2015

    CityWire reports that Walmart is telling its suppliers that it "is going back to what works and that is the 'Everyday Low Prices' (EDLP) philosophy which begin with Everyday Low Costs (EDLC) of goods from suppliers."

    In comments made last week at a supplier conference, CEO Doug McMillon said, “What we need from you is EDLP and EDLC. We are still fighting this battle in some parts of our business. ... That’s because it’s just so tempting to put an item on sale. Putting items on sale and special promotions have never worked for us. When we get away from our pricing model out in the middle of the road we get run over ... “We want to drive more business for you and us in a collaborative fashion. We are thinking about (how) dynamic pricing tools via the Internet can be applied and we don’t have it all figured it out just yet. But what I do know, is that our pricing objective is aimed at building customer trust."

    According to the story, "Greg Foran, CEO of Walmart U.S., said at the meeting that the best of EDLC suppliers are already seeing benefits. He said one item retailed for $2.94 last year, but with supplier and buyer collaboration the price was taken down to $1.68 this year, with no reduction in quality. In response, Wal-Mart doubled its order to 13 million, up from 6 million last year."
    KC's View:
    I don't want to go too far out on a limb here, but so far, I'm really impressed with Doug McMillon - he seems to have some very clear goals, and is highly focused on initiatives where he can move the needle ... challenging existing business processes where necessary and reinforcing traditional strengths where appropriate. I don't know the man, but he seems to have just the right amount of swagger ... and I have the feeling that some of that swagger may be transferred to the company he is running. Which is not good news for the companies with which Walmart competes.

    Published on: February 12, 2015

    Reuters reports that it has conducted a survey concluding that Amazon packages "ordered by its Prime members regularly arrived late during the holidays ... reflecting the strain on the logistics network that transformed the company into an e-commerce powerhouse." According to the story, "Customer satisfaction with Prime is extremely high - 96 percent are happy with its two-day shipping service, the survey revealed. But the results raise questions for Amazon as it expands and takes greater control of its shipping system."

    But while 96 percent of customers are happy, the survey indicates that "10 percent of about 1,700 Amazon shoppers who chose the two-day shipping option said packages ordered between Nov. 1 and Dec. 31 did not arrive on the expected day."

    Amazon questioned the methodology of the survey and said that the results seemed "suspect."

    The Reuters story says that "one of Amazon's chief concerns is it does not have control of the entire delivery from warehouse to consumer, said former employees who spoke on condition of anonymity. For years, the company has been testing ways to take more control of the last mile, those ex-employees said. Those steps include building its own local delivery fleet and using the trucks designated for its Amazon Fresh grocery service to deliver orders."
    KC's View:
    Not my experience, but then again, maybe I'm just in the 90 percent.

    What I think is interesting is the fact that while only 90 percent of Prime customers got their packages on time, 98 percent of them are satisfies. I think that says a lot about the way Amazon customers feel about the company - it delivers on its value proposition more often than not.

    One other point. It is worth noting that while some retailers farm out the fulfillment process to Instacart and like services, Amazon is trying to bring more of it home because "one of Amazon's chief concerns is it does not have control of the entire delivery from warehouse to consumer." Amazon understands that to build and maintain the kinds of customer relationships it needs to survive, it has to control as much of the process as possible ... which is the exact opposite of what some other retailers are doing.

    Published on: February 12, 2015

    Reuters reports this morning that the four retailers targeted by the New York State Attorney General's office for selling inaccurately labeled nutritional supplements - Walmart, Walgreen, Target and GNC - have "agreed to remove certain dietary supplements off their shelves in New York after receiving a threat of legal action from the state's attorney general."

    According to the story, "The retailers received subpoenas from New York State attorney general Eric Schneiderman on Wednesday, demanding evidence for the health claims printed on labels of dietary supplements sold in New York ... The subpoenas require the retailers to provide evidence of how they would prove the authenticity of their product claims."

    Previously, the AG had simply asked them to stop selling the designated supplements.
    KC's View:
    Sounds like the AG isn;t particularly worried about challenges to the government's testing methodology....

    Published on: February 12, 2015

    Whole Foods said yesterday that it plans to expand its Western Canada footprint "with three new locations in Greater Victoria, British Columbia as well as in Edmonton and Calgary in Alberta in its first entry into the province," MarketWatch reports. "Whole Foods, which said it entered Canada more than 10 years ago, currently has 10 stores in British Columbia and Ontario."

    The announcement came as Walmart announced that it would spend the equivalent of $269.16 million (US) to open 29 new stores there as well as convert some discount stores to the supercenter format; this move followed by less than a month the decision by Target to pull out of Canada.

    And, the Whole Foods expansion comes as the retailer announced that its Q1 same-store sales were up 4.5 percent, and total sales were up about 10 percent, which it attributed to a price-cutting strategy and its first national advertising campaign, all of which are designed to make Whole Foods more accessible to the average consumer.
    KC's View:

    Published on: February 12, 2015

    • The Associated Press reports that Best Buy "has started its first wedding registry, catering to couples interested in the latest devices, from flat-panel TVs to Apple iPads. The site, www.BestBuy.com/WeddingRegistry, will be added to the retailer’s mobile app next week. Kiosks will be installed in the company’s 1,000-plus large-format United States stores by early April, where customers can check out registries and print shopping lists."
    KC's View:

    Published on: February 12, 2015

    Yesterday, in an "Eye-Opener" that referred to Brian Williams' precipitous fall from grace, there was a brief reference to his recently signing a new five-year contract for $10 million.

    Boy, did I get that wrong.

    In fact, the reports are that when Williams signed a contract late last year, it was a five year contract for $10 million a year - for a whopping $50 million.

    So when he gets suspended for six months without pay, it doesn't cost him a million bucks, as I wrote yesterday. It actually costs him $5 million ... though, compared to the loss of trust and esteem, that may end up being as paltry sum.

    My apologies for the error.
    KC's View:

    Published on: February 12, 2015

    • Bob Simon, who worked for CBS News for almost a half-century, including 19 years as a correspondent on "60 Minutes," covering conflicts in Vietnam, Northern Ireland and the Middle East, once being imprisoned for 40 days by Iraqi forces during the 1991 Gulf War, was killed last night in a car accident in New York City. He was 73, and had won 27 Emmy awards and four Peabody Awards during the course of his distinguished career.


    • Jerry Tarkanian, who in 19 controversial years as basketball coach at the University of Nevada Las Vegas (UNLV) turned the school into a national powerhouse and was elected two years ago to the Basketball Hall of Fame, has passed away. He was 84.
    KC's View:

    Published on: February 12, 2015

    Got the following email from MNB reader Mike Jadrich:

    I totally agree with your conclusion that Jon Stewart will be remembered and revered for his contributions long after Brian Williams is gone and forgotten.  But after watching last night’s show, you need to add burning desire for less hypocritical Media to your list.  His exposure of the absurdity of 24 hour news programming has become is one of my favorite reasons to watch his show.  Let’s hope that whoever succeeds him does not let up on the gas pedal and continues to skewer them as they so rightly deserve.




    On the subject of Tesco asking suppliers for lower prices that reflect lower commodity costs, one MNB user wrote:

    Trouble with Tesco “asking” for pricing concessions is they refused price increases for commodity increases over the past 3 years.

    From another reader:

    Did Tesco alternatively “demand price increases” when they were going up?

    Appears to be a slippery slope (with a not-so-subtle threat of discontinuation of product) when retailers make specific demands on pricing based upon commodity fluctuations. Some suppliers may have opted not to take drastic price increases when the markets went up, taking it out of margin or allowances (or both), so hopefully Tesco will look at the suppliers and how “both sides of the equation” factor in before making any specific demands on price and (perhaps) rashly discontinuing products with those suppliers…


    And another:

    Is too bad Tesco doesn’t bring in their suppliers and ask them for creative ways to reduce their landed costs. Long-term supply agreements, fewer and fuller trucks, better use of freight lanes, more effective use of promotion dollars, in-store execution and store coverage opportunities, pack sizes and shipping containers, etc.

    And still another:

    Tesco is taking a very simplistic approach to the drop in commodity prices.

    There are many suppliers who were stung when the commodity prices went up, and knew they couldn’t take pricing because the market wouldn’t bear it, so they didn’t raise costs to the retailer.

    Now they are being punished for holding the line when their costs went up.

    Additionally, commodities are only one component of the cost of a product. Often times manufacturing, packaging, shipping, marketing, trade spending and labor eclipse commodity costs by a factor of 10, and many of those costs have not gone down.

    Tesco is trying to make a populist move.

    The result if the suppliers are in-fact forced to lower costs, will be reduced trade spending and ultimately higher prices to the Tesco consumer. The only entity that will benefit will be Tesco in the form of higher margins.

    Those same suppliers will be able to make much more favorable promotion plans with Tesco’s competitors.

    This will backfire on them.


    Everything does, lately.




    Finally, I screw up enough that it is nice every once in a while to get an email like this one, which came on Tuesday from MNB reader Mike O’Donnell:

    I know you have to deal with the issues of the day…but today’s column – end to end - was the best you’ve done in a long time.

    Such a wide horizon of topics and all right on target!
     

    Like I always say ... I'm going to keep doing it until I get it right. But thanks.
     
    KC's View: