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    Published on: April 16, 2015

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, I'm Kevin Coupe. This is FaceTime with the Content Guy.

    In the town where I live, a local wine merchant recently went public with an op-ed piece that focused on the fundamentals of competition, and why it is important to have a level playing field. He had two points ... but he was only half right.

    One of his arguments was regarding a bill making its way through the Connecticut State Legislature that would allow cheese shops to sell wine and beer in addition to bread, smoked meats and, of course, cheese. Now, you have to understand that Connecticut has a puritan tradition when it comes to such things ... supermarkets are not allowed to sell wine, and it is only in the last few years that liquor stores were allowed to open on Sundays.

    The merchant says that he's in favor of the bill ... as long as it also allows wine shops to sell cheese, smoked meats and bread. "It’s downright silly to use a legislative body to consider giving one small business an edge over another," he wrote ... and I agree with him.

    But that's where he goes off the rails, in my humble opinion. He then comes out against a bill proposed by Gov. Dannel Malloy that would "eliminate the minimum bottle price for wines and spirits and add additional shopping hours for the purchase of alcoholic beverages." He writes that "both of Malloy’s proposals are tax appeasing nods to the big-box liquor retailers that the state is trying to attract. They are also a direct slap at small business entrepreneurs."

    I would argue that both proposals strike me as being pro-competition, but not this merchant. No, his position is that the elimination of minimum pricing would put smaller retailers in the position of getting into a pricing battle with big box retailers that they cannot possibly win, and that extended hours would mean that if these small retailers want to compete with the big box guys it would mean "that some member of the family — husband or wife or son or daughter — will be putting in a 96 hour week. They will have to do it to stay competitive." And that, he says, simply isn't fair.

    Well, writer William Goldman may have said it best in The Princess Bride: "Who says life is fair, where is that written?"

    The thing is that while this merchant is right when he suggests that a change in Connecticut state law could make it very difficult for many wine retailers to survive, he's wrong when he says that the laws should be written in order to protect the little guys. It always has been my view that while survival often is a matter of size, it is not always thus ... and that cunning, guile, innovative thinking and exceptional execution are a far better strategy than protectionist legislation.

    The irony of this argument is that this particular merchant may be the smallest of the local wine shops, but they've carved out a singular niche for themselves by not focusing on price, by creating a highly effective wine club, and by identifying and selling wines that nobody else in the area sells.

    In other words, they've created for themselves a differential advantage.

    That's what retailers have to do, whether they are large or small. Find the thing that makes them unique and different, innovate around it, and exploit the hell out of that advantage. Is it easy? Nope.

    There's another moment in The Princess Bride that captures the concept perfectly. It is that point in the movie when Buttercup says to Wesley, "We'll never survive."

    And he, of course, responds: "Nonsense. You're only saying that because no one ever has."

    There's a first time for everything.

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

    KC's View:

    Published on: April 16, 2015

    by Kevin Coupe

    Two stories yesterday, it seems to me, illustrated the inexorable power of change and the impact it has on businesses.

    Rapid TV News had a story about a new report from Accenture saying that "television's popularity as the go-to entertainment device may be ending ... Compared with digital rivals, the television was the only product category to see uniform, double-digit usage declines across different types of media worldwide among viewers of nearly all ages. It is, said Accenture, rapidly being replaced as consumers turn to a combination of laptops, desktops, tablets and smartphones to view video content."

    The story goes on:

    "Accenture discovered that viewership for long-form video content, such as films and television on a TV screen, has declined by 13% globally over the past year and by 11% in the United States. Similarly, the report found sports viewership on TV screens declined by 10% globally and 9% in the United States.

    "Surprisingly, and worryingly for the industry, nearly all age brackets reported double-digit declines in TV viewing globally, with 14-17-year-olds abandoning the TV screen at the rate of 33% for films and television shows and 26% for sporting events. This decline was also as apparent among 18-34-year-olds at 14% for movies and television shows and 12% for sporting events, and for 35-54-year-olds, at 11% and 9%, respectively. As one may imagine, the decline flattened among those aged 55 and older, at 9% and 1% respectively."

    That's got to be worrying for companies that are what might be called the traditional television business ... which is why so many of those traditional companies are looking to develop new and expanded business models that will embrace all those other methods of content consumption.

    That may be the lesson of all this technological and cultural change. Content is where the action is ... to a great extent, companies need to focus on creating innovative programming and being device-agnostic.

    Think of it as the video version of omni-channel retailing. What will differentiate a retailer is what it sells ... the "how" has to be the means, not the end.

    Which brings me to the other, related story that caught my attention.

    It was in Variety, and reported that Netflix "blew past subscriber-growth expectations for the first quarter of 2015, packing on 4.9 million new streaming customers in the period — a record for the company."

    CEO Reed Hastings believes that one of the things driving this growth has been the company's "ever-improving content," which has included critical and popular successes like "House of Cards," Orange Is The New Black," and "Bloodline." In recent weeks, the release of new programming has continued, with "The Unbreakable Kimmy Schmidt" and "Marvel's Daredevil," and there's no reason to think that the trend won't continue. (I'll talk about 'Daredevil" tomorrow in "OffBeat.")

    The lesson of all this technological and cultural change - that content is where the action is, just as omni-channel may be the only sustainable approach to retailing - needs to be taken seriously.

    It is the inexorable power of change. And it is an Eye-Opener.
    KC's View:

    Published on: April 16, 2015

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    Bloomberg reports on a pricing study by Nomura Securities International that says Amazon "was the least expensive grocery-delivery option in New York City, beating the closest competitor by $20 on a 30-item order."

    According to the story, "In the pricing study, Nomura ordered 30 grocery items -- including green seedless grapes, Eggo whole-wheat waffles and a 2-liter bottle of Coca-Cola -- from competing New York delivery services Amazon Fresh, Instacart Inc., Peapod Inc. and Fresh Direct Holdings Inc. The order cost $122.03 from Amazon Fresh, which included a $5 tip. Instacart, with the order placed through partnering grocer Fairway, came in $20 higher at $142.86. Fresh Direct was the most expensive, at $158.74."
    KC's View:
    This is not a 'there can only be one winner" scenario. There are going to be a lot of different plays in the e-grocery business ... some folks are going to stress price, some will focus on speed, and others will focus on prepared foods. Some, of course, will try to do all three, or define some other advantage and niche.

    But I do think that this study at least suggests why traditional food retailers, especially those in markets large enough to commend Amazon's attention, need to be concerned about the expansion of Amazon Fresh. Amazon has been building distribution centers all over the country, can easily make these compatible with its Amazon Fresh business, and certainly seems to have the internal motivation to move quickly, efficiently, and effectively.

    Published on: April 16, 2015

    Internet Retailer quotes Greg Foran, CEO of Walmart's US business, as saying that the retailer's 4,500 stores will be its "competitive advantage" as it builds its online business.

    That's because Americans who live near a Walmart (the retailer says that almost 90 percent of Americans live within 10 miles of one) "could save on shipping costs and pick up web purchases at their local store before a web-only competitor like Inc. could have that same purchase shipped to their home, though Amazon offers same-day delivery service in some metropolitan areas. Amazon operates 63 fulfillment centers in the U.S."

    The story says that Foran told a recent investors meeting that "making it easier for customers to pick up online grocery orders and other web purchases in a local store is a major priority for Wal-Mart going forward," though he was "light on details."
    KC's View:
    This is what I would call one of the internal motivations for Amazon to move quickly, efficiently, and effectively.

    Published on: April 16, 2015

    In Toronto, the Globe and Mail reports that supermarket retailer Loblaw and ride sharing service Uber are teaming up "to make it easier for customers without cars to pick up groceries they have ordered online."

    The story goes on:

    "Loblaw’s 'Click & Collect' e-commerce service is still in its testing phase at three Toronto-area locations. It allows customers to place orders that are filled by store staff, to speed up the grocery trip. Customers can then pick up the items in-store.

    "The service could be particularly appealing to time-pressed professionals. But for city residents who do not own cars, grocery trips are often limited to what they can carry home. The Uber promotion, which lasts until the end of the day on April 20, offers a free ride worth up to $30, to and from a Loblaw store for Click & Collect pickup ... The new promotion is also an opportunity for Loblaw to further advertise its e-commerce service, and offers a contest for $1,000 in free groceries to any users; new Uber users also get a coupon for $10 off their next 'Click & Collect' purchase.

    There is, of course, an irony ... because even as Loblaw is teaming with Uber, the controversial ride sharing service is facing calls to shut down its Toronto business. The Globe and Mail writes that "some local governments and competing taxi operators have raised concerns about the safety of encouraging people to get in strangers’ cars and the extent of drivers’ insurance coverage for commercial operations. Taxi companies have criticized Uber for operating outside of the regulations with which they must comply."
    KC's View:
    This is all about two companies testing boundaries, trying to see what works. I like it.

    Published on: April 16, 2015

    The Associated Press reports that "Target and MasterCard say they've agreed to settle lawsuits over the discounter's pre-Christmas 2013 massive data breach." And the Wall Street Journal writes that the settlement is designed to cover "costs that banks incurred to reissue credit cards and debit cards as a result of the breach, as well as some of the fraud that resulted from the exposure of customer information."

    Target has said that it has put aside $19 million "for banks and credit unions issuing MasterCards that were caught in the data breach that compromised 40 million credit and debit card accounts between Nov. 27 and Dec. 15, 2013," the AP reports. "MasterCard Inc. said the money will be available to banks and credit unions for operating costs and fraud-related losses on cards believed to have been affected. The settlement will go into effect if at least 90 percent of eligible issuers accept the offer by May 20."

    According to the , "Minneapolis-based Target is likely to be on the hook for more payments in the future. The company is holding similar negotiations with Visa Inc., which is larger than MasterCard, according to people familiar with the talks. In March, Target agreed to pay $10 million to settle a consumer class-action suit tied to the breach."

    The AP piece quotes Scott Kennedy, president, financial and retail services at Target, as saying that the company is "hopeful that Target's agreement to pay up to $19 million to settle the claims of MasterCard and its issuers will result in a high level of issuer acceptance. Target intends to continue to defend itself vigorously against any assessments made by MasterCard on behalf of MasterCard issuers that do not accept their offers."
    KC's View:
    The question is whether the cost of the data breach to Target was greatest in terms of reputation/trust, or the cost to its bottom line. I have to think that long term, the bigger problem is the creation of unease about the financial system.

    Published on: April 16, 2015

    The Wall Street Journal reports on how companies detect and define food trends, and then develop products that cater to these trends.

    An excerpt:

    "Food companies and grocers count on us flitting from one eating habit to another to profit from a steady supply of products tailored to new tastes. But forecasting eating habits is tricky. Some new foods or health trends become common parts of daily life, like $4 lattes, while others such as caffeine gum fizzle.

    "Predicting which is which—and tracking a trend on the way up and down—have become especially important to big food companies as shoppers turn away from old standbys in favor of food perceived as healthy or premium."

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

    Published on: April 16, 2015

    WHTM reports that Ahold USA, parent company to Stop & Shop and Giant, is expected to eliminate 145 support jobs in its Carlisle, Pennsylvania, and Quincy, Massachusetts, offices. The story says that "about 7% of current support positions including, marketing, human resources and legal jobs may be cut."

    • In the UK, the Daily Mail reports that "Tesco is close to ditching the last of the private jets used by its top executives after an accounting scandal that sparked the biggest crisis in its 95-year history. Britain’s biggest grocer operated a multimillion-pound fleet of five aircraft for its bosses, but after a disastrous year new chief executive Dave Lewis admitted the planes gave the wrong image and put them up for sale."

    • Indiana-based Martin's Super Markets announced that it plans to open its 22nd store - a new, small store "Martin's Express" format - On May 7, in Goshen, Indiana.

    The company says the 26,200 square foot unit "will be the first execution of a new format to be operated by the company. It will feature everything fresh that shoppers have come to expect from Martin’s plus the rest of what is needed to complete meals, all in an easy-to-shop store layout."

    • The Food Marketing Institute (FMI) has named two winners of this year's Donald H. MacManus Award for "their tireless public affairs, community and industry commitment." The winners are
    Ron Fong, president/CEO of the California Grocers Association (CGA), and Keri Askew Bailey, CGA's senior vice president of government relations and public policy.

    • The National Grocers Association (NGA) announced that Stan Sorkin, executive director for the Connecticut Food Association, has been presented with NGA's Association Leadership Award "for his dedication and longstanding service to the independent supermarket industry."
    KC's View:

    Published on: April 16, 2015

    Reuters reports that Carlyle Group has hired Mike Duke, former Walmart CEO, to join its executive team that works with outside companies that "are focused on buying and investing in consumer products and retail companies."

    • Walmart India has announced the appointment of Pankaj More to lead its Technology team there, saying he will "play a key role" in strengthening its technology and IT infrastructure.

    The company says that More joined Walmart in 2013, and has been "leading ISD strategy for Walmart Asia market (China, Japan and India) by driving financial transparency, creating technology roadmap, leveraging cost and implementing project governance."
    KC's View:

    Published on: April 16, 2015

    I suggested the other day that if Target really wants to make headway in the grocery business, it needs not to focus on building so-called "traditional" grocery departments but rather should do something radical and differentiated. If you want to move the needle, I wrote, you sometimes have to create an earthquake.

    Which prompted one MNB user to write:

    Want to move the needle? Create a tidal wave?

    How about disrupting the status quo with this: What if Target linked with Trader Joe's to provide an in-store grocery department? They don't really compete head-on, but net gain for both!

    Talk about disrupting the traditional grocery channel.

    Interesting idea. They could team with Trader Joe's in some markets, and Aldi in others, where appropriate.

    We had an email the other day from MNB reader Michelle Graham, who wrote about how Vons had changed her life by creating a supportive work environment, as opposed to trying to exploit her and other employees. (It was a great can read it here.)

    MNB user Mark Boyer responded:

    I read the comments from Ms. Graham, and immediately went to LinkedIn to try and connect, but could not find her there. (Ms. Graham should write a book on her life; she seems as solid as they come.)

    I want to know more people like her.

    I do, too.

    The interesting thing is how her Vons experience contrasts with what Tesco is doing in the UK - telling its in-store staff to get in shape because healthier employees are not just more productive, but also "give a more appealing look than a bunch of sweaty, overweight workers wheezing around the aisles."

    One MNB user wrote:

    Seriously, did that memo actually happen, or is this some belated April Fool’s Day joke?  Can that actually be effective in the UK?  Can you imagine the firestorm here ... This is so the opposite end of the spectrum compared to the wonderful story you had recently about Vons and being flexible to help employees.

    From another reader:

    Not only am I sure that I would find such a message as “Let's be honest, trim workers are less likely to take days off sick, plus they can stack shelves more quickly than fat ones. But this also ties in with attempts to smarten up Tesco stores. Healthy workers will give a more appealing look than a bunch of sweaty, overweight workers wheezing around the aisles.” offensive as an employee, but I also find it offensive as a consumer. Considering the mess that is Tesco hearing this/reading this from upper management would have me looking for employment elsewhere and taking my sweaty, wheezing self away from the premises and that includes where I purchase my groceries.

    And another:

    My one word reaction to your Wednesday Eye-Opener, Tesco's "Fitness Regimen"…. Wow!  It is simply amazing to me that the leadership of any organization, let alone a major player like Tesco, would have the narrow-mindedness to approach their employees in this manner.  As an overweight individual myself, I read this story and took this very personally, even though I do not work for this company.  As I am sure all of the employees of Tesco are feeling as well.  And the big picture view?  Tesco just denigrated a large segment of their customer base!  If I'm an overweight customer of Tesco, how could I not think that Tesco believes I'm "fat & sweaty"?  Makes me think of the Abercrombie & Fitch CEO that didn't want to sell clothes to fat people.  Not so good for public relations.  This one is going to blow up on Tesco… and it should.

    MNB yesterday took note of a Law360 report that a number of retailers - including Macy's and Amazon - as well as the Citizens of Humanity jean company must defend themselves in a lawsuit charging that they falsely labeled jeans as "Made in the USA" when they were not. The story says that U.S. District Judge Janis L. Sammartino ruled that the California law requiring such label accuracy was neither unconstitutional nor superseded by federal law. The defendants had sought to have the case tossed out, but the judge refused.

    I commented:

    I'm always sort of amused when companies and/or people try to defend on technicalities the fact that they've been lying to their customers. As if the technicalities made it okay...

    This is a soapbox I've been on for a long time. I believe in Country of Origin Labeling (COOL). I'm in favor of Made in the USA labels as a matter of both marketing savvy and also bolstering American economic self-interests. I also think that companies better do it right, better be accurate in their labeling, and have the materials that will back up their claims.

    Anything less is a kind of malpractice.

    One MNB reader chimed in:

    Perhaps the  “made in the USA” the issue could be addressed by companies that import components of their products to use the phrase “assembled in the USA” and reserve the “made in USA label” for products that contain 100% USA labor and materials.

    The problem, in my view, is not that companies don't have these options available to them ... it is that they take the easy way out, don't know or don't care about the facts, and end up cheapening the whole "made in the USA" concept.
    KC's View: