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    Published on: April 27, 2015

    by Kevin Coupe

    The New York Times had a story over the weekend about Alli Webb, founder of a company called Drybar, which owns a chain of stores that offer blow-dry services to women.

    Though, to be sure, Webb does not believe she's selling blow-dry services. "We’re not selling blowouts," she says. "We’re selling happiness and confidence."

    There must be plenty of happiness and confidence at Drybar's headquarters - the five year old company is on track to generate $70 million in revenue this year, and it is the largest of the three national chains offering these services.

    The Times writes that "a blowout is a diabolically ingenious product: it can be undone and destroyed simply by adding drops of water. The top three blow-dry chains — Drybar, Blo and DreamDry — have more than 100 locations in the United States so far. As recently as 2007, there was not even one. The feeling of 'happiness and confidence' that comes with smooth hair is real, but it creates its own self-perpetuating need."

    And here's the thing - while Webb never saw herself as an entrepreneur, she was a woman with wavy/curly locks who came from South Florida, and because of humidity had always dealt with frizzy hair. And that's where the idea came from ... and you can read the entire story here.

    The growth continues. "In May," the Times writes, "Drybar will release an app called Dry on the Fly: A satellite will locate you and a Drybar-trained stylist will show up and give you a blowout for $75. The company plans to open 12 to 15 new shops this year: Locations in Houston and Beverly Hills just opened. The expansion to Toronto, and to foggy, frizzy London, will follow. On rainy days, Drybar provides customers with a free umbrella. “

    It is an Eye-Opener - an entire business built on a basic consumer need into which nobody had tapped.

    Nice to know, in some ways, that such opportunities still exist. And it makes one wonder about the new, untapped opportunities there may still be out there.
    KC's View:

    Published on: April 27, 2015

    The New York Times this morning reports that fast food chain Chipotle now will serve only GMO-free food.

    The new policy begins today.

    “This is another step toward the visions we have of changing the way people think about and eat fast food,” Steve Ells, founder and co-chief executive of Chipotle, tells the Times. “Just because food is served fast doesn’t mean it has to be made with cheap raw ingredients, highly processed with preservatives and fillers and stabilizers and artificial colors and flavors.”

    The story notes that "in 2013, Chipotle was the first restaurant chain to indicate which items contained genetically modified organisms, and a small but growing number of restaurants, largely in fine dining, also now label their menus.

    "Grocers, too, are moving to offer consumers more products free of genetically altered ingredients. The shelves and cases in Whole Foods stores are to be free of products containing such ingredients by 2018, and Walmart is vastly expanding its selection of organic foods, which are free of genetic alteration by law."
    KC's View:
    The story points out that it is easier for Chipotle for do this than a lot of other restaurants - its entire menu uses only 68 ingredients.

    “The vast majority of our ingredients don’t come in a G.M.O. variety, and we use lots of whole, unprocessed foods, so it was easier for us to do,” Ells tells the Times.

    I have to say that this is the difference between leadership and lethargy - Chipotle is being progressive, staking out a position that makes it part of the future of the food industry, while some of its competition argues internally about wage raises and how many stores to close. (We have a story about this, below.)

    Good for Chipotle.

    Published on: April 27, 2015

    Bloomberg reports that "in its most detailed public disclosure about a proposed service called Prime Air, Amazon is arguing that cargo drones should be allowed to take flight if the online retailer can show they’re not going to collide with planes or crash to the ground.

    "The drones, still in development, would mostly fly at least 200 feet off the ground, relying on sensors and computers to select a route to customers’ doors and avoid hazards, Amazon said in a request Friday to the Federal Aviation Administration seeking leniency on pending drone regulations. One Amazon employee would operate many drones simultaneously, according to the request letter."

    “Overly prescriptive restrictions are likely to have the unintended effect of stifling innovation,” Paul Misener, vice president for global public policy at Seattle-based Amazon, said in the letter.

    Proposed FAA rules would prevent just testing, the story notes, and Friday was the deadline for companies to file comments on its draft regulations.

    The Bloomberg story says that "the Small UAV Coalition, a trade group representing companies including Amazon and Google Inc., and the Association for Unmanned Vehicle Systems International, another trade group for the drone industry, filed similar comments as Amazon ... The industry groups’ comments put new pressure on the FAA, which is trying to balance corporate interests with the need for preserving a safe aviation system. It also highlights the cutting-edge robotics and computer technology underpinning what Amazon wants to do."
    KC's View:
    This has gone so quickly from something that seemed like a goof to something that seems like a real, serious option. There would seem to be lots of reasons that these tests should not take place, or that this technology should or will not take hold. And yet, with every passing day, it seems to grow closer to becoming reality.

    To be honest, I'm a little leery about drones flying around, delivering packages. But I also think it is kind of exciting.

    Published on: April 27, 2015

    CNBC has a story about how, "long the digital laggard to online-only shops, traditional stores are beginning to capitalize on their robust physical footprints - namely, by using them as souped-up distribution networks - as they continue to make their Web and mobile operations easier for shoppers to use ... In contrast to physical retailers, who can utilize their expansive store networks as points of distribution, online-only companies have to rely on a smaller system of warehouses that tend to be located outside of high-population areas, where the land is cheaper. Even the leader in online commerce, Amazon, has fulfillment centers only in roughly a dozen states."

    The story goes on to say that traditional retailers are beginning to develop an advantage because they "can ship multiple items at a time to stores, as opposed to one-off packages that go directly to consumers. They also offers shoppers the option to pick up items in store, which removes incremental shipping costs. And again because of their store footprints, bricks-and-mortar retailers have more opportunities to ship next-day packages on the ground, which is on average three to four times cheaper than by air."

    The bricks-and-mortar winners online, the story says, "tend to be those that sell items with a bigger price tag; appeal to higher-income shoppers; have integrated their mobile, Web and store operations; own their own brands and appeal to millennials."
    KC's View:
    It should not be a surprise to anyone that bricks-and-mortar stores have begun to figure out the online channel ... that's the whole definition of omni-channel retailing. The key is understanding that the consumer is changing, and that retailers need to figure out how to position themselves so they are relevant to their shoppers. This isn't innovation so much as it is necessity.

    That said, reality does force even traditional retailers to embrace technological innovations, to figure out how to integrate this stuff into the ways in which they always have done business. It will be more complicated for some than for others - retailers that have always treasured the in-store experience, believing that this is the key to their appeal, will always have a harder time with this transition. But it is a necessity.

    Published on: April 27, 2015

    Business Insider reports that Tesco has decided to eliminate one-third of the products from its shelves, hoping that the "slimmer range of options aligns more closely with the selling strategy of discount chains like Aldi and Lidl, which keep prices low by offering fewer items than traditional supermarkets.

    "When customers have a limited choice of stocked items, it increases the guarantee that those products will get sold. Larger sales volume helps to drive discounts, and in turn, attracts customers."

    Tesco currently is dealing with a $9.51 billion (US) loss, the largest in its history.
    KC's View:
    I understand the impulse here. When times are tough, adapt the business model so it more closely resembles that of the companies that seem to be most successful. And in general, I think most stores like Tesco do carry too much product ... I think curation and recommendation are vastly underrated skills that retailers can bring to the table.

    But I cannot help but think that imitation may not be the best approach ... that Tesco has to figure how how to be different from its competition...not the same. Differentiation, not commoditization, strikes me as the better policy.

    Published on: April 27, 2015

    City Wire has a story about how Walmart, with a goal of doing a better job in fresh foods, is streamlining the produce acquisition process so that it spends less time in the supply chain and more time in stores, where it is more likely to be satisfactory to increasingly discerning shoppers.

    "As I get around and I talk to customers, I will often hear customers say to me the product looked good yesterday, but the day after, I opened up the fridge and I can tell you that apple or that strawberry or that mango was not good enough to eat,” says Greg Foran, CEO of Walmart's US business. Foran adds that "over the last 4 to 6 weeks, I'm seeing a little bit of momentum in this area. I am seeing improvements in what we are offering our customers, but we've got a lot more to do in this area yet."
    KC's View:

    Published on: April 27, 2015

    GQ has a piece about an internal memo at Abercrombie & Fitch suggesting some of the things that the embattled retailer is doing in order to restructure and reorient its stores, which often have seemed more focused on tight abs and pretty salespeople than the tough business of retailing.

    "First and foremost," GQ writes, "we're happy to report that your nostrils will no longer be assaulted upon entry into a club-like space. The memo sent out highlights an improved sensory experience that will 'adjust scent, lighting, music, and trees to ensure a more pleasurable shopping experience'."

    In addition, the story quotes the memo as saying that "store associates will not be hired based on body type or physical attractiveness, and store associates' titles will change from 'Model' to 'Brand Representative'." And, "There will no longer be sexualized marketing used in marketing materials including, in-store photos, gift cards, and shopping bags."
    KC's View:
    This is pretty impressive, and probably even a little risky. As annoying and tiresome as A&F's marketing approach has grown over the years, I'm sure the leadership is holding its breath just a little bit as this shift takes place.

    Will love handles replace washboard abs? And if they do, will that make the store more accessible, and yet less appealing? I hope that's not the lesson of this shift ... but we won't know for a while.

    Published on: April 27, 2015

    The Associated Press reports that PepsiCo has decided to stop using the artificial sweetener aspartame in its Diet Pepsi soda line, replacing it with sucralose.

    According to the story, "The decision to swap sweeteners comes as Americans keep turning away from popular diet sodas. Rival Coca-Cola said this week that sales volume for Diet Coke, which also uses aspartame, fell 5 percent in North America in the first three months of the year.
    Atlanta-based Coca-Cola said in a statement that it has no plans to change the sweetener in Diet Coke, which is the country's top-selling diet cola."

    While the US Food and Drug Administration (FDA) has said that aspartame is safe, the story notes that "a government advisory committee for the U.S. Department of Agriculture's dietary guidelines said aspartame appears to be safe in the amounts consumed by Americans. But it added that there is still uncertainty about whether the sweetener increases risk for some blood cancers in men."
    KC's View:

    Published on: April 27, 2015

    Fortune reports that McDonald's has closed 350 stores in the US, China and Japan - in addition to the 350 closings that it already had announced for 2015.

    "While those 700 store closings this year represent a fraction of the 32,500 or so restaurants worldwide, they show how aggressive McDonald’s is getting in pruning poorly attended locations that are dragging down its results," the story says.

    McDonald's is struggling with a plethora of problems - diminishing consumer enthusiasm for its menu, low ratings for its quality, and a contentious relationship with franchisees that stems from the company's decision to raise wages in its corporate stores.
    KC's View:
    This is not a matter of McDonald's getting its ducks in a row. It is more like herding cats ... and McDonald's has a lot of work to do.

    Published on: April 27, 2015

    • The New York Post reports that just two years after spending $410 million to acquire the Hostess business and, among other things, its Twinkies brand, its new owners (Apollo Global Management and billionaire C. Dean Metropoulos) have put the company on the market.

    The story says that the owners are hoping to sell the business for $2 billion, but that this has been deemed by some potential bidders as too expensive for an entity that currently generates about $650 million in annual sales.

    MLive reports that Meijer plans to spend $50 million to upgrade four Dayton, Ohio-area supercenters that are directly competitive with Kroger ... not to mention a new Whole Foods scheduled to open later this year.

    According to the story, "The project is slated to be finished in late 2015 and will provide each store with a new facade, remodeled gas station and drive-thru pharmacy ... The store will convert to a new floor plan with wider aisles and departments redesigned to carry more products. Changes planned for the apparel section include 12-foot-high walls, specialty lighting with updated fitting rooms. A pharmacy will be added near the front of the stores."

    • Amplifying a story that appeared on MNB last Friday, the Boston Herald writes that when Ahold brings its small-store, fresh food driven concept to the Boston area later this year, the unit will be opened in Allston, a neighborhood just west of Cambridge, Massachusetts.

    The plans for the new store are said to be similar to those for Everything Fresh, a small-store, fresh food-driven concept the company opened in Philadelphia late last year.

    • The Seattle Times reports that a systemwide computer glitch at Starbucks last Friday resulted in many stores around the country giving away coffee to customers. According to the story, "Starbucks said the outage of point-of-sale terminals affected its company-operated coffeeshops in the U.S. and Canada, as well as its Teavana and Evolution Fresh stores."
    KC's View:

    Published on: April 27, 2015

    • Tesco announced that it has hired Michelle McEttrick, the former Barclays bank chief marketing officer, to be its new group brand director.
    KC's View:

    Published on: April 27, 2015

    Richard Corliss, who for 35 years offered incisive film criticism and extensive cultural coverage to readers of Time, passed away last week after suffering a stroke. He was 71.
    KC's View:
    I mention the passing of Richard Corliss this morning not just because over the years there probably were few critics who I read as consistently and pleasurably as him, but because his brother is Paul Corliss, who has been a friend and colleague to many in the food and retail industries, and has been a supporter of mine for years.

    I have great admiration for people who work long and hard and well, who ply their trade and get better with time. Richard Corliss strikes me as just such a person - he wrote more than a thousand movie reviews, four books, and dozens of Time cover stories. And he did it, I think, without ever losing his love for film and willingness to occasionally say unpopular things. (He didn't like Titanic and did like Drunken Master II...go figure.)

    Passion in the service of provocative, intelligent thinking. That's a pretty good epitaph for anyone.

    Published on: April 27, 2015

    Responding to a story from a few days ago about how young people continue to use Facebook, despite predictions that they'd move on to other social media venues, MNB user Diane Collins wrote:

    Interesting that you should post this article.  My son – now a freshman in college – gave up Facebook in his junior year in high school, proclaiming that “Facebook is for old people.”  He spent all his time on Twitter, Snapchat and Instagram.  I mentioned that although those social media sites are fun, you can’t really have a conversation or keep in touch with people on them.  Well, he is making his way back to Facebook for the very reason of staying in touch with friends and family.

    And MNB reader Elaine Howard wrote:

    It’s Instagram, not Facebook, where most teens, and perhaps more importantly pre-teens around here seem to spend their time. It’s Facebook-lite. Wonder since Facebook owns them if they are counting Instagram in their numbers? Also, older teens often started a Facebook page but don’t use it now for the love of Instagram. And we all know we are going to live forever on Facebook…so we can be counted there even if we haven’t touched the page in 5 years.  BTW, Twitter is also very big with teens. I question your lesson and even more the AP,  as I wouldn’t consider them a great source for up-to-date, hip and cool accuracy! Did they ask the clueless parents what their kids use?

    The AP story was quoting a Pew Research study ... and I think Pew tends to be pretty reliable. And I don't think I was denigrating Twitter ... though my own experience with my kids suggests that they prefer Facebook. But that's purely anecdotal.

    On another subject, one MNB user wrote:

    Hi, Kevin -- read the blurb ... about the HEB phone app, and got me thinking --

    Don't know if you've seen it, but Publix has a really cool mobile app (of course they do -- if Publix does it, they do it well...)

    On my phone app, I can:

    Browse the weekly app and add items to my grocery list with just a touch. (and it integrates seamlessly with the full website, so I can make my list on my laptop and call it up on my phone...)

    Put together a grocery list that is sorted according to the layout of my local store -- so I only have to go down aisles 3, 4, and 8, plus produce and dairy... (cuts my time in the store a LOT)

    Order from the deli -- not just one of their delicious sandwiches (custom, no less) but sliced meats and cheeses, too!  No waiting at the counter -- just walk past the small refrigerated case and pick up my order of an Ultimate sub, a pound of sliced turkey and a half-pound of sliced provolone.  (teenagers headed out for the day with friends know they can borrow my phone, place an order for subs to take to the beach, and we'll swing through the store to pick them up on the way)

    Renew prescriptions by scanning the barcode on the prescription label with the built-in software and get a text message when it's ready to pick up.

    Link over to online coupons, which are subtracted from my order at checkout, when I enter my phone number.

    In short, they've helped me save money and cut the amount of in-store time -- but holy moley -- they've upped my engagement with the brand by multiples. 

    And yeah, I've drunk the Kool-Aid -- I couldn't get a wifi signal in the store the other day, and nearly panicked -- my entire list was on the app!  (did I mention that it fixes the problem of having left my list and my coupons lying on the counter at home?)  Eventually got connected, but I'm amazed at how much I rely on it.

    THIS is going to be the way this evolves -- by making it customer's lives enough easier that customers WANT to be this integrated with your store and your brand.  (and yes, I realize they're mining all that stuff inside and out...but they'll use it to better my experience, so I'm okay with that)

    No other grocery in the area offers anything close -- it'll be interesting to see if Kroger's rumored entry into the Florida market comes to fruition...because, man, the mark on the wall is wayyyy up there.

    And on still another subject, from an MNB reader:

    Hi Kevin, I really enjoy MorningBeat and had to smile when I saw your mention of the Star Wars trailer.  My 14 year old son had me watch it and told me to watch for the funny part.
    After the trailer ended, I told him I didn’t find any laugh-out-loud moments.  He told me people are commenting (when he says people, it could be his teenage friends) that at the very end where Han Solo and Chewbacca are together and Han Solo says “We’re home” that he is really saying “We’re old”.

    Funny. Real funny.

    MNB reader Lyle Walker had a critique of something I wrote last week:

    Your commentary on Instacart says "it is offering the same delivery service to competitors, and could even deliver competitors' products at the same time."

    This is the whole point, and it seems you are discounting it.  How nice it is to be able to utilize a delivery service that can provide the products from the stores I shop.  Brilliant idea and service.

    Give me, the consumer, what I want.  Love it!

    I get the attraction ... but I continue to think it is dangerous for retailers that spend a lot of time and money trying to differentiate themselves to mash themselves together with the competition in this way.

    Responding to our piece about Starbucks opening a store in racially torn Ferguson, Missouri, one MNB user wrote:

    With my kids having attended an urban school where they were the minority, and getting exposed to parents and kids from a wide variety of backgrounds as a result, I have become convinced the solution to the racial divide is for the people who have done their best to move AWAY from minorities to move TOWARD them.  I know there are a lot of folks who think there is reverse discrimination going on, but my observation is there is a distrust after years, generations, of the white culture's resistance and even fear.

    So the Starbucks move is welcome and may well do more than a lot of the protests.

    On another subject - whether Kroger should ban guns from being carried into its stores, even in places where it is legal - MNB reader Chuck Jolley wanteds to comment on the reader who wrote that “I really don't understand those who believe that passing a law to take guns away will keep those who break the law to follow it.”

    That’s one of the most consistently silly arguments I’ve ever heard.  It might be a good excuse to cancel every law in the land because there are always a few people who absolutely insist on stealing, raping, murdering, etc.  It’s a lousy excuse, though, if you think we should be a nation of laws and authorities should have legal remedies when people break them.  His argument is the one I use to separate sane gun owners from gun nuts.

    And finally, regarding last week's FaceTime video about urban stores of varying shapes and sizes, MNB reader Joe Davis wrote:

    Probably my favorite FaceTime piece you have ever done.  Thanks for sharing this – great to see a living example of the future and some live feeds from the market.  We recently had a great top-to-top with one of our biggest customers here in the U.S. and talked about this very notion of evolving the store for tomorrow’s most valuable shopper – holding onto the strengths that comprise their brand equity, but presenting them in new ways to attract new guests and drive loyalty.  This is a wonderful example I’ll share with my team

    I'm glad you liked it.
    KC's View:

    Published on: April 27, 2015

    Minnesota-based Lund Food Holdings announced this morning that it will bring together its 27 stores operating under either the Lunds or Byerly's banner as one unified retail brand - Lunds & Byerly's.

    The first official rebranding of a store will take place in Woodbury, Minnesota, this Thursday, with a rollout to follow. According to the announcement, "Beginning April 30, customers will see new employee uniforms, name badges, grocery bags and more at every Lunds & Byerly's store. New storefront “Lunds & Byerly's” signage will be installed at every location by the end of May."

    Lunds acquired Byerly's in 1997, and the two chains have blended many of their operations over the past two decades, including training, procurement and product development. Private label products bearing the Lunds & Byerly's name began appearing in 2004, and the two chains combined for a unified website in 2006.

    CEO Tres Lund called it "a natural next step to combine our names as yet another exciting evolution of our brand."
    KC's View:
    In some ways, I'm tempted to say that it is about time ... for my own purposes, I've always sort of thought of the two retail brands as co-joined. While Lunds stores often had a distinct brand image from Byerly's, this simply makes sense ... it probably will save some money down the line, and formally brings together two Twin Cities icons that many people thought of as partnered anyway.

    I will say this. I've always thought that the Lunds and Byerly's stores - whether considered as one, or separately - are among the best reasons to live in the Minneapolis/St. Paul area. They're great stores, with a food-first approach that I find tremendously appealing. If this serves to make the company more sustainable, accessible and successful, then I'm all for it.