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    Published on: May 14, 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, coming to you this morning from the campus of Portland State University in Portland, Oregon. I'm not here for my summer adjunctivity; that starts in about a month or so. Rather, I'm here for this week's 20th annual Executive Forum sponsored by PSU's Center for Retail Leadership, which is always stimulating and educational.

    This year, I had the opportunity to moderate one of the more interesting panel discussions with which I've ever been involved. When we started planning it, the goal was to find a subject that everybody would want to talk about - it wasn't going to be about sex or religion or sports ... so we talked about the next best thing.

    Money.

    The title of the session was "Follow The Money," and our goal was to talk about where the smart money is focused these days, and where the opportunities are.

    We had three panelists, and they were all terrific. There was an old friend of mine, Tom Furphy, who helped to create Amazon's CPG business and launched Amazon Fresh, and who now has a venture capital fund, Consumer Equities Partners, which invests in start-up technology companies. We also had Scott Moses, of Sagent Advisors, who has been involved in some of the biggest mergers and acquisitions in the retail sector. And, we had someone I'd never met before - David Howitt of the Meriwether Group, who launched a company called Oregon Chai, sold it, and now invests in and advises entrepreneurial companies such as Voodoo Doughnuts and Stumptown Coffee.

    What I found most interesting about the session was that our three panelists, despite the fact that they paint on very different canvases, all voiced a common theme. For each of them, it was all about the "and."

    All of them agreed that for any company to be successful, and be worth investing in, the numbers have to be right. There has to be revenue, margins, and profits ... because without all those things, what's the point?

    But they also agreed that there has to be an "and."

    In the case of Tom Furphy, it is about identifying and helping companies that have the ability to disrupt conventional business models. He knows a lot about that, from his time with Amazon ... companies have to be have a financial unpinning, but they also have to be able to define and exploit a consumer need that nobody else has.

    For Scott Moses ... well, he may be an investment banker, but he doesn't fit the stereotype of the financial guy who only wants to plunder the companies with which he is involved for short-term investor gain. No, he said very clearly that while the numbers had to make sense, the "and" for him is making sure that the businesses are sustainable enough that they can lead to growth, more jobs, and long-term economic gains. That's good for the owners, investors, employees and customers. That's a pretty good "and."

    David Howitt's view of the investment business is that the entrepreneur is a hero, and that a founder's footprint is to be respected. He fervently believes in companies where the "and" is about making the world a better place. That doesn't make him any less of a tough-minded investor ... he isn't off living in a commune ... but it also means that his "and" is about finding and helping companies that are going to contribute to their communities.

    To me, this is incredibly insightful.

    We talk all the time on MNB about how companies need to find for themselves advantages that will differentiate them in the marketplace ... that companies find success in the places where they are different, not similar. That's essentially what Tom Furphy, Scott Moses and David Howitt are talking about.

    Anybody can make money. But not everyone can do it while focusing on the "and."

    As usual, the Center for Retail Leadership's Executive Forum came through with sessions that were stimulating, illuminating and entertaining.

    I'm glad we could be part of it.

    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: May 14, 2015

    Walmart announced yesterday that it will launch a subscription shipping service designed to compete with Amazon Prime, charging customers just $50 a year for unlimited deliveries in three days or less of qualified products.

    Amazon charges $99 for its Prime service, offering two-day delivery.

    The Associated Press writes that "Wal-Mart offers a grocery delivery and pickup service in five markets. But the unlimited shipping program marks a substantial commitment and underscores how serious the retailer is about accelerating the growth of its online business, which has seen a slowdown."

    Walmart says that "the service will be available by invitation only for now and it will offer more than one million top-selling items, from toys to electronic gadgets. Wal-Mart's online site sells more than seven million products."

    Part of Amazon's Prime service includes video and music streaming, features not included currently in the Walmart offering.

    CNet frames the story this way:

    "The test highlights Walmart's efforts to grab a larger share of the online sales market from Amazon, one of the Internet's largest retailers. The test appears to challenge Amazon Prime, the two-delivery service launched 10 years ago.

    "The program has proved lucrative for Amazon. At the end of 2014, Amazon Prime had 40 million US members, up from an estimated 29 million at the end of the third quarter, data from Consumer Intelligence Research Partners shows. CIRP estimates that the average Amazon Prime customer spends $1,500 per year on the e-commerce site, compared with $625 for nonmembers."

    And Bloomberg writes that "the move ratchets up competition in e-commerce, where Wal-Mart has been trying to make inroads. While the company is the world’s largest retail chain, Amazon dominates online shopping. Prime has emerged as a key weapon for Seattle-based Amazon because it keeps customers loyal, making it ripe for imitation."
    KC's View:
    Right on all counts. Competition is getting ratcheted up, it is Walmart's effort to be better positioned against Amazon, and starting up such a program is a great way to generate customer loyalty and repeat business.

    Again, this is just the beginning. Walmart knows that it has lost valuable ground to Amazon, and it has to move fast to make it up. Next step, I think, is a big investment in click-and-collect.

    Published on: May 14, 2015

    The New York Times reports that Wegmans "is poised to open its first New York City store, and it has selected one of the most ripe locations: the derelict Admiral’s Row at the Brooklyn Navy Yard ... the 74,000-square-foot store at the Navy Yard will be the company’s smallest by about 25 percent, but will still be about 20,000 square feet larger than the Fairway in Red Hook or the Whole Foods in Gowanus, two favorites of Brooklyn’s multimillion-dollar brownstone set."

    According to the story, "After a decade of fighting over whether to save the Civil War-era homes of Admiral’s Row along Flushing Avenue, the Navy Yard’s board approved a deal for the redevelopment of the site on Tuesday. Several buildings will be knocked down and replaced with Wegmans, other stores, industrial space and parking. Steiner NYC, creator of the Navy Yard’s 25-acre film studio, will develop the complex, set to open in 2017."
    KC's View:
    There probably are limits to how big a presence Wegmans can establish in the New York metropolitan area, simply because of real estate issues. But I also think that to the greatest extent it can, Wegmans intends to make this just an opening salvo ... and I think that this move has the potential for roiling the competitive landscape.

    Published on: May 14, 2015

    Market Force Information, which describes itself as being in the customer intelligence solutions business, is out with its annual survey of the nation's best supermarkets, and for the third year in a row, Trader Joe's got top marks.

    Publix ranked second, and Aldi ranked third in the survey, followed by Hy-Vee and H-E-B.

    The study also said, in part:

    "Market Force looked at the operational and service attributes that set leading grocery brands apart, and found Publix and Trader Joe’s led in many key areas, including cashier courtesy, speedy checkouts and cleanliness. ALDI, WinCo Foods and Costco led in the value category, while ShopRite was rated highest for sales and promotions. H-E-B, Hy-Vee and Kroger also performed well in most areas."

    "As consumers adopt more healthy eating habits, organic and locally sourced products grow in importance. The study found that 48% prefer to buy organic products, when given a choice. Produce is by far the most popular organic item – 90% said they had purchased it in the previous 30 days."

    "Prepared entrees and sides are gaining steam among time-crunched shoppers who are finding more quality options to choose from, and embracing ready-to-go and ready-to-cook meals as convenient alternatives to dining out. In fact, 28% said they have purchased prepared meals from a grocer at least weekly in the past month, a 10% increase from 2014’s findings."

    "The click-and-collect model, which involves ordering online and picking up curbside, appears to be building a loyal and satisfied following. Only 5% have used click-and-collect, but 75% of those said they were highly satisfied with the experience and more than half are repeat users."
    KC's View:
    I have such a problem with surveys like this one. Sure, Trader Joe's is a strong competitor ... but the best grocery in the country? I don't think so. I can name a dozen that are better just off the top of my head.

    Besides ... the survey also says that prepared meals and fresh produce are major customer motivators, and it seems to me that these are two things that Trader Joe's does not do particularly well.

    On the other hand, maybe this survey actually is telling us something else - that for a lot of people, it is the differentiated experience of Trader Joe's that really appeals.

    Published on: May 14, 2015

    As its mother company negotiates a potential merger with Ahold, Delhaize America has circulated a memo to its vendor partners laying out the progress it is making with its decentralization efforts.

    The memo says that the company believes that the "transition will improve our internal efficiency and effectiveness, enhance clarity of roles and responsibility, increase speed of decision making and improve our overall connection with you our vendor partners."

    The memo goes on: "When this transition is complete, Hannaford and Food Lion will have overall responsibility for Merchandising, Category Management and Pricing within the banner reporting to the Senior Vice President of Merchandising. Sourcing, Our Brands, Demand Management and Supply Chain will continue as Delhaize America shared services. Collectively, these functions will provide the governance and planning to ensure our banners operate with best practices and continue to leverage the size of Delhaize America. We strongly believe these changes will enable our banners to create a more effective organization that will better serve our customers, support future growth and create stronger alignment among all functions within the company.

    "We are making these changes all in service of strengthening banner execution of its local strategies so that we can deliver on individual customer needs, while ensuring governance from a Delhaize America perspective."
    KC's View:
    I wonder if this is all being done in order to make it easier for Delhaize to sell off one of its US chains individually, if merger talks don't bear fruit.

    Published on: May 14, 2015

    Fortune reports that Starbucks is denying some press reports that hackers had gained access to its mobile payments app and were siphoning money from customers' accounts.

    The story says that Starbucks released a statement saying that it "“takes the obligation to protect customers’ information seriously. News reports that the Starbucks mobile app has been hacked are false."

    The story notes that "Starbucks can ill-afford any bad publicity around the app. Its mobile payment service is an industry-leading success, behind some 16% of purchases ... The app helps foster customer loyalty but also reduces the interchange transaction fees charges it would pay credit and debit card issuers."
    KC's View:
    If Starbucks is being disingenuous about this, or if there really has been a hacking incident, it is going to do real damage to the mobile app business. I'm a big user of the app, and I'd almost certainly stop if I thought my data was at significant risk.

    Published on: May 14, 2015

    Reuters reports that "Chinese online shopping giant Alibaba Group Holding Ltd is rolling out a three-hour delivery service for healthcare goods ... The service will launch in five Chinese cities, including Beijing and Shanghai, and expand to 19 by the end of 2015, Alibaba said on Tuesday."

    According to the story, the move is "part of a broader trend to bring online various offline services from flagging a taxi to finding nearby restaurant deals. Known as "online to offline", this often uses a smartphone to find someone's location and the nearest service provider."
    KC's View:

    Published on: May 14, 2015

    • Weis Markets announced that Richard Gunn has joined the company as Senior Vice President of Merchandising and Marketing. Prior to joining Weis Markets, Gunn was Executive Vice President of Merchandising and Marketing at K-VA-T Food Stores.
    KC's View:

    Published on: May 14, 2015

    ...will return.
    KC's View: