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    Published on: September 24, 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, Kevin Coupe here, and this is FaceTime with the Content Guy.

    The New York Times had a story saying that while there have been many predictions about the death of physical books as customers move more and more to e-readers like the Kindle and iPad, "the digital apocalypse never arrived, or at least not on schedule. While analysts once predicted that e-books would overtake print by 2015, digital sales have instead slowed sharply."

    In fact, the story says, "there are signs that some e-book adopters are returning to print, or becoming hybrid readers, who juggle devices and paper. E-book sales fell by 10 percent in the first five months of this year, according to the Association of American Publishers, which collects data from nearly 1,200 publishers. Digital books accounted last year for around 20 percent of the market, roughly the same as they did a few years ago.

    "E-books’ declining popularity may signal that publishing, while not immune to technological upheaval, will weather the tidal wave of digital technology better than other forms of media, like music and television." And, the story goes on, "independent bookstores, which were battered by the recession and competition from Amazon, are showing strong signs of resurgence. The American Booksellers Association counted 1,712 member stores in 2,227 locations in 2015, up from 1,410 in 1,660 locations five years ago."

    I think this is what's called a resurrection of sorts.

    At the same time, the Washington Post had a story about a new Pew Research survey in which, "of Americans 16 and older, 30 percent said that libraries should 'definitely' move some print books and stacks out of public locations to make way for other resources such as technology centers, meeting rooms and space for cultural events. Nearly just as many, 25 percent, were just as adamant that libraries should not. Forty percent of those surveyed said that libraries should 'maybe' do that."

    I think that's what's called a split decision.

    Pew comments that the results indicate that "libraries’ traditional services and ‘business model’ are valued by many citizens ... Yet at the same time, there is a clear public hunger for new programs, more services for key constituencies, and changes in the longtime look and feel of these community spaces.”

    So what does this all mean?

    I think what the lesson that all this data teaches us is that people increasingly are hard to categorize, hard to slot into this or that model of behavior. More and more, people are respond to that which seems to have value to them and that seems relevant to how they live their lives. Marketing of products and services can't be one-size-fits-all, because people aren't one-size-fits-all. That's young people, but also baby boomers.

    When it comes to books, I've become a dedicated user of the Kindle app on my iPad ... but there also are books that I will buy in hardcover simply because I like the writer and want to have the physical book experience. It all sort of depends on the writer, my mood, my travel schedule, and probably a whole bunch of other influences of which I'm not even aware.

    It is a mistake to think that there are absolutes. The other day I got interviewed about e-commerce, and the first question was whether I thought e-commerce would grow to the point where it would put traditional bricks-and-mortar stores out of business. Of course not ... e-commerce is going to grow, and will be an increasingly important factor in how people shop. If your bar for success is that 100% of shopping has to be done online, well, then, forget it. I think that 10 or 15 or 20 percent would represent an enormous shift ... and I've seen nothing to convince me that it is anything less than inevitable.

    Revolutions don't occur in neat packages and in straight lines. That doesn't make them any less revolutionary. In fact, sometimes it makes them more so.

    As for libraries .... again, it is dangerous to paint with a broad brush. I think that libraries that need to evolve into something larger will do so ... and it will depend on where they are and who their customers are. It'll be different depending whether the libraries are in urban, suburban or rural markets, and it'll be different depending on what part of the country they're in.

    Here's the one thing you can take to the bank: Libraries that need to evolve but don't will find themselves out of business. Libraries that need to evolve and do will have longer and more interesting lives.

    Are we in for a digital apocalypse? Who knows?

    But I do love the smell of disruption in the morning. It smells of ... victory.

    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: September 24, 2015

    by Kevin Coupe

    Yesterday in this space I expressed a certain incredulity about Volkswagen's admission - under duress - that about 11 million of its diesel automobiles were equipped with some piece of software that essentially allowed the cars to cheat on their emissions tests - meaning that cars they claimed to have "clean diesel" technology weren't nearly as clean as claimed.

    I wrote that Volkswagen has done nothing less than put all of its brand equity at risk by making stupid, irresponsible, short-term and small-minded decisions ... There will be firings. There will be investigations. There will be lawsuits. And more lawsuits. There will be an enormous impact on the company's image. And profits.

    And I noted that Volkswagen CEO Martin Winterkorn, while denying any role in the deception despite a reputation for, as the New York Times put it, "a reputation for delving deeply into the minutiae of automobile design and construction," was scheduled to meet with his bosses at Porsche Holdings - and that probably would not be a pleasant meeting.

    As it ends up, Winterkorn continues to deny any wrongdoing, though he said that, "as C.E.O. I accept responsibility for the irregularities that have been found in diesel engines." And he resigned from his job at Volkswagen, even as "representatives of Volkswagen’s supervisory board said they would refer the case to German prosecutors for possible criminal prosecution," according to the Times.

    That same board said that it did not believe Winterkorn had any role in the deception, though, as the Times writes, "That statement immediately raised the question of why Mr. Winterkorn needed to resign if he had not known about the manipulation.

    "One answer might be that Volkswagen has long been known as a top-down organization, where even relatively minor decisions require approval from the high-rise executive office building, topped by a giant VW grill ornament, which looms over the company’s vast main factory in Wolfsburg, Germany.

    "Volkswagen’s command-and-control structure probably made it difficult for Mr. Winterkorn to escape responsibility, even if there was no direct culpability. Critics have long faulted what they said was a company culture that hampered internal communication and might have discouraged midlevel managers from delivering bad news."

    Here's my question: How come he was allowed to resign? Why wasn't he fired?

    (Could it be that by resigning, Winterkorn preserved his severance package? Just asking... I also wonder if perhaps he's looking into nations without extradition agreements with Germany.)

    It is hard to know how this all will resolve itself, except it is fair to say that Volkswagen has a lot of work to do if it is to repair a shredded corporate image. (I got a number of emails yesterday from MNB readers who also own Porsches and Audis, wondering if this was just a Volkswagen problem, or one that suggests a broader level of corruption within the larger corporate organization.)

    And I think that this case raises an issue that every corporate executive in every industry ought to be pondering ... What messages are we sending up and down our organization about our values, our corporate culture, and our priorities?

    In the end, this is something that every C-level executive ought to be thinking about and acting upon. More than that, it is something that every leader - in divisions, in stores, in departments - ought to be pondering.

    If you lead, you have responsibility for more than just numbers.

    And if you work in a company where numbers are the first and only priority, then I'd start thinking about whether it is the kind of place where one should be working.

    Think about it. The lesson could be an Eye-Opener.
    KC's View:

    Published on: September 24, 2015

    City Wire reports this morning that "rumored corporate layoffs at Wal-Mart and Sam’s Club offices in Bentonville persist, with five sources each telling The City Wire on Wednesday ... that the retail giant will begin handing out pink slips as early as this Friday and continue through the fiscal quarter which ends Oct. 31."

    While the company would not comment on any specifics, Greg Hitt, vice president of corporate communications, said that "for any company of our size and scope it’s a natural course for us to review our management structure from time to time as we work toward better efficiencies and getting closer to our customers."

    The story notes that a more efficient corporate structure would seem to be in line with the goals of CEO Doug McMillon, who pointedly told analysts earlier this year that "there are no cash registers in the home office."

    City Wire writes that "a home office restructure at Wal-Mart and Sam’s Club also is on trend with what other retailers are doing. Target, recently announced 1,700 jobs eliminated at its corporate headquarters in Minneapolis. That came on the heels of 1,500 jobs cuts announced in January. Dallas-based J.C. Penney cut 300 corporate jobs earlier this year, and last week American Apparel announced plans to slice $30 million in operating expenses over the next 18 months with corporate layoffs and store closures."
    KC's View:
    Whenever I see that McMillon line about there being "no cash registers in the home office," I think of Feargal Quinn, who used to insist that his Superquinn head offices in Ireland being thought of and referred to as "the support office," because the stores are where the action is.

    No higher praise, in my mind, than being mentioned in the same sentence as Feargal Quinn. He remains someone from whom every retailer can learn something.

    Published on: September 24, 2015

    The New York Times reports that despite Starbucks' commitment last year "to provide store employees with more consistent schedules from week to week .... to post their schedules at least 10 days in advance," and to stop asking employees to close the store at night and then open it again the next morning, the iconic coffee retailer "has fallen short on these promises."

    Indeed, complaints suggesting that little has changed "were documented more widely in a report released on Wednesday by the Center for Popular Democracy, a nonprofit that works with community groups, which gathered responses from some 200 self-identified baristas in the United States through the website"

    “We’re the first to admit we have work to do,”Jaime Riley, a company spokeswoman, tells the Times. “But we feel like we’ve made good progress, and that doesn’t align with what we’re seeing.”

    Some context from the Times:

    "Starbucks, whose chief executive, Howard Schultz, has long presented the brand as involving its customers and employees in something more meaningful than a basic economic transaction, has drawn fire for its workplace practices. But its struggles to address the concerns of its employees also open a window into a much larger problem.

    "In the last two years, the combination of a tight labor market and legal changes — from a rising minimum wage to fair-scheduling legislation that would discourage practices like clopenings — has raised labor costs for employers of low-skill workers in many parts of the country.

    "To help companies navigate this new landscape, a number of academics and labor advocates have urged a so-called good-jobs or high road approach, in which companies pay workers higher wages and grant them more stable hours, then recover the costs through higher productivity and lower turnover."

    The problem at Starbucks, the story suggests, is that while the company has tried to be a progressive employer - and has built much of its brand equity on that image - there are certain realities that work in opposition to those goals. Store managers are rewarded based on their ability to be profitable - and that usually means keeping labor costs in line, and sometimes it is hard to do that and live up to the commitments that Starbucks' corporate chiefs are making.

    Time has a piece this morning noting that Starbucks has now responded to the Times story by "urging store managers to 'go the extra mile' to give employees a more consistent, and less punishing schedule."

    An internal memo to company employees, from Starbucks U.S. and Americans president Cliff Burrows, says, in part, “While we cannot validate this survey, the findings suggest, contrary to the expectations we have in place, that some partners are receiving their schedules less than one week in advance and that there is a continuing issue with some partners working a close and then an opening shift the following morning ... Improving the staffing and scheduling experience in our stores is one of our highest priorities. We want to staff and schedule in a way that is predictable and consistent for all partners and recognizes partner preferences."
    KC's View:
    In many ways, at a different level, this does back to the stories above about Volkswagen and the comparison I drew between Walmart's Doug McMillon and the legendary Feargal Quinn. There often is a gap between intention and implementation ... and the great companies are the ones that are able to bridge that gap. It rarely happens easily and quickly, but while intention matters, implementation is the bottom line.

    Published on: September 24, 2015

    The Salisbury Post reports on a new video documentary, "Lessons in leadership," about Food Lion founder Ralph Ketner, that this week is being distributed in DVD form, along with a five-lesson plan, to every high school in North Carolina.

    The movie "produced through a partnership between Food Lion and Catawba College, documents fully the business life and philosophy of Ketner, who once presided over the fastest-growing grocery company in America."

    The story notes that Meg Ham, president of Food Lion, now owned by Delhaize, "described Ketner as an icon, leader and friend. Ketner, who retired from Food Lion in 1991, still participates in some of the company functions such as when store managers of the year gather at Food Lion’s Founders’ Hall and Food Lion employees have their annual picnic.

    "Ham herself has lunch with Ketner on occasion. She said he shows up with a letter detailing all the items he wants to discuss before the lunch is over. Ketner’s loyalty to Food Lion, which started out as a lone Food Town store in 1957, has not wavered. Never will he set foot in another store,' Ham said."
    KC's View:
    I couldn't help but think that when "Lessons in Leadership" sowed up in high school classrooms all over North Carolina, the students must've looked at it and said to themselves, "What's a DVD?"

    That said ... I think that any effort that connects business to the classroom has the potential to be extraordinarily positive.

    Published on: September 24, 2015

    The Seattle Times reports that United Food and Commercial Workers (UFCW) "is getting a seat at the table on the struggling grocery chain’s bankruptcy reorganization, although it’s unclear how much influence it will be able to exert in the process."

    The UFCW is one of seven members of an unsecured creditors committee authorized by the bankruptcy court overseeing its case, designed to "represent the dozens of parties to whom Haggen owes money, but whose claims are not backed by collateral assets. In bankruptcies like this one, these parties, usually suppliers, workers and service providers, tend to get the short end of the stick." Other members include companies such as Unified Grocers, PepsiCo, Starbucks, Santa Monica Seafood and Valassis.

    According to the story, "Experts say the committee can play a sizable role when a company reorganizes under bankruptcy because it gets privileged access to information that can allow it to push for changes. Tom Geiger, a spokesman for UFCW Local 21, in Western Washington, says that the committee can employ lawyers and financial experts to closely monitor the company’s actions and gives the union 'more leverage' in the process."

    Haggen has more than 11,000 employees in the western US, all of whom now have to deal with the disastrous results of the company's decision to go from an 18-store Pacific Northwest retailer to one with 164 stores reaching to California, Arizona and Nevada, all of them made available when Albertsons acquired Safeway and had to divest stores for antitrust purposes. Since that expansion, Haggen has seen nothing but nine miles of bad road because of high prices, poor sales, dismal profits, persistent out-of-stocks, and contentious relationships with suppliers worried about not getting paid.
    KC's View:
    I think that there's a pretty good rule that we can apply to this situation. Everybody is going to get screwed except for the investment bankers and lawyers.

    Published on: September 24, 2015

    The Financial Times reports that "almost half of UK households buying groceries are visiting Aldi or Lidl every month, as they open stores in more upmarket areas and appeal to wealthier shoppers with premium products." Nielsen says that "the trend is helping the German discounters to increase their market share. Aldi and Lidl accounted for 10.7 per cent of UK supermarket sales in the 12 weeks to September 12, compared with 8.7 per cent a year earlier."

    It is a stark contrast to what's happening at some of the UK's biggest retailers, the story says, with sales and market share dropping at Tesco, Asda and Morrison. Only Sainsbury saw an increase in sales.
    KC's View:
    US retailers that compete with Aldi and will compete with Lidl should take note.

    Be afraid. Be very afraid.

    Now go do something about it. After all, "compete" is a verb...

    Published on: September 24, 2015

    Published reports say that in Chicago, hundreds of cab drivers halted service to and from O'Hare and Midway airports as a way of protesting new rules governing rideshare services such as Uber and Lyft that are included in a budget proposed by Mayor Rahm Emanuel.

    The cab companies argue that while the new rules would allow the rideshare services to serve the airports, they would not force them to adhere the regulations that cover traditional taxi companies.

    One taxicab drivers union said that Emanuel's budget - which is trying to close a $426 million budget gap - is a “a giveaway to a $50 billion corporation but a job-killer for hard-working Chicago drivers.”
    KC's View:
    The concerns about double standards is a fair one, and needs to be addressed. But that said, you don't compete by protesting and shutting down service, because then all you do is make more customers available to the disruptive competition about which you are worried.

    Published on: September 24, 2015

    • The Los Angeles Times reports that Anheuser-Busch InBev is acquiring Golden Road Brewing, described as " Los Angeles' largest craft brewer.

    "Anheuser-Busch said the deal would help introduce Golden Road to more customers outside of its distribution network in California, Nevada and Arizona. In exchange, analysts say the beer behemoth can tap even further into the exploding craft brewing scene. Financial terms of the deal were not disclosed."

    • Kroger announced that at its Leadership Summit in Cincinnati next week - bringing together "more than 5,000 associates from across the country" including "managers from every store, manufacturing facility, distribution center and office in the country" - including a "Sharing Courage" walk designed "to raise funds and awareness for breast cancer research, detection and treatment."

    The company notes that "this is the 10th year of Kroger's Sharing Courage campaign, held annually during the month of October. Since its inception, Kroger and its customers, associates and supporting partners have raised more than $30 million to support local breast cancer initiatives."

    • The United Food and Commercial Workers (UFCW) announced that its Golden State local has reached a tentative four-year agreement with Safeway in Northern and Central California that it says "protects and enhances the wages, benefits and workplace standards enjoyed by approximately 9,000 workers at 130 Safeway stores, as well as retirees."

    Details of the agreement have not yet been released. Contract negotiations are said to be continuing between the union and Save Mart Supermarkets, Raley’s Supermarkets, Bel Air Markets and Nob Hill Foods.
    KC's View:

    Published on: September 24, 2015

    Regarding some criticism that I've been unduly harsh in my criticisms of Haggen, one MNB user wrote:

    In my career every time I went into a market it was a must to visit stores and check prices and placement at all the chains.  Sounds like basics but apparently Haggen people forgot to do that and say it is Albertson’s fault they didn’t price things right?  Poor planning and execution from the word “go”.   You are reporting and not “picking on Haggen”.  I am sure you will report the bright spots when you can find one.

    And responding to my comments about how the Federal Trade Commission (FTC) may have been using an outmoded approach in how it looked at the competitive issues that governed its antitrust rulings in this case, one MNB user wrote:

    Anyone, including the FTC who thought Haagen stood a chance of being successful just does not understand the Grocery/Food Retail business. So many people got hurt because the Federal Government again tries to run every thing.

    Listen, I think the federal government has a role in making sure that consumer interests are looked after. Companies, after all, have lobbyists who work for them, and consumers ought to have equal representation. But I do think that has the retail environment has changed, dramatically and inalterably, the way that regulators think about these issues has to evolve.

    Also regarding Haggen's misadventures, I love this comment from MNB reader Brian Burnam:

    To quote Clint Eastwood, “A man has to know his limitation.”  As I have often told people I am a good single store owner, but I think I would be a terrible multi-store owner.

    Regarding the sale and closing of A&P stores, one MNB user wrote:

    That’s sad. I worked for A&P part time and then full time in Cleveland, OH in the early Fifties. It was my first real job and it was a great place to work.

    We were always treated fairly and you can’t always say that about the retail  business.

    I read your email and thought of a familiar lyric...

    A long long time ago
    I can still remember how
    That music used to make me smile
    And I knew if I had my chance
    That I could make those people dance
    And maybe they'd be happy for a while
    But February made me shiver
    With every paper I'd deliver
    Bad news on the doorstep
    I couldn't take one more step...

    It is February for A&P.

    And about yesterday's obituary for Yogi Berra, MNB user Terry Borthwick wrote:

    Wonderful words about Yogi…

    As a lifelong Yankee fan, I was certainly upset to hear that Yogi had passed (although it was certainly inevitable considering his age and health).  Unfortunately, I was too young to ever see him play, although I do remember him being the manager for the Mets.  Certainly love his Yogi-isms. Thanks Kevin.

    I did see him play, both live and on black-and-white television, accompanied by the unique voices of Mel Allen and Red Barber.

    Some things you never forget.
    KC's View: