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    Published on: October 22, 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...coming to you this morning from Redondo Beach, California, and the almost empty parking lot of an almost empty Haggen store.

    Now, to paraphrase Shakespeare...

    I come to bury Haggen, not to praise it...

    I just had a chance to wander through this Haggen store, and I can tell you that it is a pretty depressing sight. There are no going-out-of-business signs up here ... though there are at other, nearby Haggen stores ... but you can tell as soon as you walk in the door that this is a store breathing its last breaths.

    There are more employees in there than customers (and there aren't very many employees in there). There are tons of out-of-stocks, though there is some restocking o taking place in the dairy department. The fresh food looks anything but fresh. And it is just enormously depressing.

    I feel bad for the people working in there. When I was young and working in retail, I went through a couple of going-out-of-business sales, and I remember feeling like my heart was being ripped out. Of course, I had an emotional investment in those stores, and I'm a little doubtful that anyone in this store has an emotional investment in Haggen; after all, they only worked for Haggen for a few months.

    This used to be an Albertsons, and not a very good one ... but when you walk through this shell of a Haggen store, it is easy to see that they didn't really do anything major to tell local shoppers that this was going to be a different sort of shopping experience. There's little that's differentiated about it. And I think that's a lesson that needs to be absorbed by every retailer ... that it no longer is good enough to be just good enough.

    Haggen's miscalculations and missteps are going to live on for a long time. In some ways, that's a negative ... but it also should serve as an object lesson for companies that think they can bring anything less than their A-game when opening new stores.

    Good enough isn't good enough. You have to bring something new and different and compelling to the table, or you might as well not come to the table at all.

    For now, we'll have to watch these Haggen stores slip away into memory ... and I find myself thinking about the rest of those lines from Shakespeare...

    The evil that men do lives after them;
    The good is oft interred with their bones...


    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: October 22, 2015

    Fortune has a story saying that while Walmart plans to spend $1.5 billion next year alone to increase its minimum wage to $10 per hour, the move could do more than give its people a raise - it will also force Walmart's competitors to increase their wages if they are going to be competitive for personnel.

    The story says that "Hay Group, a compensation research firm, analyzed data from 120 retailers, with the smallest employing 2,000 workers, and determined that those top stores would collectively have to shell out $4 billion more than what they paid last year to match Walmart’s $10 an hour pay.

    "Adding to retailers’ anxiety, staff turnover is edging up from recession lows, as workers grow more confident that they can find a better, or better paying job, if they aren’t happy. Annual turnover at retailers is currently at about 65% for store workers, according to the Hay Group, up from 50% during the recession. (Pre-recession, it was 90%.)"
    KC's View:
    So in other words, Walmart is making investments that won't just hurt its profitability over the next few years, but probably its competitors as well.

    Not exactly a win-win, but certainly a side benefit of having annoyed many in the investment class.

    Though to be fair, it isn't just Walmart that will end up forcing other retailers to give raises ... it is the market at large, where the balance of power is shifting toward workers (a bit).

    Published on: October 22, 2015

    Fresh & Easy, which started out in 2007 as Tesco's attempt to create a beachhead in the US market until its inability to compete forced Tesco to sell a majority of the division to Ron Burkle's Yucaipa Cos., now is winding down operations and closing down.

    The company said that the shut down of its 97 stores in California, Arizona and Nevada is because it does not have enough cash, and cannot get additional financing.

    It is expected that Fresh & Easy will file for bankruptcy protection soon. The Los Angeles Times writes that "stores are being liquidated and closed over the next few weeks ... Layoffs are starting in the corporate office next week."
    KC's View:
    Between the shut down of Haggen and now of Fresh & Easy, these markets are getting a little less crowded ... though it probably doesn't matter much, since neither were exactly setting the world on fire.

    I hear that CEO Jim Keyes is hoping for a last-minute miracle to save the company. (Sort of like the Chicago Cubs were last night in the bottom of the ninth ... which is exactly what Keyes can expect in terms of an actual miracle occurring.)

    I think that they ought to just let Fresh & Easy die. The name and brand are tainted beyond repair, in my opinion. Just let it go.

    Published on: October 22, 2015

    Business Insider has a piece about Amazon Prime, suggesting that its primary reason for existing is to create "increased customer loyalty."

    The story quotes a survey done by RBC Capital, saying that "two 'killer' data points, in our view, are that Amazon is building up significant loyalty amongst Prime members and that the longer Amazon Prime members stay around, the more they engage/spend with Amazon."

    Additionally, the story says that:

    • "Prime adoption is growing: 40% of Amazon customers in the US are Prime members versus 25% in 2013. Globally, Prime members are estimated to number 60 million to 80 million."

    • "Prime members are coming back more frequently: Seventy-four percent of Prime members said they used Amazon more today than when they first joined Prime. Also, 73% of • Prime customers said they shopped at Amazon at least two to three times a month, while only 22% of non-Prime customers said they did."

    • "Prime members spend more: Forty-nine percent of Prime members spend over $800 annually, while only 16% of non-Prime users do so."

    • "The longer they've been a Prime member, the more they spend: Forty-one percent of those in the first year of a Prime membership spend over $800 a year, versus 68% of Prime members of more than four years who do."
    KC's View:
    I'm sort of amused by this, since I've been saying for years that Amazon is essentially a loyalty program ... everything is constructed to get people to buy more, and to turn to Amazon as the best, first option for almost everything.

    But this is serious stuff, in that Amazon seems to be able to monetize consumer relationships to a degree that few other retailers ever have. In pretty much each of these cited statistics, Amazon's numbers almost certainly will improve. And its competition ought to be looking at these numbers and asking themselves to to best compete.

    Published on: October 22, 2015

    The Ecologist has a piece suggesting that Cornell University's Alliance for Science, which traditionally has promoted genetic engineering, "has opened an inclusive scientific dialogue on the safety of GMO crops," arguing that it has precipitated "a major, and most welcome, shift in the debate."

    The story - written by someone who is actively and assiduously anti-GMO - takes the position that by breaking with precedent, the Alliance for Science will enable a "productive, non-confrontational discussion" of the issues.

    It is an interesting column ... and worth reading here.
    KC's View:
    Thanks to MNB reader Tom Kroupa for turning me on to this ... which I might've missed, since I'm not a regular reader of The Ecologist... I'm always intrigued when people actually decide to act like adults...

    Published on: October 22, 2015

    Engadget reports that Amazon is making good on its promise that its Prime Fresh grocery delivery service would eventually require a $299 annual membership fee.

    "Shoppers in New York City, Philadelphia and Seattle (and possibly other cities) are finding out that they need that pricey Prime Fresh subscription before they can go food shopping," the story says. "The outlay gives you free delivery on all orders over $50, on top of the benefits of a regular Amazon Prime membership, but it's now considerably more expensive if you only occasionally want groceries shipped to your door. So far, tests that would open the door to standard Prime members (who'd always pay delivery fees) haven't led to anything concrete.
    The pricing doesn't stack up well next to rivals like Instacart, which both costs less up front ($99 per year) and waives the delivery fees at a lower threshold ($35)."


    • Amazon announced "the expansion of Prime Free Same-Day Delivery to two more major metro areas, Chicago and Orlando, as well as new locations in the New York City, Northern New Jersey and Philadelphia areas. The program now serves more than 750 cities and towns across 16 metro areas. Prime members can order as late as noon and receive all same-day orders over $35 before bedtime that very same day, free, seven days a week – even Sunday."

    In addition, Amazon announced that it is expanding its restaurant delivery service, which has been tested in Seattle, to Portland, Oregon.
    KC's View:

    Published on: October 22, 2015

    It was just a week ago that MNB took note of a Bloomberg story about how 23andMe, which makes an at-home DNA testing kit, "raised $115 million in venture-capital financing as it prepares to introduce a new consumer product and expands its drug-discovery arm."

    Now, the Associated Press reports that the US Food and Drug Administration (FDA) has given 23andMe the go-ahead to reintroduce these testing kits, which it was forced to pull from the marketplace two years ago when the FDA said the marketing was getting ahead of the science.

    "The relaunch is a partial victory for the Mountain View, California-based company, but not a total comeback," the AP writes. "23andMe still cannot offer more than 250 risk reports included in its original product, which purported to tell users if they were likely to develop diseases like Alzheimer’s and Parkinson’s. Those reports and others related to drug reactions remain unavailable in the U.S."

    The story says that "new customers will pay more for the updated 23andMe experience. The company will charge $199 per person, up from $99."
    KC's View:
    As I said a week ago, this is technology with enormous potential to affect how food is bought ... and it is only going to get more effective and more widespread.

    Published on: October 22, 2015

    • The Puget Sound Business Journal reports that Haggen "is in the process of collecting bids from prospective buyers for at least 14 stores in Washington – as well as for stores in California, Oregon, Nevada and Arizona – now that it has court approval to move forward with its plan to auction off stores. Interested buyers – be they anything from furniture stores or other grocers – have until Oct. 26 to notify Haggen of plans to submit bids, which must be filed by Nov. 2. The company will then auction off stores Nov. 9."

    The moves are all part of Haggen trying to find its way out of the competitive morass it has been in since it grew from 18 stores to 164 with the acquisition of units that were made available when Albertsons bought Safeway and regulators said it had to divest stores for competitive reasons.


    • The Wall Street Journal reports that while Yum Brands' KFC and Pizza Hut brands have been enormously popular with Chinese consumers, Yum is now spinning off its Chinese businesses, "underlining the shifting fortunes for global companies in the world’s most populous market."

    According to the story, "By the end of next year, Yum China will become a separate, publicly traded franchisee of Yum Brands ... Yum provided few details of how the plan will be carried out, but said it is intended to insulate the company from the turbulence that has beset its China operations as a result of food-safety scares, stronger competition and Yum’s own miscues - while still providing it a stream of future revenue from what remains a huge and growing market."


    National Public Radio reports that the European Union wants Starbucks to pay up to $34 million in back taxes, ruling that the company received illegal state aid from the Netherlands. The EU said that Starbucks shifted EU profits outside the EU through "artificial and complex methods" to lower their taxes, and now is asking Starbucks to pay up.

    Starbucks says it disagrees with the decision and plans to appeal.


    • The Dallas Morning News reports that speculation is that if family-owned Brookshire Grocery Co. goes on the market, it will end up being a battle between Albertsons and Kroger (and maybe HEB) for the chain's 150 stores with $2 billion in sales.

    The general sense seems to be that while Kroger traditionally has been expert at absorbing chains that it acquires, like Harris Teeter, Albertsons is still laboring to absorb Safeway.


    • The Teamsters yesterday announced that "a majority of its members working as drivers, warehouse workers and in dairy and manufacturing at grocery companies Ralphs, Vons and Albertsons in Southern California have ratified a new five-year agreement.  The new agreement raises work standards and compensation for the more than 2,000 employees represented by the Teamsters."
    KC's View:

    Published on: October 22, 2015

    MNB reader John Hall had some thoughts about the lawsuit against Subway that charges it with misleading marketing since its six and foot-long sandwiches were not exactly that long.

    Is this setting a dangerous precedent?  Are we opening the door for other lawsuits because my burger is not a quarter pound or my 16 ounce steak only arrived at the table at 15?  Are we going to see people in eating establishments with portable scales and their smart phone camera to document such wanton injustice?  This is a slippery slope methinks.




    Regarding the study we quoted from about millennials' changing priorities - less commitment to marriage and children - one MNB reader wrote:

    These studies would be more useful if they were comparative in nature. That would clarify what is attributed to life stage and what is attributed to a new belief system.  When I was 22, (many years ago) I didn’t know anyone my age who was talking about having kids for exactly the same reasons noted in the study.
     
    There are many differences with this generation regarding social accountability and responsibility, but these findings are just life stage evolution stuff.


    From MNB reader Brian Blank:

    There is something awfully familiar about the findings on the Millennials’ attitude towards needing/having children.  Oh, yes…sounds very much like what the fresh-faced young professionals (remember Yuppies?) said in the 80’s.  And if I’m doing the math correctly, they are the ones who gave us the Millennials. 
     
    I think the real change will be that babies will start arriving by Amazon drones instead of the Stork.


    Just because Baby Boomers didn't actually live up to our own expectations is no reason to think that Millennials won't.




    And, on another subject, one MNB user wrote:

    I have been following the developments at the Fresh Market for a awhile.  Very telling that in all the announcements and quotes there is no mention of improving operations, customer service or the customer experience.  Could too much focus on Wall Street be the reason for the company’s declining performance?

    Could be.
    KC's View:

    Published on: October 22, 2015

    In the National League Championship Series...the amazing, incredible, improbable New York Mets defeated the Chicago Cubs 8-3, sweeping the Cubs in four straight games in the best-of-seven series and moving on to represent the NL in the World Series.

    In the American League Championship Series, the Toronto Blue Jays beat the Kansas City Royals 7-1. The Royals have a 3-2 game lead in their best-of-seven series, as the two teams continue their battle to see who will face the Mets in the Fall Classic.
    KC's View:
    Let's go, Mets!!