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    Published on: October 26, 2015

    by Kevin Coupe

    The Saturday papers offered a sobering reminder of how fast things change, and how yesterday's disruptive influences can have trouble standing up to the challenges of new disruptions.

    The actual story was about the passing of Thomas G. Stemberg, who co-founded Staples in 1986. According to the Boston Globe, Stemberg died at age 66, two years after being diagnosed with gastric cancer.

    The Globe writes that Stemberg "came up with the idea for Staples while driving around in search of a printer ribbon on a Sunday afternoon during the Fourth of July weekend in 1985. He had just been fired as an executive at a supermarket company and needed the ribbon to finish a proposal for a new business. Most stores were closed and his struggle to find the right ribbon led him to an industry changing concept: the office superstore, a one-stop shop for business supplies.

    "With the backing of Bain Capital and its cofounder Mitt Romney, the first Staples store opened in Brighton in 1986. Growing rapidly, Staples took the top spot on the Globe’s 1991 list of the 50 fastest-growing companies in the state, with a sales growth rate of 83 percent. Today the company is worth more than $8 billion."

    That wasn't that long ago, and yet in some ways it is hard to remember a time when Staples didn't exist. But it also is important to keep in mind that these days, Staples' leadership is looking for ways to remain relevant in a vastly changed competitive climate. The company is pursuing a merger with Office Depot, which itself already has merged with OfficeMax. And Staples has been going through a re-engineering, trying to figure out how to become more of a technology-oriented business services company rather than just an office supplies superstore.

    That doesn't diminish in any way Stemberg's insights or contribution. It is just that the world changes, and yesterday's innovation is ... well, just that. Yesterday's innovation. That in itself is an Eye-Opener.

    One other note. I didn't know ... or at least did not remember ... that Stemberg's relationship with Romney that led to one particular piece of legislation.

    The Globe writes that "Romney recalled that shortly after he was elected, Mr. Stemberg asked him why he ran for governor. Romney said he wanted to help people, and Mr. Stemberg replied that if he really wanted to help, he should give everyone access to health care, which Romney said he hadn’t really considered before. 'Without Tom pushing it, I don’t think we would have had Romneycare,' Romney said. 'Without Romneycare, I don’t think we would have Obamacare. So without Tom, a lot of people wouldn’t have health insurance'."

    Consider that another Eye-Opener.
    KC's View:

    Published on: October 26, 2015

    Multiple supplier sources tell MNB that Walmart is circulating a memo to its vendors that indicates that it plans to dramatically scale back on its investment in the Neighborhood Market format.

    These suppliers say that Walmart believes that under current circumstances - it is spending billions to fund both its e-commerce ventures and wage increases for employees - the return on investment for Neighborhood Market stores simply is not sufficient, and that it makes more sense to focus on supercenters and e-commerce.
    KC's View:
    The vendors with whom I spoke who had seen this email, as well as the suppliers I contacted who had not gotten the email, all seemed relatively unsurprised by Walmart's strategic move away from the Neighborhood Markets, which none of them - to be honest - seemed all that impressed with.

    In some ways, I guess I agree. It's been well-known for some time that the Neighborhood Markets don't have the ROI of the supercenters, but my understanding was that Walmart had decided to invest in the format because it would allow the company to go into markets and specific locations that previously had not been available to it. That, and it allowed it to enjoy some incremental growth and supplemented what the supercenters were doing.

    Perhaps now the calculation is that things are too tight for this to go on, and that choices had to be made. This doesn't mean that Walmart will be selling or closing down the Neighborhood markets, just that its emphasis will be elsewhere.

    This is part of the larger recalculation at Walmart as it tries to become more relevant. The Wall Street Journal has a story today about how the retailer is looking for a more edited SKU count, wider aisles, and lower shelving in some locations as a way of creating a more focused shopping experience. Of course, if memory serves, I think Walmart tried to declutter its stores by editing the SKU count a few years ago, but then had to reverse itself when customers complained.

    It seems likely that this new effort may focus more on cutting down on facings than SKUs ... but let's not forget that Walmart also reportedly is beginning to charge slotting allowances and other promotional fees to vendors that want a presence on its shelves ... an enormous shift from past practices in which Walmart made its money on the sell, not the buy.

    But times are tough, money is tight, and Walmart is willing to try anything to get its mojo back. Of course, there's a difference between a a willingness to innovate and a tendency toward being desperate.

    It will be interesting to see how this develops. Here's one thing that does seem logical to me - that Walmart, to continue to be Walmart, has to be play the game that is front of it, not the one behind it. And it may be that focusing on supercenters and e-commerce, and finding ways to intermingle them with a designed-to-be-robust click-and-collect system, may be the best way to play tomorrow's game, as opposed to yesterday's.

    Published on: October 26, 2015

    AT Kearney is out with its third annual survey of US grocery shoppers, concluding that "consumers will pay a premium for local food ... 78 percent of survey respondents are willing to pay a 10 percent premium for local food, up from 70 percent in 2014."

    Among the other findings:

    • "Almost all consumers have coalesced around a stricter definition of local: Ninety-six percent now describe local food as products grown or produced within 100 miles from the point of sale—up from 58 percent in 2014."

    • "Access to local food is no longer the primary roadblock to increasing local food sales; only 27 percent of consumers say products are not available. However, about half say they are not buying local because of a lack of clear advertising/in-store signage."

    • "Almost all consumers (93 percent) associate local with 'fresh,' which is the primary purchasing factor for grocery consumers."

    • "Regardless of the category, 78 percent of consumers are willing to pay a premium of 10 percent or more for local food, up from 70 percent in 2014."
    KC's View:
    I don't any particular problem with these survey results, except that I do think that they may be a little situational. Local may mean something different in some locations than others; it may mean something different to people in different demographic groups.

    But in general, I think that if stores market products as local, people are going to think they are fresher ... and it seems logical that the more stores market foods this way, the more of these foods they're going to sell.

    I do think, though, that retailers have to be careful to be both consistent and clear about what local means. We all know some folks who are perfectly capable of killing the local goose and scrambling the local eggs because they think they can make a buck.

    This would not be smart.

    Published on: October 26, 2015

    There was a terrific story in the New York Times over the weekend about a New York City public elementary school principal named Jack Spatola, who came to the US from Italy at age 14; he was not just the only person in his family to go to college when he did, but he was the only one who spoke English.

    The story makes the point that Spatola has been in his job for 31 years, and that even after all this time, he brings a disruptive instinct to the school ... which seems to be working, since the schools' results are much higher than at schools in neighborhoods of greater affluence.

    For example, "Teachers, students and administrators are engaged in a constant process of figuring out what works and what doesn’t; why, for example, one student might be quickly gaining an understanding of symbolism in reading while another isn’t. Professional development is an experience that is not relegated to occasional seminars but is lived daily."

    The Times goes on to say that "Spatola’s most notable innovation ... may be the manner in which he comes up with the money to finance all the additional academic supports his school deploys in the absence of enormous Wall Street donations, which are available to many charter schools. Mr. Spatola doesn’t use textbooks, which are notoriously expensive (and a major factor in the low graduation rates at community colleges, where students often drop out because they can’t afford them). In the past fiscal year, the city and state spent $100 million on textbooks in New York City schools. At P.S. 172, the allocated money is used to buy primary texts, works of fiction and nonfiction selected by teachers and administrators. Students will, for instance, use the Internet to research how the branches of government work. The many dollars left over are spent on other services.

    "For Mr. Spatola the commitment is driven by ideology as much as anything else, the theory being that textbooks dilute and essentially cheapen the experience of learning."

    Here's what's interesting: Spatola's methods have become of interest to people in the business community, who want to know how he achieves so much with so little. There's a lot to learn here, and you can read more about those methods here.
    KC's View:

    Published on: October 26, 2015

    The Bergen Record reports that the bankrupt, soon-to-be extinct Great Atlantic & Pacific Tea Co. (A&P) is looking to sell off some of its brand names as it liquidates its various businesses.

    "Hilco Streambank, a division of the liquidation company that is working with A&P to dispose of its assets, announced on Friday that it is seeking bids for six store names - A&P, Pathmark, Waldbaums, Food Basics, SuperFresh, and Best Cellars - and for eight private label brand names," the story says.

    Among the private labels are the Jane Parker bakery brand, which dates back to the twenties. The others are America’s Choice, Greenway, Live Better, Woodson & James, Hartford Reserve, Via Roma and Great Atlantic Seafood Market.

    One retail brand name not listed in the bidding process: Food Emporium. An A&P spokesperson said she couldn't say why it was not included.
    KC's View:
    It is hard for me to imagine that most of these names haven't been so devalued by A&P over the years that they're worth very much. Then again, maybe I'll be surprised.

    But if I am, I'll be really, really surprised.

    Published on: October 26, 2015

    The Boston Globe reports that OnStar, the General Motors-owned in-vehicle communications and security service, has a new addition to its AtYourService application - drivers now will be able to use it to access discounts on coffee and food from Dunkin' Donuts, as well as find out where the nearest location is.

    The story says that the service as it exists right now will vary the coupons based on location and time of day, but that it hopes to be able to customize them even more in the future, even to the point of offering coupons based on previous transactions and consumption habits.
    KC's View:
    I love stuff like this ... not just the technology, but the way that Dunkin' is utilizing it. it is all part of our interconnected world, and I think the companies that figure this stuff out are going to be way ahead of the game.

    it is just like the Starbucks app, except that it is built into the car.

    Now, all OnStar has to do is figure how to let people order doughnuts from their cars ...

    Published on: October 26, 2015

    ...with brief, occasional, italicized and sometimes gratuitous commentary…

    • Cabela's, the outdoors/hunting/fishing chain, which has been growing stores and sales, but has seen its same-store sales dropping, is not adopting a revised approach.

    Bloomberg reports that Cabela's "presents a cautionary tale for the few companies bold enough to double down on bricks-and-mortar in a Web-savvy world. As some sellers shift more of their business online, others are moving in the opposite direction—building superstores, shopping planets that have their own gravity. If the building is compelling enough, it becomes a destination of its own."

    But as committed as Cabela's has been to its bricks-and-mortar strategy, Bloomberg writes that it is slowing down its store opening plans and even intends to focus on smaller units than it traditionally has opened.

    • The Associated Press reports that Joanne Ivy, the CEO of the American Egg Board, has retired several months earlier than originally planned, after it was revealed that she lobbied Whole Foods not to sell Hampton Creek's Just Mayo product, which simulates mayonnaise but without the use of eggs.

    Whole Foods did not do Ivy's bidding.

    According to the story, "The communication nevertheless raised regulatory questions because the egg board is one of about 20 'checkoff' programs overseen by the USDA, making them quasi-governmental bodies. The programs, which include the National Pork Board and the Mushroom Council, are funded by producers and supposed to be promotional. In a statement regarding its investigation, the USDA said it is 'committed to establishing a level playing field that protects and promotes all appropriate agricultural endeavors.' It said it did not 'condone any efforts to limit competing products in commerce' and that its administrative review would take 'some time' to complete."

    Reuters reports that Jared Fogle, the former Subway spokesman who pleaded guilty to " charges of child pornography and traveling for illicit paid sex with minors," has paid a total of $1 million in restitution to 10 victims, "meant to allow the victims to obtain counseling or other assistance and are separate from any civil lawsuits Fogle could face." Four more payments of $100,000 apiece are scheduled to be paid to additional victims.

    "Officials hope to complete the remaining four by Nov. 19, when Fogle is scheduled to change his plea officially to guilty and be sentenced before a U.S. District Court judge," Reuters writes. "Fogle would serve between five and 12 years in prison under the deal, but the judge ultimately gets to pick the sentence and Fogle could face a maximum of 50 years."

    This guy could get 100 years in prison and have to pay $50 million in restitution and it would be too little.
    KC's View:

    Published on: October 26, 2015

    • Maureen O’Hara, the Ireland-born movie star known as the Queen of Technicolor because of the way her red hair, green eyes and pail complexion showed up onscreen, and who was featured in such films as The Quiet Man (one of five films with John Wayne), How Green Was My Valley, Miracle on 34th Street and the original The Parent Trap, passed way over the weekend. She was 95.

    Several obituaries recall that John Wayne once said, “I’ve had many friends, and I prefer the company of men, except for Maureen O’Hara; she’s a great guy.” And he meant it as the highest of compliments.
    KC's View:
    If you've never seen O'Hara's work, just check out this brief clip on YouTube, from John Ford's The Quiet Man ... it is wonderful: Click here.

    And, by the way, even if you've never seen The Quiet Man, you may have seen this scene....just think back to the last time you saw E.T..

    Published on: October 26, 2015

    Got the following email from MNB reader Wayne Redfearn:

    I have shopped in the Albertsons store in Corona del Mar for 30 years. It’s been a staple of the community. Haggens purchased it. It’s been a disaster from the start. It’s now closing and I dropped in last night for my final visit.

    The few remaining employees told me they have NEVER seen a supervisory operations person in the store since the Haggen conversion. Haggens stuck a sign up with name, raised prices and added a myriad of various private labels  with little or no thought. The strip center which Albertsons once anchored has been greatly affected. A once vibrant center is now suffering.

    Those that approved the Haggens purchase and ran this sham of an operation should be called on the carpet. They have disrupted the lives on thousands of people and should be held accountable.

    Will they be? I doubt it.

    Me, too.

    And, on another subject, from another reader:

    I spend much of my work time in Walmart stores and have plenty of opportunities to watch their workers at work.  Working at Walmart does not seem to be all that fun or enjoyable.  It occurs to me that Walmart needs to offer higher wages, and publicize the offer, to attract and retain employees.  There are many better employment options for these people.  (Working at Chick-fil-A looks kind of fun.)

    As long as Walmart has a business need to perpetuate the perception of offering higher wages, it makes sense to state that they are offering the higher wages based on an ethical imperative.

    I think that has nothing to do with ethics, and everything to do with the reality of retailing that has lost some of its juice ... and a company that is trying pretty much everything it can to get it back.
    KC's View:

    Published on: October 26, 2015

    Week Seven in the National Football League...

    Bills 31
    Jaguars 34

    Browns 6
    Rams 24

    Vikings 28
    Lions 19

    Texans 26
    Dolphins 44

    Saints 27
    Colts 21

    Steelers 13
    Chiefs 23

    Jets 23
    Patriots 30

    Buccaneers 30
    Redskins 31

    Falcons 10
    Titans 7

    Raiders 37
    Chargers 29

    Cowboys 20
    Giants 27

    Eagles 16
    Panthers 27

    And, in Major League Baseball, the Kansas City Royals beat the Toronto Blue Jays 4-3 in the sixth game of the American League Championship Series, winning the series four games-to-two, and sending the Royals to the World Series where they will take on the New York Mets.

    The World Series begins Tuesday night in Kansas City.
    KC's View: