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    Published on: January 22, 2016

    by Kevin Coupe

    Two interesting points from an article this week from The Street.

    First, it was the statement by Kroger at a National Retail Federation (NRF) session that "50% of its customers are still using paper circulars to make shopping lists and clip coupons" ... a number that was high enough to surprise me, especially since paper coupon redemption rates are a lot lower than that.

    On the other hand, I'm guessing that this may have a lot to do with the fact that Kroger, which is expert at actually acting on actionable data, delivers highly customized mailers to its shoppers. It doesn't seem so crazy that the more targeted retailers are, the more successful they'll be with promotions.

    My traditional measuring stick: if you send me cat food coupons, you're not paying attention.

    Second ... and this doesn't surprise me ... it is the statement that because of technology, Kroger figures that "the days of mailing out paper circulars and coupons - long a staple in the grocery business - may be nearing an end."

    I suspect that as Kroger continues to ramp up its online business, integrating it with its bricks-and-mortar business, this will because both easier and more prevalent.

    It just seems so important ... and the philosophy is even more important than the technology.

    Inevitably - and this in part is because of the influence of companies like Amazon that are relentlessly targeted in their focus on customers - that is where all marketing has to do.

    Targeted marketing is relevant marketing. Irrelevant marketing is a waste of time and money.

    It is an equation, I think, that ought to be an Eye-Opener.
    KC's View:

    Published on: January 22, 2016

    Reuters reports that a National Labor Relations Board (NLRB) judge has ruled that Walmart "unlawfully retaliated against workers who participated in strikes in 2013 and must offer to reinstate 16 dismissed employees." The ruling, quite simply, is that Walmart violated labor law when it fired workers who were absent from work while traveling to Bentonville, Arkansas, for a rally timed to the company's annual meeting.

    The complaint to the NLRB was filed by a union-backed worker group, OUR Walmart.

    Walmart has said that the absences "constituted 'intermittent work stoppages' not protected under labor law," and now says it is likely to appeal.
    KC's View:
    Not being a labor lawyer, I have no idea what is against the law and what is not. I do think that it is symptomatic of Walmart's existence that even as it raises wages, it has to deal with these kinds of issues, which reflect a broader suspicion that everything it does on the labor front is self-serving and/or cosmetic. And I wonder the degree to which it has to move beyond these issues before really becoming a 21st century company.

    Published on: January 22, 2016

    CNBC has a story saying that despite disappointing holiday sales and an economy that suddenly seems to be struggling, retail CEOs largely are optimistic.

    "According to Goldman Sachs' Matthew Fassler," the story says, "although retail sales and personal consumption have moderated, both are still clearly in positive territory. And consumers will still have a healthy level of growth in their capacity to spend this year."

    HSN CEO Mindy Grossman tells CNBC that customers will respond to specific kinds of retail offerings: "They're looking for differentiated products, things that are going to have meaning. So our perspective on that is you've really got to be differentiated, you really do have to create an experience and you've got to create an emotional connection with the customer if you're going to want her to spend."

    And Steve Sadove, former Saks CEO and current board member for JCPenney, Ruby Tuesday and the National Retail Federation (NRF), says that consumers "are buying differently," that rather than looking for products widely available, "they are going for something that's really quite different."
    KC's View:
    Maybe it's just me, but I think the whole differentiated experience and differentiated products thing ought to be a watchword for all retailers all the time. What's the point - or even the fun - of having a 'me,too' business model?

    Published on: January 22, 2016

    The Lakeland Ledger reports that Publix is opening a new 29,000 square foot store on the campus of the University of South Florida campus in Tampa.

    According to the story, it will be "the first Publix location fully integrated into a student housing village on a college campus. Construction on the store is expected to be completed by late next year."
    KC's View:
    Someone was telling me recently that college students are happiest when there are food offerings just minutes from wherever they happen to be on campus ... and so there is a lot to be said for having a presence on a college campus with which one can make sales and create habits and form connections. Done right, these offerings can serve to be a tangible way to grow business long-term.

    Published on: January 22, 2016

    Amazon announced yesterday the expansion of its Prime Now restaurant delivery service to Chicago, offering one and two hour service to customers' homes and offices from dozens of local establishments.

    In Chicago, Prime Now also will offer grocery delivery from Plum Market, My Fit Foods and Sprinkles Cupcakes.

    According to the announcement, "Using the Prime Now mobile app, Chicago customers can view participating restaurants, browse menus, place orders, track the status of their delivery, and watch as the driver travels from the restaurant to the delivery address in real time. Once an order is placed, Amazon delivery drivers pick up and deliver the food within an hour or less. The average delivery time since introducing restaurant delivery on Prime Now is 39 minutes."

    Other cities served by Amazon's Prime Now service include Austin, Baltimore, Los Angeles, Portland and Seattle.
    KC's View:

    Published on: January 22, 2016

    • The Christian Science Monitor has a story about Amazon's drone program - dubbed Prime Air - which the company says is staffed by aeronautical engineers, roboticists, and even a former astronaut, all of whom "are completely focused on making this a reality."

    According to the story, "The goal of Prime Air is to deliver products to consumers 30 minutes after they have placed an order on Amazon’s website - the high-tech equivalent of ordering a pizza. According to Amazon, the range of delivery has to be more than 10 miles, and the drones, which are expected to weigh about 55 pounds, can only deliver packages that weigh up to five pounds."

    The story notes that Amazon knows that different kinds of drones will be necessary to serve different geographic areas, and "is well into the testing phase for these different drones, but there are some legislative hurdles that the company will need to overcome before it can implement the delivery service, namely, regulations on commercial drones established by the Federal Aviation Authority (FAA)."
    KC's View:

    Published on: January 22, 2016

    • Kroger announced this week that it has invested "more than $4 million dollars to remodel produce departments in 51 stores throughout its Mid-Atlantic Division, which includes North Carolina, Virginia, West Virginia, eastern Tennessee, Kentucky and southern Ohio." Included in that effort are 11 store in the North Carolina Triangle, which the company said now will feature "new market-style slant-top tables that display fresh produce, the departments also feature larger refrigerated produce cases with new misting systems. These changes have allowed Kroger to expand its selection of organic produce, part of the grocer’s overall strategy to continue to grow its lineup of natural foods."

    • The Guardian reports on a "high-profile global campaign to halve the amount of food wasted on the journey between farm and plate" that has been launched at the World Economic Forum in Davos, Switzerland.

    Tesco CEO Dave Lewis has been named chairman of the initiative, which will involve "a coalition of 30 leaders from business, governments, UN agencies, foundations and NGOs who want to prompt action to reduce the third of all food produced which is never consumed. Such volumes result from a combination of overproduction and wastage in the west and spoilage in developing countries."
    KC's View:

    Published on: January 22, 2016

    • The Le Pain Quotidien Bakery & Restaurant chain has announced the hiring of Doug Satzman, formerly the Senior Vice President of Business Development & License Retail Operations for Europe, Middle East and Africa at Starbucks, to be its new US CEO, overseeing 87 restaurants and three bakery production centers in the New York, Los Angeles, Washington, D.C., Philadelphia and Chicago.
    KC's View:

    Published on: January 22, 2016

    Yesterday, in a story about Wegmans' decision to open its first store in North Carolina, I referenced why that state might seem more attractive than, say, the New York-New Jersey-Connecticut suburbs of New York City, which would seem to be a lot more geographically convenient for the New York-based retailer.

    I wrote that maybe it is because New York is the second-worst state in the union to do business, according to the nonpartisan Tax Foundation, and I suggested that this is something that Gov. Chris Christie doesn't talk about a lot out on the presidential campaign hustings.

    In this case, my fingers were working faster than my brain ... or maybe it was the other way around. Just to get the facts straight...

    Christie, of course, is the governor of New Jersey, not New York.

    New York indeed is ranked the second-worst state for business.

    And New Jersey is ranked as the worst state to do business.

    Connecticut, as noted yesterday, is ranked #44.

    My apologies for the sloppy writing.
    KC's View:

    Published on: January 22, 2016

    Last week, we featured an interesting discussion of Amazon's business model, with questions raised by MNB reader Joe Elledge, a logistician who argued that while Amazon certainly is innovative and disruptive, there is little evidence to suggest that it is sustainable.

    I brought in Tom Furphy - who does "The Innovation Conversation" with me here on MNB, and who ushered Amazon into the CPG and Fresh businesses - to make the case for why Amazon actually has a sustainable model.

    It was fascinating conversation, which you can read here and here.

    To be honest, I didn't have a whole hell of a lot to contribute to the conversation other than providing the forum ... but I did (naturally) pull out a movie reference:

    Logisticians, it seems to me, depend on logic when they draw conclusions. But as Spock says in 'Star Trek VI: The Undiscovered Country,' "Logic is the beginning of wisdom ... not the end." And so I would suggest that while Amazon is using numbers and algorithms and formulas on which to build its business, it is its vision of how to move beyond logic and numbers - seeing what is possible, not just what has been done before - that makes it so formidable and disruptive.

    Got the following email back from Joe Elledge this week:

    You and I are agreed – there is a difference between intelligence and wisdom.  Warren Buffet, for example, is credited with saying one “Beware of geeks bearing formulas”.  And, BTW, I read your blog because it contains a lot of wisdom versus the technical material in my logistics periodicals.

    I remain, however, unpersuaded regarding Amazon’s future success or failure.  I am sure Amazon has many very intelligent logisticians with many excellent models.  At some point, however, assumptions must be made to underpin those models.  It is in the making of those assumptions that wisdom trumps intelligence.

    I think the key assumptions in Amazon’s models are the frequency of deliveries to each customer, the time between deliveries, and the $$ size of the basket delivered/transaction.   While I can model these as a logistician, the MBA side of me says that Amazon will be hard pressed to achieve and maintain the market share and density necessary to make this model work anywhere but in large urban areas.  Especially when the entrenched competitors respond. Even then, there are the complexities of the compressed delivery windows when the customer would actually be at home to take delivery.   I am also compelled to point out that I do not see any other large retailers charging into large urban areas.  They seem to be always testing, but never actually moving.  And I do not see the European models as directly re-applicable.

    That said, I do not see Amazon going away.  But, in the end, I suspect we will see a much smaller, leaner Amazon that does its own deliveries versus a UPS or FEDEX.  And that activity will be confined to a very specific type of market.  We shall see.
    Thanks again for the excellent blog and very readable blog.

    Here's the great thing. Eleven years from now, when we celebrate MNB's 25th birthday, we'll probably have an answer to this question. And we'll probably have all sorts of other questions about business models and companies that haven't even been invented today.

    Sounds like fun.  
    KC's View:

    Published on: January 22, 2016

    Two quick things this morning...

    I really like "The Circus: Inside the Greatest Political Show on Earth," the new weekly documentary series on Showtime that is chronicling the current presidential race. Not surprisingly, since it features "Game Change" authors Mark Halperin and John Heilemann, it has the same breezy quality of their books about the 2008 and 2012 presidential campaigns (one of which became a terrific movie on HBO). And because it also features Mark McKinnon, a longtime GOP campaign strategist who founded the "No Labels" political advocacy group, it also has a behind-the-curtain flavor that makes it compelling viewing.

    I suspect that we all may want to take a shower by the time this presidential election is over, but in the meantime, "The Circus" may be one way to get a 30-minute update each week on how the game is being played. One caution - it seems to me that the focus is going to be more on strategy and tactics than on policy, so policy geeks may find it frustrating. But on the other hand, more than any other election in our history, this may end up being an election about personality rather than policy ... so maybe that's appropriate.

    "The Circus" is on Showtime, Sundays at 8 pm EST.

    I'm also looking forward to finding time to watch "Mad Dogs," a new Amazon series that has all 10 of its first season episodes available for viewing today. I liked the pilot when I saw it last year - it is about four middle aged guys who go to visit an old friend who has sold his company and now lives in a gorgeous Belize mansion. There is the bit of "The Big Chill" about the story, except with a creepiness that gets more pronounced until a moment well into the hour that changes everything.

    I want to see where "Mad Dogs" goes from there ... and if nothing else, it'll keep me entertained until the second season of "Bosch," based on the Michael Connelly novels, that premieres on March 11.

    That's it for this week. Have a great weekend, and I'll see you Monday.

    KC's View: