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    Published on: January 25, 2016

    by Kevin Coupe

    Business Insider has a piece about Starbucks CEO Howard Schultz, who in an investor call last week "laid out his thoughts on the current and future prospects for retail business." He said on the call, "I think today in the headlines you've seen just in the last three weeks store closures of almost 50 Macy's stores, 150 Walmart stores ... You've got to ask yourself what's going to happen to the future of many of those malls that are anchored by those big-box retailers."

    And, he said, "I think we said three years ago publicly that we began to envision that there would be a seismic change in consumer behavior, and that seismic change was due in large part to e-commerce and smartphone shopping."

    That's a fair observation, I think. After all, Schultz was smart enough to change his own job description not that long ago, devoting most of his time to figuring out Starbucks' positioning in a digital world. The company's vaunted mobile payments program, which integrates smart phone technology with both the ability to pay and earn rewards, and. most recently, order before even getting to the store, almost certainly is seen as the beginning of the so-called seismic shift, not the end.

    These shifts take all sorts of forms. Fast company posted a story about how Starbucks - which used to sell CDs and even owned a small CD chain called Hear Music before streaming made CDs less relevant and profitable - has launched a partnership withSpotify that creates multiple in-store playlists with hundreds of tracks, allowing customers to download those playlists to their own devices.

    According to Fast Company, "Although customers cannot yet influence the music being played in stores, you can see how that might change in the future: In addition to saving playlists, customers can share tracks on Facebook and Twitter or tap a 'like' button on each song within the app. Over time, presuming the feature is used widely enough, this creates a new pipeline of data about customers' music preferences."

    In some ways, this is yet another progressive, ambitious company defining and expanding its own ecosystem ... generating actionable data and then acting on it, and in doing so hopes to create a stronger relationship with its customers.

    In a different story, the Washington Post put it this way:

    "Starbucks is outgunning its peers, at least for the moment, in tackling some of the problems that have befuddled the industry. One place where this is evident is in its digital strategy, which has centered heavily on incorporating mobile devices into the in-store experience.  The company’s app accounted for over 21 percent of transactions in the quarter.  At a time where shoppers have not widely embraced mobile payments, Starbucks appears to have built a digital ecosystem that customers have found especially useful ... Starbucks is getting reams of data about customers who use the app and the related loyalty program, allowing the chain to personalize offers to individual users and to generally better understand what menu items and price points are clicking with their most devoted followers."

    It's this simple, this Eye-Opener. You can't just sell stuff anymore. Retailing is much more demanding and complex. And if marketers don't adjust to this reality ... well, they can be disrupted right out of business.

    Which brings me to another story.

    The Wall Street Journal has a piece this morning that starts out this way:

    "Yellow Cab Cooperative Inc., San Francisco’s largest taxi company, filed for bankruptcy protection Friday, the latest in string of traditional taxi companies to turn to chapter 11 amid the rapid rise of ride-hailing rivals like Uber Technologies Inc. and Lyft Inc.

    "Pamela Martinez, the co-op’s president, said in court papers that her company faced a host of challenges, including a high number of accidents-related claims and liabilities, a steep decline in ridership and competition from newer app-based ride-sharing services, namely Uber and Lyft, which have also increasingly poached Yellow Cab drivers."

    That's what happens when you don't adjust and improve your game in a more demanding and complex marketplace.

    You can't just cope with seismic change. You have to create it ... and, short of that, embrace it and figure it out how to make it work for you.
    KC's View:

    Published on: January 25, 2016

    The Seattle Times reports that Amazon has created 10,000 permanent new jobs in Europe, and plans to hire thousands more this year "as it builds new warehouses and data centers and adds research and development staff across the continent." That represents a major commitment for Amazon, which says it now has 80 European facilities employing some 40,000 people.

    It has not been an easy expansion, even if Europe is seen as fertile ground for Amazon. The Times notes that the process "has been fraught with challenges, from French legislation to protect independent booksellers from the likes of Amazon to labor struggles in Germany and a European Union probe on the company’s tax deal with Luxembourg."

    At the same time, the Telegraph reports that "Amazon is creating 2,500 jobs in the UK in 2016, as it responds to 'stronger demand than ever' ... The online retailer is also opening a new head office in London's Shoreditch, with space for 5,000 workers, as well as a web services UK data centre. Both will both open in 2017.

    "The news comes as Amazon prepares to beef up its household goods and groceries service, Pantry, in direct competition to the UK's established supermarkets."
    KC's View:
    Clearly, Amazon has a big appetite and it is willing to invest in the infrastructure to create an ecosystem that is global. Retailers everywhere have to be ready for the kind of disruptive influence that it can be.

    Published on: January 25, 2016

    The Oregonian reports that subject to the approval of a bankruptcy court, Albertsons has agreed to write Haggen a check for $5.75 million, "a far cry" from the billion dollars in damages that Haggen sought when it sued Albertsons last September. charging with systematically conspiring to undermine its ability to profitably run 146 stores that it had acquired after the Albertsons acquisition of Safeway.

    Albertsons said in a statement that the Haggen claims lack merit, but that it settled in order to avoid costly litigation. Haggen has not commented.

    Haggen has closed or sold many of the stores that it bought from Albertsons, including some of them back to Albertsons - ironic, since the Federal Trade Commission (FTC) had originally mandated that they be divested in order to preserve competition. It is expected that Haggen will eventually sell off even the core stores that it had before it decided that expanding into California, Arizona and Nevada was in its best interests.
    KC's View:

    Published on: January 25, 2016

    by Michael Sansolo

    MIAMI BEACH -- The notion of work-life balance may be evolving with the emerging dominance of the Millennial generation in the workforce. More than any group, Millennials are constantly in touch with all parts of their world thanks to their ever-present smart phones.

    Rather than work-life balance, Millennials seek "work-life integration" in recognition that they are constantly connected, according to Gerarda Van Kirk of Accenture. Van Kirk was both a presenter and panelist at the opening workshop at the Food Marketing Institute (FMI) Midwinter Executive Conference. The session, held in advance of the main program, was hosted by the Network of Executive Women (NEW).

    Work-life integration, Van Kirk said, recognizes that young workers stay in touch with their private network during work through social media or other avenues. However, they also willingly bring work with them during traditional "off" hours through those same devices, by answering e-mails at any time of day or checking in with co-workers whenever asked.

    Van Kirk and a panel of industry executives detailed a number of the steps companies are taking to better connect with the new generation and make their companies more attractive to Millennial workers. Such activitIes include more regular feedback, greater job flexibility, career planning and even offering up small projects to allow workers to experience a wide range of duties.

    In other FMI news...

    • Three executive leadership awards were announced this weekend...

    Fred Morganthall, Kroger's executive vice president, Retail Operations, was the recipient of the FMI Sidney R. Rabb Award for Statesmanship.

    Jerry Kehe, chairman of KeHE Distributors, received the FMI Herbert Hoover Award for Humanitarian Service.

    And Sandy Douglas, executive vice President of The Coca-Cola Company and president of Coca-Cola North America, was named the recipient of the FMI William H. Albers Award for Business Collaboration.

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: January 25, 2016

    CNN reports that the investor class has high hopes for McDonald's this week as it prepares to release its Q4 sales and earnings numbers, which are expected to reflect a sense that new CEO Steve Easterbrook has been making progress since he took the job less than a year ago and declared he wanted to turn McDonald's into a "modern progressive burger company."

    According to the story, "Easterbrook owned up to many of the big problems facing Mickey D's -- most notably a stale menu that did little to excite the taste buds of its customers. Many burger gourmands were shunning McDonald's in favor of places like Five Guys, Smashburger and Shake Shack.

    "So Easterbrook quickly made some changes. It added some new burgers -- such as the Maple Bacon Dijon and Pico Guacamole -- and gave diners more choices so they could customize the sandwiches." And, of course, there was all-day breakfast, seen as long overdue and seen as holding enormous appeal to patrons.
    KC's View:
    Maybe it is just my abiding McDonald's skepticism showing, but I think it is way too early for pundits to be describing McDonald's as a "great American comeback story," as some are. There remain questions about the possible impact of too-deep discounts and too-unhappy franchisees ... and I'm still not persuaded that the food is better is any sort of tangible way.

    Published on: January 25, 2016

    The Seattle Times has an interesting story about REI, described as "the nation’s largest consumer-owned retail co-op, with the twin mandates of taking care of its members and spreading the love for the outdoors." But it also is "a retail juggernaut that last year had half a billion bucks in the bank, more dough than many shareholder-owned rivals."

    However, despite its millions of members, REI has its own challenges ... while sales and memberships are up, there has been some dilution of "the involvement of its membership in the running of the co-op’s affairs ... In 2015, fewer than 1 percent bothered to vote in its annual election of board members. At PCC Natural Markets, another locally based co-op with more than 50,000 members, turnout was close to 4 percent."

    REI says that "the poor turnout in the latest election is due to its switch last year to online voting, and this year it’s working on making it easier. But REI also contends that the way people get involved with the co-op has changed fundamentally from a time when there were no smartphones or Internet, and there was only one local store."

    It is a story about one of the country's most interesting retailers, that has a connection with its customers that most other retailers can only envy. And you can read the entire story here.
    KC's View:

    Published on: January 25, 2016

    • The Los Angeles Times has a piece in which it describes Washington, DC, officials as feeling "enraged" by Walmart's decision to, as part of its plan to close more than 150 stores in the US, not open two stores in the city's poorest neighborhoods.

    " The neighborhoods to be left high and dry are in the city's Ward 7, which is 95% African American, with a median household income of $35,000," the story says. "As is the case in many poor, minority neighborhoods, Ward 7 is underserved with food stores offering healthy options at reasonable prices. The expectation was that Wal-Mart's arrival would relieve that condition."

    "We have absolutely been shafted," says former DC Mayor Vincent Gray, who negotiated the 2012 deal and vetoed "living wage" expectation several years ago under threat that Walmart would not open stores in DC.

    Walmart has said that the three stores that it did built in DC have not lived up to profitability expectations, making the decision not to open the addition two stores easier. And the story notes that the agreement with Walmart never was absolute, but rather was "subject and contingent upon business conditions."

    Time reports that now that Walmart has announced the closing of 269 stores, 154 in the US, the goal is to close most of them by the end of this week ... and it is doing its best to empty them out by cutting prices by as much as 50 percent on most categories (not gas and guns). According to the story, "Don’t be surprised if the discounts go even deeper than 50% as the looming Jan. 28 closure date gets closer. Even better bargains are likely to pop up by Tuesday or Wednesday, though by then the pickings may be especially slim."
    KC's View:

    Published on: January 25, 2016

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

    • Starbucks' willingness to pull the plug when stuff doesn't work is illustrated this week by its announcement that it is closing down Teavana tea bars in New York City and Beverly Hills that it was testing as a tea-oriented alternative to its coffee shops.

    It will leave open one test store in Seattle, as well as more than 350 Teavana retail stores around the country. The company says that the moves do not change the company's "commitment to tea," but reflect a sense that it can be better realized in its main stores.

    Which may or may not be accurate ... but it doesn't matter. The plug is pulled. Move on.
    KC's View:

    Published on: January 25, 2016

    • The Fort Worth Star Telegram reports that RadioShack CEO Ron Garriques has left the company, less than a year after taking over the job from Magnacca, who became CEO of Massage Envy. CFO Gordon Briscoe, the story says, will serve as interim CEO until the company’s board finds a permanent replacement.
    KC's View:

    Published on: January 25, 2016

    On the subject of HEB's new entry in the c-store category, one MNB user wrote:

    Maybe the idea is to take advantage of a different shopper like the ones being captured by Walgreens and CVS with the pull of a gas stop vs a prescription.  Plus, even though HEB is a large format grocery store, it certainly isn’t the same as a Wal-Mart Supercenter experience.  Lastly, when these guys open the c-store format near their larger store format, it is much easier to justify an adjacent delivery stop and easy access for fill-ins from the main store to avoid disappointing in/out customers that don’t like to shop the football-field-size big store.

    Responding to Chelsea Ware's "Millennial Mind" column last week, MNB reader Jim Mahern wrote:

    Regarding the recent conversations about the ice cream parlor and the donut shop, I believe Chelsea is onto something, but perhaps not what she anticipated. I believe it is real time knowledge of your customers and the local market, and then emphasizing your point of differentiation.

    The donut guy, or lady, has built a business based on the best product quality in a category that tends not to consist of a lot of new varieties. It is also usually a locally run operation, yet they have acquired a widespread reputation for their product. The ice cream shop is faced with competition from people like Baskin and Robbins and their 31 flavors. So in order to compete, they have to innovate with flavors that push the envelope and make it difficult for national chains to react. In addition, the Baskin stores are restricted by franchise agreements. So kudos to them both for understanding their market.

    Since you enjoy movie comparisons, how about the movie Patton. For years I have used it as an example of knowing your competition. In one scene as Patton's armored division is blasting the German attempt to get through the Kaserain Pass, and while peering through binoculars, he utters these words: "Rommel, you magnificent bastard. I read your book".

    We had a story the other day about how Target CEO Brian Cornell is spending time talking to customers in their homes, trying to draw a better bead on how they shop and what they need. Prompting MNB reader Tom Herman to write:

    Maybe Brian can spend a little time in his stores unannounced.  The out of stocks are atrocious at their La Habra, CA, location and I’m sure this isn’t an isolated issue.  They have great private label items and some really differentiated products, but when it comes to the basics of having the right item at the right time they need big improvement.

    Got the following email about the ongoing Amazon-Walmart battle:

    I have to say that I've given WMT the benefit of the doubt a number of
    times only to get frustrated and return to Amazon or others.

    My Dad lives in Kansas City and dislikes Folgers and Maxwell House and prefers to drink Hills Bros Coffee, he's 74 and doesn't want to change brands now.  He can't get his favorite coffee at his local WMT anymore. Other local grocers also stopped carrying Hills Bros.

    He even went so far as to ask the WMT store manager to order an entire case for him so the store wouldn't be burdened with stock they don't need. Basically their answer was that if it's not in the warehouse you can't get it.  So you would think would be an option, with online ordering and free delivery if you pickup at the store like any other department would think?

    Not so fast, do a search for Hills Bros on, it's there along with an HD image begging you to buy it.  But wait, its for in-store only purchase???  Lucky for my Dad he travels and stocks up when he finds it. Knowing my Dad he's sitting on a year's supply or more, especially if it was on sale.

    Look I get it, pods have exploded and is requiring more and more space with each shelf reset.  But to leave customers with no alternative? Is'nt that what .com should be for?  I just don't get that scenario at all.

    Essentially forcing customers to the competition.  You would think they forgot that repeat customers start from trial customers.

    Amazon wins!  Again!

    As it often does.
    KC's View:

    Published on: January 25, 2016

    In the National Football League Conference Championship games, the Denver Broncos defeated the New England Patriots 20-18, and the Carolina Panthers beat the Arizona Cardinals 49-15. The Broncos now will face off against the Panthers in the Super Bowl on Sunday, February 7.
    KC's View:
    I'm no football expert, but I couldn't help but think of business metaphors as I was watching the Patriots-Broncos game yesterday. I expected the Pats to thrash the Broncos, but what we saw was clear evidence of how just having a supremely talented leader isn't enough when the offensive line doesn't provide enough protection and the defense does not sufficiently inhibit the other guy's offense. Also, the missed extra point kick by Stephen Gostkowski in the first quarter - the first one he has missed in nine years - ended up being the margin of defeat for the Pats, since it forced them to go for a two-point conversion at the end of the game. Which they didn't make.

    Everything matters. We wrote a chapter about this in "The Big Picture: Essential Business lessons from the Movies," citing the great Crash Davis speech in Bull Durham about the difference between good and great...

    Know what the difference between hitting .250 and .300 is? It's 25 hits. 25 hits in 500 at bats is 50 points, okay? There's 6 months in a season, that's about 25 weeks. That means if you get just one extra flare a week - just one - a gorp... you get a ground ball, you get a ground ball with eyes... you get a dying quail, just one more dying quail a week... and you're in Yankee Stadium.

    It's funny. When people use sports or sports movie metaphors, it is often to build themselves up ... they talk about being a five-tool player, or about having a great lineup, or some such thing. But I think that sports and sports movies are great metaphors because they often are about the importance of luck and chance, and the ability to recognize weakness and use defeat and shortcomings as motivation for getting better.