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    Published on: April 28, 2016

    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.

    One of the things we talk about a lot here on MNB is what physical stores need to do to compete with online merchants. It is a simple fact that nobody in retail is just in competition with the store across the street or down the road ... you're competing with virtually everybody, everywhere ... and in this case, I'm using the word "virtually" quite literally.

    Well, I'm reporting today from the Northgate Gonzales Market in Norwalk, California, just southwest of Los Angeles, and this is a store that could give any retailer a master class in how to compete. This is a big, wonderful, sublime food store that - even at 11 am on a Monday - is absolutely humming with business. That's because the food is great, there is tons of theater, and at every turn the store has differentiating characteristics that set it apart from pretty much every competitor you can imagine.

    Walk in the front door, and there's a service guacamole bar where they're making guacamole to order ... customizing it with more onion, more tomatoes, whatever you wants. There is a foodservice bar with tons of tacos, sandwiches and other specialties; I can tell you that I had the best breakfast burrito of my life, packed with flavor and ingredients that included - believe it or not - cactus.

    I'm posting some photos below the video box that'll give you a better sense of what's going on at the store, but they can only hint at the energy here - this is a story that makes big, bold statements - in the food, in the graphics, in the attitudes of the people who work there - about quality, and the importance of highest common denominator products.

    Now, this is an ethnically themed store with a strong Hispanic accent, but there are plenty of non-Hispanics walking the aisles, enticed by an approach to food and marketing that is anything but routine or middle-of-the-road.

    This kind of retailing has a universal appeal, and it offers a compelling lesson in how bricks-and-mortar retailing can compete with online merchants. You have to have a little magic, you have to have a secret sauce ... and this store has tons of both.

    My friend Norman Mayne once told me that he thought this is one of the best stores in the country. I think he's absolutely right - it is certainly one of the best stores I've ever seen, and I've been doing this for 30 years.

    Anyway, that's what is on my mind this morning ... and as always, I want to hear what is on your mind.

    KC's View:

    Published on: April 28, 2016

    by Kevin Coupe

    The San Francisco Chronicle has a story about a startup called ParkingCupid, described as "a parking version of Airbnb" that allows people to make "up to $400 a month renting out their unused apartment parking spaces, garages and driveways."

    The story notes that the site "offers to match those with parking spaces to drivers who can't find a place to park their vehicles. Naturally, spaces in inner-city neighborhoods with limited or no public parking command the biggest fees, but spots near sports stadiums and airports are also in high demand ... Membership, which allows you to post a wanted listing and contact parking hosts, is $15 a month. An upgraded membership with more features is available."

    But the point is that technology enables people to come up with real solutions to real problems ... solutions that, when you think about, circumvent the established business models used by public and private parking lots.

    And the even larger point is that every business model is vulnerable to that kind of subversion and disruption.

    It is an Eye-Opener.
    KC's View:

    Published on: April 28, 2016

    The New York Times has a piece examining Target's announcement that it will "allow transgender employees and customers to choose the restroom and fitting room that corresponded with their gender identities." It is a policy that is at odds with a recent and controversial law passed in North Carolina not just requiring people to use bathroom facilities consistent with their birth gender, but prohibiting all municipal and county lawmakers from passing laws to the contrary.

    The Times story notes that "the company’s announcement - the most prominent position taken by a national retailer - was greeted by cheers from supporters of transgender rights. It has since also made Target the intense focus of conservative activists, lawmakers and consumers, who oppose the company’s stance, highlighting the potential risks when a company takes a position on a hotly debated social issue."

    Target is hardly the only business that has been critical of the North Carolina law. As reported here on MNB and elsewhere, objections have been raised by well over 100 executives with a wide variety of companies that do business in North Carolina, including PepsiCo, Salesforce, Levi Strauss & Co., Airbnb, Barnes & Noble, Kellogg's, Apple, Pfizer, LinkedIn, Hyatt, YouTube, Starwood, Facebook, Google, Bank of America, Hilton, American Airlines, IBM, Starbucks, Microsoft, and Wells Fargo.

    And in a broader sense, USA Today has a story today noting that "Starbucks, Hudson's Bay Co. — parent company to Lord & Taylor and Saks Fifth Avenue — and Barnes & Noble all told USA Today that employees and customers in their stores are welcome to use the bathroom of the gender they identify with."

    Still, the Times writes, considerable ire has been aimed at Target over its policy announcement: "Some groups have used Target’s announcement as a rallying cry, arguing that Target’s policy threatens the public’s safety. An online petition started by one group, the American Family Association, calling for a boycott of Target stores, has been signed by more than 900,000 people. On Tuesday, the City Council in Oxford, Ala., passed an ordinance forbidding people to use a bathroom that does not match the gender assigned to them at birth. Target has a store in the city ... The ordinance in Oxford would make it a misdemeanor for people to use bathrooms that do not correspond to the gender on their birth certificates. Target’s liability in such a situation is unclear."

    Target has said it will obey all local laws, but that its corporate policy is pro-inclusion, anti-discrimination.

    Despite all the debate, the Times notes that there are at least two rationales behind Target's position. First, "Target may be betting on a more progressive shift in national attitudes on gender and sexuality. Many states have updated their statutes barring employers from discriminating based on sexual identity to include gender identity, too."

    And, "there may also be more practical benefits than just netting good will: The Equal Employment Opportunity Commission, the federal agency that enforces workplace anti-discrimination laws, has made it clear that blocking workers from using bathrooms that correspond to their gender identities violates federal law."
    KC's View:
    An additional rationale, I think, has to do with the nature of communications today. What happens in North Carolina plays out on televisions and computers and smartphones everywhere, and Target - and a lot of other companies - believe that they cannot afford to be branded as discriminatory and non-inclusive.

    In blunt terms, they know that some people see this as the 21st century version of having different bathrooms and drinking fountains for white people and black people.

    I've been pretty forthright about my position on this. North Carolina created a solution in search of a problem; it was a purely political move that sought to inflame the culture wars.

    Putting that aside for a moment, I think it has be recognized the degree to which some of these issues are tough for some people to deal with; notions about gender identity being different from birth gender, or transsexuality, or gender reassignment, are just way outside their frame of reference and beyond their comprehension.

    I get that. Totally. It is confusing. I know what it is like to have a lesbian niece who goes through gender reassignment surgery and suddenly is your nephew, but obviously is no longer a lesbian, and suddenly it makes pronouns both really important and hard to get used to. (That said, I was having a conversation about my nephew yesterday and for a minute I could not remember what his name was before the surgery.)

    So in some small sense - and it is small because I have no right, nor desire, to pass judgement on decisions like these made by others - I understand the confusion. But I am resolute in believing that personal confusion and even discomfort cannot and should not be codified in law. And while companies such as Target may be vilified by some, I respect their decision to risk losing some business by adhering to inclusive policies that they believe are critical to their employees and customers.

    Published on: April 28, 2016

    Whole Foods announced yesterday that it will open its second "365 by Whole Foods" store in Lake Oswego, Oregon, just south of Portland, on July 14.

    The 32,000 square foot store, the company said, "will host two new Friends of 365 partners that both originate from Portland, Oregon: Next Level Burger, a plant-based take on the classic American burger joint and Canteen, a fresh and healthy café and juice bar. Both ‘friends’ will establish shops within the new 365 by Whole Foods Market location and will feature specially curated menus that will further enhance the store experience."

    By creating a center island and bar in the store that will offer foodservice options, the company said that it hopes 365 "will become a Portland-area destination for healthy, fast casual eating as well as convenient grocery shopping.”

    The first 365 store is scheduled to open in the Silver Lake neighborhood of Los Angeles late next month., with a third location scheduled to open in Bellevue, Washington, later this fall. Ten additional stores on slated to open next year.
    KC's View:
    My understanding is that Whole Foods picked the three locations where it is opening 365 stores in 2016 because of immediate real estate availability, and that next year's store still-to-be-announced locations were chosen more strategically to appeal to urban millennials.

    If accurate, this would feed into the skepticism that some of us have about 365 - that it could be a hasty response to a persistent competitive problem. Whole Foods wants to create a store that appeals more to millennials and that feature slower prices, but there is a feeling out there - including some folks within the company - that in its desire to be more like Trader Joe's, Whole Foods is betraying the values and strengths that it traditionally has brought to the marketplace.

    Now, to be fair, I'm always arguing here that it is important to find ways to disrupt your own business before competitors find a way to do it for you. And that's exactly what 365 could be, and it could work great. But we'll only know that once they start opening these things.

    Published on: April 28, 2016

    The U.S. District Court for the Western District  of  Washington State ruled this week that Amazon "is liable for in-app purchases children made years ago without their parents’ authorization," saying that the online retailer "didn’t provide sufficient safeguards to prevent children from making purchases within apps that were free to download," according to the Wall Street Journal.

    The story notes that "Amazon has since taken measures to prevent such purchases and said it has reimbursed customers who lodged complaints. But the ruling means Amazon will face additional monetary penalties, which will be determined later."
    KC's View:

    Published on: April 28, 2016

    • Amazon announced that it has opened a fully-staffed pickup location on the campus of the University of Connecticut in Storrs, describing it as "a convenient location to pick up and return Amazon orders, including virtually everything one needs for life on campus, from everyday essentials to technology."

    At the same time, Amazon announced an agreement with California State University, Long Beach, to open Amazon@TheBeach, a staffed pickup location at the University Bookstore on the CSULB campus.

    • Raley’s announced yesterday that it has partnered with Unata "to launch an improved web and mobile eCommerce platform, E-Cart. The new system will replace Raley’s current online order and curbside pickup solutions across all existing eCommerce-enabled locations" and will feature "an enhanced user interface that allows customers to move seamlessly between a mobile device and a desktop computer."
    KC's View:

    Published on: April 28, 2016

    Reuters reports that Whole Foods Market won the dismissal of a lawsuit by People for the Ethical Treatment of Animals (PETA), which "accused the grocery chain of deceiving consumers into believing the meat it sells is raised more humanely than normal, resulting in overcharges." PETA said the retailer's five-step rating system for beef, chicken, pork and turkey was a "sham," because "it was not enforced against suppliers, and the standards were at best little better than normal industry practices."

    The judge ruled that "PETA failed to show that Whole Foods' alleged misrepresentations on in-store signs, placards and napkins defrauded consumers into overpaying," the story says.

    • The Cincinnati Business Courier reports that pension fund is being sued by a number of Kroger employees and retirees who maintain that their retirement money is being mismanaged, that it is "massively underfunded" and is "projected to be insolvent by 2026."

    According to the story, "The lawsuit involves an underfunded pension plan called Central States, Southeast and Southwest Areas Pension Fund that holds about 5,000 current and retired Kroger Co. (NYSE: KR) employees’ retirement funds, according to the complaint filed in U.S. District Court in Illinois. The outside plan has lost assets over the years as fewer members contribute and thanks to investment losses. Kroger employees want out of the plan."

    MarketWatch reports that just ahead of the expected completion of a merger with Ahold, Delhaize Group "reported Wednesday a near four-fold rise in first-quarter net profit after booking lower finance costs." In the US, where Delhaize owns chains that operate up and down the east coast, Q1 revenue was $4.45 billion versus $4.36 billion year ago.

    MarketWatch reports that "Sports Authority has abandoned hope of reorganizing and exiting bankruptcy and instead will count on buyers to save parts of its sprawling retail chain ... Loaded with more than $1.1 billion in debt, Sports Authority filed for bankruptcy protection in March, saying it would attempt to trim its operations and restructure, while looking for buyers as an alternate path. Now the alternative route is the only path forward for the distressed retailer, an employer of thousands of people."
    KC's View:

    Published on: April 28, 2016

    • Leonard Riggio, who transformed Barnes & Noble from a single New York City store in 1971 into the nation's largest bookselling chain, only to watch it suffer through turmoil created by the advent of e-commerce and the growth of Amazon, announced yesterday that he will retire in December. He is 75, and in retirement will continue to be the company's largest individual shareholder.
    KC's View:

    Published on: April 28, 2016

    Responding to Kate McMahon's column yesterday about the value of sensory marketing as illustrated by the fresh pies being baked at the Broadway musical, "Waitress," MNB user Bruce Wesbury wrote:

    KC, it does not take long to understand that the cost of labor (hint $15 an hour) has a profound impact on any business where labor is involved. In-Store Bakeries, Costco, Sam’s and even Mom & Pop Bakeries have all moved toward more frozen, proof and bake, and RTU items in their cases. This trend will continue as long as astute politicians push for their invented “living wage”.

    Ah, of course.

    The lack of sensory marketing in many supermarkets - which seem to be ignoring the enormous advantages that "food" can give a "food store" - can be blamed on politicians. And, by implication (though, to be fair, you did not use the word), liberal politicians.

    Let's assume for a moment that this is true. When the food stores and companies that do not exploit their natural advantages over e-tailers and other entities with which they compete sign their bankruptcy papers, you are suggesting they should blame it on the fact that they did not innovate because of wage costs.

    As opposed to the real truth - which is they simply did not innovate and exploit what should have been their natural advantages. They lacked imagination. They did not understand how to differentiate.

    Okay. I'm going to be a little harsh here.

    I would suggest that blaming it on labor costs imposed by politicians is a refuge that could be claimed by the unimaginative no matter what the minimum wage happens to be - there are people out there who think that current wages in America are too high, who will always think that any minimum wage is too high.

    You missed the point of two other MNB stories from yesterday - that some companies that engage with and invest in their employees - like by distributing stock, like Chobani did, or by creating higher-paying full-time jobs, like Sheetz did - seem to believe that this is the best way to create higher productivity and, as a result, higher profits.

    I hate to quote myself, but let me reiterate something I wrote yesterday:

    Too many CEOs are rewarded - handsomely, with little apparent ceiling - in part based on their ability to drive down labor costs. They drive efficiencies, argue against wage increases, lobby against increased minimum wages, and sometimes do so out of the belief that only a company's top managers are entitled to be entitled. They ignore the possibility that front line employees who are paid more, not less, and who have a real, tangible stake in the company for which they work, will help to build the company.

    If a company that supposedly in the food business decides that aromas and taste are not important to the differentiation of its stores, it does not just give up those natural advantages, but cedes that ground to the competition.

    When they do so, I don't want to hear the whining and complaining about how it is everybody else's fault. Yes, labor costs can be challenging. Regulatory costs can be challenging. The great retailers figure it out, make it work, and end up better for it.

    The others fall by the wayside, complaining about how it is somebody else's fault.

    Another MNB user agreed that my comments have been shallow:

    So easy to rave about progress and innovations when it's not your job on the line.

    Except that I would remind you that I started out as a newspaper reporter. Then worked in magazines. Then tried a short stint in public relations. Went back to magazines. Then ran the editorial side of a the video division of a publishing company. Then moved over to the Internet and, so I'm told, was blogging before they'd even invented the word.

    I know a little something about personal and professional reinvention.

    At least one MNB reader agreed with me about my comments regarding Chobani's decision to reward full-time employees with stock ownership in the company; I said that when companies invest in employees, those employees will feel engaged and invested in their company ... which can drive productivity and sales. Which is when I wrote that paragraph cited above.

    This MNB user wrote:

    It IS an Eye-Opener Kevin and your paragraph there could not be a more clear message to all the CEOs and corporate boards in America and around the world. We can all only hope they read it and understand the long term value that sharing like this can bring to their businesses!
    KC's View: