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    Published on: May 24, 2016

    by Michael Sansolo

    About a week ago, my adult son was stuck in traffic when the driver behind him momentarily lost focus and rear-ended him.

    Thankfully, his car was hit at a fairly low speed. My son wasn't hurt and the car, while banged up, should be back on the road shortly.

    Here’s why I share that story: when my son called me with the news, my entire concern was on his health and where he was stranded with a damaged car. Luckily, we have good insurance, AAA, and most of all, the other driver admitted all fault and immediately started taking steps to atone for her mistake.

    For us, it was an inconvenience with a little scare and nothing else.

    But for many Americans it would have been something very different. A recent Associated Press study found that two-thirds of Americans are so economically strapped that a $1,000 crisis is beyond them. Let’s be honest: $1,000 isn’t a gargantuan sum. There are countless household or family issues that could easily cost that much money including the fee for fixing a shattered car bumper.

    The AP study found that more than one-third of Americans with incomes topping $100,000 would struggle to find that $1,000 rainy day fund. And worse yet, another study recently found that nearly half of American families would struggle to produce even $400 to weather an emergency.

    So here we are nearly eight years after the Great Recession and despite the rise in the Dow Jones and the fall in unemployment, uncertainty reigns for many families and individuals.

    It would be easy to add to the cacophony of voices blaming this situation on everyone from the government to big business to individuals themselves who seem to lack any common sense when it comes to money. Lord knows we all have opinions on this as we’ve seen recently in the discussion here at MNB about student debt and the challenges of the young generation.

    But I’d like to suggest that we should look at this situation differently and through biased and self-serving eyes. All of these folks need to buy food.

    When the Great Recession hit, the industry responded as it always did, simply because there was no choice. Our shoppers needed help and every company knew that the choice was to respond or watch competitors steal the business.

    Not surprisingly we saw some great responses largely because it was the only thing to do. We saw retailers focus on money-saving strategies from price freezes on key items and to added focus on budgeting strategies.

    The reality is that nearly eight years later the situation is better, but not well. Every bit of news reminds us that many of our customers still need our help. These customers include Millennials burdened by student debt and struggling to start careers, families facing diminished income due to shifting economic conditions, and retirees in far worse shape than they expected thanks to falling or vanishing home values.

    No matter what, our job is simple: to help them get by because if you don’t do it someone else well.

    So sure this may be the issue fueling Donald Trump and Bernie Sanders in very different ways. However inside companies we need to think differently. To paraphrase The Godfather: It isn’t political, it’s business.

    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: May 24, 2016

    by Kevin Coupe

    Twice reports that Amazon has achieved yet another retailing milestone, surpassing Walmart to become the world's second largest seller of consumer electronics. Only Best Buy is larger.

    Does anyone think that Amazon won't pass Best Buy sooner rather than later?

    The story makes the point that in addition to offering a perceived price advantage to its shoppers, Amazon has driven this business with "proprietary products like Fire TV streaming media devices, Fire tablets, and Kindle e-readers," as well as with "the $99/year Amazon Prime membership program, which provides two-day and, increasingly, same-day delivery, and access to millions of songs,  books, TV shows and movies, including original content."

    In other words, it didn't just sell stuff. Amazon made it easier, through the construction of an accessible and even nurturing ecosystem, for people to buy stuff.

    The story notes that last year, Amazon's consumer electronics sales went up 28.1 percent. Best Buy's went up 3.8 percent. Walmart's went up 2.6 percent. And total sales for the country’s 100 largest electronics retailers were up 4.3 percent last year.

    Which means that Amazon is not just lapping its closest competitors, but lapping the field.

    Again ... Does anyone think that Amazon won't pass Best Buy sooner rather than later?

    And here's the next question:

    Does anyone remember a time when Walmart didn't sell groceries, and wasn't perceived as a threat by the traditional supermarket industry?

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

    Published on: May 24, 2016

    The St. Louis Business Journal reports that Supervalu yesterday said that it had "completed an amendment of its $1.5 billion senior secured term loan agreement that will permit it to make transactions related to its planned spinoff of the Earth City-based Save-A-Lot grocery chain."

    The story goes on to say that "in the event the Save-A-Lot spinoff is consummated, the amendment requires Save-A-Lot to issue a minimum of $400 million of long-term debt and that Supervalu's term loan balance be reduced by at least $350 million, including with net cash proceeds of the Save-A-Lot debt issuance.

    "Under the amended loan agreement, Supervalu also would be required to keep a certain minimum equity stake in the spun-off, publicly traded Save-A-Lot, officials said in a regulatory filing Monday."
    KC's View:
    I suspect the folks at Save-A-Lot are anxious to have this all resolved and off their plate, so they can get 100 percent focused on the serious business of upgrading a chain of stores that needs it if the company is to compete effectively in a tough environment that's only going to get tougher.

    Published on: May 24, 2016

    CVS said yesterday that it will launch a digital receipts program early next month, allowing consumers to opt out of the sometimes feet-long paper receipts and coupons that often are given out to consumers at the front end.

    According to the company, "The new option for digital receipts will roll out in early June and eventually be available in 7,900 retail locations. Customers will have the opportunity to opt-out of receiving paper receipts for all in-store purchases when completing their transactions in the front of the store. Once the one-time process is completed, customers will receive receipts digitally, along with their coupons and rewards, each time they shop at CVS Pharmacy."

    The announcement went on: "Once enrolled, ExtraCare members will have all receipts delivered digitally via email. Members will continue to receive exclusive benefits, personalized savings offers, available ExtraBucks Rewards and more, which can be redeemed in store by using a smartphone, tablet or computer, and then simply selecting the 'send to card' button found next to each offer. Additionally, all personal preferences are saved for future transactions."
    KC's View:
    Say hallelujah.

    I've been railing about these endless receipts for years, complaining that they seem engineered to create the illusion of savings while counting on the fact that people will leave them at home and forget to use them. So this is a step in the right direction ... I have a real problem with retailers that try to pass themselves off as offering savings and then do everything possible to make it more illusion than reality.

    Published on: May 24, 2016

    The New York Times reports on how General Foods "is quietly establishing itself in venture capital, investing in some of the hottest new food companies." The company's latest investment is in Kite Hill, described in the story as a company that "makes versions of cheese and yogurt from nuts — no cows involved."

    The $18 million investment, the Times writes, "is the fifth for 301, which General Mills established last fall out of its former new business development unit ... General Mills is not the only food company dabbling in venture capital. This year, Campbell put $125 million into an in-house venture capital business called Acre Venture Partners. And Unilever has long had a venture capital unit."
    KC's View:
    I think this is a very important approach for existing companies - big and small - to take, to find places where they can make canny and strategic investments that will fuel some level of innovation that they might not be able to muster internally.

    This is something Tom Furphy and I spoke about a few weeks ago in "The Innovation Conversation" ... which you can read here.

    Published on: May 24, 2016

    Fortune has an piece about Rosalind Brewer, CEO of Walmart's Sam's Club division, in which she says that she is looking to grow the business by focusing on digital retail, an area that she says rival Costco has ignored. Costco's admirable discipline in its model, she suggests, has left it slow to invest in new areas, which opens a hole for Sam's.

    "Attempting to capitalize on that opening," Fortune writes, "Brewer has made major investments in digital, ploughing resources into the company’s mobile app, which allows customers to pick up at stores within two hours of placing an order and notifies the store as soon as customers arrive in the parking lot. In the past 24 months she’s hired only decision scientists for the membership team—professionals skilled at using analytics to bring in new members.

    "To her mind, this the future of retail, and she’s focused on how she can 'build this for the long haul, not just for today or tomorrow'."

    Brewer also suggests that Amazon's plans to expand its private label food offerings may be a case of biting off more than it can chew, noting that "private label takes a lot of time and focus, adding that retailers who pursue it rashly risk diminishing their relationship with national brands. Sam’s Club at one time had 20 private label brands that Brewer has since brought down to one. Having its own brand has helped Sam’s Club push its suppliers to innovate because if they won’t do it, Sam’s Club will with its own label."

    • The Washington Post reports that Washington, DC, Mayor Muriel E. Bowser will not get the opportunity to confront Walmart real estate executives as she'd hoped at the International Council of Shopping Centers (ICSC) conference this week in Las Vegas.

    According to the story, Bowser had hoped to confront Walmart execs there about two stores that the company had promised to build in her city, but then cancelled them because of what it called high building and labor costs that it said would make the locations unprofitable.

    However, Walmart decided not to end its executives to the conference this year, which means that Bowser will have to spend her time looking for other retailers to move into the two DC locations.
    KC's View:

    Published on: May 24, 2016

    Tech Crunch reports that "Amazon has quietly ended its price protection policy on all products except for televisions. The change to the company’s policy comes at a time when a handful of startups have launched to help consumers automate the process of requesting refunds when prices change on online sites, including Amazon and dozens of other e-commerce stores."
    KC's View:

    Published on: May 24, 2016

    • The Omaha World-Herald reports that ConAgra Foods has made a deal to sell its Spicetec Flavors & Seasonings unit to a Swiss competitor, Givaudan, for about $340 million, describing it as the "latest in a series of moves that ConAgra has made to split up its business in what its chief executive says is a push to boost company value and focus resources on ConAgra’s core portfolio of consumer food products, including Peter Pan peanut butter, Reddi-wip topping and Marie Calender’s frozen pies."
    KC's View:

    Published on: May 24, 2016

    Yesterday, commenting on a story, I wrote:

    It is also worth noting that it took 11 days to take Amazon Prime Now from green-light to launch ... which is extraordinary. It also ought to scare the hell out of anyone trying to compete with Amazon using traditional metrics.

    If it actually had been 11 days, it would've been far beyond extraordinary. It would've been beyond miraculous.

    It was, in fact 111 days. Still pretty damned extraordinary, but a little longer than my typo would've suggested.

    Mea culpa, mea culpa, mea maxima culpa.
    KC's View:

    Published on: May 24, 2016

    Got an email the other day from MNB reader Jeff Gartner, who wanted to commented on one of the responses we got to the story about how the government has changed overtime rules so that millions of salaried employees are entitled to it:

    Kevin, I just sighed, not in disbelief but rather in sadness, when reading one of your reader's comment "We will just figure their hourly rate based upon their current salary with their previously scheduled 45 hours … "

    So, they feel it's ok to have their salaried employees consistently work 45 hours and not pay them any more than if they were working 40. And then they rationalize it by saying "it's a tight labor market." So obviously they feel no compunction taking advantage of their employees. My guess is they're also trying to fool their customers too with some sly pricing tactics.

    And this is why there's such distrust of completely "free and unfettered markets." Just because you can doesn't mean you should. 

    If I knew who this retailer was, I would never shop there. And certainly discourage others from doing so too.

    Employees know when they are not valued. Employees know when companies see them as a cost, not an investment. And so, employers should not be surprised that when they behave in a certain way toward the people who work for them, those employees will turn around and not value the company where they are employed and do not feel personally invested in its success.

    But of course, many are surprised ... because they simply don't get it.

    Speaking of not getting it ... I got the following email from a millennial who wanted to address the criticism of his generation being a "snowflake generation" that melts in the face of any heat:

    I have not been reading your commentary for long, because I am a millennial. I did not have a reason to before I graduated or when I was bouncing from job to job; call me a flake, but I needed to figure out what I wanted to do as well as maintain a salary that helped pay off my student debt in less than 2 years – see we aren’t all financially inept/irresponsible (and before anyone can poo poo this, I had more than the average (~$30k), depending on the source).

    Anyway, I digress, I  have been trying to keep my mouth shut, but the over-generalizations about my generation has been irking me. Why should everyone who isn’t a part of it decide how we act and determine what kind of riff-raff we are? (Just want to point out that we didn’t raise ourselves or should we debate nature vs. nurture here...) One can’t always believe whatever news platform you consume and their reports on the self-centered, instant gratification of the millennials. Also, everyone by now knows that the news is still a company that is vying for viewership, ratings, and in turn, funding.

    Yes, there are the stereotypes, but every generation has had their stereotypes. Maybe we are more staunch in our opinions, but we also have more platforms than ever before to get our opinions out and find people of like-mindedness. Perhaps it’s just my circle of friends or the university I attended, but I know even the people with the strongest opinions were willing to listen to the opposing view. If the opposing view was well-thought out, structured with facts, not just opinions, to back it up, they were willing to have a civilized conversation. I would say that it’s much more enlightening to understand both viewpoints, even if you disagree with one, then thinking “Life isn’t always going to be fair, and everyone you meet isn’t going to agree with you – face it and get over it.” We are not an apathetic generation; we were taught that we should talk about our feelings so maybe we are just a very obedient generation…?

    I know I found a soapbox and occupied it for far too long, but isn’t that’s what is expected from a person in their mid-20’s? Perhaps, I am just venting or embodying the exact persona your other MNB reader was talking about, but once the other generations realize we are not too politically correct with no plasticity, possibly we could have that civilized conversation to discuss our dissenting views. Maybe we could even convince each other we are all humans with emotions and beliefs who just want to be acknowledged.

    Just thought perhaps a millennial should be included in a conversation centered around them.

    Good for you. I feel your pain, partly because I spend a fair amount of time with college students, and partly because of some of the criticisms were of educational institutions and the media that some feel have too much sway with your generation.

    Responding to yesterday's story about Amazon's Stephenie Landry, MNB reader Tom Murphy wrote:

    This is a superb story that highlights (for the 1,000th time) something that gives Amazon a real competitive edge against most retailers.  They have a culture of innovation, not one that just tweaks the size of the deli plate, or highlights the cleanliness of the restrooms…no, this culture is about taking big swings and actively learning from their failures…in fact, relishing the failures.  This got me to wondering how many retailers, especially grocers where the margins are razor thin, have a committed and full-time innovation design team?  I am not talking about a research team who works on new line extensions for private label products, or even on new private label products…but a team that is trying to break the mothership, reinvent the business…and then has the management support and funding to “go be disruptive”!  I am afraid the answer to this question might be the “eye-opener” of all time!

    On another subject, one MNB user wrote:

    I think you have taken a rather simplistic line of thought (and maybe callous) on the proposal to tax sugary drinks in Philadelphia. Certainly consumption of these highly taxed will decline, but by how much is really the question. I do think tax revenue projections might miss targets.  However I think it is unfair to question the commitment of supporters for free pre-K who are proposing the tax because they may or may not hit necessary revenue. In a city already highly taxed I see this as a somewhat novel approach to get revenue for a proven and needed program.  Let's face it - it's a "sin tax" - a 21st century sin tax. Such taxes do impact consumption but not stop it. Witness the high tax rates on alcohol and tobacco sales. Seems like plenty of consumption still going on with these products. Again, taxes might not hit projections but that would only mean even less of a"bad" product is being sold. Certainly an offset. For a guy who touts novel approaches/solutions you're coming off cynical here.

    Cynical? Sure. Callous? I don't think so, at least not in this case.

    And, regarding the new Google Home technology, one MNB user wrote:

    In regards to Google CEO Sundar Pichai’s comment, ". . . The difficult part - and the part that will distinguish products from one another - is the experience that computers facilitate."  Amazon has realized that part of their ability to provide customer satisfaction is to take more control of the delivery system.  I’m waiting for the company who can impact customer service by ensuring the delivery system for computers (the internet-provider service) is delivering what is promised.

    If Amazon can provide internet service via Echo or any other way, I’m there!  I changed internet providers about a year ago to Century Link because they promised a lower bill and better service than my previous provider.  When I asked THREE times if the $39.95 fee included all charges, they said yes.  My bill has run over $51 every month and was recently raised to over $54.  They had to lay a cable from the street to my house (11 months and three phone calls ago) and promised three times to bury it.  It’s still laying on my lawn.  When I called to see what sort of deal I could get when my contract runs out next month, they explained that they usually only give you any kind of break if you bundle with DirectTV.  (I don’t want DirectTV- that’s why I have Amazon Prime and Netflix.)   I was then transferred twice and then disconnected while I was waiting patiently for the rep to “check into my options.”   Three strikes – they weren’t transparent about the price, they didn’t deliver in completing the installation, and they didn’t provide follow up.

    Cable TV is falling, and I predict internet providers may be crashing in its wake.  I’m ready to get off the Titanic now.

    And, a challenge from MNB reader Christine Neary:

    I saw your snippet this morning about Beyond Meat’s Beyond Burger and had to laugh a bit. I’ve been a veg-head for years now. Veggie burgers have always had a strong stereotype of being, well, gross and cardboard-like. That is quickly changing, and I have to say that I feel Beyond Meat is the front-runner in this race. Their products are flavorful, have a great mouth feel, and are easy to prepare. (They are also gluten-free and soy-free, making them a great option for those with food allergies. And they are non-GMO.) Now, I’m a very picky eater—I hate beets, too. I’ve yet to try the Beyond Burger, but I’ve had the Beast Burger and several of their other products. Yes, these products are processed foods—but they have no cholesterol and are higher in protein than the average meat burger. And sometimes the convenience is quite nice.

    So, Mr. Coupe, I challenge you to a burger … this weekend is Memorial Day and it strikes me that this may be the perfect opportunity for you to expand your palate’s horizons a bit. Toss one on the grill, load it up with your favorite toppings, and sink your teeth in!

    KC's View: