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    Published on: June 27, 2016

    by Kevin Coupe

    Talk about different perspectives.

    I was reading a story in the Sydney Morning Herald the other day that quoted Richard Goyder, the CEO of Wesfarmers, which owns Coles, the second ranked supermarket chain there, as saying that Amazon will "eat all our breakfasts, lunches and dinners."

    Amazon, you see, is coming to Australia. And Goyder wants to make sure that nobody there underestimates its potential.

    At about the same time, I was reading a Barron's piece about Williams-Sonoma in which an analyst was quoted as saying that "“Williams-Sonoma is very Amazon-proof."

    Cody Wheaton, an analyst and assistant portfolio manager at Janus Capital, tells Barron's that "because Williams-Sonoma controls its own inventory - it’s exclusive to their channel and their brand - and it has a very strong e-commerce business, the company is more immune than most to the lurking Amazon threat.”

    Here's what I would suggest.

    Nobody is Amazon-proof. Nobody.

    But I'm not just talking about Amazon here. In this case, one has to think about Amazon as being representative of any disruptive business model that has the potential of wreaking havoc on traditional businesses.

    I just think it is healthier to start from a position of "these guys could destroy us," and then work from there to disrupt from within. Think of it as healthy paranoia.

    That can be an Eye-Opener. The other way ... well, no matter who you are, I think it is akin to operating with eyes closed.
    KC's View:

    Published on: June 27, 2016

    The Oakland Press reports that Meijer has set four more locations to offer click-and-collect shopping, with plans to expand that to 14 stores by October and 33 by the end of the year.

    According to the story, "fifteen employees at every store will retrieve customers’ grocery orders, keeping them in refrigerators and freezers until customers arrive to pick them up."

    The Press goes on: "Since launching the program at its Canton and Ann Arbor stores last year, Michael Ross, vice president of Digital Shopping and Customer Marketing, said that popular demand in Detroit has seen the number of orders more than double in the weeks following most store launches, and expects that number will eventually grow to 100 per day at some stores ... He said more than 80 percent of weekly orders come from repeat customers, which demonstrates how quickly the shopping option of picking up their groceries curbside is gaining popularity especially among busy parents and young millennials."
    KC's View:
    This is a space that companies almost have to play in, and I think we re seeing, more and more, acceptance of this fact by some pretty major chains. What will be interesting in some cases is how the development of this side of the business affects store development down the road ... they have to be thinking about how the physical store will be different in an environment where virtual stores are becoming more prominent.

    Published on: June 27, 2016

    The Wall Street Journal this morning reports that Amazon "is doubling down on its Dash push-button ordering devices, getting consumer-products makers to invest in the gadgets even amid evidence that consumers are cool to them. The internet giant this week plans to announce it is adding dozens of new brands to its Dash buttons feature."

    The Dash buttons are designed to be placed in convenient appropriate places - like on a washing machine or baby changing table - so that consumers can easily reorder items like laundry detergent or diapers when the need arises. The buttons cost $5 apiece for consumers, though Amazon rebates the $5 the first time an order is placed using them; they are only available to Prime members. The Journal reports that "Companies pay Amazon $15 for each button sold and 15% of each Dash product sale, atop the normal commission, which typically ranges from 8% to 15%, the people familiar with the matter said." The story also says that Amazon has dropped "a hefty buy-in fee of around $200,000 required of the first companies that signed up," presumably to generate greater participation.

    "“It may not be the most intuitive feature,” says Ken McFarland, director of e-commerce for Seventh Generation. “But Amazon is trying so many things and you don’t want to miss out on the ones that work. You want to be out there if it does happen to be a hit.” The Journal writes that "several consumer-product executives said they have signed up for the gadget largely to ensure their brands maintain close ties to Amazon. The venture is more vital as a marketing tool than a product-delivery system, they said."

    The Dash buttons also are getting competition. MNB on Friday took note of a Tech Crunch report that Tel-Aviv-based Kwik has designed a new product that it believes that compete effectively with the Amazon Dash buttons.
    KC's View:
    The Journal story makes the point that some research suggests that "fewer than half of people who bought a Dash button since March 2015 have used it to place an actual order," and that use seems to depend on the type of product involved. on the other side, I've seen research showing that people who use the buttons are enormously brand-loyal, and Amazon-loyal.

    McFarland has it right. You have to spread your bets around the table, because you never know which one will click ... and because by being part of the Amazon ecosystem, you avoid being locked out of all the different things they are doing.

    Published on: June 27, 2016

    Reuters reports that just days after registered UK voters cast their ballots in favor of leaving the European Union, "quit the European Union hit sterling and raised the prospect of another recession," retailers saw both their sales and stock prices fall. At the same time, expectations are that the Brexit vote also could impact any new merger-and-acquisition activity that might take place in the UK.

    And, the story says, "though a weak pound makes British goods cheaper abroad, helping British retailers with international operations, the Brexit vote will also raise questions about unfettered access to the EU market."
    KC's View:
    Lots of questions about what's going to happen now, and very few solid answers ... though just the immediate impact on the UK economy appears to have created some buyer's remorse. (John Oliver did a wonderful job of explaining - and deconstructing - the Brexit situation on last night's edition of "Last Week Tonight" on HBO.)

    I can understand some of the emotions that might have led some British people to vote to abandon the European Union; globalization can be a scary thing, especially if you see your job being threatened. But it seems to me that expecting that a vote and a political statement can hold back the forces of globalization is akin to expecting that one can vote to change the weather. I just don't think it is possible to put that particular genie back in the bottle ... and my guess is that the countries, companies and people who figure out how to make globalization work for them, as opposed to using to create fear and loathing, will be the ones that are most successful in the long run.

    Published on: June 27, 2016

    MediaPost reports that Unilever "wants the advertising industry to stop demeaning women" and is "calling for all of its brands and the industry at large to advance advertising away from stereotypical portrayals of gender." Indeed, "Several of Unilever’s partner agencies have already confirmed that they will be adopting this new approach including BBH, 72andSunny, JWT, DDB, MullenLowe and Ogilvy."

    The story says that "Unilever has carried out multiple in-depth studies to better understand how female identity has evolved and how brands can be more relevant and better connected," and has concluded that "some 40% of women don't identify with women they see in advertisements suggesting the need for 'progressive representation." This means taking a more enlightened approach to how women are depicted in terms of their roles, personalities and appearances.

    "Advertising can be a powerful force in leading positive cultural change," Aline Santos, EVP global marketing for Unilever, said at an ad conference. "We believe it is our responsibility, alongside the industry, to be at the forefront of this change by positively portraying people as they truly are today – progressive ads will lead us to a progressive future for all.” 

    It isn't just ads for and about women that are being affected by this new mindset. MediaPost writes that new advertising for Unilever's Axe brand is shifting "away from its risqué frat boy humor to portray the modern, relevant, genuine world of attraction, where 'the true magic that happens between two equals'."
    KC's View:
    How nice it would be if we lived in a world where people and companies did not need to make themselves feel better by demeaning people they do not understand or appreciate. But we don't live in that kind of world, which is why Unilever is to be commended for being public about its refreshed approach to advertising and marketing.

    It is something that Unilever has some experience with, since celebrating differences rather than demeaning them has long been the approach the company has taken with its Dove brand. Glad to see that the enlightenment is spreading.

    Published on: June 27, 2016

    USA Today has a piece about Starbucks' revised loyalty program, which now awards stars based on dollars spent rather than transactions made, a shift in emphasis that created a fair amount of tsouris among consumers.

    "Even a casual perusing of social media," the paper writes, "finds many loyal Starbucks customer unhappy with the changeover (but let’s rightly note that social media is not always a great barometer, being far too often a vehicle to vent and all.) Similarly, according to an NBC news piece, soon after the change, 'YouGov, a company that tracks shopper sentiment), reported that Starbucks Buzz score has dropped by more than 50 percent since the announcement.'

    "So just what can we learn from this and what makes for a good loyalty program? The bottom line is that a valued loyalty program is one that is simple and offers clear benefits to customers for choosing to buy and stick with a brand."
    KC's View:
    I continue to find the carping to be interesting, and I'm a little surprised that it hasn't subsided. I get it - people who spend $2 for a cup of Starbucks coffee are annoyed that it takes longer to get a freebie than it does for people who spend $4 per cup. At the risk of seeming callous, that's life.

    Published on: June 27, 2016

    Twice has a story about Walmart store #5260, which "located down the interstate from corporate headquarters, has traditionally served as a retail laboratory for all manner of merchandising and display innovation." According to the piece, Twice sent in secret shoppers/field agents to check out the "superstore of the future," and came away particularly impressed by a new approach to consumer electronics and "an in-store touchscreen kiosk where customers can quickly claim and retrieve their online orders."

    For pictures and details, click here.
    KC's View:

    Published on: June 27, 2016

    The New York Times reports this morning that "over the next several years, all of Perdue’s chickens — 676 million last year — will bask in sunlight, part of an ambitious overhaul of the company’s animal welfare practices, which it will announce on Monday. The commitment will hold Perdue to standards similar to those in Europe, which the American poultry industry has long dismissed as antiquated, inefficient and costly.

    "In addition to installing windows, the company plans to give its chickens more space in barns. It may tinker with breeding to decrease the speed at which birds grow or to reduce their breast size, steps that could decrease the number and severity of leg injuries, an issue that has brought unwanted attention to the company. Also, Perdue will put its chickens to sleep before slaughter, a step taken several years ago by Bell & Evans, a smaller poultry company.

    “We are going to go beyond what a chicken needs and give chickens what they want,” said Jim Perdue, grandson of the company's founder.

    The story makes clear that Perdue took some convincing by animal rights groups to come this far, but that now it is not just embracing new animal welfare practices, but also is working to be transparent about what it is doing.

    The Times writes, "Over the last decade or so, Perdue has done more than any other major American poultry producer to eliminate antibiotics of all kinds from its procedures. That made it impossible to continue raising so many birds in as tight spaces and under conditions many people consider unsanitary. Tyson and Pilgrim’s Pride, the second-largest chicken producer in the world, are also reducing their use of antibiotics.

    "The purchase in 2011 of Coleman Natural Foods, a producer of organic meats, as well as the acquisition last year of Niman Ranch, a high-end producer of pork and beef, also helped persuade Mr. Perdue that his company, now the largest producer of organic chicken, could improve animal welfare without hurting business."
    KC's View:

    Published on: June 27, 2016

    • The Dallas Business Journal reports that Kroger "is introducing ClickList, a Kroger-exclusive online grocery ordering service, to select stores in the Dallas-Fort Worth area. Using ClickList, customers can shop online and pick up their orders curbside at participating store locations ... In order to fulfill ClickList orders, each Kroger store is hiring at least 20 additional employees. The company is also building new stores or retrofitting old locations with 600 to 1,200 square feet of additional indoor space, depending on store size and order volume, and adding three to five parking spaces."

    “Feedback from our customers, and other regions, who tested ClickList was overwhelmingly positive and very useful in helping us make changes and improvements before we introduced the service locally,” Dana Zurcher, president of the Kroger Dallas division, said in a prepared statement. “We know today’s customers are continuously looking for ways to increase their productivity yet simplify their lives.”
    KC's View:

    Published on: June 27, 2016

    • The Cincinnati Business Courier reports that Kroger "plans to open a culinary training facility at the downtown building it acquired in February." The company "plans to spend $2.5 million to remodel the building at 901 Elm St. to turn it into the Kroger Culinary Center, according to plans disclosed in a recently filed memo from Cincinnati City Manager Harry Black to city council members and Mayor John Cranley."

    According to the story, "Kroger plans to remodel the property into a culinary training and education center for its employees. In addition to training Kroger employees, the facility will serve as 'testing ground for new food products and trend research'."

    • The Associated Press reports that Albertsons-owned Shaw's "has agreed to reverse a policy and resume contributions to food pantries throughout New England." The story says that Shaw's changed a longtime donation policy in 2013 when "re-evaluating a number of our business processes." Now, apparently, that re-evaluation has come to an end, and the company in jumping back into the food donation business with both feet, and will be working with Feeding America to roll it out chain-wide.

    Biz Times reports that following Kroger's $866 million acquisition of Roundy's, "some changes are expected this year at Wisconsin Pick ’n Save and Metro Market stores. Chief among them are what the stores look like and which products they carry, at what prices."

    "Among the changes coming down the pike this year are store remodels, as well as pricing and product shifts," James Hyland, vice president of corporate communications and public affairs at Roundy’s, tells the site, adding, "“There’s obviously going to be changes in product that people will see and there will be pricing changes and there may be some changes to the store. We have committed to increase our capital spending throughout all of our Wisconsin banners. While we don’t publicly disclose our spending plans, over time our customers will notice changes in merchandising, pricing and store aesthetics.”
    KC's View:

    Published on: June 27, 2016

    • General Mills announced that Jeffrey Harmening, who has been running its US retail business, has been named president/COO of the company, a move that puts him on track to become the next CEO. Current CEO Ken Powell said the appointment was part of an ongoing succession plan.
    KC's View:

    Published on: June 27, 2016

    Got a lot of email last week about Costco's shifty from American Express to Citi Visa, which has created a lot of bad press and dissatisfied customers.

    MNB user Jeff Gartner wrote:

    Kevin, we're Costco members and received both postal mail and email notices explaining the details of the switch from AmEx to Citi Visa, including an easy-to-read list of comparative benefits with slightly higher cash-back rewards with Citi Visa. We received our cards two weeks prior to the June 20th switch and had no problem activating them.

    However, while Citi Visa's cash-back rewards are slightly better, we have experienced service issues signing up for our online account and automatic payment. More importantly, Citi Visa does not support Apple Pay (which we always use when available, it's the safest and easiest way to pay) and enables much fewer alerts than AmEx. Additionally, AmEx's telephone customer service was always exemplary (and we also have an AmEx Blue Preferred card), Citi's telephone service has been mediocre at best, comparable to the cable company or your wireless company on a good day (a very low bar). 

    Costco certainly has to hope that its own excellent customer service reputation is not diminished by Citi's mediocre one.

    From MNB reader Jay Schwarz:

    I ran into some of this.  Since I don’t go to Costco very often and have been generally disappointed when I have gone in there, I decided to cancel my membership when the Amex news broke.  Since then, I’ve been battling with Amex and Costco because they can’t seem to coordinate my cancellation and they put my annual dues on the card after I cancelled.  I got a strange letter saying that I might or might not owe that money.  I guess those are the two possibilities!

    From another reader:

    For such a large successful company, WOW!!! They did a horrible job with communicating the change!! Or I should say ... NOT communicating the change!  There was news about it over a year ago. I thought it was effective this past January, but never happened. I kept my Amex card and Visa handy each time I shopped. I don't recall any signs in the stores, no announcements via any method?  

    Really??!!  Wth were they thinking??

    PS And you know they did it because of a profit disagreement with AMEX. I worked in the CPG industry and Costco is a huge part of many manufacturers business, and they are very aggressive in negotiating terms.

    And another:

    Costco: Let us decide which credit card we want to use, just like Target, Publix, Amazon and Walmart. The media reports focus on those switching from Costco branded Amex to Costco branded Visa. Like you KC, I don’t have or want either. I want to use the credit card that makes  the most sense for my family. What benefits a Costco Visa offers are almost irrelevant to my overall credit card usage plan. I am not “quitting Costco”, but we are planning on spending less at Costco if they do not take AMEX.

    Not everybody, however, is disenchanted:

    I read your update on the troubles that Costco has encountered with the switch from AMEX to Visa.  From my perspective it was one of the most flawless changes I have experienced.  It started with communications in February and followed with communications every month.  I received my credit card terms in April, my cards arrived in May.  On Monday, June 20, all current transactions on my AMEX card were transferred to the Visa account with Citi with the exact same credit limit.  Even my pending payment was paid to AMEX but credited to the Visa account.  I added the Citi App to my phone and changed all my payment information on different accounts (Amazon, etc.) to the new Visa card.  Seamless with little effort on my side.

    Another MNB user wrote:

    I can’t speak for everyone else but, Costco communicated to me more than sufficiently. They’ve been sending me emails and letters about the switch for months. Perhaps a bit too early. Everyone I know that has/had a Costco card were handled extremely well. And, it was obvious to me that the switch provided me more benefits (i.e. – saving more money). I have to wonder what the real breakdown is. Some are likely Citi. Some could have been AmEx. Some Costco. And some the consumers themselves.

    Given the magnitude of this change, I am not shocked that there are post-change disruptions. I’ve been working with operations systems for decades and changes of this nature, by definition, will have troubles immediately after go live. I’d like to know how many DID NOT have a problem. Just because the support lines have blown up doesn’t mean this was poorly handled. What’s the percentage of the whole. That would be a far better measure of the quality of the switch.

    The bigger measure will be how quickly it settles down.

    For me, it was incredibly smooth. My surprise was, the ENTIRE account was simply transferred from AmEx to Citi-Visa. It wasn’t the shut down of one card and the start of another. Just a change of who’s handling the account. This is Costco’s account, not AmEx or Visa. They’re “simply” the clearing houses. Let that statement sink in a minute.

    I did get one email about the passing of Dandy Dan Daniel, a New York radio icon on WMCA during the rock ' roll sixties:

    You forgot to mention "Cousin" Bruce Morrow And Charlie Greer in the morning!!!

    I actually didn't. Dan Daniel was one of the WMCA "Good Guys." Cousin Brucie and Charlie Greer were, if memory serves, on WABC. Totally different deal.

    Amazingly, BTW, Cousin Brucie is still working, on satellite radio. Wow. He's still got the pipes, too.
    KC's View: