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    Published on: August 16, 2016

    by Michael Sansolo

    While I might disagree, I can fully understand the sentiments of MNB readers who think we focus too often on e-commerce and especially Amazon. They suggest that we are overhyping the threat, overpraising the possibilities and overlooking many flaws in the entire process.

    But even if you assume that everything we write here about e-commerce is wildly optimistic about its potential, the worst that happens is that we look silly. It wouldn't be the first time. It won't be the last. But that's about it.

    But if we're right - or even half right - the implications for industry are much greater.

    There's no simple choice when deciding how to address the e-commerce threat. No matter what path you take, the potential financial and competitive risks can be significant.

    But here's the important thing to know: Not acting at all creates even greater risks for the business, potentially putting them on the path to irrelevance and ruin.

    That’s no small problem. And I don't think I'm overhyping it.

    Consider a quote from a Wall Street analyst that appeared in the New York Times last weekend, as he commented on Macy's decision to close 100 stores.

    “Given the convenience of e-commerce, the consumer needs a really good reason to go to a store and park their car.”

    Athletes talk about something called “bulletin board” material - quotes from opposing players that irritate and motivate them at the same time. So they hang these quotes on a bulletin board as a constant reminder of the need to act.

    That's exactly what traditional retail businesses ought to do with that analyst’s quote.

    Read it again:

    “Given the convenience of e-commerce, the consumer needs a really good reason to go to a store and park their car.”

    Like pundits who write for online news and information sites, analysts can be wrong. They read the situation based on how they perceive benefit, not necessarily how shoppers or even businesses are acting. But they also can be right ... and their opinion matters, if only because it can impact perception, which can affect financing issues.

    And so businesses have a choice. Act or not.

    Let me repeat. Not acting at all creates even greater risks for the business, potentially putting them on the path to irrelevance and ruin.

    “Given the convenience of e-commerce, the consumer needs a really good reason to go to a store and park their car.”

    You may read this statement as hyperbole, or as simple statement of fact. You have that choice. Either way, I think retailers should post this quote in board rooms and lunch rooms, reminding us that consumers also have a choice - they can always go someplace else to do their shopping.

    It just so happens that we think more and more, they'll be choosing to go online.

    Though we could be wrong.

    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: August 16, 2016

    by Kevin Coupe

    The Washington Post has a lovely interview with Apple CEO Tim Cook, who recently celebrated the sale of the company's billionth iPhone, and who next week will observe a more solemn occasion - the fifth anniversary of Steve Jobs's decision to step down as CEO and turn the reins over to Cook. Six weeks later, Jobs was dead, and Cook has presided over a time of tremendous growth for Apple ... though lately, the company seems to be creatively stagnant, and Apple has even seen two quarters of declining sales after 13 years of consistent growth.

    Still, it has been an extraordinary time for Apple and Cook definitely has had a significant impact, "making it more systematic, more transparent, more team-oriented, more humble," the Post writes. "He has engaged on social issues more than most CEOs, writing op-eds on legislation that limits gay rights and making the extraordinary decision earlier this year to oppose the FBI’s request to unlock the San Bernardino killer’s phone.

    "As CEO, he gets high marks for managing the company’s growth, keeping margins high and expanding further into markets such as China (Apple had four retail stores in China five years ago. Today it has 41.) He has pushed into the enterprise market, grown Apple’s product lineup and positioned Apple to make more money off the devices it’s already sold: Its services business, which includes things like iTunes, iCloud and a mobile payments service, is projected to be the size of a Fortune 100 business next year — all on its own. Apple remains the most valuable and most profitable company in the S&P 500 index."

    The interview is definitely worth reading here ... but let me share with you two excerpts from the extensive interview.

    Re: the CEO's job... "I think of a traditional CEO as being divorced from customers. A lot of consumer company CEOs — they’re not really interacting with consumers. I also think that the traditional CEO believes his or her job is the profit and loss, is the revenue statement, the income and expense, the balance sheet. Those are important, but I don’t think they’re all that’s important.

    "There’s an incredible responsibility to the employees of the company, to the communities and the countries that the company operates in, to people who assemble its products, to developers, to the whole ecosystem of the company. And so I have a maybe nontraditional view there. I get criticized for it some, I recognize. But I’ve never wanted to be the stereotypical CEO. I don’t think I’d be very good at it, honestly. And I don’t think for Apple that would in the long run be good for the company. If you care about long-term shareholder return, all of these other things are really critical."

    Re: the Apple Store leadership... "I hired the wrong person for retail [former Dixons CEO John Browett] initially. That was clearly a screw-up. I’m not saying anything bad about him. He didn’t fit here culturally is a good way to describe it. We all talked to him, and I made the final decision, and it was wrong. We fairly quickly recognized it and made a change. And I’m proud we did that.

    "A lot of companies would have said, 'Oh, he hasn’t been here very long.' But when you’re looking at more time with [then] 50,000 people in retail — that’s a lot of people that you’re affecting in the wrong way. That was a mistake. I probably have a long list."

    The interview, I think, offers some strong insights into the mind of one of the world's most visible CEOs, and worth checking out.
    KC's View:

    Published on: August 16, 2016

    Time has a story saying that Walmart, responding to perceptions that its stores often are "crime magnets" and that it monopolizes police attention in many communities, is testing a new approach that it hopes will "combat crime and ease the burden on law enforcement."

    According to the story, the company is experimenting at one of its South Carolina stores with a program that deals with shoplifters internally, rather than calling the police. The plan is called "Restorative Justice," and "the idea is to give some accused shoplifters, such as first-time offenders, the option of completing an online remedial program designed to deter through education, rather than jail time.

    "The program, which offenders must pay an undisclosed sum to take but doesn’t involve the police, employs an approach sometimes found in schools and prisons, which emphasizes rehabilitation and reconciliation between the offender and the community ... Walmart believes its Restorative Justice program will alleviate the burden on local departments responding to petty crime calls.

    "David Karp, a professor of sociology at Skidmore College who studies restorative justice, says the company’s approach is promising. 'If they can reduce shoplifting by helping people understand the costs to the company as well as to themselves, that’s a good thing,' he says. 'I think Walmart recognizes that sending them to jail isn’t particularly productive'."

    The initial South Carolina test shows calls to the police going down roughly 40 percent since the new program was instituted.

    However, the story also quotes MNB fave Burt Flickinger, managing director at Strategic Resource Group, as pointing out that one of the ways in which Walmart could address shoplifting at its stores is by restoring previous staffing levels. By cutting employee hours in an effort to be more efficient and drive down costs, Walmart actually has created an environment that is more susceptible to crime.
    KC's View:
    I think I pretty much agree with this approach. If Walmart - and other companies, for that matter - can figure out a way to deal with shoplifting that takes some of the pressure off the criminal justice system, that's probably smart.

    When you think about it, this approach probably is like it used to be in the past, when the local shop owner would just collar the offender and call his or her parents. Which was a lot worse than calling the cops.

    Published on: August 16, 2016

    Publix yesterday announced what it called "a soft launch of the company’s first blog site for engaging with customers – The Publix Checkout,"

    According to the announcement, "Blog posts will range in topic from delicious recipes, community initiatives and sustainability ideas to holiday entertaining, health and wellness and more. Visitors to the blog can comment on posts or share them on social media sites."

    Publix emphasizes in the announcement that this is an extension of a social media strategy that started in 2011; it already has a presence on Facebook, Twitter, Instagram and Pinterest.

    "Our social media presence has always been about engaging with our customers where they are and extending our in-store service online," Maria Brous, Publix media and community relations director, said in a prepared statement. “Having a blog provides us a fresh and inspiring way to connect socially with customers, taking them beyond the aisles and showing them we’re more than just a grocery store.”
    KC's View:
    Maybe it is just because I've been blogging for almost 20 years - somebody I know told me that I've been blogging almost since before the word was coined - but this seems both necessary and a little late to me. But better late than never.

    Published on: August 16, 2016

    Time reports that Amazon is testing a new concept in Japan, where it will allow people watching a new cooking show on its prime video streaming service "to order some of the food featured in the episodes" using Amazon's 1-click technology.

    The initiative, Times writes, "highlights Amazon’s focus on instant-order e-commerce that can be personalized to draw local customer bases, including by integrating shopping opportunities into entertainment."
    KC's View:
    I think this idea is kind of brilliant, and Amazon is uniquely positioned to see exactly how far it can take it. I'm thinking that Emeril Lagasse has a new show starting on Amazon in a few weeks, in which he travels the world to visit other chefs and get a look at local cuisines ... and this would be a great opportunity not just to get viewers, but also make it easy for them to buy relevant foods shown in the shows.

    Published on: August 16, 2016

    The Wall Street Journal reports that Circle K owner Alimentation Couche-Tard "is nearing a deal to buy CST Brands Inc. in a big move to consolidate the convenience-store industry." CST is described as "a fuel and convenience-store chain that operates predominantly under the Corner Store name, with more than 1,000 stores in the southwestern U.S. as well as in New York and Eastern Canada."

    It is unknown what the cost of a deal would be, but the Journal says that CST has a market value of $3.4 billion.
    KC's View:

    Published on: August 16, 2016

    Seeking Alpha reports that Walmart is expanding "its no-price-matching policy to another 300 stores in US. The company started ditching Ad Match program in early June when 500 stores stopped providing price-matching option to customers." Instead, Walmart is engaging in a price rollback program that it hopes will compensate for the change.

    While the move "will take Wal-Mart away from its long held status as a price leader," the story says, it also will give the retailer "greater pricing control." The story notes that while Walmart is catching some flack online for moving away from the Ad Match program, the company maintains that it can lower prices more strategically and effectively without it.

    Seeking Alpha notes that there have been surveys showing that Aldi can be as much as 30 percent cheaper than Walmart on a similar basket of items, which puts pressure on Walmart to manage expectations about its ability to deliver low prices.
    KC's View:

    Published on: August 16, 2016

    • The Chicago Business Journal reports that Amazon plans to open up a package pickup location at the University of Illinois in Chicago, the first physical location that it has established in the Windy City.

    According to the story, "Amazon said the 2,300-square-foot staffed pickup location will be located at the Student Center East on the UIC campus and will open later this year ... Amazon said it's opened 12 staffed pickup locations at colleges across the country and said it plans to open one at the University of Illinois at Urbana-Champaign later this year."
    KC's View:

    Published on: August 16, 2016

    • The Dayton Business Journal reports that Kroger is teaming up with The Little Clinic and Feeding America for a new health and wellness initiative that will have Kroger donating "one meal through the Feeding America network of food banks for every flu shot administered at all Kroger family of pharmacies or The Little Clinic locations."

    The program will run from now until April 1, 2017.
    KC's View:

    Published on: August 16, 2016

    Responding to our stories about Hampton Creek sending out employees to buy its products to drive up sales, MNB reader Peter Talbott wrote:

    This story reminds me of the Mad Men season 4 “Public Relation” episode.  Peggy and Pete pay two women to stage a faux fight over the last Sugarberry ham in a supermarket, and alert news crews in order to generate publicity with a minimal budget.  Naturally things go awry.  When Don finds out he responds, “I don’t think it’s funny or cute.   I try and stay away from these kind of shenanigans”.

    And MNB reader Jim deLuca chimed in:

    This reminded me of a business case that we covered back in college.  At some point, 409 cleaning spray got some industrial espionage about a new competitor running a test market and went with a BOGO on their 409 in order to undermine the sales of the new product.... shoppers would not need any new spray for way past the test of the competitor so the competitor might decide not to go to market...

    Regarding the acquisition of King's and Balducci's by a private equity group, one MNB user wrote:

    I hope the recently announced acquisition of Kings and Balducci’s provides them with the capital they need to expand their newest format to more stores.  Kings does an amazing job of carving out a unique position in the highly competitive, Northern New Jersey market.

    I was just in the King's store in Old Greenwich, Connecticut, the other day, and I found it to be a little gem, with a terrific staff that seemed totally engaged with shoppers. So I agree.

    We had a story the other day about how Walmart's acquisition of Jet could hurt Jet's ability not to charge sales tax in most markets around the country. Leading one MNB user to write:

    As noted in the reporting, the current sales tax advantage that internet-only companies is enjoying, is a price advantage that has been legislated/ruled, creating an unfair competitive advantage for them.  I wonder what will happen to stock prices and continuing sales if this unfair playing field is leveled.  I believe the initial advantage created in the 1992 Supreme Court ruling is out-dated and has served its purpose in jump-starting e-commerce.  We need to return sales tax revenue back to the local economies, as well as encourage more jobs locally.  I view with interest and support the work that FMI, NRF, and others are doing to lobby and bring legislation forward to correct this issue.

    Regarding the study saying that self-checkout systems encourage usually law-abiding people to steal, MNB user Chuck Lungstrom wrote:

    Back in the day when I attended a seminar concerning loss prevention, the guest speaker relayed some interesting and rather disturbing facts about the subject of theft.  This study included both customers and employees (and sales representatives and vendors for that matter). Basically, anyone that walks in the door.  People are people whether they work for you or not.

    According to him the breakdown was as follows:  40% of our customers/employees will look for opportunities to steal and then do so, 40% of our customers/employees will not look for opportunities; however if the opportunity is presented to them....they will take advantage of the opportunity.  That leaves only 20% of our customers/employees that will not steal from us.  Really, only 20% . .  . . . 80% of our customers/employees when given the opportunity will steal from us and only 20% will not!  Disturbing!

    Our job as retailers is to minimize the losses.  Prevent the 40% that will look for opportunities, dissuade the 40% that can be dissuaded, and applaud the 20% that are honest.

    This is a perfect example of Pareto's 80/20 rule gone askew.  Oh, that it would be the other way around.  Unfortunately, I have adopted a rather pessimistic view on this subject after many years of experience processing loss prevention claims against customers, employees, vendors and even sales reps . . . . . . many of which I would not have thought possible.

    And from another reader:

    I always enjoy reading your commentary as well as views from readers.  I wanted to add a “positive” comment regarding the story of the study around theft at the self-checkout machines.  I had the benefit of being able to run an analysis of many metrics of these machines while I worked for a large grocer.  Aside from the usual thefts or “mistakes” that can occur, I was also able to note a positive feature of the machines.  In the product lines that might be considered embarrassing to purchase (condoms, pregnancy tests, etc), stores with the self-checkout units had lower shrink of these items versus stores without the self-checkout machines.  In addition, when looking at the items from shoplifter reports (items stolen), again stores with these units had much lower instances of theft of these items.  So along the lines of thought that people might be enticed to steal when given a chance (at a self-checkout), you can also make the case that at these machines, others might be more enticed to pay for their items.

    Finally, I got this note from a reader about a reference I made to a horrible meal I had in Rawlins, Wyoming, last week:

    Oh my gosh, I can’t believe you mentioned Penny’s Diner. My husband and I and my parents went on a road trip from Kansas to Boise in July. We stopped at that same Penny’s - for the same reason you did. We had the same experience and got a few “can you believe it” stories out of it. Awful!

    I guess there's something to be said for consistency...
    KC's View: