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    Published on: August 18, 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.

    Every once in a while, it doesn't make sense to offer a text version of FaceTime ... and this is one of those times, since this week's version consists of a dialogue between Michael Sansolo and me.

    So I hope you'll click on the video box and enjoy ... and as always, let me know what is on your mind.

    KC's View:

    Published on: August 18, 2016

    by Kevin Coupe

    Bloomberg has a story about how technological advances actually have created an unusual opportunity for inside-the-box thinking ... that actually seems to be working.

    The location is London, where the familiar scarlet red public telephone booths - called "boxes" there - were sitting dormant because, well, hardly anybody uses pay phones anymore. Everybody has cell phones. So what was to be done with these icons of the British sensibility?

    "Anything and everything, it seems, from an honor-based lending library to a lunch-salad stand. One is a first-aid stop replete with a defibrillator; another could be the world's smallest art gallery. In perhaps the greatest irony, they seem just the right size to serve as mobile phone repair shops and charging stations." There's even one concept that will have booths serving as mini work stations "with wifi, power outlets, a printer and scanner, and other office utilities."

    The conversion process was conceived of by Edward Ottewell and Steve Beeken, the story says, "who opened the Red Kiosk Company and a related charity. They're refurbished, given a paint job, new electric wiring, specialty glass and locks. The process takes about three months, Ottewell said ... Tenants sign leases of three to 10 years that cost about $4,720 (£3,600) a year."

    I think this is a great example of innovative thinking, and how cultural change can create opportunities. You just have to think outside the box ... or, in this case, inside it.

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

    Published on: August 18, 2016

    CNBC has a piece about Target's continuing problems, which were reflected yesterday in Q2 results that showed a 2.2 percent drop in customer traffic, which CFO Cathy Smith said was the company's "number one challenge." (Sales are a strong number two - they were down more than seven percent.)

    The core issue facing Target is the difficult it is having in balancing the two sides of its "expect more, pay less" value equation. Not only is it having trouble attracting customers into the stores to shop in its grocery and pharmacy departments, but there also was a double-digit drop in traffic and sales in its electronics departments. And, CNBC writes, "The company once again struggled to bring in shoppers for smaller "fill-in" trips during the quarter, a trend it called out in the prior three-month period."

    The story notes that "changes in its grocery business, including having more products in stock, upping its organics selection and keeping food fresher, have yet to materialize into sales, management said. Target has been testing changes to its food assortment and presentation in a set of California stores. Results have been promising, but it's too early to know how these changes would play out across the broader chain, said CEO Brian Cornell." At the same time, analysts are saying that "Target is not moving fast enough in deploying these types of changes."
    KC's View:
    It seems to me that one of the things that Target needs to continue to do is move forward with expansion of its small-store/urban concept, which tends to be more productive than larger stores. I've always liked this concept, though I do have some concerns about them being a little too vanilla and cookie-cutter, with not enough local emphasis.

    On National Public Radio (NPR), Marketplace reported that Target is trying to distinguish and differentiate its grocery offering by "strengthening its three private-label food brands." Amanda Irish, vice president of Owned Brand Food and Essentials for Target, tells Marketplace that "her team is trying to offer private-label products that are special — not just knock-offs of the name brands." I also agree with that - it is a pretty good rule of thumb to focus on the differentiated products that other people don't have rather than the items that everybody sells. (Though you still have to get people into the stores.)

    Coverage of Target's results yesterday also noted that it will be taking on a new $20 million expense in coming months - the installation, chain-wide (in stores that do not already have one), of single-stall bathrooms that will reside next to traditional male and female restrooms. These are being put in as a way of assuaging customers who were concerned about Target's announced policy of allowing customers to use restrooms that correspond to their gender identities. This was a policy designed to be inclusive, but the company did get some pushback in certain markets, which led it to take on the new expense. Target said that it was difficult to ascertain if the pushback on its inclusivity policy hurt it in terms of customer traffic and sales.

    Published on: August 18, 2016

    The Cincinnati Business Courier has a story saying that "subscribers to meal kit services are spending 6 percent less at supermarkets than they did before using the service, according to a new study by Atlanta-based credit and debit card spending analysis firm Cardlytics."

    The story goes on to say that "Blue Apron, Hello Fresh and others are growing because of two huge trends: convenience and fresh, healthy food. They deliver recipes and all of the ingredients to customers for meals that feature fresh, high-quality options. Customers prepare the meal at home in a process that typically takes 30-45 minutes. Blue Apron meals typically cost $20 for a meal for two.

    "It’s a growing force. Cardlytics found that consumer spending through meal services soared 311 percent last year compared with 2014."
    KC's View:
    Let's be clear. One of the reasons that there is so much growth in this segment is that it is new snd coming off a very small base. That's not to suggest, though, that this can be ignored. Far from it.

    The impulses that are leading people to use these kinds of services have to be taken seriously and acted upon by so-called traditional retailers, who cannot afford to lose one percent of their businesses, much less six percent.

    Published on: August 18, 2016

    WPXI-TV News in Pittsburgh reports that Walmart is extending its click-and-collect e-grocery service to that market, beginning next week.

    The five stores that initially will provide e-grocery are located in the Pennsylvania communities of Pittsburgh, Beaver Falls, Butler, Tarentum and Uniontown. The story notes that "Walmart’s grocery pickup service features 30,000 items, according to a news release from the company. All items are priced at the same prices customers find in their local Walmart store. 
    KC's View:

    Published on: August 18, 2016

    In Minnesota, the Star Tribune reports that Amazon is adding one-hour restaurant delivery to the suite of services offered to its Prime members there.

    According to the story, "Amazon has partnered with dozens of local eateries including Hell's Kitchen, Keys Cafe and Bakery, the Lowry, Common Roots Cafe, Gandhi Mahal, Broders' Pasta Bar, Manny's Tortas, French Meadow and select Leeann Chin locations. It is only available to members of its $99-a-year Prime program and in certain Minneapolis neighborhoods such as Calhoun-Isles, Uptown, Linden Hills and Dinkytown. But the company is planning to expand the delivery region in the coming weeks. Prime members can enter their ZIP codes in the app to see if their home is in the delivery area."

    First tested in Seattle, Amazon's restaurant delivery service now is up and running in a number of US cities, including New York, Chicago, Los Angeles, and Portland, Oregon.
    KC's View:

    Published on: August 18, 2016

    • In Minnesota, the Star Tribune reports that delivery service Instacart is partnering there with Good Grocer, a nonprofit business that "has an unusual model in which customers can sign up to be volunteers and work at the store for two-and-a-half hours a month in exchange for a 25 percent discount ... the idea is to give low-income residents an affordable way to access more fresh and healthy foods."

    The premise seems to be that by offering delivery, Good Grocer hopes to expand its customer base, which will allow it to keep prices low for income-challenged shoppers.

    "“We’re thrilled to offer home delivery, making it even easier for socially-minded customers to help fight hunger,” Kurt Vickman, founder of Good Grocer, said in a prepared statement. “The premise is simple but the impact is huge: Every Instacart purchase helps reduce the price of healthy food for a person in need. By choosing Good Grocer, Instacart shoppers do good and get access to the same national and local brands at our everyday low prices.”

    Instacart has a number of other companies in the Twin Cities for which it makes deliveries, including the Wedge Co-op, United Foods, the Lakewinds Co-op, Total Wine, Cub Foods, Whole Foods, Costco, and Petco.
    KC's View:

    Published on: August 18, 2016

    • Aldi has announced that it will spend $57 million to open a division headquarters and 500,000-square-foot distribution center in Dinwiddie County, Virginia.

    Aldi CEO Jason Hart said that the retailer has 32 stores in the state, with plans to open as many as 60 more there over the next five years.

    • The Food Marketing Institute (FMI) and Nielsen announced yesterday what they called "a strategic analytic alliance to uncover comprehensive insights on the 'Digitally Engaged Food Shopper..' Results from this multi-year initiative will focus on current and future digital shopping behaviors, incorporating perspectives from top retailers, CPG manufacturers and technology providers, along with extensive consumer research by FMI and Nielsen.
    KC's View:

    Published on: August 18, 2016

    • Film director Arthur Hiller has passed away at age 92, after a career that included Love Story, The Americanization of Emily, Silver Streak, The Out of Towners, The Hospital, Plaza Suite, and the original (and hysterical) version of The In-Laws.
    KC's View:

    Published on: August 18, 2016

    On the broad subject of change, one MNB user wrote:

    I get it.  Buggy whip makers hated it when the “horseless carriage” came to be.  So did the railroad . . . stagecoach companies . . . and blacksmiths.  Similarly, medical doctors took a big chunk of the local barber’s business (you know . . . blood-letting) . . . and today Physician Assistants and Nurse Practitioners are taking over for the traditional family doctor.

    Progress always creates a set of winners and a set of losers.  Winners see the opportunity and seize it.  Losers can become winners, if they get with the program. My question is: In the emerging economy, will the vast majority of our population be able to be a winner?

    Will there be access to affordable, effective education and training for those who need it? Don't you think it was easier for the buggy whip maker to learn how to bolt on a car part than than it was for later auto line workers to learn how to program a robot?  What about those who simply do not have the ability to learn the skills required?

    In this never-ending quest for more-and-more automation (usually focused on lowering costs), how many people will be left behind?  Not because they are lazy or in denial. But, because they truly cannot participate?

    Plus, as automation gets more and more sophisticated, every non-human intervention seems to be displacing a larger number of people without creating--or inspiring--associated jobs.  (It takes service departments with plenty of employees to maintain and repair cars--more people than it ever did to fix a buggy whip.) And, so many consumers seem perfectly happy to avoid human contact when they shop, bank, etc.  How is this sustainable?

    No, progress is not “evil.”  But, from time to time, we have to acknowledge "just because we can doesn’t always mean we should."  We have to remember that sometimes we can’t pull back from the brink. 

    Of course, automation isn’t the equivalent of splitting the atom leading to the most potent weapons of mass destruction.  The ethical questions may not rise to the level of those associated with cloning or genetic engineering.  But, this continual focus on getting (or producing) everything for the lowest possible price and finding more and more ways to take people (read: cost) out of our daily living . . . there will be consequences. Some positive, possibly.  But, in the long run, will they outweigh the negatives?  I'm not so sure.

    From another reader:

    I don’t doubt the impact of Amazon on brick and mortar stores. I am a prime member and we have wayyy too many boxes in our attic storage as testimony of our usage… But I used to spend thousands annually at Macys and used to love to shop there. I had the high level star rewards card.. It was also my go to place for gifts, for my clothes, bedding, kitchen, gifts, etc.  But over and over during recent years the quality of clothes went into the toilet and I found myself just not going.  I used to go there for kids clothes and baby clothes gifts and after the last three visits I came away empty handed – it was all Chinese, and predominantly skull goth and slutware. FOR LITTLE KIDS!  Really?    I needed two baby presents yesterday. I didn’t even bother to go to Macys this time.  Far cry from my fav store and #1 place to shop. Between the scarce service and the crap they are buying, the perfume assault when you walk in, and dizzying noise, visual and otherwise, I don’t need them. They became irrelevant.   Used to be a great store.Don’t blame Amazon.  Macys did this to themselves.

    And another:

    I always laugh when people associate “the fear of the future” or “fear of technology” with any form of technology objection.  Personally I fear neither and embrace both. Yet also have the foresight to recognize a future problem currently coming to fruition. Please wake up to the fact that not ALL technology is good and don’t be fearful of people who would want to classify you as fearful for objecting.
    Also, use of the buggy whip example is embarrassing. Henry Ford and the industrial revolution created job! Amazon is killing jobs!

    Still another MNB user wrote:

    Thank you for bringing attention to David Ignatius' article (in the Washington Post, about jobs that are vanishing in the new economy and the business/public policy challenges this creates).

    I have been saying for years that 80% of the jobs are going away. There are some people who soften that number to say only 50% of the jobs are going away. Regardless, you are correct in saying that the politicians, at all levels, have their heads in the sand about the implications.

    MNB reader Nancy Peterson wrote:

    I agree with your POV on change.  We are fooling ourselves if we think we can just ignore technology, ignore global markets, etc.    Ultimately you will be left behind.   However just how a truck driver can learn how to be more relevant is quite the challenge.  I agree with the Washington Post columnist that politicians need to address the real issue, the “automation bomb.”  Of course, in the current political climate, this is simply not going to happen.

    One MNB user wrote the other day that failure to recognize that Amazon is a job killer "will only lead to more unemployment, greater need for federal assistance and a further widening of the salary gap between rich, poor and the middle class Amazon is helping to destroy."

    Leading one MNB user to comment:

    Federal assistance, for what? The government is going to do what? Except maybe job training. The irony is as a manufacturer we are still struggling to hire in both GA and VA. We only manufacture in the United States but struggle to find people willing to work?
    And as far as a trade, the supermarket industry is fast losing qualified technicians to work on refrigeration systems, a job with training that can pay six figures and yet the average age is well into the high 40’s and 50’s
    Always appreciate MNB, I will stay anonymous on this email but the “Amazon is evil” and the “there are no jobs” drives me crazy.

    Another MNB reader wrote:

    The idea that e-commerce is a “threat” to retail explains much of the confusion. E-commerce is a fact and evidence of change that has always been a part of retail. Some retailers have made e-commerce a distraction and excuse while others have adapted while never forgetting the main things. When I look at Amazon – I don’t see technology; I see an outstanding customer service provider who always thinks I am right and strives to provide an exciting transaction every day.

    MNB user Robert Dyer wrote:

    Regarding the focus on e-commerce growth and the need to continue to cover it, I agree with the need to keep future-focused.  Those retailers that are not at least considering the impact to their business need to do so, while weighing the costs and benefits of doing so.  That said, we cannot ignore the many customers that still come into our doors to shop.  Whether they do so because they just like to shop or they do not participate in the internet economy due to heavy mobile and cable internet cost, they are still a large customer base.  I was reminded to this as I passed a regional mall this past Sunday, that was absolutely packed with cars in the parking lot coming into the back-to-school clothes shopping season.  Or, as I walked a Walmart and observed the crowds of parents and children packing the aisles purchasing their school supplies, backpacks, shoes, and apparel.
    I think that innovations in in-store merchandising that enable easier shopping, along with focused marketing events, continue to drive incremental sales for those retailers that put their focus on where the customers are.

    Our general position here is that a) I am not anti-store, and b) I am pro-relevance.
    KC's View: