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    Published on: August 25, 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 ... coming to you today from the brand new Apple store overlooking Union Square, in San Francisco. Just two months old, this store may be one of the nicest, coolest stores that Apple ever has opened. It is two levels, with the top level largely devoted to training, education and the Genius Bar, and the bottom level focused on products.

    But it is the open design of this store that really appeals to me, and, I think, to a lot of customers. First, the interior is laid out so that the second floor is a kind of mezzanine that looks out over - and seems connected to - the bottom floor. But even more impressively, running along the length of the building on two sides are these enormous doors that they are able to open up, essentially eliminating entire walls of the store - creating a retail environment that sort of merges into the surrounding neighborhood. It is a wonderful design conceit, and not surprising, since Apple always has made design a high priority in its products and retail locations.

    Apple's retail boss, Angela Ahrendts, recently was quoted as saying that she wants Apple Stores, wherever possible, to function as "town squares." She said, "We don't really need to open more stores, but we need to open incredible places that almost behave like a town square, like a gathering place. Right? So when all the events start to turn on, that's what, you know, we want you to meet people at Apple. See what's happening."

    That's what this Apple Store delivers. In spades.

    One new idea just unveiled by the company - it is no longer calling its stores the Apple Store. As in, "Apple Union Square," as opposed to "The Apple Store Union Square." It would seem to be an effort to recast - subtly - these locations as more than just stores, but rather as living, breathing organisms that are part of the broader Apple ecosystem.

    Now, I was talking to a friend of mine who wondered if Apple was spending so much time designing great retail experiences that it is not focused enough on designing great products. I understand where this comes from - I think most people would agree that Apple is on a bit of a design plateau at the moment. It has been a while since the company has come out with a knock-your-socks-off product.

    But I don't think this is entirely a fair observation. These two things - products and retail - are not mutually exclusive. In fact, the pipeline for new development on both sides of the business probably is so long that it is almost impossible to have them both on the same track at the same time.

    Here's the deal. Apple - like any retailer - has to have both compelling new products and engaging new stores. it isn't a matter of choosing between the two.

    It is entirely possible that next week, Apple will come out with the next great technology innovation. Or it could be next month. Or next year. But it can't let progress - or lack of progress - on one side of the business dictate the schedule of progress on the other. What's most important, on both sides of the business, is to continue to think big, dream big, and come up with big new ideas.

    I'm think this kind of approach always is a good idea.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.

    KC's View:

    Published on: August 25, 2016

    by Kevin Coupe

    Fast Company has a story about the Aloft hotel chain, and how it has come up with a new innovation - the voice-activated room.

    According to the story, "The company's future-gazing technologists have developed an app that runs on an iPad that controls the room using Apple's Homekit and Siri. It allows guests to change the temperature, switch the lights on and off, and turn on the television by using voice commands. Internally, this effort has been dubbed 'Project: Jetson' because, once set up, it really does feel like we're in the hotel room of the future."

    The system is being tested at an Aloft property in Boston, and here's how it works, according to Fast Company:

    "When you enter the room, the you receive instructions on the TV screen about how to set up voice activation. When you pick up the iPad, it takes about two minutes to say a few sentences so that Siri is able to recognize your voice. But once the system is set up, you can say 'Hey Siri' from anywhere in the room, and she will respond to your commands. (If you decide not to set up the voice activation, you can always just press the start button on the iPad, the way you would do on your iPhone, to speak to Siri.)

    "The system is already loaded up with several room moods. You can say 'reset' for the lights in the room to appear how they would when you first step into the door. If you say 'relax,' the lights automatically become warmer and less harsh. 'Review' turns on the TV screen, while 'revive' gently lights up the room for the morning.

    "On the iPad, you can also sign in to all your media accounts in order to stream movies or listen to music. And Siri also acts like a real concierge, since you can ask her questions about local attractions or nearby bars and restaurants."

    This is, of course, an entirely predictable development ... but no less cool because of it.

    I keep saying that my experience with the Amazon Echo - asking it to do all sorts of things - has led me to actually be a little frustrated when devices don't have voice recognition capabilities. This is all happening, really fast, and companies that want to be seen as relevant have to figure out what their niche is within this continuum.

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

    Published on: August 25, 2016

    The Denver Post reports that "Safeway is launching grocery delivery in the Denver metro area, joining King Soopers, Walmart and third-party providers like Instacart in offering the increasingly popular service."

    According to the story, "customers of both Safeway and Albertsons (both chains are owned by the same parent) can log onto, fill up their virtual grocery carts and have their order delivered to their homes within a one-, two- or four-hour window ... Groceries will be delivered by a fleet of more than dozen new trucks. The refrigerated trucks are equipped with multiple temperature zones so frozen pizzas stay frozen and fresh veggies stay crisp."
    KC's View:
    The best thing about this, I think, is the decision not to outsource a critical part of the customer experience to some other company, like Instacart or Uber. That's really important - because if you are going to own the delivery service, you actually have to own it. Because when stuff goes bad, the blame won't be placed on the outsourcing company. It goes right to the retailer ... and so you have to maintain control as well as responsibility.

    Published on: August 25, 2016

    The Seattle Times reports that Amazon has launched the Kindle Reading Fund, described as "an initiative to donate e-readers, tablets and digital books to libraries, schools and nonprofit organizations around the world ... The fund will initially donate 'thousands' of Kindle devices to reading programs in the developing world through a collaboration with Worldreader, a nonprofit. It’s also working with the National PTA, as well as hospitals, local schools and other non-profits, Amazon said.

    The Times notes that "it’s the latest high profile philanthropic initiative unveiled by the Seattle tech and retail giant, which seems to be finding its ground as a more vocal corporate benefactor."
    KC's View:
    I think this is a great idea ... and Amazon ought to expand it in a way that allows customers to recycle their old Kindles and stuff. That's what Apple does, and it makes a lot of sense.

    Published on: August 25, 2016

    Internet Retailer reports that in the UK, Tesco is offering shoppers the ability to order groceries online and then pick them up at bricks-and-mortar locations three hours after placing their orders.

    The service is available at 261 Tesco stores and another 36 non-store locations. Orders over $50 have a roughly $2.50 service fee attached; under $50 brings a $5 service fee.

    According to the story, "The extension to Tesco’s click and collect service brings its service into line with competitors including Asda, and enables it to compete with the convenience of Amazon Fresh ... The move also underlines the importance for supermarkets of making their online grocery service as convenient as possible in order to appeal to time-pressed shoppers."

    And, the Financial Times writes, "Britain’s biggest grocer by sales has long offered same-day deliveries for online customers, but for most this is the first time they can collect their order in store. The initiative catapults Tesco ahead of its closest rival J Sainsbury, which last month began trialling a similar service for same-day delivery and collections from three of its stores with plans to extend to 30 shops by Christmas."
    KC's View:
    There's no choice but to roll out these kinds of initiatives quickly ... you can't afford to meander along, because all that does if give the competition room and time to match or beat you. Sure, there's more of a risk if you move quickly ... but the downside of moving slowly can be losing any competitive or differential advantage.

    Published on: August 25, 2016

    The Puget Sound Business Journal reports that Cash & Cary Smart Foodservice in Seattle, described as a "wholesale food distributor and food service warehouse that specializes in large quantities of food, such as 50-pound bags of flour, whole slabs of beef and cases of drinks and snacks," is getting into business with Instacart, giving the grocery delivery service one more retail option for its local roster.

    According to the story, "Delivery will open up the option of ordering office snacks in bulk and having them delivered to an office building ... Or if a group is hosting a graduating party or a family gathering, large quantities of food can now be delivered to their door. Not only that, but it gives Cash & Carry's current customers, mostly small independent restaurants, the delivery option the store has never before had."

    Other Seattle retailers serviced by Instacart include Whole Foods, Costco, Central Co-op, PCC, Petco, Safeway, and QFC, all of which are positioning their Instacart connection as making them more competitive with Amazon and Amazon Fresh.
    KC's View:
    It is a good idea to do delivery ... but my misgivings about Instacart remain intact.

    Published on: August 25, 2016

    The New York Times this morning has a story about Amazon's Subscribe & Save automatic replenishment service, suggesting that some people are accusing the retailer of an atypically customer-unfriendly, bait-and-switch approach.

    "Amazon’s subscription program, which was introduced in 2007, lets consumers register to have their favorite consumables delivered regularly — monthly, for example — in exchange for a discount of at least 5 percent off each order," the Times writes. "Buried in the e-commerce company’s terms and conditions is that the Subscribe & Save discount is applied to the price of the item at the time that the order is placed. And on Amazon, prices change frequently — including sometimes rising."

    The story notes that "The company emails people 10 days before a recurring subscription delivery, when it informs customers of a new price of their item so they can change or skip the order. Any sticker shock, analysts said, may be the result of Amazon’s complex pricing system coming into conflict with consumer expectations of a traditional subscription."

    You can read the entire story here.
    KC's View:
    This is an interesting story, even if all it does is point out something that Amazon has not hidden. I do think that some of the price differentials month-to-month are surprising, but I'll also point out that we use Subscribe & Save for a dozen or so items at home, and we've never run into anything like what is described by the Times.

    I do think that when retailers develop competitive alternatives to Subscribe & Save, this is something about which they need to be aware.

    Published on: August 25, 2016

    The Wall Street Journal reports that Home Depot "is making progress in its effort to fulfill online orders from its stores. The home improvement retailer said customers are taking advantage of its new options for retrieving their e-commerce orders, including buying goods online that can be delivered from stores, with faster and more accurate delivery estimates.

    "About 42% of Home Depot’s online orders and almost 90% of its online returns for the second quarter were handled by its stores, executives said this week."

    The story goes on: "Many in the retail industry believe fulfilling online orders from physical stores can be provide store owners an advantage over online competitors like Inc., allowing brick-and-mortar shops to serve as both showrooms and well-located mini-distribution centers. But few have been able to handle the so-called omni-channel operation smoothly and profitably - inventory is more difficult to manage in stores than in warehouses, and determining the best source of fulfillment can involve a complicated calculation of timing, labor and shipping costs."

    Home Depot, the story says, "is aided in part by its existing delivery service, which previously only served in-store customers, and its investment into new order management software. Online purchases can now be delivered from more than 700 stores, faster and with shorter scheduled-delivery windows than previously possible."
    KC's View:

    Published on: August 25, 2016

    MarketWatch reports that Loblaw Companies will acquire "all of the outstanding common shares" of QHR Corp., described as "a Canadian healthcare technology company and a leader in the electronic medical records market, providing software for healthcare providers and their patients."

    QHR is seen as a natural complement for Loblaw, which pitches itself as "a trusted source of pharmacy and health and wellness solutions for patients and providers nationally." The story says that "QHR is expected to operate as a distinct business within the Shoppers Drug Mart division of Loblaw, and remain headquartered in Kelowna, British Columbia."
    KC's View:

    Published on: August 25, 2016

    We've had a couple of recent stories about the financial circumstances in which young people find themselves after graduating from college - they have high student load debt, and, apparently, something of an aversion of accumulating other kinds of debt - with mortgages, car loans, credit cards - that will put them further underwater. This, of course, has the potential of creating problems for retail businesses down the road.

    MNB reader Robert M. Fawcett wrote:

    I think they aren’t buying products because they simply don’t have the money, whether its bought with a credit card or not? They come out of college with a mortgage.

    From another reader:

    It's my observation that this generation is more focused on experiences than the accumulation of "things" i.e. renting(then traveling) over home purchase. And when they do purchase, they will do so online. This will drive a fundamental change to the retail world.

    And about that mortgage...

    MNB reader Monte Stowell wrote:

    There is no easy answer to resolving the student debt crisis in this country, but I do have few thoughts and observations as to why student debt is so high. I think it all started with giving people free money.

    When congress passed education credits of $1000 a year, this was a “Ka Ching” moment for the institutions of higher education. They knew they could raise their tuition rates by the amount of the tax credits. Compound this over a 4-6 year+ time, the students continued to borrow more and more money and the colleges and universities continued to raise their tuition rates.

    The demand for a college education and degree continued to grow, and the law of supply and demand kicked in even more. Again, the institutions continued to raise their rates because they could. The students continued to borrow more and more money to fund their education.

    The college I attended in the mid 1960’s , here in Portland, OR, had tuition of $305/term. Today, it is excess of $2000/term.  Let us add in the cost of books. This cost to the student is out of line for books, adding in another $1000+/year. The cost of books is ridiculous, just like the cost of the allergy drug that has a manufactured cost of $1.00/dose and the consumer is being charged over $500+/dose. Reduce the cost of what students have to pay for their books. Probably will not happen.

    Another issue is that the skills needed in todays’ job market. I would think many students borrowed heavily to get their degrees in fields where there are no jobs or the jobs are low paying. A sad story, but that is reality today. Did the parents and the HS counselors do their job in trying to guide these kids into fields where the jobs are? I have 2 nephews who went into engineering, both are gainfully employed making a good living, a grand daughter who got here Master degree at the U of Oregon and proud to say she is starting her job as a first grade teacher here in Oregon. These kids worked 1-2 jobs to help pay for their education. Do they have some debt, yes they do, but debt they can afford to pay off in 4-5 years.

    Should we let these kids off the hook for their high student debt? I think we should not, but I thinks there are ways for them to pay back their debt through some type of service to the country as well as the monetary obligation that they signed up for. After all, no one made them sign on for borrowing all this debt. Expensive lesson, you bet it is.

    I totally agree with you about books. And what makes me even crazier is when professors wrote books that cost a lot of money, and they make their students buy them. Because we're talking about the importance of story in the Portland State University business class I teach during the summers, one of the things I do is give every student a copy of "The Big Picture: Essential Business Lessons from the Movies." It is my pleasure ... and it would seem crass to ask them to pay for it.

    From another reader:

    In the College world we now have 6 times as many "administrators" as we did 20 years ago. And while teachers and teachers aids salaries have barely increased, the Administrators salaries have nearly doubled. That is part of the growth of the availability of loans from the federal government. It seems a circular augment. More money is made available so colleges hire more administrators and raise the cost of tuition because they know the money is available. Cut the moneys that are available and the cost will start to go down. Supply and demand...

    And another, MNB reader Peter Louree:

    The government could help by capping student loans to minimize the amount of money colleges and universities have access to which will force the market to reduce costs and lower tuition (maybe).  There certainly is an opportunity for the market to respond to this and offer a better value for what we call  a “4 year degree”.  Note Mark Cuban’s warnings of the “student loan bubble” that he was been talking about for several years.  The market is responding as more students are going the route of community college for the first two years of school, but maybe a new model can develop and evolve to offer a more affordable option for an accredited degree that somewhat mirrors the traditional college experience.

    And another:

    My son has student debt and so does his wife. They laughingly call it their “other house payment”…but it’s not that funny.

    It’s the difference between living a lower middle class lifestyle and the mid to upper middle class lifestyle their incomes should permit.

    Seriously let’s say their household consumption is reduced by $12,000 annually…multiply that times oh maybe 10 million other households. That’s a very sizable GDP impact. $240B (I think…lots of zeros..I know that). Like around 1 – 1.5% growth over our total current GDP.

    Solving it…well good luck, one party, the one in charge of the legislative branch,  won’t even vote for or even bring for a vote reducing student loan rates or allowing them to consolidate the student loan debt at lower rates. Which is absolutely insane policy.

    So good luck ever getting forgiveness or some other program…and I am not even sure forgiveness is the right thing to do. Making college more accessible and treating existing student loan debt like any other debt makes sense to me.  

    But keep in mind things that 80% of Americans might agree on, like tougher gun purchasing restrictions, can’t pass in a government owned by big business & lobbyist.

    And still another:

    It’s funny that you rarely read anything about college costs increasing beyond the inflation level of any industry.  Heaven forbid BIG OIL or BIG PHARMA or BIG RETAIL reports strong earnings as the media will go out to demean and destroy them.  BIG EDUCATION and their financial models with tens of millions in reserve are “hands off” from the media and government oversight.  The real problem is unchecked and unchallenged college costs at the expense of American families.  Government and big education continue to benefit from each other.  Politics anyone?

    Funny, I was under the impression that there is a lot of discussion and news about "big education" and the associated costs.

    I don't know what the solution is, but I do know this. "American exceptionalism," which has to be renewed not just with every generation, but every day, is dependent on a highly educated and engaged population. If we can't figure out how to make education accessible, affordable and attractive to young people, then we're never going to be able to say with a straight face that America's best days are ahead of it.

    On another subject, an MNB reader's assertion that the difference between Henry Ford and Jeff Bezos is that Ford created jobs and Amazon kills them prompted this email from another reader:

    I feel it might be more accurate to say Amazon is redistributing jobs.  While you might be able to say it impacted the reduction of jobs at companies like Macy’s, I think you’ll find a whole list of other companies and industries where it has created more jobs, for example:  delivery services (Fed Ex, UPS, USPS), packaging manufacturers, goods manufacturers producing the new Amazon line of products, electronics manufacturers producing Amazon’s new technology devices, internet-service providers, and movie and television production companies.  In my mind, Henry Ford is an excellent parallel to the impact Amazon is having on jobs.

    Regarding Target's continuing issues, MNB reader Russell Zwanka wrote:

    In continuing the Target food discussion, it just seems that the food strategy was developed by Marketing only- rather than Merchandising and Marketing together.  Marketing is a vital part of the mix, until it over-promises.  In the case of when Target first introduced "P Fresh", we all looked on with anticipation of what this prominent retailer was going to do to add value to the food retail space.  When they finally took down the curtains (literally curtains), and after seeing banners in their stores for months announcing the arrival of "something fresh" was like an ugly baby had been birthed.  A pantry-level offering in a high demographic store, a limited selection in what was supposed to be a traffic builder, a terrible corner location about as inconvenient as they can make it (remember, for some reason, most Targets have only one entrance and exit in one corner), "fresh" that consisted of packaged goods and gas-flushed meats, a confusing store brand offering, rampant stockouts, and what seemed like a P&G-only offering in Household (nothing against P&G, but not much on variety either).  We all breathed a sigh of relief when we saw the end-result.  Hopefully, the new leadership can chart a new course.

    But, it does seem to be taking a while.  Spending a year visiting customers' homes and reviewing surveys may be helpful, but a few "fail fast" initiatives might be suggested as well.  Do have to give them credit for their refrigerated probiotic and Kombucha ends, though.

    Finally, I was surprised by this email from an MNB reader who was responding to our obit for Steven Hill, the former "Law & Order" star who made waves earlier in his career when he played the lead during the first season of "Mission: Impossible," but was let go because his Orthodox Judaism made it impossible for him to work after sunset on Fridays and all-day Saturdays - a schedule way out of synch with how a network TV series is shot.

    I wrote:

    Hill was unwilling to compromise his faith, and he was replaced by Peter Graves as Jim Phelps in the second season for the rest of the series run.

    Leading one MNB reader to write:

    It was only a religious belief.  Whoever said a religious belief should be more important than anything else - let alone everything else?

    I never said that it should be. I was merely pointing out that Hill put his religious beliefs above his career. This is sort of like what happened when LA Dodger pitcher Sandy Koufax refused to start Game 1 of the 1965 World Series because he was observing Yom Kippur. Or what Chick-fil-A does when it closes all its stores on Sundays.

    I think these are acts of principle, and I would never suggest that they reflect only a religious belief. That would strike me as intolerant.
    KC's View: