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    Published on: November 21, 2016

    by Kevin Coupe

    We often talk here about disruptive technologies, but there was a piece in the Los Angeles Times over the weekend that served as a reminder that this is not a new phenomenon. It's been happening ... well, forever. (What was the wheel, if not a disruptive technology?)

    And speaking of wheels ... the LA Times, in a story about the upcoming Los Angeles Auto Show, noted that the manual transmission, "available in nearly half of new models in the U.S. a decade ago," is only going to be available in about a quarter of models this year, essentially "going the way of the rumble seat."

    And if the stick shift is available on 27 percent of new car models this year, the actual sales figure is much lower than that - one estimate is that just three percent of new cars are sold with manual transmissions, which once were "standard equipment on all motor vehicles, preferred for its dependability, fuel efficiency and sporty characteristics."

    As car manufacturers have "perfected the automatic transmission, and learned to make it less expensive and more dependable, drivers became accustomed to the relative ease of leaving the shifting to the car," the story says. "Automatics gradually became the preferred option, and automakers began offering them in fewer vehicles, saving them money because they no longer had to manufacture two drive trains." And while manual transmissions used to be more fuel efficient, that's changed over the years as manufacturers now can make automatic transmissions that are more efficient than any driver could be.

    Now, the numbers suggest that some models are seen as more appropriate for a stick shift than others. Two of them are cars I can appreciate - the Ford Mustang, and the Mazda Miata (six out of 10 of which are sold with a manual transmission). I drove two Miatas over the period of 20 years, and current drive a 2014 Mustang convertible .... and I can't imagine driving these with automatic transmissions.

    Purists say that the sales trend toward automatics is a shame, and I tend to agree with them. One of the things that I've always found is that driving a stick actually means you have to pay more attention to the road. I've driven my Mustang from Connecticut to Oregon and back the last two summers, and part of the fun has been the fact that I'm actually doing the driving, not just pointing it in the right direction and putting it on cruise control.

    Of course, at some level the disruptive trend that has made manual transmissions an endangered species now is leading us toward an era of self-driving cars that will change the world yet again.

    It's an Eye-Opener. It is progress. But as for me, I'll stick with my stick.
    KC's View:

    Published on: November 21, 2016

    Reuters reports that Walmart plans to offer its Cyber Monday online deals two days early this year, making them available on Black Friday - the day after Thanksgiving, the traditional beginning of the end-of-year holiday shopping season. It is a move, the story says, that "comes at a time when Black Friday is losing its importance as early discounts and online shopping keep shoppers away from stores."

    The story points out that Walmart "recently said it will boost its online inventory for Black Friday by more than half this year, as it pulls out all stops to grow online sales this holiday season. The retailer has grown its online inventory to 23 million items from 8 million at the start of the year."
    KC's View:
    It seems to me that one of the things we're seeing is Walmart being pushed by Amazon to change its game, to play on Amazon's terms. Which is one of the reasons that its profit numbers have been down, as it lowers prices to be competitive and accepts the notion that it has to view the decline as an investment in e-commerce. And, now it is pulling out the stops to drive more and more business to its online operation, using its stores as a last-mile advantage where and when possible.

    I still think that Amazon and Walmart are playing different games - that Walmart just wants to sell more stuff, while Amazon is working from an ecosystem strategy that is a lot more ambitious. But the battle is almost certainly going to get more competitive and a lot more interesting...

    Published on: November 21, 2016

    Fox Business reports that Amazon is testing a new concept in Italy that is selling three Fiat models online at a discount.

    According to the story, "Traditional dealers will still be involved in the process. After buyers select the vehicle they want on Amazon's site and commit to the purchase, they'll be contacted by Amazon and asked to choose a dealer with which to finalize their purchase and pick up the car. Italia said the vehicles should be ready for pickup within two weeks."

    While it is a small-scale, localized test, the story suggests that "it's another step toward what many believe to be Amazon's goal: to shake up the way we buy new cars."

    It would not be a concept that necessarily would translate to the US car sales business, where "state laws protecting franchised new-car dealers in the U.S. make it unlikely that Amazon will be able to sell cars directly to customers any time soon. But there are other ways for Amazon to profitably insert itself into the car-buying process and offer value to its customers."

    Amazon could mimic other businesses that connect car shoppers to dealerships to offer no-haggle pricing, and it would have the advantage of a built-in customer base with which it could communicate effectively. Dealerships might not like the idea of dealing with Amazon, but the company's size and scope might make resistance futile.

    In its story, the Seattle Times notes that "last summer, Amazon launched Amazon Vehicles, a destination on its online store that allows shoppers to browse car specifications and reviews to facilitate car shopping. But it won’t sell cars. The point is to direct customers to Amazon’s online store for parts.
    KC's View:
    There is absolutely no reason to think that Amazon can't and won't sell cars. There may be some regulatory issues, but this seems perfectly natural to me.

    Published on: November 21, 2016

    In Connecticut, the Norwalk Hour has a good piece about how a third generation is preparing to take the leadership reins at Stew Leonard's, the iconic fresh food retailer that has grown from a single store operation to one that today operates five food stores and nine liquor stores.

    "Founded in 1969 as a Norwalk dairy store by Stew Leonard Sr. and then expanding under Stew Leonard Jr.’s stewardship," the story says, "Stew Leonard’s is now years into a process in which it is prepping a third generation to run the company in an industry being turned on its end by any number of trends, including formidable competition from big warehouse clubs and smaller specialty stores touting their roots in regional food production."

    The Hour writes that earlier this year, "Blake Leonard became a Stew Leonard’s wine marketing manager, becoming the second full-time member of the family business’ third generation to take a managerial role after her cousin Jake Tavello, who is a store director in Danbury."

    But this is not a matter of just having the right relatives. "The company has established a few major criteria for anyone joining the company’s managerial ranks — etched in figurative stone after the fashion of its customer service principles etched into boulders at store entrances. Family members must work three years for another company, obtain a master’s degree and pass muster with an independent panel retained by the family to assess their readiness for the job they are seeking ... Over the years, Stew Leonard’s has readily publicized its efforts to school the third-generation cousins to work in the business should they choose the path, with retreats to Italy, Alaska and Harvard Business School among other destinations for workshops on the challenges for family businesses in passing the torch."

    Jake Tavello worked for Wegmans, the story says, and Blake Leonard worked for EJ Gallo before taking on their current roles in the family company.

    While the third generation of Leonards is getting deeply involved in the business, "perhaps the biggest challenge for the junior Leonard clan and the cadre of industry professionals running the company" is "approximating the frontman that is Stew Leonard Jr., who projects a larger-than-life wit and zest for life. Jake and Blake are not offering any insight as to who might inherit his role one day, whether inside the family or out. If it is Blake’s voice alongside her father’s on the airwaves, Jake is getting grounded in the company’s bread-and-butter business of running a supermarket."

    “We want to remain a family business, but there’s 13 of us,” Blake Leonard tells the Hour. “For any of us to think (about) who will be the CEO or that spokesperson personality — we have no idea. … There’s still so much time.”
    KC's View:
    I've always been enormously impressed by how seriously Stew Leonard's takes the succession issue ... which is as seriously as the company plans to remain family-owned. These folks don't want to make the same mistake as Fairway, where the family sold the company to an investment group, which promptly squandered much of the equity built up over decades.

    Third-generation leadership can be problematic, but I suspect this won't be a problem at Stew Leonard's. I've met some of these folks over the years, and they strike me as serious, committed and on the same page as their older relatives. That said, I suspect that Stew Jr. won't be going anywhere soon ... we're the same age, and therefore way too young to retire. But when he does, I hope he decides to do some teaching ... because there's a lot of wisdom and experience there to share.

    Published on: November 21, 2016

    Good piece in the Wall Street Journal about how Best Buy "has accomplished what many on Wall Street once considered impossible: It successfully fought off an attack from Amazon.

    "The electronics retailer’s operating margins have rebounded and same-store sales are up. That is a dramatic improvement from January 2013, when Best Buy’s shares were trading at roughly one-quarter of their current value as fears of “showrooming” - shoppers’ practice of researching products in bricks-and-mortar stores and then buying them from online competitors - swirled around the company."

    There have been several keys to the revival, including matching prices, improving its website and mobile apps, and improving its e-commerce operations.

    You can read the story here.
    KC's View:

    Published on: November 21, 2016

    The National Retail Federation (NRF) is estimating that there are "59 percent of Americans – an estimated 137.4 million people – planning to or considering shopping during Thanksgiving weekend."

    The survey found that "21 percent of weekend shoppers plan to shop on Thanksgiving Day, nearly the same as last year’s 22 percent. But Black Friday will remain the busiest day of the holiday weekend with 74 percent planning to shop that day, the same as in 2015. A substantial 47 percent are expected to shop on Saturday; of those shoppers, 24 percent say they will be doing so specifically to support Small Business Saturday, up from 22 percent last year. On Sunday, 24 percent expect to shop. According to the survey, 77 percent of 18 to 24-year-olds and 76 percent of 25 to 34-year-olds plan to shop over the weekend."

    And, "36 percent of consumers say they plan to shop online on Cyber Monday, up from the 34 percent in 2015."
    KC's View:

    Published on: November 21, 2016

    The Associated Press has an interview with Mark Tritton, Target's new chief merchandising officer, who brings to the job more than seven years as president of the Nordstrom Product Group. Some excerpts:

    Re: common ground with Nordstrom... "We're finding common ground in that it's about brands. It's about gifts. It's about putting all the pieces of the puzzle together. What's different is our guests. And so I've been fortunate to have great experiences to get to know our guests and to find out more about them by diving into the extensive data about what we have about them ... down to having real experiences with guests. (In Chicago), I got to go to homes and talk to families and play board games with kids to understand what the joy of games was."

    Re: holiday trends... "You have that great affordability and great value. But there is a little bit of glitz, from the sequined dresses to the gold silver trims in the home decorations. We're really excited about extending our franchise in Star Wars ... I think the assortment is really spectacular."

    Re: growing food sales... "We're doing more sampling (of food). It creates a high level of engagement."
    KC's View:
    I've no idea whether Target is going to have a great holiday shopping season ... I suspect that the results will be mixed. To me, Target remains a retailer in search of a definitive image.

    Published on: November 21, 2016

    Reuters reports that Gap Inc. plans "to shut about 65 company-operated stores this year, compared with its previous forecast of about 50 stores." The company also said that it "expected a further drop in traffic during the crucial holiday shopping season ... The company reported its seventh straight quarterly sales decline in the three months ended Oct. 29 as demand for its Gap and Banana Republic brands remained sluggish.

    • The Wall Street Journal reports that Staples has sold its UK business for what it calls "nominal proceeds" to an Illinois-based restructuring and turnaround investor. The deal, the story says, allows Staples "to get rid of underperforming assets without having to search for a strategic buyer that might never materialize or deal with the distraction and expense of winding it down."

    Expectations are that the company will phase out the Staples name, run the company under new management, and eventually sell the chain.
    KC's View:

    Published on: November 21, 2016

    • The USC Marshall School of Business Food Industry Executive Program (FIEP) has announced that Mike Stigers, Executive Vice President, Wholesale and Supply Chain Services for Supervalu, has been named the program's executive-in-residence for 2017.

    "I strongly believe that employee education programs are an important key to a company’s success. They help teach essential skills, build confidence and provide leaders with the knowledge to aggressively manage a business through changing times,” Stigers says. “The opportunity to serve the FIEP program as the executive-in-residence is truly an honor.”
    KC's View:

    Published on: November 21, 2016

    ...will return. However, I would like to take a moment to thank the folks who write in on Friday to congratulate MNB on 15 years of news in context and analysis with attitude. I was touched by the response, and I'll continue to try to hold up my end of the bargain.
    KC's View:

    Published on: November 21, 2016

    It is Week Eleven in the National Football League...

    Cardinals 24
    Vikings 30

    Bills 16
    Bengals 12

    Bears 16
    NY Giants 22

    Steelers 24
    Browns 9

    Buccaneers 19
    Chiefs 17

    Ravens 17
    Cowboys 27

    Jaguars 19
    Lions 26

    Titans 17
    Colts 24

    Dolphins 14
    Rams 10

    Patriots 30
    49ers 17

    Eagles 15
    Seahawks 26

    Packers 24
    Washington 42
    KC's View: