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    Published on: January 12, 2017


    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, I'm Kevin Coupe and this is FaceTime with the Content Guy.

    “Timing is everything," William Shakespeare once wrote. "There is a tide in the affairs of men which when taken at the flood leads on to fortune.”

    And while he may not have been quite as loquacious as the Bard, Yogi Berra said much the same thing. "You don't have to swing hard to hit a home run. If you got the timing, it'll go."

    I've been thinking about timing this week because of a story I read in the Washington Post the other day about Kodak Ektachrome, a film that the company stopped manufacturing and selling in 2012 - yet another victim of digital photography and mismanagement of a company that seemed unwilling or unable to deal with changing technology and shifting consumer preferences.

    In 2017, however, Kodak Alaris, one of the companies that emerged from Kodak's bankruptcy, will begin manufacturing 35 mm film again.

    The reason for its revival is much the same as the reason that vinyl records are making a comeback. There's a sense that the quality is better, and that real aficionados and professionals have created a market for it. And so the company wants to take advantage of it ... in ways that it would have been nice if the original company had been able to take advantage of the changing marketplace a decade ago.

    Timing also can work in other ways. For example, young people have latched onto a revived Polaroid technology because they think it is totally cool that they can get instant prints and not just digital versions of their pictures. Go figure. Maybe next they'll start subscribing to actual newspapers...

    Timing, indeed is important. But like Yogi Berra said, you actually have to swing. You have to be ready for the moment, and prepared to change course when events call for it. "Compete" is a verb.

    By the way, speaking of timing - the bad kind - I had to laugh when I read that in France, there's a new law that says employees have the right to ignore emails from employers if they come outside of typical working hours.

    The goal, according to the Washington Post story, is "to stem work-related stress that increasingly leaks into people's personal time — and hopefully prevent employee burnout."

    I think that worker rights need to be protected so they're not exploited, but this strikes me as crazy because it legislates something that need not be regulated ... and it also creates an environment in which it is hard for companies to be competitive in a global market that gets tougher every day.

    Then again, this is a country where the 35-hour work week is sacrosanct, and where they've passed laws taking away some of Amazon's competitive advantages, because that's a lot easier than actually forcing other retailers to compete.

    C'est la vie. Timing is everything.

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

    KC's View:

    Published on: January 12, 2017

    by Kevin Coupe

    MNB readers know that I like to use Netflix and Amazon as a metaphor for the importance of differentiated product in the retail environment. While those companies used to sell and rent movies and TV shows that had a previous life in theaters and on traditional networks, they moved to producing their own, private label programming because they knew that renting and selling stuff customers could get elsewhere wasn't the most sustainable business model.

    This is a realization that Netflix CEO Reed Hastings had pretty early on - that the company could not just compete with Blockbuster, but had to compete with the likes of HBO, if it were going to have a firmer long-term foundation.

    I've always thought this is an example that more retailers ought to emulate. Too many retailers depend on products that can be bought elsewhere, as opposed to products and services that customers can only get at their stores. That's dangerous, I think. Differentiated, unique products and services not only allow retailers to compete with their bricks-and-mortar brethren, but also against companies like Amazon that have their own advantages.

    The Wall Street Journal this morning confirms a long-rumored story about a major player that has decided to take a similar approach. According to the Journal, Apple now "is planning to build a significant new business in original television shows and movies ... a move that could make it a bigger player in Hollywood and offset slowing sales of iPhones and iPads."

    The story goes on to say that "programming would be available to subscribers of Apple’s $10-a-month streaming-music service, which has struggled to catch up to the larger Spotify AB. Apple Music already includes a limited number of documentary-style segments on musicians, but nothing like the premium programming it is now seeking.

    "The technology giant has been in talks with veteran producers in recent months about buying rights to scripted television programs. It also has approached experienced marketing executives at studios and networks to discuss hiring them to promote its content, said people with knowledge of the discussions."

    Now, the Journal story also suggests that Apple isn't looking at this opportunity with the same sense of scale that Amazon and Netflix have brought to the original content party ... but I'm pretty sure that this largely will be dependent on how successful Apple is in its initial efforts. If it can create a "House of Cards" or a "Westworld" or a "Game of Thrones" or a "Bosch" ... programs that generate high viewership, strong critical reviews and actual revenue ... plans could be changed and visions expanded.

    Regardless, the broader message is an Eye-Opener ... and it goes back to a message that Apple embraced many years ago.

    Think Different. And even more importantly, Be Different.
    KC's View:

    Published on: January 12, 2017

    Columnist Robert J. Samuelson has an interesting piece in the Washington Post this morning about the "creative destruction" affecting the retailing business, as chains big and small, from Sears and Kmart to The Limited, shut down stores and sell or close down businesses, all part of a broad consolidation movement that is likely to continue through 2017.

    The column notes that most of the time, this would be a painful but positive process - the weak get washed away, the strong get stronger and more stable, and productivity continues to grow. It is tough for workers, managers and stockholders, but it is the circle of life.

    But, Samuelson writes, there is a problem - which is that productivity growth has "slowed dramatically." And, he adds, "We’ve gotten much pain but are still waiting for the gain."

    While the column suggests that there could be a variety of reasons for the productivity slowdown, Samuelson makes a broader argument, talking about what he calls “parallel technologies":

    "We have two systems to do one job. Companies have to support the old as well as the new technology. People no longer buy everything in stores, but stores are still necessary. (In 2016, e-commerce totaled about 8 percent of retail sales.) Still, the loss of sales makes brick-and-mortar stores less productive, and their loss of productivity offsets some or all of the gains from digital technologies.

    "This is, I think, the basic explanation of what’s happening at Macy’s and Sears. They have to invest in the new technology, even as the value of the old technology erodes. The effect is compounded because they’ve been slow to shut marginal stores. There’s always the hope that these stores will bounce back and avoid large losses.

    "If these 'parallel technologies' applied only to e-commerce and stores, it would be interesting but not decisive. But it applies to many industries and products, which magnifies its economic significance. You can think of many cases: smartphones and traditional landlines; paper and digital newspapers; cable TV and streaming Internet video; standard taxis and Uber."

    The questions, he suggests, are whether there is a silver lining to the "parallel technologies" cloud ... and how long it will take to find it.
    KC's View:
    I just thought this was a fascinating piece, and it puts a finger on at least one of the reasons traditional, legacy-based companies have such a problem competing with disruptive upstarts such as Amazon. And I have to think that one of the goals of digital companies like Amazon has to to be making sure that, even as they flirt with and test physical stores, they avoid creating parallel technology tracks that will serve as a hindrance to competitiveness and growth.

    The only silver lining I can see to this situation is the recognition that it exists. Beyond that, I think it is enormously difficult for traditional companies to find ways around this problem.

    Published on: January 12, 2017

    President-elect Donald J. Trump this morning went on Twitter and wrote, "Thank you to Linda Bean of L.L.Bean for your great support and courage. People will support you even more now. Buy L.L.Bean."

    It may have been the last thing that leadership at LL Bean wanted.

    The story began during campaign season, when Linda Bean, granddaughter of the company's founder, decided to bankroll a political action committee supporting Trump's candidacy. After the election, Linda Bean's efforts became more widely known, and some members of the anti-Trump movement called for a boycott of the Maine-based iconic outdoor clothing and gear company.

    Which was something else that leadership at LL Bean didn't want.

    The company's chairman, Shawn Gorman - himself a great-grandson of the company's founder - took to Facebook to write, “We are deeply troubled by the portrayal of L.L. Bean as a supporter of any political agenda."

    The Boston Globe reports that the company has gone to great pains to point out that there are many members of the Bean family, and that they hold opinions that cut across the political spectrum, saying that "some have attempted to attribute the personal political activities of one member of a five-generation ownership family to our entire company. That is both illogical and unfair."

    These events put LL Bean in good company - with New Balance, PepsiCo, Kellogg's and GrubHub - with other customer-facing businesses that have gotten into hot water during recent weeks because of statements that created perceptions of political positions that were seen by some as untenable or inappropriate.
    KC's View:
    Well, here we go again ... except in this case, it at least can't hurt LL Bean's stock price because the company is privately held.

    The thing is, Trump got it wrong. Or at least, selectively right. The company took no position on his candidacy or positions. One person did, albeit a person with a strong familial connection to the company ... though she's one of more than 50 family members with some ownership in the company.

    But even while getting it only selectively right, Trump has demonstrated a willingness and ability to profoundly and unfairly affect the operations and image of a retail company. I think it is fair to say that this is something that retailers - and frankly, every business - will have to think about going forward. Trump said, "Buy L.L. Bean," but what if he had said, "Don't buy L.L. Bean"? And had done so while only getting things selectively right?

    (What is he going to say if he finds out that LL Bean imports some of its products from outside the US? I suspect that like a lot of companies that do so, LL Bean could be a little concerned about discussions of import tariffs that could raise the cost and price of such items.)

    This is not a partisan statement on my part. It is an objective observation about the highly partisan climate in which we're currently living.

    To be clear ... I would accuse the people threatening a boycott against LL Bean of being just as wrong as Trump in being only selectively accurate.

    I don't want to ignite a political debate here. That's not my goal. However you voted, whatever you think or feel about the country's direction, the stark partisanship that afflicts our country right now is creating a minefield that could affect everyone.

    By the way, I've met Linda Bean. Had drinks with her one night in the restaurant she owns in Freeport, Maine. I liked her a lot, and figure she can support anyone she wants, from Donald Trump to Bernie Sanders. I also know Steve Smith, the company's non-family-member CEO, a little bit - he used to be at Hannaford and Walmart, and I have a lot of respect for his talents - though his job should be to make and sell great products, grow the company's physical footprint and e-commerce business, and demonstrate leadership to the company's employees ... not defend a great company from over-zealous elected officials and activists. (He's totally up to the expanded challenge by the way...and maybe it is a good thing that for the first time in its history, LL Bean has a non-family member in the CEO office.)

    And a sizable percentage of my wardrobe comes from LL Bean, and I don't see that changing anytime soon, regardless of what Trump says or doesn't say, or what points he or any other politician tries to score at someone else's expense.

    Published on: January 12, 2017

    The Washington Post reports that "Cadillac has launched a program that it says is a “first-of-its-kind luxury vehicle subscription service" - a kind of Netflix for cars.

    Here's how the Post describes it:

    "For starters, customers are no longer customers. They’re now 'members.' A member pays a flat monthly fee of $1,500 (there’s also a one-time $500 initiation and processing fee).  For all this, the member gets unlimited access to several Cadillacs – from the V Series, XT5 and CT6 to an Escalade – for as long and whenever wanted. These same cars would cost between $60,000 and $100,00 if purchased outright ... The car is home delivered and the fee includes registration, taxes, insurance and maintenance costs. There’s no mileage limit and if you want out of the program you just have to give 30 days’ notice."

    The program will begin being tested next month in the New York metropolitan area.

    The Post suggests that what really is important about this test is "how traditional companies – a car manufacturer for example – are recognizing the need to build a community of members and create a committed long-term revenue stream from them in order to increase the company’s value and stabilize cash flow. The recurring revenue model which is based on a continuous service has proven successful for many of the world’s most profitable companies…both small and large."
    KC's View:
    My first response to this story is that the business model doesn't seem very workable to me. My second response is to remember the words of Jean-Luc Picard: "Everything is impossible, until it is not."

    And the Post is right - the most important thing about what Cadillac is doing is that it is trying to disrupt the current world order.

    Published on: January 12, 2017

    There is a thought-provoking story in the New York Times this morning that, while not specific to the retailing business, gave me pause about a pair of business and cultural trends that we've often talked about here.

    Over the years, both Michael Sansolo and I have spoken and written about how, in the digital realm in which there are so many choices available, people are able to focus only on the sources of news and information that they believe reflect their already-formed opinions. If you support Trump, you only watch Fox News and you disbelieve anything you see on MSNBC or read in the New York Times. If you're a liberal, you avoid Fox News like the plague. And in the end, you end up in an echo chamber and rarely are forced to listen to people with whom you disagree and consider the possibility that they may have a point.

    While we try to avoid spending my time in a media echo chamber, I've also over the years been enthusiastic about how an expanded number of content sources have created a kind of new golden age, with companies like Netflix and Amazon and HBO and Showtime pushing the envelope and creating new and exciting programming that doesn't depend for success on the mass audiences that are needed by broadcasters such as ABC, CBS and NBC.

    But the Times piece challenges this, suggesting that niche programming also avoids the need for the kind of "broad cultural reach" that used to define programs like "Seinfeld" and "All In The Family" and "One Day At A Time."

    This last program is front and center of the discussion, since a new version of the old hit sitcom - which focused on a single mother in Indianapolis raising two daughters and, at its height, attracted 17 million viewers a week - has just launched on Netflix. The new version focuses on a Cuban-American single mother in LA who is a veteran struggling with PTSD issues; it got very good reviews, but there is just no way that it will ever have the kind of viewership that the old version did.

    The result is "the polarization of culture, and the new echo chambers within which we hear about and experience today’s cultural hits ... Instead, we’re returning to the cultural era that predated radio and TV, an era in which entertainment was fragmented and bespoke, and satisfying a niche was a greater economic imperative than entertaining the mainstream."

    The problem is that if we don't share experiences, we end up feeling like we don't all have skin in the same game. And I think that's a problem.

    As I say, I'm not sure that this is a retail-specific issue. But I think it is worth reading, and you can do so here.
    KC's View:

    Published on: January 12, 2017

    In Minnesota, the Star Tribune reports that Lunds & Byerlys has decided to shut down its Kitchen test format in Wayzata, "an unusual, three-year experiment by the grocery company to combine a restaurant with a convenience store (that) didn’t quite pan out."

    According to the story, "For Lunds Food Holdings, whose executives hoped in 2014 the Kitchen concept was the start of something big, the idea is going into limbo. 'I wouldn’t completely close the book on the concept,' Aaron Sorenson, a Lunds spokesman, said. 'It might work at another time and location'."
    KC's View:
    I feel bad that this didn't work out, because it is a format I liked a lot when I first saw it in 2014. (I did a video piece about it that you can see here.)

    At the time, while I loved the format, I conceded that the location may not have been the best, especially because the development where it was situated wasn't completed yet. I'm guessing that traffic may have been the biggest problem, and I'd be willing to place a small bet that we will see the Kitchen format elsewhere in the company - it could be a great urban format, I think.

    Regardless of whether we see the Kitchen as a standalone store again, I am absolutely sure that Lunds and Byerlys has learned a lot from the experiment, and that we'll see the experience affect the company in other ways and places. That's what great companies do.

    Published on: January 12, 2017

    • The Wall Street Journal reports that Amazon "is introducing a new card for Prime customers offering 5% back on all Amazon.com purchases. The card, issued by J.P. Morgan Chase & Co. and branded with the Visa Inc. logo, doesn’t have an annual fee or foreign-transaction fees ... The Amazon rewards are deposited as points in a customer’s account and can be redeemed for Amazon items. Customers can also choose to receive a credit against items purchased."

    The story goes on to say that "the card represents the latest in many offers that are increasingly popular with consumers because they provide cash or discounts on future purchases."
    KC's View:

    Published on: January 12, 2017

    Reuters reports that Tesco is saying that it had its best Christmas holiday season in five years.

    According to the story, "Tesco said sales at UK stores open over a year rose 0.7 percent in the six weeks to Jan. 7, in line with analyst forecasts which ranged 0.3 to 1.5 percent. That built on UK like-for-like sales growth, also reported on Thursday, of 1.8 percent for the 13 weeks to Nov. 26, Tesco's fiscal third quarter - at the top end of analysts' forecasts ranging 1.25 to 2 percent and a fourth straight quarter of underlying growth."

    Meanwhile, MarketWatch reports that "German discount grocer Aldi was the clear winner in terms of U.K. sales growth over the 12 weeks ending Jan. 1, posting a near 12% increase on the year, with peer Lidl coming in a close second, according to a survey Tuesday ... Within the top four, number one grocer by market share Tesco PLC boosted sales 1.3%, while Wm Morrison Supermarkets PLC's sales grew 1.2%, although both lost market share, Kantar Worldpanel said."

    "Tesco's market share fell to 28.2%, from 28.3% in the comparable 12 weeks" ... Walmart-owned Asda "saw its market share fall to 15.5% from 16.2%, and its sales drop 2.4% to GBP4.32 billion" ... "Wm Morrison's market share fell to 10.9% from 11%" ... and "up-market retailer Waitrose's market share rose to 5.3% from 5.2%."
    KC's View:

    Published on: January 12, 2017

    • Tesco announced that it has hired Alessandra Bellini - most recently vice-president, food for North America and managing director, food for the US at Unilever - to be its new chief customer officer.

    She succeeds Robin Terrell, who left Tesco last summer "to pursue a different direction."
    KC's View:

    Published on: January 12, 2017

    The annual National Retail Federation (NRF) "Big Show" is scheduled to take place next week, from January 15-17, in New York City's Jacob Javits Convention Center ... and I'm planning to spend some time there next Monday, January 16.

    If there are any MNB readers who'd like to get together, I'll be camping out from 1:30-3 pm at the MyWebGrocer booth, #612 ... I'll have some copies of my books to give away, and I'm always happy to catch up with members of the MNB community.

    Hope to see you there...
    KC's View:

    Published on: January 12, 2017

    ...will return.
    KC's View: