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    Published on: March 9, 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, Kevin Coupe here, and this is FaceTime with the Content Guy.

    I'd like to say for the record that at this point, no matter what their political positions or the political implications of their actions or inactions, statements or lack of statements, I have no intention of boycotting Starbucks, LL Bean, Nordstrom, Under Armour or New Balance. I like all of these companies, find the products they sell to be relevant to my life, and they've done nothing that I think is so egregious that it'll change my shopping behavior.

    My instinct generally is to go out of my way to support companies that I think support causes or positions with which I agree

    On the other hand, I am going to be boycotting Uber ... not because of the company's politics, but rather because I don't like the way they seem to treat their people or the way they seem to view themselves as being above the law. By the way, calling it a "boycott" is probably a bit of hyperbole, since this is just me deciding to do business with a competing company. I'm not part of any sort of organized effort, nor do I plan to be.

    For the longest time, I was boycotting Mel Gibson movies, because I thought he was an anti-Semite, and I have a problem with that. And for an even longer time, I've boycotted Roman Polanski movies, because it was a way of expressing my contempt for someone who fled the country to avoid a rape trial. That said...I have to admit that I recently watched Hacksaw Ridge, which Gibson directed (and I'll review it in "OffBeat" tomorrow), and when it came out in 2010, I watched Polanski's The Ghost Writer, because I was intrigued by the premise. In these cases it was a matter of appreciating the art but not the artist ... which strikes me as both a justifiable position and a first-class rationalization.

    I say all this because the issue of boycotts has been front and center lately, largely because of the toxic political climate and the polarized - and polarizing - level of discourse in the country. I have to be honest - I'm sort of tired of it all, in part because there's absolutely no context or nuance to the conversation.

    Let me be clear. I believe in protest. I think that people, when faced with public policies or public officials with which they disagree, ought to be insistent and loud ... and ought to back it up by voting. I have fond memories of protesting against Nixon in 1972 ... it was an experience that I think in a lot of ways was formative. And it was at least in part because of protest, along with the work of the press, that created the political momentum that helped drive him from office.

    But I think that boycotting Starbucks because its CEO disagrees with the Trump administration's approach to refugees, or LL Bean because one member of the board took a specific political position, or New Balance or Under Armour because executives expressed support for pro-American manufacturing positions that they believed were being espoused by the Trump White House ... well, this just doesn't work for me. People have a right to express political opinions, though, as I've mentioned here before, these days they do so at their own risk.

    I'm much more likely to decide not to do business with a company if I learn of behavior that I find objectionable. Like polluting the air or water, or in some way mistreating employees, or being guilty of sexism in hiring. That's where I draw my line.

    The thing is, everybody draws the line in different places. And as toxic as the climate is, retailers and suppliers have to be careful about what they say ...or at least, when they take a position, they have to be aware that dominoes can fall, sometimes in unexpected directions.

    For my part, I'm going to try at least be a little intelligent about how I express my opinions through my purchasing behavior. If you boycott everything all the time, it ends up not being worth anything.

    And I like what the great mystery writer Ross Macdonald once said, that "People cannot endure inexplicable worthlessness."

    Which is sort of how I feel about the level of the political discourse right now - it is inexplicable, and tough to endure.

    But I'm going to do so in my LL Bean sweater, New Balance boots, Nordstrom shirt, while drinking a Starbucks coffee.

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

    KC's View:

    Published on: March 9, 2017

    by Kevin Coupe

    Add this to the list of traditional companies put out of business by the digital economy.

    Popular Photography magazine, which been around since FDR was president, has decided to make its March/April 2017 issue its last. And, according to Digital Photography Review, as of tomorrow "no new content will be published on PopPhoto.com. This news comes after the publication switched to a bi-monthly print schedule about six months ago.

    "Pop Photo's sister publication, American Photo Magazine, had been Web-only for the past couple of years; it will also stop updating its website as of this coming Friday."

    Businesses, like fresh foods, have expiration dates. It is a shame, but it appears that Popular Photography reached it, if only because it was unable to adapt to new realities.

    An Eye-Opener, I think.
    KC's View:

    Published on: March 9, 2017

    The Street has a story about how Walmart "is getting savvier at creating ways to shop in its stores and online at the same time, and Amazon should be worried."

    According to the story, Walmart "is testing a touchscreen monitor in its toy aisle at certain stores in Texas that helps parents and children alike find exactly what they are looking for. And if they don't find it in the store, they're only a click away from ordering online." In the same store, "Walmart is testing devices with its Scan and Go technology and eliminated most of its full-service checkouts. At one of its test stores, the company only has six full checkouts, 'everything else is self checkout' either with express lanes or through Scan and Go, which allows customers to pay via smartphones."

    And it is combining all these moves with billions of dollars of investment in its online business, and is testing "a new price-comparison test at about 1,200 stores in 11 Midwest and Southeastern states to better compete with rivals like discount food retailer Aldi and food and drug retailer Kroger."

    By the way, Fortune has a story noting that Walmart's "pre-cooked rotisserie chicken sales are up almost 10% in the past two years" ... that the sale of "foods with healthful properties like turmeric and garlic supplements are up 30% over the last 24 months" ... "sales of scientific and educational toys are up 24% over the past year" ... "smart thermostats and security devices have skyrocketed 500% over the past two years" ... and "sales of home improvement hardware, including power tools, are up 7% versus last year."
    KC's View:
    I think there is no question that Walmart is upping its game on a lot of levels, spending a lot of money and seemingly making significant organizational moves that will position it better for the dramatically changed retail landscape.

    Should Amazon be worried? I suspect that the folks at Amazon are institutionally conditioned to using the energy that might be expended worrying and apply it instead to innovating. But I'm sure they're paying attention.

    Published on: March 9, 2017

    Bloomberg reports that Starbucks has been losing market share this winter - in February it was down to an 11 percent share of all the restaurant chains evaluated by research form xAd, compared to 12 percent during January.

    A variety of factors are cited in the report, including aggressive promotions from competitors. But there also have been problems with the company's mobile ordering system, which created a pile-up of patrons at some locations that led some customers to walk out ... negative public reaction from some quarters to positions taken by CEO Howard Schultz that are seen as anti-Trump administration ... unseasonably warm weather that challenged coffee sales ... deflation that has had more people eating at home than going out, which has created a general decline in the restaurant business.
    KC's View:
    In general, I suspect that Starbucks is going to be fine. There is a fashion aspect to the Starbucks model that may make its market share ebb and flow a bit, and so I wouldn't be too worried.

    The only question I would ask is whether the economic environment is right for an expansion into higher end cafes like its Reserve and Roastery concepts. I realize that these formats represent the course of innovation at Starbucks, but I might be a little worried about bucking economic trends.

    Published on: March 9, 2017

    CNBC has a story about why off-price policies are actually a bigger threat to traditional retail than Amazon, despite the fact that the online retailer tends to be the easy whipping boy for companies in trouble.

    "As chains like Macy's and J.C. Penney remove 100 or more stores from their fleets, TJX, Burlington and Ross are on the expansion track. Their stores are resonating with shoppers because of their constantly changing inventory, as well as their consistently low prices," Macy's CFO Karen Hoguet told the UBS Consumer & Retail Conference in Boston.

    According to the story, "Macy's has already started rolling out two off-price strategies to help boost its business. The Backstage concept operates as a pure off-price shop akin to Marshalls or T.J. Maxx. Macy's has been building standalone locations for Backstage, as well as dedicating branded sections in its stores for the inventory.

    "Meanwhile, the department store has tweaked its traditional strategy of marking down clearance goods on the main sales floor, in favor of sectioning off an area meant strictly for these goods. Those sections, called Last Act, have helped Macy's clear through dated inventory quicker and at better prices, Hoguet said."
    KC's View:
    As I've said here before, nobody really knows what things cost, and Americans in general are addicted to promotions and deals. The question is whether there is a bottom to this trend, and what the long-term impact will be to US retail. In a world where the middle class is vanishing, it seems entirely possible that middle-of-the-road retail with middle-of-the-road pricing will vanish as well.

    I suspect that the companies that will succeed long term will be the ones defined by their values or value. Occasionally both.

    Published on: March 9, 2017

    The BBC reports that Tesco is in the process of reimbursing 140,000 current and former employees because of what is called "an accounting error" that resulted in them being underpaid.

    The repayment is expected to cost Tesco the equivalent of as much as $12 million (US).

    According to the story, "The staff were paid less than the National Living Wage after contributing part of their salary to pensions, childcare and cycle to work schemes. Tesco discovered the errors during a review as part of the implementation of a new payroll system."
    KC's View:
    "Cycle to work schemes?" Really?

    I wonder if I could get my boss to give me a "roll out of bed and go right to work" bump to my salary?

    Published on: March 9, 2017

    Bloomberg reports that "online grocery delivery startup Instacart Inc. has raised a $400 million round of venture funding ... With the additional capital, the San Francisco-based company’s valuation has risen to $3.4 billion."
    KC's View:
    It just got more expensive for someone to come in and buy Instacart, I'd guess. Which always has struck me as the inevitable end to this saga.

    Published on: March 9, 2017

    • As widely expected, Radio Shack has filed for bankruptcy protection. Again.

    It is the second time in two years that the electronics retailer has sought protection from creditors. CEO Dene Rogers said that the company had deuced its operating expenses by 23 percent since its 2015 filing, but that it was not enough. The Associated Press writes that "a partnership with wireless carrier Sprint ... proved not to be as profitable as expected.

    Two hundred of the company's 1500 stores are expected to be closed, with the jury still out on what will happen to the balance of the fleet.

    General Wireless, part of hedge fund Standard General, acquired RadioShack trademark and many of its stores after its 2015 bankruptcy.
    KC's View:

    Published on: March 9, 2017

    The Washington Post has a story about how the National Confectioners Association (NCA) this week is meeting in South Florida at the Trump National Doral resort near Miami, where they were plotting lobbying strategy in the Ivanka Trump ballroom, engaging in a dessert networking event on the Donald J. Trump grand patio, and, "between meetings, attendees were eligible to enjoy outings on a Trump-owned golf course and massages at a Trump spa." In addition, the group "has booked two upcoming meetings, in September and again in 2018, at the Trump International Hotel down the street from the White House."

    At the same time, the story says, NCA "is optimistic about scoring big, early policy wins from the Trump administration. Among the industry’s priorities: a long-sought rollback of government sugar subsidies that candy firms say drive up the costs of making their products." The organization has estimated that "a victory on the sugar issue could save the industry $280 million annually."

    While NCA says that it booked the venues before Trump won the presidency and ended up in a position to help its members, the Post writes that "the arrangement illustrates a repercussion of Trump’s decision to retain ownership of his business during his time in the White House — that he can become financially intertwined with a special interest that is simultaneously seeking to influence policy decisions by his administration.

    "By holding conferences at the Doral resort and the D.C. hotel, the confectioners group is making payments to businesses that directly benefit the president’s personal fortune at the time the candy group is seeking policy changes in the administration. In addition to the three events taking place during Trump’s presidency, the group also held two conferences last year at Trump properties when he was running for office — a winter gathering in Doral and a September forum at the D.C. hotel."
    KC's View:
    To be clear, NCA says that it is not spending hundreds of thousands of dollars on Trump-owned properties as a way of influencing public policy. Which may have been the case going on, when they did not expect Trump to be president, but I have to imagine that they are thrilled about the timing now.

    Also to be clear, the White House maintains that the President of the US is excluded from all conflict of influence rules (which is true), and that Trump has handed over all control of the business to his sons (presumably true), and has no interest in the business. My position on this is that all Presidents not only ought to be held to the same conflict of interest rules as everybody else in government, but also ought to be held to a higher moral, ethical and legal standard when it comes to such conflicts. But wishing won't make it so.

    I would just point out that while candy manufacturers may hope to be looked on positively by the White House, they also run the risk of offending people at the other end of the political spectrum. So this could come back to bite them down the road ... especially because there is no sign that the Trump presidency is going to get less controversial with the passage of time. And, if the controversies continue and the toxicity of debate increases, the press coverage also is going to continue and perhaps put some of these companies and organizations into an unwanted spotlight.

    I pointed out a couple of months ago that I thought the Food Marketing Institute (FMI) is courting potential controversies by planning next January's midwinter executive conference for Trump's Doral resort in Florida. Beyond the fact that we don't know how what the nation's political environment will be like a year from now, it also is possible that there will be attendees who will stay elsewhere because of their own political convictions. (There are a lot of food industry people who do not approve of Trump.)

    It is all complicated. NCA is getting questions about its lobbying efforts that it might have preferred go unasked, and publicity about its lobbying efforts that it may well not have wanted. The same thing may happen to FMI, and every other company and/or organization that uses a Trump facility in coming years.

    They should do what they want. But they need to recognize that their decisions, like elections, have consequences.

    Published on: March 9, 2017

    We had a story the other day about how more than a thousand Kroger office employees have decided to accept early retirement as the company looks to streamline operations and cut costs. Prompting MNB reader Tom Murphy to write:

    While this is a fact of doing business, the other fact is that a lot of talent, tribal knowledge, leadership, and dedication to the cause will walk out the door.  Typically, the employees with the best chance of re-employment (those with the strongest skills and experiences) make up the majority of those accepting…not particularly the group you want to lose.  I also wonder about the risk the other 700 face of layoffs…with less generous packages…if any.  Back in the late 80’s, a similar package was offered to gain traction against a KKR attempted takeover.  There were 50-ish employees who did not take the package, and all had been laid-off within a year.  They were known back then as “The Foolish Fifty”.




    On another issue, I got the following email from an MNB reader:

    In your yesterday’s (3/6) MNB, at least 3 “pieces” (The cost of AI, Blue Bunny, E-conomy Beat)  clearly point out (for those not too blind to see, or financed in some way not to see) the evils or Amazon.  If harming children’s ability to think, research, or problem solve isn’t enough, “the great job killer” continues to destroy working class jobs and contributes to the death of malls and the jobs that die with them.
     
    You and people like you need to: 1) stop thinking you’re more important than you are. 2) Stop thinking you’re busier than you are, you’re not, and 3) open your eyes to what’s happening on an almost weekly basis to brick and mortar retailers (HHGregg and Gordmans in the last two weeks.)
     
    Easy to blame the retailer, and they have plenty of culpability, but if you refuse to place at least some blame on Amazon, your obsession has blinded you to reality...and what’s coming next.


    I think one of us is blind to the realities of the economy and the inevitabilities of progress. I also think one of us has more confidence in the ability of people to adapt, and more optimism that eventually the country will embrace public policies that take advantage of these trends and make the most of them.



    Had a story the other day about how some malls are looking to get supermarkets to take over anchor spaces being vacated by troubled mass retailers. One MNB reader responded:

    Perfect example of everything old is new again.

    Westfield Mall in Trumbull CT, opened back in 1964 and included a supermarket tenant named Hills, along with some now other now defunct names such as mass merchandiser EJ Korvette’s and Read’s Dept. Stores. It was the first covered mall in CT.

    The supermarket was eventually purchased by Waldbaums and it ran into the late 80’s when eventually it was replaced by more soft goods retailers.

    While the concept of one stop shopping in theory seemed great, you would really have to plan your trip as to not have your frozen items melting in the back of your car. That along with having barriers installed so that the carts would not end up in the parking lot really put a damper on doing anything but quick trips for a few items, as those shoppers (mostly female) were not going to leave a cart full of groceries at the curb while they went to find their car.

    While I think some mall locations can be conducive to having a grocery store, the public will decide if they are convenient and worth the hassle.

    For me, I avoid the mall all together, as does my family with the insane exception of my wife and teenage daughters going there for their annual Black Friday penance.


    I generally only go to malls when there's an Apple Store inside.

    MNB reader Bob Wheatley wrote:

    Your story: Scenes from The Mall reflects moves by mall owners to staunch flagging traffic by adding in a form of retail known for frequent visits in a category that’s robust. Good idea for whom? Just a great question to ask.

    That said ultimately this is about culture shift. And that’s an unstoppable force that this tenant band-aid won’t fix. Reminds me of the old and very appropriate saying, “When times change, if you don’t change with them, you’re in trouble.” There’s more trouble ahead for Malls that don’t rethink what business they’re in.





    On another subject, from MNB reader Jerry Sheldon:

    In the speculation as to Target’s woes, why do analyst fail to consider their very public and vocal stand on restroom usage as a potential impact to the challenges they are facing? Could it be that the net effect has been overwhelmingly negative in that while they have endeared themselves to some, they may have alienated that which was their much larger core audience. There are some that choose to speak with picket lines and pen, and some with their wallets, and maybe we are hearing from the wallet crowd. Target will never admit to it, but you can be sure they know and you can also be pretty confident that they are not going to retreat from their position.

    Maybe. I tend to think that younger Americans find the bathroom issue to be much ado about nothing, and they are far more accepting of their transgender brothers and sisters. Older Americans, not so much ... and if Target's demographic appeal skews older, you could be right.

    Which could point to two problems for Target, not one.




    From another reader:

    I just wanted to let you know how much I appreciate the way you've been navigating the "Your Views" section of the MNB lately.  You have not dismissed, but embraced divisive topics (like religious freedom/LGBTA rights, immigration bans, and the 'Hollywood elites') and the polarized viewpoints that accompany them.  You are always balanced and productive in your rebuttals – always providing "one more thing to think about" in the discussion.

    Well done, and thank you!
    KC's View: