retail news in context, analysis with attitude

Published on: May 4, 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.

I've been on the road the past week or so, and when I've been in the air, I've been flying United Airlines. The trip was booked long before all the contretemps about dragging people off airplanes and killing pet animals that have done so much damage to United's reputation, but I probably would've flown them anyway. For one thing, I'm a million-mile flier on United, so I get upgraded from time to time and on long trips, when I put a bag under the plane, it doesn't cost me anything. Plus, flying United gave me the opportunity to see how they were responding to the crisis ... and I knew I could get a FaceTime piece out of that.

The short answer to the question is that I'd give United a passing grade, but just barely. Not that they did anything wrong; in fact, I'd say they were about as personable and customer-oriented as I usually find them to be, but no better.

No better is, to my mind, not good enough. Not by a long shot, not these days.

To be fair, United has been doing some penance. It settled with the doctor who got dragged off the plane for an unspecified amount. It dramatically increased the ceiling on compensation when passengers are bumped from flights. And the CEO, Oscar Munoz, has gone to Congress in sackcloth and ashes, taking all the blame. (Actually, he probably was wearing a pretty nice suit, and I'll bet he flew first class.)

The thing that really bothered me, because it struck me as a major opportunity missed, was when they ran the video that they always show before the plane takes off. You know, the one where they tell us how to fasten our seat belts, because this is technology that is foreign to so many of us.

United's video has in recent years been kind of cutesy, using Olympic athletes and showing flight crews and attendants in various different locales to which the airline flies while delivering their safety message. And when I've been on planes, that's exactly what they've been showing.

As I say, opportunity missed. Because this would've been a perfect moment for Munoz to record a message to passengers in which he demonstrated that he takes the company's problems seriously, and that he puts his customers first. He could've said something like, "We've had a bad couple of weeks, and have been in the news for all the wrong reasons. We know that we have to work hard to earn back your confidence, and here's how we are going to do it..."

I have some ideas about that. I think they ought to offer members of their frequent flier program double miles for any flights taken from now until the end of summer. They could offer free wifi on flights. And they could do whatever they need to do to create a culture in which the people who work there are empowered and invested enough to make good decisions, not bad ones, understanding that they are responsible for the airline's future.

You know, sort of the same way that everyone who works in any retail store needs to be empowered and invested, because they are the ultimate asset, not a cost.

Tell you what else United ought to do. I made a crack before about how CEO Munoz, when he testified before Congress, probably flew to Washington, DC, first class. Well, if he's serious about fixing his airline, Munoz ought to make a commitment to only fly coach on United for the foreseeable future, and to make sure he's always in a middle seat so a paying customer can have the aisle or window. And he ought to tell the entire executive team that they're going to do the same thing ... because they need to know what that experience is like, and customers need to know that they care enough to do so.

From everything I've seen and heard, it strikes me that United is trying to manage its way through this crisis. It'd be nice - in fact, I think it may be necessary, if they'd actually try to lead their way through it.

By the way ... that's what every company in crisis ought to do.

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

Published on: May 4, 2017

by Kevin Coupe

I was reading a piece in Variety this week that, while it was talking about the movie business, actually taught a pretty good lesson about bricks-and-mortar retailing and what such businesses have to do to compete with their online brethren. The story focused on director/producer J.J. Abrams, who has shown a real talent for infusing new life into existing franchises, as he did with Star Trek and Star Wars: The Force Awakens, and it essentially talked about the debate over whether firs

Here's how Variety framed the story:

J.J. Abrams loves movies, and he can make a passionate case for seeing them in the theater. But he does not love watching them at a particular theater in his wife’s hometown in Maine.

“There is a theater chain that I’m convinced hates movies,” he told a dinner audience at the Milken Institute Global Conference on Monday night. “You go there. They’re angry with you. It’s cold. There’s no music. The lights go out when the movie starts — there’s no ceremony. It’s the most uncomfortable seats… You’re convinced there’s something in front of the projector. Meanwhile, most people in that audience have better TVs at home than the image you’re seeing.”

His point was that theater chains should not be surprised if moviegoers would rather stay home. In making those remarks, he was wading into a thorny debate about collapsing theatrical windows and allowing moviegoers the chance to pay a premium for home viewing of first-run films.

“I understand the economic realities of it, and it’s tough,” he said. “At the same time, if they don’t make it worth people’s time, you better not call people to the theater and give them that kind of experience.”

Exactly.

Theater owners who fight tooth and nail against shortening the gap that separates theatrical release of a film and home viewing availability, or even simultaneous release of movies to theaters and homes, need to understand that some of them have done this to themselves. You can't offer expensive (and sometimes stale) snack food, broken armrests on seats, barely cursory customer service by staffers who don't seem to give a damn, and lousy, dirty bathrooms and wonder why people would rather stay home.

To be fair, there are theater owners who have tried to improve the experience. I have a feeling that the guy who owns the theater in Maine that he hates so much may also own the one in my town, which I've attended exactly once, because the seats are so uncomfortable that I ended up with both a headache and a stiff neck. I'll drive past this one a bunch of mediocre theaters to go to the AMC complex that is more than a half-dozen towns away and across the state line, just because they have digital projection, a couple of Imax screens, and stadium seating ... but even there, the bathrooms often are in some level of disrepair.

I'm okay spending $12 on a movie ticket. For a good movie, that is a cheap investment in a couple of hours of entertainment. But when the rest of the experience is barely mediocre, my resolve gets tested. (And they don't want to lose me. I may be older than the target movie demographic, but I see dozens of movies every year, which makes me a very good customer. On the other hand, I always sneak in my own Twizzlers, so they're probably not that thrilled with me.)

The movie theater serves as a good and Eye-Opening metaphor for bricks-and-mortar retail, I think. If the experience isn't a good one, if the service is lousy and the bathrooms aren't clean and it makes one wonder whether the company even likes being in the retail business or has any appreciation for the products they sell, then retailers shouldn't be surprised if customers decide to stay home and shop on their computers.

Published on: May 4, 2017

Bloomberg reports that Marc Lore, CEO of Walmart’s U.S. e-commerce business, concedes that "there are certainly areas where we are playing defense, and we’re behind and need to catch up" with Amazon. And in a presentation at the Bloomberg Breakaway Summit, Lore said that a key to making up ground will be investing in "long tail" assortments that can be provided through the various acquisitions that Walmart is making.

The term "long tail," as Bloomberg explains, "refers to the seemingly endless assortment of products that online retailers can offer, compared with the shelf-space constraints that force physical stores to focus on a more limited assortment of top-selling items." By acquiring online retailers such as Moosejaw and ModCloth, Walmart hopes to widen its "online assortment and close the gap with Amazon, which now accounts for 51 cents of every dollar spent on online retail thanks to its broad product offering and Prime membership benefits, according to Macquarie Research."

Published on: May 4, 2017

The new issue of The New Yorker has a piece entitled "Exploitation and Abuse at the Chicken Plant," in which writer Michael Grabell tells a devastating story. An excerpt:

"Though Case Farms isn’t a household name, you’ve probably eaten its chicken. Each year, it produces nearly a billion pounds for customers such as Kentucky Fried Chicken, Popeyes, and Taco Bell. Boar’s Head sells its chicken as deli meat in supermarkets. Since 2011, the U.S. government has purchased nearly seventeen million dollars’ worth of Case Farms chicken, mostly for the federal school-lunch program.

"Case Farms plants are among the most dangerous workplaces in America. In 2015 alone, federal workplace-safety inspectors fined the company nearly two million dollars, and in the past seven years it has been cited for two hundred and forty violations. That’s more than any other company in the poultry industry except Tyson Foods, which has more than thirty times as many employees."

In addition, Grabell writes, "Case Farms has built its business by recruiting some of the world’s most vulnerable immigrants, who endure harsh and at times illegal conditions that few Americans would put up with. When these workers have fought for higher pay and better conditions, the company has used their immigration status to get rid of vocal workers, avoid paying for injuries, and quash dissent."

It is a devastating story, and you can read it here

Published on: May 4, 2017

Last Friday, MNB took note of the opening of Kai Market, a small-format store opened by international market Uwajimaya in the South Lake Union section of Seattle. At 5,500 square feet, the store was reported to feature everything from whole fish to poke and sushi, and to be a highly focused piece of retail real estate.

Well, Kai Market is all that. And more. I know this because I had lunch there last Friday.

Normally, I'd say that the best thing that Kai Market has going for it is location, since it is smack dab in the middle of a neighborhood dominated by Amazon offices. The whole neighborhood is packed with restaurants and bars, and trying to walk through the area at lunchtime, as teeming hoards of Amazonians make their way to lunch and pack the sidewalks, can be problematic.

But Kai has a lot more going for it than just location. The market - which you can see in pictures below - is a sleek piece of work, with service counters and self0service cases offering a wide range of seafood items. The staff was friendly and accommodating, willing to answer questions about products that were foreign to my eye and palate.

In addition to an enormous tank of live crab and lots of whole fish, Kai's foodservice offerings are wonderful. I opted for a poke bowl that featured a variety of seafood items tossed in a spicy sauce and served over a bed of rice; you can't get good poke where I live in New England, and so I was thrilled to have the opportunity to indulge myself. And, I tried some sushi, which was equally spicy and delicious.

My only suggestion for the folks at Kai - and I say this knowing that I actually was there five days before the official grand opening, so it is possible that changes already have been made - would be that informational signs might be a help. This doesn't just apply to the seafood; there is a generous selection of Asian beverages, many of them apparently green teas, but there were no signs to guide the person who cannot read any of those languages. I took a shot, bought one and loved it ...but I'm just saying that maybe a little help on that would've been nice.

There are several counters in Kai where one can sit and eat, and adjacent rooms where they plan to offer cooking and other educational classes.

Kai, to my mind, is a winner ... and the Uwajimaya folks might be able to take elements of the format and create even smaller stores around the city to serve the growing urban population with a taste for good food and a need for convenience. And, it serves as an example of something that I wrote in my earlier piece - that one does not need to have a big store to have big ideas.

Published on: May 4, 2017

A company called Morning Consult is out with a list of what it defines as the Most Loved Brands in America, based on some 200,000 consumer interviews, with Amazon taking the top spot and Google coming in at number two.

According to MediaPost, "Google subsidiary YouTube also landed in the top 10. But the top 10 isn't all tech newcomers. Iconic American food companies Campbell and Hershey rank 5th and 7th, respectively. Other top 10 finishers include UPS, Fed Ex, Sony, Home Depot and Lowe’s."

Food and beverage, hr story says, "is broken down into subcategories. Among beer brands, Heineken is tops, followed by Budweiser and Samuel Adams. Baskin Robbins is the top restaurant followed by Wendy’s and Dunkin’ Donuts. In the grocery category, Kroger edges out Whole Foods. Kroger gets a net favorable score of 53%, while Whole Foods is five points behind at 48%. This difference comes largely from the fact that more people have an unfavorable opinion of Whole Foods — 13% to Kroger’s 9%. Safeway follows in third place."

One important note the study does make is that "love" can be both fleeting and situational. "Campbell's Soup is one of the most well-liked brands in America, but it is struggling to get Millennials on board. It’s a particular favorite among Baby Boomers, for whom it is tied for No. 2, and also ranks in the top 5 among the Gen Xers." But not so much for Millennials, for whom But for Americans ages 18-34, the only brands with net favorability above "Campbell is in distant 27th place, behind sugary food staples like Hershey and Dunkin’ Donuts, and food and beverage brands that try to appeal to a Millennial audience, such as sports drink maker Gatorade."

Published on: May 4, 2017

The Seattle Times reports that outdoor clothing and equipment retail co-op REI has been handing out wage increases to employees over the past year that have cost it close to $25 million, or roughly two-thirds of the $38.3 million in profit that the company earned last year. The increases work out to about a 10 percent raise per employee, the story says.

CEO Jerry Stritzke made the revelation at the co-op's annual meeting in Seattle.

According to the story, "The outdoors co-op said last summer it would boost pay starting in August for employees at 37 stores in cities where the cost of living had been rising the most. It also said all retail-store employees would be paid above the majority of retailers in their area by 2017 ... REI had said its move toward higher pay had been under way for months, but it came at a time when employees had been increasingly vocal about wage and scheduling issues. A Seattle City Council member had held a forum in which some REI workers talked of low wages and erratic hours."

Stritzke also said at the annual meeting that "the No. 1 challenge to REI’s business is that 'the basis of retail is fundamentally changing.' Focusing on shared values, not just buying things, is important, Stritzke said.

"The success of the #OptOutside social-media campaign, which REI started two years ago by closing its stores on Black Friday and encouraging people to enjoy the outdoors instead of shopping, tapped into such shared values. 'It was kind of shocking how that caught a cultural wave,' Stritzke said."

Published on: May 4, 2017

• Reuters reports that Walmart is "considering getting certified under a new international program that could help companies defend themselves against isolated cases of corruption or poor business practices.

"The International Organization for Standardization (ISO) developed the so-called anti-corruption compliance program and Wal-Mart is hoping to be the first U.S. company to get certified under it ... The ISO is the world's largest developer and publisher of international standards."

Over the past four years, the story says, "the Wal-Mart board's compensation committee has conditioned a portion of its most senior executives' compensation on making adequate progress toward annual compliance goals. In its latest compliance report, Wal-Mart said it has achieved over 200 of these board-level objectives, including over 60 that relate specifically to its anti-corruption program."

Published on: May 4, 2017

...with brief, occasional, italicized and sometimes gratuitous commentary…

• WSET-TV News reports that "Kroger has lowered prices on about 3,000 items in all Virginia stores," on top of 5,000 items that saw price reductions over the past four years.

Spokeswoman Allison McGee says that "there will be no increases in prices of other items or changes in coupons. 'Kroger customers will continue to see fuel rewards, digital coupons, weekly specials and loyalty mailers, tailored to their individual shopping habits'."

However, Kroger also said that as of May 23, it no longer will offer senior citizens a five percent discount on Tuesdays.

Just more evidence that the Virginia market is getting more competitive, as Kroger faces off against Wegmans and Publix, not to mention Aldi and Lidl, among others, that want to grab a piece of the pie.


• In the UK, The Sun reports that Tesco "has cut the prices of hundreds of fresh products in store and online, including fruit and vegetables. It comes after rival Morrisons said on Monday that it would slash the prices of 1,067 everyday products."

And the UK price wars continue...


• As both the Food Marketing Institute (FMI) and the National Grocers Association (NGA) brought their members to Washington, DC, to interact with the US Congress and gauge the temperature of various industry-oriented initiatives, the trade associations also took advantage of the moment to present some awards...

NGA recognized Kathy Kuzava, president of the Georgia Food Industry Association (GFIA), with its Association Leadership Award for "her dedication and contributions to the independent supermarket industry."

And FMI presented Ellie Taylor, president of the Alabama Grocers Association, with the 2017 Donald H. MacManus Award "for her outstanding leadership and dedication to the grocery industry."

Published on: May 4, 2017

• Albertsons announced that it has named Doug Cyan, the company’s vice president of marketing and merchandising, to be division president of Jewel-Osco. He succeeds Mike Withers, who has been named executive vice president of retail operations, East region for the company.


• General Mills announced that when its CEO, Ken Powell, retires this summer, he will be succeeded by Jeffrey Harmening, the company's president/COO.

Powell will remain as chairman for the time being.

Published on: May 4, 2017

Yesterday, an MNB reader agreed with our position that Wegmans is showing tangible leadership by engaging in menu labeling despite the delay in federal rules mandating such labels.

Which prompted Wegmans' own Jane Andrews to write:

We appreciate your insights on menu labeling as well as those of a reader who is also our customer.  Wegmans is a mission-driven company: to help folks enjoy healthier better lives through food.  A seemingly simple step of showing calories on products can nudge people to make informed choices.  Though not exactly rocket science, providing nutrition info takes discipline in execution with thousands of our in-store produced products.  Difficult, but the right thing to do.  We’re so glad that customers notice.

Wegmans has earned its reputation by never leaving any doubt in the shoppers' mind that it is an advocate for the consumer, not a sales agent for suppliers. More retailers ought to take note, and do the enlightened thing.

Of course, not everyone agrees. I used that line about being "enlightened" yesterday, agreeing with my reader, which prompted the following email:

How very elitist of you and your reader. People who disagree with your opinion are less enlightened? It’s your government?

Wrong on both counts. Sure, there are some on both sides of the aisle who are unenlightened, but most of us are very well informed and we know our history. It’s not your government, it’s all of our government. Our founding fathers, in their wisdom established our government to allow for opposing views, often extremely opposite views,  to be discussed and debated, so solutions can be reached. They didn’t say it would be easy and it was never intended that our government be full of centrists. Reread the stories about John Adams and Thomas Jefferson, for an example.

I plead guilty. I think people who disagree with me on some issues are less enlightened than I am.

I also presume that they think I am less enlightened than they are.

Isn't this the nature of disagreement? And civil discourse? And people who learn to compromise for the sake of progress ... being enlightened enough to know that we can't always have it our way? (BTW...I think I've made clear that while I am in favor of menu labeling laws, this is not a make-it-or-break-it issue for me. If the consensus is that companies like Wegmans should do it on their own in order to have a competitive advantage, then I'm okay with that. I just think it makes Wegmans more enlightened.)

One other thing. I'm not sure I understand your position on whose government it is. I just know that we get the government we deserve.

Incidentally, I took swing at this issue from another direction yesterday, and wrote:

In general, I think, the government has no interest in being on the side of the people, unless the people happen to be part of a larger business entity that uses lobbying money and campaign contributions to invest in the best government money can buy.

Which prompted MNB reader Ken Wagar to write:

I believe you are absolutely correct about this and also believe it is so clear that there should be no argument that in fact this statement is not true.

BTW...I also got this email from MNB reader Jason Ravitz:

Wakefern/Shoprite will be compliant on May 5th, 2017, as planned - it is the right thing to do for our consumers.

Exactly. And good for you.




This email, from MNB fave Glen Terbeek, gets to the heart of what we fervently believe here:

I believe that every company today should have a CDO, Chief Disrupter Officer. This person would continually look at their business and their industry just like outside attackers are looking at it. This CDO organization would consider technology opportunities as well as business practices that are out of alignment with today’s and future marketplace realities and economics, etc and lead the appropriate change.

So many large and successful companies are so focused on incrementally improving their current way of doing business they don’t look at it like disrupters do. Their organizations, measurements, substantial investments, and short term results focus won’t let them think about being different; they only think about being better at what they have been doing. Case in point, why do large companies pay big premiums for start ups, (i e Walmart, Jet) when they should be taking the lead themselves? How did Amazon become a significant powerhouse in the established consumer products market? They started with a clean sheet and ask the basic question “why are they doing business that way in today’s world?” What will the shoppers want?

In my opinion the CDO is a full time job that challenges how things are done across the whole organization starting with the customers. Most disruption is cross functional, which basically prohibits the current functionally designed organization to develop breakthrough solutions.

The choice is "Disrupt yourself, or be Disrupted!” Who is leading Disruption in your company?




We had a story yesterday about Congress considering legislation that would allow private companies to offer employees the right to take comp time instead of overtime pay when they work extra hours, which I totally agree with.

One MNB reader responded:

About 25 years ago, at a Fortune 50 company, our headquarters HR department announced that comp time would not be allowed. This rule (which no one followed) was an established precedent, but from now on it was to be "enforced."

The edict was released in October. We met with our administrative team. In prior years, in the late fall, they set up a shopping rotation. Everyone got one or two afternoons off to shop. When we advised them of the new directive, they said that they would rather have comp time versus overtime pay.

We went with their wishes. For many people, time is a more valuable commodity than money.




Addressing the Washington Post story we featured that questioned organic milk standards, MNB reader John Baragar wrote:

You had a story several months back about single source and grass fed beef.  I mentioned that we get our beef directly from a local farm because I simply don’t trust a large chain store’s supply chain.  When the market becomes big enough for any product like this, large producers will find a way to produce it cheaper and under the letter of the law but not really in the spirit.  It looks like that has played out here.  Not sure if they are complying with the organic standards or not (my guess is that they probably are in most cases), but they are clearly not producing what people think they are paying twice the cost for – the chemistry of the product clearly shows this.   Their goal is to do the minimum to qualify as Organic not produce the type of milk that their consumers think they are buying.  It’s sad and a shame, but entirely predictable.




I said the other day, when writing about Target shutting down a lot of its innovation-oriented initiatives, that such moves seem to be the exact opposite of what Amazon would do, and that Target likely will end up being at a competitive disadvantage as a result. Leading MNB reader Bill Kadlec to write:

I wonder about the Amazon to Target comparison. We never hear about a lot of the experiments Amazon does and shuts down. Unfortunately with Target, it is all news . . . at least the company makes it news. I don't think shutting down this particular project is, in itself, a problem. But, the simultaneous departure of the Chief Innovation Offices, that's a big red flag. Fail fast seems to have become evident in this venture. But, what else are they doing? This isn't your father's market where you can wait for someone else to make the innovation and then copy it. Innovation IS the market.

I think you answered your own question when you said that "we never hear about a lot of the experiments Amazon does and shuts down."

First of all, that's not exactly true ... and the Amazon Fire smartphone may be the best example of an innovation that got a lot of publicity, failed quickly and loudly, and then was pulled from the market. What Amazon learned from the failed experiment has fueled a lot of the development work done with the Echo/Alexa system, which is why it is important to take risks and try new things.

Target won't even have the chance to fail if it pulls the plug on these innovation initiatives. It isn't just one ... it seems to be an entire structure, developed with MIT to peer into the future and find new ways to come to market.

What's the line from the lottery ad? You can't win if you don't play.




On another subject, from MNB reader Gregg Raffensperger:

I agree it is good that Ahold/Delhaize is going to start “branding” Peapod.  Long overdue.  With their current internal issues and lack of competitive pricing, it will be interesting to see if they can pull it off.

Like you said, If they “manage to Main Street and not to Wall Street” they might be able to do it.




Got this email from an MNB reader:

Just thought I'd let you know how my thought process has led me to conclude the difference between Amazon, Wegmans, a few others, and Everybody Else.  The email you posted on the word "purvey" made me think of when I was back in the military and the base had a gun club (no really, that was not a pun) where we would spend several hours a week shooting skeet.  My first experience with a Remington 1100 and Tylenol, but I digress.

Anyway, the trick to doing well is to "lead" the clay pigeon by the appropriate distance.  Not unlike "purveying" where it will be when the pellets get there.  I'm sure you see the retail correlation there, BUT...  an even more accurate and telling depiction is, the folks who picked up on this and learned to do it almost by reflex, were the ones who scored the best.  Many others just lost interested and stopped going to the range.  To quote a favorite of mine, Linda Ellerbee, "And so it goes."

So to United and all the rest, I say overbooking is NOT the same as purveying the best travel experience.

To the Banks, I say at some point, people will decide they've been screwed enough, and the convenience is not worth the price.

To the Calorie label folks, I say, virtually all stores/restaurants have a website, put the data there and let the people that want to know, go there. For the handful that don't have a website, I'm sure there is some young geeky techno-wizard willing to start FindItHere.com.

America can do great things, if the government will walk along side, to keep a level playing field, rather than jump in front with stumbling blocks, and try to pick winners & losers.

Picking winners and losers is MY job.  Along with every other consumer in the country.




Yesterday, MNB reported on and offered a look at a new Heineken ad that, I think, does a much better job of addressing social, political and cultural issues than, say the Pepsi ad that recently got so much criticism for being tone-deaf and manipulative.

Which prompted MNB reader Chris Esposito to write:

While I do not care for the beer, I think this is a great commercial.

Agreed on both counts. Though, as the late, great Robert B. Parker once wrote, "The worst beer I ever had was wonderful."