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    Published on: May 12, 2017

    by Kevin Coupe

    Ted Williams, it is said, had amazing eyesight, which is one of the reasons he was able to be one of baseball's greatest and most consistent hitters.

    When he was at bat, he never took his eye off the ball.

    Which is what I found myself thinking about two weeks ago when I had the opportunity to revisit Main & Vine, the single store upmarket format that Kroger opened last year in Gig Harbor, Washington, a half-hour south of Seattle.

    MNB readers may recall that I visited Main & Vine in April 2016, and filed a story that you can read here. I liked Main & Vine, finding it to be an effort at channeling elements of New Seasons, Mariano's, Harris Teeter and Lucky's Market; Kroger owns Mariano's and Harris Teeter, and has invested in Lucky's, which meant that Main & Vine needed to be seen as part of a larger puzzle being assembled by Kroger.

    Now, a year later, my return visit suggested that the puzzle is missing a few pieces, and that Main & Vine is not living up to its potential.

    I was there mid-afternoon on a Saturday, and was surprised to find that the store had almost no energy ... and few customers. But even more concerning was the fact that there were an enormous number of out of stocks, haphazardly displayed product, and empty racks. It wasn't like the store had just endured an amazing rush and the staff hadn't had a chance to put things back together. It was more like nobody cared.

    It was, to return to the Ted Williams metaphor, as if nobody had their eye on the ball.

    I wondered about what was going on at Main & Vine. Was this a matter of casual negligence? Inadequate management? Or had Kroger simply decided that this was a combination of an ineffective format and a bad location, and that it was time to just ride it out until the end of the lease?

    It was my good fortune to have the opportunity to chat a bit about Main & Vine with Mike Donnelly, Kroger's executive vice president of merchandising, and to his credit, he made no excuses for what I'd found. He said that Main & Vine has in general hit its numbers and that Kroger believes that the format has strong potential, especially because Kroger is learning so much from its Lucky's investment ... though he added that the Main & Vine name might not be used in the future.

    To me, the Main & Vine situation offers some important opportunities for learning.

    In any store, especially at a time of intense and growing competition, management and staff have to realize that there is no room for being lackadaisical. Every time a customer walks into a store, it is not just a chance to make a sale ... it is, in fact, a chance to begin or maintain a relationship, which can be the difference between success and failure in the long term. This is true of every retailer, but it seems to me that it is even more important (if such a thing can be said) in a store that is designed to be a test.

    How can you decide whether to walk down a path if you don't put your best foot forward?

    Clearly, that's not what is happening at Main & Vine. If it were me (and I'm reasonably sure that Kroger will do just fine ignoring my advice), I'd find two or three great people from Harris Teeter and Lucky's, and I'd parachute them into Gig Harbor to spend 4-5 days getting Main & Vine into shape ... doing a forensic analysis of what isn't working, and setting out the tasks that need to be done to make it a more effective and compelling experience. And I'd make the store's personnel accountable for living up to expectations. No excuses.

    There may be those who will take some pleasure in this criticism of Kroger, but I'd be careful about that. There are a lot of food stores around the country where there are an enormous number of out of stocks, haphazardly displayed product, and empty racks. Main & Vine just happens to be the one I was in two weeks ago. (If you are a retailer, can you honestly tell me that you have no such transgressions in your stores?)

    If you're a retailer, you need to think like Ted Williams. Keep your eye on the ball, and take nothing for granted.

    KC's View:

    Published on: May 12, 2017

    Reuters reports that Aldi has conducted market studies leading it to believe that its prices are on average 21 percent cheaper than the competition's - including Walmart's.

    CEO Jason Hart says that his goal is to maintain and press that advantage.

    The story says that "his strategy, previously unreported, centers on adding more private-label goods, which are a retailer's in-house brands, to win over price-sensitive customers, and a massive expansion to further disrupt a U.S. grocery sector that has seen 18 companies go bankrupt since 2014.

    "Hart's plan calls for spending $1.6 billion to expand and remodel 1,300 U.S. stores, and open 400 new stores mainly in Florida, Texas and on both coasts by end of 2018. He also pledged Aldi will be willing to change prices more frequently to respond to rivals if needed."

    And, "though it only accounts for only about 1.5 percent of the U.S. grocery market, Aldi is growing at 15 percent a year, whereas Wal-Mart currently controls about 22 percent of the market and its U.S. sales are estimated to grow about 2 percent this year, according to analysts."
    KC's View:
    My consistent view on this has been that even if Aldi is not as successful in growing its footprint as it hopes, the marketing efforts that go into this - especially when it works to blunt the impact of Lidl entering the US - have the potential of having a real impact on the marketplace. It can shape expectations in tangible ways, which could force down prices and margins even among retailers that don't directly compete with it.

    It would be foolish to underestimate the potential impact, I think. Doubters should just reference the UK retailers that have seen their market shares shrink as Aldi's and Lidl's have grown.

    Published on: May 12, 2017

    The Indianapolis Star reports that Marsh has filed for Chapter 11 bankruptcy, saying it was taking the step " to allow business to continue as usual in its 44 remaining stores." However, the company also said that it will have to shut down if it cannot find a buyer in two months.

    Marsh reported has retained investment bank Peter J. Solomon Company to market its assets.

    The Marsh filing "estimated it has up to 49 creditors, estimated assets of up to $50,000 — the smallest amount that could be checked on the bankruptcy filing — and liabilities of $50 million to $100 million."

    Marsh already is in the process of closing down 19 stores, which will leave it with 44; Marsh had 120 in 2006, when Florida-based Sun Capital Partners acquired the company.
    KC's View:
    Bankruptcy almost certainly seemed inevitable, but I continue to be struck by how the company has shrunk over the past decade; it is almost as if it has been taking growth lessons from Edward Lampert.

    And speaking of Lampert...

    Published on: May 12, 2017

    Earlier this week, MNB took note of an interview that embattled Sears Holdings CEO Edward Lampert gave to the in which he said that he remains committed to turning the company around, despite the fact that it seems to have been heading relentlessly toward irrelevance and collapse over the past few years.

    In that interview, Lampert said that "preparing the company for this day and age is something we've been working on for the last dozen years," suggested that Sears actually is ahead of Macy's, JC Penney and Target in many areas, blamed the media for focusing too much on Sears' troubles, and said that "we've built is something that can stand up against the best competition that's out there."

    Now, The Street reports, Lampert continues to be bullish about Sears' future.

    "We don't need more customers," he said. "We have all the customers we could possibly want. As soon as we start making money, people are gonna say, 'How did I miss this?'"

    And then he added: "I give you my assurance I am not in denial."
    KC's View:
    You can assure us all you want. If you actually believe any of this, you are absolutely in denial.

    Published on: May 12, 2017

    Bloomberg has a story saying that, "after years in which e-commerce seemed like an afterthought for many Canadian stores, more and more retailers are making the pricey investments in online shopping platforms that are needed to attend to a vast and sparely populated country. As Amazon steadily ramps up its own operations in Canada, local rivals are scrambling to avoid the same sort of fate that doomed many of their counterparts south of the border."

    According to the story, "A few Canadian retailers seem up for the challenge, and eMarketer forecasts online sales to surge 64 percent by 2020. Hudson’s Bay Co., owner of Saks Fifth Avenue, opened its own robotic facility in November to get online orders out faster. Women’s clothing chain Reitmans Ltd. has been closing stores and redesigning its distribution center to support e-commerce sales, which rose 51 percent last year. Canadian Tire’s sporting-goods division, Sport Chek, is running a pilot for same-day delivery in the Toronto region, a direct challenge to Amazon’s claim-to-fame."

    One retailer tells Bloomberg that Canadian retailers have no choice, as Amazon expands: “Retailers have to move fast,” he says.

    While Amazon "has opened a fulfillment center every year in Canada since 2011," it also sees a lot of potential there - the story notes that only about four percent of Canadian households are members of Prime, compared to roughly ten times that percentage in the US.
    KC's View:

    Published on: May 12, 2017

    Reuters reports that Walmart CEO Doug McMillon will be compelled to submit to questioning in a shareholder lawsuit related to charges that the company engaged in bribery in order to grease the wheels of development in Mexico.

    According to the story, "US District Judge Susan Hickey in Fayetteville, Arkansas, said McMillon's 'direct and personal involvement' in matters underlying a class-action lawsuit justified requiring him to sit for a deposition by the shareholders' lawyers."

    The shareholders are charging that Walmart executives knew about and downplayed the impact that the bribery scandal would have on the company's share price, thus causing them financial losses.
    KC's View:

    Published on: May 12, 2017

    Time has a story about a murder case in Bentonville, Arkansas, in which authorities are using evidence "gleaned not only from the crime scene but from an array of Internet-connected devices."

    For example, the victim was drowned, and a "smart" utility meter was able to establish that a large amount of water was used at the murder scene during the window when the crime was committed. A smart phone established that the suspect was making phone calls at a time when he said he was asleep. And audio files from an Echo may provide insights into what was happening in the home when the murder was committed.

    "The case, which goes to trial in July, marks the first time ever that data recorded by an Echo, or any other artificial intelligence--powered device, like Google's Home or Samsung's smart TV, will be submitted as evidence in court," Times writes. "The move has alarmed tech analysts and privacy advocates nationwide. The issue is not only that these new devices are equipped with so-called smart microphones that, unless manually disabled, are always on, quietly listening for a 'wake word,' like 'Alexa' or 'Hey, Siri.' It's also that these now ubiquitous microphones live in our most intimate spaces: in our living rooms and kitchens, on our bedside tables. In a world in which these personal assistants are always listening for our voices and recording our requests, have we given up on any expectation of privacy within our own homes?"

    You can read the entire, fascinating story here.
    KC's View:
    To be clear, we don't exactly know what is on the audio files; Time makes the point that police may only know what song was playing when the murder was committed. (If the song is Eminem's "Kill You," though, just the music choice may offer some insight.)

    I've always been told that while my Echo is listening, it isn't recording anything other that our specific interactions. If this is accurate, and all it can do is tell the police when someone asks for instructions about, say, how to dismember a body, I'm okay with that. (If someone Googled that same subject, the police can figure that out, too.)

    Is this a little creepy? Sure, potentially. But I find myself relatively unconcerned about it, even while being fascinated by the ethical implications.

    Published on: May 12, 2017

    • The Dallas Morning News reports that "German grocer Lidl has started seeking approvals from local cities for new stores and has purchased land in North Texas as it prepares for its U.S. expansion. A search of area county records found a half dozen locations where Lidl has either purchased land or set in motion planning and zoning requests in Frisco, McKinney, Little Elm, North Richland Hills, Rockwall and Wylie ... So far, Lidl has spent more than $10 million on land purchases in North Texas, according to county records."

    • The Financial Times reports that China's largest dairy company, Yili Group, plans to bid $850 million to acquire Stonyfield from Danone.

    Danone said last month that in order to satisfy antitrust concerns about its acquisition of White Wave Foods, it would sell the Stonyfield organic yogurt business.

    Fox Business reports that Macy's has reported yet another tough quarter, with same-store sales that were down 5.2 percent, "marking the ninth straight quarter that same-store sales have fallen."

    Of course, Macy's is not alone: "Kohl's Corp., Nordstrom Inc. and Hudson's Bay Co., which owns Saks Fifth Avenue and Lord & Taylor, also reported declines in same-store sales for the three months ended April 29."

    Successful Farming reports that Secretary of Agriculture Sonny Perdue, two weeks after taking office, has proposed "the first reorganization of USDA since 1994 ... The Perdue package creates a new position, undersecretary for trade; this abolishes the undersecretary for rural development so Perdue would directly oversee economic development programs and puts one undersecretary in charge of farm subsidies and land stewardship, responsibilities now split between two undersecretaries."

    Unaffected by the reorganization, the story says, "are USDA wings devoted to public nutrition; food safety; agricultural marketing and regulatory programs; and research, education and economics. Three-fourths of USDA spending flows through public nutrition programs such as food stamps and school lunch."
    KC's View:

    Published on: May 12, 2017

    Got another email, this one from MNB reader Rich Heiland, about Kate McMahon's column about the need for culture change at so-called omnichannel retailers where in-store personnel are resistant to the idea of taking back merchandise sold online:

    I found Kate's take on her retail experience interesting. She is dead on that the future is all about the customer experience. Period. Where it happens does not matter.

    If I were redoing my management career I would probably not have commissions. I know that is heresy but as Daniel Pink has shown that aside from rote production, incentives can be counter-productive. I have no doubt at this point that the majority of people do not do well with the stress of commissions.

    Pink says, and I agree, pay everyone well - be the best wage in your area - and take money off the table as a barrier or incentive to sell. Additionally, play down the word "sell." I value sales - nothing happens until one is made. But today, replace it with "serve the customer." Do that and a sale will follow.

    If you constantly view the customer as the end game where they shop, where they make returns will not matter. The company is one seamless team and everyone involves prospers - financially and I would hope, spiritually. Yes, spiritually. There is something spiritual about knowing you were just of service to someone who needed you.

    Got the following email from MNB reader Glenn Cantor:

    The news about Jet’s temporary store in New York is interesting because it describes a concept-based retailer called “Story.”  They compare themselves to periodical magazines in that their store presentation regularly changes and it is themed to tell a story- a living, interactive story.  This is a perfect platform for web-based retailers to introduce and create excitement for new ideas without committing to permanent real estate.

    It is kind of like the seasonal displays in traditional retailers or the changing mix offered by Costco, only more dynamic.  If I worked as part of Target’s leadership team, I would explore “renting” out space for this kind of concept, in order to bring back excitement.  They have already set the example by selling their pharmacy space to CVS and they do it with endcaps.

    Yesterday's FaceTime video was about StitchFix, which prompted one MNB reader to write:

    I'm not a millennial and I love StitchFix. Although, I have to admit a millennial turned me on to it.

    And from another reader:

    I am 45 - and I love Stitch Fix!  They are smart because they have you add a link from Pinterest which gives them insight into how you would like to dress.

    I work full time, and I do not want to spend my free time overwhelmed in a clothing store.  Also, most women I know do not like trying on clothes in a dressing room.  It is different at home. Plus they make the whole process EASY.

    You should try it!

    Thanks, but probably not. I'm pretty happy with my wardrobe of jeans, t-shirts and New Balance sneakers.

    I talked yesterday about my kids loving StichFix, which prompted one reader to write:

    Well, at least it hasn’t escaped you that your 20 somethings, like many others, including mine are choosing to go on-line rather than in-store. How sad that is.

    Do they think they’re too busy? They’re not! Do they think they can spend their time doing something more meaningful? Facebook and Snapchat can wait. And they’ll probably spend an equal amount of time returning the percentage of “stuff” they don’t want.

    How sad they don’t recognize the potential harm to working class jobs their “convenience” is causing while continuing to see socialization erode.

    As a person in my upper 50’s, I realize it is my generation that has caused this and the millennials to have an over sense of importance (the participation trophy cause irreparable harm) since we made them the think they were special when in fact they are more likely “special”.

    I feel sorry for you. It must be hard to live with such a low opinion of young people, and to feel that you are responsible for a decline of western civilization.

    I actually think my kids are pretty special ... and not only do I recognize that they make different choices than I would, but I applaud them for it. And while they choose to do some percentage of their shopping online, they also patronize stores that are relevant to them, as well as make decisions in line with their life priorities.

    I'm okay with that.
    KC's View:

    Published on: May 12, 2017

    I tend not to be conflicted about comic book movies. Either I like them or I don't, and that's pretty much it. I like comic book movies when they show some degree of originality and ambition, but I also can like them where they're just plain fun.

    For some reason, I'm not quite so black-and-white about Guardians of the Galaxy, Vol. 2, the sequel to the enormously entertaining Marvel movie that was a huge and largely unexpected hit back in 2014. I think part of the problem is that I enjoyed the first one so much that there was almost no way the second one could live up to expectations and be as original. One reviewer I read suggested that the new one has to work twice as hard to generate as much pleasure, and that seems about right. It is still fun, but...

    That said, the new Guardians is a feast for the eyes as written and directed by James Gunn, who clearly has affection for his band of mismatched and vagabond mercenaries. The cast is terrific - Chris Pratt, Zoe Saldana, Dave Bautista, Michael Rooker, Kurt Russell, and the voice work done by Bradley Cooper and Vin Diesel.

    Despite my misgivings about the new Guardians, I must admit that I found one review of the film to be thought provoking - that it is emblematic of most Marvel films because romance takes a back seat to the higher priority of family. That's an interesting notion and, I think, an accurate one. And if Marvel can talk about the importance of family as being a touchstone for its approach to moviemaking, that's not the worst thing in the world.

    When I was in the Pacific Northwest last week, I made my usual trek to Etta's, on the edge of Pike Place Market, where I hung out with Morgan, often celebrated here and in both my books as one of the world's great bartenders.

    Also as usual, I didn't order anything. Morgan just opened a bottle of red wine and poured me a glass; he knows my taste and I trust his. In this case, it was the 2013 Baer Star Red ... which is a wonderful blend of merlot and cabernet franc that is silky and smooth and delicious ... and, as it happens, perfect with the amazing Dungeness Crab Sandwich that I ate.

    Yup. Perfect.

    I'm also happy to heartily recommend the Peeper Ale, from the Maine Brewing Co., which I enjoyed this week while traveling in New England. It is hoppy, but not too much so ... and went down smoothly.

    Have a great weekend, and I'll see you Monday.

    KC's View: