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    Published on: June 22, 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 thinking about my Dad's funeral. Now, I'm not going to tell you any more about him ... between the obituary and the eulogy last week, I'm pretty sure you got the picture.

    Rather, I want to talk about the sermon at his funeral ... and a business lesson that was built right into it. (Though I suspect the priest giving the sermon wasn't thinking that way...)

    The priest mentioned in the sermon that we'd received a phone call from a now-retired archbishop in which he wanted to express his condolences for my dad's passing, and assure us that he would keep both my Mom and Dad in his prayers. Which was very nice of him to do; he used to be a parish priest in the community where I grew up, and I used to be an altar boy when he'd say Mass there. I remembered him without any problem, though I may not have seen him for more than 40 years. In fact, it may have been almost that long since my Dad had seen him.

    The priest doing the funeral mass said that he was surprised by news of this phone call, and went on to say that he had a prejudice against bishops. People who achieve that office, he said, had a lot to worry about - real estate, money matters, and all the other issues that go into running large organizations. They are used to dealing with people of wealth and power, and often don't have time or even the inclination to minister to lesser folks. Normally, that would be us.

    But he called us within 10 minutes of learning of my Dad's passing. Why? Well, while some people have the authority that is conveyed by lots of money or the authority that is conveyed by the accumulation of power, my Dad, he said, had the authority of character.

    The authority of character. What a powerful phrase. What an important quality to have.

    The importance of the quality of character is applicable to religion, and to politics ... but it also, I think, is applicable to business.

    We all know businesses and business people of good character - they know that their leadership can go beyond the four walls of a store, or the outlines of a package being sold. They try to do the right thing whenever they can, and they try to achieve the highest common denominator in their own behavior.

    We know it when we see it. And we know it when we don't. (Uber, anyone?)

    There are people and companies that know they can do well while doing good.

    That's character. And I agree with the basic point of the sermon - that the authority of character can create sustaining, differentiated strength inside and outside the marketplace.

    It is a sermon from which we all can learn.

    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: June 22, 2017

    by Kevin Coupe

    Apparently Amazon believes that what is good for the goose is not necessarily good for the gander.

    The Washington Post reports that "Amazon was awarded a patent May 30 that could help it choke off a common issue faced by many physical stores: Customers’ use of smartphones to compare prices even as they walk around a shop. The phenomenon, often known as mobile 'window shopping,' has contributed to a worrisome decline for traditional retailers.

    "But Amazon now has the technology to prevent that type of behavior when customers enter any of its physical stores and log onto the WiFi networks there. Titled 'Physical Store Online Shopping Control,' Amazon’s patent describes a system that can identify a customer’s Internet traffic and sense when the smartphone user is trying to access a competitor’s website."

    This is sort of remarkable ... not because the technology exists, but because it was just a few years ago that Amazon actually introduced a mobile application, called Price Check, designed to allow people to use their smart phones to scan any bar code anywhere and find out what Amazon would charge for the same item, and even order it if the price was lower.

    Now, the story notes that when a customer at one of Amazon's bricks-and-mortar stores go online to check the competition, "Amazon may take one of several actions. It may block access to the competitor’s site, preventing customers from viewing comparable products from rivals. It might redirect the customer to Amazon’s own site or to other, Amazon-approved sites. It might notify an Amazon salesperson to approach the customer. Or it might send the customer’s smartphone a text message, coupon or other information designed to lure the person back into Amazon’s orbit."

    However it plays out, this story makes clear that Amazon has a double standard. I actually think that it is one of those innovations that ought not find its way into the store, because it does not put the customer first.

    "Customers first" always has been a core value at Amazon. It should avoid doing anything that even creates the appearance that this precept is losing importance.

    When you come right down to it, this is the Eye-Opening lesson.

    Just because you can do something doesn't mean you should do something.
    KC's View:

    Published on: June 22, 2017

    CNBC reports that Walmart is telling some of the tech companies with which it does business that if they want to continue the relationship, they no longer should "run applications on Amazon's cloud platform, Amazon Web Services."

    It is not an across-the-board position, and Walmart reportedly "uses some tech vendors' cloud apps that run on AWS," according to the story. But the company does "acknowledge instances where Wal-Mart is pushing for AWS alternatives."

    The shift in position comes less than a week after Amazon declared its intention to stake out a claim on bricks-and-mortar retailing by making a $13.7 billion bid to acquire Whole Foods.

    A Walmart spokesman said that "our vendors have the choice of using any cloud provider that meets their needs and their customers' needs. It shouldn't be a big surprise that there are cases in which we'd prefer our most sensitive data isn't sitting on a competitor's platform."

    CNBC reports that Walmart is not alone in staking out this position: "Other large retailers are reportedly requesting that service providers move away from AWS."

    An Amazon spokesman responded to the report by saying that it was an effort to "bully" vendors: "Tactics like this are bad for business and customers," he said.
    KC's View:
    I have to admit that I sort of admire Walmart's tactics on this one. After all, it is just working to avoid contributing to Amazon's bottom line.

    This may be a small thing on its own, but lots of small things tend to add up.

    Published on: June 22, 2017

    The Wall Street Journal this morning reports that athletic gear giant Nike "has agreed to sell some of its products directly to Amazon ... a concession by the sneaker giant that it can no longer afford to ignore the online retailing behemoth."

    The decision amounted to a public declaration that the company's traditional approach, selling to traditional stores and chains, is not enough. "News of the Amazon deal punished shares of retailers, with Foot Locker falling 5% and Finish Line down 4%. Shares of Nike gained 2%." The story notes that "Foot Locker and Finish Line each identify Nike as their largest vendor in securities filings, accounting for 68% and 71% of merchandise purchased last year, respectively."

    The Journal reports that "Nike executives have been in talks with Amazon for weeks about cracking down on counterfeit product and the proliferation of unauthorized third-party sales on the site ... The two companies have reached an agreement where Nike would agree to provide some product directly to Amazon in exchange for Amazon policing counterfeit and third-party sales."

    The story goes on: "The agreement between the two companies comes as both are making changes to their strategies. Amazon on Tuesday launched Prime Wardrobe, a service that lets customers try on apparel at home before deciding on a purchase.

    "Last week, Nike announced plans to eliminate more than 1,000 jobs, or about 2% of its workforce, and scale back the number of sneakers and sportswear it makes. Nike sales have declined in recent months as the sportswear industry grows more competitive."
    KC's View:
    Nothing wrong with Nike realizing that because its customers are taking a now well-worn path, it needs to do the same. The sad thing is how fast the markets react and punish the old ways of ding things. Not much that can be done about it, though ... The ways of the Lord are often dark, but never pleasant.

    Published on: June 22, 2017

    The Boston Globe magazine section has a fascinating story about Procter & Gamble-owned Gillette, which "for more than a century ... has been the standard-bearer in things that scrape away men’s whiskers," earning the brand a 70 percent market share in the US for razors and blades.

    But these days, not so much.

    "Now Gillette is in a domestic scuffle over men’s stubble. New brands like Dollar Shave Club and Harry’s have gained millions of customers by selling no-frills razors at a discount, shipping them to customers’ doors instead of Walmart’s shelves, and undercutting what they’ve framed as Gillette’s wallet-emptying razor-industrial complex. And Gillette has suffered nicks and cuts: By 2016, its share of the $2.6 billion US market dipped to 54 percent.

    "The same year, Harry’s and Dollar Shave Club’s combined piece of the pie grew to 12.2 percent. Meanwhile, Schick — Gillette’s long-time also-ran (Schick’s market share is also down, to 15 percent) — just launched discount blades that fit Gillette’s Mach3 and Fusion5 handles."

    And, the Globe writes, "the forces underlying this upheaval have implications across the consumer packaged-goods business, a trillion-dollar industry encompassing everything from toothbrushes to cosmetics to clothes, and Gillette is hitting back on all fronts."

    The details of the battle, and a fascinating portrait of the various players and their strategies, can be seen here.
    KC's View:

    Published on: June 22, 2017

    Seeking Alpha reports about speculation that Sprouts Farmers Market is a likely takeover target in a marketplace where Amazon has bid $13.7 billion to acquire its larger, higher priced rival, Whole Foods.

    The story notes that "Albertsons held preliminary talks to merge with Sprouts Farmers Market a couple of months ago. And Sprouts was at approximately $24 per share a couple of weeks ago when industry sources stated that privately-held Albertsons has been struggling in its quest to acquire a grocery store chain."
    KC's View:
    At some level, the decision to acquire or not acquire Sprouts will depend on whether or not it is seen as a good deal, but it also seems at least possible that some player could overpay for Sprouts as a way of compensating for what Amazon is doing.

    At some level, Sprouts is in the driver's seat - for now. The company's CFO said this week that as long as it serves the needs of Sprouts' customers, the chain has no intention of abandoning a deal with Amazon that has Prime Now providing online shopping services for 10 of its stores, with plans to expand.

    Published on: June 22, 2017

    Daymon is out with a new study, entitled "From Shopper to Advocate: The Power of Participation," in which it argues that an increasingly less homogenous consumer population wants "to provide direct input to improve products and services," in order to help retailers craft a more relevant experience for them.

    Among the conclusions reached by the study:

    • It's not just generational — shoppers can no longer be thought of as homogenous groups.

    • Co-creation is the future of retail innovation. Shoppers increasingly desire to provide direct input to improve products and services.

    • Fresh is the gateway to shopper loyalty, but it goes beyond a single department.

    • Conversational engagement must extend outside the store.

    • Seamless integration with mobile is a must.

    Daymon says that these insights point to a requirement that retailers adopt "a different way of thinking to ensure engagement among the Shopper turned Advocate. Retailers and brands must move beyond simple transactions and completely reimagine the shopping experience."

    The study was done on a global scale - Daymon says it "surveyed 8,500 shoppers across eight countries, including Brazil, Canada, China, Germany, Japan, South Africa, the United States and the United Kingdom, related to everyday consumable products — food, beverages, personal care, household goods and medication."
    KC's View:
    I'm not sure there are any real surprises here, but it never hurts to be reminded that the consumer is in charge, that his/her needs and desires can and should be targeted individually, and that a compelling narrative can turn them into advocates and not just shoppers.

    Published on: June 22, 2017

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

    • The Atlanta Journal-Constitution reports that "Coca-Cola said it is laying off 421 people at its headquarters and two other Atlanta locations on July 15, according to a notice sent to state officials.

    "The lay-offs, which include 334 at its headquarters near downtown Atlanta, are part of about 1,200 job cuts then-Coca-Cola President James Quincey announced just before he stepped in as the company’s new chief executive on May 1 ... The company’s plans to eliminate 1,200 jobs from a pool of 5,500 corporate positions is part of Quincey's goals to re-tool Coke’s product line-up, bottling operations and other parts of the company to rev up revenue and profit growth. The company has said it plans to use part of the savings — about $800 million through 2019 — to reinvest in new products and marketing."

    Publishers Daily reports that the Rodale publishing company - long a producer of magazines such as Prevention that could be found on supermarket checkout lane racks - "is considering 'strategic alternatives' for the company, including a potential sale."

    According to the story, "The announcement didn’t disclose an asking price for the family-owned publisher, and also left the door open to other options, such as the sale of specific properties, groups of properties, or individual businesses. Rodale is retaining Allen & Company LLC to serve as a financial advisor during the strategic review process."

    • The Financial Times has a story making it very clear that some people have all the luck.

    It is about actor George Clooney, who back in 2013 with his friend, restaurateur Randy Gerber (who is married to supermodel Cindy Crawford), started producing tequila with a local distillery when they were building houses in Mexico. Informed that they were making so much of it that they needed a commercial license, Clooney and Gerber turned the tequila - called Casamigos - into a commercial venture - and over the last two years, the ultra-premium brand has grown more than 50 percent annually.

    Yesterday, they sold Casamigos to Diageo - for $700 million, plus the possibility of another $300 million depending on the brand's performance.

    As the great Albert Brooks tweeted yesterday, "It is nice when someone like (Clooney) can catch a break."
    KC's View:

    Published on: June 22, 2017

    • General Mills announced that it has hired Ivan Pollard, until recently the senior VP-strategic marketing for Coca-Cola North America, to be its new global chief marketing officer. The role is described as responsible for "leading General Mills' effort to establish a global marketing and media planning function."
    KC's View:

    Published on: June 22, 2017

    Got the following email from an MNB reader about Lidl's US operations:

    I was scrolling through some posts on LinkedIn and came across one from a Lidl District Manager. I was taken aback by how young she looked, so I checked out her page. I had applied at Lidl for the same position a year or so ago (they were advertising heavily). It was more out of curiosity than anything else. In any event, they turned me down within a day, which was a little surprising, given my 30 years in specialty, mass, and natural grocery. I thought I might at least get a phone screen and learn more about them, but no dice.

    It was thus somewhat shocking to see that the District Manager I was looking at had essentially zero grocery experience. There was one year at a clothing chain, and 8 months at McDonald's, and nothing else. Oh, and a BA in criminal justice too. Wow, I thought, what are they thinking? So I checked out several more DM resumes. All the same - very young, no direct experience of any length or gravity. This went for higher executives as well. Clearly this is intentional, but how do you run a grocery chain without any grocery people? I know they all got like a year of training, but that can never replace hands-on, in the trenches experience.

    What are your thoughts on this? Seems like a recipe for disaster operationally. Who will they rely on when the stores struggle, as surely some of them will?

    My guess is that there is so little room for latitude or innovation at store level that they're not really worried about it. That's not how I'd want to do business, but it has worked for them elsewhere.

    Another email from an MNB reader, this one about Wegmans:

    As a Rochester NY resident, I’ve spent years watching the evolution of Wegmans. While the advent of Amazon, wholesale clubs, dollar stores and others has no doubt had an impact on their store growth, their in-store shopping experience continues (at least for me) to be the key to their ongoing success. Translating that into a home delivery service seems counter intuitive to their past history.

    I have noticed some steps taken away from the “luxury” shopping experience that they were known for, as they try and expand their appeal into the wider marketplace. they now have a bulk grocery section for instance, and their perishables departments have taken a step backwards in my opinion. On the other hand, their prepared foods efforts have helped them no doubt land a lot of time starved customers.

    Evolution is still needed in any grocery shopping experience, but I would hesitate to move too far away from the shopping experience that drove their success. Their site selection still appears to be peerless, and those people that I have talked to that have experienced Wegmans for the first time, are enraptured by their shopping experience compared to their typical supermarket. Understanding why that is, expanding on it, and driving that home to their customers seems to me to be a better road to be on.


    Regarding the Amazon-Whole Foods deal, MNB reader Melissa Setser wrote:

    I’ve read a lot about this one—as we all have—and I’ve yet to see this train of thought out there (maybe I just haven’t read enough!).

    Consumers seem to inherently trust Whole Foods—we know that 365 is a good, trustworthy label.  I think about Amazon/ private label---I would hesitate to buy my kids’ formula or other kid consumables from Amazon (3rd party sellers make me very nervous, and one complaint about Amazon is the inability to tell whether something is sourced directly by Amazon or whether it’s 3rd party—and that delineation makes a difference, at least to me).  My family lives and dies by Kirkland’s/Costco, and, locally, Schnucks…I have to think that some of the synergy/”get” for Amazon is beyond the consumer data and beyond the b/m component—part of what they’re buying is the brand equity that comes with WF.  Sheer genius.

    And regarding Kate McMahon's column yesterday, one MNB reader wrote:

    Very good article from Kate on the digital wallet. Any where there is "money to be moved" there is "money to be made".


    KC's View: