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    Published on: August 24, 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 recorded this week’s FaceTime from the Carlton Cellars Vineyards, in Carlton, Oregon, where Mrs. Content Guy came for a wine luncheon. I don’t know about you, but I look around and see the blue sky, the vines, I feel a nice breeze blowing, and I taste one of their wonderful Pinot Noirs … well, this is my idea of paradise.

    We came because the owners of the vineyard - Dave Grooters and Robin Russell - have become good friends over the years, and we take advantage of every opportunity to come visit. Plus - and I don’t mind being transparent about this - I like to do everything I can to support their independent and wonderful wine business. (Personal note: Go to the Carlton Cellars site and order some Road’s End. It doesn’t have broad distribution, but but it is totally worth the effort.)

    But there’s a lesson to be found here … and not just that they make great pinots.

    As we attended the luncheon, in addition to tasting great wine and having some terrific food, we also had a chance to learn a little but about agriculture and the growing of wine in this particular soil - what in the wine business is called terroir.

    This turned what could’ve been a pedestrian event into something special. That’s a great lesson for retailers that are looking for ways to differentiate themselves from the competition. Especially bricks-and-mortar retailers that are looking to stake out a claim on customers that could be lured away by e-commerce.

    These kinds of moments may not be able to be totally recreated in the store, but it isn’t all that hard to treat products as something special, to create events that celebrate even items that you may think of as being pedestrian or commodities.

    Think of your store as being your own kind of terroir - a unique environment that gives your brand specific and defined characteristics.

    That’s the lesson from Carlton Cellars … and it’s what is on my mind. As always, I want to hear what is on your mind.

    KC's View:

    Published on: August 24, 2017

    by Kevin Coupe

    I’m not a big James Patterson fan; in some ways, I’m more impressed by the scale of his output (he’s written or co-written or had his named listed on some 150 books with sales of more than 350 million copies) and his genius for branding than I am by the actual books themselves.

    That said, I could not resist when I saw a story about his latest book, “The Store,” co-written by Richard DiLallo, which has as the enemy a big, faceless, ubiquitous and ultimately malevolent e-commerce business that sells everything and goes by the name, “The Store.”

    While Patterson says that the books is not about Jeff Bezos and Amazon, methinks he doth protest too much.

    What he does say, at least in this interview on Marketplace, on National Public Radio (NPR), is that while he is “not maligning a big, fat bookstore,” he is “maligning the idea of monopolies in the country. And in particular, I think it's a problem when it threatens publishing, because I think that books are really important in our lives, especially books that we can't live without.” Patterson seems to be particularly worried about the diminished role of e-books in our lives, especially in the lives of young people, who he fears will lose touch with the essence of literature.

    In the book and in real life, Patterson’s concern seems to be that one man and one company have way too much control of the information we get and how we process it. In the book, the plot plays out as a married couple - having run into trouble because publishers don’t want to put out their new book - decides to go undercover at the company to investigate the culture that drives “The Store.”

    It is an interesting premise. I just wish the book were a lot better. In fact, it reads so much like a treatment for a screenplay that I’m pretty sure that, if this project ends up in the right hands, the movie actually will be better than the book. (As has been the case with Jaws, The Godfather, and pretty much every movie based on a Tom Clancy novel.)

    There are some twists and turns, and the authors’ ambition seems to be to create something along the likes of The Parallax View and The Stepford Wives (the original Katherine Ross version of Stepford, not the Nicole Kidman remake). But either they’re not up to the task, or just wanted to get the book out there fast so they can close on a screenplay deal.

    I will say this. If you like Patterson’s work, or if you are just looking for a really fast, mindless read during the last week of summer, you may want to give “The Store” a shot.

    I think the idea of turning Amazon into a book or movie villain is an entirely legitimate one - in both forms, major organizations (governmental, judicial, political, industrial, religious) often make the best villains. But I’m waiting for the book or movie that does a better job of it, that is a real Eye-Opener with some actual insights.

    There was an irony, by the way, to how I consumed “The Store.”

    I bought it on Amazon, and read it on my iPad using the Kindle app.
    KC's View:

    Published on: August 24, 2017

    Content Guy's note: This story was posted this morning; our current lead story updates it.

    The Federal Trade Commission (FTC) yesterday approved Amazon’s $13.7 billion acquisition of Whole Foods, just hours after the deal was approved by Whole Foods shareholders - meaning that there appears to be no further impediments to the purchase being completed.

    Amazon still expects to close on the deal before the end of the year, giving it ownership of more than 460 bricks-and-mortar Whole Foods stores to supplement its formidable e-commerce operations.
    KC's View:
    The timing of the FTC approval came as something of a surprise, since some Democrats, prompted by organized labor, objected to the deal because of what they said will be the resulting lost jobs. Plus, President Trump continues to have a real problem with his coverage by the Washington Post, which is owned in a private investment by Amazon founder/CEO Jeff Bezos. (He went after - and conflated - the Post and Amazon yet again in his campaign speech in Phoenix on Wednesday.)

    I suspect that this thing will close sooner rather than later, and that’s when things will get interesting. I would think that Amazon will time the closing of the deal to its ability to make a quick impression on consumers - perhaps by offering some sort of discount at Whole Foods to Prime members. It will take time to integrate their operations, but Amazon is a firm believer in speed … it will try a number of strategies and tactics to change the rules of the game as best it can.

    Published on: August 24, 2017

    The Wall Street Journal has a story about how agricultural conglomerate Cargill has made an undisclosed investment in Memphis Meats, taking out an ownership stake in the startup that is “developing technology to grow meat from self-reproducing animal cells,” also known as “clean meat.”

    Memphis Meats makes the argument that “clean meat” is better for the environment “than meat derived from traditional feedlots and slaughterhouses.”

    The story says: “Meat companies are under pressure from consumers to reduce their reliance on animal drugs and to treat livestock more humanely. Some have invested in plant-based burgers and chicken strips, hoping to win business from both vegetarians and carnivores concerned about the meat industry’s heavy use of crops and water.”

    Memphis had just landed $17 million in funding from sources such as Bill Gates and Richard Branson, though it has not made public the degree of the individual investments.
    KC's View:
    Smart move, I think. It is intelligent and forward thinking for traditional institutions to invest in the future rather than deny it.

    It also is rare, these days.

    Published on: August 24, 2017

    Ad Week writes about a new report suggesting that “contrary to popular assumptions about the much-coveted generation of digital natives, millennial shoppers actually like going to brick-and-mortar stores—a great deal, actually. According to research by behavioral marketing firm SmarterHQ, a whopping 50 percent of millennials not only go to physical stores, they prefer going to them as a primary means of shopping.”

    The story goes on to say that “SmarterHQ’s study presents a more nuanced view of millennial shopping patterns, which, you might say, are multistage … millennials are big practitioners of ‘showrooming’:  They frequently test drive products in stores then purchase them online at home (assuming they don’t whip out their phones and buy it while standing in the store itself.)”

    The conclusion is that while many retailers hate the idea of showrooming because they assume it will leave them as victims, “a retailer that takes a holistic view of revenue, one that doesn’t pit brick-and-mortar sales against online sales, can adapt to showrooming … by closing low-traffic locations and designing its e-commerce platforms to catch millennial shoppers as they exit stores with a purchase in mind.”
    KC's View:
    I don’t find this the least bit surprising. The nation may be over-stored, but bricks-and-mortar will survive when it is relevant and resonant. Young people may love going online, but they’ll shop in physical stores that are relevant and resonant. What matters is the degree to which traditional retailers can find ways to make their stores the kinds of experiences that these younger shoppers are looking for, and will continue to look for as they get older.

    Published on: August 24, 2017

    The Seattle Times has a good story about Amazon Books, and how “it’s no longer an experiment and has taken on a life of its own as the online retailer aims to add more stores … Amazon is not providing any bookstore sales or traffic data. But the growth of the bookstore operation is evident, and it comes at a time Amazon, which got its start by convincing people it was more convenient to buy books online, is becoming more interested in the brick-and-mortar retail world that it helped upend.”

    The story takes a look at howe the format has evolved, and where it might go from here, and you can read it here.
    KC's View:

    Published on: August 24, 2017

    CNBC has a story about how location intelligence app Foursquare is predicting that Amazon or Walmart are likely to next target Nordstrom as a potential acquisition.

    “The two companies are competing for the same shoppers, as one attempts to step into the other's core area of focus — Wal-Mart growing its e-commerce platform, and Amazon expanding a portfolio of real estate,” the story says, and Foursquare CEO Jeff Glueck, and so Nordstrom could be a good fit for each.

    “Nordstrom shoppers are about two times more likely to shop at Whole Foods than the average consumer, according to Foursquare, so that's where a deal with Amazon begins to make sense … Meanwhile, Wal-Mart might want a company like Nordstrom in its portfolio to capture more millennial shoppers; Nordstrom shoppers are, on average, 55 percent less likely to shop at Wal-Mart than other American consumers, Foursquare found.” Such a move would fit in with Walmart’s recent pattern of acquiring upscale brands such as Bonobos.
    KC's View:

    Published on: August 24, 2017

    • The Wall Street Journal reports on yet another impact of the e-commerce juggernaut - “values for U.S. retail properties generally fell even as they rose for industrial properties in the first half of 2017,”

    However, “Investors remain bullish on the sector partly because they expect demand from e-commerce companies as well as traditional industrial space tenants to keep pushing rents higher … Vacancy rates are especially low at industrial buildings close to population centers, because supply is limited in these areas by the shortage of available sites.”
    KC's View:

    Published on: August 24, 2017

    Got the following email from MNB reader Kirk Altmanshofer:

    I cannot speak to the home-improvement skills of author of the Business Insider article regarding why D-I-Y stores are weathering the online retailing storm, but his or her argument missed a few important factors:  urgency and the immersive experience.

    Home projects rarely go as planned, at least mine don't, and if I need something I need it NOW.  How often have you or any of your readers done that opening trip to your local home improvement store to buy everything you need for a project and then find yourself back there again in the same day?  If I crack a pipe and have one of those "son of a...!" moments (usually it's more expletive) I don't have time for online shopping even if delivery is free.  I don't even think one-hour drone delivery service is going to be much help when I need a 10' piece of 2" PVC pipe. 

    It certainly wouldn't go over well at home if I had to argue "Sorry there's no water for 2-3 days, but on the bright side I did get free shipping!”

    For those who are into home improvement sometimes it's just fun to go walk around a Lowe's, Home Depot or Ace for inspiration or simply to get away from it all.  I am sure those places have a higher incidence of impulse purchases because of just that.  Home improvement is a highly tactile event.  It's difficult to create that perfect mix of tile patterns on a computer screen.  You can't get a feel for a that new saw you didn't know you needed unless you can hold it in your hand.  Service is great, which is why I pick certain locations depending on what I need.  Often my only interaction is with the cashier on the way out.  Sometimes a quick trip to a D-I-Y store for one item can turn into a fun, lengthy and, well, expensive event.

    On another subject, from an MNB reader:

    Read on several blogs that were about Walmart catching up with Amazon on Self Service.  The article purported that Walmart had converted a group of stores to self service where you could scan on your phone and pay that way or you can pick up a scanner in the front of the store and scan that way.  Aren’t they missing the whole point.  Amazon concept is that you walk in the store and just pick up the products and you don’t  have to scan the products; the charge automatically gets sent to your phone and you walk out of the store.  In my opinion, the ultimate convenience. 
    In the end though,  this rapidly escalating trend does not bode well for the tens of thousands cashiers.

    Also got this email from MNB reader Bill Welch, about our piece regarding the importance of story as illustrated by the great Robert Shaw speech about the fate of the USS Indianapolis from Jaws:

    I agree, whenever I hear about the USS Indianapolis I play back the words of Robert Shaw in Jaws.   It says a lot about the power of monologues in movies and story telling.
    Here are some of my other favorites:
    • Jack Nicholson in A Few Good Men: “You want me on that wall you need me on that wall…”

    • James Earl Jones in Field of Dreams: “People will come…”

    • George C. Scott in Patton: “No poor bastard every won a war by dying for his country…”

    • Alec Baldwin in Glengarry Glen Ross: “The good news is you are fired…”
    What are your favorites?

    Gosh, there are so many of them.

    But I’ll tell you a few.

    I love the scene in which Anthony Hopkins analyzes Jody Foster in Silence of the Lambs: “You know what you look like to me, with your good bag and your cheap shoes? You look like a rube. A well-scrubbed, hustling rube with a little taste…”

    Robert Duvall, in Apocalypse Now: “I love the smell of napalm in the morning…”

    Morgan Freeman, at the end of The Shawshank Redemption: “Get busy living or get busy dying … I hope the Pacific is as blue as it has been in my dreams..”

    Peter Finch in Network: “I’m mad as hell…”

    And two more…

    There’s the wonderful scene in A Man For All Seasons, by Robert Bolt, in which Paul Scofield as Thomas More explains why he has to make the moral ands ethical choice, and not the politically expedient one:

    ““If we lived in a State where virtue was profitable, common sense would make us good, and greed would make us saintly. And we'd live like animals or angels in the happy land that /needs/ no heroes. But since in fact we see that avarice, anger, envy, pride, sloth, lust and stupidity commonly profit far beyond humility, chastity, fortitude, justice and thought, and have to choose, to be human at all... why then perhaps we /must/ stand fast a little --even at the risk of being heroes.”

    And finally, one I’m sure you’ve never seen. It is from one of my favorite movies of all time, Robin & Marian, in which Sean Connery and Audrey Hepburn played Robin Hood and Maid Marian in middle age. In this scene, having returned from the Crusades, Robin answers Marian’s question about whether he is sick of war:

    “On the twelfth of July, 1191, the mighty fortress that was Acre fell to Richard, his one great victory in the Holy Land. He was sick in bed and never struck a blow. On the eighth of August, John and I stood outside watching while every Muslim left alive was marched out in chains. King Richard spared the rich for ransoms, took the strong for slaves, then he took the children- all the children-and had them chopped apart. Then he had their mothers killed. When they were all dead, three thousand bodies on the plain, he had them all opened up so their guts could be explored for gold and precious stones. Our churchmen on the scene - and there were many - took it for a triumph! One bishop put on his mitre and led us all in prayer. And you ask me if I'm sick of it.”

    Go watch Robin & Marian if you haven’t. It is one of the great under-appreciated movies, in my opinion.
    KC's View:

    Published on: August 24, 2017

    As is my custom at this time of year, I'm taking the last few days of summer off. MNB is on hiatus until the day after Labor Day, Tuesday, September 5, when we'll return with all new stories and commentaries.

    Between now and then, the MNB archives will, of course, be open.

    Thanks, as always, for your patience … I hope you also have a chance to enjoy the waning days of summer. I know what I’ll be doing. (See photo.)


    KC's View:

    Published on: August 24, 2017

    Amazon announced late this afternoon that it will close on its $13.7 billion acquisition of Whole Foods on Monday, and will immediately lower prices, as well as beginning the integration work that eventually will turn Amazon Prime into Whole Foods’ loyalty marketing program.

    The official statement said that “the two companies will together pursue the vision of making Whole Foods Market's high-quality, natural and organic food affordable for everyone. As a down payment on that vision, Whole Foods Market will offer lower prices starting Monday on a selection of best-selling grocery staples across its stores, with more to come.”

    In addition, the companies said, they will immediately “begin to integrate Amazon Prime into the Whole Foods Market point-of-sale system, and when this work is complete, Prime members will receive special savings and in-store benefits.” The companies said that investments in various segments of the business, including merchandising and logistics, should enable to lower prices even more for their customers.

    The announcement came just a day after Whole Foods shareholders approved the deal and federal regulators said they would allow it to move forward; Amazon said as late as yesterday that it expected to close the deal “by the end of the year.”

    Jeff Wilke, CEO of Amazon Worldwide Consumer, said, “To get started, we're going to lower prices beginning Monday on a selection of best-selling grocery staples, including Whole Trade organic bananas, responsibly-farmed salmon, organic large brown eggs, animal-welfare-rated 85% lean ground beef, and more. And this is just the beginning — we will make Amazon Prime the customer rewards program at Whole Foods Market and continuously lower prices as we invent together. There is significant work and opportunity ahead, and we're thrilled to get started.”

    Other categories where prices will be immediately lowered include organic responsibly-farmed salmon and tilapia, organic baby kale and baby lettuce, animal-welfare-rated 85% lean ground beef, creamy and crunchy almond butter, organic Gala and Fuji apples, organic rotisserie chicken, and 365 Everyday Value organic butter, Amazon said.

    Furthermore, Whole Foods’ private label products will now be available, AmazonFresh, Prime Pantry and Prime Now, and Amazon Lockers - allowing people to have products shipped to someplace other than their home or workplaces - will be installed in select Whole Foods stores.

    In its coverage, the Washington Post writes that “analysts said the slashing of prices was an obvious move. Whole Foods — nicknamed ‘whole paycheck’ in some circles — has long struggled to shed its reputation as a pricey alternative to other supermarket chains. The company’s prices are about 15 percent higher than at the average grocery store, according to Morgan Stanley.”

    Reuters writes that “Scott Mushkin, who covers grocery stores at Wolfe Research, recently said Whole Foods, on average, can be 15 percent to 20 percent higher than some rival grocers and is as much as 25 percent more expensive at the extreme.”

    In addition, the story says, “Lowering prices could help the companies stem the defections by price-sensitive Whole Foods shoppers and bring in new consumers who can then be urged to visit Amazon.”

    And CNBC observes that one impact of the announcement was that “grocery stocks immediately tumbled Thursday afternoon … Shares of Kroger, Costco, Sprouts Farmers and Supervalu were all seen trading at session lows. Big-box retailers Target and Wal-Mart also watched their stocks fall.”
    KC's View:
    I want to be careful not to hurt my arm by patting myself on the back, but I think I wrote just hours ago - when Amazon was saying that it planned to close the deal by the end of the year - that it probably would happen sooner rather than later. (I got that right…though Monday is even faster than I expected.)

    Plus, I suggested that Amazon would move quickly to stress that the deal will result in lower prices for shoppers, that Prime will be a critical component of Whole Foods’ value proposition, and that Amazon will move quickly to integrate their operations.

    Check, check, check.

    Actually, even a broken clock is right twice a day, and I only got this stuff right because I’ve been paying attention to Amazon for almost 20 years, and I know people a lot smarter than I (like Tom Furphy) who have patiently tutored me in the ways of Amazon.

    I think the Amazon-Whole Foods combination is going to be a potent one that will present competitive problems to a lot of different retailers.

    If you are a price-driven retailer, lower prices at Whole Foods means that Amazon is pressuring suppliers to lower prices … so you’re going to have to deal with that. Plus, they’ll be promoting those low prices pretty aggressively.

    If you’re a more upscale retailer, it means that Whole Foods will be trying to make its versions of specialty foods more accessible to more shoppers.

    And if you’re a middle-of-the-road retailer … well, you’re probably just screwed.

    To me, this deal signifies something we’ve been saying here on MNB for years - that you have to have a competitive response to Amazon’s ambitions, and probably should’ve started working on it years ago. You have to figure out how to go to market with some sort of e-commerce strategy that builds on your own strengths (not necessarily mimicking Amazon), ands you have to do more to make your store a unique and compelling experience that is worth visiting.

    One thing I’d immediately start doing is working on some version of a subscription model that addresses the advantages that Subscribe & Save will offer when extended to Whole Foods. And I don’t mean starting a series of meetings that hopefully will bear fruit in a year or two. I don’t think you have that long.

    I do think it is a pretty good bet that however aggressively you think Amazon is going integrate Whole Foods’ operations and try to create a new competitive urgency at the company - while not sacrificing standards - it is probably going to do it faster than you think. There will be some misses, to be sure, and I would expect that there will be some culture clashes that will get some publicity in social media. But this is a serious threat being crafted by seriously innovative people.

    I have two predictions.

    One is that John Mackey will step down from Whole Foods within six months.

    The other is that at some point in the next two months, President Trump - who hates Amazon CEO/founder Jeff Bezos because of the aggressive coverage of his administration by the Washington Post, which he owns in a private investment - will call out federal regulators in a speech for having approved the deal.

    I’m just guessing here. But so far my average on this one is pretty good.

    By the way … when news of the closing of the Amazon-Whole Foods deal hit the wires this afternoon (and I realize that the phrase “hit the wires” clearly establishes how old I am), even as I was beginning my vacation, all I could think of was the Lloyd Bridges lines from Airplane:

    Looks like I picked the wrong week to quit smoking … looks like I picked the wrong week to quit drinking … Looks like I picked the wrong week to quit amphetamines … Looks like I picked the wrong week to quit sniffing glue.

    Just want you to know that even while on vacation, I’m paying attention. And I’ll certainly be visiting my local Whole Foods next week just to see what’s happening, and how visible it is to shoppers.