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    Published on: December 11, 2017

    by Kevin Coupe

    The New York Times had an interesting story over the weekend about the implications of last year’s acquisition by Marriott of Starwood and its various hotel brands, which include Westin, Sheraton and W. In fact, the new company - the largest hotel company in the world - has 30 brand names, 6,400 properties, and more than 1.2 million rooms in 126 countries and territories.

    It may be big, but it also is confusing.

    “For one thing,” the Times writes, “many of those brands are indistinguishable from one another. Do we really need both Sheraton and Marriott? Can you even tell their rooms apart if you walk into one without seeing the sign outside? And what do the names Element, Four Points, Homewood, TownePlace and Delta mean to you? They’re among the 30, so they seem to mean a lot to Marriott.

    “And even with all those properties, the newly combined giant is not necessarily everywhere we need it to be. Sure, they are downtown and at the airport and on ring roads that circle big cities, but the company has usually taken too many years to identify and open a property in the up-and-coming neighborhoods where Airbnb listings are legion.” (And, as we know, systems like Airbnb present a major competitive threat to the traditional hotel business model.)

    “Add in the spaghetti-swirl task of having to combine two loyalty programs with dozens of airline and other partners into one that will keep more than 100 million members in the fold. At that point, it starts to seem downright daunting for the new Marriott to answer the following question: Can it give us what we need — on every kind of trip — to keep us from straying?”

    What’s interesting about this story is how it describes a system that in recent years has gotten more diverse and less beige, and yet still features properties that often can be largely indistinguishable from each other - it can be challenging to differentiate among buildings and names like Edition, Moxy, Aloft, and Element. (I can, but I’ve stayed in all of them at one time or another … but for less experienced traveler, it can be confusing at best.)

    I think it is an Eye-Opening story worth reading, largely because it speaks to the danger of not being differentiated. Size only goes so far as an advantage, especially when the competition is a smaller disruption-minded entity playing by different rules.

    And that can happen to anyone.
    KC's View:

    Published on: December 11, 2017

    The Bismarck Tribune has a story about how Dollar General,
    currently making an aggressive push into North Dakota, is being criticized in some quarters for hurting local businesses, paying employees poorly, draining money from local economies because profits leave town, and contributing little to the communities where it does business.”

    According to the Tribune story, critics “say Dollar General can kill small-town downtowns, just like Walmart did in some bigger places. The company denies all those accusations and insists it benefits the communities where it locates because it offers customers more affordable prices for everyday goods. Company officials declined multiple requests for interviews for this story.”

    However, the Tribune also suggests that the fears may be greater than the reality, and that in the town of Hankinson - a town of 899 people that is the center of a productive farming region in the southeast corner of the state, an hour south of Fargo - Dollar General hasn’t claimed a lot of victims.

    “Local retailers in Hankinson and other towns in the state where Dollar General has opened haven’t suffered significantly, at least not so far,” the story says. “Some stores experienced short-term sales declines because everyone wanted to try the new store, but business has returned and they now say the chain is having minimal impacts on their bottom lines … Downtown has the usual mix of businesses for a town of this size — a bank, a grocery, a drugstore, a hardware store, a couple of bars, insurance dealers, and a funeral home. Customers haven’t abandoned those businesses for Dollar General. No stores have closed. They haven’t had to cut staff. Local retailers are holding their own.”

    In part, the story says, “Businesses in towns where the chain has opened say they have chosen to emphasize products that the chain doesn’t stock to differentiate their stores from Dollar General.” A local grocery store “prepared for the arrival of Dollar General by expanding its produce, dairy and frozen food sections, and reducing its inventory of general merchandise, and health and beauty products, which consumers can buy more cheaply at Dollar General … Other retailers say Dollar General can’t compete with them on quality or the depth of their selection in a category. Consumers may go to Dollar General for a cheap package of nails, but if they need a particular-sized screw or a drill, they are more likely to go to the local hardware store.”
    KC's View:
    Sometimes, there’s fear that a bigger competitor is going to feed you into a wood chipper, and it ends up that smart retailers are able to fight off the threat by doing things differently. I find that heartening.

    Published on: December 11, 2017

    Acosta is out with a new study saying that “76 percent of weekly shoppers visit more than one retailer each week for groceries” and that “67 percent of those shoppers are visiting approximately two to three retailers weekly.”

    Some other statistics from the Acosta study:

    • “Sixty percent of shoppers reported shopping at more than one retailer because ‘some products are priced lower at certain retailers’.”

    • “Only 45 percent of Millennials cite price as a key driver of retail hopping – this generation is more prone than the average shopper to vary their shopping based on where they are and specific brands.”

    • “More shoppers are choosing at which store to shop based on how much they like the store brand (53 percent of shoppers versus only 34 percent in 2011).”

    • “Thirty-seven percent of shoppers make multiple trips weekly to ensure their food is fresh.”

    • “Thirty-three percent of shoppers go to more than one retailer due to not finding all the products/brands they want at one store.”

    • “Forty-one percent of shoppers reported shopping at more than one retailer because ‘some retailers carry better quality products in certain categories’.”

    • “Thirty-seven percent of shoppers report they don't have time to figure out what to have for dinner, saying it's typically a last-minute decision.”
    KC's View:
    The big lesson, I think, is that pretty much every customer is in play … and any retailer, with the right, compelling, competitive offer, can create a niche that will bring in new shoppers and establish customer relationships.

    Published on: December 11, 2017

    The Seattle Times has a follow-up “think piece” to one that MNB took note of from the New York Times a few weeks ago - about the Smart Kitchen Summit that recently took place in Seattle, in which the writer considered not just the technology on display, but the implications.

    “The ‘democratization’ bandied about seemed to mean access to more technology, more information, more ease and more fun — for those who can afford it,” the story says. “Yes, the robots will improve and the cost will come down, but is it too low-tech to point out that there are still so many people, even here in the United States of America, who don’t have enough to eat?”

    And, it goes on: “Kitchens are just starting to get smart, and the almighty market likely will take care of the sillier ideas. Meanwhile, there’s still time to consider what problems we’re trying to solve as the future comes along.”

    The piece is worth reading here
    KC's View:

    Published on: December 11, 2017

    MarketWatch reports that there is an analysis out there suggesting that Amazon “may already be the largest apparel retailer and could still grow to sales between $45 billion and $85 billion by fiscal 2020.”

    According to the story, analyst Instinet is saying that Amazon’s “overall apparel and accessories sales at above $1 trillion with ‘above average’ online penetration and “leading gross margin” compared with other categories.”

    The story goes on: “Right now, Amazon is ‘best with basics,’ but is trying a number of strategies to see what sticks, including a push into private labels, which analysts estimate could drive $1.6 billion in gross profit, and Prime Wardrobe, which lets shoppers try on clothes before committing to the purchase. And Amazon has, increasingly, a universal appeal, Instinet said.”
    KC's View:

    Published on: December 11, 2017 reports on how Walmart./Jet are working with BuzzFeed’s Tasty App to target an urban, affluent consumer demographic, currently with Uniquely J, a new line that “features edgy packaging designs and premium ingredients, is an effort to target a younger customer, and compete with Amazon’s private label division.”

    According to the story, “ The new deal with Buzzfeed’s Tasty app is expected to boost WalMart’s numbers, as the do-it-yourself platform has over 91 million followers across social media.”
    KC's View:

    Published on: December 11, 2017

    • The Associated Press reports that McDonald’s is reviving its value-oriented Dollar Menu “after a two-year absence, but this time the items will cost $1, $2 or $3 … There are a dozen items on the new menu, including a sausage burrito for a buck, a bacon McDouble for $2 and a Happy Meal for $3.” The reason: “Offering cheap eats has become a winning strategy for the world’s largest hamburger chain, and a way to fight off other low-priced chains.” Plus, when McDonald’s dumped the Dollar Menu the decision hurt sales, as value-driven patrons went elsewhere for cheaper fast food.
    KC's View:

    Published on: December 11, 2017

    • The Washington Post reports that retailer Home Depot has announced that it plans a $15 billion share buyback, “a move that will reward shareholders including chief executive Craig Menear and other top executives.”

    And that’s before a probable conference committee agreement between the US Senate and House of Representatives that would result in a significant corporate tax cut in the US, which proponents have argued would result in companies making major capital investments, increased hiring and higher wages - meaning that the tax cuts would “trickle down” to middle class and working class Americans.

    The Post writes that “Home Depot’s statement was a reminder that corporate America may have other plans for that cash,” and that “several companies already have indicated that they will use excess funds to pay off debt, increase dividend payments or repurchase their own shares rather than create new jobs or raise wages. On Wall Street, the consensus is that workers will be last in line behind shareholders, creditors and investment bankers when the extra corporate cash is distributed.”

    At the same time, many companies, if they plan to invest in capital improvements, could spend the money automating their processes, which won’t do much for worker salaries.
    KC's View:
    I just think this is something to which it is important to pay attention, if only because how much extra cash ends up in the pockets of average Americans should matter to retailers that depend on people having money to spend.

    To be fair, we don’t know how this is all going to play out. It is possible that more money in corporate coffers will drive business growth, which will put upward pressure on wages, all of which will create greater prosperity for all. Or, it is possible that very little will trickle down to workers/consumers. I hope it works out positively, but I remain skeptical because too many CEOs are compensated based on how low they can keep labor costs and how high they can make investor returns.

    Published on: December 11, 2017

    Responding to last week’s FaceTime about sexual harassment issues, one MNB reader wrote:

    Strongly agree with your Face Time perspective yesterday. I shared it with my wife and adult daughters, strong independent thinkers, as an example of taking positions to make change from within. It shines a favorable light of potential for our industry to take a leadership position on relevant issues and be a more attractive option for talented people. Who knows, it may also help to answer unasked questions about my lifelong career choice!

    On the subject of a judge ordering Amazon/Whole Foods to reopen a closed “365” store in Bellevue, Washington, one MNB reader wrote:

    It looks like Amazon is getting an early experience of the challenges that B&M retailers face all of the time. It will be interesting to see how they navigate this challenge as they are now part of the draw to retail centers as an anchor while they take sales from others in the same retail center.

    We have heard a lot of ideas of how Amazon might impact the B&M world but I have not heard as much on the impact to the shopping centers they now occupy. Will they become part of the community as many Grocery stores strive to do? Will they create a physical presence of their ecosystem as you suggest by buying or leasing more real-estate in the centers and occupy the entire market?

    I would imagine the folks in Bentonville are having a good laugh as they watch these stories unfold and realize the media may have a new retail boogey man to focus on while they focus on catching up to Amazon online with these B&M lessons already in their past.

    Tell you one thing. They’re going to be reading leases a lot more closely before signing them.

    I wrote last week about how disgusted I was with the idea that Toys R Us senior management requested and got bankruptcy court approval for millions of dollars in bonuses that the company said needed to be paid to help it get through the busy holiday season.

    I commented:

    I’m not going to argue with the bankruptcy judge, because she knows a lot more about the law than I do, and I try to make it a practice not to cast doubt on the integrity of the justice system when I disagree with rulings.

    My problem is with the executives - all well-off people who want to be further rewarded for doing what is supposed to be their jobs, which is to rescue a company that is in terrible shape in part because it was mismanaged. Give me a break.

    As I’ve argued here before, it would be nice if just one of these times, these freakin’ people who ask the bankruptcy court to approve bonuses that would be paid to the people actually working in the stores, to raise morale at a time that, if you are on the front lines at Toys R Us, is fraught with uncertainty. When stores get closed, as they certainly will be when the company looks to emerge from bankruptcy, these people will be out of a job … while the senior execs will take their high salaries and bonuses and perks and go off and work for some other company where they’ll get higher salaries and bigger bonuses and more perks.

    Give me a break.

    One MNB reader wrote:

    It's just remarkable that your blog is so successful despite your constant condemnation of the people who read it and tear-jerking for the people who don’t.

    First of all, to be clear - this may be one of the nicest emails I’ve ever gotten. (Unintentionally so, but so it goes.)

    Second … you assume that my readership only is high-level. Actually I’ve got a lot of readership throughout all these companies - from CEOs to store and department managers.

    Third … tear jerking? Really? You display your contempt here for the people who make retail happen.

    Fourth … I don’t think it is remarkable at all. In fact, I think many senior execs would agree with me. They may not live and work in a system that does, but in their hearts, they think I have a point.

    From another reader:

    I totally agree with your assessment!!  However I think you are being too nice.  Sounds to me, like someone got a little extra remuneration of her own to rule favorably on such an injustice.  She has just allowed these executives rape this company.

    I’m not sure I would go so far as to accuse the judge of taking a bribe.

    MNB reader Ron Rash differed with me:

    Those executives and managers are key to the very success of attaining the now mandated earnings goal.

    The point is that if there is no bonus-pay-to-stay, one could convincingly argue that many of those key people would leave a sinking ship, and fulfill the prophecy of all those front-line folks being out of jobs even sooner. Just to be clear, I have deep respect for those front-line employees, having been one myself for many years.

    If there are folks at that company that do not deserve a bonus, it is the Chairman and CEO and board of directors for not having the foresight to see where that business was headed, and formulating and executing a plan to keep the business viable.

    Having said my piece, I also firmly believe that a good portion of that bonus money needs to go to many of those front-line personnel, should that not be the case already.

    For the record … I believe that the CEO is a prime beneficiary of the bonus program.

    From another reader:

    Kevin I believe that bonuses might help Toys R Us move through the holiday season and in to restructuring. However, I am in agreement with your premise that for them to be effective they should move through the whole organization. The current executive group may or may not be responsible for the state of the business but much of the success of the sales and earnings targets are in the hands of the people in the stores. If they are uncertain of their future they will also be looking for jobs in an industry that is short of bodies and not necessarily focused on their current roles. Good Store Managers in particular are needed in all facets of Retail. A total team effort is required and even then I am not sure that the Category specific Retailers that were so successful in the late 80’s and the 90’s have not been mortally wounded by Amazon, Target, Walmart, Costco etc.

    And from another:

    Total Greed! And none of these execs seem the least bit ashamed.  Moments like this make me fear we are making huge steps backwards in our society. Ugh.

    And another:

    I only shop at Toys R Us once a year… at Christmas, for all my nieces and nephews. It’s not my favorite trip, but I have to say that this year was a complete surprise. Our local store was clean, incredibly well stocked, and had lots of happy and helpful employees roaming the aisles in each section to assist customers in looking for things, etc. The only disappointment was that they only had 1 cash register open, but they were also allowing shoppers to check out at the Customer Service desk.

    Fortunately, they weren’t too busy when we were checking out and we only had to wait behind 1 person in line. The Customer Service Manager apologized and explained that they had a couple of employees go home sick, so she had to send a couple of cashiers to the floor to assist customers. I thought that was a pretty novel approach to have employees assisting and selling on the store floor, rather than waiting at empty registers at the front of the store. I would hope they would call them back to work registers should they have a rush.

    It was a good shopping experience… and I was surprised.

    KC's View:

    Published on: December 11, 2017

    In Week Fourteen of National Football League action…

    Green Bay 27
    Cleveland 21

    Detroit 24
    Tampa Bay 21

    Oakland 15
    Kansas City 26

    Minnesota 24
    Carolina 31

    San Francisco 26
    Houston 16

    Indianapolis 7
    Buffalo 13

    Chicago 33
    Cincinnati 7

    Dallas 30
    NY Giants 10

    Tennessee 7
    Arizona 12

    NY Jets 0
    Denver 23

    Washington 13
    LA Chargers 30

    Seattle 24
    Jacksonville 30

    Philadelphia 43
    LA Rams 35

    Baltimore 38
    Pittsburgh 39
    KC's View: