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    Published on: April 19, 2018

    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.

    This is a pint of Graeter’s Ice Cream. Now, it so happens that Graeter’s is one of my favorite ice creams, but I also want to make the point that my use of the brand in this commentary is completely unsolicited, unexpected and un-endorsed. They have no idea I’m going to say what I’m about to say.

    I want to use Graeter’s to make a point. Graeter’s is from Ohio and I think it is fair to say that it long has been a regional brand, though it has been expanding of late. That’s a good thing - I used to have to order pints online, which can get expensive and requires planning, though worth it. Even though I don’t eat as much ice cream as I used to, having it in the freezer is like having a security blanket. I feel better knowing it is there.

    Now, it wasn’t all that long ago that I was pleased to find out that a retailer with stores closer to my Connecticut home than the company’s Cincinnati manufacturing plant is was going to be carrying Graeter’s. I could just drive down to the store and pick up a couple of pints whenever I felt like it.


    Here’s the problem. They didn’t carry Grater’s for long. One day, the pints no longer were there, though I must say that Palmer’s, a local independent grocer, continues to carry the brand, which makes me happy.

    I wondered about the other store, however. Why did Graeter’s come and go so quickly? Sales must not have been very good, and so they decided to give the space over to another brand that they could do better.

    But the more I think about that, the more I wonder why sales didn’t do better. It occurs to me that I never saw any sort of promotion of the brand, or explanation of what makes it special, or rationale for why customers should try it.

    It is in coming to this realization that I want to suggest that this commentary really isn’t about Graeter’s, or at least not just about Graeter’s. It really is all about the thousands of products in the store that the vast majority of consumers really don’t know all that much about, but that they might be willing to try if the retailer gave them a reason.

    Now, I’ve had this conversation with retailers, and many will say that they’d do it if the manufacturer provided some financial support. I think that’s a crock.

    I think that it is the manufacturer’s job to make the best product possible, to position it in the marketplace, and to promote it via advertising and marketing to the item’s target consumer.

    But in the store? I think that it is the retailer’s job to explain products, to sample products, to create enthusiasm for products, to generate sales for products.

    Can the manufacturer offer financial and logistical support for such efforts? Sure. They should, as best they can.

    But I think that retailers have to take ownership themselves, and work hard to sell the products that differentiate them to their shoppers. It is part of bringing your A-game, which is the only game you can play if you want to win these days.

    Think about it. Unless you are from Ohio or know that market somehow, if you live in Connecticut you have no idea why Graeter’s is good or different. Unless the retailer tells you, you may never know, and you may never buy it. That is a sale the retailer could’ve had, but lost.

    Retailers have to not just stock products, but sell them - with enthusiasm and imagination and an understanding that this is part of what creates a compelling and differentiated store experience for the shopper, and - in this case - a delicious ice cream experience that satisfies the stomach and sometimes even soothes the soul.

    That’s what is on my mind this morning. As always, I want to know what is on your mind.

    KC's View:

    Published on: April 19, 2018

    by Kevin Coupe

    The Los Angeles Times has a story about how Netflix, frustrated by the fact that its original movies are blocked from playing in major theater chains because they are available for home viewing at the same time, has been exploring the idea of buying a movie theater chain in Los Angeles in New York “that would enable it to screen a growing pipeline of feature films and documentaries.”

    One of the reasons for wanting movies to play in theaters would be to make them eligible for Academy Award nominations as well as for major film festivals such as Cannes.

    The Times writes that “the idea of Netflix buying a theater chain would mark a new phase in the company's rapid ascent to become one of the most powerful players in the entertainment industry.

    “Netflix has attracted its 125 million subscribers worldwide by releasing dozens of original films and TV shows annually on its fast-growing streaming service, bypassing the traditional theatrical market, as well as the cable bundle. Netflix has promised to spend as much as $8 billion this year on original and licensed content for its subscribers who pay a monthly fee to binge shows and films.”

    When I read this story, I thought immediately of Star Trek II: The Wrath of Khan, in which James T. Kirk explains that as a cadet he finessed the Kobayashi Maru “no win scenario” test by reprogramming “the simulation so it was possible to rescue the ship.” Kirk rejects the notion that this was cheating: “I changed the conditions of the test; got a commendation for original thinking. I don't like to lose … I don't believe in the no-win scenario.”

    That’s essentially what Netflix seems to be considering, and what more retailers ought to consider when presented with what seems to be a no-win scenario.

    Change the rules of the game. Or, at the very least, don’t play the game that the competition wants to play.

    It is an Eye-Opener. And it seems entirely logical.

    Oh, and one other thing …

    I was interested to see a story in the New York Times about Amazon’s latest movie investment. (Amazon, by the way, has avoided the Netflix problem by being willing to allow theaters to show some of its movies - like The Big Sick and Manchester by the Sea - before making them available online.)

    The Times writes that Amazon has just signed a 15-year lease for Culver Studios, a 14-acre studio and backlot that is where Citizen Kane, Gone With The Wind, Raging Bull and E.T. the Extra-Terrestrial, among other films, were filmed. Amazon reportedly plans to move all of its entertainment division personnel onto the lot.

    It is yet another example of how companies such as Netflix and Amazon are revitalizing the movie business, and in this case, giving new life to old facilities that have seen better days.

    It so happens that during my last year at Loyola Marymount University, I lived in Culver City, and I could see from my street the lion that was perched atop one of the buildings at the nearby MGM backlot. Learning that these places are becoming vital and lively again just makes me happy.
    KC's View:

    Published on: April 19, 2018

    Amazon founder/CEO Jeff Bezos, in his annual letter to shareholders, has revealed a number that has long been closely held by the company - that more than 100 million people globally pay for Amazon Prime membership, which gives them expedited shipping as well as access to other services. Prime members also are said to spend more than twice as much annually on Amazon than non-Amazon members.

    In its story, the Wall Street Journal writes that “Amazon’s story to investors has largely been one of scale. In the company’s view, having a large numbers of customers and clients has allowed it to spread costs broadly and continue investing in technology. This view is shown in its growing Prime membership, through its massive cloud-server business and how it lets third-party sellers onto its platform to compete against itself for customers. Amazon said Wednesday that a majority of goods shipped world-wide on its platform are now from these sellers.”

    Two other interesting passages from the Journal story:

    • “Last year Amazon brought in $9.72 billion in revenue directly from subscription services, including fees from Prime members. The company also benefits from Prime members who tend to spend more money on Amazon than nonmembers and do so more frequently.”

    • “The letter also said more new members joined Prime last year than in any previous year. Amazon has been expanding Prime internationally, including to Mexico, Singapore and the Netherlands in 2017.”
    KC's View:
    Prime has always been the best customer loyalty program ever … creating an ecosystem that gets people invested in it, and then rewards them for it, creating a wheel that keeps turning and generating more energy and spinning off more opportunities.

    This is very tough to compete against. Not impossible, but tough, and getting tougher.

    Published on: April 19, 2018

    Forbes has a story about how “data breaches, fake news proliferation, sexual harassment allegations and gun control rallies have combined to send shockwaves through the global business community, but the United States has been hit particularly hard.”

    This year’s RepTrak 100, in which the Reputation Institute studies corporate reputations in America, “reveals an average three-point decline in the reputation of USRT100 companies. It is the most significant downward trend since 2008, made more startling by the fact that each point corresponds to $1 billion in market capitalization … Driving the reputation disruption is a lack of confidence in big business, with just 49% of those surveyed saying they don’t have faith that companies will do the right thing.”
    KC's View:
    This reflects a broad problem that faces many food companies - a growing consumer distrust of what has been labeled “big food.” This has been exacerbated by the fact that a lot of smaller manufacturers have been able to exploit their positioning as companies with purpose, and be a lot more nimble than their larger brethren, many of which are locked into legacy operations and old-world ways of doing things.

    One of the interesting things about the RepTrak 100 is the fact that at the top of the list is Campbell Soup.

    The story says that under CEO Denise Morrison, “Campbell has placed corporate social responsibility at the center of its business model, championing projects that fight hunger and launching a line of affordable and natural soups. Even more notably, Campbell has embraced transparency, something many consumer packaged-goods companies still fail to do.”

    What the story doesn’t point out is that it has not been a smooth financial road for Campbell - managing a business that continues to rely on the core red-and-white soup can business even as it tries to innovate though product development and acquisition, has had its challenges. The company doesn’t even consider itself a canned soup anymore, and is focusing more on products like snacks and initiatives like delivery.

    Campbell has tried to convert itself into a nimble company with purpose, which I completely respect … but it hasn’t been easy, and the markets haven’t always rewarded it.

    Published on: April 19, 2018

    Amazon and Best Buy yesterday announced that they will team up to “bring the next generation of Fire TV Edition smart TVs to customers in the United States and Canada. As a first step in the partnership, Best Buy will launch more than ten 4K and HD Fire TV Edition models from Insignia and Toshiba, beginning this summer.”

    These n ew smart TVs come equipped with Amazon’s Fire TV technology, which allows users to not just access a wide variety of online content, but also to use Amazon’s Alexa voice-activated system. The announcement says that this allows the Fire TVs to continue “to improve even after your purchase, with more new Alexa skills, software features, and applications added regularly. Tens of thousands of Alexa skills are already accessible today, allowing you to have amazing entertainment experiences, view and control your smart home connected cameras, lighting, security systems, and more.”

    Not only will the Amazon-connected TVs be sold at Best Buy, but Best Buy also will have a presence on Amazon’s site as a third-party merchant for the first time.

    The Wall Street Journal writes that “the two companies say they have been partners for years, and Amazon products such as Kindle e-readers have long been sold in Best Buy stores. But the new partnership brings potential benefits for both companies as sales of so-called smart TVs continue to climb. It provides Best Buy with access to Amazon’s online customers for the first time, while broadening Amazon’s potential audience for products that feature its Alexa voice assistant. Amazon, which has been expanding its physical footprint through its own stores, has deepened its reach into consumers’ homes in recent years, starting with Kindles and more recently with its line of Echo home speakers, which star Alexa.”

    Jeff Bezos, founder/CEO of Amazon, conceded the importance of bricks-and-mortar in selling televisions when announcing the partnership: “Best Buy, with a very large physical footprint, lets people come into the stores and see the product, which is very important … People do want to come in and see the TV, they want to experiment with the TV, try it out.”

    GeekWire writes that “a deep level of integration and trust is surely not the traditional relationship between Amazon and physical retailers. Best Buy’s new status as a third-party seller on Amazon is especially notable, as the Minneapolis-based chain has stood out as a comeback story after online retail upended the world of traditional retail. The company currently has more than 1,000 stores in North America.

    “Whether the partnership leads to bigger things between the companies remains to be seen, but it’s clear that Amazon is looking for more and more ways to extend its reach into physical stores — from its $13.7 billion Whole Foods acquisition to its fledgling line of bookstores, grocery stores and pickup locations.”

    Best Buy has about 1,000 stores around the country, and has improved its fortunes by creating in-store boutiques for brands such as Apple and Samsung and using in-store inventory to fulfill online orders from local shoppers, rather than using centralized warehouses.
    KC's View:
    I totally get this, and certainly think that if I’m in the market for a new TV I might wander into a best Buy - which I haven’t for a long, long time - to see the new Fire TVs. Would I then go buy one online instead of in the store? Not sure … it depends on price and maybe on service.

    I have to believe that this is a risk for Best Buy, but it clearly believes that you keep your enemies closer. If this is Amazon’s world and we’re all just living in it, then making this sort of deal makes sense.

    Published on: April 19, 2018

    US News & World Report has a story about how “home spending is on the rise, according to the latest survey data from Bank of America. A maturing millennial generation is one of the primary drivers of the surge in spending, and analysts say Walmart … will be a big winner.”

    Here’s what the report says:

    “An uptick in household spending will provide a boost to all retailers in the home improvement, appliance, furniture and household goods markets. However, when it comes to household goods, Walmart is the market leader. When asked where they purchase the majority of their household items, Walmart was by far the most popular response among survey respondents of all age groups. Even among millennials age 22 to 30, 36 percent of respondents prefer Walmart for household shopping compared to 19 percent for Amazon and 14 percent for Target Corp.

    “For older millennials, Walmart’s lead is even larger with 37 percent market share compared to 17 percent for Amazon and 14 percent for Target.”
    KC's View:

    Published on: April 19, 2018

    The Washington Post has a story about the recent “Food Justice Youth Summit” that was held in the nation’s capital.

    According to the story, “Hundreds of students from various D.C. public schools had come up with proposals for making healthy foods more affordable. They had plans for improving school kitchens and cafeterias, as well as ideas for expanding community gardens. And there was a certain urgency to their presentations, the result of critical thinking about a future in peril — their own.”

    You can read the story here.
    KC's View:
    Maybe youth really isn’t wasted on the young … I find this engagement in important issues to be heartening.

    Published on: April 19, 2018

    • The Wall Street Journal has a story about how some major suppliers have struggled to raise prices - despite the fact that they’ve “long relied on selling new or improved versions of products at higher prices to boost growth” - because of three factors. First, there’s weak inflation. Second, Amazon is driving down consumer prices. And third, there is “less brand loyalty as consumers use the internet to shop around.”

    • The New York Times reports that “Dick’s Sporting Goods plans to destroy the assault-style rifles and accessories it agreed to take off its shelves in February instead of returning them to manufacturers.

    “It is the latest action taken by the Pennsylvania retailer that agreed to ban the sale of assault-style rifles at its 35 Field & Stream stores, and to stop selling firearms and ammunition to anyone younger than 21.” That ban was implemented in the days following the school massacre in Parkland, Florida, last February, which left 17 people dead.
    KC's View:

    Published on: April 19, 2018

    • Supervalu announced that David Johnson, vice president and controller of the company since April 2013 as well as interim chief accounting officer since July 2017, has now been named chief accounting officer.
    KC's View:

    Published on: April 19, 2018

    We had a story yesterday about how the Supreme Court heard arguments in a case about online sales taxes, which prompted MNB reader Jeff Gartner to write:

    Related to the Supreme Court case on online retailers collecting state sales taxes and Trump’s obsession with Amazon, the Chicago Tribune reports that the Trump Organization collects sales tax in only 3 states for its online sales (Florida, Louisiana and Virginia). Was he not aware of this when he blasted Amazon? We should not be surprised at all.

    On another subject, MNB reader Jeannine Wilkins wrote:

    Interesting article on the Catalina article that concludes the center store aisle business is “alive and well”. I agree with you that this business is certainly vulnerable. I also suspect the study doesn’t take into account how quickly things can shift. First, someone starts buying large bags of dog food online because it’s easier than lugging it around. That experience goes well and they recognize the benefits of doing so – maybe they even sign-up for an auto-ship option after they get comfortable with the switch they made. Then they end up buying all their pet items online because now at least one online retailer knows they have a dog and can target them accordingly. At this point they no longer even enter the pet aisle, or pet specialty stores.  Switching another product(s) now becomes easier because they have built confidence in the process. Next, maybe it’s cleaning products because the exact item they want isn’t always in stock at the store they regularly shop at. Now they get targeted ads for related products…and so the shift continues.
    Even fresh items are at risk – there are now regional websites that combine offerings at all the local farms so you can order organic product from Farm X, Y and Z, free range eggs from another farm and organic dairy from yet another farm. Maybe even organic/GMO free meat cuts from other farms.  So, a person for whom organic/GMO free/ethically produced foods can now live by their values without having to spend a few days dashing about the countryside. From what I have seen they are pricey and likely only for a very niche group that isn’t at all price sensitive but it’s yet another way the grocery industry is being disrupted.
    Fascinating stuff – I know I have a variety of theories about where grocery retail will be in 10 years and center aisles as they are now will be a thing of the past in all of those theories J.

    Another MNB reader wrote:

    I read into this with a different perspective....Grocery by default has the biggest cut of the pie in a supermarket, so of course there is more grocery sales penetration ...With that , in a recent A.T Kearney  survey said is that 93% of shoppers prioritize fresh other than price and convenience....Hence the customer choosing to shop that particular store.

    Yes, grocery attributes a lot of volume, but what is missing here, is why the customer shops that store .....Fresh offerings will differentiate and be the separator.

    MNB reader Paul Schlossberg wrote:

    That's a lot of floor space to sell "one item per trip." That item is probably a "necessity," whether for a recipe or to clean one's home, etc. The preferred and discretionary items will be purchased on the perimeter of the store. 

    Average annual center store purchases at $1,408. Question: What is the share of total spending, per shopper, for center store versus the perimeter? 

    Recalling an excellent presentation (years ago) by Jack Trout. He made the same point in his 2001 book, Differentiate or Die. Paraphrasing here: "There are 40,000 SKUs in an average supermarket. Families get 80-85% of its needs from 150 SKUs."  

    If the average supermarket is 40,000 sq. ft. or more, what will they do with the wasted space? Being cynical for a moment, think of all the slotting fee which would be lost if they allocated less shelf space to the center store. 

    That’s not being cynical. That’s a real issue.

    Regarding the Starbucks racial bias controversy, MNB reader Marcel Ste. Marie wrote:

    I think a lot of this is just that there is a zillion Starbucks and they just can't bat 1.000 all the time. But overall they do a good job. Every major restaurant chain has had something like this happen. Obviously the more units you have the chances are higher it will happen. There was that Nazi guy in Chicago who punched a black customer and so on. McDonalds has had some really weird things happen. Walmart as well. Don't pick on Starbucks too hard. Glad to see they are responding in a better way than most companies. I have nothing against Starbucks other than their crappy tasting coffee.

    But, from another reader:

    This smells almost like a set-up.  These “victims” could have quickly and quietly avoided the social-media-feeding-frenzy by simply ordering a cup of coffee.  Isn’t that why they were there in the first place?  The temptation to blow it up into another victim-event just must have been too overwhelming to resist.

    I profoundly disagree with this blame-the-victim perspective.

    I have gone to many Starbucks overt the years and waited for someone to arrive without ordering coffee, largely because it seemed polite to wait. I’ve never been questioned. There seems to be little doubt that these men were questioned because they were black … and I don’t blame them for being outraged by being held to a different standard or required to behave a different way simply because of the color of their skin.

    They’re not being victims. They’re standing up for their rights.
    KC's View:

    Published on: April 19, 2018

    Tom Murphy, an industry veteran who, with companies like Kroger and FedEx, and later as a consultant to major retailers, has helped companies develop IT and logistics strategies, as well as enabling them to engineer disruptive cultures and become change agents, joins Tom Furphy and Kevin Coupe for a two-part Innovation Conversation Podcast.

    Part One looks at the difference between stopgap tactics and long-term strategies - and how to make tough choices in demanding times, while Part Two focuses on the retailers best positioned to compete with Amazon, the places where Amazon is most vulnerable, and what the biggest impediments are to innovation by traditional retailers.

    This two-part podcast can be played below, or can be accessed and subscribed to on both iTunes and GooglePlay, as can previous episodes of The Innovation Conversation Podcast.

    This Innovation Conversation Podcast is sponsored by ReposiTrak, and brought to you by GMDC.

    KC's View: