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    Published on: April 27, 2018

    by Kevin Coupe

    Following years of declining car sales, Ford this week announced that it plans to do something truly revolutionary - it is going to stop making virtually every traditional sedan in its stable, such as the Fusion, Fiesta and Taurus. The two models surviving are the Mustang and a new Focus crossover that it plans for next year.

    According to the Washington Post, “The changes will … allow the company to devote more resources to SUVs and trucks, vehicles that have surged in popularity as consumers continue to lose interest in passenger cars, which no longer have a monopoly on good gas mileage. Ford also plans to bring 16 battery-electric vehicles to market by 2022.”

    Full disclosure: I have a Mustang convertible. I’m glad they’re not messing with that iconic line of cars.

    The changes do not affect Ford’s Lincoln division, which will continue to manufacture sedans. (For now, I’d guess.)

    The Post goes on to say that “the push toward SUVs is being driven by a growing number baby boomers and millennial car buyers, both of which favor SUVs over cars and make up a majority of the car-buying market, according to experts. Experts say consumers are drawn to SUVs and crossovers for their versatility. The vehicles offer more space, a higher ride off the ground and the ability to accommodate families … Ford is not the only company reacting to the growing appetite for bigger vehicles. With their emphasis on outdoorsy Jeeps that sit high above the road, Fiat-Chrysler has invested heavily on SUVs. General Motors has also reacted to changing market trends, offering customers a growing number of crossover SUVs in recent years.”

    I think this is fascinating, because it demonstrates the importance of being willing to walk away from a legacy part of one’s business if it has grown out of touch with or irrelevant to the needs and desires of one’s customers.

    Think there is an Eye-Opening metaphor in there somewhere?
    KC's View:

    Published on: April 27, 2018

    As Amazon announced positive first quarter results yesterday, it also said that it plans to increase the annual membership fee for Amazon Prime in the US from $99 to $119. The increase will take place in mid-June for new members, and then will be phased in for existing members as their renewals take effect.

    It has been four years since Amazon last raised the cost of Prime, from $79 to $99.

    Amazon said that the increase is because of the greater number of features that Prime now offers. It also comes as the company has said that it now has 100 million Prime members globally, though it does not break out US numbers.

    Prime gives its members guaranteed two-day shipping on more than 100 million products, as well as access to Prime Video and Prime Music streaming, and e-books.

    Amazon yesterday said that its Q1 net income was $1.63 billion, up from $724 million a year earlier; revenue was up 43 percent to $51 billion, up from $35.7 billion a year earlier.

    In addressing the positive performance, owner/CEO Jeff Bezos “singled out the performance of the company’s cloud computing business - known as Amazon Web Services, or A.W.S. - referring in a statement to a ‘remarkable acceleration’ in growth in the segment for a second consecutive quarter,” the New York Times reports. The Times also notes that “Amazon’s revenue received a big lift from the company’s acquisition of Whole Foods Markets last year. The company’s physical stores business, most of which is from Whole Foods, added $4.26 billion in revenue for the quarter.”
    KC's View:
    First of all, about the Prime membership increase. As far as I’m concerned, it is still more than worth it … though I am sure that there could be some losses when people start getting their renewal notices. I don’t think it’ll be much, though … largely because Amazon keeps adding value to the program.

    As for the numbers … lots of folks kept arguing that Amazon was building a house of cards with nothing in the way of real profit. it has to be something of a disappointment to them when Amazon actually starts showing profit. The new argument probably will be that Amazon is making more money from web services than from retailing … which strikes me as a smart business model, not something to be decried as unfair or somehow illegitimate.

    Published on: April 27, 2018

    The NPD Group is out with a new study saying that “adoption of online grocery shopping is moving at a slower pace than other consumer categories, but it’s growing with about 10 percent of U.S. consumers” now regularly buying groceries online. However, the study also notes that 99 percent of all grocery shoppers still use bricks-and-mortar stores.

    Some context from the study:

    “Consumer preferences when shopping for foods and beverages and logistical challenges are the primary reasons why consumers haven’t gone all in on online grocery shopping.  Wanting to pick out their own fresh items was the top barrier to their shopping online for groceries, followed by not wanting to pay a delivery fee. Many consumers (46 percent) who are lapsed online grocery shoppers or have never shopped online like that walking through a store remind them of what else they need.  And, even though one of the key benefits of online shopping is speed, 46 percent of consumers who aren’t online grocery shopping enthusiasts feel it’s faster to go to the store.”
    KC's View:
    Seems to me that one thing is true for both online and bricks-and-mortar retailers - that in order to succeed, they each have to find ways to create differential advantages and compelling experiences. They have to find the gaps in the competitions’ offerings and figure out how to fill them. And they have to create evolving narratives that define how they fit into people’s lives.

    One thing I know is that there is plenty of room for both models in people’s lives. What I also know is that business models that don’t differentiate themselves and continue to grow and improve their relevance are doomed, regardless of whether they are physical or digital.

    Published on: April 27, 2018

    Bloomberg has a story about how US banks are getting ready for - you guessed it - Amazon, which is trying to make inroads in the financial services sector.

    Amazon, the story says, “is now in early discussions to create a product for retail customers similar to checking accounts. The tech giant’s ambitions could prove especially challenging for regional lenders, which rely more heavily than larger Wall Street firms on providing basic banking services to consumers.”

    One of the things that traditional banks are doing is working to beef up “partnerships with financial-technology startups or pursuing outright acquisitions.” The story says that these banks are putting money into investment funds that are focused on technology.

    “If we do a great job with our customer, then it’s very hard for someone else to come in between us and that customer,” Bruce Van Saun, CEO of Rhode Island-based Citizens Financial Group, tells Bloomberg. That holds true, he says, “whether it’s a tech company trying to disrupt that relationship or a money-center bank opening offices.”
    KC's View:
    I am reminded of what Bette Davis, as aging actress Margo Channing, says at one point in All About Eve

    ”Fasten your seatbelts; it's going to be a bumpy night.”

    (Great movie, by the way ... if you've never seen it, you should check it out.)

    Banks should take notice. Doing business the same old way won’t work anymore.

    Published on: April 27, 2018

    In upstate New York, the Democrat & Chronicle reports that Wegmans has come out fighting against a proposal by Gov. Andrew Cuomo that would ban most single-use, film plastic bags from being handed out by the state’s supermarkets and convenience stores.

    According to the story, Cuomo argues that “the blight of plastic bags takes a devastating toll on our streets, our water and our natural resources, and we need to take action to protect our environment.

    But in its own statement, “Wegmans said: ‘It has long been Wegmans’ position that unintended consequences come from banning anything,’ adding that a statewide plastic-bag ban would ‘likely lead to an increase in the use of paper bags, which is not what’s best for the environment. Paper bags are heavier and take up more space; it takes seven tractor trailers to transport the same number of paper bags as plastic bags carried by one tractor trailer. It also takes about 90 percent more resources and energy to make and recycle paper compared to plastic’.”

    The story notes that “environmental groups' reaction to Cuomo's new bill has been mixed. Some have pushed him to supplement a ban on plastic bags with a fee on paper bags to encourage people to use reusable bags.”
    KC's View:

    Published on: April 27, 2018

    MarketWatch reports that Amazon “will continue to stream NFL games on Thursday nights for two more seasons, the National Football League announced Thursday afternoon. The games are broadcast on television by Fox and the NFL Network.”

    "Having over 100 million Amazon Prime members provides a massive platform to distribute Thursday Night Football digitally, not only to our fans in the United States but also around the world," said Brian Rolapp, the NFL’s chief media and business officer.
    KC's View:
    This is, by the way, an example of the expanded services provided by Amazon Prime. These kinds of rights acquisitions by Amazon are just beginning…

    Published on: April 27, 2018

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

    • Starbucks reported Q2 profit of $660.1 million, up from $652.8 million in the year-ago period; revenue jumped 14% to $6.03 billion for the quarter, on same-store sales that were up two percent.

    CNN reports on the new soft drink war taking place between Coke and Pepsi, redolent of the cola wars of the 1980s but now involving weapons that include flavored colas, juices, waters, and sports drinks. Both companies have increased their ad and promotions budgets, as well as increasing their digital budgets. “The Coke vs. Pepsi war is definitely back on. But it's now playing out on Google, YouTube, Facebook and Instagram as well as TV.”

    I must admit to having developed a certain fondness for Blood Orange Diet Coke … which I think is really, really good. It reminds me of the orange-flavored Diet Cokes I get from Coke Freestyle machines, and that’s a good thing.
    KC's View:

    Published on: April 27, 2018

    • The Food Marketing Institute (FMI) announced that it has hired Peter Matz - who, it says, “spent the past decade at OFW Law as a government relations advisor where he guided regulatory affairs and legislative strategies for companies and trade associations across the food, beverage and agriculture sectors” - as its new director, food and health policy.

    • IGA Inc. announced that Heidi Huff, Director of Marketing for IGA USA since 2012, has been promoted to Senior Director, Red Oval Partnerships.
    KC's View:

    Published on: April 27, 2018

    Loved this email from an MNB reader, responding to yesterday’s FaceTime about how Dorothy Lane Markets turns its checkouts into a positive part of an already compelling shopping experience:

    My wife and I went to Best Buy last night to purchase a power converter for international travel. It’s the first time either of us had been in a Best Buy in years. The good news was they had what we needed. The bad news was there was no one at any of the checkouts. The security guy at the front ostensibly radioed for someone to come to the front, but no one came for at least 5 minutes, and only after a second radio request. During that time we noted how bizarre Best Buy’s assortment had become: Soda Stream supplies and marked down K-cups littered the front of the store. If we didn’t absolutely need the item for our trip, I would’ve left the store without buying anything.
    You may talk about Amazon a lot, but for good reason. They’re continually looking to reduce friction in the shopping experience. Evidently you need to keep talking, because retailers aren’t hearing the message.

    I’m trying.
    KC's View:

    Published on: April 27, 2018

    It’s been a little busy of late, so I haven’t been to a movie in a couple of weeks, and I cannot review I’ve been reading - the new Spenser novel, “Old Black Magic,” by Ace Atkins, until after the official publication date on Tuesday. So I’ll get to that next week.

    I am sitting here pondering the fact that Sunday has become such a terrific night for television. In some ways, that’s an antiquated observation - in an age when DVRs and on-demand, in addition to services such as Hulu and iTunes, there’s no such thing as needing to be in front of the television at any given time. We can get what we want when we want it.

    Except … one of the things that Mrs. Content Guy has found is that when she goes to work on Mondays, the conversation among her fellow teachers often is about shows that were on the previous night. So she feels like she has to watch, in order to be current. (This is less of an issue for me. I work alone.)

    That’s a great metaphor for retailing, I think - the importance of being so compelling that customers will go out of their way to visit a store even if they could get some of the same products in another way or at another time. That’s what great retailers do.

    On Sunday night, the two shows that we need to watch so Mrs. Content Guy is up to date are “Homeland” and “Billions,” both on Showtime. “Homeland,” now its its penultimate season, been remarkably prescient in its depiction of American democracy under attack from without and within, with the ability to get the audience rooting for one person or another, only to throw in an event that creates shifting loyalties both onscreen and in the audience. As always, Claire Danes and the great Mandy Patinkin give the narrative weight and investment in their roles as intelligence agents, and they are riveting from week to week. This Sunday is the final episode of the season, and I can’t wait.

    “Billions,” just a few episodes into its third season on Showtime, also is remarkable in its portrayal of the battle between Chuck Rhoades, the US Attorney for the Southern District of New York (which itself has been much in the news lately), and Bobby Axelrod, a Steven A. Cohen-like hedge fund manager with questionable strategies and tactics. Played, respectively, by Paul Giamatti and Damian Lewis with intelligence and ferocity, these characters are in a kind of war to the death … and people I know who work in that world say that it is so accurate as to be uncomfortable to watch. It is terrific drama, sometimes Shakespearian in its ambitions, and we love it.

    Meanwhile, over on HBO, there is the comedy-drama “Barry,” in which Bill Hader plays a hitman with ambitions of being an actor and having a normal personal life, and yet having absolutely no capacity for normality or personal relationships. It is wonderful. And, there is the new season of “Westworld,” a meaty riff on the old Michael Crichton movie, about a futuristic amusement park in which robots are there to serve the guests’ basic and debased needs. The new version contemplates sentience and meaning, with an amazing cast and a bifurcated narrative that I find to be simultaneously confusing and riveting - it is must-see TV. And, of course, the evenings end with “Late Night Tonight with John Oliver.”

    I get exhausted just thinking about it all.

    I’m going to do something different tonight, something I’ve never done before. I’m actually officiating at a wedding of some friends of our kids. (I’m ordained in the Universal Life Church.) I get to perform the service and even give a bit of a sermon about the joys of wedded bliss. (I’m not great at advice, but I do know something about marriage - on May 1, Mrs. Content Guy and I will celebrate our 35th wedding anniversary.)

    I’ll let you know it goes. If I have any sort of talent for this, maybe I’ll offer my services to members of the MNB community looking for someone to perform such services.

    That’s it for this week. Have a great weekend, and I’ll see you Monday.

    KC's View: