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    Published on: July 23, 2015

    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, Kevin Coupe here, and this is FaceTime with the Content Guy, coming to you this week from Hood River, Oregon. Those of you watching the video may find the wind noise to be a little distracting, but that's the price of having a great view of one of the most spectacular areas in this region.

    A couple of weeks ago, Mrs. Content Guy and I decided to do some white water rafting, and we spent the day on the White Salmon River. It was terrific, and I even went over a small waterfall, hanging on for dear life, but without falling out of the raft. On that trip, we shared the raft with our guide, as well as a father and daughter. The father was probably about my age, and lives in Israel. His daughter, who had just graduated from school and was about to begin a career as a naturopath, was very nice ... and she also had this little beard, which was a little longer and fluffier than mine.

    I have no idea what her deal was, whether she was transitioning or maybe just likes facial hair, and don't really care ... but it was something I did notice.

    Later that day, we went to a favorite brewpub here in Hood River for burgers and beer, and at the table next to us there were two women, probably in their mid to late thirties, with about four children. And it occurred to me while I was sitting there that just a few years ago, I probably would have assumed that these women were friends, that their husbands were not around, and that they were taking their kids out for dinner. But today, I realized, that could be a faulty assumption, because in fact they could've been partners, could've been married, and the kids could've been theirs together. Again, I have no idea what their deal was, and don;t really care ... it's none of my business.

    But it seems to me that this offers an important lesson for everyone in business these days. We can't make assumptions about people, their lives and their personal circumstances. We just can't. The world is a far more complicated and diverse place than it used to be.

    Sometimes we can't help it. I was guest-teaching a class at Portland State the other evening, and during a class discussion one of the women students referred to her fiancée. In a follow-up question to her, I referenced her boyfriend, and her response made it clear that her fiancée was, in fact, a woman. She didn't seem mad at me for my word usage, but I sort of kicked myself for forgetting my own lesson.

    it isn't just about not making judgments. It is about not making assumptions ... about our employees, customers, and business partners. Our even our friends and acquaintances.

    The world may be more complicated, but if we approach it with an open mind and an open heart, it doesn't have to be a more difficult place with which to deal.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind ... and next week, I promise a FaceTime video with less wind.

    KC's View:

    Published on: July 23, 2015

    The Cincinnati Business Courier reports that Kroger is doubling the number of Cincinnati-area stores that are offering its new and evolving ClickList online ordering and pickup service.

    According to the story, stores in Finneytown and Versailles will now offer the e-grocery service, in addition the the Liberty Township and Lebanon stores that have been providing it.

    The story says that Kroger "plans to continue to expand it to other Greater Cincinnati locations through 2015 and into 2016. Eventually, Kroger plans to offer ClickList at up to 1,200 locations, or more than 40 percent of its stores in 32 states. First, it’s testing the online ordering system that allows customers to pick up their groceries without leaving their car at stores with a broad range of customers. Those tests will help the company learn the types of customers who are interested in the service and why they use it."
    KC's View:
    Kroger may not be rolling this out as fast as I'd like it to, but I suspect that at some point we'll see its e-commerce business gain a fair amount of momentum and pick up some speed. And that's likely to happen once Kroger believes that it has the mix right, and a robust enough offering that it can compete effectively and even dominate this space with an e-grocery pitch that is more than just "me, too."

    Rather, Kroger almost certainly would like it to be "me first." As it should.

    Published on: July 23, 2015

    Bloomberg reports that Walmart "will start closing some of its 24-hour supercenters for at least a few hours each night, aiming to use the time to better stock shelves and organize stores for the peak shopping rush."

    The move is said to affect about 40 stores, in addition to about 24 other supercenters that began reducing hours earlier this year.

    According to the story, "The change is a sign of retreat for a company that helped bring convenience and all-hours shopping to many parts of America. Chief Executive Officer Doug McMillon is taking the step as part of his drive to improve the shopping experience at Wal-Mart’s U.S. stores, where customers have complained about empty shelves, long checkout lines and poor-quality produce."

    Bloomberg goes on to write that "Brian Yarbrough, an analyst with Edward D. Jones & Co., said he’s skeptical the overnight closures will significantly improve workers’ ability to stock and prep the stores. Rather, he thinks it may be a trial run to see if Wal-Mart can reduce overhead by cutting store hours without losing sales. Since few other retailers are also open 24 hours, customers may just shift their shopping to when the store is open rather than take their business elsewhere."
    KC's View:
    That analysis strikes me as right-on ... Walmart certainly seems to be in a cost-cutting and efficiency mode, made more important because it is doing things like raising wages and investing a gazillion dollars in e-commerce initiatives. And, at the same time, it wants to be more effective about in-stock positions ... though I agree with Yarbrough that this move doesn't seem likely to effectively address this issue.

    Published on: July 23, 2015

    Starbucks announced this week that users of its mobile application and frequent shopper program will by the end of the year be able to earn points (or "stars") by using Lyft, a ride-haling service. The accumulation of 12 stars earns the user a free drink at any Starbucks.

    According to the Associated Press, "The partnership is the latest evidence of how Starbucks is using its mobile app to cultivate loyalty and drive up sales ... Starbucks says 20 percent of transactions are now made with mobile devices." However, no other details about how the program will work were made available.

    The deal comes just after the announcement of an arrangement with the New York Times that will allow Starbucks mobile app users to access for free a selection of NYT articles, and earn stars if they subscribe to the Times. Starbucks also has said that it hopes to add other content options to the app in the near future.
    KC's View:
    It seems to me that every retailer has something to learn from the effectiveness of the Starbucks mobile app, which the company continues to make more and more relevant and robust. I've become a complete fan of the part of the app that allows me to pre-order before I even get to the store ... it is a behavior-changing "killer app" that I think will be proven to be an enormous boon to Starbucks' business.

    Published on: July 23, 2015

    Amazon announced yesterday the expansion of its new Home Services offering - which essentially competes with the likes of Angie's List in helping customers find service providers - to a number of new markets.

    The announcement says it will now be available "in 15 metropolitan areas, including Atlanta, Boston, Chicago, Dallas-Fort Worth, Houston, Miami, Philadelphia, Phoenix, San Diego, San Jose and Washington D.C., adding to existing availability in New York City, Los Angeles, San Francisco and Seattle.

    "Amazon Home Services now includes over 15 million unique services across more than 900 professional services," the company says.
    KC's View:
    Services like these that expand the Amazon ecosystem will be a significant part of the company's defense against Jet ... in addition, of course, to the blitz of low prices and promotions it is likely to unleash.

    Published on: July 23, 2015

    The Produce Marketing Association (PMA) this morning says that new research indicates that participants in its "eat brighter!" program - which provides free licensing of "Sesame Street" characters to promote the consumption of fresh fruits and vegetables - say that the second quarter showed an average three percent increase in sales in the category compared to the same period a year ago, with some participants saying that sales were up as much as 11 percent.

    The program has been deemed so successful that it has been extended through 2018.

    In a letter to members, PMA President Cathy Burns wrote, “This is an encouraging sign, and we’re thrilled that participants are able to take the eat brighter! assets, available through an unprecedented program agreement with Sesame Workshop, and turn it into results like these."

    And First Lady Michelle Obama, an enthusiastic proponent of the program, said in a prepared statement that "it's very clear that the eat brighter! campaign is working brilliantly. I am so thrilled to see 'Sesame Street' and produce suppliers and retailers coming together to get our kids excited about healthy eating, and I look forward to seeing more companies come on board to grow the momentum."
    KC's View:
    I've been a fan of this program from the moment I learned of it ... and I'm glad that retailers and suppliers are getting some marketing traction in a way that lets them compete - at least creatively - against all the bucks spent by major CPG companies.

    Published on: July 23, 2015

    The New York Times reports that a labor panel appointed by Gov. Andrew Cuomo has recommended that the state raise the minimum wage for fast food workers to $15 an hour from the current $8.75 over the period of several years, with the acceleration in New York City to be faster because of the higher cost of living there.

    The recommendation is expected to be implemented shortly. In New York City, the $15 per hour target would be reached by 2018; elsewhere in the state, it would be reached by 2021.

    According to the story, "The panel’s recommendations, which are expected to be put into effect by an order of the state’s acting commissioner of labor, represent a major triumph for the advocates who have rallied burger-flippers and fry cooks to demand pay that covers their basic needs. They argued that taxpayers were subsidizing the workforces of some multinational corporations, like McDonald’s, that were not paying enough to keep their workers from relying on food stamps and other welfare benefits."

    The decision affects some 180,000 fast food workers in the state, and "comes on the heels of similar increases in minimum wages in other cities, including Los Angeles, San Francisco and Seattle. On Tuesday, the Los Angeles County Board of Supervisors agreed to raise the county’s minimum wage to $15 an hour by 2020, matching a move the Los Angeles City Council made in June."

    Cuomo said he expected other states to follow New York's lead. "When New York acts, the rest of the states follow,” he said. "We’ve always been different, always been first, always been the most progressive.”
    KC's View:
    Or, in this case, almost as fast and progressive as Los Angeles, San Francisco and Seattle ... and in those cases, I think, politicians actually had to vote for the increase, as opposed to how they achieved it in New York.

    But Andrew Cuomo never will be accused of being the most humble.

    Here's where I come down on this. A fast food employee who worked 50 hours a week, 52 weeks a year, would make a whopping $22,750 before taxes. And so I totally agree that this seems like an absurdly low number. (Once this gets fully implemented, that same worker will make $31,200 for working a 40 hour week, 52 weeks a year. Big difference.)

    On the other hand ... anyone who works 50 hours a week, 52 weeks a year, would make $22,750 before taxes, and I'm not entirely sure why fast food workers - and fast food restaurant owners - get treated differently.

    I know the argument will be that this will result in the loss of jobs. I'm not sure that will be the case, since I tend to believe that better paid workers tend to be more engaged and productive workers, and this can actually lead to improved business. But let's assume for the moment that, say, a little more than 10 percent of those employees lose their jobs. If 20,000 end up unemployed, that'd be a tragedy ... but there still would be 160,000 who might be able to better support their families because of the higher wages, and might need fewer public services because of it. Not to be hard-hearted about it, but that sounds like some kind of win.

    Published on: July 23, 2015

    The Sacramento Business Journal reports that Raley's - which currently operates four different formats under the Raley's, Bel Air Markets, Nob Hill Foods and Food Source banners - has a new prototype in the works that is expected to debut in about two years.

    CEO Michael Teel describes it as "more along the lines of a natural, organic smaller format."

    Raley's earlier had revealed that it was working on a small-store format for downtown Sacramento, but that unit is expected to be called either Raley's or Bel Air; this new format would be something different.
    KC's View:

    Published on: July 23, 2015

    • Walmart announced the grand opening of a new, 1.2 million square foot distribution center in Bethlehem, Pennsylvania, which it says "is part of a next-generation network to support the company's rapidly growing e-commerce business."

    "This Bethlehem facility is part of a dense, multi-faceted network that combines new buildings, existing fulfillment assets, and our portfolio of stores to create thousands of points of distribution," said Neil Ashe, chief executive officer, Walmart Global eCommerce. "All of these elements working together enhance our ability to get more products to customers faster, at a lower cost, and provide more choices for shoppers."

    Reuters reports that Walmart has bought out the 49 percent stake that it did not already own in, a Chinese e-commerce company in which took a 51 percent position in 2012.

    According to the story, "Wal-Mart's move also comes after China said last month it will allow full foreign ownership of some e-commerce businesses, with the goal of encouraging foreign investment and the development and competitiveness of the sector." It also comes six days after the sudden resignation of Yihaodian's two founders.

    Speculation is that Walmart will now be able to work on "a rapid integration of the operation with its own traditional retailing business."
    KC's View:

    Published on: July 23, 2015

    The New Yorker has an assessment of the promises and probabilities surrounding the launch this week of Jet, which is positioning itself as a competitor to both Amazon and Walmart's online business.

    Here's how the piece frames the situation:

    "Until this morning, most visitors to the shopping Web site were greeted with a large virtual timer that counted the days, hours, minutes, and seconds until its launch. Up until that point, the site’s main distinction was that it had raised two hundred and twenty-five million dollars before the public could buy anything on it. Even granted that venture capitalists can be irrational and prone to excess, a startup has to appear poised to deliver on big promises in order to raise that kind of cash; to put it into context, in advance of putting Amazon online, in 1995, Jeff Bezos raised less than a million dollars, including a hundred thousand from his own parents.

    "Jet’s pitch to investors and prospective customers is that it will offer the lowest prices on the Internet for millions of products—essentially operating as an amped-up, Web-only version of Costco or Sam’s Club. It will be able to do this, according to its C.E.O., Marc Lore, partly because its profits will come from collecting annual membership fees of $49.99 rather than from margins on individual purchases, and partly because it will set its prices using special price-minimizing software, including a 'smart cart' feature that lowers the total cost of an order as you add more items to a basket."

    But the story also suggests that the virtual timer leading up to the launch has been replaced by a very real timer that could have an impact on the company's success. Lore says that for the Jet model to work, it needs to do $20 billion in sales a year, "a high threshold for a startup in a crowded field dominated by a single big corporation." He says Jet should hit that number by 2020, but as conceded that do so - and support the discounts and rollout - it will need access to additional funding. And it also will have to build those sales in the face of sure retaliation from Amazon, which is certain to lower its own prices to prevent Jet from getting any sort of real traction.

    The story is worth reading, as almost every story in The New Yorker is, and you can do so here.
    KC's View:

    Published on: July 23, 2015

    • In an interview with Shanken News Daily that focuses on the Stew Leonard's liquor store business, Stew Leonard Jr. says that one of the company's goals is to "develop our online business more. Currently, it’s not a big portion of our sales, but it is growing. We’d like to develop a 'click and collect' system, where a customer can put together an order online and then pick it up at the store. We want to have a stronger online presence than we have today."

    Stew Leonard's operates nine liquor stores, with three each in Connecticut, New York and New Jersey. The story notes that "the combined annual sales revenue of Stew Leonard’s Wines stores is now close to $100 million, with wine accounting for about two-thirds of sales and spirits and beer both comprising 15%."
    KC's View:

    Published on: July 23, 2015

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

    • The Cincinnati Business Courier reports that while analysts believe that Kroger could make a play for a number of A&P stores that the yet-again bankrupt company is selling in the New York metropolitan area - a region in which Kroger has no presence - history suggests that Kroger does not like to buy poorly performing companies or retailers that need fixing.

    And that would certainly describe A&P. Though it actually might be more accurate to say that A&P is on life support, or is circling the drain...

    CNBC reports that the National Retail Federation (NRF) has "revised down its forecast for 2015 retail sales," and now "anticipates retail sales growth of 3.5 percent this year, down from an earlier estimate of 4.1 percent. It cited 'unexpectedly slow growth' during the first half of the year due to factors including treacherous winter weather and the West Coast port shutdown."

    • The New York Times reports that Home Depot has "agreed to acquire Interline Brands, a supplier of maintenance and repair products to businesses, property managers and contractors, for $1.6 billion in cash. The deal is expected to bolster Home Depot’s sales to the professional building and repair market."

    The acquisition requires approval by antitrust regulators.
    KC's View:

    Published on: July 23, 2015

    Got the following email from MNB reader Daniel Hogan:

    I am a 25 year old who has been an Amazon Prime member for a considerable amount of time, and also an Amazon customer for as long as I can remember (my embarrassing early high school era Yahoo email attached to my account is a constant reminder…). I signed up for a 6 month membership to Jet yesterday because I was very curious how Jet would operate, and if it would be worth changing my membership. After about an hour of exploring on Jet’s site last night, I will remain loyal to Amazon. My main reason is that there are no areas for product reviews. When I buy something on Amazon, I want to read what others have said about the product. This includes both positive and negative feedback, I want a realistic representation of the product before I make a purchase. Maybe Jet has plans for this in the future, but overall, the value I would receive from Jet doesn’t come close to what I currently receive from my Prime membership.

    On another subject, from another reader:

    To the person that asked, "what argument possibly would convince anyone that consumers KNOWING WHAT IS IN THEIR FOOD should not be MANDATED by law?"

    Did they even read the article you posted? Because that is the argument. A very well thought-out fact-based argument. Many people think gluten is inherently bad for you because a product is labeled “contains gluten”. We should absolutely label products when there is an allergy or safety concern – but when there is zero evidence that a product causes harm when consumed, then no – labeling should not be mandatory.

    Unless the pro-GMO side spends a ton of marketing on why GMOs are good, people will consume less GMO product as a result of the labeling. If demand goes down for GMO product, more product will be on the market that uses up more of our natural resources.

    My brother works in the one of Cornell’s plant biology departments, holds degrees in both Plant Science and Horticulture, and if he is not concerned over any safety risks from GMOs – then I am not worried either.

    Thanks so much for posting the article. If people take the time to read it then I think it will be an eye-opener for many!

    Responding to Kate McMahon's column yesterday about Whole Foods' weights-and-measures debacle, MNB reader Kelly Dean Wiseman wrote:

    Kate, you astutely wrote:

    To get beyond this, I think it is incumbent upon Whole Foods to get its weights-and-measures house in order and its whole story straight before reacting. One more perceived 'thumb-on-the-scale' incident could lead to a whole exodus by customers who can now find quality organic products at their local supermarket, Sprouts, Target, Walmart, Trader Joe’s or Amazon. For a whole lot less.
    Not to mention food co-ops. National Co-op Grocers are 150 independent co-ops nationwide which far exceed Sprouts in sales of organics.

    In fact, about a third of co-ops in NCG are larger than any Sprouts store.
    Thought you all might want to start mentioning us as a major player: 12% of UNFI sales to us as a group, the last time I checked…

    Also regarding Whole Foods, MNB reader Andy Casey wrote:

    Not to defend WF but unfortunately it is pretty easy for this type of thing to happen in-store from time to time although maybe not on the scope we see here. One thing for sure, it ought to be inspiring some new training efforts at every chain in the industry if for no other reason than to make sure they aren't next.

    And from another reader:

    It’s interesting to me how many retailers seem to be watching this story with glee instead of doing what they should be doing, which is immediately checking their own products for weights and measures issues. I guarantee you they’ll find some.

    Weighing in on our ongoing McDonald's discussion, one MNB user wrote:

    I've been reading the MNB as my manager for my summer internship said I should. I have really loved most of your articles (I was laughing out loud at John Oliver yesterday), but it's hard to agree with someone 100% so I hope you understand. Here's my two cents on McDonalds this morning:

    As a Millennial I see McDonalds' decision to offer a breakfast menu all day incredibly strategic. On the weekends, it's rare that I am up and about before 10:30, especially after going to bars the night before. And I consider myself a morning person compared to many others my age and slightly younger that I know. McDonalds is missing out on targeting Millennials on the best meal of the day, and actually McDonalds breakfast is truly my favorite joint for pancakes. Millennials are not as frequently bogged down to time constraints, and more often have less tradition jobs than our baby-booming parents. For example, I have friends who work online, part-time, and nights. Last summer, I worked 36 hours a week but only worked weekends, because I worked two part-time jobs: at a nightclub and a cookie shop. Getting up Sunday morning before 1 (the nightclub closed at 4 AM the night before) would rarely happen. Even though your suggestions are fair, I think you aren't giving McDonalds enough credit for their move, and plenty of people will be ecstatic if they really do start serving breakfast day-round!
    Hope you find this helpful on my view of McDonalds decision, and I can't wait for breakfast on the weekends!

    I do find it helpful. And you make some good points. But I have to admit that I think you need to do better when it comes to pancakes.
    KC's View: