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    Published on: March 16, 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.

    Today, I'm celebrating an anniversary of a kind. On March 16, 1997 - twenty years ago today - I placed my very first order on Amazon.

    Not exactly an early adopter. But pretty close. (These were the days when Amazon would send customers little gifts as a thank you - I think I still have a coffee mug they sent me.)

    That year, we placed a total of nine orders on Amazon. Most of those were for single items - kid's books about people ranging from Cal Ripken and Lou Gehrig to Sally Ride. I also ordered a memoir from Daniel Patrick Moynihan, one of the greatest of 20th century American statesmen, called "Miles To Go," and a memoir by John Hockenberry who has had a wonderful broadcasting career despite being wheelchair-bound. There also were a couple of cookbooks, plus one title that makes me laugh: "Now I Know Why Tigers Eat Their Young/How to Survive Your Teenagers."

    I guess I know what was on my mind in 1997.

    The thing is, one can go on Amazon and check out every purchase one has made on the site. Ever. When I look at my purchase history, I can see that the number of purchases grew a little bit each year, but really seemed to jump in number the year that I spent most of the month before Christmas on the road, which was the same year that I joined Amazon Prime ... and I discovered the magic of making frequent purchases without worrying about shipping costs. In essence, it was the year I entered the Amazon Ecosystem.

    Apparently, there is no escape. Or at least, I'm not looking for one - it appears, based on my order history, that in 2016 the people in my household placed a whopping 176 orders on Amazon. (I think that qualifies as "whopping." There are a lot of people who order less, but I'd be willing to bet that there are folks out there who order a lot more.)

    It also is important to point out that this is not all expensive stuff. There are orders for $5, and orders for $50. What's also interesting to note in gazing at my order history is how the products being ordered have changed. That first year, it was just books. After not too long, it was also DVDs and CDs. But I don't think I ordered any CDs or DVDs last year, and I ordered more e-books than physical books. (Except for the books I ordered for my wife's third grade classroom.) Last year, there also were orders for food and household supplies and HBC items and tons of other stuff. There were a bunch of streaming videos, a lot of orders placed via Subscribe & Save, and the vast majority were placed via Amazon Prime.

    But there is one important and, I think, irrefutable fact about my ordering history.

    Everything I bought could have been bought at a bricks-and-mortar store.

    I'm sure that some of the stores where I made those purchases in the past would blame Amazon for the loss of business.

    In the beginning, I didn't go looking for an alternative to the physical shopping experience. But 20 years ago, as today, Amazon operated from a basic premise - that it wasn't going to sell me stuff, but rather just make it easier for me to buy stuff. I'd say they did a pretty good job.

    I also think it is fair to say that for the most part, Amazon has lived up to another one of its key tenets - that "today is day one." As a consumer, I've never felt that Amazon was complacent about my business. Rather, the opposite - I think the customer service actually has gotten better. (It used to be impossible to find a customer service phone number on the site, but that's not the case anymore.) And as a reporter, I continue to be impressed by the degree to which Amazon continues to innovate, push the envelope, and see the impossible as a temporary condition.

    I had no idea of any of this when I placed that first order 20 years ago. I certainly never would've imagined that I'd be involved in a relationship with a disembodied voice named Alexa, and could use an Amazon-developed voice-activated computer assistant to acquire both information and merchandise.

    Here's the thing. Today, somebody will go onto Amazon for the first time, place a first order, and unknowingly begin the process of being seduced into its ecosystem. If you are competing with Amazon - and pretty much everybody is - you have to figure out how to compete with that. It is not just a matter of identifying Amazon's weaknesses, but your strengths ... because success is found in the places where you are both different and better, not where you are the same.

    If a customer walks into your store today for the very first time, what are you doing to seduce him or her into your ecosystem, making sure they come back tomorrow and the next day, insuring that you never are complacent about their business?

    If you are not embracing this opportunity and making sure that you are relentlessly fighting for the customer's business and loyalty, then it is possible you've already lost the battle. And you won't be able to blame it on Amazon.

    That's what's on my mind this morning, and as always, I want to know what is on your mind.

    KC's View:

    Published on: March 16, 2017

    by Kevin Coupe

    This has nothing to do with retailing or the food business, but it does have something to do with a subject - politics - that increasingly occupies people's attention, including here on MNB.

    The story has to do with two Congressmen from Texas - Democrat Beto O’Rourke and Republican Will Hurd - who earlier this week found themselves unable to fly back to Washington because their flights had been cancelled by a blizzard. So, they decided to rent a car to drive the 1,600 miles together, in order to make it back in time for scheduled votes.

    The Washington Post reports that "by lunch they had stopped at SXSW in Austin, learned the uniting power of coffee from a barista in San Marcos, shared a granola bar they’d split down the middle and, yes, starred in their own version of 'Carpool Karaoke.'

    “'On the road again,' Willie Nelson sang from the speakers of their 1999 Chevy Impala rental. 'Like a band of gypsies, we go down the highway.'"

    And then the two Congressmen, who didn't really know each other that well before their trip began, belted out the next line: “We’re the best of friends.”

    The Post writes that as they traveled, :they broadcast live via Periscope and Facebook for all of America ... They decided to call it a town hall meeting on wheels, their /road to work' adventure, an impromptu experiment in democracy free of the aides and entourages of Washington ... They welcomed questions from their audience, personal and political in nature, and solicited playlist suggestions, must-see attractions and food pit stops to hit along the way."

    Throughout the trip, the Post writes, "they pondered tough questions - who would play them in the movie version of their trip, cake vs. pie, salsa verde or salsa roja - but they also fielded inquiries about the serious political issues facing Americans, including the Republican health-care bill, the border wall, criminal justice reform, foreign policy and Kellyanne Conway’s theory that microwaves can spy on you."

    It is a terrific story, and you can read it here.

    It reminded me of a podcast I listened to a while back, in which David Axelrod, who used to work for Barack Obama, discussed national and international affairs with Mitt Romney, who once was the GOP's presidential candidate. (The podcast, called "The Axe Files," is one of the best public affairs programs out there, featuring a broad range of politicians talking about the issues ... it is on my regular rotation.) In listening to Romney and Axelrod talk in a calm and nuanced fashion about their different perspective son the issues, it occurred to me that if you sent two guys like that into a room and asked them to come up with compromise positions on all the major issues facing the nation, they probably could do so. Nobody would be happy with everything, but most people would be happy about something ...and we'd actually make progress in this country.

    That's what O’Rourke and Hurd did, to some degree. At the very least, it is an Eye-Opener about what is possible.
    KC's View:

    Published on: March 16, 2017

    The Washington Post reports on a new study from Adobe saying that "the rise of online shopping across the United States is rather uneven, with more affluent states marching more quickly toward a lifestyle in which buying happens on a screen instead of at the mall."

    The story goes on: "Looking first at the year-over-year growth rates in total spending, you see the choppiness. For example, coastal states such as New Hampshire, Oregon, Rhode Island, New Jersey and California have some of the strongest surges in online shopping. But big pickups are not limited those geographies, with Texas and Mississippi also posting robust e-commerce growth.

    "Maryland saw an 8 percent increase in spending, while Virginia saw a 7 percent increase. Meanwhile, online spending actually retreated or held steady in a handful states, including Idaho and South Dakota."

    In addition, analysis of individuals' online spending says the same thing - that the more affluent are adapting to online shopping faster than people who are less so.

    There also "are unique pain points to brick-and-mortar shopping in cities," the story says. "Checkout lines at high-traffic stores can be excruciatingly long. Nabbing an on-street parking spot can feel like a miracle. Many city residents don’t own a car, and it can be hard to lug purchases on public transit or on foot. All these factors may be pushing them to adopt online shopping more quickly than those in smaller towns."
    KC's View:
    This isn't really a surprise, though it does both clarify and quantify trends that most people would've presumed were true. I think most trends begin in affluent, urban/suburban communities, usually on either coast, and work their way through the rest of the country.

    BTW ... this is one of the arguments for drones ... that they will create ease of delivery and probably some economies of scale for harder-to-reach communities.

    Published on: March 16, 2017

    The Street reports that on what appears to be Amazon's current approach to investment, returning - after a period in which it actually slowed down its spending and grew its bottom line profits - "to its heavy-spending ways, making big investments in both traditional areas and some intriguing new ones. All while assuming that the shift in Amazon's sales mix towards higher-margin revenue streams, together with the trust built up by its track record, will be enough to keep profits growing and Wall Street happy."

    You can read the entire analysis here, but essentially the argument seems to be that Amazon has identified high margin businesses that it can use to fund the bets that it seems to feel it needs to make in order to maintain dominance in its categories.

    But the story also seems to suggest that this remains a delicate balance, that Amazon needs to maintain growth in specific areas in order to justify - especially to investors - the expenses it is compiling in other areas. Fascinating reading.
    KC's View:
    Every once in a while I get an email from a reader who feels that in pointing to some of the innovative things that Amazon does, I am ignoring some basic realities - like that some feel is the unsustainability of a free shipping policy that costs the company a lot of money and reduces its profits.

    It indeed may be fair to suggest that I write more about innovation than cost; I tend to have a bias that way. But I also think that over the years, Amazon always has played the balance game ... and that it is willing to use the areas where it makes a lot of money to fund the segments of its business that it believes are necessary to build what it hopes will be as close to an unassailable advantage as it can.

    Jeff Bezos and his folks know that there is no such thing as an unassailable advantage ... but that's why Amazon works hard to keep the gas pedal to the floor, thinking of its various investments and businesses holistically. There are no silos in its business because Amazon never allowed them to be built in the first place.

    Published on: March 16, 2017

    Bloomberg reports that Walgreens Boots Alliance, still struggling to do anything it can in order to get the regulatory approvals necessary to complete its acquisition of Rite Aid, " is nearing an agreement to sell more assets to Tennessee-based discount chain Fred’s Inc. -- boosting the number of stores and adding distribution centers, software and personnel, according to one of the people."

    The story says that "the new package for Fred’s will likely include more stores than the 865 that Walgreens initially agreed to sell, according to one of the people, who declined to specify the exact number of outlets or the revised purchase price. Fred’s would also get the rights to the Rite Aid brand name for an extended period beyond the 24-month period outlined in the original deal, the person added. Senior Rite Aid executives could also move over to Fred’s, although exactly who and how many is still under discussion..."

    Bloomberg writes that "Walgreens could present the beefed-up package to the U.S. Federal Trade Commission within weeks, the person said, in hopes of satisfying the agency’s concerns after an initial proposal fell short. The merger, which would combine the No. 2 and No. 3 in the industry, has also raised concerns among state attorneys general, at least a dozen of whom are scrutinizing the deal, another person familiar with the matter said."
    KC's View:
    When this story broke yesterday, I got the following email from MNB reader Tom Murphy, who IMHO gets it right:

    Is it just me or does this deal smell a little like the Haggen debacle in the PNW?  Fred’s currently has 650 stores (mostly in the southeast)…and is going to pick up 865 stores (scattered across the US)?  If the FTC requires a quick turn on the assets, like it did with Haggen…this will be another mess.  Wonder where Fred’s is getting the capital…could it be another helpful private equity partner?

    I'm not sure I trust the FTC's instincts when it comes to 21st century competition.

    Published on: March 16, 2017

    CNBC is reporting that Walmart plans to acquire yet another online retailer - Modcloth, described as "an eclectic women's fashion brand known for serving curvy customers."

    While the acquisition has not been formally announced, and terms of the deal were not disclosed, the story says that Modcloth CEO Matthew Kaness has informed his employees that the company had been purchased.

    CNBC notes that this is just the latest Walmart purchase of an online entity - there was Jet for $3.3 billion, Shoebuy for $70 million, and Moosejaw for $51 million.

    Analysts say that the goal is to build online assortment, while providing scale and resources to companies that would find it difficult to achieve them on their own.
    KC's View:

    Published on: March 16, 2017

    • Amazon announced yesterday that its Prime members in the Ohio communities of Cincinnati and Columbus now "can add beer and wine to their Prime Now order for delivery" in one hour (for $7.99) or two hours (for free), depending on their preference.
    KC's View:

    Published on: March 16, 2017

    • In Toronto, the Globe and Mail has an interview with Michael Medline, who took over as chief executive officer of parent Empire Co. Ltd. and Sobeys two months ago, in which he says the company has a "byzantine" structure that " let down its customers in its product offerings and marketing."

    "We will take aggressive and bold actions to address the issues in our business, and we are prepared to make the tough decisions and [take] decisive actions necessary to see Empire return to sustainably profitable growth,” Medline told analysts yesterday in a conference call.

    The story notes that "Sobeys has been struggling since its acquired Safeway Canada in late 2013, in part due to what Mr. Medline acknowledged wasn’t a smooth integration, touching off a series of problems that often resulted in bare shelves and angry customers. Sobeys’ internal issues, including a switch in private labels and new sourcing for its fruits and vegetables, were exacerbated by a downturn in the economy in Western Canada as well as a growing trend towards discounting, which made Sobeys higher prices stand out."

    “I’m not going to mince my words,” Medline said. “I am disappointed in how we have approached our customers. Our ability to understand our customers and effectively communicate with them has been sorely missing.”

    • Add Neiman Marcus to the list of traditional bricks-and-mortar retailers that now need to make dramatic moves because of shriveling sales and profits.

    The Wall Street Journal reports that Neiman Marcus has "hired financial advisers to explore strategic alternatives, including a potential sale or debt restructuring." While the company did not say whether it was in talks with anyone, the said it had reached out to Canada's Hudson's Bay - owner of Saks and Lord & Taylor - to see it if was interested in acquiring its 42 stores and online business.

    Hudson's Bay did not comment on the report except to say that it is willing to selectively evaluate opportunities when they arise.

    • The Orlando Sentinel reports that Southeastern Grocers-owned Winn-Dixie "is asking customers to switch to the Plenti rewards initiative starting today and throwing out its old fuel-perks program. The Plenti program will let customers collect points and redeem them for credit at other businesses. Among those are gas stations affiliated with ExxonMobil. Other partners include AT&T, Macy’s and Chili’s.

    "Customers will have to sign up for the new program to continue getting sale prices in stores that are provided only to users of the store’s loyalty program."

    Winn-Dixie said that "only about 20 percent of old cardholders were using the rewards program at Southeastern Grocers stores."
    KC's View:

    Published on: March 16, 2017

    • An organization called Catalyst CEO Champions For Change has been launched, designed to recognize "CEOs and senior leaders who support and drive diversity and inclusion within their organizations."

    The group said that more than 40 high-profile CEOs and top industry leaders "have pledged to continue to drive change for gender equality in the workplace," including from companies that include Accenture, Campbell Soup Company, Colgate-Palmolive Company, Kellogg Company, McDonald's Corporation, Mondel z International, PepsiCo, Inc., Pfizer Inc., Sealed Air Corporation, Target Corporation, The Coca-Cola Company, The Procter & Gamble Company, Unilever, and Walmart Stores.

    These companies, the organization said, "represent more than 9 million employees and more than $1.5 trillion dollars in revenue globally. The positive ripple effect will be tremendous in helping to build workplaces where everyone has a fair chance to succeed."
    KC's View:

    Published on: March 16, 2017

    Yesterday we took note of a Wall Street Journal report that a South Dakota judge has ruled that a $1.9 billion defamation lawsuit against ABC News and journalist Jim Avila can move forward, setting the stage for a trial focusing on ABC's reporting about "lean, finely textured beef," a filler found in about 70 percent of ground beef sold in supermarkets. In the original story, which ran in 2012, ABC News reported about the existence of lean finely textured beef, made of trimmings washed with ammonia to remove pathogens, in ground beef products. The filler was labeled "pink slime," a term that was coined by an employee with the US Department of Agriculture (USDA) Food Safety and Inspection Service (FSIS). It was the opinion of some microbiologists with FSIS - though not the official conclusion - that the trimmings were "salvage," not meat.

    The suit charges that inaccurate and hostile reporting did irreparable damage to the companies that used the filler, which was, after all, legal.

    I had forgotten about this five-year-old story, but while I have no idea how the case will turn out, I continue to believe that the broader lesson is about transparency, not journalism.

    MNB user Scott Habben disagreed:

    I think it's time the media assume responsibility for not so much what they report but how. This meat has been tested and deemed wholesome for consumption.....period.......the manner with which the media attacked the industry was deplorable!

    ...and what about the closed plants and laid off workers as a result..........who takes responsibility for those people??

    High time the media is held accountable.

    From another reader:

    I disagreed with your original statement and even more so now.  BPI did not have a lack of transparency since if was not required to label the wholesome product LFTB.

    The villains here are ABC News and Jim Avila. Diane Sawyer should not have been let off the hook either. In today's vernacular, this story was truly FAKE NEWS.

    From MNB reader Steve W. Smith:

    This is FanTasTic!!  Once again ABC tries to ruin people’s lives.  And once again years after the fact ABC and Diane Sawyer et al. don’t suffer.

    What was there to be transparent about.  IT WAS A LEGAL PRODUCT.

    Are you transparent enough?  What brand of toilet paper do you use?  Is it the softest one?  You don’t tell us about that.

    For the record, I'm happy to disclose what brand of toilet paper I use ... if I thought it had any relevance to what I do for a living and the stories I report.

    I mean, come on. Really? (The last thing I thing I can be accused of is not being transparent. My wife tells me I write way too much about the the products I use, the clothes I buy, the beer and wine I drink, and the activities of my family.)

    We'll see how this court case plays out. I suspect that the ABC News defense will be that it did not create the story out of whole cloth, but rather was simply reporting on findings by government-employed microbiologists who disagreed with the official position. (That doesn't make it fake news ... I've discovered that people on both sides of the aisle who don't like stories have fallen into the trap of referring to it as fake news.)

    It is possible that ABC News will be found to be malicious and hostile. It also is possible that it will not.

    Got the following email responding to a letter from MNB reader John Rand that we posted yesterday:

    I haven't written to you in awhile but John's comments compelled me to email. I also am old enough to remember not buying grapes and "four dead in  O-hi-o."

    His comments rang so true to me. We are all in this life together let's try and focus on important things and maybe bend a little. Life's too short to stay mad all the time.

    Regarding Kate McMahon's piece yesterday about Mermaid Toast, one MNB reader wrote:

    But, it’s blue.  We eat first with our eyes.  If that showed up at my table I would think that the cream cheese had turned.  Contrary to Mark Darcy of Bridget Jones’ Diary, the world DOES NOT need more blue food.

    A fair point.  But what about Romulan ale?
    KC's View: