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Parody of Kmart ad shows the perils of viral marketing

BY Alaric DeArment

Kmart is distancing itself from a parody of its viral "Ship My Pants" ad on YouTube that many are saying goes too far, crossing the line from edgy to racist. 

The mass merchandise retailer took to Twitter to say it had nothing to do with the parody because so many people thought it was a real Kmart ad. Instead, it was the work of a California-based comedy troupe you’ve probably never heard of, and probably don’t need to hear about, The Gunfordmay. But while the "Ship My Pants" ad represents one of the cleverest things Kmart has done in a while, the company released the ad at a time when viral is the new popular, irony is the new sophistication, and pushing the envelope has become the way to get attention. This means that viral marketing comes with its share of hazards.

"Ship My Pants," which itself relies on viral marketing and a tongue-in-cheek punchline, is fair game for parody, just as any other ad out there would be. Unfortunately, that also applies to a bunch of privileged young adults who find humor in puns referencing slavery and damaging stereotypes about blacks, untethered from any sincere social commentary, but in their view somehow defensible because they’re "ironic."

It’s impossible to know exactly what was going through the head of members of the group, but it’s obvious that they saw an ad that pushed the envelope, and they decided to push it even further. Such is the nature of a popular culture in which comedians, filmmakers, artists and marketers are challenged to be as edgy as possible.

For its part, Kmart has long championed diversity and support for minorities, ranging from policies inclusive of LGBT employees and customers, scholarships for Hispanic students and services for black-owned small businesses.

And Kmart did the right thing in distancing itself from The Gunfordmay’s parody, but it’s a lesson that every retailer should heed when it attempts to "go viral": Viral marketing, particularly the kind that tests the bounds of good taste, can have marvelous effects when it works and succeeds in its goal of getting people’s attention and either making them laugh or at least starting a conversation about the company behind the campaign, but it also makes that company vulnerable to others’ attempts to take it too far and into the realm of unfunniness.

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Fresh food could help drive more loyalty for Amazon

BY Alaric DeArment

Amazon has announced that it will offer a free, 90-day trial of a new same-day delivery service to customers in the Los Angeles area that includes fresh food. The service, Prime Fresh, is being offered to Amazon Prime members, and after 90 days, the company will offer to let them upgrade to Prime Fresh on a permanent basis, for $299 per year, from the current Amazon Prime price of $79 per year. In addition to access to Amazon Fresh deliveries, the upgradeded Prime membership also includes the standard free two-day shipping on all purchases as well as unlimited access to Amazon’s streaming video service. The company tested the program for six years in Seattle and plans to expand it to San Francisco later this year.

With the upgrade comes a chance to recoup some dollars that have been leaking from the shipping line of Amazon’s balance sheet. The company spent a net $2.9 billion on shipping in 2012, a 17% increase from the year before, according to its 2012 annual report. For that, programs like SuperSaver shipping and Prime have not always been very popular among Wall Streeters. Building in an extra $220 per Prime membership certainly helps offset the impact of rising shipping costs.

Meanwhile, according to one report, Prime customers are already quite profitable to the company, with members among the online retailer’s best customers.

The March 2013 report, by investment firm Morningstar and Consumer Intelligence Research Partners, noted that Morningstar’s $300 fair-value estimate of Amazon’s stock "seemingly requires a leap of faith" given the company’s 1.1% operating margins in 2012. But that same report noted that the number of users of Amazon Prime may be much higher than originally estimated.

While coverage of Amazon by Bloomberg indicated that Prime had 3 million to 5 million members in October 2011, the Morningstar report estimated it had reached 10 million by the end of 2012 and would grow to 25 million by the end of 2017. Furthermore, the report found that Prime members show greater loyalty than nonmembers: Excluding the annual fee, members buy about $1,200 worth of merchandise per year, compared with around $600 for nonmembers. And Prime members likely make most of their online purchases through Amazon, making the online retailer something akin to an anchor tenant in a shopping mall, according to the report. Overall, according to eMarketer and ComScore, U.S. online shoppers totaled more than 184 million in 2012 and spent more than $186 billion, not counting travel.

Overall, the report found that by 2017, the company could generate $138 to $415 in operating income per member, or $3.2 billion to $9.6 billion in total, and Prime is already a meaningful contributor to profitability. Nevertheless, Prime members’ effects on profitability has been masked by technology, content and fulfillment center investments.

Getting back to Prime Fresh, giving members of the option of spending an extra $220 per year on memberships certainly would add to the revenues it gets from membership fees for the program, but it remains to be seen how big a player Amazon can become in the fresh food business. Clearly, it wouldn’t be expanding Prime Fresh to Los Angeles and San Francisco if it didn’t hold promise; Los Angelinos may find it helpful in a city notorious for gridlock traffic, where something as simple as a trip to the store can be a major hassle. But the company might find more mixed results if it tries expanding on the East Coast, where it will face competition from existing companies like Fresh Direct and Ahold USA’s Peapod.

Still, assuming the estimates by Morningstar and CIRP are on the mark, it means that giving Prime members two more reasons to use it — same-day delivery and access to fresh food without having to make a trip to the supermarket — could make them even more loyal and attract new members as well.

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The ramp up among retail-based clinics is happening

BY Antoinette Alexander

A new report by Accenture ACN states that the number of U.S. retail-based health clinics will double and drive $800 million in annual cost savings by 2015.

Well, it’s not just DSN saying it anymore. The massive ramp up is happening and, according to Accenture, the number of retail clinics is expected to increase 20% to 25% per year between now and 2015, and double from 1,418 to 2,868 clinics in that time period.

DSN expects this ramp up to accelerate as more payers get a better sense of what retail-based clinics — and the practitioners working within them — can do to bend the cost curve, and the scope of practice at clinics continues to expand.

As retail clinics increasingly shift to chronic care services, this will create new, more profitable revenue streams and will fill huge gaps in care — saving payers some serious money. For example, Walgreens’ Take Care Clinics has expanded its scope of services to include management for such chronic conditions as hypertension, diabetes, high cholesterol and asthma, as well as additional preventive health services. And CVS Caremark has stated that nonacute care is MinuteClinic’s fastest-growing segment, due in large part to the rise in chronic diseases and the primary care physician shortage that is plaguing the nation.

Furthermore, the overall convenient care industry has enjoyed some significant industry developments. For example, Massachusetts lawmakers passed in 2012 a massive healthcare bill that seeks to control healthcare costs and expands the services of limited-service clinics to allow for anything within the scope of practice for a nurse practitioner. In addition, South Carolina now allows retail-based health clinics to enroll as providers in Medicaid, a move that enables Medicaid patients to use clinics for wellness visits, preventive services and to treat acute ailments.

Clearly, the massive ramp up is happening — and gaining momentum.

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