A really bad time to be boring · Innovation · Retail

Will Macy’s ignite a new era of legacy retailer innovation?

The moderate department store sector has been struggling for some two decades; first losing share to category killers and discount mass merchants, then to off-price retailers and now, increasingly, to Amazon. Since 2008, department stores’ share of total retail has sunk from 2.8% to about 1.7%. Over 1,000 stores have been shuttered during the past few years with more sure to follow. J.C. Penney and Sears have seen their market values collapse, while Kohl’s, Dillard’s and Macy’s have significantly underperformed the market.

Recently, however, a certain ebullience has returned to the sector as financial performance has improved. Some observers now see a rebirth, while others are a bit more skeptical. It may well turn out that the past few months’ gains are more dead cat bounce than renaissance. Yet Macy’s has garnered considerable attention by stepping up its growth efforts under CEO Jeff Gennette. The first big step was announcing its Growth 50 Strategy earlier this year. Then, in just the past six weeks, two significant deals were announced. In early May, the company acquired Story, the Manhattan-based concept store, and made its founder Rachel Shechtman Macy’s new “chief brand experience officer.” And then just over a week ago Macy’s entered into a strategic alliance with b8ta, the experiential retailer and technology platform.

It remains to be seen whether these initiatives help relieve the epidemic of boring that struck Macy’s and its brethren years ago. Materially and fundamentally altering Macy’s stuck in the middle trajectory will take more than a couple of deals that look to affect a small percentage of its total business. The operational, experiential and product changes that are part of Growth 50 appear solid, but are far more evolutionary than revolutionary. And all of this comes against a backdrop of increasing competition from off-price retailers that are opening substantial number of stores (and aren’t yet close to mastering digital commerce), along with Amazon’s growing push into fashion.

Macy’s improved financial performance has to be put in the context of the broader market (Macy’s is barely keeping pace) and these innovation moves must be put in the context of their potential materiality (they aren’t likely to be). Still, Macy’s is to be applauded for its willingness to act and to embrace what I call a “culture of experimentation.” Given that the sector Macy’s competes in is virtually certain to keep shrinking, the only way for Macy’s to drive consistent, material profitable growth will be for them to steal significant market share. That will take more than incremental improvements or a random set of experiential pilots. These moves seem like a good, albeit limited, start.

While it’s easy to blame Amazon (and others) for the troubles that have befallen so many legacy retailers, the reality is that most of the wounds are self-inflicted. Too many of these retailers, including Macy’s, watched the last 15 or 20 years happen to them. They seemed to be believe that they could cost cut their way to prosperity and that mere tweaks to their product offering and customer experience would move the dial. Now, as many of them inch closer to the precipice, a few are acting—some rather more boldly than others.

The fact is they have no choice. The middle is collapsing under the weight of boring product, boring marketing and boring experiences. And you could not have picked a worse time to be boring. The only way out is to be dramatically more customer-relevant and to deliver a remarkable experience at scale. Being digital-first, offering a seamless customer experience, along with all the other buzzwords the pundit class likes to throw around (myself included) are fast becoming table-stakes. Necessary, but far from sufficient.

Traditional retailers are often pretty good at following others’ leads. I suspect that as Macy’s makes additional moves, many will be emulated by competitors. Yet the idea that legacy retailers will finally wake up to the need to be fundamentally more innovative seems unlikely. They mostly watched when it was clear that e-commerce was going to revolutionize shopping. They mostly stuck to channel-centric thinking and silo-ed behavior when it became clear that the customer was the channel. They mostly remained rooted in one-size-fits-all marketing strategies when it was obvious that we needed to treat different customers differently. And they continue to rely on store closings as a silver bullet, when the real problem is operating a brand that is not big enough for the stores they have.

Adding to my dire and admittedly cynical outlook is that many of the retailers that need to innovate the most still have no clue how to do it and, even if they did, lack the cash flow to make it happen. Sadly, for many, this will end badly.

For them, as the saying goes, the biggest problem is that they think they have time.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  For more on my speaking and workshops go here.

Innovation · Inspiration · Life Lessons

Out of ignorance or fear?

There are all sorts of reasons we stay stuck, fail to take action on the things we tell ourselves really matter, spin on items big and small.

Whether it’s deepening (or ending) a personal relationship, finishing our book, quitting a soul-crushing job or starting that new business we keep talking about, there is an aspect of our evolutionary biology that holds us back.

Vulnerability is scary.

Bringing our ideas, wishes and dreams into the light risks criticism–or even ridicule.

All too often, The Resistance is real.

Half the battle in overcoming our fears is to accept the reality that we crave both growth and safety at the same time. Yet there is simply no talking ourselves out of the fact of our hard-wiring. Our job, then, is to learn how to quiet the lizard brain and press on.

Ignorance is a different matter entirely.

Ignorance is often a major contributor to stoking our fear and anxiety. One needs neither an advanced degree–or any degree at all–nor dedication of substantial time and effort to see how much our society is burdened by irrational fears borne largely out of misinformation, misunderstanding and verifiable mistruths.

The fact is, in the developed world at least, most people have plenty of access to all the information they need to be reasonably well informed. Most folks have the tools to apply a decent level of discernment.

If it matters to you and you don’t know, your ignorance is a willful act.

In fighting our stuckness, in being willing to put our art out into the ether, in exposing who we are to another person, in contributing to a better world, it’s important to understand what holds us back.

Fear is a dragon to slay. Ignorance is a choice.

 

This post was simultaneously published on my more spiritually driven blog I Got Here As Fast As I Could.

Innovation · Retail · Winning on Experience

Macy’s acquires Story: Game changer or much ado about nothing?

Last week Macy’s announced it had acquired Story, a New York-based concept store, and appointed founder Rachel Shechtman to be its new “brand experience officer.” And, for the most part, enthusiastic gushing ensued. Let’s simmer down, people.

As I regularly write and speak on retailers’ need to innovate and embrace a culture of experimentation, I would be a complete hypocrite if I failed to applaud Macy’s (and newish CEO Jeff Gennette’s) willingness to take bold steps. Yet before we jump on the silver-bullet train we might wish to consider a few important points.

Is Story Successful Beyond Generating PR?

There is no question that Story is cool and innovative. There is no question that Story has punched way above its weight when it comes to generating industry and media attention. And the notion of “store as media” is an intriguing one that is appropriately starting to change the way brands must think about their brick & mortar experience.

But lest anyone forget, Story launched in 2011 and has never expanded to another city, much less another location in the New York area. It’s pretty difficult to make the argument that Story has the potential to “reinvent retail” on any significant scale when after more than six years the number of customers it has validated its impact upon is teeny tiny. Every other truly interesting “disruptive” concept I can think of that launched around the same time (or even later) has attracted significant investment capital and is well into their expansion plans. So, to be blunt, there is far more evidence to suggest that Story is a way cool Manhattan phenomenon than there is to suggest it has any real ability to be relevant to Macy’s customers—and ultimately material to Macy’s strategy.

Do You Know How Much Macy’s Paid? 

No, I didn’t think so. So how can you say it’s a genius deal? I happen to own a pretty nice car. But if you were willing to pay me $100,000 for it you would be the opposite of a genius. Perhaps Macy’s paid less than it would cost to hire Shechtman as a consultant for a couple of years, in which case that sounds like a bargain. Maybe it paid millions for something it could have done itself years ago, in which case that sounds more dumb and desperate. Maybe we should say “who cares?” as regardless it’s probably chump change to a huge company like Macy’s. In any event, we just don’t know. So please hold your applause.

Macy’s Problems Run Deep

Macy’s has two huge and fundamental problems to address. First, it sits in a sector that has been in decades-long secular decline—and there is no reason to think that will change anytime soon. In fact, as Amazon and the off-price sector continues to expand aggressively in Macy’s core categories, it could easily get worse. Second, while Macy’s does a bit better than most of its department store brethren, it is still part of the epidemic of boring, struggling to carve out a sustainably relevant and remarkable position. It has a lot of expensive, risky and time-consuming work to do on both the customer-facing experiential parts of their business and their technological infrastructure. This all comes at a time when the company’s profits have stalled. That’s a very tall order and no one strategic initiative is likely to make a dent.

Does This Deal Fundamentally Change The Macy’s Story?

While Walmart paid silly amounts of money for Jet.com, Bonobos, et al., it now seems clear that the injection of “digitally native” senior talent has helped take the moribund retailer to an important new level. It also earned them some street cred. So acquisitions like Story can certainly contribute to an enterprise well beyond their straight discounted cash flows.

While some have referenced Macy’s earlier deal to buy Bluemercury as an analog, my guess is that if Story is to make a real difference it will be more similar to Nordstrom’s acquisition of Jeffrey over a decade ago. As that played out, it was founder Jeffrey Kalinsky’s impact on Nordstrom’s overall fashion strategy that was the source of value rather than the expansion of his eponymous stores.

The key in this situation will be whether Macy’s gives Shechtman the latitude to impact the trajectory of Macy’s brand to any material degree or whether the culture will eat her up and spit her out. And even if she gets that latitude, it is no easy task for even the most talented and experienced executive to make a big difference within an insular culture. There are far more examples of experiments that have gone awry than have worked out. We will have a far better idea about this critical dimension a year from now. Regardless, it won’t be easy.

The Opposite Is Risky

To be sure, retailers like Macy’s got into trouble because they mostly watched the last 20 years happen to them. Consciously or not, they acted as if deciding to embrace innovation was risky when, as it turns out, their reluctance to take chances was the riskiest thing they (and so many others) could have possibly done. The simple fact is, as Seth Godin reminds us, “if failure is not an option than neither is success.” The key is not to avoid failure, it’s to fail better.

Macy’s, like all those risking “death in the middle,” are desperately in need of a transformation. And that unequivocally means placing multiple bets in the hope of creating a vastly different future. Viewed from this lens, the acquisition of Story—and giving Shechtman a chance to impact the Macy’s culture and brand—is likely a pretty decent bet. As it’s highly unlikely to materially change Macy’s overall fortunes all by itself, it needs to be the first of many such wagers.

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A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

On May 17 I will be keynoting Kibo’s 2018 Summit in Nashville, followed the next week by Retail at Google 2018 in Dublin.

e-commerce · Innovation · Retail

E-Commerce May Be ‘Only’ 10% Of Retail, But That Doesn’t Tell The Whole Story

It seems as if those who spend a lot of time worrying about the future of retail have fallen into one of two camps. There are the “retail apocalypse” proselytizers who would have us believe that virtually all shopping will eventually be done online, that most brick-and-mortar stores are doomed and that anyone who says otherwise is a dinosaur. At the other end of the spectrum are the disruption deniers who acknowledge that the retail climate is indeed changing but who take comfort in the fact that physical retail is still growing and, more notably, that e-commerce represents “only” about 10% of all retail.

They are both more wrong than they are right, and neither provides a point of view that is useful or actionable to brands or investors seeking to make critical decisions.

Let’s be clear. Physical retail is far from dead. There is no “retail apocalypse.” E-commerce is not eating the world. Every mall is not closing. And many of the brands we all know and love are likely to be around for a long time.

The facts are clear. In most major markets, physical retail continues to grow, albeit at a far slower rate than online shopping. Lots of stores continue to be opened, including by quite a few brands that are hardly new or “digital-first” (think Dollar General or Aldi). And it is true that physical stores account for roughly 90% of all retail sales (at least in North America). Five years from now, by most estimates, that number is still likely to be well over 80%.

But in most cases, taking any solace from the “e-commerce is only 10% of all retail” narrative is — and, well, there is simply no nice way to say this — just plain dumb.

First of all, that percentage is an industry-wide average, an amalgamation of many different categories. The percentage of e-commerce sales varies markedly by product segment, from around 2% for grocery to more than 20% for apparel to the overwhelming majority of sales in categories where products can be digitally delivered, like music, books and games. So perhaps folks in the supermarket business might justly not be completely freaked out by the growth and relative market share of e-commerce today, but I doubt you’d get the same reception from the executives at Borders and Blockbuster who failed to see the wave of digital disruption a decade ago and were given the gift of “spending more time with their families.”

Think of it this way: If you live in the U.S. or China or any nation with greatly varying climates, you wouldn’t decide what clothing to wear based upon the average temperature in the country. So why would one even think about driving the urgency and direction of their company’s corporate strategy based upon broad industry averages?

The other big problem with the “only 10%” argument is that it ignores the marginal economic impact of how a loss (or transfer) of physical-store sales to digital channels affects financial returns under specific retailer circumstances. A brand that has done a good job of “harmonizing” the customer experience across physical and digital channels might have kept most of the potential shift away from physical to digital within their corporate umbrella. Neiman Marcus and Nordstrom (as just two examples) may have struggled to grow comparable stores sales across the last several years, but their e-commerce business has been strong and now accounts for over 25% of total revenues. So clearly it can make a big difference, regardless of the category average for e-commerce, whether a brand captures much of the shift versus very little of it — as many other legacy retailers have failed to do.

Unfortunately, if one works in a business where margins are already below average and there are large fixed costs of operating stores and the marginal economics of online shopping aren’t good (likely owing to lower average order values and/or high rates of products returns) and the brand is not capturing its fair share of the shift away from physical stores to e-commerce, then relatively small revenue loss to online shopping can severely worsen overall economics. The moderate store department sector is a good example of this phenomenon and what is increasingly looking like a downward spiral.

Regardless of where a given brand falls within the digital category share numbers, the potential de-leveraging of its physical-store fixed costs and whether it faces what I call the “omni-channel migration dilemma” mandate a hard look at particular situations and dynamics. Relying on averages seldom works under any circumstances. An individual retailer’s mileage will, without question, vary.

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

My next speaking gig is in Madrid on Tuesday at the World Retail Congress.  On May 2 I will be keynoting the Retail Innovation Conference in NYC.

Innovation · Reimagining Retail · Retail

ShopTalk 2018: Lessons in hope, reality and denial

What struck me the most thematically — aside from how much better ShopTalk has become than the NRF’s “Big Show” — was that the talks, panels and hallway discussions tended to fall into one of three buckets.

Hope

Despite the often relentlessly negative retail narrative in the mainstream media, there was a hopeful tone. As everyone should realize by now, the future of retail will not be evenly distributed — yet at the conference there was solid optimism. I attribute some of this to (generally) improving retail trends. I think there was also a sense that some of the more gut-wrenching changes — particularly mass store closings and major bankruptcies — were starting to ebb. Through direct conversations, as well as social media response, I also found quite a lot of alignment (or was it relief?) on my “Physical Retail Is Not Dead. Boring Retail Is” post, which was published on Day 2 of the show (and I referenced at the outset of the panel I moderated).

Another key driver of the emerging hopefulness was the traction some heretofore pie-in-the-sky technologies were beginning to exhibit. Numerous presenters, panelists and exhibitors showcased newly far more pragmatic applications of voice-activated commerce, artificial intelligence/machine learning and augmented or virtual reality. Personalization now finally seems ready for its closeup. Ultimately the devil is in the details — and a given retailer’s mileage will certainly vary — but there was plenty of meat to chew on for those committed to transforming the customer journey and being willing to embrace a culture of experimentation. (Pro top: That should be every retailer).

Reality

In multiple sessions greater light was shone on some undeniable realities. Whether one sees these as inconvenient truths, blinding flashes of the obvious or somewhere in between, several important things were hard to escape. Chief among them were:

  • The digital-first customer journey. In the vast majority of cases, regardless of where the ultimate transaction is made, most customer journeys start in a digital channel–and more and more, that means on a mobile device.
  • The customer is the channel. All the talk about digital channels versus physical stores is mostly a distinction without a difference. It’s all just commerce and silos belong on farms.
  • The middle is collapsing. Just prior to ShopTalk Deloitte released an excellent study on the bifurcation of retail, which they showcased in a session. The study not only dispels the myth of the retail apocalypse but delves into the causes and conditions of the growth at the tail ends of the market and the reason why I have long suggested that it’s becoming death in the middle. The reality is retailers have to pick a lane and strive to become remarkable on either the price/value/convenience end of the spectrum or strive to make the shopping experience more intensely relevant and remarkable.

Denial

Sprinkled among the upbeat mood and growing acceptance of the new world order were moments of shocking denial or abject cluelessness. Most disturbing (or just plain sad) was when presenters would say something as if it were deep insight or some critically important new piece of strategic information. Instead they by and large only confirmed the degree to which they had been asleep at the wheel for the past decade. I won’t name names, but at least one retailer that presented will likely need a miracle on 34th Street to go from boring to truly remarkable.

Yes, brands are still important. Yes, multi-channel shoppers spend more than single channel shoppers. Yes, mobile is an important part of the customer journey. Yes, your e-commerce sales will go up in the trade area where you decide to open a store (newsflash: brands that started in catalog sales have known this for decades). Yes, when you close stores your e-commerce sales are likely to go down. All of this and more has been known for years to those who pay attention, do the work and are willing to act on their insight.

Stepping back, in total, there was a lot of great information and insight to be gleaned. I spoke with dozens of folks who had dozens of substantive follow-up actions that resulted from content sessions, one-on-one meeting or what started as purely social interactions. The key to all of this, of course, is to go from information to insight to action.

For legacy brands that are struggling — or newer brands that need to stay relevant over the long term — I remind them of a Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is today.”

 

A version of this story appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.  

My next speaking gig is in Madrid at the World Retail Congress.  Check out the speaking tab on this site for more on my keynote speaking and workshops.

Innovation · Inspiration · Life Lessons

Misteaks were made

Our culture tends to reward perfectionism. Never say die, never fail, never let them see you sweat, be all you can be. And so on.

I’ve worked with–and for–a lot of perfectionists. Some of my best friends are perfectionists. I might have even fallen in love with a perfectionist or two. And, in the spirit of full disclosure, I’ve had my own bouts with setting impossibly high standards for myself and then falling short time and time again. Let the self flagellation begin!

It’s a trap.

In fact, more and more research suggests that perfectionism actually hampers success, while being a major contributor to depression, anxiety and even suicide.

Unfortunately, the growth of social media only exacerbates the situation and sets us up for a ridiculous game of comparison as our “friends” share all the fabulous things they are doing, all the great relationships they are in (“best boyfriend ever!”) and all the wonderful food they are enjoying (“nom”).

All these crazy comparisons only make us crazy. When we stop worrying about what others will think we are truly free to embrace being ourselves, warts and all.

Our fear of looking stupid or vulnerable hinders the possibility for intimacy. Letting go of our desire for control and certainty paves the way for real connection.

And it’s precisely our unwillingness to fail that is the biggest barrier to innovation (of all kinds) and personal growth. As Seth reminds us, “if failure is not option, neither is success.”

Fear of failure, of making a mistake, keeps us stuck in so many ways.

Perfectionism is a curse. Imperfection yields many gifts.

What do you say? Let’s go make some mistakes.

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A version of this post originally appeared on my purpose-driven blog I Got Here As Fast As I Could.

Innovation · Inspiration · Leadership · Life Lessons

Predictable crises

When someone we care about fails to admit they have a serious problem and fails to do the work to remedy it, are we shocked when they eventually experience the consequences of their addictive or dysfunctional behavior?

Are we surprised one little bit when a brand facing stiff competition and highly disruptive forces finds itself struggling to stay in business because it never bothered to get serious about innovation?

Is it at all astonishing that deficits mount or poverty persists or bridges collapse when politicians lack the courage to address the root causes and constantly kick the can down the road?

In The Sun Also Rises one of Hemingway’s characters famously answered the question of how he went bankrupt by saying: “Two ways. Gradually, then suddenly.”

If we are honest, many of us see the wall we’re going to crash into long before we feel the impact. But fear keeps us stuck in inaction and false hope.

Liars lie. Gravity always wins. And few problems unaddressed magically fix themselves.

The best time to start was likely years ago. The second best time is now.

yves klein

 

 

Innovation · Inspiration · Leadership

The price of waiting

It’s typically not difficult to calculate the cost of starting something, of moving ahead, of taking the plunge.

Perhaps it’s a new IT project or a marketing test. Possibly it’s a decision to try a pilot concept or invest in a promising technology. Or maybe we’re considering taking the next big step in a hopeful personal relationship.

When we have to ante up additional time, write that big check, invest more emotional commitment, the price tag often seems pretty obvious.

Yet what we get wrong (or dramatically underestimate) are the consequences of our hesitation. We lean on the desire for better data and convince ourselves we need more time to weigh or explore our options. We become a slave to the pull of our perfectionism. We tell ourselves the time is just not quite right to act.

Ultimately, what keeps us stuck, what causes us to not pull the trigger, is our fear of getting it wrong, of looking stupid, of being judged, of fully experiencing and feeling our vulnerability.

It’s not hard to see how waiting too long to innovate has been the death knell for many companies. Think Blockbuster, Netflix, RadioShack and (soon) Sears. They paid (or are paying) the ultimate price for waiting.

My guess is that with whatever organizations you’ve been involved in you can readily point to opportunities that were missed because moving ahead was deemed too risky, when just the opposite proved to be true.

And maybe we’ve let real love and connection allude us for similar reasons.

Indeed, sometimes the waiting IS the hardest part.

Alas, other times it’s all too easy.

And we realize how high the price is when it’s all too late.

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Innovation · Leadership · Life Lessons

Whataboutery

Lately it seems like some people are all about whataboutism.

As just one high profile example, when the President of the United States is challenged on wrongdoing in his administration, his immediate response is to bring up the Clintons. Mention “alleged” sexual predatory behavior on his part (or fellow Republicans) and the knee jerk reaction is to shift the attention to the misdeeds of members of the opposition party. And so on.

If there were a Nobel Prize for chutzpah there’s little doubt who’d win.

Of course, The Donald is hardly alone. The parade of statements that start with some variation of “yeah, but what about?” often appears unending. And in the spirit of full disclosure, I will admit that I’ve engaged in some Ph.D. level deflection myself. You can definitely find at least one person who can give give you chapter and verse on my ninja-like avoidance skills.

It turns out it’s hard for many of us to own our stuff.

But, deep down, anyone with the emotional IQ a notch above a salamander knows that just because someone else might have engaged in similar bad behavior does not make our misdeeds okay. At all. Not one little bit.

While we may feel good about our self-righteous quest to point out the hypocrisy of others (thank you for your service!) what we are doing is merely taking the focus away from that for which we are ultimately responsible.

What about focusing on our own stuff for just a bit?

What about letting the Universe sort out the rest?

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Being Remarkable · Innovation · Inspiration · Leadership

Stay. Stay. Stay.

The amygdala is sometimes known as the “lizard brain.” It’s more or less a holdover from prehistoric times and its role is to activate our primal survival instincts such as aggression and fear. When we are faced with a perceived threat, it can reflexively kick us into “fight or flight” mode. Sometimes–typically when we get overwhelmed and flooded with stress hormones–we can bounce back and forth from attacker to avoider, from villain to victim. Or we can shut down entirely.

At work, the lizard brain can keep us from trying new stuff despite knowing we need to innovate. It can cause us to push back hard on challengers to the status quo because we fear being wrong or looking stupid. Or we can just get stuck, paralyzed into inaction.

In personal relationships, those of us who fear intimacy can push away those whom we love, despite our desire to be more deeply connected. Or we can bolt for the door just as we get closer to what we so strongly desire.

The Resistance is real. So is self-sabotage. But as Pema Chodron reminds us, “fear is a natural reaction to moving closer to the truth.”

Clearly some situations are untenable and they deserve to be run from and put well behind us. Frankly, quitting is often under-rated.

Other circumstances require us to stand up and fight and say “enough is enough.” No one should endure tantrums or constant boundary violations or harassment or far worse.

Discerning the situations where we need to get in and rumble and get messy and walk through our fear is not easy. It takes real courage to remain in the arena when everything tells us to to flee. To engage when the fear comes up. To do the hard, uncomfortable work. To be neither victim, nor persecutor, nor rescuer, but an accountable adult, fully present, living in reality and owning our truth.

Our restlessness is part of the human condition. And the lizard brain can be easily activated–even more so if we have a history of trauma.

But like a dog being trained, we can learn to stay. Stay engaged. Stay focused. Stay patient. Stay accountable.

We can do the work.

The challenges are great, but so too can be the reward.

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