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Introduction: Welcome to the BBB National Program’s Podcast Better Series, where we will explore top of mind topics with business and industry leaders to understand the leading trends and innovations that continue to push the envelope in today’s marketplace.
James Lee: Thank you for joining us today on the Better Series Podcast. I’m James Lee.
For the past three episodes on this podcast, we’ve been exploring the retail sector in a series we call Retail Therapy. We learned how important retail is to the overall economy and how there is a transition underway being led by consumers, not designers or manufacturers. Our group of experts collectively agreed there is no retail apocalypse. Although if you’re among the tens of thousands of people whose jobs have been impacted by store closures, you might not see it that way.
Today, there are new stores, new business models, and new experiences being born all the time to satisfy an almost universal need, the need to shop and to enjoy it while you’re doing it.
For our final episode, we’ve asked four distinguished experts to dig deeper into a few of the topics we’ve covered in the previous episodes, like customer experiences as a business driver. But some new topics too, like the health of local and regional retail.
Michael Londrigan spent 30 years in retail management and is a noted supply chain expert. Bob Conrad is a colleague of Michael’s at LIM College in New York City, where he is an Associate Chair of Fashion Merchandising. Cailey Locklair is the president of the Maryland Retailers Association that represents businesses from mom and pop to iconic brands. And Cara Salpini is an editor with Retail Dive, a Washington DC-based publication that follows the retail sector.
Thanks, everybody, for being here.
Cara Salpini: Thanks, James.
Bob Conrad: Thank you, James.
Michael Londrigan: Thank you, James.
James Lee: So I’m going to go to you first, Cailey. I want to get the conversation started by asking a clearly loaded question. What should be the number one priority for retailers of all sizes today?
Cailey Locklair: My answer, and I think you would hear it from almost anybody right now, is creating experiences for consumers. For years now, there’s been a growing number shift as far as spending money on travel and food and many of those reasons have to do with happiness. There are value shifts going on in society, so having an experience should be the focus of retail, not that instant gratification about a material item anymore. It has to be so much bigger than that.
James Lee: Anybody else wants to weigh in on experience?
Michael Londrigan: James, I think Cailey’s point is well-taken. The experience is a major opportunity. But the one thing that I always go back to is the target market, making sure that the retailers have properly identified that target market in order to create and cater to those experiences. With all the data that’s being collected today, they should be able to analyze that and pivot when they need to.
Bob Conrad: This is Bob Conrad. The experiences versus things topic is one that we’ve looked at here from a couple of different angles. And certainly, that has been the case with the Millennial shopper now, between say 25 and 40 years old, where experiences trump things by a wide margin. I can tell you, and this is mostly anecdotal, but as we get more Gen Z consumers entering our classrooms here, we do run some raise of hands and things and we’re seeing more of a movement back to things versus experiences with this younger cohort. So it’ll be interesting to follow and see whether there’s… I don’t want to say a return but some early signs are that the iGen people enjoy purchasing and enjoy going to malls. It kind of caught us a little off guard but it’s something we’ve seen over the last year or two.
James Lee: Cara?
Cara Salpini: Yeah. I was just going to say, I would kind of agree with actually what Bob just said on… Experiences are super important and we’re definitely seeing people interested and especially in the younger sort of generations that they’re interested in having those experiences in stores,but product is just as important. So the one thing I would say for all retailers that they need to focus on is really differentiating their product in terms of cost. Cost is always going to be super important but Walmart, Amazon, and Target are kind of owning the price game so it’s really hard to compete with them on price.
So having a value proposition that’s really strong and product differentiation that’s really strong and I think we’re also seeing that with those players as well. So Walmart, Target, and Amazon are all sort of launching private labels to sell, trying to differentiate even amongst themselves. So I think that’s sort of a more generic piece of advice but that’s what I would give for all retailers.
James Lee: Yeah. Let’s build on that because innovation, and we’ll kind of hone in maybe a little bit on product innovation, but that’s really what you’re talking about, making sure you’re making a product people want as opposed to making a product that you want. That’s historically been what manufacturers do. They make what they like to make. It may not ever sell but… Now retailers have to really offer products that people want. I think that’s part of the innovation.
Cara Salpini: Definitely.
James Lee: Bob, I’m going to turn to you to sort of lead this next section here. Given that retail is so important, what has been the most important innovation of the last period of time, let’s say the last decade or two… What’s been the most important or most impactful? But also which is the one we ought to haul out back, throw it in the dumpster, and set it on fire?
Bob Conrad: Well, it’s interesting as we talk about product differentiation and it’s easy. You can answer almost any question in retail today by just referring to Amazon and the Internet. They’ve clearly disrupted the marketplace and changed the way we shop, changed the way we order things, in some ways changed the way we behave. But I think one of the outcomes of all of that is products have been commoditized in certain ways. I think Amazon has done a… Not that they’ve set out to do it but the fact is that it’s the experience around the ordering of them and the delivery and the ease and the price that have almost out-shone if that’s the right way, the product itself. We talk about that a lot in classes, in some of the surveys that we do that when you open up the package, it’s really become a lot of the same stuff as it’s been for quite some time.
So one could also make the case that innovation has, in some ways, been curtailed in favor of all of the things that go around the actual product. And I kind of find that a little troubling in some ways is that the experience has become more important than the sweater. And I think Amazon has had something to do with that as far as what to go into the dumpster.
One could also make the case that fast fashion, and I know we’re going to get into sustainability in a little bit, but that’s something that really does need to be re-thought sooner rather than later.
Michael Londrigan: Couldn’t agree with Bob more. I think the most important and the worst innovation has been fast fashion. The amount of product that is being moved into the stores, and unfortunately burned in some of those dumpsters or winding up in landfills, is a result of a retail innovation speed to market.
James Lee: Cailey, what do you think? And is there innovation that’s still needed? Is there something else that’s glaringly missing from the marketplace that your members tell you?
Cailey Locklair: Yeah, absolutely. I think overwhelmingly what I hear from folks and when I talk to them, especially around the country, is just the online sales model in general, that I think by far is the biggest retail innovation that’s really changed the way that people shop. I think it’s kind of interesting though that folks, when you ask them, “How much online shopping do you think is going on?” People literally think it 50 to 80% of what’s happening in retail, when the reality is we’re only around 10% and that’s an important point to make because there is and always will be a place for brick and mortar. It’s not going anywhere.
But retail constantly changes and responds to consumers. So I think we’ve seen many bad ideas wean themselves out. And although online shopping is so important, there’s going to be a balance that happens here because ultimately a consumer’s going to want to lay on a mattress. They’re going to need to try on a suit and be in brick and mortar. Right?
So that would probably be the most significant innovation that’s really changed the way we shopped. And then there are parts of it, I think that have devastated certain portions of retail we’re concerned about.
James Lee: Cara, you’re doing a lot of head-nodding.
Cara Salpini: Yeah, I was just listening to what Cailey was saying and that’s definitely something that we think about a lot too is we’d have to talk about Amazon constantly because you can’t really write on a retail publication without talking about Amazon constantly. But it is super interesting when you think about Amazon as a retailer compared to Walmart as a retailer and it’s… Amazon is many other things in addition to being a retailer. They have AWS and they have a lot of advertising money coming in. And when you just get down to the numbers of it, Walmart is so much bigger than Amazon is. So I think that’s a really interesting point to make of like, online has changed a ton about the way that people shop, but it’s still a smaller percentage and a lot of consumers, and people in general outside of the retail industry, don’t realize that.
James Lee: Well, and there’s been this hybrid part of this business model too. So now you get to the order online pick up in-store. Is that an online order? Is that an online transaction? Is that an in-store transaction?
Cara Salpini: Yeah, no, definitely. I think that’s one of the things that’s also really interesting about, somebody mentioned this earlier, but the fact that shopping online on Amazon… I feel like the thing that has really come out of that and changed the way consumers are thinking about things is the free shipping item of it, right? So it’s changed the way that consumers think about what an online shopping experience should be. And I know that even for me if I’m shopping online and I don’t have free shipping, I don’t like that. And at least for me, that pushes me to do something like buy online pick up in-store because that’s going to be free and then I can just drive there and get the item but I have the satisfaction of making the purchase right now.
Bob Conrad: I also think that we talked about further innovation that could improve the marketplace and the smart stores I guess is the way I would characterize it. We agree with everything that’s been said here. That’s still 90-ish% of what we buy comes from a classic brick and mortar environment. But that environment is going to get smarter, whether it be through more sophisticated use of things like beacons and robots and sensors. So up until this point, we didn’t know what the consumer was looking for when he or she was in the store. Now we will. And I think that that’s going to make the configuration and merchandising of stores much more interesting and may make it hard to lose that share. I mean, will it be 90 forever? Probably not, but I think stores themselves are going to be the next big innovation and we’re just on the cusp of that right now.
James Lee: I want to move along to the next topic which we’ve kind of alluded to and, Michael, you brought it up, is it’s both a blessing and a curse, and that’s this concept of fast fashion. Ten years ago, fast fashion was all that and a bag of chips. That was the thing. My own daughter, I cannot tell you how many trips I made to Forever 21. But today, those very same brands are struggling to connect with consumers and it’s because of the sustainability concerns.
Cailey, you’re fighting an issue that’s not dissimilar right now over the use of plastic bags versus some other form of container that you use to transport whatever it is you bought at a retailer. You’ve got to get it home. How do you do that? And this trend around paper’s bad, plastic’s good. Now plastic’s bad, papers good.
So these whole concepts of sustainability have long-ranging impacts. So let’s talk about that. And in particular, can retail afford to invest in sustainability because that’s an expensive proposition?
Cara Salpini: Yeah, I would just start off by saying I think sustainability is definitely here to stay. I don’t think that this is just a sort of passing trend and just some of the things that we’ve seen on Retail Dive that I’ll talk through quickly.
Certification, like being a certified B Corp, that actually matters to consumers now and you’re seeing more people know what it means to be a certified B corporation and know that that means the retailer brand that they’re shopping from has met a certain level of sustainability or environmental standards. So consumers are actively sort of seeking out those brands or recognizing at least when they see that somewhere that this is a positive thing for the environment.
And then we’re also seeing it in even the way that some channels are reacting to it. So I think this was just last week, I saw that Instagram had this sort of specially curated selection of sustainable brands through its app shop account. And I’ve personally been surprised and curious what others think on this. I’ve been surprised that there hasn’t been sort of a marketplace that only sells sustainable brands or something to sort of take advantage of what consumers want. And a lot of consumers do want to sort of shop through these retailers and brands that they feel good about, but maybe they’re not willing to put in all of the effort to research it and find out who’s a positive brand and who’s not.
And then one of the last things I’ll say about why I think we’re going to be stuck with sustainability for a while, is that at least what we’ve seen in some of the studies that we’ve looked at and written up, is that Gen Z, in particular, is really passionate about this. And younger consumers, in general, are very interested in helping the environment. And part of that might just be because this is their world and they’re going to have to live with its effects longer than older generations. But they care about it a lot. And if that’s the majority of the consumers that you’re going to have going forward, then you want to cater to that.
So I think it’s going to become table stakes and whether or not retailers can afford it, I think is going to be a long-term question of innovation… because you already have brands like Allbirds as an example is a direct consumer shoe company and they’re a Certified B Corporation and they are most famous for their wool runners. But those sell for about $95 and not everyone is going to purchase a pair of sneakers for $95. So I think long-term, it’s going to become more a question of retailers and brands figuring out how to make those products affordable.
James Lee: Cailey, you’re living this as we speak.
Cailey Locklair: Absolutely. I sure am, not just on this issue, but any sort of single-use, plastic-oriented issue. So let me start by saying that sustainability is not at all a fad. All of us are bombarded every day by images and information that we cannot easily ignore about the environment. These are efforts that consumers are asking for and that there’s a major cultural focus and sensitivity to. This is something we have been able to afford and will continue to do. And just some examples would be energy usage to plastic packaging recouping to moving items more efficiently, store to store to even carrying brands that give back. This is something that is not going away soon.
Michael Londrigan: I totally agree with that. I just chaired a conference actually this past Tuesday and Wednesday in New York City by an organization called Product Innovation Apparel, PI Apparel out of London. And everyone there who presented talked about sustainability, transparency, corporate social responsibility. All of these issues are issues that retailers cannot afford to do going forward. They must be doing them in some sort of way in order to encourage the consumers to come in.
Again, Cailey said it’s not a fad, it’s not a trend. It is here. It is part of the landscape and will continue to be so for the near future for more than one reason. And it’s not just about the bottom line. It’s just not about drawing in those customers. I think people are waking up to the fact that if the retail industry and the fashion industry, which is the second-largest polluter in the world behind the oil industry, don’t wake up, we’re all going to be in a serious problem.
James Lee: Well, that’s a statistic I’d never heard before. That is fascinating.
Bob, what is it that the students are bringing into the classroom? What are they bringing into this equation? Because you’re training the next generation of retailers. What is it that they bring… They come to the table with the belief and how are they going to implement that as they go forward?
Bob Conrad: Well, I agree with what’s been said to this point and I do notice Gen Z students that… The freshmen and sophomores that we have now, being even more passionate than their predecessors about this. The question I often pose back to them is, what would you be willing to do? Because at the end of the day it comes down to marketplace. Would you be willing to pay more? I know we have to engineer products different and we have to legislate differently. And I think that those things are beginning to happen. But a couple of things raise up in our conversations in class is, if it’s 10% more, if it’s 20% more, would you be willing to subscribe to that kind of premium for sustainably-produced products?
The other thing that we often talk about, a point that we make is, yes that might work at a better store, whether it’s R or Macy’s or somebody like that. But what do you do at a place like Walmart where the product is already, $5 or Dollar General or Five Below or some of these lower-end retailers. There’s not that much wiggle room. And those stores tend to consume a lot of product, particularly on a unit basis. So that to me is going to be where the challenge is. But from an awareness standpoint of a younger generation of students, it’s been palpable over the last couple of years, the interest in this category.
Now the question becomes what do we do? And I think we’re still trying to figure that out to what other subset.
Michael Londrigan: We’ve embedded it into the curriculum. We have courses built solely around sustainability. LIM College has joined the New York City Carbon Challenge and we’re going to reduce our carbon footprint by 30% by 2030, I believe. Or is it 2025? So, there’s a lot being pushed, the students are saying, “This is important. We want to do something to support this effort.” And I know for me personally, they took away all the garbage cans out from under our desk and I’m lost.
Bob Conrad: I agree with everything Michael just said, but the average number of times we wear a garment or before it’s discarded in this country, is like seven. I say to students… I’d put up a number on the board and I say, “What if you wore them 12 times and you paid 25% more?” You’re saying you can’t afford…
So is that the kind of logic that has to happen almost organically. But when you see that number and the average consumer in this country throws away 70 pounds of clothing a year. Those are some of the numbers that we can control at a grassroots level. And I know there’ll be policy changes coming but how do we behave differently? Those are the conversations that I try and have in the classroom and they’re interested. They’re not denying that this is the way the world operates today.
James Lee: Yeah. That’s fascinating. If you want to look to that issue, it’s a little bit of a tangent, but the issue of the utilization of whatever it is we buy. If you’ve ever gone through a historic home and historic… Well, they don’t even have to be that old. If you go through a home built in the ‘60s and the ‘50s, and if you keep going back, the closets get smaller and smaller and smaller until there are no closets. Anybody who lives in New York City is accustomed to an apartment with no closets. But they didn’t need it because they didn’t have the wardrobe. They didn’t have the… I’ve got… I don’t even know how many pairs of sneakers I have now. I can go two weeks without wearing the same pair of sneakers. That was not an issue at those times. So there is a lifestyle adjustment that is also going to be necessary in some cases for the sustainability to play out.
Michael, I want to come back to you because I think the next extension of… We’ve talked about sustainability. What that really is to me as a marketer, is that’s an expression of brand. And all brands that are successful, they get that way by having a shared value with whoever it is that they’re trying to sell their product to or involve in their cause because you want to do business with people you like and you want to do business with people who believe like you do. So shared value brands are becoming more and more common. You can think of Patagonia. You think of Allbirds and some of these other newer brands where they really are values-based. How do you balance attracting customers who agree with you without repelling those who you need their money, but they may not agree with your politics or your social policy? And is it even important that you try to balance that anymore?
Michael Londrigan: Well, I always adhere to the 80/20 rule that 80% of your business comes from 20% of your customers. So if you stay with that and yeah, we’ve had some shifts because of brand loyalties over the last decade or so. But if you look at it from a perspective of the majority of your sales comes from a minority of your customers, you can afford to walk customers away. You don’t have to cater to everybody to be end-all for everyone. I think that there’s opportunities for you to attract new customers, but when it comes right down to it, the balance of your business is going to come from a minority and you really have to cater to them. So if you walk somebody, so be it.
Cara Salpini: I would just piggy-back on that and say that I think like one example might be… Nike recently, they had the whole Colin Kaepernick ad which drew a lot of responses and a lot of them were good and there were a lot of them that were negative and ultimately… I forget which organization it was that was performing a study, but they basically found that all in all, it was a positive move for Nike. And one of the reasons for that is because a lot of consumers are looking more to retailers and brands now to take a stand on things.
So I think the big question or one of the bigger questions that we’re also hearing is, if you’re taking a stand on something, is it an authentic stand or are you just like attaching your brand to a message because you feel like you need to attach your brand to a message?
And so like you mentioned Patagonia earlier, Patagonia is a really good example of something that feels super authentic because they care about the environment and they’ve weaved that into their brand and their consumers also care about the environment and they’re willing to pay a little bit more maybe for a Patagonia fleece versus a fleece from Eddie Bauer or someone else.
So I think it really comes down to also if you’re trying to just kind of shoehorn in some kind of brand value or message versus it really actually being a part of your company.
James Lee: Bob, how do you do that? How do you prove that you’re authentic?
Bob Conrad: You know, it’s interesting, I just jotted this down as Michael was speaking, is that the days of tricking the customer… And I heard this at a conference so I can’t take full authorship of it. But, tricking the customer is over, whether that be on pricing. They will sniff out something that’s inauthentic pretty quickly at this point. And we’ve seen that in some brands that have maybe fallen a little bit by the wayside in favor of brands that are perceived, whether it be identity-driven and full figure and things like that. Brands that were once very narrowly positioned on that issue have taken a hit. And I think the consumer will respond with their pocketbook, their feet or whatever it might be, their wallet if they sense that something is not the way it should be. And brands need to be able to make that shift or to Michael’s point or not. And you either stay true to yourself or you risk alienating consumers and we’ve seen that happen in a couple of places.
Michael Londrigan: Talking about the sustainability issue again, there’re companies out there, we use the term greenwashing. They say something but they really don’t follow it up. And a company like H&M, I get a little skeptical when they say they’re going to be so sustainable and they’re still pushing all the fast fashion. You got to look at it with a jaded eye.
James Lee: Yeah. Cailey, again, the rubber kind of hits the road with you because you’re dealing with local and state and I’m sure on occasion federal law-makers and regulators who also have some say in all of this and this is where the rubber meets the road from a consumer standpoint. If one of your members takes a political stand, you’re going to hear about it.
Cailey Locklair: And there can be just massive backlash too. We have so many members, large and small, who are afraid to take a position because of how they will be attacked publicly. And it’s so interesting too, consumers are increasingly more and more engaged as far as brands go and where they’re shopping, but we do not see that on the political side. So that’s just an interesting point to make about. I’ll just say that consumers are more engaged than ever, and that old adage that you are never going to make everyone happy, I really feel like is almost dead. And this giant opportunity that’s emerged to narrow in on very passionate demographics we see playing out over and over again right now. And that status quo company is definitely still out there, but the most successful companies are differentiating themselves and really connecting with consumers in a very different way.
James Lee: I want to stay with you for a second, Cailey, because I don’t think we can have a conversation around this without talking about the human impact of a lot of these things that we’ve discussed and one of the darker sides of innovation, one of the darker sides of sustainability of values-based brand is people lose their jobs.
From the perspective that you have working with lawmakers and regulators and talking to your members, who are everyone from the quarter drug store to the largest retailers, what about the human impact and what if anything is being done within the retail community and what can be done to help in those circumstances?
Cailey Locklair: Yeah, so let me just start with some stats. One in four people begin their career in retail and one in ten people currently work either directly or indirectly in the retail chain. And in most states, cashiering is the number one job and retail is typically your number one or number two employer.
But retail is so much more than that initial job that many people begin their careers with. And our industry is becoming hyper-focused on creating programs, training, opportunities for people to see our industry in a different light and progress with our industry. There are so many workforce development relationships that are going on right now and it’s not just because unemployment is so low, but because people are looking for careers, companies are looking to create that next generation of retail leaders. And that involves a lot of interaction and training and you see it just across the board now. And it’s probably one of the number one things that come up from folks that I talk to large and small, is that we really need to be honing in on workforce development for retail.
James Lee: We’re running up on the time but I want everybody to weigh in on one last topic and that’s the one that everybody loves, stare into your crystal ball. What’s happening next? Because I grew up in Arkansas, I had the opportunity to meet Sam Walton on a number of occasions and he was an amazing human being as well as obviously a retail genius. But he started Walmart because he thought small towns needed access to the very same goods as big cities and at an affordable price because what’s affordable in Camden, Arkansas where I grew up versus St. Louis or New York City or wherever, a very different thing. So that’s why the whole low price everyday thing became the mantra of Walmart and a variety of goods and services.
Amazon was founded on saving time. You didn’t have to spend time wandering around the aisles of the bookstore or the library. You could go online, you could see what you want, you could buy it and done. So convenience.
But it took years for both of those models to become iconic companies. So my question is this, have we already seen what is the next great disruptor, and if we have, what is it? Robert (Bob), let’s start with you.
Bob Conrad: Okay. I think over the summer, we saw a kind of a flurry of partnerships and arrangements where rental businesses, whether it be Thread Up or Rent a Runway, began alignments with the traditional department stores, Bloomingdales, et cetera. And I think the notion of renting versus sharing, and this gets back a little bit to the sustainability movement, but when you think about the fact that people who are in the business to sell you product are now establishing formats for renting product, that opens a whole host of opportunities or disruptions that could take hold over the next 10 years.
The other one that I don’t know that we’ve seen full brunt of yet would be what happens with China and India as they become more sophisticated retail and wholesale economies? To this point, they’ve been producers, they’re four times our size as economies, and I think how they get involved in the global retail game could become very disruptive in the next 10 to 15 years.
James Lee: Michael?
Michael Londrigan: Artificial intelligence, AI. I think that’s really the next big thing in the retail industry. There’s a lot of talk about it and, unfortunately, AI is going to displace some of those workers that Cailey mentioned. Some of those statistics will change in the future because the first thing that will be impacted will be the cashiers.
James Lee: Cailey?
Cailey Locklair: So I would say, and I love Bob’s answer and I really agree with him, especially in that sustainability front, whereas many women will wear a dress one time and then get rid of it or never wear it again so that you know the whole rental concept is going to be huge I think.
But beyond that, I believe that there is a far more interactive consumer experience tailored to size, likes, brands. The amount of data that’s being collected right now could be used to create a whole different type of shopping experience. I’m not just talking about those little suggestions that pop up on Amazon or on Facebook maybe when you are looking at a new entertainment system. Something very, very tailored I think is coming for all of us.
James Lee: And Cara, you get the last word.
Cara Salpini: I would just add onto what Cailey said quickly. I do think that that is super interesting about a more personalized shopping experience and I think we’re already seeing that in some of the store concepts that are emerging. Like, Nike Live, for example, is a purely members-specific store. So it operates based off of the data that you give it and that Nike’s loyalty members give them and it’s geographically based in all of those things.
The one other thing that I would bring up is arguably direct to consumer brands as a whole are already kind of disrupting the retail industry. So we’re seeing them, break into just about every market. In a lot of cases, they’re upsetting traditional cost structures. I would point to mattresses and specific Casper and Purple and name the other several brands that have cropped up in that space. But they sort of changed the way that people think about a purchase like mattresses, which I think most people would agree is usually pretty boring.
The only thing that I would say to sort of contrast myself on that, the only thing that gives me pause is that the jury is kind of still out on profitability for a lot of those brands. So a lot of them have gotten sort of cult followings but they don’t make as much in profit as those traditional players do. So they kind of get built up a little bit, the way that we were talking about earlier with e-commerce, in general, gets built up sometimes. But if nothing else, they’re changing how everyone else operates in their own verticals.
James Lee: At the end of the day, you still have to make money.
Cailey, Michael, Robert (Bob), and Cara, thank you for joining us today and thank you for listening to the BBB National Program’s Better Series Podcast and our multi-part series Retail Therapy. You don’t have to miss an episode. You can subscribe today to the Better Series by visiting our website: bbbprograms.org, then click on the podcast tab. You’ll find all of our episodes right there where you can listen on your Apple Podcast app or your favorite streaming platform.
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