Retail Podcast 601: Ethan Chernofsky Don't Squander Your Uniqueness

Bob Phibbs interviewed Ethan Chernofsky, VP of Marketing, on shopping malls, patterns of shopper behavior, grocery, and more on this episode of Tell Me Something Good About Retail. 

Ethan (1)

Tell me something good about retail

Ethan Chernofsky: Don't Squander Your Uniqueness



Bob: I'm so thrilled you are back with us for our sixth season. We are at 83 episodes, and today is number 84. And I'm thrilled to have Ethan with us today. Ethan, welcome.

Ethan: Thank you so much for having me, Bob. Great to be here.

Bob: We enjoy our company a lot. I think we were on a webinar together eight months ago.

Ethan: Wow, it's been a while. Yes, it was lovely.

Bob: It's been a while. And things have changed a little, huh?

Ethan: I think yes, things change dramatically every month, so it feels like six years ago.

Bob: So tell us, you and I got to meet, again, all of last year is a blur, but it was actually January of 2020 that we originally met. And I came to your booth, so explain it in your best Ethan name, what is and what do you do in the scheme of things?

Ethan: So is a location analytics and foot traffic data company. And what that means in its kind of simplest version is people vote with their feet, and we're showing you how they vote every single day across retail locations throughout the United States. And for us, that means we work with commercial real estate companies, retailers, CPG companies, even civic organizations, to try and help them maximize their offline decision-making.

And we do that with over 800 customers throughout the U.S.

Bob: But you also have an Aladdin genie in there somewhere because your data is so cool, and I'm always, every time I get an email, I get one of your reports like, "How did they do this?" So, I just want to start off because I think when we were last talking, the buzzwords there is a certain mindset around retail right now, malls are dead, department stores are dead, everyone is going to be afraid of Amazon and no one will ever go to a brick and mortar store.

And you have shown over and over again that is not the case. That in fact, what's going on with mall traffic, we're here in October and it's a big difference than it was just a few months ago, right?

Ethan: Yes. So malls were, if you were dreaming up something in a lab that was going to be bad for malls, it would have been the pandemic. Don't be indoors, we're going to have shutdowns, be afraid of being with a lot of people in an enclosed space. It was terrible, right? But, I think that fed into this overall narrative that malls were dying in general. And that was, look, there's a grain of truth there, the country's potentially overmalled.

I don't think many people would disagree with that, but when we look at that top tier of malls which is what we track in our mall index, what we've seen is this really steady recovery. That by July, looking at these 100 malls throughout the country, throughout different regions, they were actually up year over year in terms of visits, which is shocking, but actually makes sense when you think about all of the factors that were driving this recovery.

So you have lots of pent-up demand, you have this retail reopening, where, "Oh, we can actually go now. We're excited to go." People are home, they can't travel abroad, kids don't have camps, so you're going in larger groups. There is this lingering excitement to the mall, but I think what's really interesting is that I don't think it's going anywhere.

So yes, we're going to see ebbs and flows, and better periods and worse periods, and successful malls and less successful ones, but the general concept behind is going to get stronger because a lot of mall owners are changing and evolving too. So, we were on a webinar with a gentleman from URW who was saying that they're looking to lower the amount of apparel locations within a mall, so that they could put each one more on a pedestal, and bring in other newer, interesting elements into the mall.

And that type of thinking, even though the processes were beginning several years ago, is really starting to show itself now, and it's going to make malls more exciting, more different, and then ultimately better for the consumer.

Bob: So one of my big things when people ask me, "What are your predictions about retail in the future?" And I'm like, "We have to go back to the past." We're going back to the '50s in the U.S. It's like it's all about community, it's about local, it's all about who do I know. And it's interesting with the malls, is they're actually merchandising the malls like a downtown. Do we have the balance of cafés?

Do we have the balance of fine dining? Or do we all want to go to Chuck E. Cheese? Do we want to just go for the next apparel retail? Do we want them to buy a whole wing down there? No, maybe that's not working, and I think that does make it exciting. Sorry digital natives.

I know you're just dying to tell me that we all are going to be in our smartphones and want to endlessly scroll 500 versions of athleisure men's yoga pants but in black, but I don't think that's it.

Ethan: No, it's even more than that. I think we tell ourselves that that's what Gen Z wants, but if you actually look at what Gen Z does, they're indicating that that's not what they want. They actually care about touch and feel, they care about brand authenticity. But that means going into a place, and developing a relationship. What it does mean though is a changing conception of what a store is supposed to do.

So, one of the areas where we fail is attempting to take new concepts, What it does mean though is a changing conception of what a store is supposed to do. And so, I'll give you an example that I know you'll appreciate, as we were talking to a really big retailer, and we were talking to their stores' team. And we made this comment of how we fail to recognize all the values that a store brings, like if you have a great associate at a store, and I walk into a Nantucket and I buy a shirt that I love, and I end up buying six more online in all these different colors, that initial person who helped me gets no credit, and we give no value to the store for enabling those other sales.

And that's where we're dropping the ball. Because we're not recognizing that this is a, when we say omnichannel, the whole point is that it's supposed to be looking at everything holistically, not viewing digital channels in competition with offline channels. And we do it to a ridiculous extent. I was talking to someone who was saying that digital channels are going to make the store irrelevant. And the example he gave was BOPUS: Buy Online, Pick Up in-store.

The example he gave has the store in the term because you actually require the store to pick up the item. To a certain extent, we've lost our mind, and we're pitting these things against each other. Instead, when you look at really smart retailers, they're viewing things as different levers they can pull to make the customer happy.

And when you view it that way, that's when kind of the magic happens.

Bob: I think, my mom every year, she was a teacher, and she would buy her two one-pound boxes of See's candy. And there would be the Nuts & Chews and then there'd be the fruits and the other ones. And you'd open up, and you had all these different little chocolates, right? And so, you sometimes had to bite them to go like, "Oh, that's not good." Well, I think that's what a lot of the big retailers have been doing and realizing, "I got to have 50 chocolates in here, and this may not taste good, and I don't know how this is going to work. But we got to put it out there."

And, I live up in Upstate New York and our big retailers, I have two stoplights in my town, but the big trip is to go to Catskill where there's a Lowe's, and a Walmart, and some others. And what's interesting is Walmart has the whole big thing of buy online, pick up in-store curbside place you can go. And yes, last year that thing had a line.

And nowadays, it's not much. Does it mean it was wrong? No. Probably at their value, that's just a chocolate. Now, is that where every mall should be spending their time? I don't think so. This is the year you should be decking every inch of your mall.

You better be having every Santa Claus, you better be having breakfast with Santa, breakfast with Scrooge, I don't care. But I think we've just barely started putting the gas down on where this holiday is going to take us. What do you think?

Ethan: I agree with you completely. It's interesting. We were having a conversation about Amazon within the home improvement space. We got a question from a major retailer in that sector asking, "How should we compete with Amazon and all these digital channels where they're dominant?" And the answer is, that shouldn't be your primary focus then. When you are competing, figure out what your strength is.

And the example that I really love is Burlington, at the beginning of, maybe a month before the pandemic, announced that they were shutting down their e-commerce site. And the people were up in arms of like, "How dare you not have an e-commerce site, even though you're telling us it's not working, nobody's buying from it, and it's not good? How dare you shut it down?"

And then the pandemic hit. And those people who had been up in arms were all of a sudden incredibly happy because they were like, "Look. Look at these dummies who shut down their e-commerce site. Goodbye Burlington. It's the end." And yet now, when you look at Burlington's performance, they're destroying without an e-commerce site. Now, should Burlington have a digital offering? Of course, but it should be Burlington's digital offering. It should be centered around what Burlington does well and what customers expect and want from Burlington.

To copy and paste what Target is doing doesn't make sense, because they're not Target. And I think when you go back to that Amazon example, don't compete with Amazon on Amazon's terms, compete on your strengths, recognize the things that you do well as a brand. And this applies to the mom-and-pop shop to the same extent that it applies to the largest chains in the country, but understanding the unique elements of your offering are what you want to center everything around, your store experience, your online experience.

I think forgetting that is the key ingredient to any recipe for disaster.

Bob: It's called Sears. Oh, did I say that out loud? Sears had it all, right? They had supply, they had their own vendors, they had everything, and yet they constantly like we should be going here, nope, we're going to go here, and just gave up on the consumer.

Because instead of having people at registers, now we're going to cut all the staff down, we're going to make you go here, and then we're going to fill it with average merchandise that can be found pretty much anywhere else. But we are Sears, we can do anything. Now, I think a lot of retailers don't fall in that, because I think a lot of people realize it's ours to lose, but you made it through this far, right Ethan? I mean, it's like if you made it through the fire of last year, I know of no brand that has ever had to go through that, what we went through the last 18 months.

If you're here, something about you, either enough people give a darn that they're going to go in order from you and take out so that your restaurant, or whatever, you have deep enough pockets, but the problem is that I think we have settled for, "Oh, well, we don't have as many people and they'll understand." Well, we did understand, sort of, but now it's going to be a game of personal interaction.

And I'm going to switch topics on you a little bit right now because I just like this guy so much. Actually, you know what? Why don't we switch off to grocery, because I think it's an interesting place, and you write a lot about it? It seems to me if I was competing in the grocery space at a premium level, so not somebody who is a funky like the '50s, and the lights are half-burned out, and that kind of thing.

But if I was trying to really compete in grocery, I would have the best-trained butchers, and deli, and flour people there. I would constantly be going through and getting that fresh bakery smell going. All the things that would elicit something other than you can buy online and we'll deliver it to your cart, because no longer is that free, right?

Or self serve, because I don't think that ever works. So what do you think the magic would be, if you were working with, while you are working with grocers at Placer, so?

Ethan: I'll tell you the things I love about, and I think about my... I grew up in Allentown, Pennsylvania. And there were a couple of grocers that were...

Bob: I just have to say, do you know the famous line from the musical?

Ethan: No, but I know...

Bob: It's "42nd Street," she starts off, and she goes, "Oh, otherwise we'll have to go back to Allentown." He goes, "Allentown? Did you say Allentown?" Like what kind of a dick would be from Allentown?

Ethan: It's so funny because it's usually the Billy Joel song, which was only named "Allentown" because Bethlehem doesn't fit in the structure Bob: See, we have so much history. Anyway. You're from Allentown. Sorry.

Ethan: We had grocery stores in the area, we had an amazing Wegmans that everyone loved, and we had a Giant. And the Giant was a really big piece of the puzzle, and one of the things they did smart was there was a large Jewish community in that specific area of Allentown, and they had a kosher bakery. And that brought in people on a regular basis to this supermarket. And when you're buying your baked goods, you also get other things.

And it was an incredible way to compete with this huge, incredible Wegmans, and Wegmans is a behemoth within the kind of grocery space because they're so good. And what it said about Giant to me was, "Hey, we know our local audience, and we're finding a competitive advantage by understanding their specific needs." So there are certain places in the country where having a really high-end great butcher is going to work. And there are other places where having pre-prepared food is going to be a really significant piece of the puzzle.

And there might be others still where it's the flowers or whatever other section. I think what really needs to happen is brands need to be focusing on that micro-local level that each location base is, or in a smaller area, what can we do to drive interest? That let our audience, first of all, bring them what they want. Also, let them know that we're thinking about them specifically.

And there is something so powerful in this idea of, we know it's an important time for you, and we're there with you. And the grocery, I feel like what's so special about grocery is it's a part of our daily lives in a way almost nothing else is in retail. You know your grocery store, you go there so often, it's part of this process for preparing for these kinds of big events.

And I think it has this ability to create an emotional connection that we don't often give it credit for. If you think of the height of the pandemic, we were like, "Oh, goodbye grocery, we're never going to go again." And yet, the second the pandemic ended, grocery numbers... It hasn't ended, the second they were able to reopen in a much fuller way, visits were soaring to grocery.

And part of that is because we feel a connection and relationship with our grocery store. There is a powerful opportunity in just that, and to kind of take it a step further, there is this constant focus on what small brands, these mom-and-pop shops need to do to be more like the big boys.

But I think there's got to be an equal focus on what do the big boys need to do to be more like the mom-and-pop shops, and that's about understanding the local audience.

Bob: Well, and realize you got to come up with margin. I mean, it's a punishing game in pricing, and pricing promotion only do so much, especially with supply chains. I think you would probably agree that we're going to see less sales and discounts across the board this holiday season, because why would I discount it if I can still have it. And just to finish the idea about grocery, you've been into a Whole Foods and seen all of the Amazon, I can't think of them, Instacart or whoever the shoppers are, they're actually getting pushback because so many people are in the aisles.

To me, I'm less likely to go to Whole Foods, which used to be the premium butcher and all the other things, because I don't want to endure that kind of maddening cattle call. Is that showing up anywhere?

Ethan: Yes. Whole Foods is being hit hardest, and I think part of it is not their fault. We always say Whole Foods, it's like being six foot three, but sitting in coach on an airplane. Being six foot three, it's amazing, most of the time. You're tall, helps you in sports, probably helps you with your desired partner.

Bob: Ethan is six feet tall, just so you all know.

Ethan: I wish. But when you're sitting in coach, it's annoying. You have much less legroom, you're a little bit more cramped, it stinks. Whole Foods is oriented towards cities, they're oriented towards higher prices, it's going to create a challenge for them. But I don't think they did themselves any favors with Amazon assuming that Whole Foods is like every other grocery, it's not. If you're going to spend more money on your asparagus, you expect a different type of experience. And I think one of the things we're going to be talking about a lot when we do the post mortem on the kind of Amazon acquisition is saying, "Oh, look how they..."

They're actually kind of Walmarting. And by that I mean, if you look at Walmart when they bought Jet, we were like, "Oh, that's it. It's going to be this crazy success." And it was, but it wasn't because Jet was a success, because Walmart learned how to do e-commerce. And I think the same thing is going to end up happening with Amazon and grocery.

Bob: Interesting. And when it comes to retail, what are you thinking for the holidays? Are you seeing the same dynamics? We're hearing companies like Warby Parker and Allbirds are going to open hundreds of stores, and are they the odd ones out, or are you getting more inquiries from your clients about...?

And I want you to speak about this, it's a two-part question, because the other cool thing is, you might say, well, a Ted Baker next to your brand is great. But if it's somebody else's brand, that might be the worst thing. So that part that you, that's your secret sauce, I think.

Ethan: I agree with you. The idea of optimizing cotenancy is a really big piece of the puzzle. And I think, but you touched on two really important elements. The first is, these brands that are expanding, and I think it's perhaps the most important trend in all of retail, is this idea of the growing importance of the owned retail space. And that applies as equally to Nike, and Under Armour, and Lululemon as it does to Warby, and Allbirds, and others.

And the reasoning that it's so important is kind of severalfold. The first is they recognize that Gen Z cares about brand, and authenticity, and interaction. They understand that more can be done with a location than just selling a product. That it's about marketing. That it's about distribution, and having a place for returns, and lowering those costs.

But I think what they also realize is that the store is a platform in a way an online location can't be. So when you go online, you're not doing discovery for the most part. Discovery is better done offline. And because you're not doing discovery, you're likely to go, it's a convenience play for a lot of people. And so you're going to go...

Bob: You've been reading my book, "The Retail Doctor's Guide to Growing Your Business." But go ahead, my friend.

Ethan: I do love all of your work, including your book. So if we looked at really interesting data from athleisure, we were working on a webinar with SimilarWeb which is online data, and they found that the cross-shopping between Lululemon and Nike was credibly minimal, even though there's so many visits to both of those, the cross visits. And so what it tells you is that people pick one, but they don't pick one online.

I'm not deciding who my favorite brand is, I'm deciding when maybe when I watch ads, I'm definitely having a big impact when I walk into a store. And so, the idea that I can leverage the store as a platform I think is something we're going to discuss a lot. When you look at, maybe the smartest example of is Target. Target leveraging the fact that like, "Hey, we're going to sell you iPhones in our store, and Casper beds, and the Levi's, silverware," which makes no sense, but somehow it works because it's Target.

And I think this idea of the, you alluded to this earlier in the beginning of the department store is dying. No, it's not. It's changing. There are different rules to succeeding than there maybe once were, but the idea of the store as a platform is not changing.

Bob: I love that. Target can do no wrong. I think Target can suddenly decide to sell used Chevy Vegas and it'd be like, "That's an amazing idea." And everybody would say, "That's stupid." And then you go like, "Oh, they do it because they know who they are." They know what true North looks like. They were early on the transgender bathrooms.

They said, "We don't care. We're doing it." They were early on the drops that they would do with designers. We ran out. Oh well, that's what it is. We're going to pay them more, employees more. And while it may not be the experience I like all the time, you're exactly right, that discovery idea comes back to me of what I always say, retail is a game of being brilliant on the basics. I don't care if it was Wanamaker's, I don't care if it was the original Macy's, I don't care if it's Lululemon, great retail is still about how do I engage a stranger in a way that makes them feel, for those few minutes, that they matter.

And great merchandising still matters, I think the idea of, "stack it high and hope to God it flies" is gone. There's some odd partnerships out there now. Gap is now going to do home goods at Walmart. It's like, "Where's that coming from?" But the smart ones, you sit there and you're like, you get it, it's hard. That's the other thing I get, Ethan, is retail's hard, there's no two ways about it.

If you want to execute, you want to do a great job, it's a multiple-tier event. It's not, "We have a Facebook page. Oh, we have 500,000 followers." No one gives a damn. Did someone buy it from you for more money that makes a profit for your business? And so many direct-to-consumer companies tout how great they are and they're all bleeding incredible amounts of money, especially in the rental space, which if you had time to talk about would be great.

But, what are your thoughts?

Ethan: I mean, I agree with you. One of the things that I love that I think Target does so well is they understand who their audience is. And there's another idea that you and I both don't agree with, this idea that the middle is dying and that all that exists is luxury or value. I think Target's the perfect example. An iPhone is not a luxury item, even within its category, it's more expensive. Disney products, where they have Disney in-store, storing stores, are not the cheaper toy option.

If anyone has ever bought something for a kid, you know you're spending 10 times as much for a Disney toy as you would for a similar non-branded toy? Casper is not a value, also maybe in that similar lane. But it's about understanding what the middle wants, and understanding their audience. And Target recognizes that I want to save money on socks, I don't want to spend top dollar there, but I'm willing to spend top dollar for my smartphone or for the present for my child.

And that level of nuanced understanding of their audience is why they thrive because then they can be disciplined, and then they can make smart choices in terms of who they partner with, and what they provide. And I think that type of thinking is what gets me excited. I have to agree with you on the rental side. I was like, "How is this ever going to have long-term legs?"

The only reason I withhold judgment is because I've been wrong about enough things that I don't have any real, a strong enough thesis on, and so I kind of stay on the sidelines for this one, but it seems...A part of me is like maybe I'm biased because I don't want to wear someone else's clothes.

Bob: Well, I think that's there, but also we all know basically the more time some product is touched, the less money you make from it. And so the logistics, reverse logistics to make that work is a big deal. And I was thinking as you were talking, one thing that I didn't realize is that Disney had closed almost all their stores, and that they are down to nothing.

And I'm so shocked because at NRF, what was it? Ten, 15 years ago, there was the head of Disney Stores saying Children's Place had gone, all the Disney Stores were going belly up. And they went back to engineers and they came up with this amazing experience, and their stores are amazing, right? But frequently when you went into them, they didn't go to the next level of having an amazing experience.

The potential was there, but I always felt like they missed it on the people, because if you didn't engage me, it's... You can't do that without... Look at what Campa's doing in New York City. It's the same idea, the amazing engagement.

Ethan: There's stores that you go into and you... Have you ever walked into a sneaker store, whether it's, I don't care what your kind of your athleisure brand of choice is, and you talk to someone who really knows what they're talking about? And they're like, "Oh, no, no, for this you don't want this Nike, you want this Nike, it's got a lower heel, it'll be better for that type of exercise." And you're like, "Oh my God, this is amazing. I got the shoe expert."

And you go into another store and they're like, "I don't know." Where do you think I want to go back? If I'm going to get to spend more money, it's going to be with the person who shows this degree of care and expertise. And I think it's a really important piece of the puzzle that we forget of experiences about, does the person walk out feeling, "Oh, that place is great."

Or did they say, "Oh, it wasn't worth it. I didn't really like that store."

Bob: That's exactly it. We're going to take a little break here for a word from our sponsor. We'll be right back.

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Bob: And we're back with Ethan Chernofsky from So another category that we're reading about is how CVS and Walgreens have had this huge increase since the pandemic, and yet Rite Aid doesn't seem to have caught up.

What is going on there? I thought pandemics over, we're not going in to get our shots as much. That's a huge increase they're finding, right?

Ethan: Yes. So I think there's a few elements at play here. One, Rite Aid closed a lot of stores, so they're still getting hit with that. Two, they're more oriented towards major cities and like city-based locations than the other two in terms of their overall distribution. And so those cities that may still be seeing slightly negative migration trends linger are going to get hit more, let alone tourism, whether it's domestic or international.

But I think that the bright side is you're seeing this upward trend, because the idea that I can go somewhere for a test, the idea that I can go somewhere to get a vaccine, that they have this kind of health hub concept that they continue to roll out both in Walgreens and in CVS. But then, even more, I think those visits are so significant in those types of companies because I have never walked into a CVS expecting to get more than a few things.

I've also never left a CVS not getting more than double what I expected to get. And so every visit that they bring in is a really substantial visit, and I think it creates an ongoing degree, the pharmacy, the idea that I can get a test somewhere, there's this health component. I think it deepens the role of each one of those locations within the communities they serve. So I don't think, not only is there this kind of short-term surge, but it will likely create longer-term loyalty.

Bob: Yes, I know. I think you're right. And we could go on all day because you're just a great guest, and I just appreciate your insights. What specific advice do you think you might have for retail owners? I mean, let's face it. The one thing I will say first though is, let's face it, the news media has realized that negative sells. So we are going to hear it's going to be the worst holiday season ever, is there Delta coming for us, people close down, there's more fires in the world, it's just going to be, let's just say it's terrible.

And we know that people shop who are hopeful. So, what would you say to retailers to understand that you're going to have to do a little mental shift yourself?

Ethan: I would say that going back to what you kind of led off with in the beginning, the fundamentals of retail are not going to be all that different. The idea that there are new channels and new ways to reach and kind of help your customer doesn't change the fact that ultimately, people want to come in, they want to get the item that they want and love, and they are looking to you to help them with the discovery process, to make it convenient and enjoyable.

And so everything you're doing needs to be to serve that aim within the unique mindset that you bring to the table. And so, it's not about adding channels for the sake of adding channels, it's not about doing online for the sake of doing online, it's about doing it within a wider vision. And every retailer that's succeeding that we mentioned, and we could rattle off more names, is succeeding because they have a clear vision, they have a clear standpoint, and they leverage their channels to deliver for their customers within that vision.

Bob: Excellent point. And because you're so big in real estate, anything that you would say to people looking at all those... Manhattan's at what? Twenty-five percent vacancy in some great places when I was in the city. I mean, it's not going to come back quickly, but in some ways, you might have to look at yourself as a pioneer. I mean, New York has always been the greatest city in the world to me, so it's not like it's not going to come back.

Ethan: New York is absolutely going to, at least in my opinion as well, absolutely going to come back. I'd say the big and most interesting piece of advice is, if you are owning an office building, make your office building a place people want to come to. Because on a world where work from home is going to be a significant thing at least in the short term if I want to come to the office, I'll be there three days instead of two days. And if I'm going to be there three days instead of two days, more people are going to want to come to that office in terms of the actual people leasing the space.

So, think about how is your top floor a café that's interesting, and fun, and open to everyone who works there. Is there a nice gym within your space? How do I start thinking about my office as a... Run events. Run your own events with really interesting speakers on a monthly basis. Make your office a destination for the people who work in that building, and everyone is going to want to have a floor there.

Bob: And I would say the same thing with your whoever is there at the reception desk, better be bright and bubbly, and, "We're great to see you." And they learn who is in that building and what it looks like. I know when I was at LinkedIn I guess a year ago, a year and a half ago, whatever, I've lost last year. Anyway, and they have a little speakeasy because it was originally a little speakeasy in the Empire State Building.

So, they have little events in there and I thought, "Well, that's kind of gimmicky." But at the other side, it's like, "You're not going to get that at home in your PJs in the Zoom meeting."

Ethan: No, it's fun.

Bob: And that's what you have been today, Ethan Chernofsky, with You have been the best. Tell me something good about retail to close us out.

Ethan: That it creates community, and it creates interactions and connections, and we seek out those connections. And retail is uniquely positioned to satisfy that demand.

Bob: That was like out of the park perfect. With that, thanks for being my guest. And thank you for listening, and make sure that you realize that we are about as happy as we make our minds up to be. It's a choice. Either it's the worst of times or the best of times, you choose. I choose the best of times. Thanks for joining us.

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