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Wednesday, March 21, 2018

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The Innovation Conversation: Back To School

Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

This week, addressing the top-of-mind issues of concern to food industry executives.

And now, the Conversation continues…

KC: This week, I want to do something a little different. As I noted on my FaceTime commentary the other day, I had a chance to go to the University of Southern California (USC) to spend some time with folks attending two programs there - the Food Industry Management program, and the Food Industry Executives Program. In advance of the morning I spent there, I asked the students to email me questions that they’d like me to answer, or subjects they’d like me to address. I got to most of them, but you’re a lot smarter than I am, so I thought we could this week’s Innovation Conversation to pose some of them to you. I have four questions to pose … and if we’re going Back to School, think of this as me asking you to perform a Quadruple Lindy.

Here’s one:

Should traditional food & beverage retailers be concerned about the increasing amount of control social media companies exert over advertising? For example, not only is Facebook selling advertising, but based on what we’ve learned from the last election, we know that it can essentially be weaponized. That’s leading the social media companies, which are under a lot of pressure, to start controlling their platforms more tightly. What’s the potential impact on brands?

Tom Furphy:
I think all traditional retailers and brands should be concerned with the impact and increased control that social media and all digital platforms have over advertising. The personalization that these platforms can deliver based upon user behaviors and attributes is incredibly powerful. For retailers and brands this can provide a wonderful way for them to reach their customers. They can reward current customers and draw competitors’ customers to their store or products.

Companies that do this well, both the advertisers and the platforms, will win. Companies that struggle will lose. And companies that manipulate the experience for nefarious reasons will, I think, ultimately be exposed and have users turn on them just as we’ve seen recently.

The shift from traditional to digital media is now in its adolescence. Most smart brands and retailers are embracing this and are constantly adapting their approach as platform capabilities change and as they gather more data to learn more about what performs well and what doesn’t. As long as these firms remain truthful in their messaging, I think these platforms will be very effective for them.

KC: Here’s another … Are there best practices you have seen outside the grocery business that would translate well to grocery in regards to customer retention?

I can think of three great examples – Amazon Prime, personal service from Nordstrom and the Sky Miles program from Delta. There are elements of all three of these that could be applied in the grocery business, especially by retailers that have good customer data.

Amazon Prime is the program that keeps on giving. Amazon is constantly adding services to Prime with only a few small increases in the cost over the lifetime of the program. The combination of fast shipping, local delivery, exclusive items for Prime members, music, video, original content and more creates a very powerful flywheel effect that gets customers further entrenched in the Amazon ecosystem. For these customers, Amazon is the first place they look to have their needs met.

The personal stylists at Nordstrom are amazing. And as they continue to use digital tools for engaging customers, like BevyUp that they just acquired, these stylists will get even better. They can identify a customer personally in the store, work with them to build out a curated assortment on a digital platform, and then remain engaged with the shopper when they leave. They can introduce new items to customers that are personalized to them while they’re away from the store, they can offer exclusive discounts and they build a personal rapport. There is no reason that grocery nutritionists, chefs, fish mongers, butchers and others couldn’t do that.

Another program that I personally like is the Delta Sky Miles program. In many respects, it’s similar to other airline loyalty programs. Providing increased benefits based on reaching higher tiers of use makes good sense. When I fly, the flight attendants often go out of their way to thank me for my loyalty, verbally recognizing my current Diamond and Million Miler status. They also target special offers to their most frequent customers. Just last summer we got free ice cream sandwiches from a truck in our neighborhood in Seattle. It was really cool!

All of these are things that grocer retailers could certainly do.

KC: A third …When introducing a new product to the shelf that offers a new innovation, how much time should we allow for the product to demonstrate whether or not it can be successful? It takes time for new innovations to develop awareness with consumers, even if they're on trend, but how much time is too much time given how precious shelf space is?

This is a tough, age-old, question. I think it’s up to the budget, patience and measurement criteria of the retailers and manufacturers to determine on a case by case basis. This can be quite expensive in a brick and mortar environment. Advertising, promotions, products placements and the like are costly. And the feedback cycle through uptake and repeat purchase takes some time to develop. It’s pretty hard to accomplish this in under six months total.

It’s much easier to launch products online, where data can help shape the products that are brought to market. Products can be manufactured and introduced in manageable batches, then lit up online. From there, customer uptake and reviews can be tracked. Based on the results, products can be killed, modified or rolled out to the broader market. All of this can happen quickly and for relatively low cost.

KC: And finally … What do you believe is the biggest asset that the food industry possesses currently and how will this asset look in 5,10,15... years?

There are three that I would choose between – stores, people and data. How retailers prioritize and nurture these assets will determine both how they’ll look and how they’ll perform in 5, 10 or 15 years.

Will stores grow as vibrant environments with rich sensory experiences? Or will they become dumb inventory nodes for local fulfillment? If you want to differentiate, I would recommend investing in compelling store experiences that entice customers to shop with you.

Will your people be used merely to move around products, or will they be critical to engaging with your shoppers? Shoppers are looking to have needs met and problems solved. Many times, a human touch and engagement can make all the difference in the world.

As a retailer, will you leverage your data to help solve your customers’ needs? Will you use it to introduce new products, reward loyalty or to drive replenishment of repetitively purchased items? The better that retailers leverage the data, the higher their chance of success.

The Conversation will continue…

Wednesday Morning Eye-Opener: Platform Play

by Kevin Coupe

Barron’s has a story about the home furnishings business in which competition is heating up among players that include Amazon and Walmart, as well as Target and Wayfair.

Another company - Crate & Barrel, which does 47 percent of its sales online, while still operating bricks-and-mortar stores and sending out catalogs - also is competing effectively, the story says.

However, it was a quote from Crate & Barrel CEO Neela Montgomery that I found to be an Eye-Opener. She was asked about whether Crate & Barrel would ever sell via Amazon, and here is her reply:

“Clearly, Amazon is a formidable retailer that we respect, and most of our customers shop with them as well as us. At the moment, we would not consider that, because we want to maintain our branded experience.

“Customers tell us that’s something they really value about us, and expect from us - a more differentiated level of service, a more personalized experience. At the moment, there doesn’t seem to be reason for us to consider a platform play.”

It was this phrase that grabbed my attention: “We want to maintain our branded experience.”

Too many retailers, I think, are so busy looking for magic beans that they hope will instantly solve their challenges, even if it means outsourcing critical parts of the customer experience - like home delivery - to companies that also are delivering for their competition.

I believe in networking. I believe that retailers need to access the platforms, products and services that technology companies can offer. But I also believe that they have to preserve the sanctity of their differentiated and unique customer experiences.

Of course, if they don’t have differentiated and unique customer experiences, that’s another issue, and a different kind of Eye-Opener.

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From MyWebgrocer...

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Albertsons To Launch Digital Marketplace

Albertsons announced yesterday that it will “ launch a digital marketplace for food and wellness products” that it hopes will give its shoppers access to products and its vendors access to shoppers.

According to the announcement, “The digital marketplace will help Albertsons Companies customers find and buy hard-to-find products and to quickly discover new items and trends that suit their tastes and lifestyles. It will benefit vendors of these products by giving visibility to the products on our world class digital platform, and by handling the common e-commerce front-end functions including search, product description and ordering.

“Most importantly, this offering will generate proprietary data on food and wellness product trends in different markets. This can help Albertsons Companies merchants evaluate what innovative products to stock in the stores, as well as provide vendors insight into where they should invest in building distribution.”

Narayan Iyengar, SVP of Digital Marketing and e-commerce, referred to the move as “another example of the rapid strides we are making on building digital capabilities that serve our customers, and shows our determination to play a prominent role in the digital food and wellness eco system.”

KC's View: No doubt that this is partially what Albertsons’ new COO, Jim Donald, was talking about a few weeks ago when he told MNB that Albertsons has to look beyond the “four wall” experience and think of the retailer as having “no walls.” I think it is fair to say that Albertsons has some distance to go, but this is certainly in the right direction.

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From The Organic Produce Summit...

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Amazon Offers Glimpse Of New Whole Food Prime Program

Fortune reports that at a meeting yesterday with some of its biggest vendors, Amazon-owned Whole Foods “outlined its new affinity program in which Amazon Prime members will get exclusive discounts on the most popular Whole Foods items and additional savings on regular weekly sales. During the meeting, Whole Foods stressed to its suppliers that buying into the new program was a way for them to grow.”

The supplier meets also are being used to reassure vendors about changes that are being made in the Whole Foods buying process - centralizing some functions so that they are more efficient, but also assuring through a hybrid system that smaller suppliers will be able to get their items into local stores and use them as an incubator.

KC's View: “Whole Foods Prime.” Sort of has a ring to it, doesn’t it?

Look, we’ve been arguing virtually since the moment that Amazon said it would acquire Whole Foods that using aggressively Prime as Whole Foods’ loyalty program was not only sensible, but inevitable. It fills a gap in Whole Foods’ offering, connects the dots between the two retail businesses, and builds even greater consumer knowledge upon which Amazon can act.

Just a matter of time.

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From Samuel J. Associates...


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Walmart To Open FedEx Office Locations In 500 Stores

Walmart said yesterday that it has reached an agreement that will put FedEx Office installations in 500 of its stores over the next two years, giving its shoppers access to packing, shipping and printing services. Walmart has been testing the program in 47 stores in six states.

KC's View: This is one answer to the question, “What can we offer in-store that an online business can’t offer?”

In NAFTA Talks, US Looks To Prevent Health Warnings On Junk Food

The New York Times reports this morning that as part of its renegotiation of the North American Free Trade Agreement (NAFTA), the Trump administration is trying “to limit the ability of the pact’s three members - Canada, Mexico and the US - “to warn consumers about the dangers of junk food.”

A draft proposal put forward by the Office of the US Trade Representative, the writes, “is pushing to limit the ability of any … member to require consumer warnings on the front of sugary drinks and fatty packaged foods.” Specifically, the US wants to “prevent any warning symbol, shape or color that ‘inappropriately denotes that a hazard exists from consumption of the food or nonalcoholic beverages’.” The The Trump administration’s position, the story says, “reflects the desires of a broad coalition of soft-drink and packaged-foods manufacturers in the United States.”

According to the story, “The American stance reflects an intensifying battle among trade officials, the food industry and governments across the hemisphere. The administration’s position could help insulate American manufacturers from pressure to include more explicit labels on their products, both abroad and in the United States. But health officials worry that it would also impede international efforts to contain a growing health crisis … The American proposal conflicts with the guidance from Mexico’s national health institute and from the World Health Organization. Both have recommended that Mexico pass regulations to help combat diabetes, which claims 80,000 lives a year there. That is one of the highest rates in the world — and more than double the record number of homicides in the nation in 2017. Mexico’s Ministry of Health, which is directly involved in the trade negotiations, said it was reviewing the American proposal with the nation’s health authorities.”

KC's View: nd, in a related story, the US government reportedly is considering no longer requiring the placement of health warnings on tobacco products, a position being urged with some effectiveness by major tobacco companies.

Just kidding. (If April 1 had been a weekday this year, that might’ve been one of my April Fools jokes.)

That said, the Times story does note that “some experts have likened the fight over food labeling to that over tobacco — and the fierce if ultimately unsuccessful opposition and lobbying that industry waged to prevent the imposition of health warnings on packaging.”

Obesity and resultant health problems continue to be enormous issues. I’m not sure that putting restrictions on what other countries can do to deal with them in potentially effective ways is exactly what we ought to be doing, even if we don’t want to do it ourselves.

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From Cornell University...

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Retailers, Sensing Opportunity, Going To Pot

Forbes reports that growing acceptance of marijuana use for both medicinal and recreational purposes - which is expected to create a $24 billion industry by 2025, making it one of the leading cash crops in America - means that “traditional industries ranging from Big Pharma to international breweries have all shown an interest in capitalizing on the monstrosity of legal marijuana.” Retailers, it seems, are not ignoring the potential: “Denver-based American Cannabis Company, which produces ancillary products designed specifically for the cannabis industry, has struck a distribution deal with a handful of national retailers, including Walmart, Home Depot and Amazon,” which means that mainstream retailers may soon be selling potting soil designed especially for pot.

The story goes on: “It is worth mentioning that Amazon and Walmart are not just interested in getting a slice of the action from cannabis potting soil. These organizations have also struck deals with several other companies that manufacture health supplements made with hemp seed.
Both retailers sell a variety of hemp oils and other hemp-based products that are marketed as remedies for chronic pain, insomnia and mood disorders. Although these products are not made from the cannabis plant, they are derived from its less interesting cousin.

“But before Walmart and other national retailers could ever begin to consider slinging marijuana products in the same way they do with respect to alcohol, tobacco and pharmaceuticals, the federal government would first have change the nation’s pot laws.”

While the federal government still draws a hard legal line on marijuana, medical use of pot is allowed in 29 states, and recreational use is allowed in nine states.

KC's View: I’m not sure how I feel about it, but it certainly seems like just a matter of time before marijuana - especially edibles - finds its way into mainstream retail. It probably is years away, but then again, such things generally take less time than one expects.

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From WAFC...

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Starbucks Again Looks For A Better Paper Coffee Cup

The Seattle Times reports that “for the third time in a decade, Starbucks on Tuesday made a major commitment to redesigning paper coffee cups so they can be more widely recycled and composted, while emphasizing that the problem is bigger than any one company.”

The company announced “a series of internal and external steps including $10 million for a three-year program to back entrepreneurs working on the problem.”

Starbucks’ annual; meeting is scheduled for today, and it was expected that environmental groups would deliver petitions pushing for the company to be more progressive on the issue. The Times writes that “the environmental campaigns have become a regular feature of Starbucks’ annual shareholder meeting … not least because the company espouses social and environmental ideals, which it has so far struggled to achieve when it comes to cups.”

KC's View: If at first you don’t succeed…

E-conomy Beat

• The Wall Street Journal reports that because of a technology stock selloff this week, Amazon’s market value - at least when the stock market closed yesterday - actually passed that of Google-owner Alphabet, making Amazon the second most valuable US company. ‘

Amazon, at that moment, had a market cap of $768 billion, while Alphabet’s was $763 billion.

Apple remains number one, at $889 billion.

Deadline reports that Amazon Prime Video has signaled its intention to launch more sports programming, building on the success of its “All Or Nothing” series about the National Football League (NFL).

According to the story, “The docuseries will put the spotlight and give unprecedented access to a team’s entire season, character-driven storytelling and compelling visuals. It all starts with “All or Nothing: The Michigan Wolverines” on April 6.

“Narrated by ‘NCIS’ actor Mark Harmon, all eight episodes of  ‘All or Nothing: The Michigan Wolverines’ will be available for streaming exclusively on Prime Video. The series will offer the never-before-seen inner workings of the winningest program in college football, chronicling Michigan’s 2017 season … Also on the slate is ‘All or Nothing: New Zealand All Blacks’ which follows New Zealand Rugby’s famed All Blacks throughout 2017.”

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From Webstop...

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MarketWatch reports that German-owned meal kit company HelloFresh has acquired privately-held U.S. organic meal-kit startup Green Chef, saying that the move “will drive synergies for operations, logistics and procurement” as it adds “Green Chef's organic and gluten-free menus into its offering.” Terms of the deal were not disclosed.

• The Wall Street Journal reports that Nordstrom’s board of directors has decided to end all discussions with the members of the founding family who wanted to take the company private.

The story says that negotiations ended when an “acceptable” price could not be agreed upon; the board already had rejected an $8 billion offer as too low.

Six Nordstrom family members continue to own about one-third of the company’s stock.

• Carrefour, the French hypermarket company, has announced that it is acquiring a majority stake in French meal kit company Quitoque. Terms of the deal were not disclosed.

Department of Corrections

• Got an email yesterday from Meredith Klein, director of public relations at Jet, who wanted to clarify one point that was made in Tuesday’s Eye-Opener.

Here’s what I wrote:

“Carmela Cugini, vice president of US e-commerce for Walmart/Jet, talked about the fact that a change that she has seen take place in corporate cultures. At Jet, for example, it was important to offer paternal benefits to employees, which was not on Walmart’s list of benefits that it planned to offer. But the argument was made, and now all fathers at Walmart have the ability to take time off after the birth of a child. That’s progress.”

Here’s she said, is a more accurate telling:

“Carmela Cugini, vice president of US e-commerce for Walmart/Jet, talked about the fact that a change that she has seen take place in corporate cultures. As part of the acquisition, benefits were reviewed and Walmart increased paternity benefits for all employees. Now all fathers at Walmart have the ability to take time off after the birth of a child. That’s progress.”

Her point is that I characterized the process as being more disputative than it was. It was, to be clear, inadvertent; in fact, I have been impressed to the degree that Walmart has been willing to adjust and accept different positions and ways of doing business since its acquisition of Jet.

Apologies if I created the wrong impression. I remain impressed.

• Yesterday, we posted an email from an MNB reader about Kroger’s decision not to sell magazines featuring stories about assault weapons.

I think this is a great idea. I just returned from a trip to FL where the local Publix had these publications on display, front and lowest shelf — in plain view of all children. It was disturbing to see, even as a parent of grown children.

However, late in the day I got another email from this same reader:

I need to apologize to Publix. My brother and I were in both Walmart and Publix within 30 min of each other and it was Walmart who had the assault rifle mag on display on the bottom shelf for all to see. No less disturbing but I don’t want to disparage Publix.

Thanks for clarifying.

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The Innovation Conversation Podcast - Episode 2

Marty Ramos, Microsoft’s Chief Technology Officer for Retail, Consumer Products & Services, discusses with Tom Furphy & Kevin Coupe the “fire hose” of technology options available to retailers and how to prioritize among them. Ramos says it is all about BILL - basket size, inventory, labor and loss prevention - and making sure that technology addresses one or more of these issues. And, he talks about the retailers making the biggest, most innovative strides. Plus, Tom and Kevin talk about the challenges of the “last mile.”

This podcast can be played below, or can be accessed and subscribed to on both iTunes and GooglePlay.

This Innovation Conversation Podcast is sponsored by ReposiTrak, and brought to you by GMDC.

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Your Views

…will return.

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Industry Drumbeat


Just a reminder ... Jackson Jeyanayagam, CMO of Boxed, joins Tom Furphy and Kevin Coupe to talk about his company's competitive posture, unique value proposition, and focus on family-friendly values, as well as his experience as head of digital marketing at Chipotle during its food safety crisis. Plus, Tom and Kevin discuss Amazon’s integration of Whole Foods, and much more, in this inaugural edition of The Innovation Conversation Podcast.

This podcast can be played below, or can be accessed and subscribed to on both iTunes and GooglePlay.

This Innovation Conversation Podcast is sponsored by ReposiTrak, and brought to you by GMDC.

Now back to regularly scheduled editorial...

Finally, a word from our sponsor...

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MNB Podcast: Assembling the E-commerce Jigsaw Puzzle

“Content Guy” Kevin Coupe sits down with Barry Clogan (pictured at left) - a veteran of the e-commerce wars with his share of battle scars - the 2018 National Retail Federation Big Show, to talk about how the fast evolving e-commerce segment is creating a growing chasm between retailers that “get it” and those who don’t. The focus is on customer acquisition, and the importance of focusing on total customer value as opposed to sales and transactions, and the conclusion is that retailers are running out of time to make the critical moves to keep them relevant and successful.

Content Guy’s Note: In the interest of full disclosure, I should note here that Barry currently is president of Retail Solutions at MyWebGrocer, but also spent five years at Tesco, where he led its online grocery rollout across eight countries. I thought his perspective would be valuable, and worth sharing with the MNB community. It was only later that MyWebGrocer stepped in and asked to sponsor it … which didn’t particularly matter in terms of content, because at no point in the interview did we talk about MyWebGrocer. This is not a commercial, or even an infomercial … but I wanted to be completely transparent about it. So, enjoy…

PWS 52