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From The MNB Archives
Wednesday, November 16, 2016
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's topic: The gap between retailers and technology innovators, and between good intentions and implementation.
And now, the Conversation continues...
KC: When you talk to retailers, what do you find their priorities are in terms of what they seem to need and want?
Tom Furphy: This is an interesting one. While there are some retailers still stuck in the dark ages, the impact of e-commerce and the demands of the new shopper are prompting most retailers to respond. In the course of our businesses, most every retailer that we work with is interested in doing something innovative or strategic to survive or thrive in this changing environment.
KC: What tend to be their priorities?
TF: They revolve around the following themes:
New shopping technologies. We see retailers looking for ways to better connect digitally with the shopper and to enable new shopper experiences. This could be ways to use voice or scanning to create lists, mobile and digital coupons, e-commerce, replenishment or subscription or ways to take digital into the store.
A new e-commerce model to serve the shopper. We see many retailers experimenting with a variety of e-commerce models. Many retailers are testing “full basket” programs. In some cases they handle store pickup or local delivery themselves. In many cases they are experimenting with third party services such as Instacart, Curbside, Shipt or Uber. We are also seeing retailers experiment with “box” subscription programs such as Amazon Prime Pantry or Boxed.
Using loyalty data to drive deeper relationships. We are seeing more and more retailers look to harness their customer loyalty data in new ways beyond cardholder specials. They may be looking for deeper analytic capabilities or “big data” solutions. We are seeing retailers use their shopper data for better recommendations or to offer benefits such as free delivery, rebates or special discounts. We also are seeing the data being used to drive recommended replenishment lists to “lock-in” repeat purchases. In many of these cases, retailers are looking to drive membership or subscription themes similar to Amazon Prime.
Meal solutions. We also see retailers, particularly in grocery, wanting to become a more important part of the “What’s for dinner?” discussion. We see them testing with recipe content partners and seeking better list-building capabilities. We see competitive analysis and modeling toward being able to compete or partner with the boxed meal services such as Blue Apron and Plated. There seems to be large appetite to innovate in this space, but I don’t think anyone’s yet cracked the code.
KC: When I talk to retailers who are exploring the potential and possibilities, it often strikes me that there often is an enormous gap between intentions and the ability to actually innovate. Though I guess that's where you and your folks come in.
TF: We love working with retailers as they grapple with their strategy. But you're right - despite their great intentions, many retailers are simply not wired to be successful in an industry that is moving faster than they realize, and faster than anything they've ever before experienced. It is unfortunate, but most of these retailers are still so entrenched in legacy ways of doing business, that it will be very difficult for them to innovate on an acceptable timeline.
We see decision cycles that should take weeks or months run out to months and even years. The traditional annual budget cycle makes it difficult to free up funds for experiments. And even when a project is approved, the business and IT teams inside many retailers are very slow and deliberate to execute, often without the urgency and precision that is required. Despite their best intentions, they cannot get out of their own way.
This leaves us pretty much convinced that most retailers will struggle to compete with the innovation cycle of Amazon. In the time it takes most retailers to move forward a month, Amazon moves forward two months. For example, PrimeNow went from concept approval to launch in 111 days. We often see contract negotiations and project planning that take longer than that.
KC: That sounds like a recipe for potential disaster. I'm also curious about something else - whether companies like yours, which are made up of technology innovators and entrepreneurs, are focusing on the same things as the retailers with which they are working.
TF: Entrepreneurs tend to prioritize within their own domains. They don’t really sit back like a retailer and decide what they need to prioritize. They usually have a bold vision and are ready to rock the boat. Their priority is getting their product or service to market as quickly and completely as possible. Sometimes that means taking their offering directly to consumers – such as a company like Blue Apron or Instacart when it launched. However, more often, bringing an innovation to market means working through existing retailers and/or manufacturers.
A common problem that we see among entrepreneurs in the retail tech space is that they often build things that they think the customer wants, without proper assessment and understanding of the market. Entrepreneurs usually rely on a skill from a prior role or a new technical capability that they’ve developed and hope that the market will embrace their innovation. They are in love with their solution. However, when they start calling on retailers or manufacturers who all have existing priorities and product roadmaps, they are often dismayed to find that they are greeted with blank stares.
KC: Retailers can be tough customers, no question.
TF: Absolutely. Retail is a hard industry to sell into. Many Silicon Valley VCs won’t even touch the space because of the unpredictability of industry trends and the inconstancy of the retail sales process. However, we have found that many successful technologies and companies share some common attributes.
First, they are laser focused on a compelling value proposition. Retailers are busy. They have to easily see the technology’s value proposition and understand the benefit that it provides for them and their customers. Ideally the tech company has a case study of a successful implementation in the market. There aren’t many retailers that are willing to be first, so having proof of success or at least an existing reference can be important. The technology needs to deliver value to the shopper, the retailer or the manufacturer in a way that is both incremental and differentiated.
Second, the solution must be relatively easy to implement. As we discussed, retailer IT teams are slow and naturally risk averse. Any solution that a tech company presents has to be able to be tested and implemented with as little disruption as possible.
Third, successful tech companies shouldn’t over-rely on the timing of one or a few retail customers. It’s easy to be excited because a top retailer is showing interest in your product. It’s forgivable to allow the great things they are saying about it to trick you into a false sense that they will implement it next quarter. They won’t. It will take 3 to 4 times longer than expected. It’s important to have several retailers engaged so that you can endure the long decision cycles. If not, the time and cost drain that occurs can be fatal to a young company.
KC: Helluva way to make a living.
TF: I don't mean to sound like it is all doom and gloom. Innovating and driving change is very exciting. We love it! But it’s not all glamour. These are just the realities that we and others like us are confronted with every day.
The Conversation will continue...
by Kevin Coupe
The New York Times reports this morning that Anheuser-Busch InBev-owned Labatt, one of Canada's two major breweries, is ending a decades-long benefit offered to employees and retirees.
Free beer for life is no more.
The story notes that Labatt was acquired by 3G Capital, a Brazilian private equity firm, in 1995; 3G has subsequently acquired Anheuser-Busch and a number of other breweries, and it has been engaged in cost-cutting measures at virtually all of them.
"The end of beer for life, announced in late October, appears to be its most recent measure," the Times writes.
What interests me about the decision, beyond the fact that employees say that the decision will hurt company morale, is the reason cited by a company spokesman in defending it.
The decision was reached reluctantly, the spokesman said, after a review of "the retirement benefits offered by other Canadian breweries and consumer packaged goods companies," and the discovery that "none of the companies we surveyed offered free product to retirees."
One can argue the wisdom about free beer for life, and how much it cost the company. But what the decision really has cost the company, it seems to me, is a differentiating characteristic. They had something that made them different, and they cast it aside so they could be like everybody else.
That's not a great message to send to current and prospective employees. It isn't a good message to send to customers, especially in Canada, where citizens can be highly loyal to the beer made in their country ... but now are being told that those foreigners who own the company are taking away something that made it different.
It is not the specifics of this decision that bothers me. It is what appears to be corporate-think, corporate-speak, and a willingness to embrace similarities rather than differences. It is an Eye-Opener, and not in a good way.
Pass me a Full Sail. Or a Fat Tire.
The Wall Street Journal reports this morning that Walmart is discouraging store employees from downloading an using a smartphone application created by worker advocacy group OUR Walmart that is designed to allow them "to chat among themselves and receive advice on workplace policies or legal rights."
According to the story, "Wal-Mart has instructed store managers to tell their employees that the app wasn’t made by the company and described it as a scheme to gather workers’ personal information," saying that it is "increasingly trying to get our associates to turn over personal information to the union by using deceptive and slick looking social media and mobile apps."
The Journal writes that "the app, called WorkIt, invites users to register by providing a name, email, telephone number and ZIP Code. Users can also s hare their job title and Wal-Mart store number, but anyone can download the app. The app doesn’t access a user’s location or smartphone contacts, and lets users opt out of photo access, said Dan Schlademan, co-director of OUR Walmart."
The advocacy group has not said how many Walmart employees have downloaded or are using the app.
As the Journal writes, "As unions struggle to maintain membership and relevancy, both employers and organizers are rushing to control the messages employees digest through social media and mobile devices. Employers are launching mobile scheduling apps and finding ways to push human-resource messages out through social media or digital advertising. Wal-Mart is in the process of rolling out a test of its own mobile app to communicate with store employees, mostly as a way to quickly give employees access to their schedules, said a person familiar with the plans."
Walmart has to understand that whether these virtual networks are formal or informal, employees are going to have these conversations. What Walmart has to do is have a better story, and tell it more compellingly. Telling people not to download something is the fastest way to get them to hit the "download" button.
Investor's Business Daily reports that automaker Hyundai is "integrating its connected-car Blue Link technology with Amazon.com's AI assistant, Alexa."
According to the story, "the feature will be available on all 2017 models, most 2016, and some 2015 Hyundai models, said Lawrence Perrault, the senior manager of Hyundai's connected-car program, adding that the company is working on making the feature backward-compatible on older models.
"If you've got both an Amazon Echo and a Hyundai, this means you can command Alexa to rev up your car from the breakfast table, or lock the doors while unloading groceries onto the kitchen countertop."
The piece notes that "Hyundai is at least the third carmaker to team up with Amazon Alexa. Ford Motor announced in January that it was 'exploring' a partnership with Amazon Alexa and Echo. Meanwhile, BMW is also said to be integrating Amazon's smart-home and AI features into its functionality."
I have to admit that I've found myself recently in the car with my iPhone, wishing that I could communicate with my at-home Echo, which I've always described as a "Siri that works." Would this affect future car purchases? Maybe. Am I hoping that at some point I'll be able to talk to my Echo via my iPhone? Absolutely. Would I buy a non-Apple smartphone for the ability to integrate all this stuff? Possibly.
I do think that somehow manufacturers are going to have to find ways to allow consumers to integrate these choices the way they want to, not just along the lines that they want us to.
BTW...it seems clear that Google and Apple will make their own deals with carmakers. But maybe the smart car manufacturers will give buyers an a la carte option, with the ability to choose the AI we want.
The Journal News reports that health/natural foods retailer Mrs. Green's Neighborhood Market is closing down five of its stores in Westchester and Connecticut, with plans to focus on five remaining "core" locations in Westchester County. At the same time, CEO Pat Brown is stepping down, "with existing management taking over his duties until a replacement is found."
The story notes that "the retailer began experiencing a supply disruption last month and it affected several of the chain's stores in Westchester County. Signs posted in stores in Eastchester and Rye apologized to customers for the inconvenience. Last week, an entire dairy case at the Rye store was empty of yogurt and other products. On Tuesday, the Rye store's dairy case was still mostly empty.
"The Eastchester store was in better shape Tuesday morning, with most of the shelves and refrigerated cases well stocked."
The Journal News notes that Mrs. Green's is controlled by an entity called Natural Markets Food Group.
I feel bad about Pat Brown. He's an accomplished executive who worked at both NewSeasons and HEB before moving to Mrs. Brown's, and he is someone about whom people I highly respect speak highly. So I have to wonder if this is a case of not being given the tools to make a difference, or maybe it was just a case of being in the wrong place at the wrong time. (I questioned the wisdom of moving from Portland, Oregon, to Irvington, New York, when he first took the Mrs. Green's job ... but that had more to do with my feelings about both places than the companies involved.)
As for Natural Markets Foods Group ... I don't know much about these folks, but I do know they have a vacuous website that tells one very little about the organization. It wouldn't give me a lot of confidence about their ability to bring in a competent replacement for Brown, or in the company's ability to turn things around. (Though there may be a few former A&P's executives knocking around who are looking for work...)
From MorningNewsBeat, September 15, 2016:
A US Department of Labor report recently revealed that there were 5.2 million jobs available in the United States ... which was said to be the highest level of job availability since these specific numbers started being tracked back in 2000. This despite the fact that there remains considerable debate, much of it cacophonous, about national unemployment and under-employment.. The problem, one expert said, is that what we have in this country is "one of the biggest mismatches between skills and lack of qualified help available in the nation's history."
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Winston-Salem, NC -- ProLogic Retail Services, the largest provider of loyalty marketing solutions to independent grocers, announced the extension of its contract with Lowes Foods, which operates close to100 full-service supermarkets in North Carolina, South Carolina and Virginia.
Through the Fresh Rewards program, ProLogic enables Lowes Foods to segment its shoppers, identifying its top shoppers and understanding their purchase patterns. With this information, ProLogic enables Lowes Foods to run targeted promotions that are specifically tailored to individual shoppers or groups of shoppers. These targeted promotions help Lowes Foods to retain its best shoppers and expand their purchases throughout the store.
"We are very pleased to extend our longtime partnership with ProLogic," said Tim Lowe, President of Lowes Foods. "ProLogic delivers great value to Lowes Foods with a powerful, flexible loyalty marketing platform that enables us to create and execute intelligent promotions. The Fresh Rewards program is a cornerstone of our relationship with our guests and has proven highly effective in helping us retain our top shoppers and increase their purchases."
For more information, click here. Or contact Lance Recker at email@example.com or at 561-454-7646.
The Associated Press reports that "Denver voters have approved a first-in-the-nation law allowing willing bars and restaurants to give patrons the option to use marijuana alongside a cocktail or meal. The catch: Smoking pot won’t be allowed inside, and the locations would have to first get the approval of neighbors.
"Denver voters approved Proposition 300 on the same day that the nation’s largest state of California and two others legalized pot for all adults and five more states approved pot for sick people - signs of society’s increasing tolerance for the drug."
One caveat: Customers have to bring their own pot.
I'm amazed the degree to which tolerance and normalization of marijuana has gained momentum; as I've confessed here in the past, I'm conflicted about it.
I'm also curious to see how the Trump administration deals with the issue. My understanding is that if the federal government decided to strictly enforce federal drug laws, they could render the state laws allowing for sale and use of marijuana virtually irrelevant.
Reuters reports that UK supermarket chain Morrisons "has set up a new service that will offer Amazon Prime customers same-day deliveries of groceries from its stores, deepening the relationship between the two companies." This follows a deal struck earlier this year that had Morrisons supplying grocery products to Amazon in the UK.
According to the story, the new "Morrisons at Amazon" service "will allow Amazon Prime customers in and around London to order the full range of Morrisons' products online via Amazon's Prime Now app ... Orders will be picked by shop staff at a local Morrisons store and delivered the same day by Amazon either within one hour for 6.99 pounds ($8.72) or within a two-hour slot for free."
Such a deal may be good for Morrisons in the short term, but it may be better for Amazon in the long term, especially if it is a) able to gather tons of information about Morrisons customers, and b) it has the intention of opening bricks-and-mortar grocery stores there along the same lines as they seem to be planning in the US. Morrisons could end up being the Trojan Horse that givesAmazon a greater foothold in the UK market.
Bloomberg reports that retail sales rose more than expected during October, "in a broad advance after an even stronger September than initially estimated, showing consumers continue to pump up the economy."
According to the story, a "0.8 percent rise in October followed an upwardly revised 1 percent jump in the prior month, marking the biggest back-to-back increase since March-April 2014, the Commerce Department reported Tuesday ... Healthy hiring, wage growth and limited inflation are giving Americans the wherewithal to spend at stores, malls and online merchants. Momentum at the start of the quarter bodes well for household purchases, which account for about 70 percent of the economy, during the approaching holiday-shopping season."
...with brief, occasional, italicized and sometimes gratuitous commentary…
• The Wall Street Journal reports that the US Postal Service (USPS) reported a loss of $5.6 billion for the just-completed fiscal year, compared with a year-earlier loss of $5.06 billion, in a year when total revenue actually improved by 3.8% to $71.43 billion.
Among the expenses cited as causing the increased loss were " building improvements, vehicles, equipment and other capital projects," not to mention old standbys like "prepaying retiree health benefits and certain changes in workers’ compensation expenses."
The only thing they seem not to have spent money on is drones ... which is one of the things that everybody else is spending money on because they seem to offer a possible alternative to traditional shipping. Which, of course, seems entirely typical.
• The Guardian reports on new Kantar Worldwide figures showing that during the just-ended quarter, Tesco increased its UK market share to 28.2%, up from 27.9% a year ago. That's the second quarter in a row in which Tesco has grown market share there.
• The Des Moines Register reports that Hy-Vee has said that credit card skimmers were found on ATMs at three of its Des Moines area stores.
The skimmers are devices that can steal credit or debit card information, and the story says that "Hy-Vee executives believe only a small number of people were affected by the skimmers, and the company will work with banks to notify customers who used the ATMs and may be affected." No store transactions were affected, the company says.
We had a conversation here the other day about companies' responsibilities, with one reader suggesting that I was wrong to say that they need to embrace social responsibilities.
Another MNB reader chimed in:
May I suggest making ‘business decisions’ especially based on nothing more than making money for stockholders while ignoring larger social issues is quickly becoming a bona fide path to bankruptcy? Many in the younger generations are watching the social actions of companies and are opting with their dollars to go elsewhere when they determine a business has no social conscious or awareness.
Hard ‘It’s just business’ decisions that ignore the environment, fairness, etc. might play well now to the investment community but when sales start to fall because the public decides that business has no soul, the investment community will be quick to take their dollars elsewhere, too.
I agree. Completely.
But another MNB reader wrote, referring to our discussion of New Balance having to deal with an unwanted embrace by the white supremacist community (which was prompted by the company's apparent support for Trump's avowed trade predilections), wrote:
It's the business of a business to collect a consumer's money, no matter what his personal belief-system might be.
Disagree. There is such a thing as intelligent loss of business. One can't necessarily stop certain people from buying your products ... or reading your website. But one doesn't have to embrace these people, either.
Regarding another story, MNB reader Brian Blank wrote:
Regarding yesterday’s story on Facebook’s political influence, I recently saw a Twitter post (and I regret that I do not recall the author) that said something to the effect of “That awkward moment when Facebook tries to explain how they have no influence over politics, yet has enormous influence over consumer spending.”
For me, Facebook's claims of having no influence over politics rings hollow.
I argued yesterday that it is important to take seriously the concerns of the nonviolent protesters who are making themselves heard in recent days; I even commented that when I look back on growing up in the late sixties and early seventies, I wish I'd spent more time protesting, not less. But one MNB user wrote:
It could be argued that the reason so many people ended up on protest lines in the sixties and seventies had as much to do with drugs and boredom as anything else.
Ah. Spoken like someone who wants to minimize the opinions of people with whom you disagree, as opposed to taking them seriously.
From another reader:
It never ceases to amaze me how willing we are to squash other peoples rights when it won’t impact us..i.e. the unending cries from the right to A) “stop the protesting”, B) “give him a chance” or my personal favorite C) “respect the office of the president”.
First of all the VERY FIRST AMENDMENT is FREEDOM OF SPEECH, the right to assemble (peacefully – an important element to be sure). So re: “A)” If you disagree with people exercising their RIGHT to protest then you might want to examine your understanding of our republic. If you disagree simply because you disagree with their opinions THEN YOU REALLY need to go back and take an American history class.
Re “B) & C)” Don’t start trying to REWRITE HISTORY by telling me and anyone who will listen how warm and welcoming and respectful this country was when Obama took office and especially do not tell me the right was accepting of him when he tried to implement some of his desired policies. It will take about 15 seconds for anyone to Google racist signs and effigies of Obama to see how Obama was received and how he was respected. The pictures are chilling..and even more alarming given some of these same things are now being said again BECAUSE Trump won and credited as part of WHY he won.
I’ll give Trump his chance…I have high hopes for America, VERY VERY LOW EXPECTATIONS OF Mr. T though. I’m also going to tell the Right that if you think these protest are bad …you ain’t seen nothing yet…try overturning our right to assemble and protest…or start silencing the free press….that will (and should) raise holy hell in our streets.
Responding you Michael Sansolo's column yesterday, one MNB user wrote:
Regarding your article on MetLife’s discontinued use of Snoopy as its spokesperson, this millennial remembers "Peanuts" with a fierce fondness! Granted I didn’t spend much time reading the cartoons as a kid, but ask any of us born in the great state of Minnesota and we’ll all agree that the Camp Snoopy theme park at Mall of America was one of THE BEST childhood memories. Tossing a coin in Snoopy’s giant dog dish was a ritual for me every year-end field trip I can remember taking in elementary school. I even remember celebrating Charles Schultz’s birthday…
But, as it’s been pointed out, times change and to anyone not fortunate enough to have lived in the Land of 10,000 Lakes (only kidding!). "Peanuts" is not nearly as relevant anymore. I know they certainly aren’t to my younger cousins currently in middle school and entering high school who now know the theme park as Nickelodeon Universe (hand’s down, no comparison to its predecessor).
Snoopy and the gang will be affectionately remembered!
And finally, regarding the passing of Stater Bros.' Jack Brown, MNB reader Larry Ishii wrote:
I worked at Stater Bros during the early 80’s as Director GM/HBC. I felt comfortable with Jack from the start of my first interview with him. I started at Stater Bros just months after Jack did and I could tell right away what an amazing man he was. He touched so many and will be missed by all.
I was there through the proxy battle for control of the company and can vividly remember the great support for Jack and the “Brown-bo” t-shirts (Jack’s head on Stallone’s body) worn by union warehouse workers.
Working at Stater Bros was an amazing experience in my nearly fifty-year career in the grocery industry.
And, from MNB reader Chuck Wedge:
Being involved with Stater’s for 20 years, Jack Brown was a great American and Man!!! He will be missed!!!
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