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Tuesday, December 06, 2016

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Sansolo Speaks: Never Say Never

by Michael Sansolo

Based on the breathless coverage that appeared Monday on MNB and elsewhere about Amazon Go, you’d think it sounds like the greatest thing since sliced bread.

We constantly write here about incredible innovations from Amazon, though we do try to leaven the commentary with perspective. Not every innovation is a game changer and, to be fair, sometimes we get it wrong. (Like when the Content Guy predicted that the while notion of drone deliveries was just a corporate head fake, and wouldn't amount to much.)

Amazon Go, however, could be the real thing, offering a checkout-free shopping trip and creating an huge game changer for retailing.

Let's be clear, though. Amazon Go is a really big idea, but it isn't a new idea.

I know this, because almost 20 years ago I had the good fortune to be in a meeting with Mike Wright, then the CEO of Supervalu, at a time when both the man and his company were giants in the industry. And Mike Wright had a big idea.

I don't remember every word of the meeting, but Wright's big idea has stayed with me. He pointed out that the industry’s biggest problem was the single worst part of the shopping experience: the checkout. His vision was simple: using emerging technologies (this was the 1990s!), shoppers’ orders would scan simply by passing through some type of monitor or archway. No more unloading items onto the conveyor belt, watching them get scanned and bagged. Payments would be handled automatically as well.

What’s more, he envisioned that shopping carts would have a removable basket that would go right into the shopper’s car and then into the home. No more loading and unloading bags or lines at the checkout.

Just like that. the worst part of the shopping trip would disappear.

Mike Wright's vision led the industry to get heavily involved in the development of radio frequency identification (RFID) technology, but we discovered a problem. While the technology continues to exist and work, the cost makes it prohibitive for supermarket items.

And so, the vision never was realized. Until now. Amazon is doing it, though it is relying on other new technologies, not RFID.

Until the first Amazon Go store is up and running for consumers, there is no way of knowing whether it will be able to realize the vision of a checkout-free store any more than Mike Wright was, or than IBM was (based on the ad that it ran years ago to predict such a system even before the technology existed).

But we need to remember that technology enables us to do all kinds of things today that we found unthinkable a few years back. And if Amazon’s idea works, it will offer, as Mike Wright said, a solution to the single most hated part of the shopping experience.

That's a game changer.

So please don’t dismiss this out of hand and as “just one more crazy idea from Amazon” because it really isn’t a crazy idea. And not even a new one. Maybe just one that's time finally has come.

There's a wonderful quote from "The West Wing" (in a script by Aaron Sorkin and Lawrence O'Donnell):

"There’s been a time in the evolution of everything that works when it didn’t work.”

And another, equally wonderful line, from "Star Trek: The Next Generation" (in a script by Hannah Louise Shearer):

“Things are only impossible until they are not.”

In other words, just because the completely passive checkout experience hasn’t happened yet doesn’t mean it won’t.

One other thing. Remember that Mike Wright was neither young nor new to the industry when he talked with me about this exact idea. Nor was he a techie of any kind. Rather he was a businessperson with a keen idea of what shoppers really do and don’t want.

That’s the kind of thinking that produces true innovation and game changers.


Michael Sansolo can be reached via email at msansolo@morningnewsbeat.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Tuesday Morning Eye-Opener: Private Label Power

by Kevin Coupe

Call it yet more evidence of the power of private label.

Variety reports that Netflix has decided to more than double the number of hours of original programming it produces and offers in 2017, to around 1,000 hours.

And “that’s a conservative measure right now,” says Ted Sarandos, the company's chief content officer.

Variety writes that "Sarandos reiterated Netflix’s previous guidance that the company plans to spend about $6 billion in 2017 on content on a profit-and-loss basis, up from $5 billion in 2016. With the boost in production on originals, that will take up a bigger chunk of the overall content budget, and Netflix execs have said they’re aiming to have originals represent 50% of the content on its service."

It is an article of faith around here that companies succeed or fail based on well they execute around the things that make them different from the competition, not the things that make them similar.

I think what Netflix - a company that started our renting movie DVDs over the internet - is doing is a great example.

It is an Eye-Opener.

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From the National Grocers Association...

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Second Day Coverage: Amazon Go


MNB reported yesterday that Amazon announced that it will open a new 1,800 square foot convenience store format in Seattle early next year called Amazon Go that will allow consumers to enter the store using a mobile application, choose the items they want, and then leave - without having to go through a checkout lane.

You can see the video at left.

As might be expected, there has been a lot of coverage of this new format, and the potential implications...

Bloomberg writes:

"The speedy checkout technology matters because retailers have been trying to crack the checkout process for decades. If Amazon can solve one of brick-and-mortar retail's biggest sources of friction, then that could be a harbinger of how else the company might turn physical retail on its head. 

"Walmart once said it could save $12 million for every second it cuts from the checkout process in the U.S. This belief drove a Walmart smartphone app that let customers scan items as they shopped. The app flopped after customers said it took too long to individually scan carts full of items."

MarketWatch writes:

"The ability to build its biggest push into physical retail from scratch with this type of automatic technology could be the ticket to further disruption of traditional brick-and-mortar retailers like Wal-Mart Stores Inc. and Target Corp. Grocery shopping for fresh food has long been a difficult but enticing arena for tech startups, which have put forth efforts like Webvan during the dot-com boom and now Instacart and its rivals, which offer grocery shopping as a service. Stores have even developed their own online options, such as Safeway.com, but Amazon has a good chance to crack into traditional grocery shopping with this hybrid effort, which addresses many of the issues consumers have with online grocery shopping."

And, some context from Bloomberg:

"Amazon's move to the physical realm is no surprise. It has already started building bookstores on college campuses and in shopping malls. Mall operator General Growth Properties's CEO revealed last February that Amazon could open as many as 400 bookstores."

The Financial Times adds:

"Amazon is also putting the finishing touches on two new drive-in grocery stores in Seattle. Planning documents indicate those stores would function more like hubs that allow a customer to order groceries on their app, then pick them up kerbside while remaining in their car. Amazon has not made any public comment about the two locations."

Bloomberg also tries to find a silver lining for traditional retailers:

"All hope is not lost for traditional retailers. There's actually an upside to Amazon entering the physical retail realm: Operating in the daylight of physical stores -- as opposed to behind secretive, online algorithms -- will give traditional retail rivals such as Walmart and Target a front-row seat to Amazon's practices.

"Being able to walk right into Amazon's stores, to see how they operate and to talk to customers, gives other retailers a chance to quickly match Amazon's best ideas. For smart competitors, this scary moment could be an opportunity."

MarketWatch sees a potential downside:

"Despite the work already put into the effort, this could be a costly experiment for Amazon, with the different range of store formats planned, physical retail locations to acquire or rent, technology systems to install and maintain, more employees to hire and, of course, keeping inventory stocked. The cost of Amazon’s vast physical warehouse infrastructure build-out over the past few years has only been eclipsed in cost by the money its spends on shipping products to customers of its Amazon Prime service, which includes free shipping."

KC's View: Obviously we're not going to know whether this actually works until the store opens, but I think it is likely that this is going to be, as Michael Sansolo wrote above, an enormous game changer. And not just for food retailing ... potentially, this technology could change the face of virtually every kind of retailing. And Amazon has an enormous head start on this.

One thing. There are folks out there who as recently as last Friday were writing that Amazon's food stores wouldn't disrupt the grocery business and might not even succeed, and then yesterday decided that Amazon Go was the future of food retailing.

I think I've been a little more consistent than that in my view of Amazon's approach to food retailing, but I would also suggest the following caution. It is critical to remember that this is just one element in the ecosystem that Amazon is creating ... it is obviously not the first big idea that Amazon has had, and certainly not the last one. And here's the thing that everybody needs to remember - it isn't even the biggest.

Amazon's unique advantage is its ability to see every day as "day one" in its development. No legacies, no boundaries, and no such thing as reduced expectations. Very few companies can compete with that. Every company has to try.

And let me repeat something I wrote yesterday. For now, watch the video, and think about what it means to your business. (If the answer is "nothing," then think again.)

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From MyWebGrocer...


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Mondelez Making Exclusive Oreo Offer Online

The Chicago Tribune has a story about how Mondelez International "is diving deeper into online retail with a holiday-season website that is selling tins of Oreos directly to consumers ... The holiday Oreo website, which kicks off Monday, marks the first time Mondelez will directly handle the supply chain and shipping logistics, without going through a store or online retailer like Amazon."

Arthur Sevilla, global director of e-commerce strategy for the company, says that the goal is to sell limited time offers and exclusives on the site and, "if it's successful, we'll import this model to other markets."

The story notes that "Mondelez created a dedicated e-commerce team last year with a goal of generating $1 billion in revenue by 2020," sales it believes it can move from traditional bricks-and-mortar venues.

KC's View: There will be challenges to this approach by Mondelez - not least the fact that I'm not sure that people are going to visit lots of different sites for varying needs. But I admire the fact that it is making a cultural and financial commitment to the space. It will learn a lot, and potentially can teach us a lot by how it adapts to consumers' changing needs and desires.

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USDA To Update Meat, Poultry Nutrition Label Rules

Bloomberg reports that the US Department of Agriculture (USDA) says that "it plans to update rules for labeling the nutrition content of meat and poultry products to better align with Food and Drug Administration labeling regulations released in May.

"The Agriculture Department’s proposed rules issued Dec. 1 would revamp the nutrition labels for meat, poultry and eggs, changing both their appearance and content. The USDA said the new rules are necessary to ensure consistency in how nutrition information is presented across the food supply ... The USDA proposal would update the list of nutrients that are required or permitted to be declared. For example, the rule would remove the requirement to declare 'calories from fat,' but require the declaration of 'added sugars,' vitamin D and potassium, similar to the FDA rule. The rule would also lower the value used for calculating the percentage of daily intake for sodium from 2,400 milligrams to 2,300 milligrams."

There is some political context for these proposed changes: "The move comes amid uncertainty about whether the broad changes to nutrition facts and restaurant menu labeling rules put in place over the past few years will survive under the Donald Trump administration. Some Republican lawmakers have opposed the new disclosure requirements, calling them a regulatory overreach, and have introduced amendments to appropriations bills that would block them."

KC's View: I've been consistent about this issue pretty much from the first day I did MNB - that companies are best served providing consumers with as much information as possible in the most usable possible context and form. Companies should not think about the information they'd rather not provide, but rather about how they can best inform shoppers.

Ad Spending On Social Media Seeing Significant Growth

Reuters reports that a new study from ad agency Zenith Optimedia suggests that "the amount of money spent on advertising on social media is set to catch up with newspaper ad revenues by 2020."

Specifically, the story says that "global advertising expenditure on social media will account for 20 percent of all internet advertising in 2019, hitting $50 billion and coming in just one percent smaller than newspaper ads. It expects social media to overtake newspapers comfortably by 2020."

The story notes that "the media industry has been convulsed by the rapid shift in advertising trends in recent years, with firms moving their ad budgets from traditional sources such as newspapers to websites found on computers and mobile phones. Marketers are increasingly directing their spending to social media sites where ads blend into users' newsfeeds on platforms such as Facebook and Snapchat proving more effective than interruptive banner formats."

KC's View: What concerns me about this trend is that the ad spending might actually end up supporting a lot of the fake news stories that crop up on social media. That would be a truly negative result, and I hope that manufacturers are responsible about not supporting sites that are irresponsible and even destructive.

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ProLogic Retail Services Extends Shopper Loyalty Program at Lowes Foods

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 lrecker@prologicretail.com or at 561-454-7646.

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E-conomy Beat

Canadian Grocer has a story about how Longo's there "is expanding its Grocery Gateway business," and has seen a double digit increase in shoppers since it relaunched the site in June.

“As consumers get more comfortable with online shopping and gain more confidence and trust in the product assortment and quality, they will typically move on to more categories when they shop,” CEO Anthony Longo tells Canadian Grocer, saying that he is “very bullish” on e-grocery.

Longo's is putting its money where its mouth is. The Canadian Grocer story says that "Longo’s has spent approximately $8-million to triple the size of Grocery Gateway’s Rexdale-based facility to 150,000 square feet, enabling it to keep up with increased consumer demand. That follows an approximately $2.5-million investment in a new Grocery Gateway website that includes new features such as themed grocery lists and the ability to add regular items to personal shopping lists."

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From iControl...

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McDonald's Reinvests In McCafe Brand

Bloomberg reports that McDonald's " is planning to shake up its McCafe brand - part of a bid to challenge Starbucks Corp. and Dunkin' Donuts."

According to the story, "The company will reintroduce the McCafe concept next year, about eight years after it debuted nationwide. The push follows efforts to upgrade its java and get more of its beans from sustainable sources, mimicking a move by its Seattle-based rival."

The story goes on: "Re-emphasizing coffee is critical at a time when food sales are under pressure. Supermarkets have lowered prices, making it more alluring to eat at home instead of at a restaurant. Gas stations and other channels also are increasingly selling prepared meals, adding to the competition.

"McDonald's is looking to build on the success of its all-day breakfast, which rolled out last year across the U.S. It's also upgrading stores with table service and more touch-screen ordering kiosks. The all-day breakfast push helped fuel a return to growth, but the resurgence has been waning: Domestic comparable sales rose just 1.3 percent last quarter, and McDonald's is facing declining foot traffic."

KC's View: Fascinating that Mickey D's is trying to move upscale into the Starbucks space at a time when Starbucks is trying to go even more upscale itself. One has to wonder, I think, if these folks are taking a risk by abandoning their core markets.

FastNewsBeat

• Supervalu announced that it has finalized the sale of its Save-A-Lot business to an affiliate of Onex Corporation for $1.365 billion in cash, "subject to customary closing adjustments." The company said that "with the sale of Save-A-Lot, Supervalu is now a more focused company. In connection with the closing of the sale, Supervalu and Save-A-Lot have entered into a five-year professional services agreement pursuant to which Supervalu will continue providing certain back office services to Save-A-Lot."


• The Food Marketing Institute (FMI) has sent a letter to members of the US House of Representatives urging them to oppose legislation that would roll back debit card reforms originally designed to make the market more competitive.

The roll back would be part of a broader effort to repeal financial regulations passed during the Obama administration.

“With talk in Congress about repealing or replacing components of the Dodd-Frank law, we want to make sure Congress knows of the five year success story of the pro-competitive debit reforms that increase reliability and efficiency, and urge that they be preserved. We oppose section 335 of the so-called CHOICE Act,” said Jennifer Hatcher, chief public policy officer & senior vice president of government relations. “We hope that if legislation is considered by Congress that it will work to increase competition in the debit routing network space, not stifle it.”


• The Food Marketing Institute (FMI) has announced its 2016 Community Outreach Awards Winners...

The Youth Development Program Winner was Northgate Gonzalez Market's "Cooking Up Change" program, which "provides students from low-income schools with the tools to transform their school lunch menu, develop culinary skills, improve self-esteem, and continue their education in nutrition."

The Programs Addressing Food Insecurity Winner was a "Double Up Food Bucks" program created by Family Fare, a SpartanNash company, described as "a public-private partnership administered by Fair Food Network with support provided by federal, state and private sources. For each dollar of fresh Michigan produce SNAP customers purchased an equivalent amount of points will be earned and placed on their yes Card."

The Neighborhood Health Improvement Programs Winner was "Food Lion Feeds' Great Pantry Makeover program," which "transformed 38 food pantries in its 10-state footprint in 30 days. Food Lion mobilized its community to eliminate hunger by providing 1.7 million meals in total and more than 1,400 volunteer hours by renovating facilities, providing equipment and stocking pantries."

The “People’s Pick” Social Media Category Winner went to Hy-Vee, which "designed a free, online program to help kids and families make health, exercise and nutrition not only priorities in their everyday lives but also fun ... Part of the program, Hy-Vee KidsFit, provides an interactive health and wellness website for children, teens and families that offers a free, online personal trainer."

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Executive Suite

• Wakefern Food Corp. said yesterday that it has promoted Chris Lane, Senior Vice President of Product Divisions, to Executive Vice President of the company. In his new role, the company said, Lane will guide "day-to-day operations and strategy planning."

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From the Western Association of Food Chains (WAFC)...


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Your Views

...will return.

From The MNB Sports Desk

In Monday Night Football, the Indianapolis Colts obliterated the hapless New York Jets 41-10.

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