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Wednesday, May 17, 2017

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The Innovation Conversation: The Big If & The Inevitable When




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 topics: Making Big Bets Early, and "If This Then That."

And now, the Conversation continues...

KC: So, for all those folks who may think less of themselves because they didn't "get" Amazon, or understand its potential impact when it launched, we now have Warren Buffett saying that there is only one word to describe why he didn't invest in Amazon (or Google) in early days: "Stupidity." But he's hardly alone - Amazon has been in the Subscribe & Save business for years, and only now do we see retailers like Walmart and Target trying to catch up.

I suppose at some level people like Buffett avoided Amazon and Google because they did not have tangible enough businesses, but they're learning their lesson now.

Tom Furphy:
Amazon and Google were two businesses that were very different than anything that came before them. While each was based on powerful premises and models, neither had anything tangible in terms of assets or financial performance upon which to base investment. The only way to invest in these companies early was to meet with the founders, listen to their vision, understand their intended path to monetization and then assess their ability to lead their company down that path. And even if an investor was able to do that, putting in money was still not a clear decision. While the Google guys had access to early capital through their Stanford connections, Jeff Bezos had to put up his own money, hit up his friends and family, then knock on about 40 investor doors before he got funded. Of course, those early investors in both companies have since been rewarded handsomely.

I saw a quote from Jeff Bezos the other day that really struck me. It had to do with taking a long term view of the business and recognizing that foundational changes can take a long time to yield results, but once they take root they can be both powerful and predictable. He said "I ask everybody to not think in two-to-three-year time frames, but to think in five-to-seven-year time frames." He followed "When somebody … congratulates Amazon on a good quarter … I say thank you. But what I'm thinking to myself is … those quarterly results were actually pretty much fully baked about 3 years ago. Today I'm working on a quarter that is going to happen in 2020. Not next quarter. Next quarter for all practical purposes is done already and it has probably been done for a couple of years."

So, Amazon makes big bets well before the market can see or understand them. How many retailers today think in these terms? My guess and my observation is nearly none. And it is going to kill them. As threatening as things feel now, with Amazon already claiming almost 1,000 traditional center stores in CPG, how will it feel in 4-5 years when that number is several thousand? I don’t think it will be pleasant. Making bold, foundational moves in business models is not optional today. If you are not currently making these, you are in big trouble.

KC: One way in which Buffett seems to be learning the lesson could be seen when he talked about the impact of driverless cars. He recently said that inevitably they will make the world safer, but that they will be terrible for the insurance business ... which is just another example, I suppose, of collateral damage from disruption.

We saw that recently in the story I ran on MNB about the builder in Los Angeles who believes that when he builds a garage, he has to make sure that it can be easily converted to another purpose, because eventually people are not going to have their own cars to park. I worry that I'm not smart enough to think this way ... but I suppose that to survive in the long run, you have to be able to think this way.

TF:
Exactly. Retailers need to be thinking five or more years ahead. For example, the fundamental purpose and composition of the traditional grocery store is going to change. When the nature of the store changes, when the center store becomes an automated service due to subscriptions, automated replenishment and the Internet of Things and the perimeter truly becomes about service and the highest quality products, how many retailers will be ready? There will be some, but not many. Those that are not making foundational moves today will never be ready for the shopper of tomorrow. And tomorrow is coming fast.

KC: I did want to follow up with you about something I mentioned on MNB recently - the idea of an IFTTT (If This Then That) platform that, for example, allows me to tap into an algorithm so that a product is automatically bought online if it goes below a certain price. I haven't seen much of this, but it sounds like a natural. How much of it might you be seeing, and is this yet another way for the consumer to take control of the buying experience (and, by the way, potentially creating real problem for value-driven retailers)?

TF:
IFTTT is pretty interesting. Essentially it’s a platform that lets developers create applets that do certain things when certain conditions in other web services are met. Apparently over 1 million tasks have been created. There are versions of the platform for both iOS and Android, and there are also Internet-of-Things protocols so anyone can connect an appliance or re-order button to an e-commerce site. It’s limited to doing one thing based on one criteria being met. But it’s still pretty cool in how it can be applied. It does have some potential to empower the consumer. But it’s ultimately up to businesses to use it in ways that actually provide value and allow them to better serve their shoppers.

IFTTT can certainly be disruptive in driving prices to the lowest common denominator. The pricing algorithms that Amazon and their competitors are using today are already pretty damaging to price. Amazon and competitor systems keep tabs on each other’s prices. They work to lower price to levels where the retailers are barely profitable, or not profitable. Adding another variable to this via IFTTT could stand to even further degrade prices. That’s good for the shopper in the short term. But in the long term it will be tough to sustain for retailers.

Today Tesco is using IFTTT for a number of automated tasks. Their applets can automatically order products if they meet a certain price, they can add burgers to a shopping basket based on the weather, or they can set a reminder to add certain items to a basket at a certain time. They are also using IFTTT to allow customers to use Google Home to add items to their basket. I’m not sure these add up to providing real utility for the shopper, but they are great for R&D. And Tesco should to be applauded for the innovation. Today, customers expect their favorite retailers to innovate on their behalf and that’s what Tesco is doing.

The Conversation continues...

Wednesday Morning Eye-Opener: Sound Off

by Kevin Coupe

The Washington Post has a story about how the MP3 file format, which was used on the original iPod, "has been abandoned by its inventors at the Fraunhofer Institute. The German organization, a division of the group that helped develop the MP3, is letting its licensing hold on the format expire."

The Post waxes rhapsodic about the MP3 this way:

"The MP3 was, in its day, the spark of a revolution. The file format, created in 1993, changed the way we listened to music as it liberated people from tapes and compact discs.

"It wasn't just about the equipment we used to enjoy our music that changed with the MP3, though the MP3 hastened the abandonment of many a Walkman and Discman. The MP3 let mix tapes give way to playlists. Albums, and the order in which artists laid out their songs, didn't matter quite as much. You could carry thousands of songs with you at all times, without having to lug around a CD wallet. (Millennials, ask your parents. Or even just slightly older millennials.)

"And, of course, you could share. Arguably, more than anything, the MP3's cultural mark comes from the way it enabled sharing — especially, let's face it, illegal sharing..."

The MP3 format, the story notes, "fell out of favor with companies steadily through the early 2000s. The iTunes store adopted the AAC standard in 2003. In 2014, Amazon MP3 was rebranded as Amazon Music. As streaming picked up steam, so did newer formats." And so, the Fraunhofer Institute decided to let its patents expire.

This doesn't mean that MP3 files suddenly will be unplayable. Far from it. But what does mean is that technology has moved on, and that even an innovation that sparked fundamental change in how people acquired and engaged with music eventually becomes obsolete and is replaced.

That's life. A fact of doing business today. It happens faster and faster. And it is an Eye-Opener.

Wednesday Morning Eye-Opener: Sound Off

by Kevin Coupe

The Washington Post has a story about how the MP3 file format, which was used on the original iPod, "has been abandoned by its inventors at the Fraunhofer Institute. The German organization, a division of the group that helped develop the MP3, is letting its licensing hold on the format expire."

The Post waxes rhapsodic about the MP3 this way:

"The MP3 was, in its day, the spark of a revolution. The file format, created in 1993, changed the way we listened to music as it liberated people from tapes and compact discs.

"It wasn't just about the equipment we used to enjoy our music that changed with the MP3, though the MP3 hastened the abandonment of many a Walkman and Discman. The MP3 let mix tapes give way to playlists. Albums, and the order in which artists laid out their songs, didn't matter quite as much. You could carry thousands of songs with you at all times, without having to lug around a CD wallet. (Millennials, ask your parents. Or even just slightly older millennials.)

"And, of course, you could share. Arguably, more than anything, the MP3's cultural mark comes from the way it enabled sharing — especially, let's face it, illegal sharing..."

The MP3 format, the story notes, "fell out of favor with companies steadily through the early 2000s. The iTunes store adopted the AAC standard in 2003. In 2014, Amazon MP3 was rebranded as Amazon Music. As streaming picked up steam, so did newer formats." And so, the Fraunhofer Institute decided to let its patents expire.

This doesn't mean that MP3 files suddenly will be unplayable. Far from it. But what does mean is that technology has moved on, and that even an innovation that sparked fundamental change in how people acquired and engaged with music eventually becomes obsolete and is replaced.

That's life. A fact of doing business today. It happens faster and faster. And it is an Eye-Opener.

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From MyWebGrocer...

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From ProLogic Retail Services...



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Study: Extolling The Subscription Opportunity

Consultancy Brick Meets Click is out with a new study about “Leveraging the Subscription Opportunity,” in which it concludes that "subscriptions now represent an increasing percent of online purchases of food and nonfood items – from meal kits to shaving cream to baby wipes and dog food. This growth is driven by the subscription offer’s ability to deliver some compelling benefit. If you’re in retail today, subscription models should be on your radar, because they challenge not only the traditional in-store buying trip, but traditional e-commerce buying as well."

Bill Bishop, Chief Architect of Brick Meets Click, says that "subscriptions are part of the larger direct-to-consumer movement that is one of the growing trends in selling around the globe today. We conducted extensive research and interviews with both domestic and international industry experts, and it’s clear that when subscriptions are used to connect the right consumers with the right products, they can deliver new sources of growth.”

KC's View: I agree completely, and have been talking and writing about this trend for years. One does not have to look any farther than Amazon's Subscribe & Save and Dash programs to get a sense of how subscriptions build sales, create enduring relationships with customers, and take significant dollars out of the market (that, once they've gone to Amazon, are unlikely to return).

I think the retailers that adapt subscription models - and thus engage competitively with Amazon in this arena - will give themselves a significant leg up over those that do not. People and companies have to be careful not to expect too much too quickly ... innovations are not always game changers overnight. But for those with a taste for innovation and a willingness to be patient, subscription models can turn out to be extremely effective.

Worth Reading: The Essential Supermarket Quandary

The New York Times has an excellent piece about Michael Ruhlman, author of the new book, "Grocery: The Buying and Selling of Food in America," which looks at some basic inconsistencies in the American supermarket industry.

"Shoppers are increasingly shunning the processed, packaged products that fill most of the shelves in the center of the store," the Times writes. "Instead, they are hunting the perimeter for fresh fruits and vegetables, yogurts and cheeses, and prepared foods that go way beyond the traditional rotisserie chicken."

Grocers, the story suggests, "face a quandary: how to maintain a huge store whose center is filled with items that are largely out of step with how we eat today, yet are a steady source of slotting fees (to secure the best spots in the store when a product is introduced) and other payments from the companies that produce them.

Ruhlman "predicts that much of what is sold in the center of the store — the cereal, canned soups, detergents and Ziploc bags — will be largely bought online in the not-too-distant future as food shoppers become more accustomed to e-commerce. To repurpose their acres of space, he says, supermarkets could develop specialties that make them more competitive ... And he believes that many supermarkets will simply get smaller, as people order more online and consumers buy groceries from more places."

You can read the entire story here.

Ruhlman, by the way, appears to have a pretty good publicist ... he's also featured on national Public Radio's The Salt, and you can read/hear that interview here.

Traditional Grocers Blunt Costco, Walmart Impact in Canada

In Canada, Global News reports that traditional retailers have managed to "mount an improved defence" against Walmart and Costco, which have "gobbled up a growing share of Canadian food sales for more than a decade."

According to the story, "Industry watchers say the price gap between the two sides has narrowed and the traditional stores’ loyalty programs are helping support sales."

In addition to effective loyalty programs, Global News writes, one of the things that traditional grocers have done is open discount formats that have effectively blunted the impact of Walmart and Costco. "Loblaw, for example, operates 500 discount banner stores, including No Frills, across Canada," and CEO Galen Weston says, "We believe we have some of the strongest, most effectively operated and most customer-centric discount formats in the country."

"For the average Canadian shopper," the story says, "that means the price difference between a product at a traditional grocer and a Costco or Walmart is not necessarily compelling enough to justify shopping at two separate locations."

KC's View: In a lot of ways, I've found that Canada's discount-driven food stores to be superior to many in the US ... they manage to have a sense of personality while still driving home a price message. Especially in a US environment where discount retailing may be about to see a surge, it might be worth a trip north of the border to see how these folks come to market.

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From Samuel J. Associates...Better To Light A Candle Than Curse The Darkness...


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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From Cornell University...

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The MNB Walmart Watch

• The Chicago Tribune reports on life and lessons at Wal-Mart Academy, described as a multi-location "training program that by the end of 2017 will have reached a quarter million employees of the world’s largest retailer."

An excerpt:

"While the company slows down store expansion to invest in remodeling and raising employee pay, it also is establishing dedicated training sites in select stores across the country, 100 so far and 200 by the end of the year.

"The Shawnee store has the Wal-Mart Academy for the Kansas City area. Its training site occupies 2,500 square feet at the back of the store, replete with ranks of desktop computers, iPads, Apple-based software and walls decorated with trademark blue and yellow graphics with upbeat messages.

"Ian Markley, one of 17 trainers — called facilitators — at the Shawnee academy, wears a headset and carries an electronic device as he maneuvers through a training room. Lesson information is synced onto the trainees’ individual screens or projected on a wall-mounted screen. Participants lean over small yellow pads, scribbling copious notes as Markley digs into the minutiae of restocking and order programs."

While it is too early to be able to calculate ROI for the training programs, there is a sense that if Walmart is going to remain current in the bricks-and-mortar arena - even as it invests billions in e-commerce companies and initiatives - it has to make its stores more efficient and effective.

You can read the entire story here.

E-conomy Beat

• The Wall Street Journal reports that Amazon "is preparing to bring its full retail offering to Australia, signaling a major competitive threat to the country’s retailers and an important new beachhead for its global distribution network.

"Australia’s more favorable regulatory climate is also likely to offer Amazon opportunities to test deliveries via autonomous drones and road vehicles, a person familiar with the matter said. Australia last year rolled out new rules for remote-operated drones, and government officials are looking to develop national guidelines for autonomous-vehicle trials. Amazon, which announced its Australia intentions last month, hasn’t said when the full retail offering will roll out. Some analysts say 2018 is a likely date."


• Delivery service Instacart announced that it plans to launch service to the Columbia, South Carolina, market, offering residents there the ability "to order from retailers such as Whole Foods Market, Publix, Costco and Petco and have their groceries delivered straight to their doorsteps in as little as one hour."

The new delivery coverage area includes Columbia, Forest Acres, West Columbia, Lexington, Irmo, Chapin, Elgin and Blythewood.

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From The Organic Produce Summit...

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FastNewsBeat


• The Milwaukee Journal-Sentinel reports that Kroger-owned Roundy's has decided to close two Pick 'n Save stores in the Milwaukee suburbs, saying that "the long-term financial performance of these two stores ... did not bring about the results needed to meet our business goals and objectives."

The story goes on to say that "when Kroger purchased Milwaukee-based Roundy's in 2015, market-watchers told the Milwaukee Journal Sentinel that Kroger would almost certainly close under-performing stores with territories that overlap other stores in the Milwaukee metro area."


• The Chicago Sun Times reports that some Starbucks stores' payment systems went offline for a time yesterday, which resulted in at least some customers getting free coffee until service was restored.

The company did not say how many locations were affected, but did say that the cause was a technology update that was being installed.

Executive Suite

• Kroger announced that Sukanya Madlinger, senior vice president of retail divisions, is retiring from the company after more that three decades of service. She will be succeeded by Calvin Kaufman, president of Kroger's Louisville division.

At the same time, Ann Reed, vice president, Customer 1st Promise at the company's general office, will succeed Kaufman as president of Kroger's Louisville division.

From The MNB Politics Desk

• The Washington Post reports that "the anti-Trump resistance movement is setting its sights on a corporation: McDonald’s," the first time they have focused on a corporation in this way.

According to the story, "Organizers from the Women’s March, MoveOn.org and the Bernie Sanders campaign spinoff Our Revolution will join forces next Tuesday to march from Trump Tower in downtown Chicago to the Rock N Roll McDonald’s, a half-mile away. Their goal: to rally the fast-food giant - and the country’s second-largest employer - to pay an hourly minimum wage of $15 and allow its workers to unionize."

“McDonald’s, frankly, is the Donald Trump of corporations,” Kendall Fells, organizing director of 'Fight for $15,' a labor movement backed by the Service Employees International Union, which is leading the effort, tells the Post. “There’s no way to resist Donald Trump without resisting the corporations that are bringing us all down.”

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Stater Bros. Adopts ReposiTrak Food Safety Compliance Management Solution

SALT LAKE CITY - Stater Bros. Markets announced today that it has chosen ReposiTrak, Inc., the leading provider of Compliance Management and Track & Trace solutions for food and dietary supplement safety, to manage regulatory and business documentation compliance within its supply chain.

“Our top priority at Stater Bros. is to provide the safest and highest quality products for our customers,” said Dennis McIntyre, Executive Vice President of Marketing at Stater Bros. “ReposiTrak’s automated system will enable us to better manage our growing list of documents we require from our approved suppliers in order to verify their good business and safety practices.”

ReposiTrak, a wholly owned subsidiary of Park City Group, helps manage regulatory, financial and brand risk associated with issues of safety in the global food, pharma and dietary supply chains. Powered by Park City Group’s technology, the platform consists of two systems: Compliance Management, which not only receives, stores and shares documentation, but also manages compliance through dashboards and alerts for missing or expired documents; and Track & Trace, which quickly identifies product ingredients and their supply chain path in the unfortunate event of a product recall.

For more information about how to join the rapidly expanding community of retailers and suppliers using ReposiTrak's robust safety and compliance solutions, go to ReposiTrak.com.


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Your Views

...will return.

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"GOOD IS NOT GOOD WHEN BETTER IS EXPECTED"

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

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Good Is Not Good When Better Is Expected

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

Now back to regularly scheduled editorial...

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Industry Drumbeat

"GOOD IS NOT GOOD WHEN BETTER IS EXPECTED"

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see Main Street through a constantly evolving technological, demographic, competitive and cultural prism.  These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely will pave a path to irrelevance;  Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

"Kevin inspired our management team with his insights about the food industry and his enthusiasm. We've had the best come in to address our group, and Kevin Coupe was rated right up there.  He had our team on the edge of their chairs!" - Stew Leonard, Jr., CEO, Stew Leonard's

Constantly updated to reflect the news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed by Coupe’s 30+ years of writing and reporting about the best in the business, "Good Is Not Good When Better Is Expected" will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.

Want to make your next event unique, engaging, illuminating and entertaining?  Start here: KevinCoupe.com. Or call Kevin at 203-662-0100.

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