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Friday, January 18, 2019

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Friday Eye-Opener: Big Numbers

by Kevin Coupe

MarketWatch reports that Amazon Prime membership has reached 101 million people, and that 62 percent of Amazon’s US customers are members, spending an average of $1400 annually on Amazon, compared to the $600 a year spent by non-members.

The numbers come from Consumer Intelligence Research Partners (CIRP).

In addition, CIRP estimates that “membership exceeded 100 million in the holiday period, and grew from 26 million in December 2013. More than one-third of members (36%) pay a monthly fee while 58% pay annually and 7% are on a free trial, share a membership, or don't know how the fee is paid.”

Jeff Bezos, Amazon’s founder/CEO, has said that his goal to make Prime membership so robust and attractive that it would be “irresponsible” for one not to be one. It would appear that he is making that argument successfully … that while Prime membership growth has slowed a bit from previous periods, it still has considerable traction.

This is a critical issue for Amazon’s competitors to consider, because the numbers with real power are the ones that go into the algorithms that Amazon uses in analyzing and predicting its customers’ behavior, preferences and desires. I’ve always argued that Prime actually is the world’s biggest and best loyalty marketing program - it gives Amazon an enormous and unparalleled ability to customize its offerings to specific shoppers and create a highly personalized experience.

It is unlikely that Amazon will drop this ball. And that’s the real Eye-Opener.

Walmart Goes Into Stealth Mode With New Job Posting

Bloomberg reports that Walmart has posted a job opening on its website for “CEO, Stealth Company,” who would be responsible for “building…from scratch” and serving as “public champion” for a startup company “housed inside its technology incubator, Store No. 8.”

According to the story, one key skill being sought “is the ability to handle competitive threats and possibly ‘pivot strategy’ just in case, say, Amazon.com decides to try and crush the fledgling unit.”

Bloomberg explains that “Walmart created its incubator Store No. 8 two years ago to identify and capitalize on changes in the way people shop, by using tools such as virtual reality and self-checkout. The unit already includes several endeavors, such as Jetblack, a concierge shopping service for upscale city dwellers; Spatialand, a virtual-reality software maker acquired in 2018; Project Kepler, a push to compete with Amazon’s cashierless Go stores; and Project Franklin, which is still in stealth mode after hiring a Google veteran as its CEO year ago.”

The “Store No. 8” name is “a reference to a Walmart location where co-founder Sam Walton tried out new concepts. It’s the brainchild of Marc Lore, who joined Walmart in 2016 when he sold his own startup, Jet.com, to the Arkansas retailer for $3.3 billion. The goal is to have a fast-moving, separate entity based in the heart of Silicon Valley that pinpoints emerging technologies that can potentially be used across Walmart.”

KC's View: Further evidence - that we needed any - of Walmart’s new nimbleness and ambition. I’ve had more than a few people who are smart about this stuff tell me that they feel that right now, Walmart is the most innovative traditional retailer out there, because it seems perfectly willing to do what CEO Doug McMillon said it would - ““We will test a lot, fail a lot.”

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Survey Details Top CEO Concerns: Recession Tops List

The Conference Board is out with a new global survey of CEOs, who say that a recession is their “biggest external concern for 2019 … Just a year ago, in 2018, they considered a recession as an afterthought, ranking it their 19th concern.”

Other major external concerns for global CEOs: threats to global trade, global political instability, and cyber security.

The major internal concerns were listed as “talent quality and leader development.”

One interesting excerpt from the survey:

“When it comes to investing in leaders of the future, CEOs believe that ‘broader is better.’ Along with improving formal leadership development programs, CEOs want their organizations to provide more cross-functional rotational opportunities for high potentials.

“However, organizations may be missing a critical piece of the development puzzle: exposing leaders to digital experiences as part of their development. Less than one-third of CEOs globally rate this as one of their top three leadership development priorities and only about one in five in the U.S. do so.”

KC's View: It is extraordinary to me that any CEO in pretty much any industry would not see “exposing leaders to digital experiences” as being one of the most critical parts of any development process. Maybe it is because some folks think that the next generation of leaders will understand digital because it is part of their DNA. But I think that spending time with leaders in the tech field is incredibly important - the conversations I’ve had (and I try to do more listening than talking) with people from places like Amazon and Microsoft and Intel and Google have been enormously eye-opening … and, at the same time, I think tech folks learn from people who are trying to lead in more traditional venues.

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From The Organic Produce Summit...


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On The Road Again, And Again, And Again, And Again

CNBC reports that Walmart has made deal with four different companies - Point Pickup, Skipcart, AxleHire and Roadie - to provide delivery services in a quartet of markets, with expansion planned for the “coming weeks.”

This more than doubles the number of companies that Walmart currently is working with, which includes DoorDash, Postmates and Deliv.

The story says that Walmart “says it’s still on track to have its online grocery delivery service available in more than 800 stores by the end of this fiscal year, then doubling that in 2019.”

CNBC notes that “not only is the company experimenting with driverless cars to deliver bread and produce to shoppers’ doorsteps, but U.S. e-commerce chief Marc Lore recently said Walmart will find a way to one day put groceries right into customers’ refrigerators. It’s clearly not afraid to push the envelope. But it also has to compete with Amazon and its Whole Foods stores.”

KC's View: I’m wondering when Walmart is going to start buying some of these companies, as opposed to contracting out to them. Because I have to think that Walmart won’t want to rely for too long on outsourcing of such critical functions, especially if they can position it as a differential advantage.

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From the National Grocers Association...

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Walmart, CVS Strike Deal On Health Care Network

Reuters reports that Walmart has made a last-minute deal to remain part of the CVS Health network for commercial and Medicaid pharmacy customers, reversing a decision reached earlier this week to sever the relationship.

Terms of the deal were not disclosed.

“In addition to its retail pharmacies and stores,” Reuters writes, “CVS is one of the country's biggest pharmacy benefit managers and, after buying Aetna, one of its top health insurance companies … On Tuesday, CVS said the companies had failed to agree on pricing and that Walmart was leaving the pharmacy network for the prescription drug plans that CVS manages for companies and health insurers and for the Medicaid program for low income people.”

Considering The Death Of The Department Store

The New York Times has a story about how the closing this weekend of Henri Bendel and the recent closure of the Lord & Taylor flagship store on Fifth Avenue may be inevitable, but certainly worth thinking about. “Such emporiums are going the way of the glossy magazine,” the story says, which is going the way of the dodo, but that doesn’t mean we should be cavalier.”

An excerpt:

“What were these grand department stores but monuments to our shared history, repositories of group memory? That’s why, whenever the end of the department store comes up, people immediately begin to quote everything from Émile Zola and ‘The Ladies’ Paradise’ to Judith Krantz and ‘Scruples.’ It’s why Midge Maisel was given a day job working the switchboard at B. Altman.

“They represented not only consumption, but also much more: the way New York became a city of aspiration, invention and reinvention. They were about communion and the treasure hunt for identity; rites of passage individual and generational. In their walls, memories lie. Losing them, we lose a piece of our own past too.”

People didn’t “go to stores to buy, necessarily, but to revel in a world that offered sensory delight without judgment. Unlike in the boutiques of today, no one followed you around watching to see if you would buy. You were anonymous until you didn’t want to be.”

You can read the piece here.

KC's View: Memory and nostalgia are fine … and I’m old enough to remember being taken to some of these department stores and seeing in them the notion of possibility beyond the suburban bubble of my childhood upbringing. It is good to remain connected to that past … but also not to think that it is somehow superior in nature to the present and future.

When I go online, I can find a lot of evidence of aspiration, invention and reinvention. In fact, it may be a lot more small-d democratic, not limited to people who can go to the big city.

Besides, as Tony Soprano once said, “‘Remember when’ is the lowest form of conversation.”

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Worth Reading: For Sears, What’s Next?

Bloomberg Businessweek has a good piece about what might be next for Sears, which has been rescued this week from liquidation - whether or not that is a good thing - by its chairman, Eddie Lampert, for $5.2 billion.

An excerpt:

“Allies say Lampert saved an American icon and the jobs of its almost 50,000 workers. Others say he simply delayed its inevitable death. Still others say he had a compelling personal motive to stay involved after creditors threatened legal actions over Sears’s asset sales during the years he led it.

“Besides having to offer more than $150 million over his earlier bid, Lampert had to give up a key bargaining chip to win the bidding. He’d been asking unsecured creditors to indemnify him from possible legal action over what the creditors allege were conflicts of interest in the stripping of assets from a failing company.”

One conclusion of the piece - Lampert may have saved Sears from death, but he is likely to spend a lot of time in court proving that this was positive for the company’s creditors.

You can read the story here.

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From Samuel J. Associates...

"It’s a bad time to be in the business of selling groceries, and the headlines are as bleak as you’d expect: "The Retail Apocalypse Is Coming for Grocery Stores" ... "Grocery Retail ‘Bloodbath’ Is Here" ... Conversely, it is a great time — arguably the best time ever — to buy groceries."
- New York Magazine/Grub Street


At Samuel J.Associates, we have a response to this assessment:

Bull.

We think it is a great time to be selling groceries, whether you are a retailer or a supplier. That’s because a more educated and demanding consumer, no matter the demographic, will reward businesses that are innovative, disruptive, and in touch with what people need, even if they don’t know they need it.

And, we know this: Those businesses require, and are fueled by, great people.

People who don’t just get the job done, but who set the tone in an organization, establish cultural and business priorities, who build teams, and who are able to not just adapt to competitive realities, but see the future and thrive in it.

And yes, ignore dire warnings about a "retail apocalypse" and see opportunities.

At Samuel J. Associates, we have a winning record of connecting great talent and innovative businesses ... as well as innovative talent with great businesses. We exceed your expectations so that you can do the same thing for your customers.

No bull.

Click here to find out more.

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The MNB Walmart Watch

CNBC reports that Walmart has decided not to launch a new advertiser-supported video streaming service that would compete with the plethora of other streaming services out there (Amazon and Netflix, for example), not to mention the ones being planned by other companies (NBC, Disney and Apple, for example).

The reason: “Walmart couldn’t get comfortable with making a large investment in content, a business where it has no real experience and where competitors such as Netflix can spend more than $10 billion a year on new TV shows and movies.”

Instead, the story says, “Walmart will focus on bolstering Vudu, the video service it acquired in 2010. Vudu offers a variety of movies and shows for free with ads or for purchase that can be rented or owned. Vudu is No. 3 in pay-per-view digital video, trailing Apple and Amazon, Variety reported in October.”

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From WAFC...

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E-conomy Beat

…with brief, occasional, italicized and sometimes gratuitous commentary…

Variety reports that “for the fourth quarter of 2018, Netflix reported 1.53 million paid net adds in the U.S. and 7.31 million internationally, to end the year with 139 million streaming members worldwide. The 8.8 million overall net gain was the biggest Q4 in the company’s history. Netflix had forecast Q4 U.S. net additions of 1.5 million paid streaming subscribers and 6.1 million international paid subs.”

I could end up being wrong about this, but I don’t think that the Netflix price increase will have a big impact on subscriptions. For me, that money - along with what I spend on Amazon Prime - is some of the best money I spend each year on entertainment.

FastNewsBeat

…with brief, occasional, italicized and sometimes gratuitous commentary…

• The St. Louis Business Journal reports that private equity-owned limited assortment store chain Save-A-Lot is laying off about 100 people at the corporate level, or about one percent of the company-wide workforce.

The company says that “the reductions are mostly managerial and administrative positions. They do not include store level team members nor do they impact operations at our 1,300 stores.”

Save-A-Lot was sold by Supervalu in 2016 to Canadian private equity group Onex Corp. for $1.4 billion. The Business Journal writes that “Save-A-Lot moved from its former headquarters in Earth City to its new headquarters at the Crossings at Northwest Plaza in St. Ann in early December. The company said at the time that it had invested $8 million to revamp the 162,000-square-foot space at the former Northwest Plaza where it would house 500 workers. Save-A-Lot's chief investment officer, Kevin Proctor, told the Business Journal last month that the company planned to add at least 60 employees after the move was finalized.”

One doesn’t normally shift from hiring to laying off if things are going well. Just saying.

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From Portland State University...

Here ya go!

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Your Views

…will return.

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“RETAIL 2020: What’s The Future (WTF)?” - A New Presentation by Kevin Coupe

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see the fast-evolving retail world through a radical new 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 pave the 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.

Constantly updated to reflect the hand crafted news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed over 30 years of writing and reporting about the best retailers and retail strategies, “RETAIL 2020/WTF” will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.


Here’s what Joe Jurich, CTO of DUMAC Business Systems, has to say about a recent appearance:

”Kevin recently participated in and spoke at our Annual User Conference.  Our group consisted of independent retailers, wholesalers, and software vendors – a pretty broad group to challenge in a single talk.  While his energy, humor, and movie analogies kept the audience engaged, his ability to challenge them to think differently about how they go to market is what really captured them!  Based on dinner conversations afterward, he appeared to have left everyone thinking of at least one new approach to their strategy!”

Want to make your next event unique, engaging and entertaining? Contact Kevin at kc@morningnewsbeat.com , or call him now at 203-253-0291.

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OffBeat: Citizen Ruth

I’m not entirely sure how Supreme Court Associate Justice Ruth Bader Ginsburg became perhaps the most unlikely cultural hero of recent years. Maybe it is because she seems indomitable. Maybe it is because, despite strong policy disagreements, she forged a close friendship with the late Associate Justice Antonin Scalia, which said something good about our ability to transcend partisanship.

That said, she’s a singular figure … and an early episode in her legal career forms the central story of On The Basis of Sex, which stars Felicity Jones as Ginsburg. The movie starts as she enters Harvard Law School - one of just a few women who get in, though they are challenged on why they are taking spots that could go to men.

Later in her career - she’s teaching law at Rutgers because she’s been unable to get a job at a law firm - Ginsburg is presented with an opportunity to represent a man who has been denied certain benefits because he is a man; she takes the case, working for the American Civil Liberties Union (ACLU), because she realizes that taking down any law that creates boundaries on the basis of sex will bring down similar laws that discriminate against women.

On The Basis of Sex is, in my view, a great story, though not a great movie. While much of it is a paint-by-numbers biopic, the theme of the movie - that women were systematically discriminated against and denied equal opportunity by a system largely engineered by men looking to protect the status quo - is compelling and timely. Jones is terrific, and supported ably by Armie Hammer as her husband, Martin Ginsburg - he gets points in my book (and Mrs. Content Guys) for being the best…husband…ever. Sam Waterston, Kathy Bates, and Justin Theroux round out a strong supporting cast.

It is going to be a cold weekend in much of the country, so if you can, turn this into part of a double feature … and watch RBG, the excellent documentary that came out last year about Ruth Bader Ginsburg. For me, both films reinforced the notion that our governmental institutions can work and, in fact, do work much of the time. Sometimes it is painful and laborious and difficult, and sometimes the results are not everything that we would hope for. But they work, and that’s something.



“Star Trek: Discovery” returned last night on CBS All Access with its second season premiere, and while I liked the uneven (and sometimes too dark and dour) first season, the evidence to this point is that things are going to get even better this time around.

As Trek fans and devotees know, “Discovery” takes place about a decade before James T. Kirk took command of the USS Enterprise, and focuses on the Discovery, and focuses on Commander Michael Burnham, the ship’s Chief Science Officer. Burnham carries a lot of Trek myth-making baggage - played by Sonequa Martin-Green, she is the first lead character on a Trek series not to be the ship’s captain, and she’s also the first African-American woman to lead a Trek show (which always has had diversity as a core value). And, the character is the foster sister of Spock, who is legendary in the Star Trek universe.

The second season opener also brings back another Trek legend - Captain Christopher Pike, who preceded Kirk as the Enterprise’s commanding officer, now played with steely vigor and humor by Anson Mount - he’s great, and a great addition to the crew. Plus, comedian Tig Notaro shows up as a ship’s engineer, and she’s fabulous - sort of a combination of Leonard McCoy and Montgomery Scott, and just what the series needs.

We know that a young version of Spock (played by Ethan Peck, following in the footsteps and pointed ears of Leonard Nimoy and Zachary Quinto) will show up this season, and that, in coin a phrase, the Discovery will go in search of Spock, in addition to saving the known universe (of course). Unlike much of last season, it looks like they’re going to have some fun along the way … as will we.

Sign me up for the whole trip.



A wine to recommend this week - the 2017 Albariño from Bodegas del Palacio de Fefiñanes, a lovely white wine that goes great with spicy seafood or chicken. Or even just a salad. Or by itself. (Let’s face it - I love albariño … it is one of my favorite white wines.)



That’s it for this week. Have a great weekend, and I’ll see you Monday.

Sláinte!!

PWS 53