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    Published on: May 29, 2015

    by Kevin Coupe

    The Washington Post this morning takes note of Chieh Huang, CEO of Boxed, on online retailer of bulk-sized grocery products, and how he has decided to offer his employees an unusual - and unusually generous - benefit.

    He is going to pay the college tuition for every one of their children.

    Huang says that he will fund the initiative largely with his own money, setting aside a percentage of his stake in the company to do so. No company funds will be spent on the project.

    "I actually don't think of it as a perk," he tells the Post, saying that he believes that employees have to believe that he is as willing to invest in them and their families as they are willing to invest their time and energy on his business. "If you're along with us for a ride, you deserve us investing back in you and your family's upward mobility," he says.

    He's also asking people who have invested in Boxed to contribute to the initiative: "I tell them I love that you're investing in me and us, but you have to value the employees as much as me."


    The Post reports that "the program covers four years of tuition (not room and board, say, or books). He says it is designed to help employees who chose to work at Boxed before the company goes public. Huang, whose decision was first reported by Forbes, also says he plans no eligibility requirements in terms of length of tenure, or cap on tuition.

    "Huang has started a nonprofit foundation, funded with a chunk of his personal shares in the company currently valued at between $1 million and $2 million, along with some cash to meet short-term obligations, to administer the program. As of now, the company only has 12 children among the families of its roughly 100 employees ... Huang says his goal is to give back to early employees as long as his stake doesn't significantly decrease in value."

    That's pretty cool. And, I think, reflective of what businesses may need to do to differentiate themselves in the face of heightened competition for employees.

    More on this trend below, in our story entitled "Companies Face Tighter, More Demanding Labor Market."

    It is an Eye-Opener.
    KC's View:

    Published on: May 29, 2015

    Published reports today say that Amazon is preparing to unveil a line of private label grocery products that will include categories such as milk, cereal, cookies and baby food, as well as non-edibles such as household cleaners. The move comes as Amazon continues to roll out its Fresh grocery delivery service, as well as expand its capacity for same-day shipping - all of which seem targeted at putting grocery front-and-center of the company's long-term strategy.

    According to the Wall Street Journal, "Amazon’s planned expansion in the private-label business mirrors a more traditional retail model where name-brand products are sold beside store-owned goods. Private labels have become a vital business for mass-market retailers, generating stronger margins and building loyalty with consumers who no longer view generic products as lower quality.

    "Earlier this month, Amazon sought trademark protection for more than two dozen categories under its Elements brand, including coffee, soup, pasta, water, vitamins, dog food and household items like razors and cleaning products."

    Time writes that the move reflects Amazon's desire "to take its fight with the likes of Costco Wholesale, Target and Walmart deeper into the grocery aisles ... The foray into private-label grocery comes as food is becoming ever-bigger business for major retailers. Groceries can bring higher profit margins despite the lower retail prices some retailers charge because the companies save on the marketing costs.

    "Such in-house brands are also finding more acceptance with customers, many of whom are increasingly looking for bargains and are more open to buying store brands."

    The Journal says that Amazon has spoken with a number of private label purveyors, including TreeHouse Foods, which some reports say has been chosen as its own-label supplier. However, neither Amazon nor TreeHouse are commenting on those reports.

    This move has been rumored for a couple of years, but this is the first time that it seems to be anchored in reality.
    KC's View:
    First, let me take a moment to contort myself so I can pay myself on the back ... because I've been suggesting that for years that is is the path on which Amazon inevitably would find itself. And I think I first wrote it when I ordered a cover for my Garmin and was able to save money when I ordered one that carried Amazon's private label; if this could work for a Garmin cover, I reasoned, wouldn't grocery be a natural next step?

    (Of course, even a broken clock is right twice a day. Let's face it, I got lucky. End of back-patting.)

    Having suggested that this is a natural next step, let me walk that back a bit. It also is a step that is fraught with complications, because Amazon is going to have to take an entirely different role now when it comes to quality control. It learned that the hard way when it brought out private label diapers in its Elements line, and then had to pull them back because of quality issues.

    This ain't easy stuff to do. It is a good time to do it, because private label is an ascending category, if you can get the quality-value equation right.

    Now, if I were Amazon (and I think it is fair to concede that Amazon won't be taking advice from me anytime soon), one of the things I'd do is a lot of sampling. If I were bringing out a line of cookies, for example, I'd go into the database and find out who has been a big cookie purchaser and send them some freebies, asking for feedback.

    I think that Amazon has to model its private label groceries on Costco, which always has put quality first in developing items that carry the Kirkland label. (In some cases, its private label is so strong and so respected that it actually can charge more for it than for national brands.)

    One of the things that Amazon has going for it is a high level of price transparency, so if it is undercut national brands on price, it will be able to make that fact very evident ... and can use its famed algorithms to figure out which of its customers are most price sensitive, and then market directly to them.

    Y'know, there are still retailers out there who believe that their business is not really threatened by Amazon ... but I hope that this new story convinces them otherwise.

    Amazon threatens everybody.

    Remember what Woody Allen said about relationships in Annie Hall? He said they are like sharks - they have to keep moving forward or they die.

    That's what Amazon is like these days. Moving forward. And eating everything in its path.

    Published on: May 29, 2015

    Just another day in the life of e-commerce giants...

    The Washington Post frames the story this way:

    "The battle for online shoppers intensified Thursday as several leading tech giants announced moves to lure consumers into their virtual malls.

    "In the morning, Amazon said members of its Prime program in select cities will have access to free, same-day delivery on certain items, a move that broadens the subscription service as new players are poised to provide fresh competition online.

    "In the afternoon, Google introduced 'Android Pay,' which will allow users to pay for items by waving their smartphones in front of a scanner at cash registers. And at its developer’s conference in San Francisco, the search giant announced it would add a 'buy button' to Web pages that makes it easier to purchase products featured in ads that appear alongside search results.

    "Meanwhile, Apple confirmed this week that it would partner with logistics company Postmates to offer same-day delivery of online orders. Apple already offers Apple Pay on its newer iPhones; analysts have said it is the first mobile payment system to gain traction with consumers."

    It also was interesting yesterday to see the Fortune story in which Target CEO Brian Cornell "came close" to thanking Amazon for waking up traditional retailers to the fundamental ways in which people's shopping habits are changing. "We almost need to say thank you to Amazon. They have taught the American consumer to shop online, but they don’t own that relationship,” he said at a Re/code conference.
    KC's View:
    As I said above, just another day...

    I would expect that we're going to have a lot of these days in the near future, as competition becomes more intense. The Post story didn't even talk about Amazon's new private label grocery initiative, or Walmart's creation of a program to rival Amazon Prime.

    Retailers are going to have a choice. Compete or not. There is no such thing as business as usual.

    It seems to me that retailers need to find ways to offer e-commerce services that will at least make them competitive with all these new offerings, plus work to make their stores as compelling and experiential and differentiated as possible. If they don't, they'll be collateral damage. Or roadkill.

    Published on: May 29, 2015

    The Washington Post has a story about a new Cisco study suggesting that "in five years, 80 percent of the entire world's Internet consumption will be dominated by video. That number will be even higher in the United States, approaching 85 percent."

    Compare that to now, when the combination of services such as Netflix and YouTube consumes roughly half of all internet bandwidth.

    The Cisco report "predicts that by 2019, the Internet will have become more or less a big video pipe. Part of the growth will come from adding new people to the Internet — for the first time, over half the world's population will be digitally connected. But individual Internet users are also expected to consume more video over time, and at a higher quality, which will put tremendous new burdens on the world's Internet infrastructure."

    The Post goes on to write that "implicit in this idea is that mobile devices will be the primary way users will access all this video. And researchers agree on that point. Five years ago, Americans were spending less than an hour a day on mobile devices. Today, it's more like three hours a day, accounting for more than half of the time we spend consuming digital media in general."
    KC's View:
    The business lesson from this story comes from a basic competitive reality - if all those people are going to spend all that time consuming video online, it stands to reason that they won't be consuming it in ways that we consider to be traditional. (Think broadcast and cable.)

    Which means that these traditional businesses have to find ways to continue to be relevant, and look for new business models that will allow them to stay in the game ... albeit a game that is radically changing.

    This is what is happening to everybody. If it hasn't happened to your business yet, it will. Count on it. And start planning for how to deal with it now.

    Published on: May 29, 2015

    USA Today reports this morning that "companies are scrambling to hold on to workers amid a tightening labor market and higher turnover, doling out bigger raises, expanding benefits and providing more training and other perks ... The U.S. unemployment rate last month fell from 5.5% to a near normal 5.4%, helping shift the labor market's balance of power to employees. In March, 2.8 million workers quit their jobs, largely to take other positions, the most since April 2008.

    "Companies are responding. Wages, salaries and benefits jumped 2.6% in the first quarter, the most since 2008, according to Labor's Employment Cost Index."
    KC's View:
    There will, of course, be the entirely legitimate argument from some that things really aren't all that good, that the unemployment rate is that low only because so many people have stopped looking for work and taken themselves out of the labor force. Which is true enough.

    But that doesn't change the fact that the labor market is tightening, that the economy is improving (though clearly not for everybody), and that companies are going to have to compensate based on these facts. I hope that business leaders are smart enough to realize that this is time to start closing the wage imbalance chasm that has afflicted this country for so long, with top-level execs making more and more money while the people on the front lines make less money.

    Some will say that better paid employees do not necessarily translate into more motivated and productive employees. (This is a standard line used to argue against an increased minimum wage.) That's true ... but creating a dedicated, motivated and productive workforce doesn't stop with a bigger paycheck ... it just starts there. Employees want to feel they have some skin in the game, that their opinions are valued, and even that they have a sense of ownership.

    If top-level executives can figure out how to create these kinds of environments, that'll be one way for them to start earning their money.

    Published on: May 29, 2015

    Internet Retailer reports that Home Depot's online sales "increased 30% in the quarter," to just over a billion dollars in revenue, and that "e-commerce accounted for 5% of total sales."
    KC's View:

    Published on: May 29, 2015

    • The Denver Business Journal reports that Natural Grocers by Vitamin Cottage will open two new stores in the Mile High City later this year. The story notes that Natural Grocers is pushing to increase its store count by about a third, to 120.
    KC's View:

    Published on: May 29, 2015

    • Dollar General Stores yesterday said that its COO, Todd Vasos, will be elevated to the CEO job, succeeding the retiring Rick Dreiling.
    KC's View:

    Published on: May 29, 2015

    ...will return.
    KC's View:

    Published on: May 29, 2015

    I've been trying for a week to think about how best to write about Tomorrowland, the new movie from Brad Bird, who has brought us such terrific films as The Iron Giant, The Incredibles, and Mission: Impossible - Ghost Protocol (which was, to my way of thinking, finally a really good Mission: Impossible movie because it was less about Tom Cruise, more about the mission, and actually had a sense of humor).

    The thing is, Tomorrowland has gotten only mediocre reviews, wasn't very successful at the box office on its opening weekend, and Mrs. Content Guy wasn't nuts about it. And the problem is that I completely understand why the reviewers and Mrs. Content Guy didn't like it much, and why audiences stayed away more than the folks at Disney expected.

    Still, I liked Tomorrowland. A lot. Didn't love it, but respected what it was trying to do, and liked much of what it did.

    I remember when I was in college at Loyola Marymount University, one of our teachers was Charles Champlin, who also was the main film critic for the Los Angeles Times. (That's my idea of a dream career.) Champlin was noted for being generous of spirit when he reviewed movies, and sometimes was referred to (by cynical, know-everything college students) as "the Will Rogers of film criticism" - he never met a movie he didn't like. But I don't think that's the case here, especially because as I get older, I find myself less forgiving of films that test my taste and patience.

    Without giving away too much, I can tell you that Tomorrowland is about a young woman, played by Britt Robertson, who finds a mysterious pin that seems to transport her to a futuristic land whenever she touches it; that leads her to a grumpy middle aged man (George Clooney) who, she believes, knows what that land is and how to get there.

    Among the problems that some people seem to have with Tomorrowland is that a) it takes too long to get going and is too long in general, b) the marketing was misleading, so they didn't know what to expect, c) seems to be much ado about too little, and d) is too preachy.

    As I said, I can't really disagree with these points. It is certainly true that the marketing for the movie hasn't given away very much ... which, to be honest, I found to be a nice change from trailers and commercials that seem to give away entire movie plots, leaving me often wondering why I needed to actually see the flick.

    But this is where I differ with some of the critics and even Mrs. Content Guy.

    At its core, Tomorrowland is a movie about hope ... about whether humanity is capable of innovation and imagination, of greater achievement and higher level thinking. In some ways, it is even a criticism of modern movies that seem to take a kind of perverse pleasure in watching cities come tumbling down because of alien invasions or natural disasters. Preachy? Sure, to some degree. But about one-third of the way through the movie, I decided that I liked the core message, agreed with it, and was willing to go along for the ride on which Bird wanted to take me. And from that moment on, I enjoyed myself immensely. Tomorrowland may have its flaws, but I was perfectly willing to look past them and enjoy the movie for what it is.

    There's a moment in the movie when Robertson's character talks about a Native American legend that, in fact, explains the movie in simple terms:

    There are two wolves who are always fighting. One is darkness and despair. The other is light and hope. The question is... which wolf wins?

    The one you feed.

    A good lesson, I think. There are worse concepts around which to build a movie.

    I also saw a lovely little movie, Love is Strange, last weekend, and I can recommend it without reservation.

    The film concerns two aging homosexual men, played by with great style and delicacy by Alfred Molina and John Lithgow, who after a decades-long relationship are allowed to marry when the law changes in New York. However, when they do so, Molina's character loses his job - he's a longtime chorus director in a Catholic school, and while the diocese has known about his homosexuality, same-sex marriage is more than it can handle. With the loss of his job comes the loss of the apartment they can no longer afford ... and they are forced to split up and live with friends and family members until they can find a place to live.

    Love is Strange is like a terrific and heartbreaking little short story ... it does not have any grand ambitions, and it plays out on a small scale. But it is about real people, and these days, few movies seem to be ... so I was happy to spend some time in Molina's and Lithgow's company.

    Finally, my daughter convinced me to sit and watch a comedy called The Wedding Ringer last weekend. It was pretty good - it stars comedian Kevin Hart as a fellow who hires out his services as a best man to people who don't have a friend to fill that role. Josh Gad plays the hapless client, and while the movie plays out pretty much as you'd expect it to, there are plenty enough laughs to go around.

    My guess is that Hart and Gad will end up reteaming at some point. Maybe they'll get a script that a little less predictable, and it'll be better for all concerned.

    I have a new beer to recommend to you this week - the Sierra Nevada Northern Hemisphere Harvest Wet Hop Ale.

    "Wet Hop" means that "wet - undried - hops go straight from the fields into our kettles within 24 hours," according to the Sierra Nevada website, creating an intense flavor that I found enormously tasty.

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

    KC's View: