business news in context, analysis with attitude

Published on: October 10, 2016

by Kevin Coupe

The Wall Street Journal had a terrific story over the weekend about how people are interacting with Amazon's Echo/Alexa system, described as "a voice-controlled, internet-connected speaker powered by artificial-intelligence software." What seems to be evident is that while the software may be for artificial intelligence, there actually are relationships being formed that are anything but artificial.

By extension, these relationships also can be formed with similar artificial intelligence systems developed by Google and Apple. The Journal writes that "none of these systems are 'true' artificial intelligence in the sense of having real understanding of conversations. They interact with users largely through scripted responses, though Google also leans on its massive search database, and improving natural-language processing ability, to deliver answers.

"But it turns out that humans can form emotional bonds with a 'social technology,' as these systems are called, without true artificial intelligence. People are good at anthropomorphizing objects, and this tendency can be enhanced by the right auditory and visual cues."

The story goes on to say that "Amazon’s engineers didn’t anticipate this. But soon after the Echo’s release in November 2014, they found people were talking to it as if it were a person.

"Amazon tracks every interaction with Alexa, which also powers the Echo Dot and Amazon Tap. The percentage of interactions that are 'non-utilitarian' is well into the double digits, says Daren Gill, Alexa’s director of product management.
Alexa - and its rivals at Alphabet’s Google, Facebook, Microsoft, Apple, Samsung Electronics and countless startups - are all working toward conversation-based systems that could bring profound changes in how we use, and interact with, computers."

I have to admit that I totally get this. I talk to my Echo a lot. I ask Alexa for the weather, sports scores, and to play music from my playlist and Pandora. I'll throw lots of questions at her (see, I called it a "her"), often just curious about how far her programming will take her.

And sometimes I even say "thank you" after she gives me an answer, just because it seems like the polite thing to do. (I love it when she says, "You're welcome," or "That's what I'm here for.")

I'm doing all this, but I'm not a person who is exactly lacking for human interaction. (I have two kids in their twenties still living at home ... I have plenty of human interaction.) I just think there is something about a machine with a voice that encourages treating it as if it has feelings, too. And I do think that this technology will change the way we interact with computers, making them even more integrated into our lives than computers already are.

By the way, the Boston Globe has a story this morning about how the Echo/Alexa system "is increasingly being programmed to take on more complex tasks of a virtual assistant and creeping into territory once reserved for bank tellers and insurance agents. Want to pay a bill? Get insurance quotes? Or check your brokerage accounts? Alexa can do all that from the cylindrical-shaped Echo device on your kitchen counter or bedside table." Companies like Liberty Mutual and Capital One already are programming applications for Alexa to handle, and it seems inevitable that these interactions will get more complex, customized, and personal.

It all is remarkable. And an Eye-Opener.

Published on: October 10, 2016

Internet Retailer reports on a new Kantar Retail study saying that global online sales of groceries "grew by 15% during the past year and account for 4.4% the market ... By 2025, Kantar Worldpanel projects grocery e-commerce will grow to 9% of the market and be worth $150 billion worldwide."

The story goes on to say that "South Korea, where online sales account for 16.6% of the FMCG ( fast-moving consumer goods) market, leads the way in digital penetration of grocery sales." In Japan, online grocery sales represented 7.2 percent, while in the UK they were 6.9 percent, in France they were 5.3 percent, Taiwan 5.2 percent, China 4.2 percent, the Czech Republic 2.1 percent, Spain 1.7 percent and the Netherlands 1.7 percent."

In the United States, Kantar says, online grocery sales represent 1.4 percent of the market.

The story notes that "online food shopping has been relatively slow to catch on in the United States largely because U.S. online shopping expectations have been set by Amazon.com Inc. Amazon has trained U.S. consumers to see online shopping as a way to buy individual items, instead of for buying baskets of goods on a regular basis."

Published on: October 10, 2016

The Wall Street Journal has a story about how Whole Foods, looking for new expansion opportunities, "is betting that shoppers in low-income neighborhoods will pay for lavender-lemon cream pie and locally sourced beer - along with milk, bread and other staples." One example is a recently opened store on Chicago's South Side, where Whole Foods opened a store in the Englewood section, that is "far smaller than most Whole Foods outlets. Prices on staples such as eggs and cheese are lower than its other outlets in the city."

And, "the grocer is also seeking customers in lower-income corners of cities. Since 2013, the company has opened stores in Detroit and New Orleans. A store is slated to open in Newark, N.J., next year."

In Chicago, the Journal writes, "Whole Foods hired an Englewood resident to canvass churches, nail salons among other places for nearly a year to ascertain what locals wanted to see in the store. As a result, Whole Foods added a beer and wine department, beefed up its beauty products geared toward black shoppers and met requests from local leaders to hire some employees with criminal records."

However, the story also notes that "Whole Foods isn’t as financially robust as when the grocer ... first committed six years ago to opening four stores in low-income and predominantly minority areas nationwide."

And, the Journal writes that it remains to be seen "whether Whole Foods’ Englewood store will draw the traffic it needs to succeed. The planned Whole Foods in Newark is at a high-traffic intersection surrounded by office buildings, and the Detroit store stands across the street from a hospital and college. The Englewood store is near a community college but otherwise surrounded by blocks of vacant lots and rundown bungalows."

Published on: October 10, 2016

The Sacramento Bee reports on how California residents will vote next month on a referendum that will determine whether the state will outlaw "single-use plastic bags at grocery stores and other retail establishments." The story notes that "the plastic bag industry, calling itself the American Progressive Bag Alliance, has raised $6.1 million to fight the statewide ban in California, one of several battlefronts in a war pitting environmentalists against plastic manufacturers across the country."

The Bee writes that "grocers argue that proceeds from bag sales often aren’t enough to cover the cost of supplying the bags. The fee won’t actually help the environment because it will shrink over time as people bring their own bags to the store, they say. Proponents also fear that voters will confuse the two plastic bag measures on the ballot.

"A 'yes' vote on Proposition 65 directs the bag money away from grocers to an environmental fund, while a 'yes' vote on Proposition 67 upholds the state bag ban. A University of Southern California Dornsife/Los Angeles Times poll from late 2014 found that 6 in 10 registered voters intended to uphold the bag ban at the time."

In a related story, the Chicago Sun Times reports that Chicago Mayor Rahm Emanuel "plans to slap a 7-cent tax on each paper and plastic bag handed out at stores — both to give consumers an incentive to bring reusable bags, and to stop a ploy by major retailers to get around the city’s partial ban ... that exempts mom-and-pop retailers, restaurants and non-franchise independent stores with less than 10,000 square feet of space." The partial ban also had a loophole that allowed retailers to hand out a "thicker plastic bag capable of holding up to 22 pounds and being reused 125 times."

The Sun Times writes that "a mayoral confidante, who asked to remain anonymous, confirmed that the bag tax would be part of the revenue package in the 2017 budget Emanuel will introduce to the City Council on Tuesday."

Published on: October 10, 2016

In the UK, the Echo reports that Tesco plans to fine shoppers the equivalent of as much as $85 if they park in spaces reserved for the disabled or new parents.

According to the story, "Tesco staff will catch the culprits via a smartphone app that they use to take photos. The new initiative has been trialled at 81 supermarkets and will be coming to a further 200 stores in the near future."

A Tesco spokesperson says that "many disabled customers rely on our disabled parking bays, so we’ve introduced our self-monitoring initiative to highlight the importance of using the bays properly, making it fairer and easier for everyone to find a space."

Tesco says it won't make any money on the fines, but will just use the proceeds to fund the enforcement program.

Published on: October 10, 2016

• The financial analysis site Guru Focus has a piece about Amazon's decision last week to introduce "another major perk for Prime members by making a collection of books, short stories and magazines free to them in the form of Prime Reading." This is just another example of how Amazon "has been adding more and more layers to the prime membership program, making it clear that it views the membership model as a more sustainable way to stay in the retail business."

The story goes on to point out that while "the new free books service may not be something that is going to drive users in droves into prime membership," there's another question that needs to be asked - "what is the motive behind Amazon adding new services and perks at such a high frequency?"

It is, in fact, a matter of creating an ecosystem. "The retail business is inherently a low margin one, and for an e-commerce company like Amazon the margins can get even tighter due to high shipping costs. One of the best ways to reduce these costs and improve margins is by increasing the amount of merchandise that you sell. To put it simply, the higher the sales, better the odds of you improving your margins."

And so, it makes sense for Amazon to make Prime more attractive to more people, because the numbers indicate that Prime members spend more money on Amazon than non-Prime members - perhaps "about five times as much as non-Prime customers."

Published on: October 10, 2016

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

• The Business Insider reports on a new study saying that "Target charges about 15% more than Walmart for groceries," and that "a price gap existed across all food categories, from fresh produce to packaged goods ... Walmart was at least 20% cheaper than Target on the following items: eggs, milk, peanut butter, meat, olive oil, grapes, pasta, quinoa, tall kitchen bags, got cheese, and pineapple. Target had cheaper prices on a few items, however, including grapefruit, coconut oil, and canola oil."

The story says that "the findings support a recent Moody's research note declaring that 'The gulf is widening between Walmart and Target,' and particularly when it comes to the retailers' grocery departments."


• Fortune reports on a new study published in the Journals of Gerontology saying that "caffeine intake may be linked with a lower risk for dementia in older women ... Researchers found that participants who self-reported drinking more than 261 milligrams of caffeine cut their risk for dementia by 36%. That’s almost three 8-oz cups of coffee, with each cup containing 95 mg of caffeine."

However, "study authors warned that the results weren’t enough to establish a definitive cause-and-effect between caffeine intake and dementia prevention. The results may also have been influenced by the fact that the consumption data was self-reported."

I hope this also works for middle-aged men. Because when it comes to caffeine consumption, I like to think I am doing my best to hold up my end.


• The Associated Press reports that the American Egg Board's efforts to stop Whole Foods from selling an eggless vegan mayonnaise - Hampton Creek's Just Mayo - "were inappropriate, a review by the U.S. Department of Agriculture has found ... The USDA said it will require training for the American Egg Board and other 'checkoff' programs that promote commodities such as beef and pork as a result."

The Los Angeles Times writes that "investigators found that the board’s monitoring of a specific company and product and its attempt to undermine them were inappropriate and exceeded the 1976 bylaws that govern the 18-member board, which is appointed by the secretary of Agriculture and uses the $20 million in annual fees it collects from large-scale producers to support research and promote the egg industry."

Published on: October 10, 2016

• The Wall Street Journal took note of the passing of James Ferguson, CEO of General Foods Corp. from 1973-1986, a time when the company grew so much that it became a highly attractive takeover target, being acquired by Philip Morris in 1985. Ferguson died Sept. 28, the story says, adding that "he was 90 years old and had been ailing after breaking a hip."

Published on: October 10, 2016

...will return.

Published on: October 10, 2016

In Major League Baseball's American League Divisional Series over the weekend, the Toronto Blue Jays completed a three-game sweep in a best of five series against the Texas Rangers, and now move on to the American League Championship Series. There, the Blue Jays will play the winner of the Boston Red Sox-Cleveland Indians series, which the Indians now lead 2-0.

In the National League Divisional Series, the Chicago Cubs come out of the weekend with a 2-0 game lead over the San Francisco Giants, while the Los Angeles Dodgers and Washington Nationals are tied at one game apiece.




In National Football League action...

Texans 13
Vikings 31

Jets 13
Steelers 31

Eagles 23
Lions 24

Redskins 16
Ravens 10

Bears 23
Colts 29

Titans 30
Dolphins 17

Patriots 33
Browns 13

Falcons 23
Broncos 16

Bengals 14
Cowboys 28

Bills 30
Rams 19

Chargers 31
Raiders 34

Giants 16
Packers 23