business news in context, analysis with attitude

Published on: February 7, 2017

by Michael Sansolo

Paul Harvey, the famed radio broadcaster, used to say that "in times like these, it pays to remember there have always been times like these.”

In some respects, it’s a pretty calming statement. Sure, we tell ourselves, things are crazy now, but they’ve been crazy before and we managed to survive. That’s comforting, but it can also lead you astray if you approach tumult with complacency.

The truth is that the people, companies and industries that managed to survive other tumultuous periods did so by making the changes necessary at the time. They found a way to evolve, sometimes rapidly and dramatically, to confront and rise above the new environment.

That time is here again and let’s be clear, past success promises very little for the what’s happening today.

The Coca-Cola Retailing Research Council of North America is out with a new study examining the heart of the challenges the entire world of retail faces today and it’s a massive topic. In short, the question is whether retail as we know it can remain relevant to today’s shoppers, competition and technologies.

It’s a question that deserves consideration and discussion inside every company, no matter how large or small.

The study, assembled in partnership with Kurt Salmon Associates, offers a bevy of ideas and initiatives that retailers should consider to take on the challenge of continued relevance. But it also powerfully sums up why, with apologies to Paul Harvey, this challenge is unlike anything we’ve seen before. (Full disclosure: I am the Research Director of the Council and had a role in compiling this report.)

Start with this: in the emerging world the cornerstones of retail advantage are eroding or disappearing. Begin with location, which has always been the ultimate trump card against competitors. In the new world, the convenience of a great location is wonderful, but can hardly compete with the Amazon Echo or the like.

Other long-held advantages are equally threatened. No longer can retailers claim exclusivity of specific products. Channel blurring is on steroids in this new world. Plus, no longer will shoppers provide the free labor of choosing and transporting their own orders. Whatever else e-commerce may bring, profit pressures are sure to be a big part of it.

Continued relevance requires a new relationship with the customer, one that provides an improved and possibly personalized experience that solves the problem of the day or the moment, the meal or the specific shopping trip.

In other words efficiency still matters, but is no longer enough. Convenience and value both still matter, but they, too, are simply not enough.

Tomorrow is demanding more than ever and tomorrow is coming fast.

The new council study challenges retailers to consider how the shopping trip is changing and many key potential ways to respond. The study includes a diagnostic tool aimed at helping to get company teams and trading partners talking about the emerging issues so that a plan of response and attack can be formulated.

The road to irrelevance is likely a one-way street in the wrong direction. A roadmap seems like a really good idea. That's what the Coca-Cola Retailing Research Council of North America has endeavored to provide and you can download it here.


Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.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.

Published on: February 7, 2017

by Kevin Coupe

The New York Post has a story saying that Amazon CEO Jeff Bezos is contemplating the creation of "a two-story, automated grocery store in which a staff of robots on the floor upstairs grabs and bags items for shoppers below."

The story goes on: "The ground level of the futuristic prototype — a supermarket-sized version of its recently unveiled 'Amazon Go' convenience store, with a bigger layout that could span anywhere between 10,000 and 40,000 square feet — would be devoted to goods that shoppers typically like to touch ... Those could include as many as 4,000 items, spanning fresh fruits and vegetables, eggs, meats and cheeses, and grab-it-and-go stuff like beer and wine, the sources said. Pharmacies might also might spring up at some of the high-tech locations, as Amazon looks to break into the lucrative sector, insiders said.

"But for many, the most striking feature of the bigger stores is that they could operate with as few as three employees at a time. Sources said the plans call for staff to max out at 10 workers per location during any given shift." All because robotics will be employed wherever and whenever possible, taking on jobs that in the past might've been occupied by actual people.

And, the Post writes, "With the bare-bones payroll, the boost to profits could be huge. Indeed, the prototype being discussed calls for operating profit margins north of 20 percent. That compares with an industry average of just 1.7 percent, according to the Food Marketing Institute. Labor accounts for the lion’s share of a supermarket’s operating costs. In 2015, the industry employed 3.4 million workers nationwide, with an average grocery store employing 89 workers to generate annual sales of more than $2 million, according to the trade group."

All of which may scare the hell out of some folks.

Except for one thing. Amazon denies that it is planning any such store. (The Post is standing by its sources.)

I actually think both may be truthful. It is entirely possible that some of the folks at Amazon, at Bezos' behest, have envisioned such a store ... but that there are no actual plans to build one.

The key lesson here is that Amazon always is thinking about the next frontier, trying to figure out new ways to connect with the customer and disrupt old ways of doing business. Some will be pipe dreams, and some will involve the laying of actual pipe.

But it is always looking forward. That's the Eye-Opener.

Published on: February 7, 2017

The Washington Post this morning reports that the US Securities and Exchange Commission (SEC) may reconsider the enforcement of a rule established during the Obama administration requiring public companies to disclose the difference between how much senior executives make and the amount paid to typical rank-and-file employees.

The pay-ratio rule was part of the Dodd-Frank legislation that was designed to overhaul financial regulations that some believed led to the economic meltdown of 2008. Now, the Trump administration is pushing for a review of those regulations, with President Trump saying that he would like to upend those rules and relax the regulatory environment. That effort, the Post writes, "is expected to ignite a protracted battle on whether efforts to rein in Wall Street after the financial crisis when too far — or not far enough."

Michael Piwowar, the acting chairman of the SEC who voted against the rule originally, said yesterday that "it is my understanding that some [companies] have begun to encounter unanticipated compliance difficulties that may hinder them in meeting the reporting deadline." And so, he said, he has "directed the staff to reconsider the implementation of the rule based on any comments submitted and to determine as promptly as possible whether additional guidance or relief may be appropriate.”

The Post writes: "Piwowar, a Republican, was appointed to the agency's commission by President Barack Obama in 2013. President Trump appointed him acting chair last month. He replaced Mary Jo White, who stepped down upon Trump's inauguration. But Piwowar's time at the top is not expected to last long. Trump has nominated Wall Street lawyer Jay Clayton to head the SEC. The Senate has not scheduled Clayton's confirmation hearing."

Published on: February 7, 2017

Royal Ahold Delhaize-owned Ahold USA and Delhaize America said yesterday that following the merger of their companies last year, steps are being taken "to ensure they will remain customer-focused, close to their communities and positioned to win in their markets."

The move includes "the creation of Retail Business Services LLC, led by Roger Wheeler, President. Retail Business Services will leverage its scale to drive synergies and best practices as well as provide industry-leading expertise, insights and analytics to the Ahold USA brands and Delhaize America brands to support their respective strategies. Services provided by Retail Business Services, in addition to commercial support, will include financial services, not-for-resale procurement, legal services, information technology, and people systems and services."

The goal of the new services group is to allow each of the company's banners "to dedicate full focus on building on their leading positions in their respective markets and delivering even more for their customers. Each of the brands will have distinctive commercial strategies that are tailored to local markets with dedicated resources, including category merchandising, assortment, pricing, promotions, marketing and format teams."

The brand-centric structure is expected to be fully in place in about a year.

At the same time, Ahold USA also announced "that its Stop & Shop New York Metro and Stop & Shop New England Divisions will be consolidated into one brand organization. Having a single brand organizational structure dedicated to Stop & Shop will strengthen the brand and will ensure it can better leverage its brand to serve the unique needs of customers in the different markets that Stop & Shop serves."

Published on: February 7, 2017

The New York Times has a story about how Boulder, Colorado, "perhaps best known for craft beer and bicycles," is beginning to be known "as the place where new companies are challenging the old guard in the food business."

Not only are companies moving there, but along with them "the infrastructure such companies need — brokers, distributors, contract manufacturers ... The second-largest natural foods distributor, KeHE, opened an office here in 2013, and the Rodale Institute, a nonprofit research group devoted to organic farming, is opening a satellite office here."

Interesting piece, and you can read it here.

Published on: February 7, 2017

• The Seattle Times reports that Amazon is reporting " strong growth in its payments platform, with the amount of money that changed hands using the technology nearly doubling in 2016 from the previous year as it launched in several European countries and its adoption increased among retailers.

"Though it wouldn’t disclose dollar figures, Amazon said Tuesday that the number of consumers who have used the Amazon Payments platform at least once rose by 10 million in 2016 to 33 million, a bump of 43 percent. It’s a sign that the company’s bid to rival PayPal, Apple and other digital payment services is gaining traction."

Published on: February 7, 2017

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

• The National Association of Convenience Stores (NACS) is out with its annual c-store count, saying that as of the end of 2016, there were a record 154,535 stores, a 0.2% increase (340 stores) from the year prior.

The report goes on: "The industry store count has increased by 63% over the last three decades. At year-end 1986, the convenience store count was 95,000 stores; at year-end 1996, the store count was 104,600 stores; and at year-end 2006, the store count was 145,119 stores. Over that timeframe, there have only been five times when the store count did not set a record; the latest being year-end 2008 and 2009 during the Great Recession."


• Bloomberg reports that Apple is planning to expand its iconic Fifth Avenue store in New York City - more than doubling its size from 32,000 square feet to 77,000 square feet.

Apple already has moved into the space in the General Motors Building that used to be occupied by FAO Schwarz, where it will remain until the expansion of its regular store is completed.

The irony of the decision is that GM Building is just blocks from Trump Tower, a neighborhood where a number of retailers have experienced traffic issues because of increased security provided both by the NYPD and the Secret Service, not to mention protests for and against the administration.

Apple either is betting on a on-term Trump presidency, or a belief that the Apple brand is strong enough to supersede the Trump brand.


• When MNB reviewed the original Starbucks Reserve Roastery and Tasting Room in Seattle, one of the things we noted - with great pleasure - was the presence of a Serious Pie pizza restaurant inside. We've always been enormous fans of the Tom Douglas format, and finding it inside the Roastery was a terrific bonus.

But now, Serious Pie is being evicted (willingly) from the Roastery "to make room for a high-end Italian bakery and café (called Princi) Starbucks invested in last summer in an effort to appeal to customers with a more refined palate."

Tom Douglas Restaurants CEO Pamela Hinkley called it "a good outcome for both of our companies ... We enjoyed watching the Roastery come to life but it became evident to both of us that we each need our own dedicated space."

Published on: February 7, 2017

• Lorenzo Servitje, the cofounder of the Grupo Bimbo bakery company, has passed away. He was 98.

The New York Times,/i> writes that Servitje started the company with the goal of selling sliced white bread to customers in Mexico. Today, it is a "Mexican conglomerate whose trademarks now include Wonder Bread, Sara Lee, Entenmann’s, Thomas’ English muffins, Brownberry, Boboli and, in Britain, New York-brand bagels ... Today, Grupo Bimbo has 130,000 employees and 170 factories in 22 countries that make 10,000 products distributed by more than 11,000 vehicles."