business news in context, analysis with attitude

Published on: May 15, 2017

by Kevin Coupe

I have a good friend of mine who is immensely fond of the phrase, "Life is too short to drink cheap wine." (I would extend that to mediocre beer and lousy fast food.)

In the UK, Marks and Spencer has taken the sentiment to heart, unveiling a new advertising campaign, "Spend It Well," that focuses on the power of great products (mostly food and clothing) to enhance one's life. Using a wide variety of people and places, the campaign is highly aspirational, with just a hint of British cheek, saying at one point, "If it doesn't make you feel ten feet tall, if it doesn't take you somewhere extraordinary, say no ... We only get one life. Let's spend it well."

The campaign hasn't been universally applauded - some people find it to be too cultural and too little about brands - but I like it a lot ... especially because in a market where discounters have been doing significant damage to traditional retailers, this ad seeks to differentiate Marks and Spencer in a way that I think is quite effective. It also tells a story, and endeavors to illustrate an emotional connection between the retailer and its customers.

I believe a lot of retailers have not been effective enough about communicating the fact that "low price" and "value" are not the same thing, and that a a store can have both value and values without driving relentlessly toward the lowest common denominator.

I think that's what Marks and Spencer is doing in this ad ... and it is an Eye-Opener.

Published on: May 15, 2017

Bloombergreports on a new Seattle startup, Flexe, which "has created a marketplace of spare storage space in 550 warehouses, quickly establishing better geographic coverage than the vast delivery network that Amazon.com Inc. spent decades and billions building. Flexe did it without spending a nickel on facilities and already has 25 million square feet of storage, about 25 percent of Amazon’s capacity, and expects to add 10 million square feet this year."

Flexe defines itself as an overnight delivery service focusing on online merchants that "are looking for new ways to reach customers but have few options that match Amazon’s speed. And because the inventory is stashed all over the country, overnight deliveries can be made by truck rather than plane, which is cheaper."

The company launched in 2013 by "offering 'overflow' services, when retailers and wholesalers needed to stash pallets of inventory for brief periods. Flexe added online order fulfillment last year, giving warehouse operators the option to charge more to pack and ship individual orders directly to shoppers' homes."

Published on: May 15, 2017

The National Retail Federation (NRF) is launching a new advertising campaign designed to fight efforts by the financial services industry to roll back provisions in the Dodd-Frank Act that reformed the way debit card swipe fees were assessed by Visa and Mastercard.

The swipe fee provision, known as the Durbin amendment, "shifted billions of dollars of revenue from the banks and other financial institutions to the merchants," the Wall Street Journal writes. "Banks say consumers haven’t seen cost savings, a point that retailers dispute."

Dodd-Frank has been under attack since the Trump administration took office, with expectations among the Wall Street wing of the Republican party assuming that control of both the legislative and executive branches meant that Dodd-Frank - enacted during the Obama administration - could now be dismantled. However, these interests have run up against the Main Street wing of the GOP, which objects to any change to swipe fee reforms.

The Journal writes that "until now, the group and ones representing card issuers and networks have targeted ads at Washington audiences. The retailers new ads will run in the Winston-Salem, N.C., market and will spread to other markets in the country over the next couple of weeks at a cost that will run somewhere in the mid six figures, the retail federation said ... Banks and card networks haven’t yet said if they will begin advertising nationally."

Published on: May 15, 2017

Inc. has a fascinating story saying that while the anecdotal evidence suggests that these are tough times for bricks-and-mortar retail, a broader look suggests that things are not so bad.

"Apple's stores have been a hit," the story points out, "and a number of digital companies, like Amazon, Warby Parker and Bonobos have been opening brick and mortar locations. Sure, e-commerce is growing, but the Census Bureau estimates that it still accounts for less than 10% of total retail.

"As Darrell Rigby explained in an article in Harvard Business Review, every 50 years retail goes through a major disruption. The rise of urban centers led to department stores. Automobiles created suburbs and shopping malls. Then category killers and discount stores challenged that status quo. Today, retail is in the process of being reinvented once again."

You can read the entire story here.

Published on: May 15, 2017

The Los Angeles Times reports on how Domino's Pizza has "aggressively embraced digital technology to make ordering more efficient, customer friendly and maybe even cool," which has been a critical part of a broader strategy to revive the brand. (Making the food taste better and the stores look nicer helped, too.)

The Times writes: "More than 60% of Domino’s orders are now executed on digital platforms, rather than by phone, and Domino’s often refers to itself as a 'technology company.'

"Customers can order on Domino’s own smartphone app, Amazon.com Inc.’s Echo speaker or online via Facebook, Twitter and other platforms as well as at the Domino’s website. Discounts often are included when ordering online, and there’s a loyalty rewards program.

"In the cool technology department, the Domino’s app includes an order tracker that lets customers follow the preparation and delivery of their food. It also has a voice feature allowing customers to order by simply speaking into their phones."

CEO J. Patrick Doyle tells the Times that Domino's strategy has been centered not around new product introductions - he says the chain tries to be judicious about new menu items - but rather around improving the experience of ordering favorites, which is "what’s ultimately going to drive growth in the business." The company is less risk-averse when it comes to technology innovation, which is "the sort of thing that’s not going to generate a fast return, but that’s part of how you stay ahead of the market."

Published on: May 15, 2017

Bloomberg reports that "the proliferation of commercial drones won’t be so much about getting your pizza or new shirt faster - although there is that consideration - but a broader change in how companies employ aerial surveillance and data to inform their businesses, spurred by efficiency and new U.S. rules allowing commercial unmanned systems to operate at farther distances, autonomously.

"A diverse array of companies, ranging from insurers and utilities to real estate and energy, are likely to shift some of their operations to UAV. Some of the work now done by helicopters could be replaced at lower cost. Insurers, for example, are finding aerial surveillance to be a good method for assessing claims after tornadoes and hurricanes and to help understand risks in their underwriting activities."

Published on: May 15, 2017

National Public Radio's Marketplace had a story over the weekend about how some outlet malls - which have been celebrated of late because they've avoided the hard times that have hit so many traditional malls around the country - are changing the way they do business, hoping to attract more shoppers who will spend more money.

Part of the effort is focused on offering better food options, but they're also beginning to open stores that are selling products at full price.

The story says that the outlet malls "are moving into the mainstream to reach even more millennial shoppers, who spend more on apparel than any other group."

And retailers, which "used to have restrictions keeping outlets far away from their full-price stores," now are relaxing or eliminating those restrictions."

Published on: May 15, 2017

The Washington Post had a piece over the weekend about demonstrated "weaknesses in the way that the United States ensures that what is sold as 'USDA Organic' is really organic."

While federal officials describe the regulatory system as "robust," critics say that "the system suffers from multiple weaknesses in enforcement: Farmers hire their own inspection companies; most inspections are announced days or weeks in advance and lack the element of surprise; and testing for pesticides is the exception rather than the rule."

You can read the entire story here.

Published on: May 15, 2017

• Arkansas Online reports that Walmart is partnering with a tech firm called RevUnit "to establish a hub for young startups that is to be called Exchange."

According to the story, the collaboration "will provide selected companies with free working space, mentorship opportunities and access to events that could help foster relationships between entrepreneurs and established businesses in Northwest Arkansas. The space will be located in RevUnit's new headquarters in the former Farmers Exchange building near downtown Bentonville. Space will be reserved for startups selected through an application process."

Published on: May 15, 2017

• The Milwaukee Journal Sentinel reports that AmazonFresh now is available to Milwaukee-area customers, noting that "AmazonFresh costs $14.99 per month as an add-on to the online retailer's popular Prime membership program ... The monthly AmazonFresh membership allows for unlimited deliveries on orders of $40 or more."

AmazonFresh also is offering delivery of products from a number of local retailers in addition to items from its own warehouses.


• The Wall Street Journal reports that Amazon "is making a major push into furniture and appliances, including building at least four massive warehouses focused on handling bulky items, according to people familiar with Amazon’s plans.

"With that move, the Seattle-based retailer is taking on two companies that dominate online furniture sales— Wayfair Inc. and Pottery Barn owner Williams-Sonoma Inc. Furniture is one of the fastest-growing segments of U.S. online retail, growing 18% in 2015, second only to groceries, according to Barclays. About 15% of the $70 billion U.S. furniture market has moved online, researcher IBISWorld says."

Published on: May 15, 2017

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

• The Puget Sound Business Journal reports that as Amazon continues to reshape the Seattle skyline with new buildings, one of them will include a permanent homeless shelter run by local charity Marty's Place. The "47,000-square-foot shelter will have 65 rooms and will house more than 200 homeless women, children and families," the story says.

“Mary’s Place does incredible, life-saving work every day for women, children, and families experiencing homelessness in the Seattle community,” Amazon CEO Jeff Bezos said in a news release. “We are lucky to count them as neighbors and thrilled to offer them a permanent home within our downtown Seattle headquarters.”

Good for Amazon, which often has been criticized for a lack of charitable giving in Seattle. This is a great way to address that issue and the larger issue of homelessness.


• The Boston Globe reports that LL Bean has signed a deal to open a 8600-square foot small-format store in Boston's Seaport District, which "will be the company’s first full store in an urban setting," and a test to see if the format could be opened elsewhere.

Ken Kacere, the company’s vice president of retail, tells the Globe that the new store will "present a 'really curated supply of our products' ... with a focus on attire that will appeal to a more urban crowd. As an example, he cited the company’s Traverse line of clothing, which is designed to be worn both in the office and on the trails."

This is what smart companies do. Focus the value proposition, and test new ways to bring it to shoppers.


• The Associated Press reports that some Massachusetts lawmakers "are joining activists in other states pushing for taxes on sodas that they say will ease the rise in obesity-related diseases and bring in money for programs aimed at improving the health of children in Massachusetts ... The bill would set up a tiered tax rate based on the amount of added sugar per 12 fluid ounces of a drink over 5 grams. Beverages with between 5 and 19 grams of sugar per 12 fluid ounces would be taxed at one cent per ounce. Beverages with 20 or more grams per 12 fluid ounces would be taxed at 2 cents per ounce."

However, even if the bill gets through the legislature, GOP Gov. Charlie Baker has said that he will not sign it ... so prospects for a soda tax in Massachusetts in the short term are not good.

Published on: May 15, 2017

Powers Boothe, a longtime character actor with a deep Texas voice and a talent for playing corrupt authority figures, passed away over the weekend at age 68. He was perhaps best known for playing cult leader Jim Jones in a TV movie "Guyana Tragedy: The Story of Jim Jones," as well as roles in "Deadwood" on HBO and the films Tombstone and Sin City.

Published on: May 15, 2017

Got a number of emails last week responding to my piece about Kroger's single-store test, Main & Vine, which disappointed me when I returned to see it a year after it opened.

One MNB reader wrote:

This was a great observation of what I believe is a systemic opportunity in the grocery industry (any retail business). What you observed at Main and Vine is any grocery store USA…with rare exception. The Ted Williams analogy is perfect, Ted still had to practice every day. I believe everyone from executive to store personnel can see the in store opportunities, the first retailer that fixes it will win ALL the business.

Kroger has sustained for over 100 years, they need to dig deep to see how/ why that happened. The answer is people customers, associates and suppliers. With associates being the most controllable, they touch both the customers and the suppliers. I would argue that what has sustained The Kroger Company has been the releasing of the entrepreneurship of the individual divisions. Ten years of trying to be Walmart is catching up…they need to go back to being The Kroger Company. Just look back anyone that tries to be Wal-Mart is where, Albertsons, Winn Dixie, Safeway and Target…they are all limping along trying to figure out how to sustain their grocery business.

From another reader:

I too visited the store in April 2016.  I found that perishables and perimeter departments excellent.  However a store employee told me the sales volume and it really wasn't much higher than when it was a QFC.

Later I visited a large Kroger owned QFC store next to the University of Washington campus.  This was much more impressive than Main & Vine.  It had everything Main & Vine had and more.  The parking lot was solidly packed.  I was told the store does well over a million per week and that was obvious.  I was more impressed with this store than Mariano's.  This store was not implementing anything from Mariano's, Harris Teeter, or Main & Vine.  This was all Kroger right from the beginning.  Kroger does not need to copy ideas, they have always had t he ability to pull off an impressive format when they want to.  My suggestion to Kroger is to turn Main & Vine back into a QFC.  Forget trying to copy Whole Foods in the center store.  Just be who you are.

For the record ... it is my understanding that the QFC next to the University of Washington may be the single best performing QFC in the fleet - it is a terrific store with really, really high volume. So it may not be fair to compare it to other stores.

MNB reader Bob Wheatley chimed in:

What’s happened to Mariano’s?

Ask Bill Kies the same question and you’ll get a similar review: Since Chairman Bob has left the scene, decline has set in as the once shining jewel of Chicagoland food retail that starts to look increasingly like a mainstream Jewel. When Bob was around the stores were pristine, service levels and consumer contact in the aisles was extraordinary and merchandising was in top form.

Now you find messed up shelves, out-of-stock conditions, virtually no customer contact outside the Deli of any kind, dirty and disheveled aisles. Bob looked at Mariano’s as his opportunity to remake the definition of a supermarket from the ground up. In every new store opening he would experiment with interesting additions in the perimeter from oyster bars to vegan prepared food counters.

At the Mariano’s near me, right in front of a special custom spices area and in the midst of a specialty tea bar was a 7 foot tall stack ‘em high and watch ‘em fly pile of detergent and toilet paper on deal. It was so inconsistent with the vision and retail experience Bob was working to create. The store management lapses are hard to fathom. Would Wegmans ever allow this kind of thing to happen? I think not. Bob is missed, you can see it the moment you walk in. Another bit of evidence that leadership and vision, once removed, can commoditize even the greatest of retailing ideas.

MNB reader Ken Wagar wrote:

I agree with virtually everything you reported regarding Main and Vine except for this statement:
 
"I'd find two or three great people from Harris Teeter and Lucky's, and I'd parachute them into Gig Harbor to spend 4-5 days getting Main & Vine into shape ... doing a forensic analysis of what isn't working, and setting out the tasks that need to be done to make it a more effective and compelling experience. And I'd make the store's personnel accountable for living up to expectations. No excuses."
 
No offense intended but this statement shows a remarkable lack of understanding of what it takes to create and maintain a great supermarket presentation. I have the deepest respect for Wegmans and for Dorothy Lane Markets and other great retailers but even they couldn't send 2 or 3 people into a poorly run store and turn it around for the long term in 4 or 5 days. I have been part of such teams many times in the past 40 years in many different formats and with many different retailers. Just doesn't happen. Now, moving 2 or 3 high qualified people into that unit for the long term with training and development time and hiring and firing authority may well do the trick. Just sayin' it's tougher than you suggest by a long ways. Could a small team make the store look great in 4 or 5 days? Probably. Would it then be maintained that way long term when they left? Very doubtful.

And from another reader:

The out of stocks you showed in your pictures were all perishable items and could be a sign that it is not doing enough volume to support filling the shelves.  I visited the store 2 times within a month of its opening.  It was busy then but I heard the volume wasn’t as high as they hoped.  Kroger hired someone from King Soopers to manage it, which I never understood.  The focus at M&V is very much on “local items” so why didn’t they hire someone local from QFC to manage it?  A local manager would know the local DSD and perishable vendors and the products that sell locally without there being a learning curve.