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    Published on: March 23, 2018

    by Kevin Coupe (with a little help from an MNB friend)

    There has been a lot of discussion since Lidl decided to begin opening stores in the US about the degree to which it is being effective … with the general sense being that it may take a little longer to gain traction than the company may have expected.

    Or a lot longer, judging from the pictures than an MNB reader sent me this week, and that you can see below.

    This reader said that over a series of visits to a Lidl store in Greenville, South Carolina, he found empty shelves that never seemed to get filled. Finally, after a third visit, he took these pictures.

    “I have discussed with management,” this reader told me, “and the responses have been, ‘trucks late, labor hours cut, and ordering processes still need work’. They spend continue to send me flyers, and email spam, but they never have the specials on the shelves, or anything else for that matter.”

    Regardless, the MNB reader adds, management adheres to company policy - "no rain checks and no substitutes.”

    Now, let’s be clear. This is one store, and it could be an outlier.

    But, it always has been my observation that a persistent problem with many limited assortment stores - including Aldi, Lidl, and Save-A-Lot - is that they are prone to suffering from “nobody gives a damn” disease.

    That certainly seems to be what is happening here. And it is an Eye-Opener.

    KC's View:

    Published on: March 23, 2018

    Bloomberg reports that Amazon-owned Whole Foods is looking to open larger stores as it expands, with the desire to use the extra space as small distribution centers that can help it fulfill orders placed on Amazon’s site.

    In addition, the story says, “Whole Foods is … working with Regency Centers Corp., one of its largest landlords, on a project to convert parking areas at existing stores into stalls for Amazon delivery contractors to load up their orders.”

    According to the story, “Amazon’s investment in physical retail is partly designed to lift the online shopping business. The company began rolling out two-hour delivery of groceries from Whole Foods stores in the U.S. last month. It currently maintains separate warehouses for orders of non-grocery items. Combining them could help Amazon cut costs and deliver goods more quickly. The plan would more deeply integrate the business Amazon acquired last year for $13.7 billion.”
    KC's View:
    Not surprising, and completely logical … especially as Amazon tries to find ways to drive down its fulfillment costs even while playing a great role in the delivery part of the customer experience. (We have a story about this below.)

    In the long run, I suspect, we may see Amazon/Whole Foods reducing the center store footprint and, as appropriate, expanding the backroom sections of these stores. It’ll make sense, as customers order packaged products online, and look to use the bricks-and-mortar store for fresh purchases.

    This will, I think, create challenges for the competition, as the savvy companies consider ways they can rationalize their space even while figuring out how to control more of the process where they can. Less savvy companies won’t get it, and will miss the wave, risking irrelevance.

    Published on: March 23, 2018

    The Sacramento Business Journal reports that California-0based Raley’s has made its first acquisition since the 1990s - six Scolari’s Food & Drug stores in northern Nevada.

    Terms of the deal were not disclosed.

    According to the story, five of the stores “will be rebranded as Raley's. Those stores currently operate as Scolari’s Food & Drug. The sixth store, Sak ‘N Save, is also under the umbrella of Scolari's. Under the acquisition, it will still be called Sak ‘N Save and become part of the Food Source division of Raley’s.”

    The Journal notes that “in addition to the stores it just acquired, Raley's has 122 stores under four banners. Its most recent acquisition was in the 1990s, when the chain purchased Nob Hill Foods in the Bay Area and Bel Air Markets locally. Acquiring the Scolari’s stores will bolster the presence of Raley's in Nevada, where it currently has 11 Raley’s stores, one Food Source location and two Aisle One fuel stations.”
    KC's View:
    This is what companies like Raley’s have to do in order to survive - expand the footprint so it can have greater buying power while at the same time working hard to create a shopping experience that is more unique, more compelling, more differentiated.

    Can’t do one without the other.

    Published on: March 23, 2018

    Motley Fool has a story about how Amazon appears to be grappling with increased shipping costs - the downside of its Prime program that, for $99 a year, offers guaranteed two-day shipping on more than 100 million items. Fulfillment costs went up more than 43 percent to $25.2 billion last year, as revenue only went up 30.8 percent, which creates a gap that Amazon would like to close.

    According to the story, “Amazon has been working to fix this issue for years. Amazon's add-on program, where certain cheaper items are only available as part of a $25 order, reduces Amazon's costs at the expense of forcing Prime members to deal with order minimums for some items. Some grocery and household items are only available though Prime Pantry, which tacks on a $5.99 delivery fee even for Prime members. And some items are only available through Amazon Fresh, which carries an additional $14.99 monthly fee for Prime members and requires a minimum $50 order to avoid a $9.99 delivery fee for each order.”
    KC's View:
    As a way-too-frequent Amazon customer, I’ve noticed this, though it hasn’t bothered me and I haven’t found it getting in the way of my regular shopping behavior.

    I do think that these are the things that Amazon has to calibrate carefully - there is a point where Prime no longer would seem like a good deal, though I think we’re a long, long way from that. The thing is, Amazon has so much data and such sophisticated analytics that the odds seem pretty good that it knows where the tipping point is … and can avoid it.

    Published on: March 23, 2018

    TechCrunch reports that Kozmo, the dot-com delivery startup that during the late nineties went through $280 million in investment capital before crashing and burning, is back for another try, albeit with new ownership and management and a different business plan.

    “Instead of delivering anything from videos to games to books and more,” TechCrunch writes, “the new Kozmo is focused on bulk delivery of groceries. Kozmo will offer next-day delivery, with the goal of delivering on-demand within two hours, for groceries. Kozmo will initially charge a $5.99 delivery fee for orders costing a minimum of $35. With Kozmo, the company says customers can expect to save between 20-50 percent off retail prices … Kozmo seems to be going after Costco, Jet and, the site for buying food and household items in bulk that similarly does not charge membership fees.”

    Kozmo only is delivering in Los Angeles at present, but has plans to expand later this year. It is being positioned as the delivery service for grocery ordering platform Yummy, the ownership of which bought the brand name.

    Kozmo CEO Barnaby Montgomery tells TechCrunch that “ is an iconic brand that millions of people remember. In addition, it’s synonymous with convenience so we felt that keeping the name with our updated offering was the perfect fit.”
    KC's View:
    If this logic is correct, then I suppose that at some point we’ll see yet another car called the Edsel, a soft drink called New Coke, an e-grocery site called Webvan, and an airline called the Trump Shuttle.

    Maybe this makes sense. But to me, reviving failed business names for new concepts is a dubious approach.

    Published on: March 23, 2018

    The Minneapolis/St. Paul Business Journal writes that a proxy fight at Supervalu as an activist investor pushes the company to change its board of directors and move the company out of the retail business.

    According to the story, “Blackwells Capital, a New York firm that now owns about 4.3 percent of the company, has nominated six candidates for seats on Supervalu’s nine-member board of directors.

    “Blackwells has privately pressed Supervalu for months to shift away from retail stores and bring in new leadership. It requested three board seats last month and pushed a plan to split Supervalu into separate companies and possibly seek a buyer. Supervalu rejected the plan.

    “The company responded Thursday morning saying the nominations were unfair to shareholders and that the increase to six board nominations is a sign that Blackwells ‘effectively seeks control of the company.’ Supervalu argued that a shakeup of the board is not necessary.”

    As part of is resistance, the story says, Supervalu and its CEO, Mark Gross, have “announced two acquisitions of regional grocery distributors in the past year and closed or sold off retail stores, including most of its Farm Fresh operations earlier this year and its Save-a-Lot chain in 2016. Gross has also said that the company plans to hold onto remaining retail chains like Cub Foods and would put some of the proceeds from the Save-a-Lot sale into improving its stores.”
    KC's View:

    Published on: March 23, 2018

    USA Today reports that Toys R Us delayed its plan to begin a liquidation sale yesterday, saying that “unforeseen circumstances” were to blame. The paper says that these circumstances included attorneys “preparing a court filing for the bankruptcy judge to sign off on the process, said a person with knowledge of the company’s deliberations.”

    According to the paper, “Shoppers throughout the country headed for Toys R Us and Babies R Us stores in the morning expecting to see markdowns on dolls, games, baby supplies and all other merchandise. Instead, they were greeted by signs alerting them that the sales had been postponed, and in some cases apologizing for the confusion.”

    The Washington Post is reporting, by the way, that Toys R Us also is annoying customers holding gift cards, which it says it will stop accepting in mid-April, and those who got Toys R Us credit cards so they could rack up rewards that could be used at the store; once the chain is gone, those rewards will be useless.
    KC's View:

    Published on: March 23, 2018

    Advertising Age reports that Walmart “will expand a car-buying service offered to its customers by opening 250 CarSaver Shopping Centers at its stores, the retail giant said Wednesday. The program, run on CarSaver's digital automotive marketplace, has essentially been in pilot mode at 14 Walmart stores since it was announced early last year.” The service “uses a network of certified dealerships, banks and insurance companies to support its car-shopping and -buying assistance to Walmart customers. In addition, every vehicle bought through CarSaver comes with a lifetime warranty.”
    KC's View:
    This week alone, Walmart has announced the expansion of FedEx Office and car buying services in its stores … which points to the fact that it is willing to make changes to the bricks-and-mortar environment if it will keep those stores relevant to its shoppers.

    Published on: March 23, 2018

    • The Los Angeles Times reports that Amazon “has been granted a new patent by the U.S. Patent and Trademark Office for a delivery drone that can respond to human gestures. The concept is part of Amazon's goal to develop a fleet of unmanned aerial vehicles that can send packages to customers in 30 minutes or less. Issued this week, the patent may help Amazon grapple with how flying robots might interact with human bystanders and customers waiting on their doorsteps.

    “Depending on a person's gestures — a welcoming thumbs-up, shouting or frantic arm waving — the drone can adjust its behavior, according to the patent. As described in the patent, the machine could release the package it's carrying, change its flight path to avoid crashing, ask humans a question or abort the delivery.”

    Gizmodo reports that “Walmart filed a glut of patents today that suggest the US’s biggest retailer could be ramping up incorporation of emerging tech in ways that would dramatically change how consumers shop and order.”

    These tech patents include a shopping cart “sensing device,” a means for tracking customers through wearables, and systems that could be used for “human-less picking, packing, and delivery.”

    The story goes on: “All this stands as yet another sign of the ongoing battle between Walmart and its chief rival, Amazon. While Amazon has made moves into groceries with its acquisition of Whole Foods, considers more physical locations, and continues to court lower-income customers, Walmart seeks to scale up its e-commerce footprint and find any sort of technological edge.”

    • The San Jose Mercury News reports that “Walmart has begun testing at some Bay Area stores intelligent robots that can meld artificial intelligence with autonomous movements to assess inventories on store shelves … Using technology developed by Bossa Nova Robotics, a software startup in the Bay Area, Walmart has deployed robots in 50 of its stores to determine what’s on the company’s shelves … The company’s robots can zip down a retailer’s aisles and scan shelves. At the same time a robot navigates through a store, it continuously returns information to indicate what’s sold and unsold in the store.”
    KC's View:
    All I can say is, check out my review of the “X-Files” episode, ““Rm9sbG93ZXJz,” below in “OffBeat.”

    Published on: March 23, 2018

    • In upstate New York, the Democrat & Chronicle reports that Wegmans “again has lowered prices on store-brand produce, grocery, dairy and frozen-food items it says are popular with families … The company last cut prices on certain items in late 2016, and most of them remain unchanged, the store says.

    “Wegmans' list of reduced-price products now stands at around 130.” The list includes both fresh and private label products.
    KC's View:

    Published on: March 23, 2018

    Recode reports that “Matt Kaness, the former CEO of ModCloth who sold the women’s fashion retailer to Walmart one year ago, has recently left the mammoth brick-and-mortar retailer, multiple sources have told Recode.

    “Walmart acquired ModCloth in March of last year to help boost the fashion assortment of its subsidiary, and Kaness continued to run that retail operation for the next few months. But the retail industry veteran later turned down a move from San Francisco to Los Angeles after Walmart management decided that the CEO role should be based there, ultimately paving the way for his exit, according to one source.”
    KC's View:

    Published on: March 23, 2018

    • Charles P. Lazarus, who founded Toys R Us seven decades ago, passed away yesterday or respiratory failure. He was 94.

    His passing came as the company he founded dealt with bankruptcy and a liquidation sale.
    KC's View:

    Published on: March 23, 2018

    Yesterday we had a discussion here with an MNB reader who objected to my argument against an official position being taken by the US in the current NAFTA renegotiation that would limit the ability of the pact’s three members - Canada, Mexico and the US - to require labels on junk food that would to warn consumers about obesity-related dangers.

    That MNB reader wrote:

    Kevin, you have to be a complete idiot to think that a warning on a candy bar would stop obesity. I also think you would be quite cozy to live your life completely controlled by the government.

    What you and most far left individuals want is to tell people what to do and when to do it. I just don't understand why people want to live like this.

    My position, restated:
    Information is not regulation. Information is just information. People still get to make their decisions, except that maybe those decisions are a little better informed. At least some of the companies that fight against this kind of transparency, I think, may have something to hide.

    But this reader came back at me:

    If a company is told to put information on their wrappers it is a regulation. Information is voluntary. Guess speed limits signs only provide information, yeah right.

    I disagree with your characterization, but that’s fine. I have no problem with companies being required to provide relevant information…that’s what we did with the tobacco companies, and I’m okay with it here.

    From another reader:

    I have some perspective on the topics of obesity and candy bar labeling. In the early 2000s, I worked in marketing for a food CPG manufacturer. We were conducting foundational consumer research on the “energy bar” segment that was growing like wildfire at the time. Focus groups were shocking. First of all, I anticipated that frequent users of the energy bar segment would be triathletes, marathoners and weekend workout warriors. I was mistaken. Group after group, the consumers were mostly overweight and obese.

    A verbatim that was representative of the sentiment: “I don’t have the time to work out, so I eat an energy bar instead.”

    For those that are unaware, most of these products (at the time) had as much sugar and as many Calories as a Snickers bar. Perhaps education and transparency would do our collective waistlines good?


    On another subject, from MNB reader Phil Censky:

    I am fascinated by the Cornell study conclusion that cooking at home (with a cookbook that predates my grandmother’s cooking, no less) contributes to obesity. I’d much rather see a statistical analysis that looks at how dollars spent on restaurant food (takeout included) correlate to increases in obesity over time. Demonizing a cook book seems counter-productive.

    I am a statistical n of 1, but I’ve found that when I cook more, including bringing my own lunches to work, that my weight goes down. Conversations with friends and colleagues suggest I’m not an outlier. It will be very interesting to see if grocery retailers and/or meal ingredient delivery brands can position themselves to capitalize. In the meantime, I’ll keep my knives sharp and cutting board oiled.

    Regarding Toys R Us, from MNB reader Lisa Malmarowski:

    Pardon my French, by why in the hell isn’t anyone talking about the EXPERIENCE of shopping at a uber large Toys r Us? It’s miserable. The stores are overwhelming, messy, unimaginative and often dirty.Toys are supposed to be FUN! I don’t give a rat’s backside that Toys R Us has failed - I’m surprised it was still afloat.

    If you want to succeed and thrive in retail, you have to offer a reason to set foot in a store. A local, albeit small, toy store is thriving in my neighborhood - they just moved to a larger location. It’s FUN to shop there. They have events, you can try out most of the toys, they have extremely well-trained staff that know their product lines and can recommend toys for kids ages and interests. And they offer complementary gift wrap. I know I could call ahead, ask them to recommend a gift, buy it over the phone and they would have it wrapped for me to pop in an pick up on my way to the kid’s party.

    When we make businesses into mega-large volume movers, we lose that magic. I don’t know how they will survive unless someone can really reinvent the whole thing.

    Meanwhile, I will do my best to support local, eschew pressing the ‘easy button’ by shopping mindlessly on Amazon, and give gifts with meaning that will be used and loved.

    Look, I’m no saint, I click express buy like anyone else when the need is there, but conscious consumerism has to start somewhere, a little at time.

    PS - I don’t have kids or grandkids and most of my friends that do have kids have made a conscious choice to buy less for them - this mindset probably plays into why Toys R Us failed as well.

    And, from another MNB reader, regarding the execs who have left Whole Foods since its acquisition by Amazon:

    More “fake news” according to John Mackey.   He said Tuesday in the Summit there has been no more turnover than usual and the merger is going well.

    I’ll go with the Wall Street Journal on this one. 
    KC's View:

    Published on: March 23, 2018

    As a longtime devotee of “The X-Files,” I’ve found the new season to be inconsistent, but with flashes of brilliance. I’ll take it.

    As you may know, “The X-Files” ran for nine seasons from 1993 to 2002 and spawned a couple of feature films. Then, last year, it came back for a six-episode tenth season, and this year, for a 10-episode eleventh season. David Duchovny and Gillian Anderson are back as FBI agents Fox Mulder and Dana Scully, who bring different - and sometimes varying - levels of belief and skepticism to their investigations of the paranormal.

    It is sort of fun to see Mulder and Scully on the case again; in some ways, it is like watching a favorite band play old and familiar hits. While there have been episodes into the series extended mythology about alien invaders and their human co-conspirators, my favorite episodes have been of the stand-alone variety, which play like jazz riffs off a standard tune. There’s also an interesting subtext to the new set of episodes and the repartee between Mulder and Scully; it is almost as if things are so much darker and threatening than they could have anticipated 20 years ago that they have an almost rueful cynicism about it all.

    One of the best of this season, or of any season, was “Rm9sbG93ZXJz,” which was a thriller about the impact of technology and A.I. on our lives. The premise was deliciously simple: Mulder and Scully go out for a sushi dinner at a completely automated restaurant, are dissatisfied with the experience and don’t leave a tip. One machine communicates with another machine, which communicates with drones and self-driving cars and robots and all sorts of other increasingly smart and adaptive technologies. Things spin further and further out of control as Mulder and Scully try to disconnect, with less and less luck and under more and more threat.

    With everything that we know - and don’t know - about Facebook’s impact on our lives, culture and even politics, it all seems utterly current about where we are and may be going. Even if you are not a fan of the series, it is worth finding via on-demand, iTunes, Hulu or other means - it is terrific, inventive television, with a great “Black Mirror”: vibe.

    In some ways, the episode is reminiscent of “Ghosts in the Machine,” a first-season segment of the series that now seems prescient about the role that technology would play in our 21st century lives. And, “Rm9sbG93ZXJz” manages to be both sentimental and even revelatory about our two heroes, with whom many of us have grown older and more jaded about whether, even if “the truth is out there,” we’ll ever be able truly to know it.

    I have no idea if this season is the end for Mulder and Scully, but I hope not. Duchovny and Anderson, along with creator Chris Carter and a group of talented writers and directors, seem to have plenty left to say. I’d miss them if they were gone.

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

    KC's View:

    Published on: March 23, 2018

    Fast Company this morning is out with a story saying that Kroger and Target are discussing a possible merger.

    According to the story, “The two companies first started conversations last summer about a partnership that could improve Target’s grocery business and give Kroger customers more access to merchandise and e-commerce. Target and Kroger spoke again in the fall and talks are ongoing this year. The companies appear to be struggling to decide whether a merger is the best path forward. Last year, Target and Kroger’s combined annual revenue added up to $195 billion.”

    Neither company has commented on the report.

    UPDATE/11 am EDT: CNBC reports that its sources say that no such talks are taking place, but neither Kroger nor Target are talking to it, either.
    KC's View:
    In some ways, this isn’t an enormous surprise, and the fact that talks are taking place should not be interpreted as meaning that a deal is inevitable or imminent. Remember, Kroger has been said to have been in recent discussions with both Alibaba and Overstock, and it made a bid for Boxed, which was rejected as inadequate. So stay tuned.

    It is an interesting possibility to consider, on a number of fronts. I’ve been arguing here for some time that Target ought to partner with a major grocery chain and have it run its grocery departments, in the same way that it outsourced Rx/HBC to CVS. This would certainly improve Target’s grocery offering, expand Kroger’s national footprint, and would certainly go farther than just a strategic alliance. (Though, it also is possible that the talks could result in exactly that, and not a merger … which would still be an intriguing deal.)

    Both companies also have worked on e-commerce and delivery to various degrees, and Target’s ownership of Shipt might make a deal seem more attractive to Kroger, which has achieved some measure of success with its ClickList initiative. While bricks-and-mortar is still where most of the action is, it is anticipated that more than $100 billion worth of grocery spending could move to online over the next few years, and that 15-20 percent of center store sales could move to e-commerce. A Kroger-Target deal could position both companies better to deal with these eventualities.

    So, there are lots of synergies. I have no idea what the antitrust implications might be, so that remains to be seen. But there are a lot of companies making moves around the board at this point, and so I think it is fair to expect that anything could happen. As I’ve said in a different context, I’m out of the “never” business … it doesn’t pay well, and almost inevitably I end up being wrong.

    But … as I’ve said here before about other deals … this cannot be just about size and efficiencies. It has to be about effectiveness, and about a vision for a new and compelling retail strategy that will differentiate both banners.

    Published on: March 23, 2018

    Perfect strategic and tactical vision isn't enough to guarantee business success anymore. Not by a long shot. To have even a chance of creating an enduring and vibrant business model, one has to be able to see not just what is dead ahead, but around corners, past the horizon, into the nooks and crannies of operations and out at the vast expanse of innovation and ideas.

    For more than 18 years on, and for more than three decades as a writer and speaker, "Content Guy" Kevin Coupe has been entertaining and illuminating audiences by chronicling the most successful customer-facing companies in the world, examining their forward steps and occasional missteps in areas of experiential marketing, technology adoption, customer understanding, and their grasp of cultural influences on business.

    In "Why 2020 Vision Isn't Enough," Kevin uses real examples from the worlds of retailing, e-commerce, marketing, entertainment and sports to chart the connection between disruptive innovation and tangible, durable business growth, and sends audiences home with actionable steps they can take in their businesses.

    A recent client described Kevin as "a talented and engaging speaker," saying that he kept the audience "focused on his excellent ideas – and his frequent use of humor and personal anecdotes made his topic even more interesting."

    To book Kevin for your upcoming event, click here, or call him directly at 203-253-0291.

    KC's View: