business news in context, analysis with attitude

Published on: May 22, 2018

by Michael Sansolo

If you are laboring under the illusion that there isn’t enough to worry about, I have something else for you. (Don’t shoot the messenger.) It concerns an educated look into the future buying power of the American consumer, and I have one suggestion for you before reading on.

You may want to sit down.

A survey by GoBankingRates.com found that 42 percent of Americans have less than $10,000 saved for retirement. About 14 percent have nothing saved at all.

Those are horrible statistics.

Now, it’s possible there could be all kinds of problems with that survey. For instance, perhaps it oversampled young people who are just getting started in the workforce and haven’t begun to think about a far-off retirement. That might explain the stunningly poor retirement planning and help the numbers look better.

It’s possible. But unfortunately, that’s not the case.

As the Motley Fool reported this past January, 42 percent of boomers (and 41 percent of Gen Xers) have only just begun saving for retirement, which as any financial planner would say, is way too late.

Clearly the numbers from GoBankingRates are on the money, even if the consumers aren’t.

Essentially everyone currently in their 40s, 50s, 60s and 70s needs go on an incredible saving spree (if circumstances allow it) or prepare for either working into their 80s or watching every last penny for the rest of their lives.

The reality is that we are going to have millions of consumers facing a dim financial future, which means that pressure on economizing in every way is going to take hold at a furious pace sooner or later. Suddenly it might make sense why Aldi and Dollar General are opening stores at a breakneck pace and why Lidl is trying so hard to get its footing in the US.

We are looking at an explosion in the numbers of people making price their chief priority when it comes to shopping.

Here’s the good news for some of our readers: this story isn’t about Amazon.

The bad news is that it actually is and it doesn’t matter anyway.

Shoppers always are driven by different needs and even different need states. There are times and even specific products for which price is the main determinant. At other times, indulgence or experience wins the day. The challenge for any company has always been to carve out a large enough niche to ensure success and to understand the almost illogical mix of moods that drive spending behavior.

That might explain the most recent moves by Walmart (partnering with Lord & Taylor!) and Kroger (an alliance with robotics/logistics/warehouse company Ocado) in a larger sense. Smart companies are playing chess and making moves for the long-term battle ahead when the challenge will come in winning as much market share as possible from the 60 percent of the population with sufficient savings for their future or getting into the trenches to go after the other 40.

Don’t forget, Amazon is out there looking for its share as well. (And if you don’t remember, MNB will be here to remind you.)

The question that retailers have to ask themselves is this: What are you doing to get ready for these changing circumstances?

Unlike that 40 percent of the population, you had better get planning.

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: May 22, 2018

by Kevin Coupe

The embattled US Postal Service (USPS) - beset by billions of dollars in losses, facing a dramatic drop in first class mail usage, and at the center of a political struggle with the Trump White House, which wants it to raise shipping costs for Amazon (perhaps because it is owned by Jeff Bezos, who also owns the Washington Post, which has been aggressive in its coverage of the president) - has come up with one solution to its problems.

Popsicle-scented stamps.

(No, this is not a joke.)

The USPS yesterday sent out a press release that said the following:

“The U.S. Postal Service's first scratch-and-sniff stamps will add the sweet scent of summer to letters of love, friendship, party invitations and other mailings when the Postal Service introduces the Frozen Treats Forever stamps … The stamps feature illustrations of frosty, colorful, icy pops on a stick … Each of the 10 stamp designs includes two different treats. The words ‘FOREVER’ and ‘USA’ appear along the bottom of each stamp.”

I would suggest to the USPS that if wants to assuage President Trump, it is moving in the wrong direction. The president, after all, has a highly publicized affection for fast food, especially McDonald’s.

And so, if they really want to make the president happy, there is one obvious solution:

Big-Mac scented stamps. And maybe McDonald’s fries.

Now that would be an Nose-Opener.

Published on: May 22, 2018

Shane Sampson, Albertsons’ chief marketing and merchandising officer, told analysts last week that the retailer is exploring the use of checkout-free technology in its stores, which would serve as a de-facto response to the Amazon Go store.

However, the technology is not envisioned as being store-wide, but rather being focused on the company’s Plated meal kits and perhaps other convenience-oriented products and prepared foods.

A pilot has not yet been begun.

Published on: May 22, 2018

The Wall Street Journal this morning has a story about how Amazon, which has “cultivated an image as a customer-friendly company in part by making it easy for shoppers to send back items they don’t want,” has at times banned customers “from the site for infractions such as returning too many items, sometimes without telling them what they did wrong.”

There are, apparently, some customers that Amazon doesn’t want.

““We want everyone to be able to use Amazon, but there are rare occasions where someone abuses our service over an extended period of time,” an Amazon spokesman said. “We never take these decisions lightly, but with over 300 million customers around the world, we take action when appropriate to protect the experience for all our customers.”

The Journal reports that “dozens of people have complained on Twitter , Facebook and other online forums that Amazon closed their accounts without warning or explanation. Amazon doesn’t tell customers in its return policy that their return behavior can get them banned, but the company says in its conditions of use that it reserves the right to terminate accounts in its sole discretion. Some people said they have also received email alerts from Amazon about their return activity … According to former Amazon managers, the company terminates accounts for behaviors including requesting too many refunds, sending back the wrong items or violating other rules, such as receiving compensation for writing reviews. Cases are typically evaluated by a human after algorithms surface the account as suspicious, they said.”

Published on: May 22, 2018

Nosh reports that meat kit company Chef’d has announced a partnership with vending company Byte Foods that will bring the meal kits to 100 locations in San Francisco and Sacramento.

The story says that “Byte Foods has developed patented smart refrigerators to sell fresh food via unattended storefronts embedded within workplaces, hospitals, and apartments. Byte’s smart fridges are stocked with an array of high quality, fresh foods—salads, sandwiches, snacks, drinks, and now meal kits. Customers purchase food with their credit card directly from the fridge, 24/7, and Byte’s technology automatically knows what was purchased and charges the customer.”

Chef’d CEO Kyle Ransford says that “by partnering with Byte Foods, we are able to bring our meal kits to a new channel, beyond our current direct to consumer and traditional retail distribution and provide an innovative solution for grabbing dinner just before you leave work.”

Published on: May 22, 2018

The Washington Post reports on how the trucking industry is experiencing a “perfect storm,” as it faces “an extraordinary labor shortage” at the same time as there is a rising demand for freight services tied to an improving economy.

What this means, the Post writes, is that “higher transportation costs are beginning to cause prices of anything that spends time on a truck to rise. Amazon, for example, just implemented a 20 percent hike for its Prime program that delivers goods to customers in two days, and General Mills, the maker of Cheerios and Betty Crocker, said prices of some of its cereals and snacks are going up because of an ‘unprecedented’ rise in freight costs. Tyson Foods, a large meat seller, and John Deere, a farm and construction equipment, also recently announced they will increase prices, blaming higher shipping costs.”

The Post goes on to say that “the United States has had a truck driver shortage for years, but experts say it's hitting a crisis level this year. There's even more demand for truckers now as just about every sector of the economy is expanding and online sales continue to soar. On top of that, the federal government imposed a new rule in December that requires drivers to be on the road for no more than 11 hours at a time and track their time by an electronic device so they can't cheat.”

Published on: May 22, 2018

Fortune is out with its annual Fortune 500 list of the world’s largest companies, and Walmart is at the top of the list for the sixth year in a row. Amazon is on the list, too - at number eight, the first time it has cracked the top 10.

There is one other retailer in the top 10 - CVS, which comes in at number seven.

The balance of the top 10 spots are taken by Exxon Mobile (2), Berkshire Hathaway (3), Apple (4), United Health Group (5), McKesson (6), AT&T (9), and General Motors (10).

Published on: May 22, 2018

Ahold Delhaize USA yesterday announced the opening of a new entity, Peapod Digital Labs, which it said “will drive digital and eCommerce innovation, technology and experience to meet the changing needs of customers of its local brands, regardless of when, where and how consumers choose to shop.”

The company said that JJ Fleeman - most recently Executive Vice President, Commercial Services & Strategy for Ahold Delhaize USA's newly established support services company, Retail Business Services - has been named as President of Peapod Digital Labs and Chief eCommerce Officer. Freeman also was Chief Strategy and Development Officer for Delhaize America.

“The creation of Peapod Digital Labs and appointment of JJ to lead the new company and serve as Chief eCommerce Officer will enable us to sharpen our focus on leveraging the size and scale of the U.S. brands to provide customers with a personalized and effortless shopping experience,” says Kevin Holt, CEO at Ahold Delhaize USA.

The new entity is expected to be fully staffed by the end of the year.

Published on: May 22, 2018

Fortune has a story about Amazon’s desire to get a foothold in - and even dominate - the grocery business in the US, a goal that has so far has been thwarted by logistical and competitive realities. Amazon seems unbowed, however.

An excerpt:

“The very thing that makes grocery delivery hard—that food goes bad—is the reason it’s so desirable to a company like Amazon. Because cheese grows mold and meat goes rancid and milk sours, consumers can’t hoard it in their cupboards or refrigerators indefinitely as they might toilet paper or laundry detergent. As a result, the average family hits the supermarket at minimum once a week; there’s nothing else you purchase or consume so much or so often. For Amazon, getting in on that frequency is critical to further ingraining itself in our routines and behaviors.”

You can read the entire story here.

Published on: May 22, 2018

The BBC reports that UK-based Marks and Spencer is closing 100 stores - 21 of which already have been shuttered.

The closings are said to be part of a broader strategy, in which M&S moves one-third of its sales online and operates “fewer, larger clothing and homeware stores in better locations.”

The company says that these changes are “vital” for its long-term future.

The BBC writes that “retail veteran Archie Norman took over as M&S chairman last year. He said the retailer had been "drifting" and promised to speed up changes.

“That has included scaling back ambitions for its Simply Food chain. It had intended to open 40 stores this financial year, but has cut that number to 25.”

Published on: May 22, 2018

• Recode reports that “Code Eight, a stealthy personal-shopping startup incubated inside of Walmart, has rebranded itself as Jetblack … Jetblack marks Walmart’s latest attempt to appeal to new types of customers who typically wouldn’t have shopped at Walmart stores or through Walmart’s website. Jet.com, which Walmart acquired for $3 billion in 2016, is now being positioned to appeal to millennial consumers who live in big cities — not traditionally Walmart’s demographic.”

Jetblack is being beta tested in Manhattan … where Walmart does not have any physical stores.

Published on: May 22, 2018

• The Detroit News reports that “Amazon’s Alexa assistant is the latest must-have vehicle app as carmakers rush to put connectivity on wheels.”

Ford, the story says, is offering tech packages in its cars that will allow an in-home Alexa system to interact with an auto-based Alexa … it would allow people to raise the temperature and turn on the lights in their homes from the car, while allowing people to warm up their cars from inside their homes - all via voice-activation.

Published on: May 22, 2018

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

• Fox Business has a story about how fresh food market chain Stew Leonard’s “is giving employees a bonus to shop around for health care … With health care costs for businesses and individuals on the rise, Leonard decided to start a health and wellness program to educate employees on lifestyle choices, making better financial decisions associated with healthcare providers and the importance of preventative care.”

“People we found didn’t know what health care costs,” says Leonard. “For instance if you have to go get a colonoscopy -- $2,800 you would have to pay -- most people don’t even know how much it costs. You can go get the same thing by sometimes the same doctors for $1,500.”

Leonard says that while annual increases in health care costs have been about seven percent over the past few years, at Stew Leonard’s the cost increases have been about one percent a year.


• The New York Business Journal reports that chef-restaurateur-retailer Mario Batali is in the process of being bought out of B&B Hospitality Group, which is a part-owner of Eataly stores here in the US, as more sexual misconduct allegations come to light.

Batali stepped down from any active role in the company when harassment allegations became public last year; his cookbooks and food products were immediately purged from Eataly’s shelves. But now, with new allegations being reported on “60 Minutes” and investigated by the New York Police Department, B&B - in which he has been a partner with Joe Bastianich - is severing ties completely.

Batali has denied the new charges of drugging and sexual assault.

The restaurant where Batali reportedly committed these acts is called the Spotted Pig. Which seems about half-right.

Published on: May 22, 2018

Regarding the changes taking place at Campbell Soup, which its strategy of the past few years is being completely reevaluated, one MNB reader wrote:

Kevin, you may be right about the dismantling of Campbell’s.  At this stage, few of us know what really happened at the Board level (although I wouldn’t rule out insiders filling in the blanks within a few weeks).  Many CEO’s are struggling with growth because of investor expectations so most CPG growth ideas focus on “acquiring vs. building”.  Part of this has been driven by retailer concentration (which has impacted Campbell’s via the WMT fight). Boards must share some of the blame for accepting the idea that their own companies can’t grow traditional brands organically.  Cookies are still being consumed everyday, as is soup, snacks and juices. Which makes me ask: Are Boards performing their role(s)?  
 
Its unlikely that the former CEO didn’t get the Board’s blessing for any company acquired during her tenure.  Boards seem willing to invest current earnings for future growth projections, by adding smaller, niche subsegments to the core. Then executing customer plans with less people.

So, instead of focusing on acquisitions (where the money being made is in the hands of few individuals and the companies that underwrite these transactions) what happens if Boards instead vote for growing the core? Cut out-of-stocks by 2% (for example) is worth more in sales than some of these acquisitions are worth.  Retailers themselves are setting re-stocking algorithms to allow for 4-6% out of stocks but that doesn’t mean that suppliers can’t improve them with additional investment in store. Sure, this method of “selling more” isn’t sexy – in fact, it requires courageous conversations, with 1-2 levels below functional leadership,  to understand “why” and “what” the fix is.  But, rather than ask these questions, the Board will likely hire McKinsey and other over-priced consultants to do the work Boards themselves can easily do if they are engaged.



Regarding the push by the Trump administration to get the US Postal Service to raise shipping prices for Amazon, MNB reader Gary Loehr wrote:

Might be time to buy stock in UPS or Fed Ex.  Or maybe it will be Lyft or Uber.  Does Trump really think that Amazon will pay double and continue to use the USPS?  About as likely as Bernie Sanders making Wall St. pay for all his ideas.  Big companies have choices.  If one supplier or a politician make life too difficult, they will find alternatives. Wake up and get real, Washington.



MNB reader Jerry Bergquist had a thought about another MNB story:

I believe the “right-size” for Sears is zero!



Some thoughts about the ongoing Starbucks story.

One MNB reader wrote:

One other problem that strikes me is the impact on Starbucks image in keeping a clean bathroom.
 
One of the surveys I was involved with recently focused on the “why” travelers chose rest stops. Among them was “clean bathrooms”.  (It is the kiss of death for a McDonalds located along a freeway access which gets to be known for unsanitary / not cleaned bathrooms.)   The same will be true for paying customers – they care about bathroom cleanliness.
 
I can’t help but wonder how this rule change impacts store associate hours.  My guess is that there’s more for Starbucks to learn as they role out the new “open access” standard. 

From another reader:

The biggest losers with this new open bathroom policy are the Starbucks baristas. 

With the increased foot traffic, there will be LOTS more bathroom cleaning to do…

And, from MNB reader Robert Burch:

Starbucks has not faced the problem of non-pays before. As an African American male, I have never faced being mistreated by Starbucks. I was really surprised this happened at all. The many Starbucks I have visited have always been open. As far as I have experienced they have never faced the problem of people taking advantage of the welcoming culture. For the locations where this has never been a problem it will continue to not be a problem. I am sure they have locations that have had volume and seating issues. In a business sense, I hope they will continue to have that problem. It means they are doing well.

However, I don’t believe they are going get an influx of non-pays due to this public declaration. These two men were arrested for doing what other customers were already doing. This is a point of clarification for employees, not a question of access in customers minds. These two men probably expected their treatment would be the same as it had always been to that point. In effect, things remain the same on the customer side. Nothing should change in their minds. It seems to me Starbucks has clarified its practices for those few employees that might discriminate, that is, they shouldn’t.