business news in context, analysis with attitude

Published on: November 19, 2018

by Kevin Coupe

Seventeen years ago today, I wrote the first edition of MNB.

To be honest, I had no idea if it would work. I knew I was tired of other people and companies screwing around with my career, and I was convinced there was an audience out there for something a little different when it came to business writing.

I guess I was right. It hasn’t been a perfect 17 years, but I’ve learned something every day of it, and I hope that I’ve provided insights and analysis that have gotten MNB’s growing community to sometimes think about issues and events differently from time to time.

I had a few dozen friends and business connections on my email list when I started, and now we’re at 30,000-plus … for which I can thank Michael Sansolo, Kate McMahon, and Tom Furphy for keeping all the conversations lively … all my sponsors from over the years for helping to keep me in business … and most of all, you, for your continued engagement and participation. I couldn’t do it without you.

Seventeen years is a pretty good run. But I’m not done yet … and trust you’re not, either.

Lots of Eye-Openers ahead of us, I hope.

Published on: November 19, 2018

Tech Crunch reports that eMarketer is saying that Walmart has become the third-ranked online retailer in the US, surpassing Apple.

According to the story, “While Amazon still leads by a wide margin, accounting for 48 percent of e-commerce sales in 2018, Walmart – including also Sam’s Club and Jet.com – is poised to capture 4 percent of all online retail spending in the U.S. by year-end, totaling $20.91 billion.”

eBay remains number two, with the rest of the top-10 list filled out by Home Depot, Best Buy, QVC, Macy’s, Costco and Wayfair.

In its analysis, eMarketer says that “Walmart’s e-commerce business has been firing on all cylinders lately. The retail giant continues to make smart acquisitions to extend its e-commerce portfolio and attract younger and more affluent shoppers. But more than anything, Walmart has caught its stride with a fast-growing online grocery business, which is helped in large part by the massive consumer adoption of click-and-collect.”

Published on: November 19, 2018

The Wall Street Journal has a story about how “research from consulting firm AlixPartners says the most profitable transaction for retailers is when shoppers make purchases the old-fashioned way, by visiting a store.” The problem, of course, is that this “is no longer the preferred option for many people.

“This holiday,” the story says, “US online sales are expected to increase 15% from last year to $124.1 billion, according to Adobe Analytics, which analyzes visits to retail websites. Overall, holiday sales are expected to rise as much as 4.8% to $721 billion, according to the National Retail Federation, a trade group.”

It won’t be without challenges, though, since “those who order online will have some tough choices to make. They can pick up items in a local store, or have them delivered to their car in the parking lot. They can reserve clothing online and have it waiting in a fitting room to try on. Or they can take advantage of an expanding menu of free shipping choices, some with guaranteed next-day delivery in a direct challenge to Amazon … The myriad choices each have their own shorthand—there is Skip the Line, Drive Up and Get It Fast, to name a few - which can be confusing. Many consumers say they aren’t aware of all the options.”

Published on: November 19, 2018

In Maine, the Portland Press Herald reports on “ L.L. Bean’s thriving, 26-year engagement with Japan, one of the world’s most challenging retail markets, with high rents and wages, notoriously discerning customers and fashion trends that cycle at a breakneck and often unpredictable pace. By good fortune, timely investments, and an unexpected cultural synergy between outdoorsy, practical Maine and nature-and-tradition loving Japan, the Freeport-based retailer has ridden out booms and busts to embed itself in the world’s third-largest economy.”

Japan, as it happens, is “the only foreign country where L.L. Bean has stores, and it’s home to more than a third of all the stores the company has on the planet. (It announced Oct. 31 that it will allow a Toronto company to own and operate LL Bean-branded stores in Canada starting next year.) The stores – relatively small and typically located in city centers – have slowly spread across much of the country, even as competitors like Seattle-based REI have seen setbacks. Online orders are growing, too, accounting for about half of sales here, prompting an ongoing upgrade of the software and technology that support it.”

Published on: November 19, 2018

Some more interesting pieces in the press about Amazon’s decision to choose for its second North American headquarters both New York’s Long Island City, just across the East River from Manhattan in the borough of Queens, and Arlington, Virginia, in the Crystal City neighborhood, adjacent to National Airport and just across the Potomac River from Washington, DC.

• The New York Times had an op-ed column by Vishaan Chakrabarti, former director of planning for New York City, that looked at the potential upside for the city:

“It is with dismay that I hear the fiercely negative reaction to the announcement that New York City won the Amazon competition to land at least 25,000 jobs and decades of direct and indirect economic growth in Long Island City. The fact that the debate has yielded so much heat and so little light is a sign of how complacent we have become. It is easy to forget that employment generates our city tax base, which strains to help fund the public goods we so desperately need, from schools to transit to affordable housing to parks to basic services like snow and trash removal. The city’s tax revenues have more than doubled since Sept. 11, to $83 billion from $40 billion. The Bloomberg administration put us in this enviable economic position; Mayor Bill de Blasio and Gov. Andrew Cuomo should be lauded for doubling down on those efforts.

“Yet there are stiff headwinds. Municipal spending is outpacing growth. Federal urban investments continue to retract. And we already have some of the highest income taxes in the country … It is for these reasons that we should welcome Amazon, but with a few caveats: To become true New Yorkers, the people at Amazon must abide by our implicit social compact, which is that New York City strives to be a place of opportunity for all. Amazon, the city and the state must build an ‘infrastructure of opportunity’ that creates both physical and social mobility for all New Yorkers, and they must do so with fiscal responsibility.”

One of the advantages for the city, she writes, is that Amazon’s investment actually will make New York less dependent on the ebbs and flows of the financial industry.

The piece can be found here.

• The New Republic has a somewhat different angle:

“When Amazon announced on Tuesday that it would build one of its new headquarters in Long Island City’s Anable Basin, environmentalists were quick to notice that the site could be partially underwater by 2050. By the next millennium, it will be completely submerged, according to the environmental research group Climate Central’s most recent projections. Situated in an inlet along the East River, the site is currently home to parking lots and warehouse spaces, but when Amazon breaks ground, which could be as soon as 2019, new apartment complexes and office buildings will go up—all of which would be vulnerable to flooding if sea levels rise even just a few feet. 

This piece can be read here.

• The Wall Street Journal writes about how, “If Seattle is a guide for the just-announced future hosts of the online giant’s second headquarters, Amazon’s arrival will be transformative. Restaurants and new infrastructure are likely to follow - what some Seattleites call the Amazon prosperity bomb - but the invasion of workers will also bring traffic jams and a jump in housing prices.”

The story points out that “in Seattle, Amazon rewrote the book on how a big company makes its home in an urban area, putting thousands of employees in the downtown core rather than a suburban campus … Amazon’s campus, which spans over several city blocks, has its own banana stands that hand out thousands of free bananas. Some workers have said there is a shortage of bananas at nearby grocery stores as a result.”

Local celebrity chef Tom Douglas (MNB fave Etta’s is one of his restaurants there) tells the Journal that there is an easy way to identify Amazon employees: ““They want cheap, and they travel in packs,” but they also fill the tables of his restaurants and come back for Happy Hour.

You can read the story here.

Published on: November 19, 2018

The Associated Press has a story about how “by early next year, the first foods from plants or animals that had their DNA ‘edited’ are expected to begin selling. It’s a different technology than today’s controversial ‘genetically modified’ foods, more like faster breeding that promises to boost nutrition, spur crop growth, and make farm animals hardier and fruits and vegetables last longer.

According to the story, “The U.S. National Academy of Sciences has declared gene editing one of the breakthroughs needed to improve food production so the world can feed billions more people amid a changing climate. Yet governments are wrestling with how to regulate this powerful new tool. And after years of confusion and rancor, will shoppers accept gene-edited foods or view them as GMOs in disguise?”

The AP notes that scientists “hope gene editing eventually could save species from being wiped out by devastating diseases like citrus greening, a so far unstoppable infection that’s destroying Florida’s famed oranges.”

Published on: November 19, 2018

• Engadget reports that “Amazon has launched a new portal called ‘Second Chance,’ which compiles information on how to recycle, repair and return devices. The e-commerce giant calls it a ‘one-stop shop’ where you can learn how to responsibly get rid of old gadgets lying around and taking up space … In case your old gadgets are broken, the website can also help you find repair options. Broken beyond repair? You can still visit Second Chance for instructions on how you can get Amazon to take and recycle them for free. The website also encourages you to purchase refurbished items at a discount and includes short instructions on how to recycle Amazon packaging -- as it should, seeing as the company is notorious for using huge and excessive packaging for tiny items.”

Published on: November 19, 2018

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

• The National Retail Federation (NRF) is predicting that “an estimated 164 million people are already planning to go shopping Thanksgiving Day through Cyber Monday … The survey found that of those planning to shop during the long holiday weekend 21 percent (34 million) plan to shop on Thanksgiving Day, but Black Friday will remain the busiest day with 71 percent (116 million) planning to shop. Forty-one percent (67 million) are expected to shop on Small Business Saturday, and 78 percent of those say they will do so specifically to support small businesses. On Sunday, 20 percent (32 million) are expected to shop. The shopping weekend will wrap up on Cyber Monday, when 46 percent (75 million) are expected to take advantage of online bargains.”


• The San Diego Union-Tribune has a story about Jen and Farzan Dehmoubed, “co-founders of Lotus Trolley Bag, a company that makes a popular set of four heavy-duty grocery sacks that hang like accordion files in a shopping cart. Before and after use, they can be folded up into a 2-pound over-the-shoulder carrier that resembles a yoga mat. The couple designed the shopping bags with pockets for things like eggs and wine, and a cooler bag for frozen items.”

According to the story, “the product is going gangbusters, selling in 500 stores, including retailers such as Ralphs, Vons, Jimbos and Albertsons. This is their first venture, and the couple is still reeling from success. After designing the bags, they placed an order for 5,000 units, hoping to sell that many in three months. Instead, the bags sold out in two weeks.” And, the story says, the bag is perfectly positioned to take advantage of the trend toward checkout-free stores, whether it is with Amazon Go-style technology or the use of handheld scanners.


• The Associated Press reports that “Florida is suing the nation’s two largest drugstore chains, alleging they added to the state’s opioid crisis.
Attorney General Pam Bondi announced late Friday that she has added Walgreens and CVS to a state-court lawsuit filed last spring against Purdue Pharma, the maker of oxycontin, and several opioid distributors.”

According to the story, “Bondi said in a press release that CVS and Walgreens ‘played a role in creating the opioid crisis.’ She said the companies failed to stop ‘suspicious orders of opioids’ and ‘dispensed unreasonable quantities of opioids from their pharmacies’.”

CVS and Walgreen have not commented on the suit.


• Bloomberg has a story about how small turkeys - as opposed to the enormous, Norman Rockwell-style birds - are becoming more popular. That’s because “smaller families, growing guilt over wasteful leftovers and a preference for free-range fowl have all played roles in the emergence of petite poultry as a holiday dinner centerpiece … Smaller families are fueling the trend. Last year, 62 percent of American households had just one or two people, compared with 41 percent in 1960, according to the U.S. Census Bureau. The proportion of single-person homes has risen, too.”

The story goes on: “Don’t call them capons. They’re not castrated chickens. Nor are they chicks. They’re not babies. They’re just turkeys that weigh in the neighborhood of six pounds.

Thanksgiving leftovers? I always thought that was a feature, not a bug. Though I may be the wrong guy to walk about this, since our Thanksgiving meal this week will be ribs, short rib mac and cheese, and some sort of vegetable (to assuage our guilt over all the ribs). And, of course, pie. The only thing I’ll miss about not having turkey, in fact, will be the leftovers…

Published on: November 19, 2018

• Arkansas-based Harps Food Stores announced that CEO Roger Collins is stepping down as CEO after 17 years in the role, to be succeeded by Kim Eskew, the company’s president/COO. Collins will remain with Harps as chairman.

Published on: November 19, 2018

William Goldman passed away last week at age 87. The cause was reported to be complications from colon cancer and pneumonia.

Among the movies he wrote: “All The President’s Men." "Butch Cassidy and the Sundance Kid." "Marathon Man." "The Stepford Wives." "The Great Waldo Pepper." “The Hot Rock.” “Harper.” ”A Bridge Too Far." "Chaplin." "Misery." And, of course, "The Princess Bride.”

And yet, he may best be known for one line, from his books "Adventures in the Screen Trade," about Hollywood: "Nobody knows anything.”

Published on: November 19, 2018

One MNB reader had some thoughts about our story about how 7-Eleven may be using federal immigration enforcement tactics as a weapon against franchisees with which it is less than enchanted:

I tend to think that this is less of a case where corporate is using federal agencies to eliminate franchisees versus using the learnings that come from federal raids and investigations to root out franchise holders they deem as not in compliance with their franchise holder agreements.  It is undoubtedly a mess, but in my opinion, 7 Eleven’s bigger issue is that their franchise agreements fail to give them the necessary control of their stores – ultimately their brand – to effectively compete in today’s changing convenience market.

The inconsistency of the 7 Eleven store experience, outdated merchandising and product offerings, cleanliness of their interiors and exteriors, etc., are all contributing heavily to their losses as more contemporary operators like Wawa, Sheetz, Racetrack, etc., transform their stores to meet the needs of today’s shopper.  The failure of 7 Eleven to proactively manage franchisees to improve performance against the key dimensions that matter most to shoppers will be their failure.

Despite their location advantage in countless markets, they do not seem to have the vision or operational standards that can allow them to leverage this effectively.  If you know the beer wholesaler system, you are likely familiar with the non-wavering stance they take with their distributor or wholesaler franchisees on operational excellence.

AB used to have a program called “dimensions of excellence” that each wholesaler was rated on quarterly.  It resulted in fresh inventory, clean facilities (scrubbing a truck bay was a frequent occurrence) and stellar, consistent execution.  That’s what 7 Eleven needs to be focusing on as they transform non-performing franchisees.  Simply changing owners won’t change the outcome.  They need to hold franchisees to a high standard as an on-going part of their agreements.

MNB reader Jeannine Wilkins had some thoughts:

Interesting and scary article. Makes me wonder if there is something about the old school C-Stores that motivates ugly behavior. I worked for Cumberland Farms as a teenager many years ago. After two weeks two investigators came in and “interviewed” me in the back room for at least an hour. They accused me of stealing $100 and offered me three choices: pay them back the $100 and keep my job, give up my job or file for an appeal. I was a teenager and it was a second job in addition to school and I really didn’t care about it, I also didn’t steal the $100 and was pissed about being accused and how they tried to intimidate me so I just quit. It never occurred to me no one stole the $100 – I just assumed I was blamed as the new employee. Then years later my brother saw something in the news – turns out for a while there that kind of behavior was standard procedure at Cumberland Farms and someone had started a class action suit. I was in college by then and still received mail at the same address so the forms came in – I filled them out honestly, indicating I really didn’t feel I had suffered any loss (unlike some folks who needed the job). It took a few years but eventually I received $3,700 as a part of the class action settlement. Not too bad for a couple weeks part-time work as a teenager J.
 
It did make me wonder what idiot came up with the idea. If I had stolen the money and returned it – why would they want me as an employee? And how many potentially good employees did they tick-off with the accusation who just walked away like I did?



On another subject, from MNB reader Barry J. Sullivan:

I want to mention a side of the Amazon HQ2 story I saw come across on Twitter this past Monday. Take it as you want, but do use it as food for thought (pun intended). If Amazon gets what they want by having three HQ’s, one in each of three states, they will in fact have two Senators from each state to do their bidding, and they will “play” those Senators off each other. This also will allow Amazon to use the laws of whatever state they need to make “things” go in their favor. Just a few points to ponder.

Excellent point.

But, to be fair, Walmart has stores in 41 states. Do you think it does not flex its muscles in those locations to the best of its ability? Don’t you think every company with multiple locations does the same thing?

I agree with your concerns … but are you maybe holding Amazon to a different standard because it is Amazon?

MNB reader Dan Jones wrote:

Amazon cannot win.  As a big company they are a big political target.  Amazon has built a spectacular business, and people in Seattle complain about real estate and congestion.  Amazon split the HQ2 decision to benefit two communities and people complain.  And even with the split, NY is complaining HQ2 (HQ½?)  will still be too big a strain on housing.



CNBC reported last week that Sen. Bernie Sanders (I-Vermont) has introduced a new bill “that would prevent large companies from buying back stock unless their employees are paid at least $15 an hour.

“The proposal is aimed squarely at the nation's largest bricks-and-mortar retailer: Walmart … The legislation is titled The Stop WALMART Act, or The Stop Welfare for Any Large Monopoly Amassing Revenue from Taxpayers Act … It would also require large employers to give workers up to seven days of paid sick leave for themselves or to care for a family member. In addition, it caps executive compensation at 150 times the median employee wage. Under the bill, companies with more than 500 workers would face these new restrictions.”

I commented:

The bill isn’t going anywhere, but it does serve to start to stake out 2020 positions as politicians prepare for potential presidential runs.

I’m not sure that this kind of stuff should be legislated, but I do sympathize with the idea that front line workers rarely are treated with the same largesse as the folks in the corporate suites. And I agree that companies ought to invest in their employees before buying back stock and increasing c-suite compensation packages.

But a law to force it? I don’t think so.

MNB reader Liz Braciak wrote:

Thanks for your thoughts on the WALMART bill introduced by Bernie Sanders. While I agree it isn’t going anywhere in a Republican Senate, I do not agree that we shouldn’t legislate these requirements.

Big Business will always look out for itself as was seen during the industrial revolution. It wasn’t until laws were put in place in 1938 with the Fair Labor Standards Act that children were taken out of the sweatshop environment, and a defined workweek was established ensuring overtime pay. Had this New Deal legislation not been implemented, many companies would have continued abusing employees both physically and monetarily rather than shifting to the eventual pension system that drove huge growth in the 1950’s. Now that the pension programs are going the way of the dinosaurs, having faith and trust that a company cares about their employees can be seen in the value they place in their CEO’s salaries versus the average worker. Millennials are paying attention to these details in the companies where they are searching out opportunities. An index for the CEO should be seen as a driver of growth, not a death sentence. If the company makes more money, and increases the average worker’s salary, the CEO’s salary can be increased as well. Besides, companies always find the loopholes when they really want to.



We had a breaking news report on Friday about how European discounter Lidl, which has struggled to get a foothold in the US since it first opened an office here more than three years ago, announced that it is acquiring Best Market, a privately held, family-owned 27-store chain of supermarkets in New York, mostly on Long Island, and New Jersey. The move, it seems to me, is a way to start a new phase of growth, where acquisition will help it gain share in places where they have none.

One MNB reader wrote:

Sure hope they come to New England and take on Shaws.. aka Cerberus !!



On another subject, from another reader:

Self-scan (either on APP or at end of shopping trip)  is a great idea but when a shopper scans a $10 bottle of wine instead of the $50 bottle in their shopping cart, the retailer loses money (unless inventory consigned by distributor).

Costco got rid of their self-check out in a few cities because of wine theft. Members would have a box of wine and scan the cheap bottle twice and not scan the expensive one.  The checkers at the departure door didn’t always check label names when they marked the receipt.  (That’s how it was reported to me by Costco cashiers.)

I worry that moving to APP scanning will mean more high theft items go into lock-boxes, defeating the time saving benefit.

I’ve always been told by retailers that they see a lot more shrink/theft in manned checkout lines, not self-checkout. It happens and it is regrettable … but I think most shoppers are honest.



I did a piece the other day about the Organically Grown Company, which is using trust law “to structure its operational and funding model to support purpose-based entrepreneurship, ownership and succession … Previously employee- and grower-owned, OGC is making a bold move to buy back all the shares from its stockholders and transfer them to the Sustainable Food and Agriculture Perpetual Purpose Trust.”

This prompted MNB reader Seth Hunnicutt to write:

Reading your post today brought to mind a local San Antonio company and, given your love of all things cinema, I thought you’d especially appreciate hearing about it.

Santikos Entertainment was founded in 1911 as Santikos Theaters  by Louis Santikos, a Greek entrepreneur. The business was family owned and operated by his son, John L. Santikos, until his passing in 2014. Upon his death, Mr. Santikos donated Santikos Entertainment to the San Antonio Area Foundation to ensure the successful operation of his business and to make annual charitable donations, establishing an enduring legacy. They now operate as a for-profit company whose sole purpose is to give back to non-profits in the San Antonio area.

Current president and CEO, David Holmes, says this on the Santikos website: “You can see a movie anywhere, but every time you see a movie at Santikos, you become a vital part of our charitable legacy because a portion of every ticket, drink or snack purchased goes back to organizations that improve our society. All movies have a beginning and an end, but when you see a movie at Santikos, the end of the movie is just the beginning.”
Their “authentic purpose” makes them the first choice when our family sees a movie, and knowing that we are supporting our community by doing so takes the sting out of our $20 concession bill for two drinks and a bucket of popcorn.

Great story. Thanks for sharing.



MNB took note the other day of a USA Today reports on how Drinkworks, a joint venture between Keurig and Anheuser-Busch, this week debuted its first product - the Drinkworks Home Bar: “Similar to the Keurig Coffee Maker, the Drinkworks Home Bar uses pods to make cocktails, beer and mixers … The machine costs $299, with each pod costing $3.99 individually or $15.99 for four. There are currently 24 drinks available – including Mojitos, Long Island Iced Teas and Moscow Mules – with ‘many more to come,’ according to the company.”

I commented:

And humanity teeters on the verge of losing yet another skill - making a decent drink. That talent now will go the way of tying a bow tie and driving a car with a manual transmission. The end of western civilization, I call it.

One MNB reader responded:

The drinks can’t possibly be that good. Any discerning drinker won’t trade a pre-mix for fresh ingredients. I’m also struggling to figure out who the target demographic for this would be. Rich frat houses?



Very funny line from MNB reader Mary Schroeder, commenting on the story about how a new National Bureau for Economic Research study showed that in states where marijuana is legal, the birth rate is up, apparently because “its consumption heightens sensory perception, increases relaxation, reduces stress and diminishes anxiety. A feeling of relaxation may change attitudes toward taking sexual risks by becoming less concerned about the consequences of sexual intercourse, including reducing protection or taking on more sexual partners.”

She wrote:

Is the National Bureau for Economic Research going to research Barry White albums next?

Boom!

Now that’s why I love MMN and its readers.



I wrote the other day about my visit to Siena College, which led MNB reader Gary Loehr to write:

I am a Siena Alumnus, class of ’80.  Great school, great culture.  I like to refer to the Franciscans as the fun loving Catholics. Glad so see that they are offering this program.  Feels like they should bring in one of the Golubs to guest lecture.

Wouldn’t be surprised if they have.

I also listed the terrific colleges where I’ve had the privilege of speaking/teaching over the years, which prompted MNB reader Frank Fay to write:

Just a plug for DePaul University and their sales leadership/category management program that Dan Strunk created with the team there.  I was fortunate to have taught Cases in Category Management and co-teach Science of Retailing, etc. with Laura Lee Larson.  I was so energized by the undergraduates and graduate students I taught!  What great programs for future leaders!

Agreed. I would’ve mentioned DePaul, but they’ve never invited me to teach there. But I’m available, should they call.
 


Finally, even after doing this for 17 years, it still is a thrill to get emails like this one:

 A friend/coworker of mine clued me into MNB a while ago and it has become an important part of my morning routine in the office. In addition to helping me stay current with industry news, your work is a good reminder that there are still people who value critical thinking, civil discourse, and thoughtful considering of other people and their opinions. It’s refreshing and encouraging. Sometimes I agree with your views and sometimes I see things differently, but – without fail – I appreciate your work and approach. Keep it up.

As long as I can.

Published on: November 19, 2018

In Week Eleven of National Football League play…

Tennessee 10
Indianapolis 38

Tampa Bay 35
NY Giants 38

Pittsburgh 20
Jacksonville 16

Carolina 19
Detroit 20

Dallas 22
Atlanta 19

Cincinnati 21
Baltimore 24

Houston 23
Washington 21

Oakland 23
Arizona 21

Denver 23
LA Chargers 22

Philadelphia 7
New Orleans 48

Minnesota 20
Chicago 25