business news in context, analysis with attitude

Published on: January 8, 2019

by Michael Sansolo

It should be abundantly clear by now that there will be no simple strategy to emerge victorious in the coming competitive war with e-commerce. We’ve had articles recently examining various tactics being tried from the emphasis on click and collect to even complicated tax strategies to cut fixed costs.

But there is no single solution, no one right answer.

However, one idea keeps popping up that demands the attention of traditional retailers: the notion of building an in-store experience that is so strong it will attract shoppers off their sofas and away from Internet based ordering. But even that idea itself rests on a complex point:

We will clearly need motivated and engaged staffers to make the in-store experience and customer interactions special. That’s something that even the most sophisticated technologies can only assist, but not replace. And, to be frank, it’s a problem.

Take this from whatever direction you want. Unemployment stands at historic low levels currently, which means that the competition for really good staffers is more pitched than ever, especially since retail jobs are rarely considered the most desired. So the burden will increasingly fall on management to ensure proper training of front-line staff and managers to build workplace environments that produce the customer experience so essential to these battles.

Here’s the bad news: that’s going to take a lot of work. Back before Christmas, the Washington Post featured a

perspective written by a retail worker that clearly outlined what a problem we have. It’s an article that will likely irritate you no end if you are above a certain level in any company. But I guarantee there are countless front-line workers you know who will cheer every point.

Through the years, I’ve known retailers who have viewed staffers as cost centers or disposable liabilities best replaced repeatedly and quickly to avoid costing too much. Not surprisingly, many of those folks are no longer in business having lost out to companies that value staffers and show a willingness to pay for experience and longevity, knowing that both traits can enhance the customer experience.

But the reality is that those bottom-line minded individuals weren’t without logic. Staff does cost and services aren’t free. But it strikes me that we need to turn the discussion around to focus on the assets that good, engaged and knowledgeable staffers can bring to the shopping experience.

We can all cite experiences where the actions of a single individual managed to make our day and turn an ordinary chore into something pleasant. It could something as simple as a server in restaurant making a suggestion that enhances a meal or a chambermaid in a hotel giving me some extra towels. And we have all experienced the opposite and, quite frankly, much of what we write about here at MNB documents both of those types of occasions.

Even the way a cashier in a supermarket looks at me (or doesn’t) and certainly how they sack my produce will mean far more to me than that same company’s policies on countless issues. People make—or break—the experience.

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: January 8, 2019

by Kevin Coupe

Walmart clearly has decided to the pedal to the metal in marketing its click-and-collect service, which makes sense it is is said to be on the verge of offering it in more than 2,000 of its stores; since Walmart is the nation’s dominant bricks-and-mortar retailer, it only makes sense to use that advantage in its pitched battle against Amazon, the nation’s dominant e-commerce retailer.

With that goal in mind, Walmart unveiled a new commercial during Sunday’s Golden Globe awards ceremony, a long version of which can be seen at left.

The commercial shows a number of cars made famous in movies and on television - among them the Batmobile, the customized ambulance from Ghostbusters, the Pontiac Trans Am from "Knight Rider,” Lightning McQueen from Cars, the station wagon from National Lampoon’s Vacation, the van from “Scooby Doo,” the SUV from Jurassic Park, Fred Flintstone’s car, Bumblebee from Transformers, and the DeLorean from Back to the Future - all racing to Walmart to pick up orders than had been placed online.

One bonus car that may have gotten past some folks - there also was a red and white Ford F-150 truck, which is what Sam Walton used to drive.

My only problem with the commercial - and this definitely falls into the category of nitpicking - was the cars that were left out.

Where was James Bond’s Aston Martin? Burt Reynolds’ Trans Am from Smokey and the Bandit? The Love Bug? Any vehicle from any Mad Max movie? A Tucker? The Ford Thunderbird from Thelma and Louise? Any Mini from The Italian Job? The truck from “The Beverly Hillbillies?” Chitty Chitty Bang Bang? The Gran Torino from The Big Lebowski? And, of course, the best movie car of all time, the 1968 Mustang from Bullitt? (I could go on … I would’ve loved to see a dark green 1968 Dodge Dart GTS, but almost nobody else would’ve gotten or even cared about that reference. Extra credit to anyone in the MNB community who does.)

Oh, well. Maybe Walmart will make a sequel … the way it is going with e-commerce in general (one estimate is that its e-commerce sales will grow more than 150 percent a year between now and 2021) and especially its Eye-Opening commitment to click-and-collect, there may be plenty of opportunity.

Published on: January 8, 2019

Bloomberg yesterday broke the story of how Kroger and Microsoft, driven in part by a shared antipathy for Amazon and in pat of a common desire to find technological solutions that will enliven the “often-tedious ritual of food shopping,” have embarked on an extended partnership “to bring the ease of online shopping to brick-and-mortar grocery stores.”

Using two stores as their laboratories - one in Washington State, near Microsoft's headquarters, and the other near Cincinnati, kroger’s home base - the two companies are testing out new features that “include ‘digital shelves’ that can show ads and change prices on the fly along with a network of sensors that keep track of products and help speed shoppers through the aisles … customers using Kroger’s self-checkout app will be guided through the store to items on their shopping list. When they enter an aisle, the digital shelf will display a personalized icon chosen by the shopper—a  banana, say, or a pumpkin—below the relevant product.”

The digitization of the experience isn’t just there to help customers. According to the Bloomberg story, “The smart shelves light up to help store employees pick orders for Kroger’s curbside grocery pickup service, where customers order online and then later in the day have their bags brought out to their car in the parking lot. The companies say this ‘pick-to-light’ system can cut in half the time required to pick each order, a possible advantage as rivals such as Walmart and Target perfect their own curbside pickup services.” In addition, “in a refrigerated meat case, temperature sensors appear every few feet, automatically flagging workers if the case warms up too much, helping prevent  the roughly $10,000 worth of meat inside from spoiling.”

Furthermore, the consumer information being gleaned through the system also could be used by Kroger - and sold to outside vendors - so that shoppers can be targeted with specific and relevant promotions keyed to previous behavior and purchases.

Kroger CEO Rodney McMullen explains the partnership this way: “Together we can create something that, separately, we could not.”

And Microsoft CEO Satya Nadella adds that “the technology will help shoppers find food in the ‘most seamless way’ and hopefully inspire other grocery chains to adopt it in their own stores .”

Which leads to another important point - that this technology will not be proprietary to Kroger; the chain hopes to be able to sell it to other retailers, which also are seeking ways to compete more effectively with Amazon.

Bloomberg goes on to point out that “Kroger isn’t the first big retailer to entrust valuable data and tasks to Microsoft’s Azure cloud service. Microsoft has also signed up the likes of Macy’s, Walmart and European grocer Ahold Delhaize, which would prefer not to pay Amazon for critical technology.” And, “Kroger’s plan to commercialize its futuristic shopping experience could provide a lift to Microsoft’s Azure cloud business, which is critical to Nadella’s ongoing efforts to reinvent the software pioneer. The Kroger pilot makes use of several types of Microsoft cloud technology, including the ability to analyze data generated by a host of sensors spread through the store. The two companies are also working on a Virtual Store Manager, which would alert the human store manager when, say, there aren’t enough shopping carts for customers at the front of the store.”

Published on: January 8, 2019

Fortune reports that yesterday Amazon achieved a market capitalization of $790 billion - which allowed it to leapfrog Microsoft, with a $785 billion market cap, to become the most valuable publicly traded US company.

Microsoft had been number one since late November, when it passed Apple to take the top spot after eight years during which Apple was the most valuable US company. The story points out that yesterday “Apple wasn’t among the top three most valuable companies. Instead, Google parent Alphabet was third in third place with a $740 billion market value, significantly higher than Apple’s $694 billion.”

Fortune notes that this shift in fortunes “came the same day that Microsoft announced a new partnership with Kroger to create futuristic, digitally savvy grocery stores. This is a direct challenge to Amazon, which acquired Whole Foods in 2017 and has been rolling out brick-and-mortar, cashierless retail stores across the country.”

Published on: January 8, 2019

The Wall Street Journal is reporting on an interview with Starbucks CEO Kevin Johnson, heir to the Howard Schultz legacy, in which he says that he is “scaling back” some of his predecessor’s initiatives - such as the opening of 1,000 Starbucks Reserve cafes and as many as 30 giant Roastery units - and focusing more on the company’s core coffee shop business.

Johnson describes Schultz’s ambitious plans to focus on upscale stores and products as aspirational, and says they will have to prove themselves before the company puts significant investment against their growth. An he even is slowing the growth of Starbucks’ traditional store fleet, preferring to improve customer service, develop new drinks, and apply greater rigor to the development and implementation of the company’s priorities.

One phrase Johnson has been heard to use around Starbucks’ Seattle headquarters: “I’m not Howard, I’m Kevin.” And he tells the Journal that “he is trying to bring more financial discipline to the business and return more cash to shareholders,” at a time when the company “is under pressure to expand sales in an increasingly crowded coffee market,” and dealing with diminished traffic.

Published on: January 8, 2019

VentureBeat reports on how Procter & Gamble is exhibiting at the annual Consumer Electronics Show (CES) in Las Vegas for the first time, with what it says is a new focus “on leading disruption through technology, and it showed some very cool tech in what would otherwise be very ordinary products … putting sensors and artificial intelligence into things like skin advisers, razors, and blemish removers.”

For example:

• “SK-II Future X Smart Store is a traveling learning lab and pop-up store that uses facial recognition, smart sensors, and computer vision technology to provide next-generation smart skincare counseling.”

• “Olay Skin Advisor is an online beauty tool that uses artificial intelligence to analyze your selfies and make custom skincare recommendations.”

• “Airia is a connected home fragrance device that can distribute custom levels of scent throughout your home, managed conveniently through a mobile app.”

• “Oral-B Genius X with artificial intelligence is a toothbrush that combines the knowledge of thousands of human brushing behaviors to assess individual brushing styles and coach users to achieve better brushing habits.”

• Gillette has come up with a self-heating razor.

• And “DS3 is an engineered soap that can clean with a lot less water. In fact, P&G estimates it can save 800 million gallons by eliminating the water wasted each day.”

Published on: January 8, 2019

Plant-based diets may be getting all the publicity these days, but Bloomberg has a story about how meat sales also are growing - “ Beef consumption is expected to continue to rise,” the story says, “to 58.8 pounds per person in 2019, 2.8 percent higher than last year.”

One of the thins that is interesting about this is that much of the growth is coming from high-end and esoteric cuts that can be both sustainable and traceable … but more and more, they seem to be turning to online sources to make these purchases. While “55 percent of Americans still buy their meat at full-service markets, a growing segment is shifting to the internet to find more specialized products. Online meat purchases have jumped from 4 percent in 2015 to 19 percent in 2018.”

So, the story says, “while traditional retailers such as Kroger, Albertsons, and even Whole Foods have done little to innovate—course-correcting a brick-and-mortar chain is slow business—consumers are now a click away from the finest-grade beef…”

One example: “Crowd Cow, which started in 2015 and has already grown to reach annual sales well north of $10 million. Today it has more than 100 farms; steak arrives with the farmer’s name attached. Online you can learn how the animal was cared for and fed.”

Published on: January 8, 2019

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

• Amazon announced yesterday a series of product and service innovations designed to support its Key by Amazon initiative, which, it says, “puts security, convenience, and control in the hands of customers to offer one common benefit that everyone can enjoy—the magic of being key-free.

“New offerings include the all-new Schlage Encode Smart Wi-Fi Deadbolt, the first WiFi-enabled smart lock for Key; Key for Garage with Chamberlin Group (CGI); compatibility with the Ring app for access control; and Key for Business, a smart fob for drivers delivering Amazon packages to commercial and residential properties.”

Let’s be clear. The stated purpose may be to allow people not to need keys anymore, but the real goal is to continue to expand the Amazon ecosystem so that all this stuff makes Amazon absolutely indispensable in the living of daily life, and so deliveries from Amazon can be accomplished in the simplest, safest and most frictionless manner possible. Not that there’s anything wrong with that strategy …


• Standard Cognition, which is working to develop and license/sell AI-powered checkout-free systems that can compete with Amazon Go, said yesterday that “it has acquired Explorer.ai, a mapping and computer vision start-up … As part of the acquisition, Standard brings on a team of seven experienced AI engineers and mapping technology to accelerate the rollout of its autonomous checkout solution.”

According to the announcement, “Standard’s autonomous checkout solution utilizes cameras on store ceilings to determine what is in the store, the location of customers, and which items they possess. Indoor mapping is an essential component of this equation. Explorer.ai’s technology was initially developed for autonomous vehicles by a team out of Carnegie Mellon University. This same technology is used for in-store mapping, significantly compressing a process that used to take hours down to just minutes. The new technology helps Standard map larger stores, allowing the company to expand into retail verticals rapidly.”

Standard has a way to go before it has the kind of credibility Amazon Go does; right now, it is just operating a tiny test showroom in San Francisco, not a going concern. But it is making strides, and it’ll be interesting to see when and where it gets its first real test.

Published on: January 8, 2019

Yesterday, we took note of a New York Times has a story about how big box retailers and national chains are using what it termed “an aggressive legal tactic” to reduce their local property tax bills, saying that their stores and properties have been appraised at values that are too high considering the degree to which bricks-and-mortar retailers have suffered at the hands of e-commerce companies.

These retailers argue that even stores that are successful ought to have their assessments and property taxes lowered because the new competitive reality is that those locations no longer are worth what they used to be. They then argue that the value of abandoned or closed retail properties ought to be used to evaluate what their open businesses are worth. If local assessors don’t agree, these retailers then go to court to make their cases - and sometimes win - and the cost to local governments can, in the aggregate reach billions of dollars … especially because one legal win in a locality results in other businesses in the area making the identical argument. And then what happens is that local governments have to figure out how to make up the shortfall.

I argued that this is short-term thinking that will undermine their business’s success - essentially, a self-fulfilling prophecy. If localities are short on funds, they’ll either have to raise taxes on existing homeowners, who will have less money to spend at these retailers, or will cut back on services, which will hurt property values, which won't be good for business. I wrote:

They should be looking at these communities as places where they want to make investments, where they want to create the kinds of connections that will keep their businesses not just relevant and resonant, but growing in value.

Instead, they argue for the inevitability of their demise, and then will bemoan their fates when the boulders they have set in motion gather speed and run over them.

Ah, irony.

One MNB reader wrote:

Municipalities meticulously evaluate the future value of ratables when they consider applications of retailers, and all businesses, to build in their communities.  Businesses are not approved in isolation.  Commercial approvals are part of a master plan that takes into account the contribution to the overall well-being of the community, including how these new businesses will benefit that community’s taxpayers.  They encourage “clean ratable” that will help with the affordability of municipal services to the benefit of the entire community.

If local businesses start to challenge their assessments, they do this to the detriment of the entire community, which is dependent upon the assumptions that were made when the approval was given.   Basically, if a large retailer wins a smaller assessment, the community must either plan for the reduction or obtain the lost ratables elsewhere.

This is how dystopias begin. People stop investing in their communities, civilization suffers, and pretty soon it is everybody for themselves, with the fabric of society completely destroyed.
 
Another MNB reader wrote:

Agree entirely with your perspective. Is there no sense that retailers need to reflect the values of their neighborhoods? It’s one thing to support the local little league team which has visibility to the community, while robbing them of vital revenue.



On an other subject, from MNB reader Paul Schlossberg:

Interesting thoughts about Amazon Go versus c-stores.  

My sense is that among the targets for Amazon Go are what I refer to as the "at-markets." That is at-work, at-college, at-hospital, and so on. Those locations have been served by onsite foodservice and vending operators. 

Business Insider reported "Gianna Puerini (who runs the Amazon Go business) told CNN they want to put the stores in hospitals, office building lobbies, or 'anywhere where there's a lot of people who are hungry and in a rush.'"   

My thinking is that Amazon has noticed that this is a relatively fragmented business sector and it could be disrupted, "Just walk out shopping" will give Amazon a huge advantage over the established players in this sector. 

The question to ponder is Amazon's long-term direction. Is this a near-term focus by Amazon Go to sell immediate consumption food, snacks and beverages sales? Or is there a long-term initiative which will be based on the success of the smaller Amazon Go stores? 

Foodservice is an evolutionary industry. It is a relatively risk averse business when it comes to disruptive innovations. Onsite foodservice and vending operators have a huge advantage in being the most conveniently located source when "people are hungry and in a rush." They have not seen a competitive threat like this. It will be fascinating to see how they react and what they will do.

Published on: January 8, 2019

Number two-ranked Clemson trounced top-ranked Alabama 44-16 in the College Football Championship game.