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    Published on: March 19, 2019

    by Michael Sansolo

    In many ways, these are the scariest seven words I hear these days. I come home from a business trip and my wife says: “Your daughter and I went to Ikea.”

    These words always are followed by the same question: “When can you go to her apartment to assemble what we bought?”

    And so it begins.

    As anyone who has visited Ikea knows, there is nothing to compare with the task of assembling the stuff the giant retailer calls furniture. It entails unpacking huge boxes, trying to decipher the incredible cryptic assembly instructions and then hours spent in back-breaking positions shredding your palms while using an Allen wrench to assemble the “songesand” or “poang” (those are actual products) to create tables, chairs, bookshelves and more.

    As Tina Fey once joked on her sit-com “30 Rock,” Ikea is “where marriages go to die.”

    Personally I believe it happens in the assembly process.

    Except … it is important to remember that Ikea fills an important need, especially when one’s daughter is moving into a new place and looking to fill it with furniture on a budget.

    MIT ‘s Sloan School of Management recently explained that what Ikea sells is not furniture or Swedish meatballs. Rather, the retailer sells “holes.” In other words, it provides furniture that can be easily assembled using only the thoughtfully provided wrench and the occasional screwdriver or mallet.

    You can read the story here.

    MIT explains that Ikea eliminates the needs for drilling or any kind of skills that evade most of us. By selling furniture with pre-cut holes for easy assembly, Ikea solves a consumer problem and succeeds.

    The MIT article explains that problem resolution is a key to success, but only if companies understand the actual problem. For instance, InstantPot is hailed as a success story because it allows cooks to control it remotely with Bluetooth technology so that we can make sure the chili is cooking even from our offices. The Internet capability allows us to have a meal cooking remotely. As MIT explained, no one wanted an Internet enabled pressure cooker. They simply wanted an easier way to make dinner.

    In contrast, a similar approach failed with espresso makers because no one wants to make an espresso when they aren’t there to actually drink it. As the MIT author explained, it’s like having the ability to turn on a massage chair from a remote location. The benefit of the chair comes from sitting in it, not from just turning it on.

    There’s a valuable lesson in that especially as companies increasingly look for ways to solve customer problems to earn and retain their loyalty. Let’s remember that we need to solve actual problems and not just use technology for technology’s sake. The former is a path to success and loyalty. The latter simply results in an espresso getting cold while waiting for us to arrive.

    Speaking of problem solving, my wife sent me the MIT article thinking it would make for a great MNB column.

    Now she’ll probably want me to build a desk or something.

    Michael Sansolo can be reached via email at . 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.
    KC's View:

    Published on: March 19, 2019

    by Kevin Coupe

    Outdoor clothing and equipment retailer LL Bean has announced that its annual sales over the past year grew about one percent - which was enough for the company to decide to reinstate its employee bonus program.

    More than five thousand employees will get performance bonuses of about five percent of their annual pay, which CEO Steve Smith said was a reflection of the fact that the company “performed well in a very competitive industry and a very difficult retail economy.”

    There’s a reason I think this is an Eye-Opener.

    It was just about a year ago that LL Bean got a lot of attention because it announced a change to what was seen as a lifetime return policy. Arguing that it actually has been a “lifetime satisfaction guaranteed” policy, and that a growing percentage of people abused it to the point that it is no longer is sustainable, the retailer said that returns have to take place within a year, and be accompanied by proof of transaction.

    There was a lot of negative reaction to the decision, including at least one lawsuit from someone saying that it had breached its contract with shoppers.

    I thought it was a shame that LL Bean had to make the change, but I didn’t blame it - at some point, if shoppers are going to take advantage of a policy and exploit it to the point that it creates problems for a company’s sustainability, then you have to bite the bullet and make the change.

    I said at the time that I thought it would blow over … and this week’s revenue announcement by the privately held company suggests that it has.

    I think the way LL Bean handled the controversy was absolutely right. It was clear about what it was doing, clear about its explanations, and clear about the rationale. Both the policy prescriptions and messaging struck me as perfectly positioned - in the end, a successful LL Bean is good for those of us who love the brand.

    The Associated Press notes that LL Bean “is coming off several years of flat sales and belt-tightening that included a reduction in workforce … restrictions on free shipping, and a paring of product lines to refocus on the company’s outdoors roots … Behind the scenes, the company completed an upgrade of tech and warehouse systems, which allowed it to process an all-time 315,000 orders in a single day in early December.”

    All of which is good.

    I’ve argued here for years that LL Bean is a great case study in how to nurture an iconic brand and keep it both relevant and resonant to a changing customer demographic, not to mention nimbly adapting to an omnichannel environment. I think this week’s results underline that suggestion.
    KC's View:

    Published on: March 19, 2019

    Business Insider reports that Walmart has decided to end its Savings Catcher program, described as “a popular price-matching tool that automatically refunded customers for any price differences between Walmart and its competitors.”

    The reason: Walmart says that in most cases, it already is the cheapest, and so the promise to match prices was irrelevant.

    One problem - at least some customers disagree.

    The story says that one shopper - who said she has saved more than $857.19 through Savings Catcher - wrote on Walmart’s Facebook page, "You are not discontinuing Savings Catcher because your prices are lower, you are doing it because very often your prices are not lower and it is costing you more money.”

    And another customer wrote on Twitter: “You LIE when you say your prices usually win. I will restructure my grocery-buying between @amazon & local stores. You made a terrible, greedy choice #Walmart.”

    Walmart said in a statement, "We are at our best when we deliver everyday low prices for our customers, and we've been focused on doing that through investments in price … And customers are noticing - we’ve seen a significant reduction in usage and redemptions from Savings Catcher. As a result, beginning May 14 this year, Savings Catcher will no longer be offered as we continue to offer upfront, consistent low prices to customers shopping our stores.”
    KC's View:
    It almost doesn’t matter whether Walmart is being honest or not … if some of its customers think it isn’t, then that is what matters.

    That said, I suspect that the real reason that Walmart decided to dump this program is because it ended up not mattering to the company very much. If it mattered, then Walmart would’ve kept it. And I presume that Walmart figures that it doesn’t matter to enough customers to keep it going.

    Then again, maybe it was just too expensive.

    Published on: March 19, 2019

    Quartz reports on a new study from Marketplace Pulse suggesting that while “Amazon had more than 130 proprietary or private label brands, plus 422 brands sold exclusively on," the evidence is that “most Amazon-owned brands aren’t resonating with shoppers yet.

    Marketplace Pulse looked at 23,000 products from Amazon-owned or exclusive brands<‘ the story says, “and concluded that a handful of brands, like AmazonBasics and Pinzon, made up the bulk of sales.” Sales for the thousands of other brands are said to be, in a word, negligible.

    To this point, the story points out, Amazon has said that private label accounts for about one percent of its total retail sales. But it has seemed to be pushing for higher penetration, being aggressive about promoting lower-cost own-label brands when people are looking at national brand items on its site, which it says is just a way of letting customers know about cheaper alternatives.

    In its assessment of the study, Bloomberg writes that “the study suggests popular political and media narratives about Amazon’s market power are overblown, despite the company capturing 52.4 percent of all online spending in the U.S. this year.
    KC's View:
    I don’t know that I find this wildly surprising. I always sort of assumed that Amazon Basics - by dint of its name and penetration - was the best performing of its private labels.

    As it happens, this could end up being one of Amazon’s best arguments against the Sen. Elizabeth Warren proposal that it (as well as other tech companies) should be broken up. Her position is that Amazon is able to take advantage of its position of being both a platform and a seller, and undercut brands in a way that, in the long run, could inhibit honest competition. This study suggests that brands are doing a pretty good job on their own being competitive.

    Published on: March 19, 2019

    Digiday reports on how Target is making so-called direct-to-consumer brands a centerpiece of its retailing strategy, offering in its stores formerly online-only brands such as Casper mattresses, Harry’s shaving supplies and Quip toothbrushes.

    The story notes that such brands “all have an aesthetic instantly recognizable by online shoppers — or really anyone who has experienced targeted ads on social media. They claim also to offer better versions of everyday products at cheaper prices than customers are used to finding in stores. They have established customers, and troves of first-party customer data thanks to the direct-to-consumer launch strategy.”

    All of which makes these brands enormously attractive to Target.

    And - go figure - makes Target attractive to these brands. “As the cost to advertise on Facebook and Google climbs and online growth slows, digital brands need new retail outlets to both increase brand awareness and drive customer acquisition,” the story says.

    Plus, Target has something else: money. These brands “need an influx of cash,” which Target delivered, for example, when it invested $70 million in Casper in 2017.

    In cases like Quip toothbrushes that have a subscription component - after one buys the toothbrush, one can sign up to get a new brush head and battery every three months - Target has struck deals that get get it a piece of the subscription action.

    Simon Enever, the CEO and co-founder of Quip, explains the attraction this way:

    “Retailers are looking to innovate. They themselves have their online presences, they understand movement in the industry around the convenience and value of online brands for customers and how close a relationship you can build. So Target was wanting to innovate around the changing dynamic of retail. It’s never been a painful discussion, but there are many details to iron out how that works. This hasn’t necessarily been done before, and we’re a business and they’re a business, so new things are being tried. We’re going to keep trying to get the balance right and at the core of it, it’s about creating the best experience.”
    KC's View:
    In its own way, this is in keeping with Target’s long time cheap chic image - offering cool brands with a very specific kind of consumer appeal. And, it does so by offering those brands something they can use - distribution, exposure and a connection with a brand that increasingly seems to matter.

    Published on: March 19, 2019

    The Spoon reports that Amazon-branded meal kits “are surfacing in select Whole Foods” in San Francisco, Southern California, Nevada and Arizona.

    To this point, the meal kits only have been available online - via Amazon Fresh and Amazon Prime - as well as in its Amazon Go checkout-free stores.

    According to the story, “A recent Nielsen report showed that the majority of growth in the meal kit sector came from in-store sales, generating $93 million in revenue across 2018. That number is could climb even higher as NPD found that nearly 100 million American adults still haven’t tried meal kits, but want to. NPD also found that consumers are not tied to a particular brand of meal kit yet, so there is room for a company like Amazon to come in and grab marketshare without having to fight set-in habits.

    “So there is burgeoning demand for meal kits, and Amazon is ready to get you one in just about any way imaginable. You can buy them online when you’re planning ahead, at a Go store when you’re, well, on the go, and at a Whole Foods for either of those occasions.”
    KC's View:
    The story makes the argument that “Amazon is looking to expand its meal kits presence as part of the reinvention of the meal journey,” which “shouldn’t be a surprise to anyone paying attention.”

    I’ve been paying attention. And I’m not surprised. Except maybe that it took this long.

    Published on: March 19, 2019

    Digiday reports that Amazon is reaching out to lower income shoppers than it traditionally has targeted, “running a discounted $5.99 per month Prime program for customers on government benefits” and offering “a bargain section on its site.”

    The story goes on: “The company also created other features like delivery pickup points to serve customers who have difficulty accepting packages. Amazon is also part of a yet-to-be-launched USDA pilot, which will allow SNAP recipients to use EBT cards to make online purchases at participating retailers … It’s an effort to gain ground in an area where Walmart and dollar stores have a home-court advantage, with low prices and a broad physical footprint. But Amazon is betting on a digitally comfortable lower-income consumer for whom time is a premium resource.”

    It is, Digiday points out, “fertile ground for Amazon: According to a Piper Jaffray study from October 2018, new Prime subscribers are increasingly coming from middle- and lower-income segments.”

    • The San Francisco Business Times reports that “Instacart is cutting 8 part-time employees in Cupertino and 56 in Los Angeles effective Feb. 10 … This is just the tip of the iceberg. On Dec. 12, Instacart announced 243 of its 1,415 part-time in store shoppers who delivered groceries from 76 Whole Foods markets across the nation would be laid off beginning in February.

    “The Instacart layoffs are a result of Whole Foods severing ties with Instacart, following Amazon’s buyout of the grocer. Amazon is a competitor of Instacart. The on-demand grocery delivery startup, however, plans place more than 75 percent of the affected Whole Foods shoppers at other neighboring retailers in their area that it strikes deals with.”
    KC's View:

    Published on: March 19, 2019

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

    • National Public Radio’s Marketplace has a story about how the American Trucking Associations (ATA) is saying that there is an “acute” shortage of long-haul truckers - “nearly 600,000 drivers are currently employed and 60,000 more drivers are needed,” with the shortage expected to get worse “in coming years, as baby boomers retire.”

    The story notes that “young workers, meanwhile, are hesitant to take on the long hours, weeks away from home, solitude and other hardships of long-haul trucking. That's even though the training period is short, and pay can range from $50,000 to $100,000, or more.”

    NPR points out that many trucking companies have invested a lot of money in trucker pay, hoping that higher wages will attract younger people to the job. But it doesn’t seem to be just about money - aside from the fact that being a long-haul trucker can be a tough life choice, there’s also the uncertainty that the advent of autonomous vehicles creates for their futures. Meanwhile, all of the business and consumers that depend on the trucking business become increasingly vulnerable.

    • Shopko announced yesterday that despite its “best efforts,” it has been “unable to find a buyer for its go-forward business as a going concern. As a result, Shopko will commence an orderly wind-down of its retail operations beginning this week.”

    It is expected to take between 10 and 12 weeks to conclude the company’s liquidation.

    Shopko filed for bankruptcy earlier this year, citing competitive pressures, and began a series of store closings as it sought a buyer.

    • Burger King has launched a kind of coffee subscription club. Customers can pay $5 per month, which entitles them to one small cup of hot coffee per day at restaurants participating in the program.

    The promotion is available via Burger King’s mobile application. The tag line: “Enjoy BK Café for a month for the price of a large cappuccino from Starbucks.”
    KC's View:

    Published on: March 19, 2019

    • The Washington Post reports on how Jelly Belly inventor David Klein is out with a new jelly bean infused with cannabis-derived CBD.

    The product, once announced, proved to be so popular that it is already sold out.

    The Post notes that “CBD is a cannabinoid compound, but it’s not the chemical in cannabis that causes a high. Short for cannabidiol, it acts on different parts of your nervous system than does THC, which is the chemical associated with a marijuana high, according to the Centers for Disease Control and Prevention.”
    KC's View:
    Next Monday, we’ll be featuring a new Retail Tomorrow podcast on the cannabis market … I hope you’ll listen, because I found the discussion of this subject to be fascinating.

    Published on: March 19, 2019

    …will return.
    KC's View: