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    Published on: July 22, 2019

    by Kevin Coupe

    Somebody once said, “I love my job only when I’m on vacation.”

    Not me.

    I never forget - whether I’m working or taking time off - how lucky I am to be able to make a living doing something I really enjoy. (It helps that this may be the only thing I know how to do.)

    I may not have been writing MNB over the past few weeks, but that doesn’t mean I haven’t been paying attention. I have, and I’ve tried to synopsize some of the most important stories - or at least the ones that most grabbed my attention - below, and maybe provide some useful commentary or perspective. (I’ve also been teaching at Portland State and doing some speaking engagements, but to be honest I spent a lot of time at the beach and at wineries and just hanging out with Mrs. Content Guy. After 36+ years of marriage, I’m amazed she still wants to hang out with me.)

    But I also can tell you that I’ve had some encounters over the past few weeks that both grabbed my attention and my imagination … and I’ll be writing and talking about them over the course of the remainder of the summer. I got to chat with some folks who just blew my mind with their ideas, and I’ll be bringing some of them to MNB in the hope that they’ll do the same for you.

    I’m back. Time to get to work.
    KC's View:

    Published on: July 22, 2019

    The US House of Representatives voted last week to raise the federal minimum wage to $15 an hour. The bill passed in a 231-199 vote in the Democrat-controlled chamber.

    CNBC notes that the bill “received almost immediate criticism from major business organizations,” and that the Congressional Budget Office has estimated that “raising the minimum wage to $15 could cost 1.3 million jobs but raise pay for 17 million.”

    Among the trade associations objecting to the bill are the National Federation of Independent Businesses, the National Restaurant Association, the National Retail Federation, and the National Association of Manufacturers.

    However, the CNBC story also points out that “although major business organizations quickly came out to criticize the House’s move, some of the country’s largest businesses in impacted sectors are outliers on this issue.”

    CNBC reports: “McDonald’s stopped working with the National Restaurant Association to lobby against the wage hike in March, and the company came out in support of introducing the wage increase in all industries.

    “Amazon raised its minimum wage to $15 for U.S. workers in October 2018. CEO Jeff Bezos challenged rivals to raise their wages to $15 or higher in April.

    “Walmart CEO Doug McMillon said the current federal minimum wage is ‘too low’ at the company’s annual shareholders meeting in June. ‘It’s time for Congress to put a thoughtful plan in place to increase the minimum wage,’ he said.”
    KC's View:
    It seems entirely reasonable to characterize the House vote as political posturing - not only is a $15 minimum wage a surefire campaign issue in the I-can’t-believe-the-campaign-already-has-begun 2020 presidential election, but there is absolutely no shot that the bill will ever pass the Senate (if it even comes to the floor for a vote there), and even less shot that it would be signed by President Trump. But, posturing is part of politics and so I shouldn’t be surprised.

    Here’s a posture for you. If a person works 40 hours a week, he or she grosses $600 a week. It is really hard in a lot of places to survive on that kind of money, especially if you have a family … hard to pay rent or a mortgage and pay for a car and clothing and food and school books and maybe some medical bills.

    This is a complicated issue, in some ways. Some will argue that part-time workers don’t have those kind of expenses, and so don’t need the higher wage. (Unless they happen to be paying for their own educational expenses, say.) And some will say that nobody making the minimum wage has all those expenses, to which I would respond, quoting Ernest Hemingway, “Isn’t it pretty to think so.”

    The minimum wage, as it almost always is, will become a political hot potato … and so nothing is likely to get done, and the people earning it will continue to suffer. Maybe we could think about them instead of focusing on ideology.

    Published on: July 22, 2019

    Speaking at the Digital Food & Beverage Conference in Austin,Texas, Albertsons’ vice president of e-commerce marketing and merchandising, Kenji Gjovig, said that the company is testing a subscription/delivery service in about a dozen of its stores, and plans to expand it after seeing "off the charts" results.

    There are a lot of decisions still to be made about the service - like its name, whether there should be an order minimum, and what the pricing should be. But Gjovig said that the company is “seeing a dramatic increase in frequency — above where our forecast was, and an increase in profitability as well across the two cohorts in the annual and the monthly subscribers.”
    KC's View:
    I got all excited when I saw these quotes because I thought, for a brief moment, that maybe Albertsons was getting into the subscription business, wading into a battle that to this point has been dominated by Amazon’s Subscribe & Save.

    I was hoping.

    But nope. That’s not what it is doing … it is, instead, offering subscriptions to its delivery services that allow frequent users to save on fees. Which is good, to be sure … but it isn’t as potentially game-changing as the other kind of subscription service would be, which would at least create the possibility of extended loyalty to Albertsons and its brand partners and keeping some of the packaged goods sales that may be going elsewhere.

    Can we keep hope alive, folks?

    Published on: July 22, 2019

    The Houston Business Journal reports that H-E-B “plans to launch a pilot program this year to test self-driving vehicle delivery in San Antonio,” and will “deploy one autonomous van with driverless technology near its Olmos Park store, just north of downtown. As part of H-E-B's testing, it will obtain an autonomous delivery vehicle from California-based Udelv, which can travel about 60 mph and is equipped with climate-controlled compartments that can hold multiple orders of fresh, frozen and dry goods.”

    The story says that “during the first phase of the H-E-B pilot in San Antonio, the ADV is expected to have a driver. If the initiative is expanded, the retailer will implement a multi-phased rollout giving the technology time to learn the safest, most efficient routes, leading to the vehicle becoming fully driverless.”

    Houston seems to be becoming a hotbed of driverless delivery vehicle activity, as Kroger has expanded its own test of the technology from an initial pilot in Scottsdale, Arizona, to the Houston market. Kroger is working with a different autonomous car company, called Nuro.
    KC's View:
    I’ve seen a number of stories over the past month or so talking about how a lot of experts seem to feel that driverless cars technology will take longer to implement than was previously believed. For example, the New York Times says that a number of the companies working on such initiatives “had developed about 80 percent of the technology needed to put self-driving cars into routine use — the radar, cameras and other sensors that can identify objects far down roads and highways. But the remaining 20 percent, including developing software that can reliably anticipate what other drivers, pedestrians and cyclists are going to do, will be much more difficult.”

    I have to believe that at least for the foreseeable future, it only will be the biggest and best funded retailers that will be able to invest in such programs. As for the rest of them, let me suggest a more radical approach. Invest inn drivers who are hired and trained to carry forth your business narrative and communicate your brand’s value/values proposition to the customers with whom they make contact.

    Think of these moments as your close encounters of the best kind … the kind that drive connections and sustained loyalty.

    Like I said, it is a radical approach, especially since so many retailers prefer to simply outsource these contact points to others that may or may not have the retailer’s best interests in mind.

    Published on: July 22, 2019

    The Wall Street Journal over the weekend had a story suggesting that, while the growth of e-commerce continues to put pressure on bricks-and-mortar retailers, there’s another factor with some culpability - continuing high rents being charged by developers and landlords.

    While rents have come down from the highs of just a few years ago, the Journal writes, “they haven’t fallen as fast as sales at struggling chains. The rents remain higher than prerecession levels in many prime shopping areas such as Manhattan, Los Angeles and Dallas.”

    The story goes on: “Landlords say it isn’t that simple. They argue retailers fueled demand with a flood of store openings coming out of the 2008 recession. And even when the landlords dangle lower rents, it is hard to tempt retailers to open stores when they are retrenching … In other cases, though, landlords have an incentive to leave space vacant because slashing rents would violate their loan agreements, industry executives said. Moreover, any devaluation of the property would make it harder for them to borrow in the future.”
    KC's View:
    It strikes me that this is yet another example of how certain traditional ways of thinking about things has to be adjusted, with buy-in from everybody involved. Retailers and landlords, faced with economic realities that affect both their interests, may need to find new ways to work together that will give both the flexibility they need and the profitability they require. And then, of course, financial institutions will have to get on-board, too … never the easiest of propositions.

    Having said all this, I must confess that I have no idea how to do this. It is a little above my pay grade. Actually, a lot. But it doesn’t seem all that much of a leap to suggest that new circumstances require new thinking.

    Published on: July 22, 2019

    The New York Times reports that specialty food chain Dean & DeLuca has announced that it will close three of its remaining nine US stores, “including a high-profile ‘concept’ store in downtown Manhattan that opened just three months ago.”

    The story says that while the brand remains a successful global presence, with more than 60 stores around the world, the US operation has been foundering.

    The Times writes that Dean & DeLuca, now owned by a Thai real estate company called Pace Development, “has developed all the signs of a company with debt problems: It pulled out of lease agreements; promised and revoked sponsorships; closed its stores in North Carolina, Kansas and Maryland; and has consistently withheld payment from vendors, who are increasingly vocal in their outrage … The company has also incurred large debts to industry suppliers like Imperial Dade, the Chefs’ Warehouse and Baldor, some of which are no longer extending credit to the chain at all.”

    When Pace bought Dean & DeLuca in 2014 for $140 million, it had more than 40 stores in the US.
    KC's View:
    No doubt there have been an enormous number of factors that have gone into the steady and probably irreversible decline of one of the iconic names in specialty food retailing. But from everything I gather, the chief problem seems to be a lack of respect for the unique qualities of a respected brand. You cannot just buy a brand and depend on it to sustain itself - you have to nurture it, grow it, and find ways to expand it.

    You can’t, as the Times writes, increasingly stock your stores with “Coca-Cola and Chobani yogurt instead of their craft-made equivalents.” Those are perfectly nice brands, but they don’t do a hell of a lot to differentiate your stores.

    Published on: July 22, 2019

    In the UK, the government-run National Health Service (NHS) is working with Amazon to use its Alexa-powered devices to deliver health-oriented information to users.

    It is, according to a story from Engadget, part of the UK government’s plan to make such services more accessible through digital technologies.

    The collaboration, according to Engadget, “is designed to help patients -- such as the elderly and blind -- who can't access the internet through traditional means, which could reduce pressure on the NHS and local GPs. Plus, of course, by linking directly to official and reliable NHS information, users are less likely to stumble upon random medical advice -- anyone who's ever Googled their symptoms knows how much of a minefield that can be.”

    The BBC writes that “under the partnership, Amazon's algorithm uses information from the NHS website to provide answers to questions such as, ‘How do I treat a migraine?’ and, ‘What are the symptoms of chickenpox?’” The story notes that “privacy campaigners have raised data protection concerns but Amazon say all information will be kept confidential.”

    According to the BBC, the NHS is also exploring similar arrangements with other technology companies.
    KC's View:
    I asked my Alexa how to treat a headache, and got a decent recitation of various options that can be used to treat headaches of various kinds. I can imagine how it could be a lot more specific … and also could offer to put me in touch with with medical experts if the headache won’t go away.

    One thing Alexa didn’t do, which sort of surprised me, was offer to immediately order some headache medicine for me. After all, Amazon knows that I’ve ordered Aleve online … it shouldn’t be that hard to suggest that if I’m out, a new order can be immediately placed.

    By the way … I’d be willing to bet money that this is exactly what Amazon has in mind. It just has to ease into it so that people don’t get too creeped out.

    Published on: July 22, 2019

    The Washington Post reports that Toys R Us will open “two mall stores this holiday season and bringing back its website. But don’t expect the Toys R Us you’re used to.

    “For one, the new locations — at the Galleria in Houston and Westfield Garden State Plaza in Paramus, N.J. —will be much smaller than their predecessors. And instead of aisles overflowing with packaged toys, the focus will be on open play areas, interactive displays and spaces for special events and birthday parties.”

    According to the story, “The revamped Toys R Us is a joint venture between Tru Kids Brands — which acquired the Toys R Us brand in January — and b8ta, a chain of ‘experiential’ consumer electronics stores. The new effort is being led by Barry and Phillip Raub, the founder of b8ta.”

    The move comes a year after Toys R Us, having gone into bankruptcy, closed all its US stores.
    KC's View:
    I’ve been skeptical - and that may be too kind a word - about a Toys R Us revival, but the idea that its new owners are working with the b8ta chain actually gives me a glimmer of hope.

    I wrote about b8ta a couple of years ago when we visited iut during the first Retail Tomorrow conference in Silicon Valley, and was very impressed … you can read the story here. If these folks are working together, maybe Toys R Us actually has a shot.

    Published on: July 22, 2019

    Mercatus, the e-commerce service provider, has a fascinating podcast that features an interview with Barclays Investment Bank’s Karen Short, who recently authored a report entitled “Dissecting the Instacart Addiction” in which she looked at the impact that Instacart is having - and is likely to have in the future - on its retail clients.

    Spoiler alert: Short agrees with many of my criticisms of the Instacart business model and the ways in which it can disintermediate the retailer from its shoppers.

    Now, let’s be clear - Mercatus has a dog in this hunt. It competes with Instacart, and so it benefits from retailers casting a more jaundiced eye on the companies with which they do business.

    But as Short says on the podcast, “It just seemed to me as I observe all the differences in terms of the strategies all these retailers are taking in terms of how they use Instacart, that A, the power is building with Instacart as opposed to the retailers. But as Instacart continues to develop stronger and stronger relationships with customer, the customer starts thinking of Instacart as their provider, not the actual food retailer, and that becomes a very dangerous situation to be in, in my view, if you’re a food retailer, especially food retailer with limited differentiation.”

    And yet, retailers keep signing up … just this week, the Cincinnati Business Courier reported, Kroger-owned Food 4 Less announced that it would offer “home delivery service in conjunction with Instacart at all 129 of its locations in California, Illinois and Indiana.”

    Short argues that retailers seem to be addicted to the short-term e-commerce fix that Instacart offers them, while not considering the long-term implications of what this addiction could mean to their businesses.

    I think the podcast is totally worth listening to - there’s a ton of research and provocative analysis, and Short has a compelling story to tell. Here’s the deal … if you don’t have time to listen to it, there’s also a text version you can read.

    You can check it out here.
    KC's View:

    Published on: July 22, 2019

    A couple of weeks ago, John Oliver, the host of HBO’s “Last Week Tonight,” spent much of one program going after Amazon and its CEO, Jeff Bezos, accusing the company of “creating a system that squeezes the people lowest on the ladder hard, and all the while the man behind Amazon is now worth $118 billion, more than anyone else in the world.”

    Focusing on what he called the low pay and grueling work conditions that Amazon’s warehouse employees endure, Oliver said, “The more you look at Amazon, the more you realize its convenience comes with a real cost.”

    Amazon did not let the accusations go unchallenged. (Good thing, too. Oliver has a history of being able to move the needle in terms of public perception.) Dave Clark, Amazon’s senior VP of operations, went on Twitter to call Oliver’s charges “insulting,” and wrote, “As a fan of the show, I enjoy watching John make an entertaining case for the failings of companies, governments and most recently – Mount Everest … But he is wrong on Amazon.”

    (Funny. A lot of people think Oliver is right until he trains his sharp and acerbic wit on them.)

    I think the Oliver piece is totally worth watching, and I urge you to do so. (Warning: If you are in an open office or at home with little kids, use headphones. Some of the commentary is definitely R-rated.)

    KC's View:

    Published on: July 22, 2019

    Mark Bittman, the former New York Times food writer and cookbook author who now has a blog called Heated on a site called Medium (got that all straight?), has a good piece in which he addresses what he sees as the problematic state of the industrialized farming system that dominates American agriculture.

    Writing about a recent trip to Iowa for a “Future of Food” series that he is shooting for PBS NewsHour Weekend, Bittman talks about how “logically (sort of), every farmer in Iowa behaves as an individual, believing that the way to beat low prices is to ‘compensate on volume.’ Farmers put their farms and their lives on the line by plunging deep into debt for a century - advised by the government to focus on commodities and squeezed by declining prices and ‘free trade’ in a global market, all while trying to maintain a family business that’s existed for generations. The more they produce, the more ‘inputs’ - chemicals, seeds, equipment - they must buy. The more they produce, the lower prices go, and everyone in the system benefits except the farmer, who goes along with it, believing there is no other choice.”

    Bittman suggests that the broader agricultural system has to change - and he has some recommendations that combine elements of capitalism and public policy … though it would be inaccurate to suggest that he seems hopeful about things getting better.

    You can read this provocative piece here.
    KC's View:

    Published on: July 22, 2019

    The New York Times reports that the European Union’s top antitrust regulator has begun an investigation into whether Amazon “unfairly uses data collected from third-party sellers who rely on its platform,” utilizing it to “promote its own products at the expense of other retailers … Regulators said they were examining whether Amazon was hurting competition by abusing its dual role as a retailer that sells its own goods and a marketplace where other merchants sell products.”

    “E-commerce has boosted retail competition and brought more choice and better prices,” said Margrethe Vestager, Europe’s competition commissioner. “We need to ensure that large online platforms don’t eliminate these benefits through anticompetitive behavior.”

    According to the Times story, “The investigation highlights the growing importance of data in measuring the power of tech platforms. Regulators in Washington and Europe are looking more closely at whether the methods that companies like Amazon, Facebook and Google use to collect and hoard data give them an unfair advantage over rivals without comparable access to the same kind of data.”

    And, the Times notes, “Europe has been at the forefront of regulating the tech industry on issues like antitrust, tax evasion, privacy protection, and the spread of hate speech and other harmful content.”

    At the same time, the Times reports, the British Competition and Markets Authority has “begun an investigation into a $575 million investment led by Amazon in the London-based food-delivery service Deliveroo,” based on concerns that the investment actually is a de facto acquisition, which would be a potential violation of the nation’s antitrust laws.
    KC's View:
    Amazon lately has been seeing a lot of political opposition being raised to its business model. Sen. Elizabeth Warren (D-Massachusetts), who is running for the 2020 Democratic presidential nomination, has made breaking up Amazon (and Facebook and Google and Apple) one of her campaign planks. And, as Fast Company reports, the Retail Industry Leaders Association (RILA) - urged on by members Walmart, Target, and Best Buy - is urging the federal government to “prioritize control of information - primarily through data collection - just as much as market power and price control” as it conducts antitrust probes.

    Add to that the fact that the Trump administration is no fan of Amazon founder-CEO Jeff Bezos (he owns the Washington Post in a personal investment, and the President doesn’t particularly like the tone and volume of its coverage), and you have Amazon potentially facing nine miles of bad governmental and regulatory road.

    And that’s not all …

    CNBC reports that a federal appeals court has ruled that Amazon can be held liable for products sold through its online Marketplace for third-party vendors. The story says that the decision “related to a case in which a Pennsylvania customer … purchased a retractable dog leash” from a vendor on Amazon called The Furry Gang. At one point, the leash recoiled - and the customer was blinded in one eye. The Furry Gang reportedly has gone completely off the radar, and so the customer wanted to go after Amazon.

    This new ruling is just the beginning of the process - it means that the customer now will be able to take Amazon to court and sue for damages.

    The CNBC story points out that “Amazon has previously escaped liability for its vendors’ products. Last year, a judge in Tennessee ruled the company was not liable for damages caused by a defective hoverboard that exploded, burning down a family’s house. The plaintiff, who bought the product on Amazon’s site, claimed the company did not sufficiently warn of the product’s dangers.”

    What this all means is that Amazon seeing a variety challenges to the ways in which it has done business. What’s the old Mike Tyson line? Everybody's got plans... until they get hit. It sounds like Amazon’s going to be taking on some body blows, but I suspect that Jeff Bezos has built an organization capable of absorbing them and effectively fighting back.

    It isn’t all negative news for Amazon, by the way.

    Bloomberg reports that the company is asking the Federal Communications Commission (FCC) to let it launch 3,236 communications satellites into space, where they would circle the planet in low orbits and allow it offer internet service to terrestrial residents.

    Amazon isn’t alone in this quest - the story notes that “the FCC already has approved nearly 13,000 low-Earth orbit satellites,” including more than eleven thousand that will be launched by Elon Musk’s Space Exploration Technologies Corp.

    Here’s how the technology works: “At low-Earth orbit -- altitudes of 112 to 1,200 miles (or about 180 to 2,000 kilometers) -- satellites need to race around the globe to stay aloft, completing orbits in as little as 90 minutes. As one moves toward the horizon it will hand off signal duties to the next satellite coming by. Many satellites are needed if continuous, widespread coverage is the goal.”

    When you are doing stuff like this, dealing with antitrust probes must seem awfully pedestrian. Not unimportant, but not like challenging gravity and making physics work for you.

    Published on: July 22, 2019

    Bloomberg has a story about how, while “Walmart’s U.S. online business has grown, becoming a viable second fiddle to Amazon after the division’s revenue expanded 40% last year,” it continues be be mired in red ink, “with losses expected this year of about $1.7 billion, up from $1.4 billion last year, according to Morgan Stanley estimates.”

    At the same time, Walmart CEO Doug McMillon recently told a technology conference about the changes the retailer is making to adapt to new consumer realities, MarketWatch reports.

    “Obviously bricks-and-mortar stores are one thing. E-commerce in some ways started out feeling like an independent channel or an independent business,” McMillon said. “Yeah, we fell behind and have been playing catch up and have been doing a number of things to accelerate that progress and learning along the way and getting better as it relates to the customer experience … today we’re very focused on creating a seamless experience for the Walmart brand, bringing the stores and e-commerce together.

    “Stores have some advantages and we’re trying to make the most of those. And then catch up in e-commerce and get better with the customer experience and put them together in a way that’s unique and customers will find not only saves them money and time, but creates the optimal experience.”

    MarketWatch writes that “one of the ways that McMillon demonstrated the differences between Walmart and Amazon are its bricks-and-mortar locations and supply chain. Walmart has more than 100 distribution and fulfillment centers, but, McMillon said, they serve various functions. There are about 20 ‘e-commerce-dedicated’ fulfillment centers.

    “According to the Amazon website, it has more than 75 fulfillment centers.

    “But McMillon said Walmart stores operate as ‘dual store and pick centers,’ particularly for perishable items, like food, which have to be sold in a short amount of time or discarded. Walmart has beefed up its options for getting items into customers’ hands, with in-store pickup gaining popularity.”

    Still, Walmart has to find ways to stanch the tide of red ink. Bloomberg writes that “to help streamline things, Walmart brought Jet fully under its umbrella last month. It has also encouraged consumers to pick up their online orders at the store, saving Walmart money on home-delivery costs. More recently, it has rolled out a next-day delivery service that’s now in 28 states, according to data tracker Marketplace Pulse,” which Marc Lore, who run’s Walmart online business in the US, “claims is less expensive to operate as orders typically come in one box from a nearby warehouse.”

    Which also explains why, as Bloomberg reports, Walmart “is conducting its second U.S. restructuring in as many months to better integrate its money-losing online business with its 4,700 physical stores.”

    According to an internal memo obtained by Bloomberg, Walmart “will merge the logistics and finance teams for its e-commerce unit and stores … The company’s merchandising operation, which makes critical decisions on what products to carry, when to carry them and at what price, will maintain separate teams ‘to enable focus and speed’.”

    The story says that “the decision to keep merchandising separate -- for now at least -- illustrates the primacy of Walmart’s in-store merchants, who for decades have wielded vast power inside Walmart’s sprawling corporate bureaucracy. It also shows the increasing complexity of managing an online business that sells about 75 million products, many from small third-party sellers, and now promises next-day delivery in many states to battle rival Amazon.”

    Meanwhile, according to a story from Vox, losses have “forced Lore to reevaluate some of his division’s non-core, money-losing businesses. As a result, Walmart will likely sell at least one of the three digital fashion brands the company has bought under Lore.”

    Since Lore joined Walmart, the company has spent hundreds of millions of dollars to acquire several brands that would seem to appeal to non-core Walmart shoppers, such as Bonobos, Moosejaw, ModCloth and Eloquii. The theory was that spreading its bets around would give Walmart the ability to expand its appeal and, potentially, its economic foundation. However, profitability has been difficult to achieve, and Walmart has been reported to be considering a sale of one or more of the brands.
    KC's View:
    Doug McMillon has been very clear that doing business these days requires the willingness to make mistakes and have a greater degree of flexibility than in the past. I don’t see the Bonobos-type acquisitions as anything more than Walmart being willing to try things and, if they don’t work out, moving on. This isn’t a bug in the system … it is a feature.

    I guess my only concern about these organizational changes is that, bottom line, they are being done for reasons of efficiency, not effectiveness. But it seems to me that Walmart is trying to make the most of its advantages and compensate for its weaknesses. It takes a certain kind of gumption to simultaneously concede that you are playing catch-up with your biggest competitor and bet the business on a new way of doing things.

    Published on: July 22, 2019

    CNBC reports that Amazon says “it sold more than 175 million items during this year’s Prime Day shopping event, more than its sales for the past Black Friday and Cyber Monday combined.”

    No dollar figure was given, however.

    The International Business Times writes that “according to Amazon, Prime members saved more than $1 billion during the sale with millions of items purchased and shipped in one day or faster, which it called the ‘fastest Prime Day ever’ … Amazon’s Whole Foods Market also did well with organic strawberries, red cherries, blueberries making up the top-selling goods while its independent third-party sellers sold more than $2 billion in products.”

    According to the CNBC story, Amazon “said that on Monday and Tuesday it sold more Amazon devices — like the Echo Dot, the Fire TV Stick and Alexa Voice Remote — over a two-day period than it ever has before.

    “A ‘record number’ of Prime members in the U.S., which pay an annual fee of $119 to get perks like free shipping and access to Prime Day, shopped the event this year, Amazon said. It said it added more new Prime members on July 15 than it ever has before on a single day. And it said almost as many people signed up again on July 16.”

    Meanwhile, Bloomberg reports that search intelligence firm Captify says that internet searches for “cancelling Amazon Prime” were considerably more numerous - at one point, 18 times higher - once Prime Days started than just the day before.

    The suggestion is that people joined Amazon Prime to take advantage of the promotion’s deep discounts, and then bailed out once their purchases were made. In addition, the research suggests, consumers are simply getting savvier about the online shopping experience: “Searches for Best Buy Co. were up 255% from the day before Prime Day, while Walmart Inc. queries climbed 130% and EBay Inc. searches rose 72%. That suggests shoppers are bouncing from one site to another in search of the best deal before subscribing to Amazon Prime.”

    “If Amazon is hoping to use Prime Day as a way to sign up and retain new Prime members, they might need to rethink their retention plan,” Captify said in a statement.
    KC's View:
    It was inevitable that competing retailers would see some benefit from the annual Prime Day event - many of them offered their own sales at around the same time, hoping to steal some sales and customers from Amazon. But it has to be pointed out that Amazon is setting the terms of the promotion, and everybody else is simply responding.

    There’s a lot of research out there saying that Amazon Prime has an enviable retention rate - as high as 90 percent. We know that Amazon Prime is reported to have as many as 103 million members just in the US, and that they spend more than twice as much annually as non-Prime customers.

    I’m pretty sure that Amazon rethinks pretty much everything as it works to improve its value proposition … if I were competing with Amazon, that’s precisely what would worry me.

    Published on: July 22, 2019

    Bloomberg reports that “Crate & Barrel is cooking up a new business strategy to draw people to its home furnishings, opening a full-service restaurant this month inside a suburban Chicago store.” The story says that patrons “can have a meal on plates, chairs and tables, most of which are also for sale at the Oak Brook, Illinois, store. And if the concept performs well in terms of foot traffic and customer engagement, the company will consider bringing the eateries to more of its 100-plus stores.”
    KC's View:
    Crate & Barrel is doing something that I think makes a lot of sense - it is working to put its products in context. Tables and chairs aren’t just furniture - they are part of our lives, things that help us create community.

    And, as I like to say, becoming more than just a source of product, but serving as a different kind of resource for shoppers. In doing so, Crate & Barrel starts to create its own kind of community, which has to be good for business. (Assuming, of course, that the food is good.)

    Published on: July 22, 2019

    The New York Times had an interesting op-ed piece the other day by Shoshanna Saxe, an assistant professor of civil and mineral engineering at the University of Toronto, in which she expressed considerable skepticism about the smart city movement; there is a certain irony to that, since Toronto also happens to be where Sidewalk Labs, a sister company to Google, plans to “remake two neighborhoods with things like snow-melting roads and an underground pneumatic-tube network,” not to mention an enormous amount of technology tracking and responding to what happens there.

    “Smart cities,” she writes, “make two fundamental promises: lots of data, and automated decision making based on that data. The ultimate smart city will require a raft of existing and to-be-invented technologies, from sensors to robots to artificial intelligence. For many this promises a more efficient, equitable city; for others, it raises questions about privacy and algorithmic bias.

    “But there is a more basic concern when it comes to smart cities: They will be exceedingly complex to manage, with all sorts of unpredictable vulnerabilities.”

    While some of these vulnerabilities will be technological, they also more than likely could be rooted in human behavior. Software will be required to run these smart cities, she says, but we all know that software has to be updated and replaced on a regular basis. Can politicians be counted on to budget for these updates on a regular basis?

    Plus, “Cities must also plan for the inevitable moments when the sensors fail no matter how often we maintain or replace them. Failures in engineered systems tend to come at the most inconvenient times, like when a storm drops high levels of water and simultaneously knocks out the electricity to a smart storm water management system.

    “Managing all the sensors and data will require a brand-new municipal bureaucracy staffed by tech, data-science and machine-learning experts. Cities will either need to raise the funds required to pay a tech staff or outsource much of their smart city to private companies. Since current average salaries for tech workers are typically higher than for public employees, such a bureaucracy is likely to be expensive. If the answer is to outsource that staffing to private companies, then cities need to have frank conversations about what that means for democratic governance.”

    Plus, she writes, smart solutions aren’t always the best solutions, and they rarely are the easiest solutions:

    “Congestion can be tackled with autonomous cars, true; it can also be tackled with better railways, bus rapid transit and bike lanes. Houses can be covered in sensors to control an automated heating and cooling system; they can also be built with operable windows and high-quality insulation.

    “And public garbage cans can be emptied when sensors say they are full, or on a regular basis, based on the expertise of experienced, well-paid city workers. Smart solutions might be exciting, and they might seem cheaper in the short run, but that alone doesn’t make them better.”

    Saxe concludes: “For many of our challenges, we don’t need new technologies or new ideas; we need the will, foresight and courage to use the best of the old ideas.

    As we consider the city of the 21st century, we do well to remember that the things we love most about cities - parks, public spaces, neighborhood communities, education opportunities - are made and populated by people, not technology. Tech has a place in cities, but that place is not everywhere.”
    KC's View:
    At the same time that this piece ran in the Times, there also was a piece in the paper about the difficulties some medium sized cities are having competing with big cities, using Winston-Salem as an example. In that piece, the following passage stood out to me:

    The city made a bid for Amazon’s second headquarters. But though Amazon will build a fulfillment center in nearby Kernersville, where FedEx runs a distribution hub, Winston-Salem didn’t make the short list for HQ2. “If you go down the Amazon checklist, it requires all the things that we don’t have,” said Koleman Strumpf, a professor of economics at Wake Forest. “We don’t have mass transit. No Amtrak. No good airports. It’s not a walkable city. It doesn’t have great amenities.”

    “Smart,” I suppose, is a word with a variety of implications. “Smart” can mean all the things that Sidewalk Labs envisions - and, having been to Toronto and seen what is planned, I must say that I am energized by the possibilities. But “smart” also can mean having great mass transit, walkable green spaces, access to a terrific airport … as well as having great retailers. (I’m particularly in tune with this at the moment because I’m in Portland, Oregon, doing my annual summer adjunctivity at Portland State University, and as always I find myself thrilled with the options that an urban environment offers compared to the suburbs.)

    I hope there isn’t a move away from the concept of smart cities. Though it might not be a bad thing if we’re just smarter about how we build them.

    Published on: July 22, 2019

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

    CNBC reported last week that Amazon “plans to retrain a third of its U.S. workforce — or 100,000 workers — by 2025 to help its employees move into more advanced jobs or find new careers … The planned program is among the biggest corporate retraining initiatives ever announced, at a cost of roughly $7,000 per worker, or $700 million.”

    According to the story, Amazon “intends to expand its existing training programs and introduce new ones. The training will be voluntary, and most of the programs are free.”

    Among the retraining programs are “Amazon Technical Academy, which equips non-technical employees with the skills to transition into software engineering careers” and “Associate2Tech, which trains fulfillment center associates to move into technical roles.”

    • Ahold Delhaize USA’s Retail Business Services division announced the opening of “a fresh processing facility and culinary innovation center in Rhode Island” that “will process fresh food items for area grocery stores, including cut fruit and cut vegetables, leaf, grain and pasta salads, sandwiches, wraps, and other items commonly found in deli or grab and go sections of supermarkets. Initially, the facility will serve the Hannaford and Stop & Shop brands.”

    The facility will be run through the company’s Infinity Fresh Kitchen subsidiary.

    I hope there is a real effort here to put a focus on high quality - there are plenty of mediocre brands out there, and I think that mainstream retailers would do well to decide to make quality food - produced by people who understand food culture - a marketing centerpiece presented as a differentiator.

    Fox Business reported that Starbucks has “opened its first express retail store in China aimed to transform pickup and delivery for its customers.”

    Dubbed Starbucks Now, the store “opened in Beijing’s financial district and featured a minimalist design and limited seating — much different from its typical stores. One or two baristas will be at the express location to help with walk-in orders as well as those made on its app and website.”

    But the main feature is “an in-wall system where delivery riders are directed to a designated pickup portal for the order they are delivering” - the store is designed for ease of use by delivery personnel who are taking its coffee from the store to the offices and homes where it has been ordered.

    The story notes that “Starbucks has been expanding its delivery program in China amid competition from other chains such as Luckin Coffee. Starbucks said it plans to open more Starbucks Now stores in ‘high-traffic areas’ in the country.”

    No plans to expand the concept to other markets, like the US, have been announced.

    CNBC reports that CVS plans to expand its HealthHUB concept - which offers expanded “health services and products like blood testing and sleep apnea machines” - which has been successfully piloted in the Houston market.

    CVS “announced last month it would add 1,500 HealthHUBs by the end of 2021,” the story says, and “in the first half of 2020, CVS will open HealthHUBs in Boston, Dallas-Forth Worth, Florida, Maryland, North Carolina, Ohio, and Virginia. It will also open a handful of stores in Hartford, home of CVS’s newly acquired Aetna’s headquarters, New York City and Washington, D.C.”

    The story notes that “HealthHUBs embody CVS’s vision for the $70 billion acquisition of health insurer Aetna it completed last fall. CVS hopes that in combining drugstores, pharmacy benefits and health insurance, it can better tailor its stores to treat chronic diseases and other costly conditions, improve the stores’ performance and lower health-care costs.”

    • The Seattle Times reported that Starbucks has decided to stop selling newspapers in its 6,800 US stores, beginning in September.

    The move, according to the story, “will eliminate the three national dailies that are now sold in racks at Starbucks — The New York Times, which Starbucks has carried since 2000, and The Wall Street Journal and USA Today, both of which have been in the stores since 2010. It will also do away with local newspapers, including The Seattle Times, which has been available at Starbucks stores across the Pacific Northwest since at least the early 1990s.”

    The Times writes that “Starbucks spokeswoman Sanja Gould said the move follows the decline of in-store newspaper sales and is part of the company’s broader attempt to respond to ‘changing customer behavior’.”

    The story points out that this isn’t good news for the newspaper business, which has been suffering for years (though it has seen something of an uptick in readership - especially in digital editions - since 2016). The Times also points out that Starbucks was such a valuable venue for the three national papers that some were willing to offer free advertising to Starbucks in exchange for a continued presence. Not enough, I suppose, in the end … but this is a shame. I’ll miss seeing newspapers there, though, to be honest, if I were reading the paper while drinking coffee it almost always is on my iPad.

    • The Minneapolis/St. Paul Business Journal reports that Lunds & Byerlys plans to close “all 14 of its pharmacy locations next week,” transferring its patient prescriptions to nearby Walgreens locations.

    "Unfortunately, it has become increasingly difficult for retail pharmacies given a number of economic challenges within the industry," the company said in a statement.

    The Journal writes that “the pharmacies are all located in the Twin Cities metro area and are connected to existing Lunds & Byerlys stores. The company said it was remodeling the spaces, though it's unclear if they would be converted into more grocery-store space or used for some other purpose. The fate of the pharmacy employees is also not known.”

    • The New York Times reported that department store chain Kohl’s is “now accepting Amazon returns at its more than 1,100 stores after running a pilot program in 100 locations. The retailer, which will pack, label and ship the returns for free, expects the program to benefit millions of shoppers along with bringing more people into their stores, Michelle Gass, the company’s chief executive, said in a statement … It timed its national rollout to the back-to-school shopping season.”

    The story quotes Oliver Chen, a retail analyst at Cowen, as saying that “it’s an interesting marriage because what Kohl’s needs is store traffic, and what Amazon needs is to make customers happier with a place to return their items. The dream is that it’s a fair but attractive split where that shopper will come in and purchase other items.”

    • The Sacramento Bee reports that California is changing its definition of beer “to include varieties fermented with fruit, honey, spices or other foods.” The bill making the changes was signed by Gov. Gavin Newsom.

    According to the Bee, “Tom McCormick, executive director of the California Craft Brewers Association, said the new law won’t change what the average consumer thinks of as beer, which is made from malted grain or a malt substitute. California brewers have already been brewing beers using fruit for flavoring, he said.

    “Under prior California law, using fruit in the fermentation process required a wine license, but the new law clarifies that beer brewers can use fruit and other ingredients to supplement their products, McCormick said.

    “The change puts California law in line with federal law, which already allows for fruit and other ingredients to be used during beer fermentation.”
    KC's View:

    Published on: July 22, 2019

    • The Cincinnati Businesses Courier reports that Kroger plans to build a new digital headquarters in downtown Cincinnati that eventually will house as many as 1,000 employees. The campus, according to the story, “is expected to have a $40 million payroll following the company’s $5 million investment in leasehold improvements, furniture, fixtures and equipment.”

    Yael Cosset, Kroger’s chief digital officer, says that the new “Digital HQ is an important step on our journey to create a truly seamless shopping environment.”

    Fox Business reports that convenience store chain Sheetz “will be adding bitcoin ATMs to six stores in Pennsylvania and North Carolina, giving customers an opportunity to sell and buy cryptocurrency.”

    According to the story, “the convenience store chain teamed up with Coinsource to add the machines.” In a press release, Sheetz said that “as cryptocurrency increases in popularity and demand, we are excited to add this service in our continual mission to be the ultimate one-stop-shop.”
    KC's View:

    Published on: July 22, 2019

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

    PhillyVoice reports that Ahold Delhaize-owned Giant will open its second small/urban format Heirloom Market in Philadelphia next month, in the University City neighborhood. “Giant also said it will be opening three additional Heirloom Markets after the initial success of the Graduate Hospital location. Stores in Northern Liberties and Queen Village are scheduled to open by the year's end.

    Reuters reported over the weekend that the US Centers for Disease Control and Prevention (CDC) is saying that “ two people have died following a multi-state outbreak of salmonella infections linked to backyard poultry … One death was reported in Ohio and the other one in Texas … An additional 489 people with salmonella infections have been added to an ongoing investigation since the last update in June, the CDC said, taking the total to 768 cases from 48 states.”

    To be honest, I had to look up what “backyard poultry” was. According to a website called OutbreakNewsToday - and I’m sort of perplexed that such a site exists - the term refers to chicks and ducklings that have been acquired “from several sources, including agricultural stores, websites, and hatcheries.” Which sounds like a pretty good argument to buy one’s food from a reputable food store.

    • The Wall Street Journal reports that some traditional CPG companies, “facing stagnant sales of household mainstays from diapers to detergent,” are embracing a new approach - they “are trying to crack the lucrative market for influencer-pitched, millennial-approved skin-care products.

    “Household-goods makers such as Procter & Gamble Co., Colgate-Palmolive Co. and Unilever have begun snapping up skin-care startups selling pricey creams, serums and lotions - long the domain of beauty companies - while relying on Instagram and Sephora, a U.S. beauty chain, to drive sales instead of drugstores and shopping malls. … In the past two years, consumer-products companies acquired nearly a dozen skin-care brands, far more activity than in previous years, according to Dealogic.”
    KC's View:

    Published on: July 22, 2019

    • In Minnesota, the Star Tribune reports that “Target Corp. has hired Facebook executive Hari Govind as senior vice president of infrastructure and operations, landing a high-profile tech veteran at a time when technology is becoming increasingly vital to the retailer’s operations.

    “Govind has more than 20 years of experience leading engineering and product management teams, and has expertise in social media, e-commerce, digital advertising, search and cloud infrastructure, the company said in announcing Govind’s hire.” The story says that Govind, as Facebook’s group manager on the infrastructure team, “is credited with helping to scale platforms for Facebook, Messenger, Instagram, WhatsApp and Oculus.”
    KC's View:

    Published on: July 22, 2019

    …will return.
    KC's View:

    Published on: July 22, 2019

    …will return.
    KC's View: