business news in context, analysis with attitude

Published on: March 3, 2020

by Michael Sansolo

It’s entirely reasonable to consider the range of competitive, demographic and economic news surrounding us and conclude that a retail bloodbath is coming.  For some companies, it already has arrived.

At last week’s National Grocers Association (NGA) convention in San Diego, there were moments that touched on both the optimistic and pessimistic outlook for the industry. Fortunately, there were also some signposts that offer direction, if not hope, for how to end up on the sunnier side of these predictions.

Three particular presentations stuck with me on these themes and luckily for you, I only made one of those speeches.

The first was the opening keynote by famed historian Doris Kearns Goodwin, whose stories of individual past presidents reminded us that tough times have always been upon us.  And yet, as a people, we have found the unity and strength to grow especially when motivated by great leaders.

The second was far more germane to the industry. Neil Stern of McMillan Doolittle and one of my regular favorites, outlined the elements of the current competitive storm from Amazon to Aldi, Lidl, dollar stores and more.  But Stern also offered the line that businesses should focus upon today, tomorrow and endlessly. After detailing the retail carnage of recent years right up to the start of 2020, Stern said he doesn’t believe it’s a time a gloom and doom for retail. “Just for bad retail.”

It’s a simple, yet incredibly profound statement - and one that we've used, in various iterations and forms, over the years here on MNB.  Yes, numerous retailers have been falling for a number of years now and there’s no reason to think those numbers won’t grow. But it’s worth pondering whether each of those business failures was a case of homicide by competitive or suicide thanks to complacency and mediocrity. I’d argue for the latter.

Yes, the competitive situation is incredibly challenging, but that isn’t a brand new phenomenon. I recall with clarity the carnage and predictions of doom just a few decades ago when Walmart decided to add food to its wide array of general merchandise products. Countless retailers fell in the face of Walmart’s rise to the top of the food chain, but many others survived.

They did so by improving efficiencies, operations, experiences and more. In other words, many retailers did die, but the best did not. That’s a piece of history that no business should ignore now that the feared, relentless competitor is Amazon, not Walmart or any of those powerhouses of the past back to Sears and A&P.

My feelings of optimism were enhanced by the session I ran at NGA, the annual salute of outstanding merchandising and marketing. The essence of that session is a celebration of how smaller retailers have found ways to build businesses, brand and customer excitement by creating special moments in unexpected and sometimes stunning ways.

That kind of creative thinking and activities won’t guarantee success, but promotions such as shooting a donut 18 miles over Utah or giving shoppers in-store passports to try a range of international foods might be the simple, yet brilliant steps that help individual companies rise above the pack and survive or possibly thrive despite the times.

But just remember. It won’t happen easily and as historian Goodwin reminded us, it won’t happen without leadership.

To paraphrase John Donne’s famous poem, Ask not for whom the bell tolls … just make sure it doesn't toll for you!

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 here.

And, his book "Business Rules!" is available from Amazon here.

Published on: March 3, 2020

The Los Angeles Times reports that the COVID-19 coronavirus "has killed more than 3,000 people, more than 2,800 of whom have been in China’s Hubei province. On Monday, the U.S. death toll from the coronavirus rose to six."  There are said to be close to 90,000 coronavirus cases around the world, as public health experts warn that it is on the verge of turning into a pandemic.

New Hope Network announced last night that it will postpone the Natural Products Expo West 2020, originally scheduled to take place in Anaheim, California, later this week, because of concerns related to the global COVID-19 coronavirus outbreak that threatens to become a pandemic.

Facing a hemorrhaging list of attendees, with a wide range of retailers (from Amazon to Wegmans) and suppliers (from Applegate to Unilever) reportedly cancelling their plans to attend the giant food show, New Hope said that this week's event "is officially postponed, with the intention to announce, by mid-April, a new date."

New Hope said that "it is our intention to work with all our Exhibitors and Attendees on future credits and support, with particular focus on the many entrepreneurs and small businesses who are the heartbeat of this community, for whom we are going to stand up a rebate fund of $5m targeted at their specific needs. 

"It is our intention to deliver a Natural Products Expo West event before the summer to serve the community, either in Anaheim or a suitable alternative location.  We are already working on how we deliver a much-enhanced Expo East in September in Philadelphia, serving and supporting the community with the best show we have ever had on the East Coast."

The coronavirus impact is being felt throughout the industry.  Some of the relevant media reports:

•  The Wall Street Journal reports that "supermarkets and other retailers are preparing for a surge in demand and shoppers are stocking up on staple foods and cleaning supplies as more cases of the new coronavirus appear in the US … Walgreens Boots Alliance Inc. said it has seen greater demand for products including face masks and hand sanitizers at many stores and online. Home Depot Inc. said it had halted online orders for face masks and was limiting purchases at its stores to 10 per customer."

•  Also from the Journal:  "Raley’s Supermarkets, which operates about 120 stores in Northern California, said it is working to increase the availability of hand sanitizer, tissue, disinfectants and other cleaning and hygiene products. The chain said it is in discussions with suppliers to ensure the availability of these products. A spokeswoman said Raley’s hasn’t experienced shortages of any foods it sells.

"Another California chain, Smart & Final Stores Inc., said it is taking directions on how to respond to the epidemic from the CDC and trade groups. Meijer Inc., a Midwestern chain of more than 200 stores, said it is focused on maintaining stock in sanitizers and antibacterial wipes. Discount grocer Save A Lot said it is working with suppliers to prevent potential disruptions to its supply chain."

•  From the Seattle Times:

"E-commerce delivery, which has grown rapidly in the past two decades, could take on an even bigger role with a population that appears increasingly uneasy about going out in public.

"While many physical retailers were jammed and running out of items including toilet paper, medicines, water and bananas, other shoppers sought to avoid the stores altogether, relying instead on services such as Amazon and Instacart. As the outbreak worsens, more people may turn to e-commerce, analysts and survey data suggest … More than 27% of 1,121 U.S. internet users surveyed by Coresight Research in late February said they were already avoiding public places such as shopping centers and entertainment venues, while 58% said at the time they would do so if the outbreak worsened."

•  Bloomberg reports that "Prime Now and Amazon Fresh delivery services have been overwhelmed by demand, a sign that virus-spooked shoppers are turning to the world’s largest online retailer to avoid going to brick-and-mortar stores … Amazon on Monday warned customers that both services would have limited availability, meaning orders are being delivered more slowly than usual. The company hasn’t reduced the number of people or trucks dedicated to either service, but it has seen a surge in demand that’s straining its delivery capacity, according to a person familiar with the matter, who requested anonymity because they aren’t authorized to speak publicly about the issue."

•  CNN reports that "Amazon says it has pulled more than 1 million products for price gouging or falsely advertising effectiveness against the coronavirus … The removal comes after Wired found sellers gouging the prices of coronavirus-related products, like face masks, or charging people 'exorbitant shipping costs,' according to the magazine. In one instance, the publication found a seller with face masks for as much as five times their normal price."

"We are disappointed that bad actors are attempting to artificially raise prices on basic need products during a global health crisis and, in line with our long-standing policy, have recently blocked or removed tens of thousands of offers," an Amazon spokesperson tells CNN. "We continue to actively monitor our store and remove offers that violate our policies."

•  Reuters reports that Ocado, the British pure-play e-grocer, is telling shoppers "to place orders further in advance because of 'exceptionally high demand.' indicating a possible reaction from shoppers to the spreading coronavirus outbreak … The company advised customers to place orders further in advance than they might normally; ideally, two or three days before.  It also asked customers to book weekday delivery (Monday to Thursday) rather than weekends if they are able to be flexible."

The story says that "Britain announced a jump in coronavirus cases on Sunday, with 13 new infections taking the total to 36 and Prime Minister Boris Johnson warning that the number is likely to rise."

•  The International Housewares Association (IHA) yesterday cancelled its annual Inspired Home show in Chicago, which was scheduled to take place March 14-17.

"In the end, the global nature of our event, combined with the worldwide concern regarding the coronavirus outbreak and ongoing travel restrictions make it impossible for us to hold The Inspired Home Show next week," said Derek Miller, president of the IHA.

The Chicago Sun Times writes that "it is the first event to be axed at McCormick Place due to the spread of the virus. With about 56,000 attendees, the show was expected to draw participants from 130 countries. A McCormick Place spokeswoman said the show accounted for more than 47,000 room nights at Chicago hotels."

The show is not being rescheduled this year.  The next one is slated to take place March 13-16, 2021 at McCormick Place in Chicago.

•  It isn't just retailing, of course.  The Journal notes that there are "few businesses … at greater risk of being impacted than sports … This is a multibillion-dollar industry built on live entertainment, easy travel and mass gatherings, and that makes it especially vulnerable if major cities begin to embrace social distancing, as they have in countries where the virus has already disrupted everyday life."

Among the events that may be affected:  "The NCAA tournament. Major League Baseball opening day. The Masters golf tournament. The NFL draft, the NBA and NHL playoffs, the Boston Marathon and Olympic qualifiers all over the U.S."

Published on: March 3, 2020

The Harvard Business Review has a good piece about how businesses, which used to shy away from the issues of the day as well political activism and advocacy because of concerns that any sort of public posturing would alienate a sizable percentage of their customers, now are embracing the opportunity to take up causes - in part because they have to, and in part because it is in synch with their brand identities.

"The change started with the corporate social responsibility movement of the 1980s, when more companies began considering the impact their practices had on society and the environment," the Harvard Business Review writes.  "There was advocacy, but it was about products and processes, not politics. No one could take umbrage at a company that produced hormone- or BPA-free products or whose supply chain banned firms that employed abusive labor procedures. These were rooted in ethics as opposed to political ideologies."

And it isn't just on one side of the aisle or the other:

"As society became politically polarized, companies became more activist. With a 24-hour news cycle and social media fanning polarization, it’s more problematic for organizations and their CEOs to remain neutral. Consider what’s happened in the past decade: Hobby Lobby — a chain of craft stores that challenged a federal mandate stating companies pay for insurance coverage for contraception — took their case all the way to the Supreme Court and won. Nike featured the controversial athlete and social crusader, Colin Kaepernick, in an ad campaign. Retailers like Walmart and Dick’s Sporting Goods stopped selling certain weapons in response to tragic mass shootings nationwide."

That's not to say that all people view political activity the same way.

In a survey, the Harvard Business Review presented a fictional case of a company taking political positions - but half the participants were told that they were conservative positions, and half were told that the company was liberal.

"Participants who were told the company had conservative values viewed it in a significantly worse light. Their opinion of Jones Corps dropped 33%. The company was not only seen as less committed to social responsibility and its community, but also as less profitable. Participants were 25.9% less likely to buy its products and 25.3% more likely to buy from a competitor. In addition, job seekers were 43.9% less likely to apply for a position there.

"Because conservative activity was viewed so poorly, the reverse seemed likely for liberal activity. That wasn’t the case. Participants who were told the company had liberal values viewed it as neither good nor bad. There was no significant change in any opinions or intended behaviors."

Also interesting, the Harvard Business Review wrote, was a general lack of cynicism about these political positions:

"We asked participants whether political advocacy was genuinely held by companies — our fictitious one, as well as a few real-world examples — or whether it was designed to build loyalty among like-minded customers. We thought the answers would be mutually exclusive — that advocacy would be viewed as either genuinely held or designed to build loyalty. But overall the political beliefs of companies were seen to be both genuinely held and designed to build loyalty by the majority of participants.

Overall, these results reveal a societal shift about what is and is not acceptable for companies to endorse.

"The fact that participants viewed engaging in liberal advocacy as neither good nor bad suggests that they thought doing so was merely normal business.  This lack of cynicism, frankly, perplexed us. We live in an age where trust in fundamental institutions — be they church, state, or business — is steadily waning, especially among millennials (which was 75% of the sample).

"Perhaps this can be explained by our supposition that political advocacy has been absorbed to the extent that it is seen as a natural extension of a business model. Further, participants generally acknowledged that political advocacy is both a way for companies to connect with customers and promote their brand. Using advocacy to advertise to target audiences isn’t seen as manipulative pandering. Rather, it’s seen as common practice."

You can read the HBR analysis here.

https://hbr.org/2020/02/how-do-consumers-feel-when-companies-get-political

Published on: March 3, 2020

In Minnesota, the Star Tribune reports that Target, which has spent close to $9 billion refreshing and remodeling old stores and opening new ones over the past three years, plans to "slightly decrease its capital expenditures as the pace of new store remodels slows after this year," though it will "continue to make significant investments in technology, supply chain and new stores."

That's according to Michael Fiddelke, Target's new CFO:  "“That’s the thing that we think has driven our success and so we’ll continue to keep an eye out for what are the right places we can continue to invest,” he said in an interview. “We want to play offense.”

Neil Saunders, an analyst with GlobalData Retail, tells the Star Tribune that "the road ahead for Target won’t be easy, especially since it’s up against tough sales comparisons from the last year.  'There’s definitely still a lot of opportunities, but also a lot of headwinds and potential challenges — coronavirus, tariffs are still lurking, potential disruption from elections, danger of slowdown in consumer economy, and competitive challenges from Walmart and Amazon'," he says.

Published on: March 3, 2020

Good blog posting by my friend Bob Wheatley at brand marketing firm Emergent, in which he writes about the personalization of food.

An excerpt:

"Have you noticed over the last 20 years palates have become more sophisticated? Quality expectations around menus, ingredients and preparations have grown alongside the rising popularity of celebrity chefs. Elevated cooking is everywhere. A genuinely satisfying culinary experience can now be had at the neighborhood gastro-pub. Great food experience is just an arm’s reach away. This is evidence of a food culture shift.

"Equally so, food literacy has jumped with the treasure trove of content available online that satisfies the consumer’s thirst to know more about the food they put in their bodies. This concern got traction when people generally connected the dots between the quality of the food they consume and the quality of their lives. People now understand that diet influences the foundation of health and wellness, and sub-optimal nutrition may contribute to the onset of disease. More culture driven transformation.

"An outcome of being in constant control is the marketplace of one."

Wheatley argues that "the desire for more customized solutions" will "gain momentum as it mirrors the consumer’s view that who they are, what they want and their perceived unique needs and preferences.  Answering this call will be the next great revolution in food as businesses work to create more options that answer the desire for hyper relevance."

You can read more about it here.

Published on: March 3, 2020

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

•  Paul Saginaw, the cofounder of famed Zingerman’s Deli in Ann Arbor, Michigan, has decided to roll the dice with a new deli in the soon-to-be opened Circa Hotel and Resort in downtown Las Vegas.

The name:  Saginaw’s Delicatessen.

According to Forbes, the new deli will be opened in December.  It will be opened 24 hours, but will focus on foodservice.  There will be no retail element.

“I couldn’t be happier,” Saginaw tells Forbes.  “It’s been a lifelong dream to open a business in Las Vegas. Things happen at the right time.”

Forbes writes that "Vegas might seem like the antithesis of Ann Arbor, but for Saginaw, it is a second home. He became interested in gambling through his great-uncle, Charles 'Chuckie' Sherman, a bookie who was arrested at least 65 times, by Saginaw’s count."

It seems to me that if you want to make a bet on Vegas, you do your best to make sure the odds are on your side … which in this case, would mean using the name Zingerman's, which has so much brand equity.  Saginaw says that to do so would violate a core company value, which is to "keep the brand local."  But I think it is fair to say that Saginaw isn't making his job any easier.

Published on: March 3, 2020

James Lipton, who became known as the creator and host of "Inside The Actor's Studio," a television series on which he gently interviewed and prodded actors about their backgrounds, influences and creative choices, becoming an unlikely cultural touchstone and fixture on television as well as a target of Will Ferrell on "Saturday Night Live," has passed away.  He was 93.

Published on: March 3, 2020

…will return.

Published on: March 3, 2020

Digital strategies aren't just about creating alternatives to the bricks-and-mortar shopping experience.  Done effectively, they can actually bring people back to the store, while also eliminating customer anonymity, creating rich and actionable data, and deepen relationships between the store and consumer in a way that transcends the simple transaction.

Our newest Retail Tomorrow podcast, which brings together a terrific panel of experts from a wide range of disciplines, was recorded at Google’s New York City offices during the recent National Retail Federation (NRF) Show.  Our guests:

•  Matt Alexander, co-founder of Neighborhood Goods, an unusual and fascinating take on physical retailing with stores in Dallas and New York.

•  Patrick Flanagan, senior vice president of digital marketing and strategy for Simon, which has more than 200 properties in 37 states and Puerto Rico.

•  Tom Furphy, CEO and Managing Director of Consumer Equity Partners, a member of the Retail Tomorrow podcast family and a regular contributor to "The Innovation Conversation" on MNB.

•  And Jalna Silverstein, a leader in Ernst & Young’s Transaction Advisory Practice and its Real Estate, Consumer Experience and Retail Strategy.

You can listen to the podcast here.

This Retail Tomorrow podcast is sponsored by the Global Market Development Center (GMDC).

Pictured below are our panel members, from left:  The Content Guy, Matt Alexander, Tom Furphy, Patrick Flanagan, Jalna Silverstein.