business news in context, analysis with attitude

Published on: July 30, 2020

The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

Yesterday, four of the technology sector's most prominent CEOs - Amazon's Jeff Bezos, Facebook's Mark Zuckerberg, Apple's Tim Cook, and Google's Sundar Pichai - appeared on Capitol Hill (virtually) to testify before the House of Representatives Judiciary Committee's subcommittee looking into antitrust issues.  The session had its share of fireworks, not a ton of nuance, and plenty of discussion about the nature of competition in a digital marketplace.

As the session wound down, Tom and Kevin connected via Zoom for an extended chat about what they saw as the recurring themes - both legitimate and frivolous - and to evaluate the substance and style of the executives' performances.

Published on: July 30, 2020

From the Washington Post:

"The number of new unemployment insurance claims rose again last week — the second week in a row after months of declines — a concerning sign that the pandemic is exerting new pressure on the labor market.

"About 1.43 million people filed claims last week, up by about 12,000 from the previous week’s jobless claims, which was also revised upward, according to the Department of Labor.

"The number of workers continually claiming unemployment insurance also rose, by about 867,000 workers to 17 million for the week ending July 18, up from 16.1 million for the week ending July 11. That statistic lags by a week."

At the same time, the Post writes, "The U.S. economy shrank 9.5 percent from April through June, the largest quarterly decline since the government began publishing data 70 years ago, and the latest, sobering reflection of the pandemic’s economic devastation.

"The second quarter report on gross domestic product covers some of the economy’s worst weeks in living memory, when commercial activity ground to a halt, millions of Americans lost their jobs and the nation went into lockdown. Yet economists say the data should also serve as a cautionary tale for what’s at stake if the recovery slips away, especially as rising coronavirus cases in some states have forced businesses to close once again.

"GDP shrank at an annual rate of32.9 percent, according to the Bureau of Economic Analysis, the agency that publishes the statistics on quarterly economic activity. While it usually stresses the annualized rate, that figure is less useful this quarter because the economy is unlikely to experience another collapse like it did in the second quarter."

Published on: July 30, 2020

Axios reports that a new Axios/Harris poll shows that "the public's view of almost every industry has improved since the beginning of the coronavirus pandemic … Leading the index are companies that have focused on solving problems related to the coronavirus:  Grocers, including Publix, Wegmans and Kroger, are among the highest-ranking companies."

In fact, the only business sector that is ranked higher than the grocery business is the medical profession.

The poll suggests that the way in which certain industries responded to the pandemic - "with a prominent role in life under quarantine" and "focused on solving problems related to the coronavirus" - has sustained and accelerated a trend that already was taking place:  "Businesses in America were already undergoing a transformation from being solely focused on profits to also focusing on values."

The Axios story also points out that "consumer packaged goods companies that focus on cleaning and kids, like Clorox, Hersey's, Disney and Procter & Gamble Co.," as well as streaming giants like Netflix … and chain drug stores like CVS and Walgreen, all have been judged by consumers as being up to the challenges created by the pandemic.

Published on: July 30, 2020

The Washington Business Journal reports that a new 46,000 square foot Whole Foods has opened in Washington, DC, and that it includes a Spike Mendelsohn-operated "PLNT Burger restaurant, a plant-based fast-casual spot that first launched in Silver Spring."

According to the story, the store has a built-in constituency:  "The Whole Foods at 967 Florida Ave. NW in Shaw is part of a mixed-use development, The Wren, that will have 433 apartment units, including 132 units of affordable housing."

The story notes that "during the Covid-19 pandemic alone, Whole Foods has opened four other locations across the country in Austin, Colorado, New York City and Baltimore last month.

Published on: July 30, 2020

From today's Los Angeles Times:

"Food insecurity for U.S. households last week reached its highest reported level since the Census Bureau started tracking the data in May, with almost 30 million Americans reporting that they’d not had enough to eat at some point in the seven days through July 21.

"In the bureau’s weekly Household Pulse Survey, roughly 23.9 million of 249 million respondents indicated that they 'sometimes [had] not enough to eat' for the week ended July 21, while about 5.42 million indicated that they 'often [had] not enough to eat.' The survey, which began with the week ending May 5, was published Wednesday.

"The number of respondents who sometimes had insufficient food was at its highest point in the survey’s 12 weeks. The number who often experienced food insufficiency was at its highest since the week ending May 26."

Published on: July 30, 2020

MarketWatch writes that "this year was supposed to be a slugfest between the nation’s two biggest retailers, Amazon and Walmart. But even in a pandemic in which Walmart should have had some natural advantages - a brick-and-mortar presence and investments in click-and-collect orders - early signals from spending data suggest that Amazon hit the turbo-boost button and left Walmart in the dust."

An examination of consumer spending data, the story says, tells " a tale of two companies…

"Of the two retailers, Walmart seems like it would best be positioned to capitalize upon the COVID-19 crisis. Start with ubiquity. As recently as 2017, 95% of Americans had shopped at a Walmart or Walmart.com within the past year.

"Add the fact that Walmart had introduced pandemic-friendly options such as the ability for customers to buy online and do curbside pickup at a physical store. For good measure, consider that even in a pandemic and the economic hardship that goes along with it, people still need groceries — and there are a lot more Walmarts than there are Amazon-owned options like Whole Foods.

"For a brief moment, it seems like Walmart is on a good track. Both companies experience a spike around March 8 and March 15 that can be attributed to 'panic shopping' as people stocked up on essentials. Amazon experiences a 30% year-over-year increase, while Walmart rises about 18% year-over-year.

"Then, Walmart sinks back down to minus 5%, while Amazon takes off like a rocket. Amazon achieves as much as a 95% increase in year-over-year spending, and maintains at least a 70% increase in year-over-year spending for 11 of the next 14 weeks. Walmart, meanwhile, shows a comparatively unexceptional 5%-10% increase."

Published on: July 30, 2020

Tom Furphy and I offered our assessment of yesterday's testimony by four tech CEOs - Amazon's Jeff Bezos, Facebook's Mark Zuckerberg, Apple's Tim Cook, and Google's Sundar Pichai - before the House of Representatives Judiciary Committee's subcommittee looking into antitrust issues.

Here are how some other media outlets covered and characterized the encounter.

•  From the Washington Post:

"They came for blood.

"For more than five hours, lawmakers relentlessly questioned the CEOs of four of the world’s largest technology companies about everything from antitrust to conservative bias. It was an aggressive, wide-ranging hearing that was held to determine if the companies’ outsize power and influence was bad for competition and consumers.

"And the lawmakers showed up with evidence  - both in the form of documents and people - to hold the CEOs accountable. It was clear many had also done their research, navigating complicated tech jargon to try to pin the executives down."

The Post goes on:

"Over the course of the more than five-hour hearing, the executives were interrupted and cut off repeatedly by lawmakers on all sides. While Republicans’ and Democrats’ main issues with the companies varied, their unhappiness with the companies was consistent.

"The CEOs have been carefully trained to not give away too much and fill in the blanks with stock phrases, but with just five minutes on the clock for each question, lawmakers quickly cut them off when it was clear they weren’t being direct.

"It was probably a change of pace for the wealthy and powerful CEOs, who are used to calling the shots at their own companies. The aggressive questioning often used the executives’ own past words against them, as lawmakers read lines from old emails."

•  From the Wall Street Journal:

"The chief executives of Amazon.com Inc., Facebook Inc., Apple Inc. and Alphabet Inc.’s Google faced relentless criticism at a congressional hearing Wednesday, with Democrats and Republicans alike challenging their business practices over more than five contentious hours.

"The session, conducted via videoconference because of the coronavirus pandemic, laid bare deep-rooted frustration with some of the country’s most successful companies, at a moment when Americans rely on them more than ever.

"It also highlighted the threat to the companies from ongoing investigations by antitrust authorities, with lawmakers citing internal company emails and witness interviews as evidence that the platforms improperly abuse their dominant position.

The tone of the questions, directed at Amazon’s Jeff Bezos, Facebook’s Mark Zuckerberg, Apple’s Tim Cook and Google’s Sundar Pichai, was almost universally hostile. Rep. David Cicilline (D., R.I.), chairman of the House Antitrust Subcommittee, kicked off the hearing by declaring: 'Our founders would not bow before a king. Nor should we bow before the emperors of the online economy'."

•  From the New York Times:

"The chief executives of Amazon, Apple, Google and Facebook, four tech giants worth nearly $5 trillion combined, faced withering questions from Republican and Democratic lawmakers alike on Wednesday for the tactics and market dominance that had made their enterprises successful.

"For more than five hours, the 15 members of an antitrust panel in the House lobbed questions and repeatedly interrupted and talked over Jeff Bezos of Amazon, Tim Cook of Apple, Mark Zuckerberg of Facebook and Sundar Pichai of Google.

"It was the first congressional hearing for some time where Democrats and Republicans acted as if they had a common foe, though for different reasons. Democratic lawmakers criticized the tech companies for buying start-ups to stifle them and for unfairly using their data hoards to clone and kill off competitors, while Republicans questioned whether the platforms had muzzled conservative viewpoints and were unpatriotic."

The Times goes on:  

"In response, Mr. Pichai, Mr. Zuckerberg, Mr. Cook and Mr. Bezos, who testified via videoconference because of the coronavirus pandemic, were forced to strike a more humble chord. They presented themselves as participants in enormously competitive and fast-changing digital marketplaces, and they evaded questions about the decisions that turned their companies into giants.

"'We approach this process with respect and humility, but we make no concession on the facts,' said Mr. Cook at the outset of his testimony."

•  From Axios:

"Yesterday's House antitrust hearing didn't nail a case that the Big Tech companies are monopolies. But lawmakers wrung some surprising admissions from the CEOs about how they wield their market power … All the companies, subcommittee chair David Cicilline said, have become bottlenecks for distribution, using their chokehold over data to surveil potential competitors and their control over technologies to extend their power."

The coverage suggests that the attacks were on two fronts:  "Amazon faced tough questions about its role as both a massively successful online retailer and the proprietor of the biggest online marketplace for third-party sellers.  Apple took sustained heat for its power over the its App Store, and the cut it takes from developers who sell digital products through their apps."

Facebook and Google, on the other hand, faced withering criticism for acquisitions they made of companies that might've become formidable competitors:  "Panel Democrats said the social network's acquisitions of Instagram and WhatsApp were plainly anticompetitive — that the company made the deals to stop Instagram from becoming a competitor to its main platform and WhatsApp from becoming a competitor to its messaging service … Lawmakers homed in on (Google's) acquisition of DoubleClick in 2007 as the watershed moment when its dominance of search combined with power over the levers of online ad targeting."

Published on: July 30, 2020

Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

•  In the United States, we now have had 4,568,375 confirmed cases of the Covid-19 coronavirus, with 153,848 deaths and 2,245,521 reported recoveries.

Globally, there have been 17,212,853 confirmed coronavirus cases, with 670,903 fatalities and 10,726,201 reported recoveries.

•  From the Washington Post:

"New infections appear to have peaked across the United States, but hospitalizations continue to rise, and the death toll is soaring. More than 1,400 coronavirus-related deaths were reported nationwide on Wednesday — roughly one fatality for every minute of the day. It was the worst day for covid-19 deaths in more than two months, as Florida, California, North Carolina and Idaho recorded single-day highs."

The Post goes on to point out that "Anthony S. Fauci, the nation’s top infectious-disease expert, said states such as Ohio, Tennessee, Indiana and Kentucky are seeing a subtle but worrisome uptick in positivity rates. That suggests they 'may be getting into the same sort of trouble' as hot spots in the South that were quick to reopen, Fauci warned."

•  Politico reports that Rep. Louis Gohmert (R-Texas) tested positive for Covid-19 during a pre-screening at the White House on Wednesday.

Gohmert has been at several Congressional hearings on Tuesday, largely without wearing a mask, and was identified as being positive for the virus because he was tested before a planned trip to Texas on Air Force One with President Trump.

•  The Washington Post reports that "fans will not be allowed to attend the U.S. Open at Winged Foot in Mamaroneck, N.Y., which will be held Sept. 17-20 after it was postponed from its usual Father’s Day weekend spot because of the coronavirus pandemic."

•  The Chicago Tribune reports that "the Illinois High School Association on Wednesday put the football season — at least in the traditional sense — on ice due to continuing concerns surrounding the coronavirus pandemic.

"According to a new plan introduced by the IHSA, there will be a streamlined football season from Feb. 15 to May 1. Girls volleyball and boys soccer have also been moved to that time frame.

"The only fall sports in 2020 the IHSA plans to conduct, starting Aug. 10 and ending Oct. 17, are boys and girls cross country, boys and girls golf, girls tennis and girls swimming."

•  Willamette Week reports that "Portland Public Schools will hold online classes through at least Nov. 5, the district announced July 28 after it became clear that Portland schools—public and private—are unlikely to open anytime soon … To begin having in-person classes, at least for kindergarten through third-grade students, Multnomah County would need to reduce its number of new COVID-19 cases by more than 40%, and for a full reopening, the cases would need to decline more significantly under state criteria announced today."

•  From the New York Times this morning:

"As the nation heads toward a chaotic back-to-school season, with officials struggling over when to reopen classrooms and how to engage children online, teachers’ unions are playing a powerful role in determining the shape of public education as the coronavirus pandemic continues to rage.

"Teachers in many districts are fighting for longer school closures, stronger safety requirements and limits on what they are required to do in virtual classrooms, while flooding social media and state capitols with their concerns and threatening to walk off their jobs if key demands are not met … But even as unions exert their influence, they face enormous public and political pressure because of widespread acknowledgment that getting parents back to work requires functioning school systems, and that remote learning failed many children this spring, deepening achievement gaps by race and income.

"With the academic year set to begin next month in much of the country, parents are desperate for teachers to provide more interactive, face-to-face instruction this fall, both online and, where safe, in person. But many unions, while concerned about the safety of classrooms, are also fighting to limit the amount of time that teachers are required to be on video over the course of a day."

The degree to which the country can achieve any semblance of normality will be tied to our kids' ability to return to school.  There's no question about that.

It is, however, a tenuous construct.  If a teacher has 20 kids in her class and one of those kids tests positive, the classroom has to be closed for 24 hours and the entire class - and teacher - have to quarantine for 14 days.  The same goes for all the other kids and teachers who have been in contact with that kid in the school, playground, on the bus, or elsewhere.  It is like a dominoes game that we cannot win.

•  Amazon announced that it will be selling new face shields - designed by the same folks who designed theAmazon Prime Air Drones - at cost to front line medical workers and their institutions.  This is in addition to some 200,000 shields being donated to medical personnel and $10 million worth of gear and protective equipment being donated by the company.

•  Interesting column in the Financial Times by Edward Luce in which he postulates an American divide over a coronavirus vaccine.

Luce writes:

"A recent poll found that only half of Americans definitely plan to take a coronavirus vaccine. Other polls said that between a quarter and a third of the nation would never get inoculated. Whatever the true number, anti-vaccine campaigners are having a great pandemic - as indeed is Covid-19. At least three-quarters of the population would need to be vaccinated to reach herd immunity.

"Infectious diseases thrive on mistrust. It is hard to imagine a better Petri dish than today's America. Some of the country's vaccine hesitancy is well grounded. Regulators are under tremendous pressure to let big pharma shorten clinical trials. That could lead to mistakes … Cutting immunological corners could be dangerous to public health.

"Such caution accounts for many of those who would hesitate to be injected. The rest are captured by conspiracy theories. In the battle between public science and anti-vaxxer sentiment, science is heavily outgunned. It faces a rainbow coalition of metastasising folk suspicions on both the left and the right. Public health messages are little match for the memology of social media opponents."

Yikes.  (BTW … I had no idea what "memology" means.  I checked.  It is "the study of memes."  Naturally.)

Published on: July 30, 2020

Perhaps because the nation is in a time of considerable unrest, Ben & Jerry's - a company founded by a couple of aging hippies that had a strong social consciousness component, and has largely maintained that orientation despite being acquired by Unilever - has been getting a lot of attention lately.

The New York Times Magazine jumps in this weekend with a long "Talk" interview with founders Ben Cohen and Jerry Greenfield in which they talk about how business can be conducted - and lives lived - with purpose that goes beyond self-interest.

It is a terrific interview, and you can read it here.

Published on: July 30, 2020

With brief, occasional, italicized and sometimes gratuitous commentary…

•  Raley’s announced that it "will provide an appreciation award to every hourly store, distribution center, pharmacy, production bakery and support center team member. The reward amount will be $500 for full-time team members and $250 for part-time team members … This is the fourth and largest award provided over the past five months."

•  Department store chain Kohl's has joined the march of retailers deciding to close on Thanksgiving, saying it is a away to reward employees stressed out by the pandemic.

Walmart started the parade last week, and since has been joined by Target, best Buy and Dick's Sporting Goods.

It should be noted that many retailers are using the pandemic as a rationale for starting their end-of-year holiday shopping seasons earlier than usual, figuring that appropriate physical distancing will mean that stores won't be as crowded as usual.

Which almost certainly is true.  But it also means that e-commerce is likely to have a banner year.

•  USA Today reports that "JC Penney is looking to go forward with a sale of the business to avoid a brush with liquidation.  The company went into bankruptcy last May.

"The retailer's attorney, Joshua Sussberg of Kirkland & Ellis, said during a bankruptcy court hearing Wednesday that the sale should be completed by the fall under an expedited process and rebuffed rumors of a liquidation of the entire chain."

Published on: July 30, 2020

…will return tomorrow.

Published on: July 30, 2020

KC made a guest appearance recently for a Portland State University marketing class, and as a follow-up, the professors in charge offered students an extra-credit assignment:  Write a brief essay offering a business lesson from a movie (prompted by "The Big Picture," written by Michael Sansolo and KC).  The judging was up to KC ... and here, he offers his conclusions.