Published on: June 9, 2021
KC has thoughts about the new Hubert Joly book, "The Heart of Business." Joly, the former CEO of Best Buy, writes about how self-inflicted problems are the best kind … the power of stakeholder capitalism … and how leaders are made, not born.
Published on: June 9, 2021
by Kevin Coupe
The New York Times has what amounts to a eulogy for what it calls "the golden era of the Millennial Lifestyle Subsidy … the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists."
For almost a decade, the Times suggests, "these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeois royalty while splitting the bill with those companies’ investors. We plunged MoviePass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals."
To paraphrase the Johnny Cash song, the man has come around.
The venture capitalists "didn’t set out to bankroll our decadence. They were just trying to get traction for their start-ups, all of which needed to attract customers quickly to establish a dominant market position, elbow out competitors and justify their soaring valuations. So they flooded these companies with cash, which often got passed on to users in the form of artificially low prices and generous incentives."
But now, "the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings."
I've long argued here that a core problem in the US economy is that nobody really knows what anything costs. The world has long been flooded with deals and promotions and incentives that made a lot of prices artificially low, and then there were things that, because of supply and demand, seemed unconscionably expensive. Often, prices seemed to have little to do with value … which didn't necessarily hurt people of certain means who got their indulgences subsidized, though it could be terribly unfair to people struggling just to pay basic bills.
"There is still plenty of irrationality in the market," the Times writes, "and some start-ups still burn huge piles of money in search of growth. But as these companies mature, they seem to be discovering the benefits of financial discipline."
Which may be Eye-Opening. And also may be a good thing.
And, for whatever reason, this whole story makes me think about the Johnny Cash song that I referenced above.
Published on: June 9, 2021
After what the two companies termed a successful five-week pilot, Albertsons and Fetch Rewards announced that they will roll out the loyalty/rewards program to more than 2,200 supermarkets under 20 different banners.
Fetch describes itself as "a mobile shopping platform that rewards shoppers for buying the brands they love. The Fetch Rewards app gives users the easiest way to save on everyday purchases by simply scanning their receipt. For our brand partners, the platform allows them to understand a 360 degree view of shopping habits, and to meaningfully reward a customer's individual loyalty … Since launching in 2017, the Fetch Rewards app has been downloaded nearly 19 million times and has nearly 7 million active users. To date, Fetch has processed nearly a billion receipts and has delivered more than $120 million in points to its shoppers."
Albertsons said that the test "resulted in strong incremental sales from existing shoppers. It also drove a significant number of new and re-engaged users to the stores who were established Fetch Rewards fans."
"We're constantly looking at innovative and relevant ways to engage with our customers, and after seeing such strong results, we decided to expand the Fetch Rewards pilot to additional stores," said Usman Humayun, VP of Digital Marketing for Albertsons Cos., in a prepared statement. "This relationship is a win-win for our company and for our customers who use Fetch to earn rewards on grocery, retail and restaurant purchases."
I tend to have two priorities when it comes to retailer loyalty programs.
First, it needs to demonstrate that the retailer is loyal to the shopper, not just be a vehicle for discounts that try to "buy" loyalty.
And second, it should reinforce the core retailer value proposition; I like it when a program creates a kind of flywheel, as opposed to have them building value for other brands.
One of my recent favorites was a program developed for Price Chopper by tcc, which allows shoppers to use points to help kids pay off student debt - this just struck me as a big, enormously relevant idea.
It will remain to be seen if the Albertsons-Fetch program meets my priorities. On the other hand, Albertsons may not give a crap about my standards, figuring, what the hell does he know.
Published on: June 9, 2021
Walmart and Amazon have both unveiled new pharmacy-oriented programs that seem designed to generate growth for the two retailers, though there is a divergence in their approaches - Walmart seems to be using pharmacy as a way to generate greater enthusiasm for its Walmart+ offering, while the Amazon program seems designed to further its healthcare ambitions.
Here are the stories:
•. Fox Business reports that "effective immediately, any Walmart+ member will receive discounts up to 85% off for select medications or, in some cases, entirely for free as part of the members-only prescription savings program Walmart+ Rx for less … To receive the savings at any Walmart pharmacy, members will need a pharmacy savings card and a valid prescription. Members can also get discounts applied to e-prescriptions provided by a prescriber and transferred to the pharmacy, according to Walmart."
In a message to customers this week, Walmart said that savings are available to members for "a variety of health needs, including heart health, mental health, antibiotics, allergies and diabetes management," though it did not detail the prescriptions covered and the ones that are not.
Fox Business offers some context: "Last year, the Arkansas-based retailer launched Walmart+, charging subscribers either $98 a year, or $12.95 a month, in its latest effort to compete with e-commerce giant Amazon which launched its Prime subscription service in 2005. Walmart+ offers same-day delivery on 160,000 items, a fuel discount at certain gas stations and a chance to check out at Walmart stores without having to wait at a register."
•. Amazon said yesterday that it now is "offering six-month prescriptions starting at $6 for medications of common health issues" through its Amazon Pharmacy program, Reuters reports.
According to the story, Amazon said that "under the new offering, customers can search for their medication by name and find out if it’s eligible for a six-month supply and what the price it will be when using the Prime prescription savings benefit … The company said Prime members would get additional savings when paying without insurance. Customers can pay as low as $1 per month for select medications, including drugs to treat diabetes and blood pressure, and will get free two-day delivery."
Bloomberg writes that "the new offering from Amazon Pharmacy is aimed at consumers who take just one or two daily pills to manage common ailments such as high-blood pressure and diabetes. Amazon Prime subscribers, who pay for delivery discounts and other perks, will be able to get six-month prescriptions for $6 on such medications as amlodipine for high blood pressure and simvastatin for high cholesterol.
"Amazon can buy the medication in bulk at a discount and make two annual deliveries to the customer, using the savings to reduce costs, said Amazon Pharmacy Vice President TJ Parker. 'We want to make filling a prescription just as easy as shopping on Amazon,' he said."
Reuters writes that "the e-commerce giant launched an online pharmacy in November for delivering prescription medications in the United States and stirring up competition with drug retailers such as Walgreens Boots Alliance, CVS Health and Walmart … Amazon is also looking at launching physical pharmacies in the United States, the Insider reported last month."
Health care-centric strategies remain an enormously fertile ground for retailers looking to establish enduring points of connection with shoppers, which is why we see Amazon and Walmart making these moves. They also threaten the status quo - which is why CVS and Walgreen stocks dropped in value when these programs were announced.
Published on: June 9, 2021
The Boston Globe has a piece about how supermarket chain Roche Bros. is getting some grief for having decided to outsource deliveries to an outside contractor called The Grocery Runners, which is using gig workers to make deliveries in their own cars.
According to the Globe, "A few of the staff drivers quit, and others have been kept on to deliver to major customers, the drivers said. But the rest have been relegated to in-store positions, without the opportunity to earn tips — $20 to $50 on an average day, drivers said, climbing to as much as $250 during the pandemic. Some clean or stock shelves, others shop for online customers or take orders out for curbside pickup, in some cases handing off groceries to the very people who replaced them."
The Globe notes that 21-store Roche Bros. was early to the e-grocery game, having "started its delivery service in 2005 — adding 25 full-time employees and 16 temperature-controlled delivery trucks, according to news reports at the time." At the time, "online grocery sales made up only about .6 percent of total US grocery sales. Last year, online sales grew 54 percent, accounting for 7.4 percent of total grocery sales, according to the research firm Inside Intelligencer. And the new shopping habits formed during the pandemic are expected to stick. By 2023, 11.2 percent of total US grocery sales are expected to be online orders."
The Globe quotes But Flickinger of Strategic Resource Group as saying that "outsourcing delivery is a 'smart, strategic move.' Seventy percent of weekly grocery sales occur between Friday and Sunday, and on-demand drivers can meet the need as it arises, he said, allowing the company to shift delivery drivers to other roles. And with food and energy prices through the roof, grocers are trying to reduce expenses, he said: 'They’re looking at ways to cut costs without giving shoppers a higher grocery bill'."
However, Steve Striffler, director of the Labor Resource Center at the University of Massachusetts Boston, takes the opposite view, saying that while "the practice of cutting labor costs has intensified during the pandemic," it is a "'particularly bad look' for grocery stores, which saw profits rise about 10 percent on average during the pandemic,."
"It seems totally unfair and unnecessary to go after the very drivers who risked their lives during the pandemic, particularly because they grew the business,” Striffler said. “They should be getting rewarded.”
I think the Globe did a reasonably fair job of laying out the various arguments, though the headline, which quoted a former driver as saying, "I thought I was a hero, but I’m expendable," didn't do the retailer any favors. (It appears that Roche Bros. management did not provide any quotes for the story.)
Flickinger makes an excellent point, which in many ways is sort of the closing argument - at a time when inflation is causing prices to go up, and labor is getting more expensive, an independent retailer like Roche has to find ways to keep prices down, which means looking for efficiencies wherever and whenever possible. That may be the only way to compete with retailers that have deeper pockets and big ambitions to dominate the market.
That said, my biases on this subject have been stated here many times - I think that retailers do run a risk of being disconnected from an important part of the customer experience when they outsource delivery services. But it may be that the folks at Roche would argue that at this time, it is a tough call, but one that has to be made.
Published on: June 9, 2021
The Washington Post reports this morning about Oxnard, California, where the city council has "unanimously approved a measure last week to give anyone who worked at least three months in a grocery store or pharmacy during the first 12 months of the coronavirus pandemic a $1,000 bonus," using "$2.5 million in stimulus money allocated to the city by the American Rescue Plan."
The Post writes that Oxnard officials had considered following the path taken by a. umber of other west coast cities, imposting an hourly hazard pay mandate on retailers of a certain size, which businesses have decried as making it much harder to keep some stores economically viable.
However, the city took this approach once it was determined that "there was a mechanism in the stimulus law for doing such a thing.
"Oxnard’s decision avoids the confrontation between grocery store companies and officials that have taken place in other cities. It will also be quicker to institute and reach more workers, like those in smaller stores, officials said."
At least this city is putting its money where its mouth is. Workers get a nice little bonus, but retailers don't get screwed in the deal. Works for me.
Published on: June 9, 2021
•. The Financial Times reports this morning that "DoorDash has launched in Japan, marking the company’s first foray into the Asian market and the latest move by a big delivery group to expand globally in an effort to tap a pandemic-driven boom in demand.
"DoorDash, the US market leader, said the move would give it access to one of the most 'restaurant-dense countries in the world.' although it would start relatively small. Emulating its US strategy, where it first focused on suburban areas outside major cities, DoorDash said it had enlisted 'hundreds' of restaurants in Sendai, a city north of Tokyo with a population of about 1million."
Published on: June 9, 2021
With brief, occasional, italicized and sometimes gratuitous commentary…
•. The Washington Post reports that as "supply-chain problems and virus outbreaks in meat-processing plants have led to meat price increases that far outstrip those of groceries overall," the moment is proving helpful for the plant-based meat business.
"It’s getting easier and less expensive for companies to create a lot more of these plant-based proteins, bringing down the costs of the soy and pea-protein meats, dairy and eggs much faster than anticipated," the story says, reversing concerns in some quarters of about a year ago that the plant-based segment might be more fad than trend.
These price reductions, the Post writes, "against a backdrop of surging grocery prices overall, have pushed the skeptics and the curious over the edge: They’re trying it. Beyond Meat’s grocery store revenue was up 108 percent in 2020, with more people reportedly becoming repeat customers. And while Impossible Foods, a private company, doesn’t release sales numbers, in 2020 it expanded retail sales from fewer than 150 grocery stores to 17,000 stores, as well as via direct-to-consumer sales.
"And the playing field got more crowded. In a year when groceries were just about the only thing consumers were buying, an eye-popping 112 new plant-based meat, egg and dairy brands hit grocery aisles in 2020, reflecting some $3.1 billion worth of new investments in “alternative proteins,” according to the Good Food Institute, a nonprofit organization that promotes alternatives to traditional meat, dairy and eggs."
•. Business Insider reports that "Costco will open new stores in: Murfreesboro, Tennessee; Little Rock, Arizona; Moore, Oklahoma; Springfield, Missouri; and Naperville, Illinois. These stores are due to open between July and August, Costco said.
"It was also opening one new store in each of Australia and Japan, it said.
"Lots of retailers in the US pulled back on physical stores during the pandemic - Costco is one of the few to be opening new locations."
•. CNBC reports that "Starbucks customers can start using their personal cups again at company-owned locations in the United States on June 22.
"Starbucks and other restaurants and retailers are making strides to return to business as usual after changing many policies due to the pandemic.
"The coffee giant paused the reusable cup program in March 2020."
The story says that "to fill a customer’s personal cup, a Starbucks barista will first check that the cup is clean and place it in a ceramic vessel. The beverage will be made without any contact with the cup, and the customer will pick up their drink at the handoff area of the counter. Only clean cups will be accepted. Reusable cups will not be accepted at drive-thru lanes, although the company is testing ways to do so safely at its Tryer Center in Seattle."
The CNBC story also notes that while Starbucks has made a point of embracing sustainability and using this program as one way of underlining its commitment, it has a long way to go - Starbucks goes through some seven billion disposable cups in a typical year.
Published on: June 9, 2021
•. Jeff Philipps, president-CEO of Rosauers Supermarkets, announced his August 13 retirement after more than two decades in the job.
He will be succeeded by Cliff Rigsbee, most recently the CEO/CMO of Hawaiian Springs Co.
Published on: June 9, 2021
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, there now have been 34,242,866 total cases of Covid-19 coronavirus, resulting in 613,052 deaths and 28,220,863 reported recoveries.
Globally, there have been 174,802,246 total coronavirus cases, with 3,764,250 resultant fatalities and 158,224,355 reported recoveries. (Source.)
•. The Centers for Disease Control and Prevention (CDC) says that 63.8 percent of the US population 18 years of age and older has received at least one dose of vaccine, with 53.1 percent being fully vaccinated.
Published on: June 9, 2021
Yesterday MNB reported that vitamins-and-supplements retailer GNC has signed a distribution deal with Walmart that will put a range of GNC-branded vitamins into more than 4,000 Walmart stores, with the goal being to expand the presence to additional sports nutrition and weight-management products.
I commented:
It may be that smaller retailers that traditionally have had a physical presence are going to have to find a new way to reach shoppers in a bricks-and-mortar environment. Selling products through other, bigger stores is one way toi do that, whether it means being in mainline shelf sets or having targeted boutiques where it makes sense.
Probably going to see a lot more of this.
One MNB reader responded:
Small independent health store retailers have the edge….it is called educated staff in the isle to sell the products/companies they represent, something you won’t find in mass market.
MNB reader Mike Moon chimed in:
I can't help but wonder how the high/low business model of GNC will clash with the EDLP model of Walmart. GNC is very high priced every day, but has great monthly specials. Walmart is going to be cheap on it every day. Why would I ever visit a GNC store again? If I was a franchisee, I would be pissed.
Good point.
On a different subject, one MNB reader wrote:
Knowing that you're a big fan of Subscribe and Save, I'm surprised Amazon (not that they need my help!) hasn't come out with this: "If you had used subscribe and save last year, based on your purchases, you would have saved xx dollars!" Boom!
It is a fair observation, but the reason may be that Amazon doesn't see Subscribe and Save as a price play, but rather as a convenience play. I use the program for maybe 20 or so items, and as long as the prices seem reasonable, I don't even question them - it is all about not having to go to the store for items for which it simply does not matter. I have other, better things to do with my time.
Responding to my FaceTime video yesterday, one MNB reader wrote:
Great commentary on the side benefits of the Zoom call! Maybe a new interview question when in–person interviewing resumes (here in Canada who the hell knows when that will occur) could be “so if we were doing this interview via a Zoom call and you were at home, what might I see in the background.“
Might get some interesting insight into the candidate!
Or maybe just make sure one interview in a series of conversations is done online.
And finally, from MNB reader Monte Stowell:
I could not agree more with your comments about Jacob Degrom. You need to enlighten your readers with Jacob Degrom’s season to date statistics. Right now, his season to date stats will totally rewrite the record books for the greatest year for a starting pitcher. His ERA, his pitching velocity, and strikeout rates are insane. There is nobody in MLB that comes close to what he is doing.
And he's ours.
At least for now.
