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    Published on: February 9, 2023

    Two stories this week about how organizations are changing the way to sell tickets - both AMC Theaters and Major League Baseball are looking at new models - suggest that this is the time for retailers to do the same, to pursue ways to deepen and widen customer relationships.  It may be variable pricing, a subscription/replenishment model, or something else … but it is all about being willing to change the rules of the game.

    Published on: February 9, 2023

    Excellent piece in the Financial Times by opinion columnist Brooke Masters entitled, "The Revenge of the Incumbents," in which she talks about how bricks-and-mortar stores appear to have stolen momentum from e-commerce companies.

    "For years, start-ups and other digitally focused groups enjoyed a massive advantage in the form of cheap funding," she writes. "Investors, who had few other options, looked to them for growth and were willing to tolerate early losses in hope of eventual profits. The disrupters competed for and won top talent with not just high salaries but also the promise of future equity riches. Tech’s ascendancy grew even more pronounced during the early days of the pandemic when e-everything boomed while everyone else struggled with shutdowns and supply chain woes. Now we are seeing a rebalancing," as technology companies see their businesses slow, valuations decline, and have to engage in sometimes significant layoffs.

    Masters writes:  "This is not the first time that incumbent companies have had an opportunity to regain ground: the downturns that followed the dotcom crash and the 2008 financial crisis also prompted investors and workers to rethink their choices. But this tech pullback comes at a time when at least some groups are much better positioned to seize the advantage.

    "That’s partly because the nature of the opportunities has changed. During the Covid lockdowns, ecommerce, streaming and cloud based software profited, but those sectors are now suffering as consumers turn elsewhere. Success in areas like decarbonisation, electric cars and healthcare means more than designing a good product. The ability to scale up requires building factories, supply chains and customer bases, skills that strong incumbents already have."

    Masters points to Amazon's decision to hit the pause button on physical store growth as indicative of the larger moment:

    "The Amazon store experience shows that it is what comes next that will be crucial. Coming up with innovative ideas — in this case fully wired convenience stores and shopping carts that let customers skip checkout lines — is just the first step. Making sure the offering can be rolled out in a profitable way is equally if not more important.

    "For Amazon, sales in physical stores have stagnated since the company bought the Whole Foods grocery chain in 2017. Amazon’s problem, (CEO Andy) Jassy says, has been finding a format that 'resonates with customers'; successful incumbents in the sector already have one."

    KC's View:

    The piece makes some excellent points, but for me the bottom line is this - ubiquity and incumbency only will get you so far.  One of the ways in which legacy bricks-and-mortar businesses can extend their advantage is by continuing to innovate, to give their companies' engines of invention plenty of gas, to find new ways to be relevant and resonant to their shoppers.

    I've said it before and I'll say it again … There is no such thing as an unassailable advantage.   That goes for incumbents as well as disruptors.  If you get complacent, you end up getting compromised.

    Published on: February 9, 2023

    CVS Health yesterday said that it will acquire Oak Street Health for about $10.6 billion, and move that, the Wall Street Journal writes, "would widen CVS’s healthcare offerings, adding about 600 physicians and nurse practitioners and Oak Street’s network of 169 senior-focused clinics to the Covid-19 vaccinations, strep tests and other medical services that CVS provides through its pharmacies.

    "It would also further the consolidation of firms that manage health benefits, pay for medical care and provide the treatment."

    More from the Journal analysis:

    "CVS has used acquisitions to become one of the biggest healthcare companies in the U.S. In addition to its roughly 10,000 pharmacies, CVS, based in Woonsocket, R.I., is the parent of large health-insurer Aetna and CVS Caremark, one of the biggest managers of drug benefits in the U.S.

    "Last fall, it announced a deal to acquire home-care provider Signify Health Inc. for about $8 billion.

    "CVS Chief Executive Karen Lynch has said adding primary-care doctors was a company priority. Acquiring physicians would help it to more closely manage and guide the care of patients, as well as bring down costs, she said. CVS also wants to push further into forms of healthcare payment that are supposed to reward value, rather than reimbursing for every service."

    The Journal story notes that "CVS executives, demonstrating in a call with analysts how the units would work together to expand the business, said a home-care patient could receive a checkup from a Signify doctor, who determines that person needs more care and then direct them either to an Oak Street practice or to a CVS in-store clinic.

    "Under the setup, the executives said, patients would also have options to go to other, non-CVS clinics, while CVS services, doctors and others would be available to patients using insurers other than CVS’s Aetna … Chicago-based Oak Street focuses on taking care of Medicare patients. Its acquisition would enable CVS to tie treatment of the patients with the company’s Medicare Advantage plans, though Oak Street would continue to work with other insurers as well."

    KC's View:

    The coverage makes the point that CVS wants to grow the Oak Street footprint, maybe adding as many as 40 clinics a year yo get to 300 by 2026.  This isn't just about meeting internal; goals for ROI on the investment, but also about keeping pace with the likes of Walgreens and Walmart, each of which have similar aspirations for a health care presence.

    But I remain skeptical, largely because the CVS stores I visit and sometimes patronize seem like they would be perfectly at home in the late 20th century, not in the second third of the 21st century.  And recent experiences suggest to me that - at least partly owing to staffing shortages - the customer service is getting slower and sloppier.  For me, CVS has become the third option for prescription fulfillment … I only want to go there if I need to.  Trusting CVS for any level of healthcare strikes me as a long reach.

    Published on: February 9, 2023

    Flashfood, the digital marketplace that allows consumers to access heavily discounted food nearing its best-by date, this morning announced that Nicholas Bertram, former president of Ahold Delhaize-owned The GIANT Company, is its new president-COO.

    The company pointed to Bertram's history of focusing on sustainability, innovation and growth - at Jewel-Osco, Walmart, in addition to GIANT - as making him ideal for Flashfood, which in 2022 "successfully diverted over 65 million pounds of food from landfills - a milestone achieved following the company’s rapid expansion to over 1,550 grocery stores across North America. In addition to providing consumers and retailers with a simple solution to reduce food waste, Flashfood has also saved shoppers more than $150 million on grocery bills during a time when food costs are rising more than 11 percent."

    The Flashfood app, the announcement says, "enables consumers to browse deals – directly from their phone – as a way to save up to 50% off high-quality items nearing their best-by date, such as meats, dairy, seafood, fresh fruits and vegetables, bakery items and more. Shoppers conveniently browse and buy discounted food items directly through the Flashfood app on their mobile phone, and then simply pick up their order from the Flashfood Zone located inside their participating store."

    “I have never been more excited about the collective impact the food industry, sustainability-minded investors and technology companies like Flashfood can have on our future,” Bertram said in a prepared statement, adding,  “Together with its retail partners, Flashfood is already making huge inroads in reducing food waste while helping consumers save money – and now is the right time to accelerate this bold work."

    KC's View:

    Last June, while Bertram was still at Giant, I had the opportunity to go to Philadelphia and spent part of a day touring stores with him, and I was tremendously impressed by both his vision for retail and his connection to the front lines  - all of which will be critical in helping Flashfood to expand and grow.  (The company appears to have a pretty decent footprint in the east and midwest, but virtually no presence in California, Oregon, Arizona, Nevada, and other Rocky Mountain states.  In other words, lots of room for growth.)

    On the one hand, it is too bad when talented retail executives move into the tech sector, because retail companies lose out by their moving on.  But, on the other hand, people like Bertram will make these tech companies better at serving retailers, and helping retailers serve customers.

    Published on: February 9, 2023

    CNBC reports that "wholesale egg prices have cratered in recent weeks from record highs," but it is uncertain that this will have an impact on retail prices in the short term.

    While "the deadliest outbreak of bird flu in history" has been primarily responsible for egg price increases, the story points out that "there haven’t been any new bird-flu outbreaks among commercial table-egg laying birds since Dec. 20, according to the U.S. Department of Agriculture.

    "A prolonged period without setbacks in egg production has given suppliers a reprieve and the market time to recover, said Brian Moscogiuri, global trade strategist at Eggs Unlimited, one of the largest egg suppliers in the U.S.

    "Consumer demand also typically wanes in January and February, further alleviating price pressures, Moscogiuri said."

    But … egg demand generally increases during the weeks before Easter - on April 9 this year - which means that retailers will be incentivized to do a little profit-taking.

    Plus, experts say that "it takes about four weeks for retail prices to reflect wholesale price trends," and "for every 10% decrease or increase in wholesale egg price, consumers can expect retail prices to shift about 2%, on average."

    KC's View:

    Seems to me that this is one of the moments when retailers have the opportunity to prove that they are advocates for the shopper.  Even if profit-taking seems like a legitimate first impulse, this perhaps is a good time to resist it.

    Published on: February 9, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  Advertising Age reports that "Amazon in 2022 powered up worldwide advertising and promotion spending by 22% to $20.6 billion, breaking a record for annual spending by any marketer.

    "The spending spree came as net sales rose 9% in 2022, the slowest growth since Amazon opened its online bookstore in 1995.

    "The company had double-digit percentage increases in ad and promotion spending every year from 2004 through 2022 except for 2020, when Amazon trimmed spending by 1%."

    •  From the Washington Post:

    "Amazon has added a 24/7 sports gambling network to its Prime Video offerings that will be available to consumers Wednesday. The deal with gambling network SportsGrid comes as the e-commerce giant is weighing the creation of a stand-alone sports app.

    "SportsGrid also will be available as part of Amazon’s free bundle of channels on its FreeVee platform, which previously was known as IMDb TV.

    "A gambling network is just the latest sports content push by Amazon. This NFL season, it broadcast its first year of “Thursday Night Football” games after shelling out more than $1 billion per season over 11 years for the rights. The company also has exclusive rights to a number of English Premier League games in the United Kingdom and is a part-owner of YES Network, which broadcasts New York Yankees games. In November, Amazon beefed up its sports programming by launching a 12-hour block of sports talk shows, including ones hosted by former ESPN anchor Cari Champion and Master Tesfatsion, previously of Bleacher Report."

    I'm not entirely sure that Amazon should be getting into the sports betting business, but I'm sort of old fashioned about this stuff.  That said, if it makes money from this new network, it should use some of the funds to clean up the Freevee streaming platform - as it exists now, it is one of the clunkiest, least user-friendly, hard to navigate platforms out there.

    •  From Variety:

    "Roku and food-delivery service DoorDash inked a partnership under which DoorDash will be the exclusive marketplace ad partner for DoorDash U.S. restaurants and grocery stores that buy interactive shoppable ads on Roku. Fast-food chain Wendy’s is the first to buy ads on Roku through the DoorDash pact, offering a $5 discount on orders of $15 or more purchased through Roku’s streaming platform, an offer available through March 12 at participating Wendy’s restaurants in the U.S.

    "In addition, Roku and DoorDash are offering Roku account holders (who have a linked streaming or smart-home device) six months free access to DashPass, the ecommerce company’s membership program that waives delivery fees on eligible orders."

    Here's how the new partnership is being promoted:

    Published on: February 9, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  From Urbanize Atlanta:

    "When pint-sized but beloved 'Baby Kroger' closed in December as part of the grocer’s brick-and-mortar cutbacks in Atlanta, it left a troubling void in Downtown Decatur’s commercial landscape: no supermarket within reasonable walking distance for everybody.

    "Which means the city’s prized walkability also took a substantial hit.

    "To help combat that, city officials have begun a three-month experiment using electric shuttles as a means of whisking people—free of charge—from downtown to a new Publix Super Market, located about two miles east of many Downtown Decatur multifamily residences … As part of Decatur’s strategic plan, the program is being operated by Let’s Ride Atlanta and sponsored by the DDA and Publix. It’ll be available on a test basis until April 18."

    Sometimes, I guess, the Mountain has to go to Mohammed…

    Published on: February 9, 2023

    With brief, occasional, italicized and sometimes gratuitous commentary…

    •  From Reuters:

    "A federal judge in Chicago has dismissed a proposed class action lawsuit accusing Walmart Inc of deceiving shoppers by selling Fudge Mint cookies that lacked fudge and mint.

    "Eugene DeMaso, of La Salle, Illinois, said packaging for the cookies sold under Walmart's Great Value label misled reasonable consumers because the cookies' 'fudge' contained no milkfat and its 'mint' contained no mint ingredients … U.S. District Judge Mary Rowland said no cases showed that consumers expect 'fudge' to contain milkfat, and DeMaso undercut his argument by asserting that fudge could contain vegetable oils, as Walmart's cookies did.

    "Rowland also agreed with Walmart that 'mint' promised a flavor, not actual mint."

    Walmart said it was pleased with the decision.  The plaintiff reportedly is considering an appeal.

    I know not everybody agrees with me on this, but I think that if you are going to say that something has fudge in it, it ought not be necessary to play word games to win the argument - it ought to have actual fudge.  And actual mint, not artificial flavoring.  I understand that packaging language, often tiny print, can serve as a defense, but it really is about the lowering of standards.

    Published on: February 9, 2023

    Yesterday MNB took note of a really good piece from the Los Angeles Times about the impact - social, cultural, infrastructural - of the pandemic-fueled e-commerce boom, which "accelerated the land grab" for warehouse space in California's Inland Empire.

    The area, the Times wrote, has become "ever more hardscaped into the staging point for trains and trucks carrying goods from the ports of Los Angeles and Long Beach to the rest of the nation.  There are 170 million square feet of warehouses planned or under construction in the Inland Empire, according to a recent report by environmental groups. And despite fears of a recession, demand hasn’t ebbed."

    I commented, in part:

    This is such a complicated issue.  There's no question that the logistics industry that has changed the landscape of the Inland Empire has brought jobs and some economic advantages, but those things come at a cost, largely to the agricultural entities that are being displaced and the middle-income folks who are seeing their communities falling under the shadow of enormous warehouses, breathing in the exhaust of a seemingly inexhaustible parade of diesel trucks.

    It isn't this simple, of course, but I tend to frame the discussion in my mind this way:  Would I want to live in one of the communities being forever changed by this hardscaping?  Would the leaders of the companies and the politicians who support them want to?  The answer to these questions is no … and in the same way that the golden rule ought to dictate our behavior toward each other, maybe it ought to be applied to how we treat our communities and neighborhoods.  Is it to much to say, I will treat every community as if it were my own?

    One MNB reader wrote:

    The golden rule is great when teaching little kids how to interact with each other. It's an easy way to communicate, "be nice to so-and-so because you would want them to be nice to you." The reality is that the golden rule should be long retired by adulthood. We should not just treat others how we want to be treated. We should also treat people how THEY want to be treated.

    There are small changes that each of us should make when interacting with others. How do you motivate others? Do they need cheerleading or a kick in the butt? I'll bet that if you're a good manager you have figured that out and tailor your feedback, regardless of your own motivation. How does that coworker respond best when you need a quick response? Email? DM? Phone call? Bringing them coffee or chocolate? I'm willing to bet that you've also figured that out, too regardless of your preference. Have a significant other who doesn't always see the world the way you do? Is he/she happy? If so, I'll bet you have learned how to communicate in a way that works for both of you. Does your business have customers? Do they keep coming back? I'm sure you can see where I'm going with that one...

    Let's retire the golden rule. Be nice to people and then learn how to treat them in a way that works for them and for you.

    I take your point.  Maybe we can have it both ways?

    With people you get to know to the degree that you describe, they should be treated in a way that they want to be treated.  But in general, when you don't have the level of understanding, the golden rule becomes the default position.

    BTW … I appreciate your confidence in my skills as a manager, but the fact is that with few exceptions over the years, I've never really managed anybody.  One of the reasons I started MNB 21+ years ago, Mrs. Content Guy would suggest, is because I don't play well with others.  (I'd prefer to say that it is just because I value autonomy, but she's probably right.)

    I got the following email from MNB reader Howard Carr, who had some thoughts about my description of Bed Bath & Beyond as being a dead company walking, believing that "it can be brought back to a vibrant life:"

    I think it is a matter of the current management not coming to realize that the level of household formation continues to increase, but by a household group with different wants and needs.  We know we are adding living units at an incredible pace throughout the US, otherwise, (why would we be building all these apartments) and the upcoming generations, and the baby boom generation has different wants and needs. 

    The baby boomers are seeking to downsize and live in more intellectually rich environments (in cities, near art and performance venues, near universities and in formats that support their lifestyles (of less hurry, and less pressure/stress)).  But, when it comes to the home making part, BBB and the product makers just did not understand the wants of the baby boomers to live a smaller footprint of life (now with the kids gone, I do not need a huge KitchenAid mixer to make bread for my family; I don’t have family dinners for 15 any longer, I go to my kids homes for the big holidays; the Sunday morning breakfasts now consist of “designer coffee” from a french press and the NY Times, and we are NOT  trucking kids to Little League practices/games, but are going for a ride to an art show or craft fair to enjoy some of life’s pleasures. 

    The Gen X, Y, and Z’s and any other letters we can think of, are leading a very hurried and pressured lifestyle because of all the pressures placed upon them by technology, and the race to be aware of what it the next greatest thing to be involved with.  Therefore, they order from GrubHUB, DoorDash, UberEats, or any other take-out/delivery service to make their lives easier, because their time for leisure is certainly strained under today’s family environment.  What has BBB done to find what appeals to this buyer group(that  would be their customer for years to come), so as to make their stores more relevant.  Retailers have always been the front line in terms of knowing what the customer wants and needs 9remember the edict of the Home Depot founders, put the buyers in the stores so they know what to buy, and know what the customer wants).

    BBB lost sight of their customers’ wants and needs, both older and younger, so the stores became less relevant, and did not offer anything that was not already being shown by online retailers.  They lost their opportunity to be pioneers in helping the home maker determine what they needed/wanted and how to integrate it into their lifestyle.

    I know it may sound hard to believe but household goods are fashionable, just look at the growth of design that has it foundation on HGTV.

    The other day we referenced a Food & Wine report that Subway is adding meat slicers to its 20,000 stores as fast as it can acquire the equipment, which the company said is harder than one would think.

    Subway apparently is one of the few sandwich shops that has not sliced meat on site; meats always have been sliced in a central location and shipped to stores.  "But as prices for almost everything have continued to increase — or as essentials have been in short supply — Subway execs say that the on-site slicers will allow them to save money on shipping costs, and because the restaurants will be using unsliced meats, they may be able to use less-expensive vendors," Food & Wine writes.

    I commented:

    It is interesting to me that this decision seems to have nothing to do with freshness or quality - it all has to do with speed and cost.  While those two things are important, if you're in the freakin' food business you ought to make food quality and freshness your number one priority.

    Maybe it isn't surprising that a food business that has faced questions about whether its tuna fish actually is made from tuna isn't making freshness and quality a priority.  But this story illustrates to me why a) people shouldn't go to Subway, and b) why nobody in the food business should use it as a role model.  It may be big, but its approach is bad.

    One MNB reader responded:

    Who do you think in a Subway is trained to or knows how to sanitize a slicer? And even if they know how, would they be given the time to or care enough to do it?

    Good point.  Which means that at Subway, the term "finger sandwiches’ probably is going to take on a whole new meaning….

    And finally … more conversation about Sandy Koufax's decision not to pitch game 1 of the 1965 World Series against the Minnesota Twins because it fell on Yom Kippur.  One MNB reader said it was "perhaps the most heinous display of narcissism in the annals of professional sports."   I was chagrined by this, and noted that after Game One, Koufax had an amazing Series, pitched three games and was the MVP.

    MNB reader Dave Ahrens responded:

    Hey Kevin – looking at it from another perspective.

    I was 13 at the time and watched much of that series in the bleachers on a 22” TV in my high school auditorium - in a small town in Minnesota.  (Remember when the school’s “Audio Visual Dept” consisted of two TV’s and two reel - reel tape recorders that rolled into classrooms as needed?)

    My thoughts are, I wish Koufax and Drysdale were both Jewish and they both would have taken the entire series off.

    Just FYI … ESPN describes the events this way: 

    "In 1965, Sandy Koufax refused to pitch in Game One of the World Series because it was Yom Kippur, a Jewish holy day. Instead of Koufax, Don Drysdale pitched for the Los Angeles Dodgers, and he gave up seven runs in 2 2/3 innings. 'I bet right now you wish I was Jewish, too,' Drysdale said to Walter Alston when the manager came to pull him from the game. The Dodgers lost to the Minnesota Twins, 8-2.

    Yesterday, after considerable internal debate (which consisted of me talking to myself), I posted an email from an MNB reader who objected to my talking about what Koufax achieved later in the Series.  He wrote:

    What Koufax did after he made his self-centered decision has absolutely nothing to do with his thinking when he made his self-centered decision.  Or perhaps the Jewish gods had assured him that he’d be rewarded for determining his religious-beliefs were more important than his teammates, fans, and employer.

    I was appalled by this, and responded:

    First of all, yes … his religious beliefs should be more important.

    And then I added:

    I debated long and hard with myself whether to post this email.  In so many ways it is distasteful in its language and sentiments, having nothing to do with Sandy Koufax.  But I decided to use it precisely because of what it says and how he says it.  Jewish Gods?  Last time I checked, Jews had a single Deity, the same one as Christians.  We should never forget that people like this think the way they do and say the things they say.)

    This MNB reader got back to me yesterday with this comment:

    At least I respect your right to have foolish opinions, an attitude you demonstrably do not convey to people who disagree with any of them.

    Really?  Not only do I respect the right of people to have opinions different from mine, but I give them a place to post them if they so desire.

    In this case, I've given your sentiments more oxygen than they deserve because they expose your antisemitism, and I think it is important to remember that this still exists even in a so-called enlightened society.

    And, to be clear, while I respect your right to hold even detestable opinions, I also reserve the right to have the last word.