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Monday, December 17, 2018

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Monday Eye-Opener: Metaphor Alert!

by Kevin Coupe

Here’s a trend that simply screams “disruption.”

Deadline reports that in 2018, for the first time, there were more original television series produced for streaming services such as Amazon Prime Video, Netflix, and Hulu than there were for traditional broadcast and cable networks such as CBS, NBC, ABC, HBO and Showtime.

In fact, there has been a 385 percent increase in streaming series in the last four years.

That’s remarkable. And for people who like to watch quality programming, a little daunting - there’s simply too much out there. It only is likely to get worse (or better, depending on your point of view) - both Apple and Disney are launching new video streaming services. There will be others.

I’m not sure this all is sustainable.

There are only so many eyeballs out there, and only so many hours in the day that people are willing to dedicate to watching anything. It also is fair to say that not everything being produced is high quality … when I scroll through Netflix, for example, there are a fair number of titles that make me shake my head and wonder who the hell is watching this stuff. At the same time, producing all this stuff is expensive - Netflix, for example, has financed its production ambitions by accumulating debt, and while it is playing a long game, it can’t go on forever.

But the landscape is being altered, forever. How we consume content is changing, forever. What we expect, in terms of accessibility and breadth of content, is changing forever.

Retailers and suppliers should look at all of this as a metaphor for what is happening in their businesses, It isn’t apples-to-apples, and will take place in different ways and at different rates.

But it is happening. It will continue to happen. And business as we know it, every business, will endure - and, if they are smart, will embrace - these changes with Eyes Open.

Margin-Minded Amazon Tries To Clear Away The CRaP

The Wall Street Journal this morning reports that Amazon, having identified some items as CRaP - for “Can’t Realize a Profit” - is having “second thoughts” about how it sells such items and is pushing suppliers to make changes in their offerings.

The products in question, the Journal writes, “tend to be priced at $15 or less, are sold directly by Amazon, and are heavy or bulky and therefore costly to ship - characteristics that make for thin or nonexistent margins… . In recent months, it has been eliminating unprofitable items and pressing manufacturers to change their packaging to better sell online, according to brands that sell on Amazon and consultants who work with them.”

An example cited by the Journal: “Amazon used to have a $6.99 six-pack of Smartwater as the default order on some of its Dash buttons, a small device that allows for automatic reordering with a single press. But in August, after working with Coca-Cola to change how it ships and sells the water, Amazon notified Dash customers it was changing that default item to a 24-pack for $37.20. That raised the price per bottle to $1.55 from $1.17. And Coca-Cola will start shipping those orders directly to consumers, sparing Amazon the expense of shipping from its warehouses.”

The story goes on to say that the Amazon Marketplace, which gives third party sellers a platform, gives it the ability to trim its own item offerings while maintaining its reputation as the “everything store” - even if it doesn’t sell something itself, the odds are pretty good that someone else will on its site, and it gets a 15 percent cut of the sale.

It is all part of a new fiscal discipline that has contributed to growing profit numbers at Amazon in recent years.

KC's View: First of all, I have to say … “CRaP” is a pretty good acronym.

There’s no question that, after more than 20 years in business, Amazon is evolving in its approach. I wouldn’t call it a mature business - its “today is day one” philosophy keeps it innovating at a rate foreign to so-called mature companies - but it is in a new phase of its development.

The first thing Amazon had to do was enable a fundamental change in consumer behavior, and do so at a pace that, I think, most people would’ve thought unachievable 20 years ago. Fair to say that this has been achieved, and now it has to find ways to be more profitable … though it almost certainly will continue to invest those profits in new shopper-centric initiatives. There’s nothing fundamentally wrong with asking suppliers to provide products and packaging that are more efficient and profitable … especially because it still had the backstop of the Marketplace, which provides so much more availability.

It will be a harder tightrope to walk, I’d guess - living up to consumer expectations while also living up to its own. But it is a pretty good bet, based on history, that it will make game0-changing moves that will continue to appeal to shoppers and challenge competitors.

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From Export Solutions...

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Pet Parents Changing The Game For Legacy Pet Food Brands

Business Insider has a story about how millennials are challenging the traditional pet food business.

Here’s how: As millennials wait longer to get married and have kids, they are lavishing attention and money on pets that they see and treat as surrogate children. And so, rather than buy the pet foods that their parents purchased and fed the pets of their youths, they are shifting toward premium items that speak to their priorities and tastes.

An excerpt from the story:

“This has led to a flurry of new brands entering the market. Many of these new brands are selling more premium food and ‘human-grade’ snacks, including Rachael Ray's Nutrish brand, which uses high-end ingredients and even sells gluten-free meals for pets.

“According to data analytics firm GfK, more than 4,500 new pet-food products were introduced in 2017, which was a 45% increase from the year before. The majority of those new products were premium, according to Gfk.

“This shift has led to prices rising substantially. According to GfK, the average price of pet food increased from $1.71 a pound in 2011 to $2.55 a pound by the end of 2017.”

KC's View: I’ve never been one of those folks who has identified himself as a “pet parent.” Always have loved my dogs, but I’ve never made that leap. That said, I respect the emotional investment that many people put in their animals, and am not surprised by the notion that these attitudes are changing shopping behaviors.

One thing, though. I hate it when I see people driving with their dogs on their laps. or have their dogs on their laps in restaurants. Maybe I’m being cranky, but that’s just not cool.

FDA: Romaine Lettuce Safe To Eat, With Caveats

USA Today reports that consumers can once again safely consume romaine lettuce, as long as it isn’t from a farm owned by Adam Bros. Farms in Santa Maria, California - which has been identified by the US Food and Drug Administration (FDA) as the source of a November E. coli outbreak.

The E. coli strain is said to come from the sediment of a local irrigation reservoir used by a single Adams Bros. farm.

According to the story, “The federal government's warning that consumers avoid romaine lettuce grown in California's Monterey, San Benito, San Luis Obispo, Santa Barbara, Santa Cruz and Ventura counties has been amended. Romaine lettuce fans may go back to eating greens from San Luis Obispo, Santa Cruz and Ventura counties, if it was harvested after Nov. 23. Also OK are romaine grown hydroponically and in greenhouses.”

KC's View: I’m not a big fan of caveats with my lettuce. I prefer tomatoes and croutons, and maybe some grilled shrimp and a nice chipotle ranch dressing.

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From the National Grocers Association...

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Bankrupt Sears To Pay Top Execs $25 Million In Bonuses

The federal judge overseeing the Sears Holdings bankruptcy has ruled that the company - which lost close to $2 billion during the past year - can pay out more than $25 million in bonuses to some of its executives.

According to the Chicago Tribune, “Sears plans to pay $8.4 million to 19 executives if the company is able to reach certain fiscal goals in the first six months of 2019. The retailer could also pay $16.9 million to another group of 315 top employees.”

Hedge funder Eddie Lampert, Sears’ chairman and former CEO as well as its biggest creditor, has offered to buy the company out of bankruptcy for $4.6 billion, though he wants to be insulated from all future legal actions as part of the deal.

KC's View: Of course these folks are going to be eligible for bonuses. Though based on past performance, it is hard to imagine that they’ll get them … or get a job at any other retailer, for that matter.

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From Webstop...

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Johnson & Johnson Faces New Talcum Powder Allegations

The Washington Post reports that Johnson & Johnson is facing new allegations saying that “the company knew for decades that raw ingredients used in its talcum powder sometimes contained small amounts of asbestos, which can cause cancer … The report said company officials fretted over the test results while keeping the information private and failing to disclose the test results to regulators and the public.”

The company has denied the report, calling it “one-sided, false and inflammatory’’ and a “conspiracy theory.”

According to the Post, “The company has been hit with lawsuits by plaintiffs who claim use of Johnson & Johnson Baby Powder and Shower to Shower powder caused a form of cancer caused mesothelioma, which is triggered by asbestos exposure. It also has been subjected to lawsuits by plaintiffs alleging their ovarian cancer was caused by its products.

“A jury in St. Louis this year awarded $4.7 billion to 22 women who claimed the products caused their ovarian cancer. The company said it planned to appeal that verdict and has continued to deny that its products caused harm.”

KC's View: Have to imagine that at some point J&J is going to have to do some sort of major brands refresh. Because I look at those little white powder containers, and the first thing I think about is cancer … and this story makes it worse.

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From Samuel J. Associates...

"It’s a bad time to be in the business of selling groceries, and the headlines are as bleak as you’d expect: "The Retail Apocalypse Is Coming for Grocery Stores" ... "Grocery Retail ‘Bloodbath’ Is Here" ... Conversely, it is a great time — arguably the best time ever — to buy groceries."
- New York Magazine/Grub Street


At Samuel J.Associates, we have a response to this assessment:

Bull.

We think it is a great time to be selling groceries, whether you are a retailer or a supplier. That’s because a more educated and demanding consumer, no matter the demographic, will reward businesses that are innovative, disruptive, and in touch with what people need, even if they don’t know they need it.

And, we know this: Those businesses require, and are fueled by, great people.

People who don’t just get the job done, but who set the tone in an organization, establish cultural and business priorities, who build teams, and who are able to not just adapt to competitive realities, but see the future and thrive in it.

And yes, ignore dire warnings about a "retail apocalypse" and see opportunities.

At Samuel J. Associates, we have a winning record of connecting great talent and innovative businesses ... as well as innovative talent with great businesses. We exceed your expectations so that you can do the same thing for your customers.

No bull.

Click here to find out more.

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E-conomy Beat

Fox Business reports that the “German trade union Verdi called on workers at two Amazon logistic centers to strike on Monday, part of a long-running campaign for better pay and conditions.

“Verdi has organized frequent strikes at Amazon in Germany since 2013 to press demands for the retailer to raise pay for warehouse workers in accordance with collective bargaining agreements in Germany's mail order and retail industry. Amazon has repeatedly rejected Verdi's demands, saying it believes warehouse staff should be paid in line with competitors in the logistics sector, not as retail staff. Germany is Amazon's second-biggest market after the United States.”

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From WAFC...

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FastNewsBeat

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

Entrepreneur has a piece about Costco’s blaming disappointing earnings on “increased competition from the likes of Walmart and Amazon.com -- particularly in the grocery business -- for shrinking margins,” with the implication that Walmart and Amazon’s online strategies are presenting Costco with an existential threat.

I get the point, and probably have made it myself from time to time, but it may be just a bit overstated … it isn’t like Costco is simply standing pat when it comes to e-commerce. Not only does it sell online, but it also is transparent about how products you buy from it online differ in price from when you buy them in its warehouse stores. But I’d also argue that Costco does not seem agnostic about where it does business with the customer; it remains, from all appearances, a highly store-centric enterprise. I’m a longtime Costco member, and it seems to me that its online communications are both infrequent and ineffective. I simply think it needs to do a better job, with a greater sense of online mission, and the embracing of initiatives such as automatic replenishment, if it is going to have a seat at the table where the stakes are high.


CNBC has an interview with Starbucks CEO Kevin Johnson and Uber CEO Dara Khosrowshahi, in the wake of the announcement that Uber Eats will begin delivering coffee for some 2000 Starbucks locations around the US.

The focus was on culture - a key issue that stands out because Starbucks is a company that has made culture a high priority, and Uber is a company where the culture got so toxic that the former CEO, founder Travis Kalanick, was forced out.

“The fact is that some of the Uber culture was good in that it created an incredible company that grew extraordinarily fast [and] innovated very quickly," says Khosrowshahi. “But I think that what happens is success sometimes imprints faster than failure, and sometimes, when you succeed too fast, you don't take the time to kind of rebuild the frameworks from within.

“Now, I think we're at a much better point in time. We get to have partners like Starbucks that are extraordinary partners that we can align with. The culture work is never done, but I'm much, much happier where we are today than where we were a year ago.”


Advertising Age reports that the UK’s Advertising Standards Authority (ASA) has ruled that it is establishing regulations preventing “advertising from including gender stereotypes that are likely to cause harm or serious or widespread offence.”

The story notes that the “ASA operates a system of self-regulation, but all major advertisers have signed up to its code of practice.”

And, ASA has said, "We don't see ourselves as social engineers, we're reflecting the changing standards in society."

I don’t care if this is a regulation or not. Brands of any kind that traffic in stereotypes are stupid.

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From ReposiTrak...

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Department of Corrections

Last week, in the piece about the new, smaller Amazon Go format that the company is testing in Seattle, I wrote the following:

Amazon founder-CEO Jeff Bezos has famously said that he wants Amazon Prime to be such a distinctive and attractive service that it would be irresponsible for people not to be members. As it rolls out various versions of Amazon Go - this likely is just one of many on the drawing board, which can be placed in a wide variety of locations and venues - keep in mind that they require Amazon Prime memberships to get shop there.

I goofed on this. In fact, one has to have the Amazon Go app, which is linked to the credit card used when shopping on Amazon … but you don’t have to be a Prime member to shop at a Go store.

While I was wrong in making this statement - no excuses, no explanation - I think it can be argued that a major Amazon priority is to convert people who shop on its site and, I think, at any of its bricks-and-mortar stores, into Amazon Prime members. The data generated by any purchase from any Amazon entity can be used by Amazon to seduce you into its Prime continuum.

I think, in the end, that the statement I made after the erroneous comment still stands:

This is not an initiative taking place in a vacuum. It is all part of an integrated and strategic whole, part of a puzzle that is being put together with nuanced foresight, and insight. That’s what you’re competing with if you happen to be in a customer-centric business not named Amazon.

That said, I was wrong in the Amazon Go/Prime observation, for which I apologize.

Mea culpa, mea culpa, mea maxima culpa.

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Industry Drumbeat

From Portland State University...

Here ya go!

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Your Views: Value Propositions & Cultural Ethics

Got the following email from MNB reader Steve Baus:

I thought the ‘Your Views’ comment from a reader about Amazon Go formats at airports that took a shot at Hudson News was probably misdirected.

While I have no connection to airport retail or Hudson News, I can tell you that the percentage of sales $ vendors pay to get placed in publicly owned sports stadiums is shockingly high.  I would suspect its the same at airports so do not be surprised when an Amazon Go store shows up your local airport, substantially lower prices do not.




On another subject, from MNB reader Jerome Schindler:

In regard to people who park non-electric cars in electric car spaces, non-fuel efficient cars in fuel-efficient car spaces, and in carpool-only spaces even while driving all by themselves, my prediction is that the demographics would correlate well with those that also are responsible for the plastic straws, bags, bottles etc. that are polluting our environment (and perhaps those that cheat on their taxes).

That litter didn't get there by itself - it took the multitude of seemingly ever increasing inconsiderate slobs.

If I disagreed with a private company's parking lot restrictions I would just choose not to shop there.


I think it is important to remember that Whole Foods’ approach in its parking lots is pretty consistent with its value proposition and cultural ethics. It is anything but dissonant.



And, from MNB reader Bryan Silbermann:

Regarding your comments on millennials being open buying furniture online: as retirees we bought our new mattress from Tuft & Needle 2 years ago and at the same time our new linens from Brooklinen. These were the least painful bedding shopping experiences ever. Even better, the products are the most comfortable ever.

Go back to buying these items in a store? Wouldn’t dream of it.


Not the first time Bryan has waxed rhapsodic here about this experience … just click here for more.

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Industry Drumbeat

“RETAIL 2020: What’s The Future (WTF)?” - A New Presentation by Kevin Coupe

In this fast-paced, interactive and provocative presentation, MNB's Kevin Coupe challenges audiences to see the fast-evolving retail world through a radical new technological, demographic, competitive and cultural prism. These issues all combine to create an environment in which traditional thinking, fundamental execution, and just-good-enough strategies and tactics likely pave the path to irrelevance; Coupe lays out a road map for the future that focuses on differential advantages and disruptive mindsets, using real-world examples that can be adopted and executed by enterprising and innovative leaders.

Constantly updated to reflect the hand crafted news stories covered and commented upon daily by MorningNewsBeat, and seasoned with an irreverent sense of humor and disdain for sacred cows honed over 30 years of writing and reporting about the best retailers and retail strategies, “RETAIL 2020/WTF” will get your meeting attendees not just thinking, but asking the serious questions about business and consumers that serious times demand.


Here’s what Joe Jurich, CTO of DUMAC Business Systems, has to say about a recent appearance:

”Kevin recently participated in and spoke at our Annual User Conference.  Our group consisted of independent retailers, wholesalers, and software vendors – a pretty broad group to challenge in a single talk.  While his energy, humor, and movie analogies kept the audience engaged, his ability to challenge them to think differently about how they go to market is what really captured them!  Based on dinner conversations afterward, he appeared to have left everyone thinking of at least one new approach to their strategy!”

Want to make your next event unique, engaging and entertaining? Contact Kevin at kc@morningnewsbeat.com , or call him now at 203-253-0291.

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From The MNB Sports Desk

In Week Fifteen of National Football League action…

Houston 29
NY Jets 22

Cleveland 17
Denver 16

Arizona 14
Atlanta 40

Oakland 16
Cincinnati 30

Miami 17
Minnesota 41

Dallas 0
Indianapolis 23

Tampa Bay 12
Baltimore 20

Detroit 13
Buffalo 14

Green Bay 17
Chicago 24

Washington 16
Jacksonville 13

Tennessee 17
NY Giants 0

Seattle 23
San Francisco 26

New England 10
Pittsburgh 17

Philadelphia 30
LA Rams 23

PWS 54