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Monday, March 18, 2019

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These Days, Economists Laid End To End End Up In Seattle

It was the Irish dramatist George Bernard Shaw who once wrote, “If all the economists were laid end to end, they'd never reach a conclusion.”

But at least in 2019 terms, Shaw was wrong.

These days, if you laid all the economists end to end, they’d likely end up in Seattle … because, as CNN reports, Amazon reportedly has hired “more than 150 PhD economists, making it probably the largest employer in the field behind institutions like the Federal Reserve, which has hundreds of economists on staff. It was the only company with a recruiting booth at the American Economics Association's annual conference in January, handing out free pens and logoed stress balls.”

To put that in context, the talent pool of PhD economists in the United States grows by about 1,000 new graduates every year.

Here’s how CNN explains the hiring strategy:

“Unlike economists in academia or government, the work of Amazon's economists is almost entirely secret, and staff are required to sign non-disclosure agreements to keep it that way. But according to background interviews and Amazon itself, integrating economists has been critical to the company's phenomenal growth in e-commerce.

“Amazon's economists game out real estate decisions, set the lowest prices that will deliver a profit, precisely determine what customers care about and whether advertisements are working — all using machine-learning algorithms that automate decisionmaking on a massive scale. It's the kind of asset that smaller companies can't always pay for, allowing Amazon to pull further and further away from the competition.”

The story notes that “economists are not new to private companies, where they've long helped forecast macroeconomic conditions to guide strategic decisions about what to produce, which markets to enter and where to source raw materials. They're not even new to the tech industry: Companies like IBM, Intel and Microsoft have had them for decades.”

At Amazon, the company deploys the economists across the company’s many divisions, using them to build risk models as well as “advise on product design and engagement tracking for devices like Alexa and Kindle, help target customers for its booming cloud services business, and forecast server capacity needs for the consumer website.”

And here’s the really good news for Amazon’s economists - the company pays really well, better than most places that hire economists: “Even rank-and-file economists make up to $160,000, which is where all Amazon employees top out in base salary, with stock options that make their total compensation a lot higher.”

KC's View: This story plays into the common - and seemingly accurate - perception that while almost everybody else is playing checkers, Amazon seems to be playing three dimensional chess.

That’s not to say you cannot compete against such companies.

You can.

Traceability Demands Fuel New Responsiveness

Bloomberg reports that Tyson Foods plans an ambitious program that will “use DNA samples from elite cattle to track steaks, roasts and even ground beef back to the ranches the animals grew up on … samples the size of a grain of rice will be taken from carcasses at the processing facility, and a company called IdentiGEN will use proprietary sets of DNA markers -- nature’s bar codes -- to identify individual animals.”

The program will be applied to Tyson’s Open Prairie brand, “which sources animals raised with no antibiotics and no added hormones.”

Kent Harrison, vice president of marketing and premium programs at Tyson Fresh Meats, tells Bloomberg that the move is a response to consumer research suggesting that “shoppers are demanding to know where their food comes from… A majority of Americans want to know everything that’s in their food, and more are trying to buy healthy and socially conscious products, according to Nielsen.”

KC's View: It long has been an article fo faith around here that the food business is best served by policies that support as much trackability and traceability as is technologically possible. And yes, I said business is best served … it seems obvious that consumers are best served by such policies, but I also firmly believe that this is best for business, too, in the long run.

We’ve gotten pushback on that over the years, but nothing has occurred that would change my mind. If anything, I feel more strongly about it … I think customers want access to more information than ever, which doesn’t always mean that they’ll actually access it. But to know it is there and available creates trust, and trust is the coin of the realm if you are in the food business.

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Walmart Seeks Healthier Approach To Health Care

CNBC has a story about Walmart’s approach to improving both the effectiveness and efficiency of the health care it offers to its employees, which has been so successful that it has co-authored a piece that ran in the Harvard Business Review “in an effort to disseminate its ideas more broadly.”

Essentially, it comes down to this: Rather than just focus on lowering the costs, which certainly was part of the equation, Walmart “looked for ways to improve overall health outcomes for their workers, so they could return to work, including by offering travel programs for workers to see doctors at top hospitals who were not incentivized to push for an unnecessary surgery.”

At the heart of the program, the story says, “is an idea that health care incentives need to change. Rather than paying health providers for performing procedures and tests, Walmart rewards them for overall health outcomes. And it's going well, so much so that Walmart wants to encourage other employers to follow its lead.”

The story goes on to point out that Walmart’s Centers of Excellence program “requires its employees to use a curated list of hospitals for some surgeries … It started with a relationship with Mayo Clinic, but Walmart has been forming these arrangements with other health centers including Geisinger. Spine surgeries were an early focus, as they are expensive and often unnecessary.

“Sometimes, these hospitals will agree with the community physician and recommend surgery. But they'll often diagnose the patient with a different condition … or they recommend physical therapy or other less invasive options instead … Walmart employees also get their travel paid for to get second opinions on cancer diagnoses and heart surgeries.”

Jonathan Slotkin, a director of spine surgery at Geisinger, says that the experience is equivalent to the kind of "concierge, white-glove care that was reserved at other companies only for highly paid executives.”

KC's View: One of the interesting things about this story is that it makes the point that Sam Walton was complaining about the cost of health care more than three decades ago, and it has taken this long to get a handle on things. It also argues that this battle also is the one being fought by Amazon, Berkshire Hathaway and JPMorgan Chase in their new healthcare venture.

The battle continues.

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Study: The Implications Of An Online Shopping Economy

The Washington Post reports that a team of Stanford University economists “compared online transactions with their bricks-and-mortar equivalents and found the typical household gained about $1,150 in terms of convenience and expanded choice by shopping online in 2017, when the Internet accounted for about 8 percent of all consumer spending.”

However, the story notes, “The rise of online shopping has also exacerbated income inequality, the researchers found. Higher-income households enjoy about three times the gains of lower-income ones, relative to their spending. Households with annual incomes above $50,000 do about 9.7 percent of their spending online. For lower-income households, the figure is around 3.4 percent.”

Another conclusion from the study:

“When the company offers online and offline options and the bricks-and-mortar option is a mile away, a customer will choose online about 12 percent of the time. When it’s 50 miles away? The customer will take the online option more than half of the time.

“Yet, contrary to expectations, Americans in remote locations did not rely more on online shopping. Instead, the researchers found people in more densely populated areas were more likely to do their shopping online, though that may also be tied to education levels and access to Internet connections and banking services.”

Farmers Markets Grapple With Growing Failure Rate

National Public Radio’s The Salt has a story about farmers’ markets around the country are facing two problems - too few farmers and too few customers.

According to the story, “Nationwide, the number of farmers markets increased from 2,000 in 1994 to more than 8,600 in 2019, which led to a major problem: There are too few farmers to populate the market stalls and too few customers filling their canvas bags with fresh produce at each market. Reports of farmers markets closing have affected communities from Norco, Calif., to Reno, Nev., to Allouez, Wis.

“Markets in big cities are hurting too. The Copley Square Farmers Market in Boston reported a 50 percent drop in attendance in 2017. In Oregon, where 62 new markets opened but 32 closed, the researchers of one multiyear study concluded, ‘The increasing popularity of the markets is in direct contrast with their surprisingly high failure rate’.”

KC's View: Farmers’ markets may seem vaguely counter-culture and an alternative to more commercially focused stores, but the scenario behind the competitive issues is very similar - big farmers markets are more attractive to vendors who can sell more of their wares there, which steals the oxygen from the smaller markets that have been cropping up.

It is a fact of life that the fittest will survive, and that’s not necessarily a bad thing. It seems to me that what the best of farmers’ markets offer - and what traditional retailers ought to emulate - is a sense of discovery, freshness, adventure, and connection to where food comes from. That’s invaluable.

For me, the Saturday farmers’ market at Portland State University in Oregon usually serves as a touchstone for my adjunctivity there each summer … a remarkable gathering of farmers and shoppers that yields some terrific products, and where I can get an amazing breakfast burrito.

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Lime Costs Threaten Supply, Margarita Aficionados

The Los Angeles Times reports that lime prices have gone up “sharply” recently and may continue to rise - which means that some chefs and bartenders are considering lemons as an alternative.

It isn’t the first time.

“Ebb and flow is a natural function of the produce market — prices change as things go in and out of season,” the Times writes. “But what happened with the price of limes in the spring of 2014 was unprecedented, when the price of a case skyrocketed to around $100 from $15. The reported reason for the spike was a combination of natural (weather, disease) and unnatural (extortion at the hands of drug cartels).

“The U.S. is almost entirely reliant on Mexico for its supply of limes, with 98% of consumed limes coming from south of the border. That mean

KC's View: I didn’t realize that 98 percent of our limes came from Mexico, and when I saw that notation I immediately started worrying that the damned wall was creating real problems. I mean, creating an intransigent immigration debate is one thing, but instigating a shortage that might impact my Tito’s-and-soda-with-lime?

Unforgivable.

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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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Egg Researchers Say The Yolk Is On You

The Wall Street Journal reports that a new study from the Northwestern University Feinberg School of Medicine concludes that “eggs may not be so good for you after all.” The study links “higher consumption of dietary cholesterol with cardiovascular disease and death.”

The specifics:

“Eating 300 milligrams of dietary cholesterol a day was associated with a 17% higher risk of developing cardiovascular disease and an 18% higher risk of death from any cause, researchers determined from analyses of the eating and health patterns of a diverse population of 29,615 U.S. adults over several years.

“Eating three to four eggs a week was linked with a 6% higher risk of developing cardiovascular disease and an 8% higher risk of dying from any cause.”

The story notes that “the findings are likely to feed into a long-running debate over whether eggs are harmful or beneficial to health, as they become increasingly trendy and U.S. consumption grows.”

KC's View: Uh-oh.

It was bad weekend for practiced behaviors.

Not only was egg consumption thrown into doubt, but there also was a story in the Wall Street Journal about how “ low-dose aspirin shouldn’t be given on a routine basis for the purpose of preventing heart attacks and other heart disease in people 70 and older or adults of any age who are at increased risk of bleeding.”

I’m not at risk for anything as far as I know, except for my age making me more at risk for everything. But I’ve been taking baby aspirin daily for like 20 years, and I eat eggs a couple of times a week.

Go figure - the Sunday bacon from Applegate that I ate yesterday morning was the healthiest thing I had for breakfast. (It was certainly the most delicious.)

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E-conomy Beat

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

Bloomberg reports that Amazon has “won the last approval it was seeking for an incentive plan that helped lure the largest online retailer to Northern Virginia.

“The five-member Arlington County Board on Saturday unanimously approved $23 million in incentives for the company to build a headquarters in the Crystal City neighborhood, just outside Washington, D.C. -- after six-and-a-half hours of testimony, protests and discussions by more than 100 people who argued for and against the deal.”

The story notes that the protests were not on the same scale as in New York City, where they were loud and strong enough, objecting to a proposed $3 billion in tax incentives, that Amazon changed its mind and decided not to bring its HQ2 campus to the Big Apple.

Is it me, or does $23 million in tax incentives seem like pocket change compared to $3 billion in tax incentives?


• It was reported on Friday that Kroger and robotics company Nuro will expand their autonomous vehicle delivery test to two stores in Houston, Texas, after having started a test last August in Scottsdale, Arizona.

Now, USA Today reports that the Houston move is not so much an expansion as a switch in venues, since Kroger and Nuro will be ending the Scottsdale test, switching customers who were getting deliveries via autonomous vehicle to more traditional deliveries by actual human beings.


CNBC reports that “Amazon is testing a new way to bolster its relationship with start-ups and possibly bring in more capital to the ecosystem. The fledgling effort, known as the Amazon Web Services Pro-Rata Program, is designed to link private investors with companies that use AWS, as well as venture funds whose portfolios are filled with potential cloud customers. “ The story says that Amazon is targeting “specific companies and funds raising capital, and inviting investors who otherwise wouldn't have access to the deals to get a piece of the action.”

The story notes that “AWS has built a $25 billion enterprise tech behemoth by luring big companies and government agencies onto its cloud, and it now accounts for the bulk of Amazon's profit. Ever since getting off the ground over a decade ago by providing computing and storage services for start-ups, AWS has counted on young and emerging companies for a big part of its success. Start-ups bring innovation to the platform and some, like Lyft, Pinterest and Slack, grow up to be large enterprises with hefty technology budgets.”

FastNewsBeat

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

• The Associated Press has an interview with Starbucks president/CEO Kevin Johnson in which they ask him how his background in technology - he was a longtime executive at Microsoft - informed his work at Starbucks. His answer:

“I learned about how to how to unify people around a common mission and pursue that particular mission. In addition to that, I spent years understanding how technology is reshaping the consumer. Starbucks has over 16 million active Rewards members and a total of 30 million digitally connected customers. We're bringing in technology in a way that complements the human connection and the in-store experience. And that is a big part of what we believe is essential for every retailer. Every brick and mortar retailer must create an experience in their store that becomes a destination, and they must extend that experience to a digital, mobile relationship.”


• Published reports say that Dollar General has decided to accelerate its move into self-distributing produce, as the company believes that an improved fruits and vegetables selection has resulted in higher traffic. Self-distribution, the company reasons, only can help margins and reduce out-of-stocks.

Interesting, since there have been a couple of recent studies suggesting that dollar stores - in general - have drawn equal with supermarkets - in general - in terms of fresh produce. Which, if I were a supermarket retailer, would concern me.


• The Denver Post reports that members of the United Food and Commercial Workers (UFCW) employed Kroger-owned King Soopers and City Market “ave voted overwhelmingly to authorize a strike.”

According to the story, “The UFCW Local 7 represents 12,000 of King Soopers’ and City Market’s 23,000 employees. The union has bashed the company and its contract proposals since members voted to opt out of a temporary contract extension with the company last month. The existing contract between the two sides ran out in January. Issues raised by the UFCW since have included a lack of across-the-board pay raises included in company proposals and alleged increases to employee health care costs.”

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HOW TO BE A RETAIL PIRATE: Authentic, Relevant, Resonant, Rapid, Revolutionary (ARRRR!)

A NEW PRESENTATION BY KEVIN COUPE

Steve Jobs once said, “Better to be a pirate than join the navy.” In today’s cutthroat retail environment, that attitude needs to be at the core of every business’s strategic, tactical and operational approach - challenging the status quo, doing the unexpected, creating customer-centric business initiatives and then disrupting them internally … appealing to people’s hearts and heads and aspirations … acting with piratical verve and always moving forward. In this brand new, lighthearted, illuminating and uniquely pertinent presentation, filled with examples and anecdotes and lessons, MorningNewsBeat’s Kevin Coupe brings a passion for storytelling and a unique perspective on business that will entertain and energize audiences.’’

Here’s what Lori Stillman, Executive Vice President - Analytics, Insights and Intelligence, Advantage Solutions, has to say about a recent appearance:

"Kevin joined us as a moderator and facilitator for a two-day client executive event we hosted. His role in the success of the event went far beyond his time presenting and sharing his great wisdom and content. From the moment our planning process began and we selected Kevin as a key part of our program, he dove in and worked with our team to review session topics, ideate on programming and help ensure our overall event delivered on the goals we had established. His quick wit, deep industry knowledge and ability to synthesize conversations into key take-aways enabled us to hit a home run!”

And, from Joe Jurich, CTO of DUMAC Business Systems:

”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!”

To book Kevin for your upcoming event, click here , or call him at 203-253-0291.


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A New Retail Tomorrow Podcast: The View From SXSW

Prepare to be dazzled. This Retail Tomorrow podcast comes from the annual South By Southwest (SXSW) festival in Austin, Texas, and features a provocative look at the changing shape of retailing, a discussion of why retailers should target being “fluid” rather than “frictionless,” and how a new definition of experiential marketing can be a literal game changer for retail.

Our guests:

• Amber Allen, founder/CEO/Chief Strategist at Double A Labs;

• Becky Banasik, VP of merchant success at DOSH;

• Marie Chevrier, founder/CEO of Sampler;

• and Nancy Giordano, the strategic futurist who created Play Big Inc.

Here’s where you can check our guests’ websites: Amber Allen Becky Banasik Marie Chevrier and Nancy Giordano.

The Retail Tomorrow Podcast is sponsored by the Global Market Development Center (GMDC), seeking to focus not just on best practices, but next practices. This podcast, as well as past editions, also can be found on the site. In addition, check out more details about GMDC’s Retail Tomorrow initiative here.

Pictured below, from left to right:

Kevin Coupe, Amber Allen, Becky Banasik, Nancy Giordano, Marie Chevrier





Your Views: Ragtop Days

We had a story last week about how an organics advocacy group is pushing for stricter organic standards, saying that some organic growers and food companies, while technically adhering to the definition of organic, “are a far cry from the idealism and high standards with which the movement began.”

One MNB reader responded:

The Washington Post last May ran an article about organic milk and how some companies are cutting corners and still get the organic label. The thing is organic milk has extra nutrients that conventional milk does not have and so you are not getting what you are paying for. That would also be true for organic cheese, yogurt and kefir. I had no idea at the time there was a nutritional difference for organic verses conventional milk products.

The thing is, if you have a square and keep cutting corners eventually you end up with a circle, something completely different. If you have a product and you are describing it a certain way you can't cut to many corners or you end up with something different and not the product you advertising and in the process lowing the standards of a good product.

It reminds me of the articles you had about Oregon wines, at a certain point you just cheapen the product and ruin it for everyone else.


From another reader:

Thanks for writing about this new initiative that some are proposing.  I am skeptical as to what is driving this enthusiasm to tighten organic standards. Is it consumer centric or are they trying to create more barriers to entry for growers to protect their markets?  We have to be very careful here not to further confuse the consumer.  The current standards serve the industry and consumer very well.  If these advocacy groups continue to push their agenda consumers may lose confidence in organics and fruits and vegetables.



Last week we took note of a New York Times story about how tobacco companies, which decades ago owned brands that included Tang, Capri Sun and Kool-Aid and “barred from targeting children for cigarette sales, focused their marketing prowess on young people to sell sugary beverages in ways that had not been done before … Using child-tested flavors, cartoon characters, branded toys and millions of dollars in advertising, the companies cultivated loyalty to sugar-laden products that health experts said had greatly contributed to the nation’s obesity crisis.”

One MNB reader responded:

I know I am dating myself, but I grew up at a time when candied cigarettes were sold in a familiar cigarette like package (basically 100% sugar). (Talk about hooking kids on cigarettes at an early age.) I also thought, thank God, they don’t sell them today, but then I did a quick internet search and low and behold, they still sell candied cigarettes and cigars online (see link below). This is a horrific idea to give children this junk and it’s hard to imagine any parent giving this to their child. But someone is buying this stuff.



On another subject, from MNB reader Aaron Gottschalk:

I completely agree with your thoughts in response to the four day work week plan coming from Shake Shack.  Being a part of the leadership team at our retail grocery store the amount of days and hours all of us put in week to week is unproductive, mentally, to quantify, but it's a lot and encompasses the demands of working within a very low margin industry.  

I'll go so far as to say I wouldn't by habit know what to do with three days off per week.  I'm certain it would drive my spouse crazy as well as myself.  

Work for some of us old school types is a journey unto itself full of value and rewards.  When any of us in our leadership group start to keep tabs on the clock it's a bad sign and speaks of root based issues that need to be addressed in order to help manifest (again) the deeper meaning held within our professions.  We are here to contribute, serve others, and be inspired.




We had an Eye Opener on Friday about customization and personalization specifically about how brands like Porsche, Ford, Mini and Volkswagen are experimenting with marketing methods to make their models more attractive to buyers — and better for their bottom lines.

The New York Times wrote, ““With electric and autonomous vehicles on the horizon, nearly all brands worry that the car will emerge as a commodity, an appliance. So the concept is to allow customers — custom is the first part of that word — to build an automobile to their exact specifications, making it almost as easy as (and in some cases easier than) ordering an Ethan Allen couch or a pair of Nike by You sneakers.”

I commented:

It also was interesting to see this story because I’ve been sort of vaguely thinking about my next car … it isn’t going to happen anytime soon, but I’ve been thinking about the possibilities.

There are certain things I know. It’ll be a ragtop. And it’ll have a manual transmission. Might be another Mustang (I love the dark gray one I own now). I suppose it could be another Miata (for the 20 years before I owned the Mustang I had two different Miatas, and I loved those cars). Also could be something else.

But one thing I have been thinking about is that I would like my next car to be in British Racing Green … and, having done a little checking, I’ve found that neither the Mustang nor the Miata is made in that color. It’s not available.

Now, I haven’t done a lot of exhaustive research, so it is entirely possible that I’ll find another convertible with a manual transmission that comes in that color. But in checking out Mustangs and Miatas, I found myself wondering why there aren’t a greater number of customizing options, especially paint colors, available in 2019 … It does seem like a natural next step for car companies, which need to recognize that customers want what they want, when they want it, and how they want it.

For me, that’s a ragtop. Manual transmission. British Racing Green.


MNB reader Carl Jorgensen wrote:

The new Bullitt Mustang comes in a green that’s pretty close to British Racing Green. And it’s an awesome car.

It looks spectacular, and that’s the color … but it doesn’t seem to come in a convertible.

Another MNB reader wrote:

You can always customize your new Ragtop color with a whole vehicle wrap.
My nephew does them as a business...it's fascinating what he can do and there are literally thousands of options.

He has already had customers who have changed colors multiple times too.

When I was a kid if you wanted a color change you had to repaint but not anymore.

You are also making me miss my 71 MGB...man I loved that car.


And, from MNB reader Tom Williams:

Based on your three requirements for your next car, take a look at the Morgan company.  Either a 3 wheeler or 4/4, both have over 100 options to customize including British racing green.  I know I am considering the 3 wheeler for my next car.

Wow. I did a little research and checked out the Morgan Plus 4, which looks awesome. Little out of my price range - it appears to go for about $60,000 - and maybe a little impractical, but I now have a new fantasy.

(I remember the Morgan that played a central role in the movie, The War of the Roses. It didn’t end well for that car, as I recall…)

PWS 59