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Monday, June 17, 2019

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Monday Eye-Opener: The Epitome Of The Neighborhood Store

by Kevin Coupe

There is a sweet story in the New Bedford Standard Times about Lees Market in Westport, Massachusetts, a one-store independent that has served the community for more than seven decades, surviving one change in ownership - from the Lees family to the Clements family, in 2014 - and competition from the likes of Stop & Shop.

The market, the story says, “has deep ties within the community, and with its long history and emphasis on customer service, is the epitome of the neighborhood store.”

Some context from the story:

“The history of Lees Market began when father-and-son duo Al Lees Sr. and Al Lees Jr. opened their general store in March of 1949, which sold mainly hardware goods and fertilizer. In 1951, they opened what is now the current Lees location, and throughout the 1950s, saw plenty of change as new merchandise and goods were added to the store’s selection.

“The first food items were introduced to the store in 1960, and by 1965 the transition from general store to grocery store was complete. In the time since then, the store has continued to see change and growth, and has remained a household name in Westport.”

Owner-operator Tracy Anthony tells the paper that one ingredient of the store’s secret sauce has been the ability to “sell products that support local farms and artisans.” And the story says that “with the growing trend to eat local, all-natural, and organic foods, the store is way ahead in the game since they’ve been selling mindful products for years. Some local vendors of Lees include DD’s Farm Eggs of Attleboro, Black Tie Cookies of Acushnet, Paradise Hill Farms of Westport, and Silverbrook Farms of Dartmouth, just to name a few.”

I was so glad that an MNB reader sent this story to me, since I knew Al Lees pretty well; he and another independent retailer, Marv Imus, were inseparable fixtures at industry conferences and shows, and were always looking for ways to differentiate themselves. (They recognized that they were a vanishing breed, and even embraced it. I once wrote a magazine column about how the three of us went out to dinner once - at the Culinary Institute in California’s Napa Valley - and talked about the challenges and delights of being a single-store independent. I titled it “Dining With Dinosaurs.” They loved it.)

The impact that Lees Market had on Westport and local residents - not to mention store employees - cannot be minimized. I remember going to Al Lees’ funeral a number of years ago, and how, as the funeral procession passed the store, all of the employees lined the curb in tribute. The funeral itself was packed … and I can remember thinking about how deeply entrenched in the life of a community a great retailer can be.

It is a good and Eye-Opening story, and I am glad to hear that the Clements family is keeping the torch burning.

Kroger Expands Its Wellness Your Way Festival

The Cincinnati Business Courier reports that Kroger will host its second annual Wellness Your Way festival in downtown Cincinnati this fall, and will host a similar event for the first time in Denver in late summer.

The story notes that Kroger “sponsors the festival to provide customers with information about healthful nutrition and lifestyle as well as medication … Kroger partnered with Inclusion Cos. and pop singer Jewel to create the festival, which will again include interactive stations featuring health and wellness technology. That will include  the Kroger Health app and Kroger’s OptUp app, which helps shoppers find nutrition information about grocery store items.

“Jewel will return for this year's festival, hosting music events in Cincinnati and Denver on Saturday nights. Her Never Broken Foundation is the festival’s nonprofit partner.”

The Courier points out that “Kroger Health, a division of the company, operates more than 2,300 pharmacies and 11 specialty pharmacies nationwide as well as 200 clinics.”

KC's View: I love ideas like this one, which focus on the burgeoning self-care/healthcare area by combining elements of health maintenance, nutrition, exercise and mindfulness.

This increasingly may end up being the center of the target for retailers such as Kroger and CVS, which could find themselves adjusting their business models and modifying their stores and approaches to take advantage of this opportunity. People have the ability and desire to be smarter about their own health, and savvy retailers will cater to this in their efforts.

I would look for Kroger to do more of this around the country if the Denver expansion works, and then for other retailers to follow suit and find their own self-care/healthcare path.

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Walmart Challenges Amazon Prime With New Delivery Fee Structure

TechCrunch reports on how the delivery wars continue to rage, with Walmart “taking aim at Instacart, Target’s Shipt and Amazon Prime Now/Whole Foods with a new grocery delivery subscription service called simply, ‘Delivery Unlimited.’ Before, Walmart shoppers could order groceries online and pick them up at their local store for free or they could opt to pay the $9.95 (or sometimes less) per-order delivery fee. Delivery Unlimited is a third option that offers consumers a way to skip the per-order fee in favor of a monthly or annual subscription” - $12.95 per month or $98 per year.

The story makes the point that Delivery Unlimited isn’t available at all Walmarts yet, but is in the process of being rolled out.

It is a competitive price for the service - Target’s Shipt and Instacart both offer $99 annual membership fees. Amazon Prime, at $119 a year, is more expensive but also includes more benefits, including access to streaming services and proprietary content.

TechCrunch points out that “unlike some grocery delivery businesses, Walmart doesn’t operate its own network of delivery professionals or independent contractors. Instead, Walmart partners with delivery providers across the U.S., including Point Pickup, Skipcart, AxleHire, Roadie, Postmates and DoorDash. It has also tried, then ended, relationships with Deliv, Uber and Lyft.”

KC's View: Walmart understands that its investments in e-commerce are bearing fruit - the story says that its Q1 e-commerce sales were up 37 percent, and it is on track to expand its offerings. Right now it offers grocery pickup at 2,450 locations and delivery at nearly 1,000 locations, with expectations that by the end of the year it will be pickup at 3,100 stores and delivery at 1,600. And do investing in a delivery fee model that undercuts Amazon Prime also makes a lot of sense, though I’m personally dubious that Prime members will suddenly switch to Walmart, especially because Prime benefits go beyond fast delivery.

I still have to wonder if the next big investment Walmart will make will be the acquisition of a big national delivery service that will allow it to exert more control of this part of the experience.

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Amazon Douses Its Spark

TechCrunch reports that Amazon is shutting down AmazonSpark, a two-year-old business that it originally built to compete with social media business Instagram.

According to the TechCrunch analysis, “Amazon Spark had been a fairly bland service, if truth be told. Unlike on Instagram, where people follow their friend, interests, brands like they like, and people they find engaging or inspiring, Spark was focused on the shopping and the sale. While it tried to mock the Instagram aesthetic at times with fashion inspiration images or highly posed travel photos, it lacked Instagram’s broader appeal. Your friends weren’t there and there weren’t any Instagram Stories, for example. Everything felt too transactional.”

However, the story also notes that Amazon will use learnings from the Spark experience by blending them “into a new social-inspired product, #FoundItOnAmazon,” that will be rolled out as a new shopping discovery tool.

KC's View: Amazon has a track record of learning from failures (like its smart phone debacle) and applying this knowledge to something that works really well (like its Alexa-based systems).

Besides, moves like these are right in character. Just read out next editorial story…

If At First You Don’t Succeed, It Is Okay To Change Your Mind

Bill Murphy Jr. has an excellent column in Inc. in which he writes that Amazon’s recent decision to shut down is Amazon Restaurants food delivery service - which apparently failed to gain traction when competing against the likes of GrubHub and DoorDash - actually illustrates a key belief held by the company’s founder-CEO, Jeff Bezos:

“People who are right a lot listen a lot,” he says, “and they change their mind a lot … They wake up and reanalyze things and change their mind. If you don't change your mind frequently, you're going to be wrong a lot … The smartest people are constantly revising their understanding, reconsidering a problem they thought they'd already solved. They're open to new points of view, new information, new ideas, contradictions, and challenges to their own way of thinking.”

Murphy writes that “of course, it's one thing to say that in the abstract. It's another entirely to act on it -- especially when changing your mind could cost you money (sunk costs) or cause other people to think less of you.” Bezos actually does it - he is willing to re-examine the situation, especially in the light of new facts - without apparent concern for appearances.

Murphy also criticizes a Wall Street Journal piece about the Amazon decision that said it was a “rare logistical misstep by a company that is a dominant force in e-commerce and prides its delivery prowess. It also adds to a list of failed projects for the online behemoth that includes its Amazon Fire smartphone blunder, a travel site named Destinations and Amazon Local, an extinct online hub to find local deals.”

“I don’t think that’s right,” Murphy says.

KC's View: I agree with Murphy 100 percent on this.

Tom Furphy makes this point often. Amazon always has had failures, all of which it has learned from … it is just that now, being bigger and far more visible, the failures end up being bigger and more visible.

Two relevant quotes from Jeff Bezos:

• “If you know in advance that it’s going to work, it’s not an experiment.”

• “As the company grows, the size of the mistakes has to grow as well.”

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Start Spreading The News: Where Department Stores Plant Their Flagships

Despite the fact that a lot of bricks-and-mortar retailers are in trouble, and the fact that the department store business is not what it used to be, not by a long shot, New York City continues to be a magnet for some of the nation’s most prestigious retail names.

That’s the gist of a new Bloomberg story tied to the recent opening of a 188,000 square foot Neiman Marcus in the new Hudson Yards development on the west side, and the scheduled opening this October of the city’s first Nordstrom, a 320,000 square foot store near Columbus Circle. That’s in addition to the money being spent on expansion and redevelopment by retailers such as Bergdorf Goodman, Bloomingdale’s and Macy’s on their flagship locations in the city, which can have a n outsized impact on those chains’ financial performances. (The 2.5 million square foot Macy’s in Herald Square, for example, is the most productive store in the chain, while the 815,000 square-foot Bloomingdale’s on 59th Street generates close to one-fifth of the chain’s total sales.)

That’s not to say that New York City is a safe space for all department store chains. Bloomberg writes that “there are around 30 department stores on the island, ranging from discount shop TJ Maxx to luxury emporium Bergdorf Goodman, each vying for New York’s 8.6 million residents and the 65 million tourists who visit each year. Their selling floors take up a lot of space, nearly 6 million square feet in all, about the size of 100 football fields.” However, stores that have closed there in recent memory include the “gargantuan Lord & Taylor and the Henri Bendel flagship and the Saks Fifth Avenue women’s store downtown.” In fact, “on a net basis, the city will lose about 340,000 square feet of department stores this year - the equivalent of two Walmart Supercenters.”

KC's View: Of course, there are no Walmart supercenters in Manhattan - the result of extreme pressure by powerful union interests placed on local politicians, who have so far prevented the nation’s largest retailer from opening a store there.

I was a little surprised that the Bloomberg story didn’t mention this. It always has struck me as farcical that Walmart has been essentially banned from Manhattan, while it is safe for the likes of Costco and JC Penney to operate there.

Ironically, of course, Walmart is in Manhattan now. Sort of. Its Jet e-commerce business delivers in the city, and it has established a small beachhead with its Jetblack upscale delivery business, which only operates in Manhattan for the moment.

(Walmart isn’t the only mass merchant to have found New York to be inhospitable. Amazon - the “everything store” - found that across the East River in Queens, many people who didn’t want it to build part of its HQ2 campus there gave it the Bronx cheer.)

The stores that are the focus of the Bloomberg story are, for the most part, upscale operations that serve not just locals but the tourist crowd - and the story makes the point that these high-end department stores depend on a balance of the two to be successful.

Still, the turnover in square footage mans that an “unprecedented shift” is taking place, the story says, which is “a rarity in a market where stores can stay open for more than 100 years, through every downturn and depression.”

I have to wonder if these stores’ situation is a little more precarious than they used to be because of the extraordinarily high rents and labor costs that can be associated with their operation, and that doesn’t even take into account online competition.

Granted, these flagships are designed to be highly experiential environments that can survive in an increasingly digital world. But is it possible that we live in a world that is less forgiving than it used to be?

I suspect so. It is worth noting that what used to be Lord & Taylor’s New York City flagship is now a WeWork location.

Target Suffers Checkout Shutdowns Over The Weekend

The Wall Street Journal reports that Target management is saying that the shutdown of its checkout registers on Saturday around the country was the result of an “internal technology issue,” and not any sort of outside data breach that put customer information at risk.

The problem lasted for about two hours before it was resolved by Target employees, the company said. The Washington Post writes that “it was not immediately clear how many of the company’s 1,850 U.S. stores were affected, though shoppers reported outages in several states, including Iowa, California, Minnesota and New York.”

Then, on Sunday, it happened again.

And, in what may the oddest coincidence of the story, the Post reports that Target “experienced a similar systems failure exactly five years ago, when its registers went down for several hours on June 15, 2014.” At the time, the company used similar language to describe the reason behind the shutdown.

Yesterday, Target released the following statement:

“Like many other companies, Target uses NCR as a vendor to help accept payments, and on Sunday afternoon NCR experienced an issue at one of their data centers. While this was not an issue within Target’s technology system, Target was unable to process select card payments at some stores for about 90 minutes. The issue is now resolved and payments are going through normally. Additionally, we can confirm that this was not a security-related issue and no payment information was compromised at any time. Although this was unrelated to Saturday’s issue, we know many guests had a frustrating shopping experience in our stores this weekend. For that, we are truly sorry. We never want to disappoint any guests and we’re working tirelessly to ensure these issues don’t happen again.”

The Journal story says that on Saturday “many shoppers took to Twitter to complain of long lines and confusion at stores. They used the hashtag #TargetDown and pointed out the poor timing of the outage, coming the day before Father’s Day.”

KC's View: Seems like a lot of trouble to go to - five years ago and again this weekend - to create a built-in excuse for forgetting to pick up a Fathers Day present.

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E-conomy Beat

Yahoo Finance reports that Amazon plans to expand on its relationship with the Morrisons supermarket chain in the UK, expanding their “Morrisons at Amazon” delivery service to “cities like Glasgow, Scotland, and Liverpool, England … The service is currently available for Prime Now customers in Birmingham, Manchester, Leeds and some parts of London.”

The story says that “the latest partnership extension of Amazon with Morrison bodes well for its focus on the European grocery space. Apart from this initiative, the company teamed up with Casino Group’s subsidiary — Monoprix — last year, which enables it to offer its food products and other grocery items via Prime Now app to customers in Paris and its suburbs.

“Per latest talks, Amazon is willing to expand its grocery delivery service in France on the back of its Monoprix partnership.”

The MNB Walmart Watch

CNN reports that Walmart, looking to offer high quality steaks to customers at low prices, is for the first time “working directly with cattle ranchers to create its own Angus beef supply chain.”

The private label brand name that will be used for the steak has not yet been disclosed. It is scheduled to be rolled out in stores this fall.

"This became a really important priority for the company," Scott Neal, Walmart's senior vice president of meat, tells CNN. ”Meat is center of the plate" and "drives the customer to the store," he says.

In addition, the story points out, controlling some of its beef production gives Walmart the ability to “gain an upper hand on suppliers. Owning its own beef supply could put Walmart in a stronger position when it negotiates prices with companies.” One of those companies is Tyson - at present, CNN says, Walmart represents 17 percent of its total sales.

FastNewsBeat

• The Financial Times reports that “Walmart is on track to file more drone patents than Amazon for the second year in a row, as the pair battle for supremacy in the rapidly changing world of retail. The Arkansas-based chain has filed 97 new drone patents with the World Intellectual Property Organisation since July 2018, according to research by accounting firm BDO. In the same period, Amazon registered 54 product ideas.

“The year before, Walmart submitted 57 patents compared to Amazon’s 54.”

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From The MNB Politics Desk

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

• The New York Times has a story about how, “already battered by the e-commerce revolution, traditional retail stores are bracing for another blow — new tariffs on $300 billion worth of Chinese imports that the Trump administration is threatening to impose.”

Here’s how the Times frames the story:

“Retailers and analysts warn the impact will be disastrous for an industry already tormented by vacant storefronts and deserted malls. The reason: Unlike earlier tariffs that mostly targeted industrial and commercial products, the next round is aimed squarely at consumer goods like footwear, toys and apparel.

“Even for healthy chains, like Walmart and Costco, the new duties threaten the business formula that helped speed their rapid rise over the last few decades: Import cheap products from Asia and sell them at rock-bottom prices. The National Retail Federation estimates that China supplies 42 percent of all apparel, 73 percent of household appliances and 88 percent of toys sold in the United States.

“The government has already imposed tariffs on $250 billion worth of Chinese goods.”

Analysts suggest that the imposition of higher tariffs will cause stores to close and people to lose their jobs … and will have maximum impact during the all-important end-of-year holiday shopping season. And the concern is that the almost unanimous call of by retailers on the Trump administration not to impose the tariffs will remain unheeded.

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Your Views: Hairballs, Secret Weapons & Taxes

Last week we reported here how Amazon has been sending an email to suppliers in which it offers them access to a program that is designed to help combat the presence of counterfeit goods on its site.

I commented, in part:

Counterfeit products have turned into a hairball for Amazon, which is why it is venturing into this arena. Consumers, with some justification, expect it to police the products it is selling on its site.

My reading of the memo suggests that it is a little softball for my tastes … I think that Amazon ought to be a little tougher on this issue - requiring, not suggesting, that companies be able to prove that what they are selling are real, not fake … I’m a firm believer in transparency, trackability and traceability - it is what consumers want and demand, and at some point retailers that do not have such systems at their disposal will end up at a competitive disadvantage.


MNB reader Joe Zink responded:

Great call.

Amazon needs to be tougher on requiring proof and help protect the brand. Great brands can be damaged by consumers having a bad experience with the product as know.

I purchased Gillette Fusion Razors that ended up being counterfeit. Amazon did refund my money and Gillette, no fault of theirs, sent me some high value coupons which I greatly appreciated. Gillette was terrific.

At the end of the day, it cost me time but it cost Gillette money unnecessarily.




We also last week referenced a Washington Post story about how Amazon’s stewardship of Whole Foods since it acquired the chain has been less surprising and innovative than some of us might’ve expected.

I commented:

This strikes me as an entirely fair assessment of the impact Amazon has had on Whole Foods - there have been some changes, but not to the extent that outsiders like me would’ve expected. Which gives me pause when thinking about the new chain of physical stores that Amazon is said to be opening later this year - if Amazon doesn’t include some of its secret sauces in the recipe, what’s the point? Isn’t it an opportunity squandered?

MNB reader Cindy Sherman reacted:

I just read your take on Whole Foods.  I could not agree more.  Somehow WFM feels like a slightly better value than before, but just a bit more blah (and I am a store experience junkie, given that my background is innovation).

Insider scoop from my Seattle days - Amazon does have some secret weapons here and it will depend on their ability to recognize and unleash that, amid corporate hierarchy, bureaucracy and the matrix.  Starbucks had a very innovative store concept team (that was largely overlooked).  One of these folks is extremely talented and is now one of the top folks for Amazon Go.  So, they could become more innovative in their store format expansion if they let him do his thing and know how to leverage it.  But that is a big if.




Finally…

Last week we posted a link to a Wall Street Journal story concluding that it is not a simple matter to figure out whether Amazon is not paying any federal taxes. While the subject has become a matter of much political debate - politicians as disparate as President Donald Trump, and presidential contenders such as former Vice President Joe Biden and Sen. Elizabeth Warren (D-Massachusetts ) have argued that that Amazon is somehow not living up to its civic responsibilities - the Journal writes that Amazon says it pays every penny in taxes that it owes, and that it likely is simply taking advantage of a tax system that offers “deductions and incentives related to investment, research and employee compensation.”

This prompted MNB reader Rich Richardson to write:

It’s not just Amazon…

Rich sent me a link to The Center for Public Integrity website, which concluded that “about twice as many of the largest U.S. companies reported they didn’t owe taxes in 2018 compared with previous years, a partial result of the 2017 Trump tax law.”

The story says: “At least 60 companies reported that their 2018 federal tax rates amounted to effectively zero, or even less than zero, on income earned on U.S. operations, according to an analysis released today by the Washington, D.C.-based think tank, the Institute on Taxation and Economic Policy. The number is more than twice as many as ITEP found roughly, per year, on average in an earlier, multi-year analysis before the new tax law went into effect.”

Among the companies, in addition to Amazon, on the list are Delta Air Lines, Chevron, General Motors, Occidental Petroleum, Halliburton, Netflix, Whirlpool, IBM, Goodyear, and Penske.

Tax law is way above my pay grade, but what I understand about this story is fascinating. Thanks to Rich for bringing it to my attention.

PWS 59