retail news in context, analysis with attitude

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The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

In today's Innovation Conversation, Tom and KC tackle the issue of whether retailers should buy or build technology solutions, and conclude that the answer has less to do with technology and more to do with vision and commitment to a unique consumer experience.  One size definitely does not fit all, and turnkey solutions may lock retailers into solutions ill-matched to their needs.

If you're interested in listening to an audio version of this Innovation Conversation, you can do so here (or can download this file):

Remember…

The discussion sets the stage for Thursday's planned open conversation on Clubhouse, the new social networking app that enables real-time  audio conversation between the hosts (Tom and KC) and fellow members.

Date:  Thursday, February 25

Time:  4:30 pm EST / 1:30 pm PST

Link. 

Come join the Innovation Conversation … and if you're not yet a member, get the app … reserve your username … and request access.  (It'll help if you know someone who already is a member…)

See you Thursday!

If you are if the food business, then the new CNN series, "Stanley Tucci: Searching For Italy," is a must-see.  It'll educate your mind and titillate your palate.  KC has some thoughts.

The show runs Sunday nights at 9 pm EST.  Here's a preview:

(If you are in the food business, but don't think of yourself as being in the food business, then even the great Stanley Tucci can't help you.)

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The Los Angeles Times this morning reports that the Los Angeles County Board of Supervisors has voted to mandate that publicly traded supermarkets and drug store chains must pay their store employees $5 per hour in extra hazard pay for the next 120 days.  The mandate will apply to some 2,500 workers.

The bump also applies to "companies that have at least 300 employees nationwide and more than 10 employees per store site. The measure applies only to unincorporated areas … which includes portions of South L.A. and much of northern L.A. County. Many of the 88 cities in the county do not have measures, meaning a worker can live in one city with a mandate but work in another without it."

The Times writes that "since January, several cities, including Santa Monica, San Jose, Berkeley and West Hollywood, have considered or passed some level of hazard pay mandates.

"The county’s ordinance will probably be challenged in court in the coming days by the California Grocers Assn., which has sued the city of Long Beach after it passed its 'hero pay' measure."

Both Long Beach, California, and Seattle have passed hazard pay mandates, to which kroger responded by closing two under-performing stores in each city, saying that the legislation made the units untenable.

KC's View:

I've been arguing from the beginning that singling out one sector is  poor public policy, but now one has to wonder the degree to which retailers are going to start cutting back hours and reducing services, or even closing more stores - all of which will end up with people either unemployed or under-employed.  Cannot imagine that will be good for the communities that these mandates are affecting.

These mandates strike me as knee-jerk responses to the current situation.

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Gelson's Markets, the 27-unit specialty food store chain in Southern California, is being sold by private equity group TPG Capital to Japan-based Pan Pacific International Holdings.

Terms of the deal, expected to be finalized in the second quarter, were not disclosed.

In a prepared statement, Rob McDougall, president-CEO of Gelson’s, said, "As we look to the future, we are excited about opportunities for new growth and partnerships under PPIH, while remaining focused on our longtime commitment to the highest standards of quality, value, and unsurpassed customer service. PPIH leadership has visited every one of our locations and has been incredibly complimentary of our stores and teams, as well as our customer service philosophy.” 

The announcement notes that "Gelson’s was acquired by TPG Capital in 2014. The brand has grown significantly over the seven-year partnership, expanding its footprint from 17 to 27 stores from Santa Barbara to San Diego."

Pan Pacific is described in the release as "a global retailer with 638 international stores, 582 of them in Japan. The company was founded over 40 years ago by entrepreneur and innovator Takao Yasuda and is particularly known for their famous Don Quijote store brand. PPIH also operates stores in the U.S. in Hawaii and California, as well as in Singapore, Hong Kong, Thailand, and Taiwan."  The company has been talking about expanding its US presence for close to a decade.

Late last year, Bloomberg reports, Pan Pacific was in the news for less positive reasons - its former CEO, Koji Ohara, was arrested for insider trading.

KC's View:

It is interesting that Southern California's two major specialty food store chains, Gelson's and Bristol Farms, are both now owned by Asian companies;  Bristol Farms is part of Good Food Holdings, which is owned by Emart, South Korea’s largest retailer.

Both Emart and Pan Pacific have expressed interest in broader expansion within the US.  Emart has seemed focused on the west coast specialty food segment - it also owns Metropolitan Markets in Seattle and New Seasons Markets in Portland.  If Pan Pacific pursues a similar strategy, whether on the west coast or elsewhere in the US, then it might be a good time for such businesses to be considering a sale - in part because it might be a seller's market, and in part because they might find themselves competing against better-funded entities with their eyes on the same customer.

(If I were such a retailer considering a sale I'd be getting on the phone with Scott Moses at PJ Solomon, who specializes in such deals and is one of my favorite people on the planet.  This is an unsolicited plug - Scott will be surprised when he reads this.)

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The Wall Street Journal this morning reports that Visa and Mastercard "are planning to raise swipe fees for some types of credit-card purchases in April, adding to the squeeze felt by restaurants, retailers and other merchants already struggling through the Covid-19 pandemic.

"What’s more, customers’ switch to online shopping during the pandemic - a trend heralded for keeping businesses afloat when people are reluctant to venture inside stores - is also creating extra costs for merchants. Swipe fees, which merchants pay when a customer pays by card, are often higher on online purchases."

The Journal points out that "the swipe fees, known as interchange fees in industry parlance, are a perpetual source of contention between merchants and card companies. Though invisible to consumers, they are glaring to merchants, which often end up paying fees of about 2% of their customers’ credit-card purchases. The fees are set by the card networks, such as Visa and Mastercard. Merchants pay them to the banks that issue the cards."

The story makes the point that while the use of cash dropped in 2020 and people shopped far more often online, the revenue generated by swipe fees actually was down 17 percent last year, largely because many people curbed their spending on major purchases such as travel.

KC's View:

It is extraordinary the degree to which people have moved away from cash, especially since 18 months ago there was a lot of blowback against retailers that did not want to accept it.  Times change.

I'm guessing that if retailers and their trade associations can find a reason to sue the credit card companies over increased swipe fees, they'll take it.  I'm not sure the degree to which greed can be litigated ... but it would be nice if the credit card companies gave retailers - which have had a tough year - a break.

The Chicago Tribune reports that eight-store upscale convenience chain Foxtrot Market has plans to use $42 million in new investment money to open four more stores there, as well as units in Dallas and Washington, DC - largely taking advantage of storefront availabilities created by the pandemic.

Foxtrot is described as a unique format, combining prepared and specialty foods with a coffee shop and a delivery hub for online orders.   The Tribune writes that "in addition to new stores, Foxtrot also plans to invest in expanding its line of private label products," though it considers locally made products, like coffee from Metric Coffee and Half Acre beer, its 'lifeblood'."

Bloomberg describes the format this way:

"Foxtrot distinguishes itself with its hybrid, locavore model vs. your typical 7-Eleven. The shelves are stocked with products made by local artisans in addition to major consumer brands. In Chicago that will include coffee from Metric, Do-Rite’s old-fashioned doughnuts, and IPAs from Pipeworks Brewing. Customers order via an app.

"The chain also specializes in private label products, notably candy gummies. The best-selling online items are wine and ice cream; the average order is $50."

The company says that the pandemic has demonstrated the continued health of both the online an d offline business - while its online sales tripled in 2020, in-store sales grew 55 percent.

KC's View:

I've not been in a Foxtrot store to the best of my recollection, but I must admit I'm intrigued … it sounds like an interesting combination of formats built out from customer needs and desires.  Which, to my way of thinking, is the right way to go.

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Good piece in Fast Company about a company addressing the problem of "gross" grocery store touch screens.  "After grabbing unwashed produce and packs of raw meat, dozens of customers poked at the same checkout buttons. When was the last time they were cleaned? Who knows.

But a new idea out of the London-based design studio Special Projects fixes the hygiene heebie-jeebies that come with grocery store touchscreens. Called Moving Buttons, it intelligently moves the onscreen buttons for each customer, ensuring that two people never touch the same spot."

You can check it out here.

Random and illustrative stories about the global pandemic and how businesses and various business sectors are trying to recover from it, with brief, occasional, italicized and sometimes gratuitous commentary…

•  In the United States, there now have been 28,897,718 total cases of the Covid-19 coronavirus, resulting in 514,996 deaths and 19,212,517 reported recoveries.

Globally, there have been 112,739,054 total coronavirus cases … 2,498,493 resultant fatalities … and 88,308,784 reported recoveries.  (Source.)


•  The Washington Post writes that "at least 44.5 million people have received one or both doses of the vaccine in the U.S.  This includes more than 19.9 million people who have been fully vaccinated."


•  Breaking news from CNN:

"In an analysis released Wednesday, the US Food and Drug Administration said the Johnson & Johnson Covid-19 vaccine has met the requirements for emergency use authorization.

"The efficacy of the Johnson & Johnson vaccine against moderate to severe/critical Covid-19 across all geographic areas was 66.9% at least 14 days after the single dose vaccination and 66.1% at least 28 days after vaccination, a new analysis meant to brief the FDA's Vaccines and Related Biological Products Advisory Committee said."

FDA emergency use authorization is expected within days, with shots-in-arms possible by early next week.


•  From the Wall Street Journal:

"Hospitalizations due to Covid-19 have more than halved from a month earlier. As of Tuesday, there were 55,058 Covid-19 patients in hospitals in the U.S., the fifth day in a row the figure has been under 60,000, according to the Covid Tracking Project. The burden on intensive care units also eased, with 11,272 coronavirus patients in ICUs across the country, compared with more than 22,000 a month earlier."


•  From the Washington Post:

"Global deaths from the coronavirus fell by 20 percent last week compared with the week before, the World Health Organization said in a statement, part of a wider trend that also includes a decline in cases worldwide.

"The downturn in cases and deaths follows a winter surge in infections but also has coincided with an increase in vaccinations, particularly in the United States and Europe.

"According to the WHO, nearly 66,000 global deaths from coronavirus-related complications were reported last week, marking the third straight week that the figure has fallen. The number of new cases also dropped for the sixth consecutive week, falling by 11 percent last week, the agency said."


•  The Washington Post reports that Pfizer and Moderna executives testified to the House Energy and Commerce oversight and investigations subcommittee yesterday, predicting "a major increase in vaccine deliveries that will result in 140 million more doses over the next five weeks, saying they have solved manufacturing challenges and are in a position to overcome scarcity that has hampered the nation’s fight against the coronavirus."

The Post notes that "if the companies are able to meet their projections, it would signal the beginning of the end of a period of deep frustration and mark faster progress against a pandemic that has claimed more than 500,000 lives in the United States. The slower-than-anticipated vaccine rollout has hampered progress toward vaccinating the 70 or 80 percent of the U.S. population of 330 million people required to achieve herd immunity against the coronavirus."

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•  CNet reports that "Walgreens and Instacart are teaming up so you can have rapid delivery of whatever drugstore item you might need. The partnership is launching in Illinois over the coming weeks with plans to expand into southeast Florida, Dallas, Atlanta, Washington, D.C., and New York City next. Eventually, you'll be able to order from Walgreens and expect same-day delivery through Instacart in all 50 states.

"At launch, you'll be able to order items from a number of the categories you'd expect to find at Walgreens, including over-the-counter meds, personal care items and convenience products. As the partnership grows, Walgreens is promising to also expand the number of items available for on-demand purchases. The company says the catalogue will start with tens of thousands of options."


•  The Boston Globe reports that Massachusetts-based Market Basket is concerned that someone is on Facebook, pretending to be from the retailer and asking customers for personal information.

The company has posted a message on its Facebook page saying that "this imposter page is sending out friend requests and asking people for 'sensitive information' to be able to enter its 'Drink Up, Work Out' giveaway … The company noted that it doesn’t send out friend requests and that if a customer receives one, it is a fake."

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With brief, occasional, italicized and sometimes gratuitous commentary…

• Tom Vilsack, who served as Secretary of Agriculture for the entire eight years of the Obama administration, will return to that job after he was confirmed 92-7 by the US Senate.

The Associated Press writes that in his testimony, Vilsack "heavily endorsed boosting climate-friendly agricultural industries such as the creation of biofuels, saying, 'Agriculture is one of our first and best ways to get some wins' on climate change.

"He proposed 'building a rural economy based on biomanufacturing' and 'turning agricultural waste into a variety of products.'  Vilsack also pledged to work closely with the Environmental Protection Agency to 'spur the industry' on biofuels.

"With systemic racial inequity now a nationwide talking point, Vilsack also envisioned creating an 'equity task force' inside the department … Vilsack also heavily backed the Supplemental Nutrition Assistance Program — commonly known as food stamps, or SNAP — as a key instrument in helping the country’s most vulnerable families survive and recover from the pandemic era."


•  Food & Wine reports that "Shake Shack announced a new series featuring menu collaborations with well-known chefs and restaurateurs around the country, including Dominique Crenn, JJ Johnson, Chris Shepherd, and Junghyun Park. Called 'Now Serving: A Collab Series by Shake Shack,' the line of menu items will donate proceeds to regional nonprofits that are supporting restaurant workers during the COVID-19 pandemic."

I love ideas like these - they're such a great way to pump innovation into systems that, if they become calcified, can destroy a business model over the long term.


•  The New York Times reports that "Macy’s, the retailer that also owns Bloomingdale’s and Bluemercury, said on Tuesday that its sales last year plummeted 29 percent, highlighting the toll that the pandemic has taken on mall chains and the uncertainty around how traditional retail will recover in a post-pandemic world.

"Macy’s said that sales fell to $17.3 billion in the year that ended on Jan. 30, and that it posted a net loss of $3.9 billion, compared with a $564 million profit the prior year."

The story says that Macy's executives "emphasized that Macy’s was building its digital business, which it expects to reach $10 billion in sales in the next three years. It is moving out of unfavorable American malls as part of previously announced store closures and expanding its off-price chains like Macy’s Backstage, which aims to compete with T.J. Maxx."

•  Jeff Blackburn, Amazon's senior vice president of business development and a 23-year veteran of the company, has decided to move on from the company after a year's sabbatical.

In a note posted to the company's intranet, Blackburn wrote that he was not retiring, and would have news about his next venture soon.   Founder-chairman Jeff Bezos said that Blackburn “has kept me in the loop on his next chapter, and I can assure you it’s a very exciting one! … I predict that Jeff will be every bit as amazing in his new role as he’s been in all his roles at Amazon."

Blackburn's departure is just the latest in a series of moves in Amazon's leadership ranks.  Bezos announced that he would be leaving the CEO's office and transitioning to the chairman's role, succeeded by Andy Jassy, who has been running Amazon Web Services.  And Jeff Wilke, Amazon’s Worldwide Consumer CEO, is leaving, to be succeeded by Dave Clark, the former head of worldwide operations.

In his posting, Blackburn wrote:  "The 'too many Jeff’s' bug that’s been bothering many of you for two decades has been fixed! Over the years, we’ve always had multiple Jeff’s on s-team - Jeff Wilke, Jeff B, myself, and for a time Jeff Holden … Wilke’s retirement meant one less Jeff, and today, I’m taking it down to just the original."

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MNB reader Steve Workman wrote in about the proposed legislation in Seattle that would make certain misdemeanors - like shoplifting - non-prosecutable, which I thought was "completely nuts," since it would make doing business there impossible for many retailers:

Regarding your FaceTime with the Content Guy on Tuesday.

My Sister works in a Rite-Aid (Walgreens) store in NJ.  She is told by management that if they see someone stealing, to just let them go, DO NOT CONFRONT THEM.

Someone can literally come in the store and wipe an entire shelf of OTC drugs into a bag and walk right out the door.

They do this to avoid conflict and I think it also has to do with Covid, since that is when the policy was implemented.

Thieves have No Fear.  The only caveat is that they probably don’t want to  come back to the same store too often since the cameras have most likely identified him stealing and they might have the ability to stop them when they walk back into the store.

Crazy world….

Another MNB reader wrote:

A couple of thoughts…

There are two kinds of thieves and they can be identified by the items they are stealing.

Both are thieves though – crime and punishment should be commensurate with each other.

Has anyone given any thought to what happens on the other side when $4/hour is pulled away from someone that may have adjusted their budget?

Or is the underlying goal to increase minimum wage one way or another?

And from another MNB reader:

In my 20 years of working in grocery, I have been involved in dozens of situations of catching shoplifters. Not one has ever said they did it because they had to feed their family. And unless they only feed their family steak and crab meat, I’m pretty sure they’re stealing for other reasons. 


Michael Sansolo's column this week was about how the people who don't wear masks are putting people at risk, and how a new term - “Fauci-ing" - has been created for breaking up, cutting off or ghosting a romantic partner who isn’t taking covid seriously enough.  The same thing can happen between customers and retailers when one or the other isn't taking the pandemic seriously enough.

One MNB reader wrote:

I’m with you, CEO Steve Smith and especially Dr. Fauci.  I used to go buy water most mornings from a gas station/convenience store after walking my dogs.  I could easily wait until I got home to have water, but I really liked the staff and the daily interactions I would have with them.

They have a sign that says you must wear a face mask when entering the store, but I’ve never saw it enforced.  I totally understand the predicament they put staff in.  The staff does wear face masks.  I quit going there because of all the “boneheads” who don’t take C-19 seriously and walk in without masks.  A bottle of water in not worth the potential health repercussions.  We seek out stores like Costco and Nugget (a local grocery chain in the Sacramento area) because they enforce wearing of masks.  We been Fauci-ing for a long time now and breaking up with the retailers who won’t enforce mask wearing. 

But MNB reader Dave Parker wrote:

Shouldn’t “Fauci-ing the business” mean 100% face mask, social distance, and hand-washing compliance? It shouldn’t stand for the resisters. Flouting is the term for that.


Responding to the John Oliver piece about poor treatment of people working in meat-packing plants, one MNB reader wrote:

Doesn't make me feel any better knowing Smithfield is a wholly owned subsidiary of WH group of China.

MNB reader John Rand chimed in:

Sometimes history rhymes.  The 1906 novel “The Jungle” by Upton Sinclair comes to mind. 

At the turn of the before-last century there was a lot of journalism and exploration of dreadful industry behavior, dangerous work conditions, terrible product ingredients, abuse of immigrant labor, outright illegal behavior in some cases but mostly because there were no laws, no oversight, and no consequences. 

At that point in time Republicans were often proudly progressive, and Teddy Roosevelt was a leader in establishing laws and standards. Things like the FDA.  The premise was that companies needed standards to prevent them from sinking to the bottom level of behavior , to level the playing field because pure competition had no method to value public good. 

Funny how some things just echo. At some point we always need to go back and see what we learned before. 

And MNB reader Joe Ciccarelli wrote:

I watched this video and it is really eye-opening. Where are our Federal and State Legislature’s?  Probably on a golf vacation with some lobbyist from the meat industry.


And, regarding the growth of e-commerce in 2020, and speculation about how it continue post-pandemic, one MNB reader wrote:

Walmart isn't putting most of it's record 15+ billion in cap ex this year into e-commerce because it thinks things will return back to normal...

Fair point.


Continued discussion of the McDonald's decision to tie executive bonuses to the company's ability to execute on diversity goals…

One MNB reader wrote:

Attaching bonus goals to racial diversity in management … The term White Supremacy is being bantered around like it is ok.  Well, it is not.  Here is the Oxford definition of White Supremacy “White supremacy or white supremacism is the belief that white people are superior to those of other races and thus should dominate them. The belief favors the maintenance and defense of white power and privilege.”

The use of that label to make a general statement is quite frankly offensive.  I have a serious issue with anyone, that feels using that statement as an argument to promote equality in the workforce is a justifiable position. 

Let me ask a question:  How many times have you seen a minority get a job over a non-minority, and they were not as qualified???  In my time, I have. And no this is not a personal experience; it has been observed.  That is to me minority supremacy.  Which in my opinion is just as bad.

I guess then if you have requirements for the number of minority positions in management shouldn’t that apply to all companies?  Even minority owned companies?  Hey, aren’t “whites” a minority in that company as well?  Let’s only mandate to give every chance we can to the poor minorities since we, the global, evil, White Supremist population won’t.

Come on man. This is just another example of left HR practices trying to make everyone feel good and never truly addressing the issue.  Kumbaya.

'Just to be clear, I was the person who used the term "white supremacist," but only in the context of a comment made about a Coca-Cola diversity program in which the phrase "try to be less white" was used.

I wrote:

I'm a little unclear, based on my reading, the degree to which the stuff posted by the whistleblower reflects the totality of the Coke training program.  I gather that some of the criticisms are coming from quarters that are opposed to what's called "critical race theory," which among other things posits that one has to acknowledge that white supremacy exists and that existing law often serves to reinforce it.  (I don't think there's much question that white supremacy exists, and it certainly seems to me that white supremacists are being more public about it than ever.  But then there are some folks that argue that white supremacy doesn't exist.  I'm confused.)

So, I wasn't just dropping the term in a general statement.  I would also suggest that the perspective described in the dictionary definition seems fairly accurate in terms of how some people in this country are talking and acting these days.

MNB reader Tim McGuire has a good response to some of your observations:

Two thoughts for the reader who worries that “if there are no qualified (diverse) applicants for a role” companies that tie management performance reviews/bonuses to diversity and inclusion goals will force their leaders to hire unqualified diverse candidates to “fill in the numbers”:

Assuming that the D&I goals are part of the overall bonus program, not 100% of it, those leaders would be shooting themselves in the foot by hiring unqualified candidates, so it’s unlikely to happen.

The bigger issue in the question is why there are no qualified and diverse applicants for the role - that’s a failure of recruiting, attraction and support of diverse candidates.  If you find diverse candidates don’t apply for, get hired for, or succeed in roles in your company, figure out why not and fix it - not because you need to hit your D&I numbers, but because you’re missing out on an enormous and qualified pool of talent.

Strong boards and management teams don’t create D&I goals to “check boxes” - they do so to make sure the organization casts a wide net to find the best people.

Thank you.  That's what I wanted to say.

One other thing.  Just out of curiosity, I googled the word "kumbaya," just because I wanted to get an accurate sense of a word that was used so flippantly in the earlier email.

In the original African-American spiritual, the word was meant to be "an appeal to God to come and help those in need."  But, the dictionary says, it often is used "disparagingly, to moments of or efforts at harmony and unity."

Leading me to ask, who would anyone be disparaging at actual efforts at harmony and unity?

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