business news in context, analysis with attitude

Published on: November 4, 2013

by Kevin Coupe

Interesting couple of stories that shed some light on Amazon's continuing evolution…

• The Wall Street Journal reports that as of last Friday, there were more customers in the US eligible to pay sales tax on Amazon purchases than not. It happened when new laws compelling the collection of state sales taxes by Amazon went into affect in Connecticut, Massachusetts and Wisconsin, meaning that "163 million Americans in 16 states will have to pay tax on their diapers, books and other goods on Amazon."

According to the story, "Amazon continues to fight sales taxes, but its position has softened. The company supports a bill that would apply an online sales tax nationwide, in order to level the playing field with e-commerce rivals who don’t have affiliates.

"But Amazon is challenging the rules in New York, where it has collected the levies since 2008, and hopes to have its case heard before the U.S. Supreme Court. In Minnesota and Missouri, it recently cut off local partners who may have triggered a sales tax under new ordinances."


• The Seattle Times reports that Amazon "disclosed Friday that it ships more than twice as many items to members who use its Prime subscription service in the United States than to those shoppers who opt for free shipping."

The story notes that Amazon usually is "opaque" about prime, which guarantees two-day delivery to customers who pay a $79 annual fee.

According to the piece,"To be sure, it’s not particularly precise data point, since the company would only say the units, not dollar amounts, shipped using Prime are twice the number as those sent via its free shipping offer. What’s more, Amazon racks up plenty of sales of items for which consumers opt to pay for shipping. Still, the detail about how much more Prime members shop offers insight into Amazon’s strategy to add more features to boost enrollment in the program."


It strikes me as an interesting confluence of stories … and, I think, it speaks to Amazon's broader strategic objectives. In the end, while Amazon deals with things like having to collect sales taxes and raise the minimum purchase for free two day delivery (as reported here recently), the e-tailer continually pushes to add value where it can, especially through its highly effective Prime program that rewards best customers. Which is something that all retailers ought to be doing.

It's an Eye-Opener.

Published on: November 4, 2013

The Washington Post has a piece about Walmart's announced initiative to spend $50 billion over 10 years to source more products from the US, arguing that there are four good reasons to do so (even if $50 billion is but a fraction of what Walmart spends sourcing products):

• The economics make sense because, as Walmart US CEO Bill Simon says, there are factors - America's natural gas boom, rising labor costs in China, the risk of global supply chains - that make "insourcing" more attractive.

• Good public relations generated by a "made in the USA" effort allows Walmart to burnish its image "with measures that save money," while buying some cover "for less savory business practices that would cost it money to change, such as paying low wages and busting unions."

• According to the story, "Wal-Mart is actually selling more in the markets where it has long been manufacturing products. Chinese consumers are buying lots of Wal-Mart products that are made in China; Mexicans are buying things made in Mexico, etc. Wal-Mart can shorten those lead times by keeping production close to the buyer on both ends, in America and around the world."

• And finally, "American poverty is starting to hurt Wal-Mart's bottom line" … it is in Walmart's best interests to adopt and encourage manufacturing that will employ more people, who will then have money to spend at Walmart.

Published on: November 4, 2013

The New York Times had a long piece over the weekend about Gary Vaynerchuk, perhaps best known for the wine videos he used to produce, but now the founder and CEO of VaynerMedia, "which opened in 2009 and now has 290 employees, serving clients as mainstream as Del Monte, General Electric and PepsiCo. They come in the hope that Mr. Vaynerchuk can do for them what he has already done for himself: build an online audience through pluck, ubiquity and charm," using social media to sell things.

"If reducing virtually all human interaction to purely transactional terms isn’t your style, you probably should avoid Gary Vaynerchuk," the Times writes. "Since his childhood days hawking baseball cards at convention halls in New Jersey, and later pitching wine online at his father’s liquor store, he has dedicated most of his waking life to a single puzzle: What will sell more stuff?

"In recent years, that puzzle has given ulcers to a lot of executives. They have watched the rise of Facebook and Twitter, along with the advent of commercial-skipping technologies like DVRs and hardware like the iPad, and realized that spending money on television, print and radio will no longer suffice. But how do you market to people in these virtual realms? Given that these platforms are supposedly about friends connecting — it’s called social media for a reason — will anyone listen and look? Is it too much to ask for a return on this investment?"

Vaynerchuk believes not … and you can read more about it here. (After you read it, you can decide whether you are buying or not.)

Published on: November 4, 2013

Amazon announced that it has begun offering groceries for sale online in Canada, with more than 15,000 SKUs available. The company said that "a majority of items available in the Grocery store are eligible for free shipping or Free Two-Day Shipping with Amazon Prime."

At the same time, Amazon said it has launched an auto supplies store, stocking more than 200,000 items, "everything from car care products, jump starters, seat covers, windshield wiper blades and a wide variety of automotive tools and equipment."

Internet Retailer writes that this is one step closer "to the same-day grocery delivery service Amazon has been testing for several years in the U.S., first in Seattle and, since this summer, in Los Angeles. Called AmazonFresh, the U.S. grocery service offers both dry and perishable goods like fruit or meat. The e-retailer also offers same-day delivery services, though not for fresh groceries, in 11 U.S. markets: Baltimore, Boston, Chicago, Indianapolis, Las Vegas, the New York metropolitan area, Philadelphia, Phoenix, Seattle, Washington, DC, and San Bernardino, CA."

Published on: November 4, 2013

Online Media Daily reports that the Google 2013 Holiday Shopping Intentions Study says that "64% of women, compared with 56% of men, are more likely than men to start shopping early and purchase on the big days," and that "81% of shoppers will rely on discounts, 76% will take advantage of free shipping, and 60% will act on purchase incentives."

In addition, the study says, Millennials will be making a significant move toward the digital realm: "In fact, 95% plan to use the Internet as a holiday shopping resource, versus 87% of adults ages 35 and above. Mobile will also help consumers locate the stores. One in three millennial smartphone owners plan to make a holiday purchase on their phone, up 28% year over year. In contrast, 17% of adults 35 and above who own smartphones plan to make a holiday."

Published on: November 4, 2013

The Boston Globe reports that Procter & Gamble-owned Gillette is taking advantage of a somewhat obvious but very smart marketing opportunity today.

It will play host to two members of the World Champion Boston Red Sox - MVP David Ortiz, Shane Victorino, and also Boston police bullpen Officer Steve Horgan - when they shave off the beards that were cultivated during the season and that came to help define the personality of the Red Sox team.

Gillette is making a $100,000 donation to a local charity to draw attention to the shaving event.

Published on: November 4, 2013

CNet.com reports that Tesco us rolling out "eyeball-scanning tech to target adverts at you. The supermarket giant will install screens that scan your eyes in its petrol stations. Then while you queue for the till, the screen will show adverts it hopes will appeal to you based on your age and gender … As well as choosing ads based on your age and gender, the screens take into account the time and date, too. So they could show ads for Red Bull and other energy drinks in the morning, then switch to women's magazines if they detect a queue of females. Expect seasonal promotions aplenty, as well as ad-funded branded spots for big events like the World Cup."

Published on: November 4, 2013

CNet.com has a piece about Peapod, the e-grocery company that has been in business for more than two decades, and how "looking at Peapod's challenges and successes could be a window into how Amazon and Walmart, companies with massive resources, could evolve their services." At the very least, the story says, the competition among the three - and other players - certainly seems likely to heat up.

"Lots of people are looking at this business," Peapod COO Mike Brennan tells CNet. "We're the biggest, but that hasn't gone unnoticed. There are more companies looking into this space. We have a persistent paranoia. We have to make sure we're innovating and developing new ideas and try to push forward."

According to the story, "Brennan said Peapod, which was founded in 1989, has the benefit of being the oldest online grocer, so the company has had more time to understand the ups and downs of the business. This includes the obstacles around the delivery, particularly during the winter when weather is harsh, and the storage of food before it goes out … Peapod has found success on mobile by letting customers create shopping lists from their smartphones and order groceries with a tap of a button. Walmart has yet to deliver a standalone Walmart-To-Go app, but AmazonFresh, like Peapod, is available through both iOS and Android." Indeed, Brennan says that "30 percent of Peapod's orders come from mobile."

Published on: November 4, 2013

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

• Analyst Michael Douglass writes in the Motley Fool that he believes that the Harris Teeter acquisition by Kroger is going to be good for both companies - especially because tougher competition from Walmart was inevitably going to make it tougher for Harris Teeter.

"As the largest grocery chain in the U.S., it can bring scale advantages and additional capital resources to protect and increase Harris Teeter’s market share in the Southeastern U.S.," Douglass writes. "Given Kroger’s track record of business management, which includes 10 consecutive years of positive comps and eight consecutive years of lowering costs, Harris Teeter will have additional resources and management talent to compete and retain and grow market share.”

Douglass's comments were relayed by the Cincinnati Business Courier.

I'll be shocked if this deal doesn't work out well for both Kroger and Harris Teeter. The synergies - to use an overused term - dimly make enormous sense.


• The Wall Street Journal reports that the $1.2 billion sale of Dole Food to its CEO and founder, David Murdock, has been narrowly approved by a vote of shareholders; it is the second time Murdock has taken the company private in a decade. However, the story also says that "several large holders plan to seek a second opinion on the deal price from a judge … Judges in appraisal cases have often awarded more than the offer price, especially in buyouts by large shareholders like Mr. Murdock. An appraisal could result in petitioners receiving a lower as well as a higher price, and a decision often can take years."


• The Wall Street Journal reports that the Federal Trade Commission (FTC) has okayed the $1.2 billion merger of Office Depot and OfficeMax, an approval that "comes even as antitrust authorities under the Obama administration have stepped up efforts to block so-called horizontal deals that leave industries more consolidated … The merger green light means the pair likely will announce a new CEO to oversee the combined enterprise."

Published on: November 4, 2013

• Ahold USA announced that Gordon Reid, most recently group director for commercial services for Dairy Farm International, the pan-Asian retailer that operates more than 5,600 retail outlets throughout Asia, has been named president of the company's Giant Landover division. He succeeds Bhavdeep Singh, who has served as interim president since September 2013 and now will continue in the role of executive vice president, operations, for Ahold USA.


• Wakefern Food Corp. announced that Natan Tabak, the company's CIO and senior vice president, is retiring from the company after 32 years.

In a statement, Wakefern President/COO Joe Sheridan said, "Throughout my 37-year career here at Wakefern, I have seen many people make their mark on our company.  While Natan’s contributions are his lasting legacy, it is his boldness, fierce honesty and vivacity that will be missed.  There is no doubt that Natan has kept our organization on its toes and in a constant pursuit of excellence. He is the embodiment of the entrepreneurial spirit that drives all of us to win each and every day."

Published on: November 4, 2013

Got the following email from MNB reader Joe Davis, chiming in on the discussion we were shaving last week about comments made by Kroger CEO about digital marketing and e-commerce:

I saw a few of your readers mentioning some limitations and/or caveats about the E-Commerce surge in response to Mr. Dillon’s comments.  I wanted to share with you a leap of faith we recently took that was a step I never thought I would take and was mentioned specifically by one of your readers – we have boldly gone into buying produce online and having it delivered.

We approached this with much skepticism (or at least I did – my wife is much more progressive/evolved than I am).  There is a company called Fresh Harvest that operates in the Atlanta area which offers great, locally-grown produce (mostly) and plenty of flexibility in options, delivery frequency, and price.  I won’t belabor you with all the details, but I was pleasantly surprised by their quality, reliability, and – perhaps most shockingly – affordability relative to our traditional trips to the grocery store or local farmer’s market.

Having our produce delivered, knowing it will be high-quality, and enjoying a controlled bit of variety has been a great pleasure and I’d heartily recommend it to others.  I’m sure there are similar operations out there, but these guys are genuine foodies and the model seems to benefit all parties from farm to table.  I don’t know their economics, but I do wonder about a retailer picking up on this model and giving it a go.

This experience makes me call into question the limitations I perceive of E-Commerce and reiterate a phrase I use more and more of late – all is possible.




I got the following email responding to last week's piece about Sesame Street licensing out its logo and characters for free to the Produce Marketing Association (PMA) in an effort to get more kids to eat fruits and vegetables:

While I applaud the PMA and Sesame Workshop for their efforts here, can we please note that this is definitely NOT a unique effort.  The use of pass-through licensing of very popular characters in the produce department has been explored for more than ten years.   In fact, back in 2003/04 the Product for Better Health Foundation struck a similar arrangement with Sesame Workshop and offered all its members a wide array of customized retail marketing solutions featuring Sesame characters.  PBH also struck deals with Marvel Comics, Disney, United Media (think Charlie Brown and Halloween), and others.  You would NOT be hard pressed to find MANY in the produce industry that have championed a licensed character program (Dole comes to mind quickly).

Certainly it’s noteworthy that PMA is picking up the work that many before them have started and newsworthy that the White House has lent a little sizzle to the effort.  But the good folks at PBH can tell you about the devil and the details.  Retailers need to embrace this opportunity and drive it in the marketplace.   In the early days of PBH’s efforts, Wal-Mart was an early adopter, they ran quarterly programs with great results (sales) but it took a lot of work and coordinated effort between Wal-Mart and their suppliers and PBH was the catalyst.

I wish PMA so much success with this very important effort but I also think we should note that this effort was made possible by many that blazed this trail before them.

I was unsure about how the new PMA effort might differ from previous initiatives, so I reached out to Bryan Silbermann and asked him to elaborate:

Let me just say at this point that I am VERY familiar with what PBH has done because I was one of the two people (the other was Bob Carey) who created and launched PBH – Produce for Better Health Foundation -- in 1991 in partnership with the National Cancer Institute. This is one creation of which I am intensely proud.  And I’m very familiar with the extent of their programs – which PMA helps to fund and has given millions of dollars to over the past two decades.  PBH was housed in the PMA offices for the first several years of its existence too.

But the way in which this Sesame license and use will be rolled out is fundamentally different from approaches that have been taken before, especially when married with the other elements of the rollout that we have in mind.  Can’t say more than that at this stage but stay tuned. And a number of people who have been involved in character licensing for their own companies will be members of the task force developing the Sesame Street campaign.

We'll stay tuned. Promise.

Published on: November 4, 2013

In Week Nine of the National Football League…

Minnesota 23
Dallas 27

New Orleans 20
NY Jets 26

Kansas City 23
Buffalo 13

San Diego 24
Washington 30

Tampa Bay 24
Seattle 27

Baltimore 18
Cleveland 24

Pittsburgh 31
New England 55

Philadelphia 49
Oakland 20

Tennessee 28
St. Louis 21

Atlanta 10
Carolina 34

Indianapolis 27
Houston 24



And, in the 43rd New York City Marathon, Geoffrey Mutai and Priscah Jeptoo - both from Kenya - came in first place in the men's and women's races.

Mutai finished the men's race in 2 hours, 8 minutes and 24 seconds, while Jeptoo won the women's race in 2 hours, 25 minutes and 7 seconds.