business news in context, analysis with attitude

Published on: June 9, 2014

by Kevin Coupe

Got an email this morning that was an instant eye-opener.

Now, I get a lot of emails and a lot of press releases. Most of them are instantly disposable; there's a reason that the "delete" button is one of the more-used keys on my MacBook Pro.

But this one grabbed me.

It was from NACS, and pointed out that 50 years ago tomorrow, "convenience store operator John Roscoe flipped the switch at a convenience store in Westminster, Colorado, to activate the first U.S. remote access self-service gasoline pumps." The release points out that "Roscoe’s wasn’t the first self-serve gas station - as far back as the 1930s, some stores allowed customers to pump their fuel with a nearby attendant resetting the pump and collecting money - but this station was the first that allowed true self-serve as we’ve come to know it."

Fifty years ago. Yikes.

When you think about it, self-service gasoline stations have been one of the most memorable and impactful retailing evolution shifts in our lifetime. In the same way, I think, that ATMs - essentially self-service banking - have changed consumer behavior in fundamental ways.

It took some time to catch on - NACS says about a decade, noting that there are just two states (New Jersey and Oregon) that don't allow self-service gas stations - but today it is hard to imagine a world without them.

And what's really important about them, beyond the fact that it ended up being good for the c-store business in that it reduced labor costs significantly, is that it tapped into a nascent trend … the empowerment of consumers. The simple fact is that today, shoppers fully expect to be in charge of the consumption experience and believe that the companies with which they do business should be transparent … and the creation of the self-service gas station industry was part of the beginning of that.

It is an Eye-Opener.

BTW…I did a quick check and discovered that in 1964 … the year I turned 10 … a gallon of gasoline cost 30 cents, a first class stamp cost a nickel, a dozen eggs cost 54 cents, and a gallon of milk cost 95 cents. The average US life expectancy was 70.2 years, the Dow Jones high for that year was 891, and unemployment was 5.7 percent.

Yikes.

Published on: June 9, 2014

Snippets from the Walmart annual meeting that took place last Friday in Arkansas…

• The New York Times reports that Doug McMillon, the company's new CEO, captured the attention of attendees when he "talked about the company’s long-term strategy and ways to move ahead in a rapidly changing retail world," and specifically about how it will compete with Amazon, which has developed a potent online challenge to Walmart's longtime low-price dominance.

"There are so many new ways to serve customers,” McMillon said. “Technology, data and information are opening new doors for us to lead through. Our purpose of saving people money will always be relevant, but we’ll do it in new ways.”


• The Associated Press reports that "despite the festivities, Wal-Mart is under scrutiny. Revenue at established Wal-Mart stores in the U.S. has declined for five consecutive quarters. The number of customers has also fallen six quarters in a row at the division, which accounts for 60 percent of the company's total sales.

"Like many other retailers that cater to working-class Americans, Wal-Mart has been hurt by an uneven economic recovery that has benefited well-heeled shoppers more than those in the lower-income rungs. Moreover, shoppers are increasingly looking for lower prices at online rivals like Amazon.com and at dollar chains and pharmacies.

"As a result, Wal-Mart is opening more small stores, like Walmart Express and Neighborhood Markets. It's also pushing online grocery services. It's also adding money transfers and other services to cater to low-income shoppers. Meanwhile, Wal-Mart has more than tripled the number of items it sells online to more than 7 million from 2 million just 18 months ago."


In addressing these challenges, the Times writes, Bill Simon, president of Walmart US, said: "It’s a combination of just trying to get better in the day-to-day operations, merchandising, and dealing with the structural changes that are happening in the marketplace … We could be doing better, and we’re trying to be better, and I’m seeing momentum in the business that leads us to believe that that’s happening."


• According to Arkansas Business, Simon also said that "supercenters for us are still performing very well. The bottom 10 percent of our stores, they’ve been a pretty big drag on us. I get asked all the time, ‘Why don’t you just close them?’ We still make a lot of money on them. They’re profitable stores.

“We don’t have a significant number of stores that are negative cash flow stores. Our problem is a high quality problem, even our worst stores, the ones that are not having the same-store sales we would like, are still very good stores."


• Neil Ashe, the CEO of Global e-Commerce for Wal-Mart, talked about a groceries test the company is running in Denver…

We are testing both delivery and pickup,” Ashe said. “I will tell you that pickup has grown faster than delivery at this point in Denver, which has been very interesting to us. One of the challenges with grocery delivery is obviously you have to have a time slot for that delivery … In a market like Denver, which is a driving market, it is proving to be very attractive … to have the convenience of picking up the order whenever she wants. We’re enthusiastic about that.”

Ashe said that Walmart's goal is not to segment different kinds of sales, but rather offer shoppers a multi-platform experience from which they can choose.

"Our goal is not to have a percentage of sales that is specifically e-commerce,” Ashe said. “Is Denver e-commerce or is it retail? I’m not sure it really matters. It is solving a problem for a customer in a new way that no one else can do. We want to do a lot more of that. If that ends up being 100 percent of our business that’s awesome."


• Walmart said that its 2013 e-commerce business reached $10 billion, and projected that it will do $13 billion in e-commerce sales this year.

Published on: June 9, 2014

Bloomberg Businessweek has an interview with John Rossman, described as a consultant who "sat in Amazon’s inner sanctum while Chief Executive Officer Jeff Bezos was trying to recover from the dot-com bust and build a sustainable future for the company," and now the author of "The Amazon Way: 14 Leadership Principles Behind the World’s Most Disruptive Company."

Some excerpts:

• "Amazon’s leadership principles are different for a few reasons. First, they are usable at a practical level. Amazon’s can be employed in most situations where trade-offs, prioritization, strategy development, or key scenarios are being developed. Second, Amazon’s are authentic and represent who the company really is. They are a very practical reference to help a large, rapidly growing organization to gain alignment. Most companies’ principles are watered down, not used to make hard decisions, and are not well understood by employees."

• "There are two key words: 'customer' and 'obsession.' To obsess means to think very deeply about it, to never let it out of your thinking, and to use it as the constant cornerstone of approach. Most companies don’t truly obsess about anything—they think about it, they may even act on it, but they are not obsessed. Look at the history of features and advancements Amazon has made, and they truly do work to make a great customer experience. They make long-term investments to create an innovative and better customer experience."

• Regarding Amazon's dispute with Hachette over the cost of books… "Amazon is flexing its muscle and negotiating with a supplier. It happens every day by every company in every industry. One can argue that 'getting improved terms' benefits the customer, as this allows Amazon to pass price improvements and other terms on to the customer. The flip side is also true: The negotiation, in the short term, impacts customers and makes it harder to easily access the Hachette selection and Amazon features such as Prime and preorders.

"Customer obsession is a very real value at Amazon, but it is not the only one. That’s the great benefit of having stated and well thought-out principles, which sometimes might not be in alignment—they help you think through all the considerations. Another Amazon value is ownership, which is defined as 'thinking long term and not sacrificing long-term value for short-term results.' By pursuing favorable terms and increasingly using their leverage in the market, Amazon is balancing long-term benefits to customers and shareholders with immediate customer impact."

You can read the entire story here.

Published on: June 9, 2014

The San Francisco Chronicle reports on a new study conducted by the Food Labor Research Center at UC Berkeley and UC Davis Professor Chris Benner suggesting that "1 in 3 grocery workers is on some form of public assistance. While grocery chains are cash machines for investors, nearly 1 in 5 workers has cut back on meals because he or she couldn't afford to buy food."

The study, according to the story, "shows how much has changed in an industry that long promised stable, middle-class jobs. These days, the 124-page report found, 'workers who sell food in California are almost twice as likely as the general population to not be able to afford to eat the food they sell.' This new generation of low-wage grocery workers uses $662 million worth of public assistance benefits annually, according to the report."

The piece goes on to say that the study found that from 2000 to 2012, "the median wage at a union grocery store decreased from $19.38 to $15.17 an hour. Roughly 1 in 4 of California's grocery workers belongs to a union … Meanwhile, the report lauds Costco, which has captured the largest share (13.3 percent) of California's grocery business while paying workers above the norm."

The report also specifically "chides California's larger grocery chains - particularly Safeway and Albertsons/Supervalu - for directing a majority of cash back to investors rather than back to the workforce."

Published on: June 9, 2014

Reuters has a story about United Parcel Service (UPS) and how the company is expanding and forging new services.

One statement that stood out: the comment that "rising demand for drugs and medical devices will create a large revenue opportunity for UPS, the executives said, as aging populations and rising income fuel demand for home delivery of healthcare products. Pharmacists at UPS's hub in Louisville, Kentucky, for example, fill orders for pharmaceutical companies, medical device makers and wholesalers."

Healthcare, in fact, is called UPS's "fastest-growing segment after e-commerce."

Published on: June 9, 2014

Walmart would've liked the weekend's headlines to be focused on the spin it offered at its annual meeting, but there also were some less positive stories in which the retailer's name got mentioned…

• The Associated Press is reporting that a Walmart truck driver has been charged with death by auto and four counts of assault by auto after the vehicle he was driving on Sunday precipitated a multi-car crash that left one man dead and several others, including comedian Tracy Morgan, critically injured.

According to the story, "authorities said 35-year-old Kevin Roper, of Jonesboro, apparently failed to slow for traffic ahead early Saturday in Cranbury Township and swerved at the last minute to avoid a crash." Roper, accompanied by an attorney, turned himself into police, "was released on $50,000 bail Saturday night and has been placed on administrative leave, Wal-Mart spokesman David Tovar said Sunday.

"Wal-Mart President Bill Simon said in a statement that the company 'will take full responsibility' if authorities determine its truck caused the accident."

There has been speculation that Roper may have been drowsy or asleep at the wheel, and "the National Transportation Safety Board is working with state police to look at any issues in the crash related to commercial trucking and limousine safety."


• And in Las Vegas, Reuters reports that "an armed man and woman shouting about a 'revolution' opened fire and killed two Las Vegas policemen who were eating lunch in a pizza parlor on Sunday, then fatally shot a civilian in a nearby Wal-Mart store before killing themselves, police said.

The reasons behind the event have not yet been determined.

Published on: June 9, 2014

• Reuters reports that "Prime Minister Narendra Modi's government could allow foreign direct investment in India's e-commerce sector as early as next month, paving the way for global online retailers such as Amazon to expand their business … A more robust online retail sector will spur manufacturing and help an economic revival, said the people, who are privy to discussions within the new government. An announcement is expected in next month's budget."

The story notes that "India currently bans global online retailers from selling goods directly to customers but allows them to own 100 percent of a marketplace business, where third-party suppliers can use their platform."

Published on: June 9, 2014

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

• The Associated Press reports that Hershey is suing TinctureBelle LLC and TinctureBelle Marijuanka LLC, accusing the two companies of making marijuana-infused candies that "too closely resemble" its own products. The suit specifically claims that "TinctureBelle’s Ganja Joy, Hasheath, Hashees and Dabby Patty mimic Hershey’s Almond Joy, Heath, Reese’s peanut butter cups and York peppermint patty candies, respectively."

This may explain Maureen Dowd's pot-themed column in the New York Times a week or so ago.


• The Wall Street Journal reports that Carl Icahn has taken a 9.4 percent stake in Family Dollar, spending $265.8 million for the shares, and plans to push for strategic changes in the company's direction as well as some board seats.

According to the story, "In emerging as a big shareholder of the Charlotte, N.C.-based retailer, Mr. Icahn joins a host of high-profile investors. Nelson Peltz's Trian Fund Management LP has been the discounter's largest shareholder with 8.4 million shares, or 7.4% of shares outstanding, as of the most recent data available. Paulson & Co. has almost 6.5 million shares, a 5.7% stake."


• The New York Times this morning reports that Tyson is expected to be the victor in the battle for Hillshire Brands, having outbid Pilgrim's Pride to acquire the manufacturer of Jimmy Dean sausages and Ball Park hot dogs. Details of the winning offer have not yet been divulged.

Published on: June 9, 2014

…will return.

Published on: June 9, 2014

• In the French Open men's singles championship, Rafael Nadal defeated rival Novak Djokovic in four sets - 3-6, 7-5, 6-2, 6-4. It was Nadal's ninth French Open championship overall, and his fifth in a row.

In the French Open women's singles championship, Maria Sharapova won her second championship, defeating Simona Halep in three sets - 6-4, 6-7, 6-4.


• And, Tonalist won the Belmont Stakes on Saturday, ending California Chrome's hopes of winning racing's Triple Crown after it won both the Kentucky Derby and the Preakness.

Published on: June 9, 2014

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