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    Published on: November 7, 2014

    by Kevin Coupe

    Amazon apparently is not letting the folks who are dubious about its approach to sales-and-profits get it down. The company has just released - on an invitation-only basis - a new speaker called "Amazon Echo" that is capable of taking voice directions, just like Siri on the iPhone.

    According to the Chicago Tribune story, "As well as taking commands such as 'play music by Bruno Mars' or 'add gelato to my shopping list,' Amazon said the device accesses the internet to answer questions such as 'when is Thanksgiving?' and 'what is the weather forecast?'

    "Amazon said the speaker, which runs on Amazon Web Services, continually learns a user's speech patterns and preferences … Amazon Echo is priced at $199, or $99 for members for the online retail giant's Amazon Prime loyalty scheme."

    First of all, it is interesting how this new gadget is being linked to Prime, where Amazon seems to be working overtime at providing value-added products and services.

    And second … don't let them underplay that thing about "add gelato to my shopping list." In fact, that's probably the major impetus for Echo - allowing people to seamlessly order products from Amazon, whether it be books, groceries, or virtually any other item it sells. Ideally, from Amazon's perspective, it'll be the height of impulse purchasing.

    And I fully suspect that six months after this thing is up and running and going wide, there will be people out there who will be wondering how they ever lived without it.

    It's an Eye-Opener.
    KC's View:

    Published on: November 7, 2014

    The Cincinnati Enquirer reports that "Kroger is quietly tinkering with digital shelf technology it hopes could save it money and better reach customers," including touch screen shelf tags that would allow shoppers to "learn more about the products, such as nutritional information."

    According to the story, "Kroger officials say providing more on-the-spot product information for customers could also prove a powerful lure. Using technology to help shoppers organize their lists and getting them through the checkout have been tools the nation's largest supermarket chain has leveraged to grow market share."

    The technology is only being tested in one store in Northern Kentucky.
    KC's View:
    It always has seemed to me that this kind of technology is the natural evolution for where things are going, and one way in which consumers are going to access information in-store in the near future. Want to know the country of origin, or whether the product contains GMOs, or how to cook it, or what other products might go with it? Simply touch the tag…

    Of course, I suspect that even as these kind of technology innovations are made available, retailers also are going to have to make it possible for customers to access the same information through their smartphones. whether through QR codes or some other system. It is all going to be about transparency and ubiquity of information … not because every or even the majority of customers will use it, but because providing such information will create trust on the part of the shopper.

    Published on: November 7, 2014

    The Wall Street Journal reports that Whole Foods CIO Jason Buechel says that the company's new technology initiatives seem to be "showing some payoff," including "its implementation of Instacart and a focus on data analytics."

    According to the story, "Now in 15 cities, Whole Foods’ partnership with grocery delivery app Instacart has resulted in digital shopping carts 2.5 times the size of their brick-and-mortar counterparts."

    The story goes on to say that "other projects at Whole Foods include a new mobile app, a loyalty program and a new point-of-sale platform. The firm is in the process of bringing data from around the company into a single place so it can easily deliver it across technology platforms. Whole Foods sees a chance to differentiate itself in its ability to integrate accurate and detailed product information across those platforms."

    As Whole Foods looks to expand its technology capabilities, it has said that it it plans a 25 percent increase in stores by 2017, growing the current fleet of 401 to more than 500.
    KC's View:
    I remain a little skeptical about the whole Instacart thing, just because it strikes me as risky to outsource the whole delivery experience. As for loyalty marketing … in some ways, it is amazing to me that Whole Foods has waiting until now - when it is facing more competitive pressure than ever before - to start accumulating and acting on actionable information.

    Published on: November 7, 2014

    Home Depot yesterday released a final count for the number of customer email addresses that was stolen by hackers - 53 million. That's in addition to the credit and debit card information of 56 million customers that was accessed by hackers.

    According to the Associated Press, "The file containing the email addresses did not contain passwords or other sensitive personal information, according to Home Depot. However, it said that customers should be on guard against phishing scams. Phishing attacks are sent through texts or emails and try to trap you into disclosing personal information … Home Depot also explained how the hackers got into its system. It said that the hackers initially accessed its network in April with a third-party vendor's username and password. Home Depot said hackers stole information through malware installed on self-checkout systems in the U.S. and Canada. That's similar to what happened at Target where thieves hacked into the password of a third-party supplier."
    KC's View:
    Yikes. And yet, I don't have any real sense that people have stopped shopping at Home Depot because of the breach. Maybe they are being more careful about using credit and debit cards there, but in many communities, they don't have a lot of options.

    Published on: November 7, 2014

    TechCrunch reports that Amazon has begun testing same-day delivery in select neighborhoods of both Toronto and Vancouver, Canada.

    Amazon is defining "same day" as applying to people who order before noon, with orders showing up by 9 pm.

    The story says that "same-day delivery doesn’t come cheap: For Prime members, it’s a $6.99 additional fee on top of their order value. For everyone else, it’s still available, but you have to fork over an additional $5 for a total delivery fee of $11.99."

    The TechCrunch story says that same-day delivery is available seven days a week in most cases, an unusual offering in Canada, where Sunday deliveries are unheard of and even Saturday deliveries are unusual.
    KC's View:

    Published on: November 7, 2014

    CNBC reports that Costco is currently "soliciting bids for an issuer and payments network for U.S. cards," a process that could result in American Express being dropped as the sole credit card accepted in its stores.

    On the other hand, American Express could win the bidding process.

    Costco dropped its co-branding efforts with American Express in Canada earlier this year.

    The CNBC story notes that Costco's former CEO, Jim Sinegal, said earlier this year that one of the advantages of only taking one card made it easier to maintain the kind of security that prevents data breaches of the sort that recently have affected Target, Home Depot and other retailers.
    KC's View:

    Published on: November 7, 2014

    The New York Times reports that the US Department of Agriculture (USDA) is reversing policy and "will allow Chinese poultry processing companies to ship fully cooked, frozen and refrigerated chicken to the United States.

    The move has been criticized by some food safety activists, who say that China's questionable record in this area makes it dangerous to accept their products.

    "China’s food safety system is a wreck,” Food & Water Watch said in a statement, adding, “There have been scores of food safety scandals in China and the most recent ones have involved expired poultry products sold to U.S. fast food restaurants based in China … Now, we have FSIS moving forward to implement this ill-conceived decision, and it has not even audited the Chinese food safety system in over 20 months.”

    The Times writes that "China has wanted its chicken to be accepted as a quid pro quo for lifting a ban it imposed on United States beef products in 2003 after a cow in Washington state was found to have mad cow disease."
    KC's View:
    If the chicken said "imported from China," would you buy it? Because I'm pretty sure I wouldn't …

    Published on: November 7, 2014

    • The Consumerist reports that the US Postal Service (USPS), emboldened by the success of its Sunday delivery program for Amazon, which has "delighted" shoppers and generated much-needed revenue, plans to expand the service and make it available to other retailers.

    ReCode reports that "for the first time since launching its Prime membership program in 2005, Amazon is extending some of the club’s perks to its members as they shop on other big shopping sites around the Web … Amazon announced its first such deal Tuesday with the mid-size British fashion retailer AllSaints, which has started offering Amazon Prime members free, next-day shipping on purchases they make on … The move underscores the growing importance inside Amazon of the Prime program, the $99 annual membership that gives members two-day shipping on a wide range of products and access to a large library of TV shows, movies and songs that can be streamed online. And it’s clear why: Prime members spend double the amount that non-Prime members do on Amazon in a year, according to research studies conducted by various industry analysts.

    "As a result, Amazon is looking to add more perks to the program to attract more members…"
    KC's View:

    Published on: November 7, 2014

    • Fairway Group Holdings said yesterday that it continues to experience sales problems during its fiscal second quarter, with net sales up 5.9 percent or $10.8 million for the period, attributable to three new stores that opened during the previous year. Same store sales, however, were down 3.9 percent for Q2 compared to the previous year.
    KC's View:

    Published on: November 7, 2014

    Reuters reports that PepsiCo's president, Zein Abdalla, plans to retire from the company at the end of the year. The story notes that this is the second major departure from Pepsi's top ranks this year, the first being Brian Cornell's decision to leave his job as head of the company's Americas Foods unit to become CEO at Target.

    No reason was given for Abdalla's retirement.

    • Target said yesterday that it has hired Jacqueline Hourigan Rice, chief compliance officer at General Motors, to be its new chief risk and compliance officer.
    KC's View:

    Published on: November 7, 2014

    Got the following email from MNB reader Bob Warzecha:

    I have to disagree with you that CVS is not feeling any effects from their decision to end tobacco sales.  Looking at the earnings report, CVS reported a 4.5% decline in front-end sales and 480 basis points (4.8%) was due to the loss of tobacco related sales.  In addition, 4th quarter EPS projections from the company are now below consensus.  Listening to the earnings conference call, management appears to be unable to tell us how they will get these front-end sales back.

    Today Walgreen’s earnings saw an increase in front-end sales of 2.7%, even taking in effect some loss sales due to a calendar shift.  Is CVS throwing their front-end under the bus with their tobacco decision?

    My sense of the situation is that CVS thinks it can more than make up the sales and margin through sales of health-related products that won't addict or kill you. I suppose that remains to be seen … but I still think that it was a smart and differentiating branding decision by CVS.

    MNB reader Jeff Folloder wrote:

    I read your piece regarding retailers and their decisions about tobacco sales.  And while I wholly support any retailers' decision to sell or not sell a given item for any valid reason, I refuse to believe that the CVS decision was anything but a PR stunt.  I recently stopped by the local CVS to pick up some bandage tape.  I walked to the register and witness the reset in progress of the premium front end space that formerly held the tobacco and decided to treat myself to a candy bar (I'm weak).  The cashier cheerfully informed me that I could get a second candy bar for only 50 cents.  All I could say was "So, you don't want me to hurt my health by way of tobacco but you have no problem helping me increase my risk for diabetes and obesity?"  The cashier sheepishly told me that I did not have to buy a second candy bar and I let her know that I was quite appreciative of being given that choice.  For some things.

    CVS is not interested in my health.  They are interested in their brand, their brand image and sales.  Increased pharmacy sales and services?  That only happens with more people being... in need of pharmacy products and services.  Some would say that the sicker the customers are, the more CVS will make.  The decision to eliminate tobacco was a PR move.  An effective one since we are still talking about it.

    Regarding plans by the plastics industry to force a referendum that would repeal California's ban on free single-use plastic bags, MNB user Scott Roseman wrote:

    Is is not obvious that the plastics industry is simply running a campaign of deception to reverse the good works of people in CA?

    First, the fact that less than 5% of the money already contributed to this campaign is from outside our state says that it is about a special interest trying to brainwash our populace that continuing to encourage the use of plastic bags in grocery stores is a good idea, when, in fact, it is not.

    Second, the ridiculous assertion that the ban was a “big grocers cash grab” is simply preposterous, and shows the level of deception that these plastic manufacturers are going to use to try to fool us to support their initiative. In fact, big grocers have repeatedly opposed bag bans, and it has only been small, independent, mostly natural food grocers like myself, who are sincerely concerned about the environmental effects of not only plastic bags, but new paper bags, and who have encouraged our customers for years to re-use bags, who supported this ban, along with the general populace who see the environmental effects of both plastic and paper bags.

    The cash grab is solely owned by the plastic industry.

    On the subject of Delhaize's decision to sell its Bottom Dollar chain to Aldi, one MNB user wrote:

    Funny, I recently left the grocery industry for an alternative energy startup, yet I still catch your blog.

    My view, having worked in both Salisbury and Scarborough up until recently is that Bottom Dollar was always going to have a tough time.  It was saddled with the Food Lion distribution model and the category and merch teams at corporate weren't able to pull the trigger and make it a true Aldi competitor.  Not to mention the category and merch teams were all Delhaize people, so all you got was sort of Food Lion.  Bloom wasn't any different, it was a sort of Hannaford for the south.  I ran so many analysis on BDF, trying to wring out costs, but it was impossible to actually make an impact because leadership refused to move closer to Aldi in terms of operations, selection.  It's ironic that is who bought them in the end.... I think culturally, legacy grocery companies have a very difficult time giving leadership to "outsiders", most people who didn't start bagging groceries and work their way up don't last long because they seek other opportunities.

    I already know some friends down south who will be out of work come December.  I'm hoping they land in other roles, Delhaize has been good about that in the past  The sad part is the people who set the strategy, which the foot soldiers followed, will land somewhere nice I'm sure.  Plenty of excuses on why it didn't work.

    MNB reader Glenn Cantor wrote:

    All of the Bottom Dollar stores in PA were opened within recent years.  Delhaize penetrated the Philadelphia market quickly.

    What is astounding is that Delhaize is selling them for a mere $15 Million.  Although $15 Million is more money than I will see in my lifetime, $15 Million is a bargain for 66 thriving retail stores.  Additionally, they’ve noted that the sale will result in an “asset impairment” (whatever that means) of $180 Million.  Clearly the Bottom Dollar concept was an unsuccessful and expensive test to serve lower income consumers.

    Additionally, without fanfare Walmart expanded their stores in Philadelphia to Supercenters which include large grocery sections.  When you visit these stores, it is apparent that Walmart has figured out how to meet the grocery shopping needs of lower income consumers.  They beat Bottom Dollar.

    This demonstrates that the existing supermarket brands operating in Philadelphia are able to nicely meet the grocery needs for lower income shoppers.  For example, the Brown Shop Rite group has a beautiful, full-service Shop Rite store on the outskirts of Camden.  There is no compromise to the shopping experience.  However, I am sure that the food prices are comparable to anything Bottom Dollar offered.  In my opinion, lower income shoppers don’t want to compromise on the shopping experience and quality of perishables.  They just want lower prices.

    Responding to our story about generational disjoints in the workplace between millennials and gen-Xers, one MNB reader wrote:

    I’m a (young) boomer, so maybe my memory isn’t what it used to be … but didn’t this report come out a generation ago?  Only the name  “gen X” was replaced by “boomer,” and “millennial” was replaced by “gen x”?

    The various generations have had different life experiences that shape them – the depression shaped my grandmother’s view of money, my mother tried to be a working woman in a stay-at-home-mom world, my nephew grew up with 9/11 and terrorism – but overall, the generations are not all that different.
    What hasn’t changed as much as it should have in many organizations is the management style.  Millennials want to be part of a team, work on exciting projects, and receive equal pay for equal work no matter the gender.  Hmmm, I must be a gray-haired millennial!  I think if management teams would ask, they would find that ALL their employees, no matter their age, want to be recognized for their talents, challenged to stretch those talents, and excited to work on the next assignment.
    The question isn’t “does the environment need to change for the millennials, or do they?”  The question is, “how can we change the environment to empower, inspire, and develop everyone?”

    And, regarding our story about the Kantar Retail report saying that Amazon Prime Pantry is not a threat to membership club stores, MNB reader Patrick Miller wrote:

    The idea that Pantry has anything to do with club stores was created by the media and that people are still comparing Pantry to club shows a fundamental misunderstanding of Prime Pantry.  Club items do great on regular the higher average selling price typically allows more margin for Amazon, keeping the items CP+. If one looks the actual selection in Pantry, these are everyday FDM items, not club items.

    Here the Average Selling Price is $22.13--much closer to what the average ring would be in a Club Store and 7.5x Pantry ASP.  Prime Pantry is much closer to traditional FDM and Amazon Grocery is much closer to club.

    Additionally, to the point that Amazon has done nothing to promote the program, ignores the output Amazon is seeking, which is steady, (not too quickly or there would be recurring OOS issues like at launch) customer adoption.  Seeing as that Prime Pantry is already in the top quarter of all significant search terms on Amazon, I think they are achieving the desired output.

    The bigger questions for the vendor community, is what do your shoppers want, where are they shopping/researching, and how do you adapt to meet their needs?

    Fair enough.

    I got a lot of email yesterday regarding my FaceTime video about the aging process, which was prompted by my turning 60 this week. Here are some of them…

    MNB reader Art Ruder wrote:

    You mention doing MNB for at least another seven, and maybe another 12. Or more.  (I hope it is the third option.)

    Just so you know, there was an article in the Minneapolis Star Tribune (as well as local TV news reports) that Sid Hartman was celebrating 70 years at the paper as a sportswriter and columnist .  He is now in his mid-90s...still writes a column several times a week as well as TV and radio shows.

    Good for him.

    MNB reader Rich Heiland wrote:

    Happy 60th. I just turned 68 and have not plans to retire because I have been blessed to never having had a career - first journalism and now consulting, training, speaking - that I really consider work. I plan on working as long as it's fun and as long as folks want me to spend time with them. When that ends, I will find something else. In the end, we are all sharks - without motion, we die.

    Extra credit for working in the Woody Allen line from Annie Hall

    MNB reader Bob Vereen wrote:

    Congrats on reaching 60, but that’s only the start.   I’m now 90 and, like you, still writing—about the hardware/home center industry.

    We’re lucky in that our professions keep forcing us to stay abreast of new trends, new ideas, new challenges.

    From another reader:

    As I inch towards 60 I try to look for ways to enjoy everyday at work, at play, at home.   I try to play more and reflect on the beauty of nature, how lucky I am, with family, friends, job ,health and happiness.

    MNB reader Jamie Liebich wrote:

    I just want to thank you for the stories and perspectives you share with your followers on a daily basis.  My boss turned me onto your daily e-mail shortly after I joined the company, and I have to tell you that I truly look forward to my daily e-mail from you.  You are so right about keeping moving, I’m watching it right now with my grandmother.  As soon as she stopped being active she aged 20 years in a matter of less than 5.  It’s sad, so keep moving!

    And MNB reader Larree Renda wrote:

    Of all the many years I have been reading Morning News Beat and enjoying your take on our industry, business in general and LIFE, this morning’s FaceTime with the Content Guy was my absolute favorite. Maybe because it comes at a time in my life where I am about to embark on some pretty major change (leaving Safeway after 40 years of my life) or maybe because what you wrote rang such a familiar bell with me. I lost my father to cancer when he was 36, my mother at 63, my husband to cancer at 56 and it’s very hard not to let those things weigh heavy on your mind when milestones like 60th birthdays come around. Not that I should know of course as I’m FAR from 60 . . . well, okay, maybe not that far.

    I could not agree with your message more. Numbers don’t matter. And “getting your money’s worth” out of life IS what matters. There is a church I pass every day on my commute to the office that has a sign board in front. Yesterday’s message I think was fitting for this moment. It read; “Life is short, Eternity is not”.  So . . . .  you gave great advice again; Staying in gear, in motion and keeping momentum.  I know it’s a cliché to say “live each day as if it were your last” but can you imagine the possibilities if we actually did? Maybe that goal is always illusive, but I do know this, I do intend to make this day better than the one before in some way and in this case, I think I should get some credit for at least trying.
    Happy belated birthday, my friend and thanks for giving ME a gift in the words you have written.

    Thanks to everyone who wrote.

    I am reminded of the Steve Jobs line:

    “If you live each day as it was your last, someday you'll most certainly be right."
    KC's View:

    Published on: November 7, 2014

    In Thursday Night Football, the Cleveland Browns defeated the Cincinnati Bengals 24-3.
    KC's View:

    Published on: November 7, 2014

    One of the great things about celebrating my 60th birthday was the fact that we enjoyed an awful lot of great wine over the weekend. Hanging out with friends, we had the absolutely splendid 2010 Martin Codax Albarino and the 2013 Willamette Valley Vineyards Whole Cluster Pinot Noir - both perfect (if differently so) with the shrimp and lobster risotto I made.

    But we also broke open some bottles that we'd gotten over the years, bottles that were actually being saved for a special occasion.

    There was a 2000 Opus One…which was delicious if surprisingly delicate…not as big and bold as the wines I usually like, but absolutely delicious.

    And then, there was the 2006 Archimedes, a beautifully dense cabernet from Francis Ford Coppola's vineyard…

    After that, there was a 2005 Rubicon, a spectacularly flavorful cabernet from Coppola's Inglenook Winery…

    And finally, the equally wonderful 2006 Apocalypse Now "Full Disclosure," a Sonoma cabernet from (natch) Francis Ford Coppola. (Obviously, I was on a Coppola tear at a certain point…)

    All memorable … all luscious and satisfying and a wonderful way to celebrate a birthday.

    One more thing … and definitely something to toast …

    Star Wars: The Force Awakens.

    The title finally released. Five words to make most moviegoers' hearts soar. Certainly mine.

    Coming on December 18, 2015.


    That's it for this week … Have a great weekend.

    See you Monday.

    KC's View: