retail news in context, analysis with attitude

Published on: July 27, 2015

by Kevin Coupe

The New York Times yesterday reported that "calories consumed daily by the typical American adult, which peaked around 2003, are in the midst of their first sustained decline since federal statistics began to track the subject, more than 40 years ago. The number of calories that the average American child takes in daily has fallen even more — by at least 9 percent."

The drop is said to be across pretty much all demographic groups, though the percentages do vary a bit, but the result is clear - adult obesity rates in the US actually have begun to level off, and childhood obesity rates have begun to go down.

The Times goes on to write that "in the most striking shift, the amount of full-calorie soda drunk by the average American has dropped 25 percent since the late 1990s."

Here are three passages from the story that I found particularly interesting:

• "The encouraging data does not mean an end to the obesity epidemic: More than a third of American adults are still considered obese, putting them at increased risk of diabetes, heart disease and cancer. Americans are still eating far too few fruits and vegetables and far too much junk food, even if they are eating somewhat less of it, experts say."

• "By 2003, 60 percent of Americans said they wanted to lose weight, according to Gallup, up from 52 percent in 1990 and 35 percent in the 1950s.

"The Obama administration has increased pressure. The Affordable Care Act, passed in 2010, required chain restaurants to publish the calorie content of their meals. The federal government has also changed requirements, making school lunches healthier, although the effort has created some backlash.

"Several cities have gone further. Philadelphia subsidizes produce purchases for the poor. New York limits the kind of food available in day care centers. Berkeley, Calif., last year became the first city in the United States to tax sugar-sweetened beverages. The evidence for the effectiveness of these interventions is mixed, but their popularity reflects public health officials’ emphasis on diet and obesity.

"Still, the timeline of the calorie declines suggests that people started eating a little less before policy makers got involved. That follows the pattern for tobacco use, which peaked right around the time of the 1964 surgeon general’s report. The policy changes that many credit with the country’s sharp reductions in smoking — advertising bans, warning labels, taxes and restrictions on smoking in public — came later, accelerating change after attitudes had already begun to shift."

• "The recent calorie reductions appear to be good news, but they, alone, will not be enough to reverse the obesity epidemic. A paper by Kevin Hall, a researcher at the National Institutes of Health, estimated that for Americans to return to the body weights of 1978 by 2020, an average adult would need to reduce calorie consumption by 220 calories a day. The recent reductions represent just a fraction of that change."

Beyond the fact that this trend, if it continues, could eventually have an impact on the food sold in this country, I'd like to think it also speaks to two different things.

One is that it is encouraging that even before any public policy steps were taken in this regard, more people were recognizing the need to improve their diets and be smarter about what they eat, even if that only means moderation.

But I think the other is that there is a role for public policy in the obesity debate, especially when it comes to kids. There have been plenty of people - many of them in the military and national security apparatus - who have said that childhood obesity put the nation at long-term risk. I tend to believe them.

This shift in habits is an Eye-Opener. Hopefully, the shift continues.

Published on: July 27, 2015

The Silicon Valley Business Journal reports that Amazon "is developing a new drive-up store concept in Silicon Valley that will allow consumers to order grocery items online, then schedule a pickup at a dedicated facility, according to industry sources familiar with Amazon’s plans. If confirmed, the project could signal a new distribution strategy for Amazon, the world’s biggest online retailer, while adding an additional threat to a grocery industry already in the throes of change."

According to the story, "For Amazon, a standalone drive-up store would signal a new phase in the company’s evolving grocery ambitions. AmazonFresh, Amazon’s same- and next-day grocery delivery service, has been expanding into major metropolitan areas in recent years. A physical pickup spot could help solve the 'last mile' problem of getting perishable goods to consumers by having consumers come to Amazon ... The move comes as retailers and startups add new options for ordering and obtaining food and other goods with one overarching objective: Customer convenience. It’s a trend spurred on by our increasingly hectic lifestyles, so it’s probably no surprise that workaholic Silicon Valley would be a hotbed of such experimentation."

The story notes that Amazon is not commenting on the report, and that plans for the "new 11,600-square-foot building and grocery pickup area" in Sunnydale, California, do not identify Amazon as the tenant. However, sources tell the Silicon Valley Business Journal that Amazon is the tenant, and could roll out the concept to multiple locations in Silicon Valley and, if that works, to additional markets around the country.

The report says that "customers will pre-order their 'grocery and other retail items,' then choose a specific 15-minute to two-hour pickup window, a planning application states. The building would be mostly warehouse with a designated eight-stall car pickup area ... Consumers can also 'arrive on foot or bicycle and pick up their groceries and other retail items in the store,' it states. The project was approved earlier this month."

In its analysis, PC Magazine writes that "before you start writing up your shopping list and grabbing your keys, know that Amazon's model is likely to differ a little bit from the drive-up experience you're probably used to. For starters, you won't be ordering your groceries at the store itself, or while idling your car in the world's biggest queue. You'll figure out all the things you need to buy online, and you'll pick up all the ones that are available at the drive-up store ... Though Amazon already serves Silicon Valley with its AmazonFresh delivery service, a physical pick-up presence could help Amazon cut costs while still expanding its presence for consumables. It could also help out potential purchasers who don't have the time to deal with delivery windows and would instead prefer to just swing by a store and grab groceries on the way home from work."

Published on: July 27, 2015

Internet Retailer reports that as Walmart opens a new 1.2 million square foot e-commerce fulfillment center in Pennsylvania, one of four it plans to open by the end of the year, the stated goal is to be able "to deliver online orders to 95% of the U.S. population in two days or less.

The story goes on:

"The two-day goal is likely not chosen at random: The Amazon Prime loyalty program promises members free two-day shipping on all purchases. Market research firm Consumer Intelligence Research Partners LLC estimates 41 million U.S. consumers belong to Prime, which charges a $99 annual fee. Walmart.com is testing its own program, called ShippingPass that offers consumers free three-day shipping for $50 per year.

"While Wal-Mart’s e-commerce distribution centers are key to getting online shoppers their orders quickly, the spokesman for the retailer stressed they are but one part of Amazon’s fulfillment strategy."

In related news, Arkansas online reports that Walmart plans to open a second grocery pickup location in Northwest Arkansas, which would consist of "two kiosks with overhangs and a loading area connected to the side of the store. The loading area consists of parking spots with a metal canopy."

The company also is testing such facilities in markets that include Denver, Phoenix, San Jose, Calif., and Huntsville, Ala.

Published on: July 27, 2015

Profitero, which describes itself as a "global provider of e-commerce intelligence for retailers and brands," is out with a new pricing study comparing Jet with Amazon and Walmart, concluding that on Jets' launch day last week, "Jet was priced an average of 9% lower than Amazon and 6% lower than Walmart" on products where an "exact match" could be made; these are defined as "products that are identical (same UPC, brand, and pack configuration)." In addition, the report did not always factor in "extra discounts at Jet from combined orders, waived returns and preferred payment methods."       

The report says "that Jet’s pricing was slightly closer to its competitors in higher-priced categories, although Jet was still, on average, cheaper. For example, Jet was priced 6% lower than Amazon on electronics products, compared to 9% lower across the 7 categories analyzed."

Indeed, the study also shows that on grocery, Amazon was seven percent higher priced than Jet, but that Walmart was two percent lower.

The report goes on to say that Profitero "analyzed Jet's pricing on Amazon's best-selling products - those Amazon products with a best seller ranking of 20 or below in their respective categories" and found that "Jet was, on average, priced 8% lower than Amazon even on Amazon’s best-selling products" and that "in some categories, Jet’s pricing on Amazon’s top 20 best sellers was closer to Amazon’s."

However, the report makes clear that "Jet is not cheapest across the board. While Jet.com was priced on average 9% lower than Amazon and 6% lower than Walmart on exactly-matched products in the 7 categories we analyzed, this certainly isn't the case across all products. There was a percentage of products in every category, particularly electronics and office supplies, where Jet was more expensive."

Published on: July 27, 2015

The Oklahoman reports that 7-Eleven in Oklahoma City - which is independent of the national chain - is "rolling out new, larger stores with expanded drink and food offerings." there. One is open, and three more are under construction, with the company planning to have as many as 15 of them operating there.

"The new store has softer lighting, patio seating and an expanded selection of coffee, Icy Drinks and frozen yogurt," the story says. "The store is also the first of the company's stores with a kitchen. The new format store has more breakfast items, as well as menu items like pizza and chicken bites."

We don't have everything made-to order yet, but that's the direction the market is going," Jim Brown, president of 7-Eleven Stores, tells the paper.

Published on: July 27, 2015

There is a sweet piece in Advertising Age entitled "An Ode to A&P" in which the writer, Judann Pollack, waxes rhapsodic about the yet-again bankrupt supermarket chain that seems on the verge of selling off or closing all its stores and becoming a kind of historical footnote.

Here's how she frames the piece:

"Not a lot of people get misty-eyed when a company goes into bankruptcy, but it happened to me when it became apparent that A&P will truly go away once and for all.

"To many people, the A&P brand today probably signifies high prices and middle-of-the-road quality, but it wasn't always that way. In my childhood it was the Great Atlantic & Pacific Tea Co. and it wasn't just another grocery store.

"Just hearing the name conjures up visions of that distinctive steeple-top building and the smell of Eight O'Clock coffee being ground at the checkout stands. There was no custom bakery -- bread and rolls came courtesy of Jane Parker. Our carts were filled with canned goods from Ann Page. On Saturdays, I'd eagerly pick up the latest installment of Nancy Drew at A&P. And when we left, if I was lucky, I'd get to paste the Plaid Stamps in our book.

"For me, A&P was more than just a place to pick up something for dinner; it put dinner on my family's table. My father began working there in 1942 and remained for nearly half a century and he ran the meat department, which was a pretty decent gig in the '70s..."

You can read the entire story here.

Published on: July 27, 2015

National Public Radio reports that the US Food and Drug Administration (FDA) "wants to make it easier for Americans to track how much added sugars we're getting in the foods and beverages we choose.

"So, in addition to a proposed requirement to list amounts of added sugars on the Nutrition Facts panels, the FDA is now proposing that companies declare a daily percent value, too.

"What this means is that, instead of just listing the 65 grams of added sugar in that Coke, soda companies would be required to list that it represents 130 percent of the recommended daily intake. In other words, that one bottle contains more added sugar than you should be eating in an entire day."

The story goes on to say that "the FDA proposal expands on changes recommended in 2014, when the FDA laid out a template for a new overhauled Nutrition Fact panel. The FDA will take public comment on the new proposal for 75 days," before issuing final rules.

Published on: July 27, 2015

In Canada, the Globe and Mail reports that Loblaw has announced "the closing of 52 stores across the country ... surprising more than a few observers by doing so while simultaneously posting respectable profits.

"Although it struck some as a kind of corporate oxymoron, the economic picture in this sector made the company’s decision to close a cluster of stores appropriate."

The story makes clear that while Loblaw may be growing its sales and profits, its margins are thinning, which put pressure on the company to shutter its least productive units.

The story explains:

"In order to get store design right, to sell food alongside cosmetics and health products, it’s crucial to eliminate unprofitable stores and generate operational cash.

"These measures are a small part of a much bigger picture. Sobeys and Metro, Canada’s other top food distribution players, are also supporting profitable stores by shutting down stragglers. Over all, it’s a much more nimble, pro-active sector than in the past – all because of market demand, which has become increasingly complex and challenging to predict. It requires exceptionally effective intelligence, and companies are trying harder to listen to what the market is telling them. With the right assessments, grocers can quickly cut bait and move on.

"In essence, a major paradigm shift has shaken the food industry. The sector long resisted using technology and innovation to the extent seen in other sectors. But Loblaw and others are now investing millions in logistics to become more effective cost managers, allowing them to increase margins. Food distributors are gradually catching up with new technology and new strategies for reaching consumers. And it’s about time ... "

Published on: July 27, 2015

Crain's New York Business reports that while there has been significant outrage from the business community about the decision in New York to phase in a minimum wage increase for fast food workers so that it reaches $15 per hour in just a few years, there is at least one argument to suggest that the dire warnings about lost jobs and crippled businesses may not play out.

And that argument, as it happens, come from Walmart.

Here's how Crain's frames the story:

"Earlier this year, under intense pressure from activists and maybe its own store managers, Wal-Mart raised its lowest pay to either $9 an hour or $1 more than the minimum in any U.S. locality. It promises another hike, to $10, next year.

"Did disaster ensue? No. Turnover declined, said Chief Executive Doug McMillan in June, and job applications went up. He said the increase to $10 would be followed by others.

"Wal-Mart got tired of losing its best workers to places like Costco, which has always paid more. The mega-chain also feared what would happen as competitors such as the Gap raised wages. Target quickly matched Wal-Mart's move.

"Now the question is whether that dynamic will come to New York."

Published on: July 27, 2015

Good piece in the New York Times about Netflix, where the company's evolution "has become an example of how companies can adapt, tapping their legacy businesses to fuel growth in new areas as the ground underneath them shifts." However, it is not an evolution without stresses.

"Netflix now counts more than 65 million streaming members in more than 50 countries and plans to expand across the world in the next 18 months," the Times writes. "But that breakneck growth comes at a cost: The company expects its streaming business to just break even globally through 2016 as it pours billions of dollars into content and an aggressive expansion.

"Helping fuel that expansion is the company’s dwindling, often ignored DVD-by-mail operation, known for envelopes that wind up under sofa cushions and viewed by many as an anachronism in an era of lightning-fast streaming."

The Times goes on: "Netflix has 5.3 million DVD subscribers, a significant falloff from its peak of about 20 million in 2010; still, the division continues to churn out hundreds of millions of dollars in profit each year. And behind the scenes, engineers are trying to improve customer service and streamline the labor-intensive process of returning, sorting and shipping millions of DVDs each week.
"Netflix has not put a life expectancy on its DVD division. Even as its subscriber count shrinks, the group has kept a core base of customers, particularly in rural zones with lackluster Internet service and among people who want access to the breadth of its selection, and executives expect it to stay around. To hold on to those customers — and the profits they bring — Netflix continues to deploy innovative technologies that help trim costs as well as improve customer service."

Fascinating story about vision, strategy and tactics, and you can read the entire piece here.

Published on: July 27, 2015

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

• Bloomberg reports that "after almost three years in development, the retail industry’s answer to Apple Pay is finally getting off the ground.

"A mobile payment application developed by Merchant Customer Exchange -- a company founded in August 2012 with funding from Wal-Mart Stores Inc., Target Corp. and Best Buy Co. -- has been tested by employees of the retailers and will get a limited trial run next month in stores, according to three people familiar with the situation. That means shoppers will soon be able to use the technology, called CurrentC, to pay for items with their phones.

"The challenge for CurrentC now is playing catch-up against established apps from Apple Inc., Google Inc. and others, as well as explaining to customers why they should bother using it. When Apple Pay rolled out last year, CurrentC was derided by critics as a lower-tech alternative that retailers supported because it would give them tighter control over shoppers’ transactions."


• The Times Herald-Record reports that "C&S Wholesale Grocers will pay $46,000 to settle (a New York) Attorney General investigation into its policy of firing workers at its Chester and Newburgh facilities for incurring 'preventable' injuries during their 90-day probationary period." In firing those workers, the AG said, C&S "violated workers’ compensation law protecting employees who seek benefits from retaliation or termination ... the fear of being fired dissuaded workers from reporting injuries and filing claims."


• CNN reports that "Walmart and Evenflo announced this week a new infant car seat with technology designed to remind drivers of their backseat passengers, and stop children from dying in hot cars.

"In most new cars, an alert sounds if a driver or passenger is not wearing a seat belt or if headlights are left on. Using a similar idea, a sensor on the infant seat harness triggers a series of tones if a child is still buckled in when the ignition is switched off. The feature is meant to remind drivers who might forget that a child is in the vehicle."

The story notes that "38 children die every year as a result of being trapped in hot cars. In about half the cases, children are forgotten in the back seat, according to the nonprofit KidsAndCars.org. Often, a parent has forgotten to drop a child off at daycare."

I have this last story in here because, to be honest, I am amazed how many stories I read in the course of a year about idiot parents who leave their kids in cars. They ought to make this kind of technology absolutely mandatory ... and I also tend to think they ought to sterilize any parent who leaves a child in a car so that he or she is prevented from procreating ever again. Though I suppose there would be some who would argue that this kind of punishment may be a little over the top...

Published on: July 27, 2015

I've gotten numerous requests from folks living in the Portland, Oregon, area for one of those casual MNB get-togethers that we occasionally do when I'm visiting a city. And so, we're planning one for this week...

Let's plan on meeting at 5 pm on Thursday, July 30 at Nel Centro, located at 1408 SW 6th Ave, in Portland. I'll plan on being there for a couple of hours - if the weather holds, on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.

Published on: July 27, 2015

One MNB user had some thoughts about Jet, the new e-commerce competitor to both Amazon and Walmart (and pretty much anyone else who sells pretty much anything else):

To me, the shame of jet.com is squandering $225MM of investor funding on a tired pricing play that reignites the race to the bottom. "Price is an issue in the absence of value."

eCommerce is desperate for innovative thinking. For example, why are we happy with every single eCommerce platform being largely based on a catalog design (which is eComm's heritage), when that just isn't how most shoppers shop in bricks and mortar?

Ultimately, you nailed it - this is a play to build rapid valuation with splashy headlines, PR, and big names, and then pray Walmart or another big player comes along and scoops them up before the funding runs out.

Well, it's nice that you think I nailed it. But I'm not sure that it rises to the level of tragedy.

Then again, I've always liked the Mel Brooks definition:

“Tragedy is when I cut my finger. Comedy is when you fall into an open sewer and die.”

So maybe it all depends on how and where you are placing your bets...




Much of the argument against GMO labeling depends on the willingness to accept genetic modification of food as science being done in humanity's best interests ... with the implication often being that anyone who is anti-GMOs or pro-GMO labeling is by definition anti-science.

Which prompted one MNB reader to write:

So… this is science but climate change is not?

Wait, silly me, it’s not about science, safety or well-being, it’s about corporations, from fossil fuel to food, buying politics.

I actually think this MNB reader makes a very good point. I wonder how many people who are accepting of the argument that food containing GMOs is the same as food without them would also make the argument that climate change is not supported by scientific evidence.

Just curious.

What's the line from Upton Sinclair?

"It's difficult to get a man to understand something if his salary depends upon his not understanding it."




On another subject raised last week, one MNB user wrote:

Count me in as one that dislikes the checkout process at my local retailer.  I find it amazing that the part of the shopping experience where I am trying to give them money is the part of the experience they make the most difficult.

You are part of a very, very big club.