retail news in context, analysis with attitude

Published on: October 2, 2015

by Kevin Coupe

My son, Brian, likes the phrase, "Don't urinate on my leg and tell me it's raining." (He uses a word other than "urinate.")

It isn't, to be honest, my favorite phrase ... but it is the first one that came to mind with a couple of stories this week.

One of them is from Bloomberg, which reports that "in time for the holiday season, UPS is rolling out to 100 cities a program that requires people in some neighborhoods to fetch packages at nearby locations -- such as a druggist or dry cleaner -- if they weren’t home to meet a driver. UPS says the service, introduced a year ago in New York and Chicago, will trim costs by ending second and third delivery attempts, and can save consumers a trip to a distant customer center."

UPS says that it "wants to have 8,000 Access Point locations nationwide by December, including its 4,400 existing UPS Stores. The pitch to shopkeepers: they get less than a dollar per package, but get foot traffic that might otherwise pass by."

UPS also says that "the Access Point program receives a favorable response on surveys," but I'll betcha that the place it has gotten the most favorable responses is at company headquarters.

This strikes me as being a total money play, as UPS tries to get out of the service business as much as they possibly can. It would be a lot more customer-friendly to, when UPS drivers leave a note saying that they've been there but could not deliver the item, people have the option of choosing a local retailer and having the package delivered there. It ought to be up to the consumer, not the delivery service ... but it seems to me that UPS wants to be in the efficiency business, not the effectiveness business.

UPS is fond of saying that it loves logistics ... but logistics have limited appeal, in my view, if they are not both efficient and effective.

Meanwhile, Motley Fool reports that soon after Amazon announced that it will allow its users to download original video content and not just stream it, Netflix says it will not offer the same option.

Netflix's rationale, according to the story, "Downloading content is too challenging for users."

Netflix's Neil Hunt says that while subscribers want "the ability to consume anywhere they happen to be," Netflix also believes that the "paradox of choice" means that adding options leads to more customer inaction, which can lead to lower customer counts, which would damage Netflix's growth plans.

Now, I get the whole "paradox of choice" thing ... but I think the Netflix explanation is what my old friend Vic Magnotta used to call "nebulous verbosity." I happen to be a big Netflix and Amazon user, and I am best served when I have options of when to watch things ... and if I could download Netflix programming onto my iPad to watch on airplanes, it'd be a huge deal. A game-changer, even.

The real Eye-Opener, here ... is don't tell me that something is in my best interests if it really is in yours.

'Cause I'm not buying it.

Published on: October 2, 2015

The Bergen Record reports in detail on payments made to top executives at the Great Atlantic & Pacific Tea Co. (A&P) before the company declared bankruptcy, including $4.6 million paid to the company's chairman.

According to the story, "Payments from an unusual $6 million trust to top executives at Montvale-based A&P came to light several weeks ago, but details about these and other payments were not revealed until late Wednesday in a filing in bankruptcy court in White Plains, N.Y. A&P is required by law to itemize payments made to corporate insiders during the year before a Chapter 11 filing.

"The details at the end of the 452-page revised financial statement showed that A&P’s chairman of the board, Greg Mays, received $4.6 million in consulting fees and other payments during the year before the July 19 bankruptcy filing, including a $2.5 million payment from the special trust. Chief Executive Paul Hertz received a $1.5 million trust payment and a $225,000 bonus, according to the document ... Chief Administrative Officer Christopher McGarry received $2.3 million during the year leading up to the bankruptcy filing, including his salary, a $1.5 million trust payment and a $225,000 bonus."

The company said that A&P set up the $6 million “executive management plan secular trust" as a kind of retention bonus fund for senior executives, but that it was "in addition to $3.9 million in retention bonuses for managers and midlevel executives; such retention payments are common in bankruptcies. The $6 million in trust payments were made in April, 2½ months before the bankruptcy filing, according to court documents."

The story goes on to say that "Mays, who became chairman of the A&P board in 2013, and who was chosen by billionaire A&P investor Ronald Burkle as his replacement in that job, was paid monthly consulting and board fees ranging from a low of $50,000 in December 2014 to as much as $500,000 in February 2015, according to the financial statement filed Wednesday. Most months, Mays received $100,000 as his board and consulting fee. Mays also received the largest of the trust payments given to five executives or directors, with his $2.5 million payment.

"The revised financial statement also shows that Senior Vice President and Chief Financial Officer Tim Carnahan and Chief Strategy Officer Nirup Krishnamurthy each received trust payments of $250,000. The chief merchandising officer, Eric Kanterman, received a $100,000 bonus in May, and a $400,000 retention payment July 17, two days before A&P filed for bankruptcy.

"The financial statement also shows that the top executives received monthly car allowances of $700 to $800 and reimbursements for expenses. Mays had the highest expense account reimbursements, with over $16,000 in reimbursements during the month before the bankruptcy filing. The financial statement did not describe the expenses covered."

Published on: October 2, 2015

In Minnesota, the Star Tribune is reporting that Supervalu CEO Sam Duncan plans to retire in February, "three years after he became the company’s CEO." Duncan, the story notes, "took over after an embattled Supervalu had sold its four main grocery chains for $3.3 billion, a move that halved the size of the company. Since then, Eden Prairie-based Supervalu has regained some momentum, as Duncan cut costs, lowered prices at Supervalu-owned supermarkets and decentralized its grocery store management."

“After 46 years in the grocery and retail business, this is a bittersweet moment, but I am also excited by the opportunity to have more time for my family and personal interests following retirement,” Duncan said in a prepared statement.

The company said that the board of directors is engaged in a selection process that is looking at both internal and external candidates.

The story also says that "Bruce Besanko, Supervalu’s chief financial officer, has been promoted to the newly created position of chief operating officer," and that "Susan Grafton, Supervalu’s chief accounting officer, has been promoted to chief financial officer."

Jerry Storch, Supervalu's chairman, said in a prepared statement that Duncan stabilized the company and "led a turnaround in the performance of the entire company, including improving the performance of all three of its core business segments."

Published on: October 2, 2015

The Seattle Times reports that "Uber is launching Uber Eats, a lunch delivery service, in several Seattle neighborhoods Oct. 7. Uber Eats will appear as another option within the Uber app, and uses UberX drivers. Customers choose from a menu of several options that change daily. Next week, meals from Monsoon, Skillet Diner and Volunteer Park Café will be on the menu."

The story goes on to say that "Uber said the food will be delivered in 10 minutes or less. One of the ways it may be speeding up delivery is by requiring customers to meet drivers curbside. Drivers never leave their cars ... They also never touch the food. The meals are prepared at the restaurants and packaged into containers in bags before the drivers pack them into their cars."

Seattle is the 10th city in which Uber Eats has operated, and, the story says, "is thought to be part of Uber’s push to become a much broader delivery system, branching far beyond giving people rides."

Published on: October 2, 2015

The Seattle Times reports that "Amazon plans to stop selling two of the most popular electronics products on Amazon.com at the end of the month" - Google's Chromecast, which is its 4th best selling electronic device, and Apple TV, which is its 14th best selling device.

The reason? They compete with Amazon's own Prime Video services.

Amazon says that it is making the move to “avoid customer confusion."

The Times story notes that "The move clearly underscores the growing importance of Prime, the $99-a-year service that offers shipping on millions of products at no additional cost. Prime subscribers buy more products, and buy them more often, than non-Prime shoppers. That’s why Amazon has added benefits to Prime over the years, such as its Prime Instant Video streaming service.

"Removing Apple TV and Chromecast from Amazon.com could drive more customers to Amazon’s video offerings."

Published on: October 2, 2015

• The Milwaukee Business Journal reports that just as CEO Bob Mariano said earlier this week that Roundy's-owned Mariano's Fresh Markets is considering various possibilities for a delivery service in Chicago, the company also says that similar talks "are also underway in the Wisconsin market, where Roundy's operates under the Pick 'n Save, Metro Market and Copps banner."

Spokesman James Hyland tells the Journal, "In terms of the Milwaukee-area market, yes, we are currently in the process of investigating grocery delivery for our customers here. We are exploring a number of options and our goal is to deliver an efficient, high-quality grocery delivery option to our customers."


• The Wall Street Journal reports that Amazon "is expanding its same-day delivery service in the U.K. to include items like butter and cheese, a move that comes as the online retailer is widely expected to launch a full grocery service in the country." The e-commerce giant already has a nonperishables same-day-delivery program in London and Birmingham, but now is "expanding that offering to include a small range of chilled and frozen items in those cities."

Published on: October 2, 2015

• The Associated Press reports that "two former managers of a Georgia peanut plant linked to a deadly salmonella outbreak are heading to prison, though for far less time than the ex-boss they helped convict. A U.S. District Court judge on Thursday sentenced Daniel Kilgore to six years in prison and Samuel Lightsey to three years."

Both men had served at different times as plant managers for Peanut Corp. of America, which was identified as a source of a deadly salmonella outbreak in 2009. Kilgore and Lightsey pleaded guilty and testified against their ex-boss, Peanut Corporation owner Stewart Parnell, who got a 28-year prison sentence.

Parnell is appealing.

Published on: October 2, 2015

Had a story the other day about Amazon using Uber-like drivers to create its new Flex delivery service, and I expressed some reservations about it.

MNB user John J. Scherer wrote:

It sounds like they should have called it “Uber-zon."

Boom!

Another MNB user wrote:

I’m with you.  I’m uncomfortable about who might be delivering packages to my door.  If Amazon doesn’t communicate how they will screen delivery people, I’m not inclined to jump on board with this approach.  I’d rather use my regular, 2-day Prime and know that my packages are being delivered by my friendly, UPS driver. 

Maybe they could design the app so it will have a built-in I.D. and background checker before it activates.



Publix said this week that it was considering yet another e-commerce venture, and I said that I think they never should have stepped away from previous efforts. Which prompted MNB reader Gregg Raffensperger to write:

I agree with your questioning of Publix reasoning.  E- commerce is the future.  It surprises me that a chain as successful as Publix, is not on the forefront of this.  Publix is a great retailer and I wish more retailers were like them, however, if they don’t get on stick and put a concerted effort towards the e-shopper, there future will be stagnant.  This year no.  But in 5 years yes.

Catch up should only be a condiment, never a business direction.

Published on: October 2, 2015

In Thursday Night Football, the Baltimore Ravens scored an overtime 23-20 win over the Pittsburgh Steelers.

Published on: October 2, 2015

To be honest, it's been a crazy week. Haven't seen any movies and haven't read any books since last week ... I did share a bottle of the 2011 Willamette Valley Vineyards Tualatin Estate Pinot Noir...and it was excellent, so I can recommend that to you without reservation.

Hopefully I can do better next week.



I've made sure to watch the first week of "The Daily Show with Trevor Noah," wanting to see how Jon Stewart's successor would do, and I'm hopeful, even though the first four shows did illustrate some shortcomings.

Most of the problems, it seems to me, reflect realities about which Trevor Noah - a South African comedian of great charm and quick wit - can do little.

Because he's new to the United States, Noah is simply more naive when interviewing political figures - Stewart's personal and professional history gave him more knowledge and context, which would inform his questions and often fuel his outrage. Last night, when commenting on the Oregon school shootings, Noah wisely moved past the subject quickly, knowing he does not yet have the gravitas to deal with it effectively.

On the other hand, Noah was excellent last night in a piece that compared some of Donald Trump's words and actions may be uncomfortably similar to those of some notable African dictators ... and Noah knows more than most of us about African dictators. So he had exactly the kind of context needed for that piece.

It also seems to me that in some ways, the structure and tone of "The Daily Show" may be a little too similar to that of the show when Jon Stewart was the host ... the writing seems very similar, which makes it seem like Noah is doing an imitation rather than his own thing. Perhaps that was inevitable, since "The Daily Show" is a major franchise for Comedy Central, and they don;t want to mess with it more than they have to. I suspect that it will evolve as Noah gets more comfortable and seasoned in the role, and that will take some time.

Remember ... it took time for Stewart to become an icon, too. There was an arc to his development, just as there will be to Noah's. The approach taken probably as much reflects business concerns as artistic choices, and illustrates the uneasy tension that often exists in many businesses.

"The Daily Show with Trevor Noah" isn't yet the must-see that it became under Stewart's stewardship, but I'm confident that it'll get there ... he just hasn't revitalized it yet in the way that Stephen Colbert seems to have done with David Letterman's old show, turning it instantly into a must-see with an eclectic group of guests and a more cheeky sensibility.




That's it for this week. Have a great weekend, and I'll see you Monday.

Slàinte!