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    Published on: November 18, 2015

    "The Innovation Conversation" is sponsored by ProLogic: Leading the Industry in Loyalty Marketing Services for Independent Grocers.

    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    And now, the conversation continues...

    KC: This week, I just want to bounce a few recent stories off of you … things that I think may have meaning beyond the immediate implications.

    First, there were a bunch of retailers agreeing to sell the Amazon Echo voice recognition device … which I described as a kind of Trojan Horse strategy by Amazon, since one of the things the Echo does is allow people to order products easily and seamlessly from Amazon … including, one can assume, products sold by those retailers.  Is this just traditional retailers willing to do anything for some short-term sales?  Or do you think they really don't understand what they're doing?

    Tom Furphy:
    I could not believe my eyes last week when I saw the press release about this. Just when you think retailers can’t be any more naïve regarding the impact of Amazon on their business, they pull something like this. I cannot fathom why any retailer in their right mind would sell the Echo.

    Echo is a brilliant strategy for Amazon. It is an Internet of Things (IoT) connected “hub” device. The Echo answers to the name “Amazon” or “Alexa”. Using voice commands, you can operate lighting, turn up or down your thermostat and operate any IoT connected device. There will be a very large number of these IoT devices launching over the next few years and many more apps and devices will run through the Echo. It’s right out in front with competitive and forthcoming options from the likes of Google/Nest and Apple.

    The Echo allows you to ask it just about anything and it will search the web and come back with a pretty good answer. It is a cooking timer that you don’t have to touch. You can vocally check weather, sports scores and get the news. You can even listen to your favorite music and turn the volume up and down with your voice. It is designed to become the trusted hub of the home, used by all family members.

    Most importantly, it allows you to order from Amazon. And it does so very well. Since my wife and I are geeks for practical innovation in retail, we’ve been experimenting with it at home. She will be cooking, and as she dumps the last of the pasta into the boiling water she says “Alexa, please order Barilla pasta.” And Alexa responds “Barilla Pasta, Mezze Penne, 16oz., Pack of 4, $15.00. Shall I place the order?” My wife will say “Yes” and Alexa will confirm it was placed. You can order on demand and also keep a shopping list on it. The Echo records and keep a record of EVERYTHING we ask it, further building the data set that can be used to personalize our experience and market to us. That, plus our browse and purchase history on Amazon make it very easy for Amazon to be very relevant to us.

    So, why would a retailer be so short sighted to want the $179.99 sale in return for any other future business from these shoppers? Sure, Home Depot sells lightbulbs and other connected devices. But, as a shopper, why would I go back to that store when Alexa knows me so well and can easily order from Amazon and have orders get to my home today or tomorrow?

    These retailers are basically saying “Here you go Amazon. Here are my loyal customers. I’m giving you access into their homes where they will give you all of their personal information (if for some strange reason you don’t already have it), they will tell you what music they like to listen to and which topics interest them. They will ask you to suggest recipes and they will ask you to send them products. You will record all of this and get to know them much better than I do.” Really, that is what is happening here.

    Retailers will sell these devices to their loyal customers. They will try it, sign up for Prime, increasingly use it, get great recommendations and order even more from Amazon. Eventually these customers will have no reason to go back to the retailer where they purchased the Echo.

    One more step for Amazon toward total retail domination.

    KC: There also was the CEO of delivery service Postmates, who says he wants to be the anti-Amazon, and thinks he can succeed with services that Amazon also offers because many bricks-and-mortar retailers won't want to do business with a company that they see as their most dire competition.   Do you think he has a point?  (Of course, the Echo story we've already talked about suggests that he's wrong - that retailers see short-term sales as more important than long-term brand equity.)  And is it enough to be the anti-Amazon?

    It is important for anyone that deals commercially with Amazon – as a partner, a supplier or competitor – to have a strategy to either compete with Amazon, or to hedge against reliance on them. Sooner or later, everyone will realize they can benefit from an “anti-Amazon” strategy. So, to that end, I think it is a great for Postmates to position themselves as the anti-Amazon.

    That said, living up to that strategy will be a challenge for Postmates. Perhaps in a future Innovation Conversation we can discuss this and other on-demand models. Net, they face a significant challenge to generate the requisite volume and delivery density required to make their models profitable while providing a good value to retailers, restaurants, delivery staff and consumers. Amazon has the benefit of almost every consumer having an Amazon account, having a proven partnership platform and having an inventory of hundreds of thousands of SKUs available for instant delivery. Physical and digital and digital goods can all be delivered on demand. They have very good density of activities. Can Postmates become a comparable go-to destination for the shopper? If they are successful, it could be a nice hit. But it’s a big, risky bet that will require a lot of patient capital to develop.

    KC: Two other quick things:  Any thoughts about the concept behind the ShopWithMe installation in Chicago, designed to be a kind of global, moveable showroom that I think ultimately speaks to some brands' desire to disintermediate traditional retailers?

    We often hear that manufacturers want to reach shoppers wherever, whenever and however they want to be reached. So I think it’s great they are experimenting with this.

    I’ve always been a big believer in the concept of retail on-demand or retail anywhere. ShopWithMe seems to be taking an interesting approach at delivering on this promise with seemingly robust capabilities across marketing, merchandising, transaction / tendering, follow up service and back end processes. I have not tried any of the capabilities, so I cannot speak to the richness or effectiveness of the experience. But there seems to be some merit there. The ultimate votes will be cast by shoppers. It will be interesting to see their uptake on this.

    I’m not so sure that it’s so much about manufacturers wanting to disintermediate retailers. Probably some of them do. Especially those that have been beholden to antiquated, strong-arm retail practices. But I think that most manufacturers love going to market through retailers that are fair and that offer added value to the overall brand and shopping experience. If they allow brand messaging to make its way through to marketing and merchandising, if they provide an inviting venue for shoppers to engage with their products, if they share information back with manufacturers to enable them to learn and improve their offerings and if they eliminate friction in the various engagement points and processes, manufacturers will not feel the need to go around them. ShopWithMe certainly seems to do that.

    KC: Fair enough. And how about the move by 7-Eleven to broaden their locker strategy, offering not just Amazon lockers but also FedEx and UPS lockers.  Seems to me that this is proof positive that the revolution has arrived…

    I think the locker strategy is perfect for 7-Eleven and is a win for shoppers. They are clearly positioning themselves to be about service and convenience. They provide value around a quick stop for gas, coffee, refreshments or merchandise in a pinch. You can even have a key made at some locations if you’re locked out of your house (they have a fingerprint reader to authenticate you, have a digital copy of your key stored in the cloud and can cut on demand). Lockers are great if a shopper can’t receive an order at home, or if they don’t want something valuable to sit on their front step. 7-Eleven is a great place to pick up products and grab a few things while there. This is great for 7-Eleven, Amazon and other e-commerce retailers. I think the strategy will be here for a while. I suppose you could say that the revolution has arrived!

    "The Innovation Conversation" will return in a couple of weeks. If there are subjects you'd like us to chat about in the future, let us know.
    KC's View:

    Published on: November 18, 2015

    by Kevin Coupe

    I remain blessedly, assiduously ignorant of why, exactly, the Kardashian family has gained any sort of celebrity. Don't know. Don't care. I don't even know their names, nor how many of them there are. (I think the family is all-women, but I'm not even sure of that.)

    I do know - and do care - about the fact that somehow, this family captivates the media. I simply don't understand it. If I were a news director or magazine/newspaper editor, I would ban them from my coverage, requiring my reporters to have an actual and legitimate news hook when violating that dictum. How they lose weight after pregnancy would not qualify. (Of course, this probably is one explanation - there would be many - why I am neither an editor nor a news director.)

    I do wish, as a consumer of news, that I could banish them from everything I read.

    Now, go figure. There's an app for that.

    App Advice reports that there is a new mobile application that does precisely that. Called the K Blocker, described as a "new app that provides a Kardashian-free browsing experience ... After installing this handy little app, you just hop over to your Safari settings and enable it as a Content Blocker. Then, enjoy browsing the Web and checking out your favorite entertainment sites without a Kardashian in sight. The app also claims to work with Caytlin Jenner and Kanye West for an extended elimination experience."


    Now, the story makes clear that the app is not 100 percent effective, but "it is definitely worth a try for those who are really ready for a Kardashian-free life." The app costs 99 cents, and is only compatible with Mac software.

    The existence of the K Blocker, I think, drives home a point we've been making here at MNB for close to 14 years ... that with every passing day, consumers increasingly are in charge of the shopping experience and the knowledge that informs those experiences. Retailers and manufacturers need to reorient their strategic thinking and tactics, understanding that the balance of power has shifted away from them.

    There is part of me, I must confess, that is troubled by the ability to use an application as a kind of information colander that allows one to filter out the information you don't want to get. That's all well and good if the information we want to filter out has to do with a craven, celebrity-crazed culture. But it also could allow, for example, liberals to filter out all information from the conservative side of the aisle .... and conservatives to filter out data from the liberal side.

    This happens anyway, just as people choose the media to which they choose to pay attention, but information blockers could make the situation more absolute ... the divisions in our country more stark ... and the inability to compromise or understand that the people with whom we disagree should not be demonized more entrenched.

    And so, even at the same time as I celebrate the K Blocker app, the implications worry me. Yet another example of how a Kardashian-related story foreshadows the end of western Civilization.

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

    Published on: November 18, 2015

    Technology columnist Farhad Manjoo has a piece in the New York Times this morning in which he looks to assess Amazon's past and, he thinks, likely estimable future.

    "For years," Manjoo writes, "observers have wondered if Amazon’s shopping business — you know, its main business — could ever really work. Investors gave Mr. Bezos enormous leeway to spend billions building out a distribution-center infrastructure, but it remained a semi-open question if the scale and pace of investments would ever pay off. Could this company ever make a whole lot of money selling so much for so little?

    "As we embark upon another holiday shopping season, the answer is becoming clear: Yes, Amazon can make money selling stuff. In the flood of rapturous reviews from stock analysts over the company’s earnings report last month, several noted that Amazon’s retail operations had reached a 'critical scale' or an 'inflection point.' They meant that Amazon’s enormous investments in infrastructure and logistics have begun to pay off. The company keeps capturing a larger slice of American and even international purchases. It keeps attracting more users to its Prime fast-shipping subscription program, and, albeit slowly, it is beginning to scratch out higher profits from shoppers.

    "Now that Amazon has hit this point, it’s difficult to see how any other retailer could catch up anytime soon."

    It is, experts tell Manjoo, a potentially "insurmountable infrastructure."

    It is really, really worth reading this piece ... and you can do so here.
    KC's View:

    Published on: November 18, 2015

    Bloomberg reports that Amazon "has a new, expensive-to-reach target in its quest to sell everything to everyone: last-minute holiday shoppers. The online store has spent the past year expanding its same-day delivery service to 24 metropolitan areas covering a population of 75.7 million people, or almost one in four U.S. residents, according to data compiled by Bloomberg ... By promising consumers in Seattle, Chicago, New York, San Francisco and other cities that they can get their purchases right away, Amazon CEO Jeff Bezos is betting that more people will be convinced to buy gifts online instead of trekking to physical stores. He’s also eager to maintain Amazon’s dominance of online sales, which are projected to top $95.5 billion in November and December, an 11% increase from a year earlier, according to Forrester Research Inc."
    KC's View:
    The story notes that same-day delivery is an expensive bet for Amazon - the retailer has to have both the infrastructure to get these products into the hands of consumers demanding - and willing to pay for - instant gratification, but also enough stock to make the offer compelling. But if the bet is expensive, Amazon may also see it as absolutely necessary if it is to maintain its e-commerce leadership.

    It is a pretty good bet that the numbers show Amazon that the consumers who use its same-day offering tend to be its most committed and profitable shoppers overall, so it is worth investing in the program. Furthermore, Amazon seems to be a company culturally committed to making expensive bets.

    It is ironic that there are analysts and pundits out there arguing that the jury remains out on same-day delivery. I wonder how many of these folks also have been arguing that in the end, bricks-and-mortar stores would be able to maintain dominance because customers often demand instant gratification and can't/won't wait for items to be delivered.

    Published on: November 18, 2015

    Fortune writes that while Walmart's quarterly sales numbers, released and reported on by MNB yesterday, may be reason to be optimistic about the company's fortunes, there is a "potential Achilles’ heel: e-commerce is not contributing enough to its turnaround."

    The story says that Walmart's "global e-commerce, the bulk of which is in the U.S., grew by only 10%, a much smaller rate than in any preceding quarter this fiscal year. And, perhaps of greatest concern, that clip is well below’s growth last quarter. (Amazon has project growth of as much as 25% in the current holiday season quarter.)>

    And CEO Doug McMillon conceded, “E-commerce sales and traffic were softer than we would like."
    KC's View:
    Read the Walmart e-commerce story in the context of the two Amazon-related stories that preceded it, and one gets a sense of how hard it is going to be for Walmart to catch up, keep up, and go ahead of Amazon.

    Published on: November 18, 2015

    The New York Times reports that the US Department of Justice, after a one-year investigation, has "filed criminal and civil enforcement actions against 117 companies and individuals" in the nutritional supplement industry, accusing them of selling mislabeled or tainted products.

    "At the center of the sweep," the Times writes, "is USPlabs, a company based in Dallas that sold the best-selling workout supplements Jack3d and OxyElite Pro, which contains the amphetamine-like stimulant dimethylamylamine, or DMAA. On Tuesday, federal prosecutors brought criminal charges against USPlabs and six of its executives related to the sale of those products."

    The story goes on to say that "the Justice Department, which worked alongside the F.D.A. and other federal agencies in its investigation, said on Tuesday it had also filed complaints against numerous companies that have sold supplements as cures for diseases or that were otherwise in violation of the law."
    KC's View:
    No retailers were named in the indictments, but that doesn't mean that Wall Street isn't holding them responsible - GNC, in particular, saw its share price drop yesterday, apparently in response to the charges.

    It has been apparent in recent months that the nutritional supplement industry is coming under increased and persistent scrutiny by regulators. Which is how it should be.

    Published on: November 18, 2015

    • The New York Times this morning reports that Martha Stewart has decided to move her American Made store - which sells locally made food, crafts and health and beauty products that have been curated by Stewart and her staff - from eBay to Amazon's Handmade marketplace.

    The decision seems to reflect a sense that Amazon's new effort to build on growing interest ion the online handmade goods market has a greater upside than eBay's, which was itself a response to Etsy's offering.

    According to the story, "Since Amazon introduced Handmade, the number of artisans who list on the site has doubled to more than 10,000, according to Erik Fairleigh, an Amazon spokesman. The number of products for sale on Handmade has also jumped to 200,000 items, from an initial lineup of 80,000, he said."
    KC's View:

    Published on: November 18, 2015

    • The Boston Globe reports that the City Council of Salem, Massachusetts, has unanimously rejected an appeal by Walmart, which asked that it be allowed to open its store there at 1 am on Black Friday. The retailer will only be allowed to open during regular business hours ... which means it also will be closed in Salem on Thanksgiving.
    KC's View:
    Walmart should count its blessings. Considering Salem's reputation, somebody could've cast a spell on it.

    Published on: November 18, 2015

    • The Associated Press reports that ConAgra Foods is announcing today that it is "splitting off leading brands such as Chef Boyardee and Healthy Choice into Conagra Brands Inc. It will spin off its frozen potato business under the Lamb Weston name."

    The story notes that these changes are just the latest at ConAgra, which already has sold its private brand business to TreeHouse Foods for $2.7 billion, has cut about 30 percent of its office-based workforce, and is moving its headquarters from Omaha, Nebraska, to Chicago.
    KC's View:

    Published on: November 18, 2015

    • Kohl's announced that it has hired Sona Chawla, most recently Walgreens' president of digital and chief marketing officer, to be its new COO, a new position at the retailer. She will be in charge of store operations, logistics, supply chain, and e-commerce, the company says.
    KC's View:

    Published on: November 18, 2015

    Yesterday, in a "Worth Reading" piece about the power of millennials, I wrote the following...

    "The San Francisco Chronicle has a piece authored by Pat Wadors, senior vice president of LinkedIn’s Global Talent Organization, in which she writes about the millennials who work for him."

    I got more than a few emails pointing out to me that I was mixing up my pronouns. Is Pat Wadors a man or a woman? And why couldn't I make up my mind?

    Pat Wadors, for the record, is a woman. And I fixed the pronouns as soon as the mistake was pointed out to me.

    You may not care, but ... When I originally wrote the story, I made the mistaken assumption that Wadors was male. (Shame on me!) But in the editing/proofreading process, I double-checked and saw I'd been wrong. So I fixed the pronouns ... but missed one.

    For which I apologize ... both for the editing mistake, and, more importantly, for the original, mistaken assumption.
    KC's View:

    Published on: November 18, 2015

    Got the following email from an MNB user:

    Hi Kevin.  Held off on chiming in on the story regarding the "LGBT Safe Places" article.  After seeing comments and responses I felt inclined to give my two cents.

    Liberals tend to think laws and policies that provide special protections are obvious and essential to a progressive society.  I personally view these laws as political tools that fracture society even if they have the best of intentions.  If you disagree then just listen to how the news reports a police officer using deadly force.  The first words will be the race of the officer and victim regardless of the more pertinent facts.  We are always pitting group against group and these laws add fuel to that fire.  I would rather live in a nation where we are granted equal protection under the law.  This is what Martin Luther King Jr worked so hard to achieve and ultimately gave his life for.

    I think that everyone would rather live in a nation where everyone is granted equal protection under the law. The problem is that not everybody gets it ... that there sometimes is a gap between the ideal and the real.

    On the same subject, another MNB user wrote:

    Do they really need that or shouldn't they just call police? It's called battery and/or assault. I can't remember ever seeing anyone making that big a deal about someone's sexual identity.

    I sat next to my gay friend last night, I had the calamari and he had the fish and chips. We talked about why Andy Dalton couldn't win important night games(and he congratulated me on taking the under in the second half) and the subject of sexual orientation never came up. Don't most of us judge people for who we are, not what we are?

    Since it is the Seattle Police Department that initiated the "Safe Places" program, it sounds to me like it was conceding that more needed to be done than it could do.

    And, with all due respect, just because you've never seen anyone making that big a deal about someone's sexual identity doesn't mean it doesn't happen. Often. Sometimes with terrible consequences.

    We had an email yesterday from someone who wrote:

    As a conservative Roman Catholic, I think..... Never mind. I'm sure you've already formed your non-biased tolerant opinion of what I have to say.

    Which prompted another MNB user to write:

    The Roman Catholic who made that comment did a huge disservice to our faith. They need to spend a little more time reading their Bible before making statements.  Sure, there are a couple of passages in the Bible that make a reference to orientation, but there are dozens that talk about not judging people and loving everybody.  Just look at our current pope.  He's made some huge statements about not being an exclusive religion, about making Catholicism accessible to everybody, even those who don't check  all of the traditional boxes.  He's really making headway in the Catholic perception globally, but intolerant people who believe it is their right to judge others are really hurting this progress.  That MNB reader really needs to reexamine his theology.

    We've had some debate here on MNB about a piece I did comparing the efforts by some NYC churches to adjust their Sunday school offerings to make them more appealing to young people to what I think businesses need to do in order to remain relevant.

    To which MNB user Lisa McDonald responded:

    Having been raised Methodist I tried to give my children the same opportunity to explore their faith.  I have enjoyed seeing my 25 year old daughter grow in her faith during her college years at an extraordinary community church.

    They have a laid back service (they start at 10ish), you can come in your pajamas, there are bean bags to sit in and the whole service started out in a bar on Sunday morning that had obviously had other activities the night before. They serve coffee and doughnuts and give out cool t-shirts for the kids to wear.
    I’ve been to a few services there and experienced it – while definitely not the traditional service I was used to – it definitely filled a need and a community and got the word out. The first service I went to the sermon was titled “the F word” and I was startled, but in this case the F word was FAITH.
    Church, like retail, needs to know their audience and deliver the message in a way they need.  Not that the message changes – just the delivery.

    Finally, on a lighter note, I mentioned yesterday that I was not familiar with the beers of craft brewer Ballast Point, which has just been acquired by Constellation Brands for $1 billion. Prompting MNB reader Julie DeWolf to write:

    As a native Californian, I am a huge supporter of Ballast Point, which has achieved much more than a cult following in our home state.  In fact, it is one of the best known and most frequently bought beers in our circle of friends.  I would say it’s much bigger than Stone at this point, which I’m sure you HAVE heard of.  Make sure you try Sculpin and the new Grapefruit Sculpin ASAP—delicious!!  And if you like stout, the Sea Monster is fantastic as well.

    We look forward to you getting more distribution in your home state so you can learn what we already know about this great brewery.

    Me, too.
    KC's View: