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    Published on: April 4, 2016

    Articleby Kevin Coupe

    On Friday, April 1, as has been my customer on that date every year since launching MNB, the lead story here was one that was fiction, not fact ... in this case about a decision reached by Amazon to launch a fleet of TruckBots that would be self-driving delivery vehicles equipped with artificial intelligence-infused robots capable of spewing obscenities and giving other drivers the finger when appropriate on major city streets.

    It was enormously gratifying that so many people were taken in by the story until they reached the sentence about robots flipping the bird. I suppose that's because this was fiction that was specifically written to teeter on the edge of credibility. In fact I got several emails from MNB readers castigating Amazon for costing good American workers their jobs with this new technological advancement; I felt compelled to write each of them directly and tell them to calm down, that they should check the calendar.

    (I also got emails from folks suggesting that I had provided a glimpse into an Amazon strategic initiative in advance of the company's announcement of same, and that I might be looking at subpoenas as they tried to figure out where I get my information. I doubt that, and can only reassure you that I made it all up.)

    What I did not know when I wrote the piece, was that the Washington Post had done a piece just recently about robot delivery technology ... in which it described a "little white device, which looks like an ice chest rolling on six wagon wheels," as being able to "ply sidewalks along with pedestrians to make local deliveries of groceries or small packages."

    These robots, the Washington Post story said, "began rolling autonomously last month through parts of London and Tallinn, Estonia’s capital, using proprietary digital maps and sophisticated software. They can also be guided over the web by an operator if they get stumped on their way. To make delivery cheap — from $1 to $3 dollars a trip, hopefully dropping to under $1, company executives said — engineers are trying to keep the hardware basic." (Though one of the problems is that sidewalks also can be pretty basic, and need to be flattened and repaired so that the robots can effectively navigate them ... begging the question of why they'd be repaired for robots and not humans.)

    You can watch a video about the delivery robots above.

    But beyond the fact that my original piece got closer to actual fact than even I knew, I'd like to suggest that there is something else about the Washington Post story that makes this an Eye-Opener.

    Jeff Bezos, who owns Amazon, also owns the Washington Post. Coincidence?

    I think not.

    KC's View:

    Published on: April 4, 2016

    Kroger on Friday announced what it is calling a "strategic partnership" with Colorado-based, 17-store Lucky's Market, which operates stores focusing on "natural, organic and locally grown products" in 13 states. The deal, which calls for an as-yet undisclosed investment by Kroger, is designed to "significantly accelerate Lucky's Market's growth in new and existing markets."

    The move is just the latest in a series of efforts by Kroger to expand its footprint and experiment in venues outside its traditional business model. The company has in recent years acquired Harris Teeter and Roundy's/Mariano's, and tried to acquire The Fresh Market, while at the same time opening a Main & Vine store in Washington State that focuses on fresh, local foods.
    KC's View:
    Several things seem likely to me here.

    One is that it seems probable that Kroger will own Lucky's outright sooner rather than later.

    Another is that following its traditional pattern, Kroger will manage to teach the folks at Lucky's a lot about how it does business, while effectively learning what it can from the Lucky's approach.

    And it also seems likely that Kroger will allow Lucky's to achieve a more focused growth pattern - 17 stores in 13 states doesn't sound very efficient to me.

    The Tampa Bay Business Journal positions the move as a direct threat to Publix, writing that "with Kroger behind it, Lucky's is likely to become a much more significant competitor in the grocery world — and yet another new concept to chip away at Publix's market share. In recent years, Publix has held its own against specialty grocers by offering more organic and natural items and increasing its prepared foods departments."

    Published on: April 4, 2016

    Bloomberg reports that Amazon "plans to broaden the reach of its fast delivery service Prime Now, and is selling major brands promotional deals connected to the expansion, a sign the world’s largest Internet retailer is satisfied with early results from the nascent offering."

    Indeed, a reflection of the degree to which Amazon plans to integrate Prime Now into its mainstream business is the decision to run the service on its main website, and not just via the Prime Now app on smartphones, as has been the case to this point. "Getting Prime Now on the Web puts the service in front of a larger audience, many of whom may not have downloaded the app on their phones," the story says. "While shopping on mobile devices is expected to reach $96.2 billion in the U.S. this year, that represents a quarter of all e-commerce, according to the research firm EMarketer."

    Prime Now currently operates in about 20 U.S. cities and London, and includes not just products from Amazon distribution facilities, but also from local restaurants and stores; two-hour deliveries are free for those paying $99 a year for Amazon Prime, and one-hour delivery costs $8.

    The story says that "Amazon is trying to sell advertising space to major brands for the Web launch, promising them visibility with tens of millions of Amazon shoppers. The premium 'Launch Hero Package' would cost $500,000 for about two weeks of placement on Amazon’s website associated with the rollout. That price includes e-mail promotions sent to Amazon customers, which Amazon said have a stand-alone value of $100,000, according to the documents reviewed by Bloomberg."
    KC's View:
    Amazon's Prime customers are its best, most frequent and most profitable customers, and Prime Now shoppers tend to be even more dedicated than just regular Prime members. Call it the ecosystem effect ... the more you buy into it, the more you buy.

    I've begun to think that Prime Now will be more important to Amazon's growth and sustainability as a business model than Amazon Fresh ... or that maybe there will be a coalescing of the two initiatives over time. It just would seem to make sense.

    Published on: April 4, 2016

    The Wall Street Journal has a story about how Ahold-owned Peapod "is working to shore up customer loyalty and improve fulfillment and operations with technology. That includes what is for Peapod an untried combination of warehouse management software, scanners, robotics and seven miles of conveyor belts ... Peapod has built a 400,000 sq. ft. fulfillment center that runs software from specialty vendors Manhattan Associates Inc. and Dematic Group – a departure for a company that has built much of its own software since its founding in 1989 in Chicago."

    Essentially, the story argues, Peapod is having to raise its game in order to compete with Amazon, FreshDirect and other existing and future e-grocery competitors in the New York marketplace, with the likely expectation that whatever it learns there can be applied to other markets where it operates ... especially once Ahold's acquisition of Delhaize is completed, which will put the company in new markets with new competitive pressures.
    KC's View:
    The story also makes the point that one of Peapod's competitive concerns is Walmart, which is looking to expand its online grocery business. This is something that every retailer needs to be thinking about ... how to create connections, both online and instore, that will be hard for Walmart to disrupt when it starts throwing money and other resources at them.

    Published on: April 4, 2016

    The Associated Press reports that PepsiCo CEO Indra Nooyi has added her voice to "the growing list of company heads and municipal officials voicing opposing to North Carolina's new law that prevents specific anti-discrimination rules for LGBT people for public accommodations and restroom use."

    That list now consists of more than 120 executives with a wide variety of companies that do business in North Carolina, including Salesforce, Levi Strauss & Co., Airbnb, Barnes & Noble, Kellogg's, Apple, Pfizer, LinkedIn, Hyatt, YouTube, Starwood, Facebook, Google, Bank of America, Hilton, American Airlines, IBM, Starbucks, Microsoft, and Wells Fargo.

    The law, which was fast-tracked by the Republican legislature and GOP Gov. Pat McCrory, was a response "to a Charlotte City Council ordinance approved in February that would have extended protections to gays and lesbians as well as bisexual and transgender people while at hotels, restaurants and stores. Charlotte also would have allowed transgender people to use the restroom aligned with their gender identity ... The new law blocked Charlotte's rules and prevented other local governments from approving similar ordinances. And government agencies of all kinds must now require people who use multi-stall public restrooms to use the one that corresponds with their biological sex."

    In a letter to McCrory, Nooyi wrote that the law is "completely inconsistent" with the way her company treats its workers, and that it undermines efforts to advance North Carolina's long-term interests.

    The story notes that "NCAA President Mark Emmert says he has spoken to North Carolina's governor about the state's new law excluding LGBT people from antidiscrimination protections, making clear if it remains in place it will affect the state's chances to host major college athletic events."

    However, proponents of the law say there is significant support for it both in the business community and among voters.
    KC's View:
    What I don't understand about the list of executives who abhor the North Carolina action is how come it isn't longer? To put it in crass commercial terms, I don't understand why any business or business leader would come out in favor of legislation that actively engages in discrimination against people who might someday be their customers.

    To me, not saying anything in this case is as bad as saying the wrong thing.

    Putting aside the commercial aspects, though, it would appear that some folks would like to roll the clock back to another time, and would also like to make sure that nobody else tries to make progress in this area. They may be successful in the short term, but they are on the wrong side of history, in my view, and history will not be kind to them and their decisions.

    Published on: April 4, 2016

    The Seattle Times reports that in order to "get enough organics to stay in business day in and day out," Costco is taking steps to address supply chain issues.

    Costco, the story says, now is "working with farmers to help them buy land and equipment to grow organics ... The idea is to ensure a greater supply of organic foods at a time when demand is soaring but supply has not kept up.

    "While other retailers might have loan programs for suppliers to upgrade equipment or offer financial incentives such as advance payments or long-term contracts, helping farmers buy land to grow organics appears to be unusual in the industry."

    At present, Costco is just partnered with one farmer in the effort, but it is looking to expand the initiative.

    The story notes that Whole Foods "has had since 2006 a loan program to help its local producers grow their businesses. About $18 million has been lent so far, for everything from helping farmers buy equipment to building greenhouses and packing facilities, according to the company." And Washington State co-op PCC Natural Markets "supports preservation of farmland through PCC Farmland Trust, which the Seattle-based co-op founded in 1999," and has "worked to conserve more than 1,600 acres of Washington farmland, according to PCC."
    KC's View:
    When demand outstrips supply, it only makes sense to do something to improve and expand the supply chain. You can't just wait for the other guy to do it...

    Published on: April 4, 2016

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

    • The Wall Street Journal reports that Staples, facing declining customer traffic and square footage in its stores that is underperforming, in part because of the growth of e-commerce, is turning some of that space into offices. Staples "is expected to unveil a partnership with office-sharing startup Workbar LLC to open communal workspace at three Boston-area stores," the story says. "Workbar is one of several firms that have emerged in recent years that manage a network of locations with desks and conference rooms that subscribers can access for a monthly fee."

    The dedicated office space is expected to take up between 10 and 20 percent of the square footage in the stores where the concept is tested.


    • The Wall Street Journal reports that Blue Bell Creameries, which had to recall all of its products about a year ago because of listeria contamination, has informed the US Food and Drug Administration (FDA) that "it hasn’t nailed down all the sources of contamination in its plants, though the company now has in place programs to effectively control for the bacteria ... Blue Bell’s declarations come after the company in January announced it had completed its market re-entry program, with its ice cream now back on store shelves in parts of 16 states, down from 23 prior to the recall."

    It is interesting that in Blue Bell's statements, there is a lot of "likely" and "probably," but no "definitely." Which sort of reminds me of Chipotle, where they never really figured out what caused all their food safety issues. Maybe it all just means that this stuff is too complicated to know for sure, but for me, it means that I'll be avoiding Chipotle and Blue Bell, because it just feels like another problem is around the corner.


    • The Charlotte Observer reports that The Fresh Market has officially asked its customers not to bring "firearms and other weapons" into its stores, “to ensure a welcoming environment where our customers and employees feel safe, and treat one another with kindness and respect while shopping and working."

    According to the story, "The grocer said it had engaged in discussions with a group of activists called Moms Demand Action, who gathered nearly 4,000 signatures across North Carolina to support what they call a 'gun sense policy'."

    The Observer writes that "Fresh Market joins a handful of other grocers including Whole Foods and Trader Joe’s in asking customers not to bring guns into its stores. Moms Demand Action has also persuaded Starbucks, Target, Chipotle, Sonic, Chili’s and Jack in the Box to change their gun policies."


    • The Wall Street Journal reports that Rodale has decided to no longer solicit or accept advertising for Prevention, its onetime flagship publication that long has been a staple at supermarket checkout lanes. The decision will also result in increased newsstand and subscription costs, but the elimination of ads also will allow the publisher to cut costs, which it hopes will allow it to keep the title alive.
    KC's View:

    Published on: April 4, 2016

    Tom Coughlin, the Sam Walton protege who rose to become the number two executive at the company, passed away on Friday. He was 66. The cause of death was not released.

    The Wall Street Journal writes that "Coughlin was a Wal-Mart legend ... He started at the company in 1978 as director of loss prevention, and later was an integral part of the executive team that made Wal-Mart the largest retailer in the world. He was a well-respected manager, known as a fiercely loyal and hardworking leader who demanded the same commitment from his deputies.

    "But he is perhaps best known for the scandal that erupted around him as he retired as executive vice chairman in 2005. He left the company amid accusations he misappropriated as much as $500,000 from Wal-Mart through fraudulent reimbursements and improper uses of gift cards. After pleading guilty to wire fraud and tax-evasion charges, he was sentenced to 27 months of home confinement in 2006. The judge spared him jail time in part because his doctor at the time described him as '57 going on 87,' saying he had coronary disease, diabetes and other ailments."
    KC's View:
    Maybe it is just me, but I've noticed in the last week or two the deaths of a number of people - Garry Shandling, Patty Duke, and now Tom Coughlin - who were in their sixties. I personally find this to be distressing .. especially because these days, when I see obits for people who died in their seventies, my first thought it that it seems way too young to pass away.

    Published on: April 4, 2016

    ...will return.
    KC's View:

    Published on: April 4, 2016

    Major League Baseball had its opening day yesterday, with three games played.

    The Pittsburgh Pirates Pirates defeated the St. Louis Cardinals 4-1, the Toronto Blue Jays defeated the Tampa Bay Rays 5-3, and in a rematch of last year's World Series combatants, the Kansas City Royals defeated the New York Mets 4-3.
    KC's View:
    As a Mets fan, I'm hopeful that this year will be different from the way things used to be.