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    Published on: April 20, 2016



    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: One of the things people have always referenced in discussions about e-commerce is the mythical "long tail," or the ability to offer far deeper and broader selections because of the lack of bricks-and-mortar limitations.  But there recently was a story about how Netflix seems to be taking a different approach in its streaming business, challenging the "long tail" approach and offering a reduced library of films while emphasizing more and more its proprietary content, such as "House of Cards." I wonder if this is yet another case of something that was fundamental yesterday being less so today.

    Tom Furphy:
    I continue to believe that one of the most important key fundamentals to e-commerce business models is the long tail. Large e-commerce platforms make it much easier to carry a large assortment. As long as a product can be activated on the website with a good image and strong content, it is on the shelf and available nationally. The retailer does not need to carry multiple units or redundant inventory of the product. It can place one case of product in one warehouse and be in-stock nationally. The incremental cost of carry a long tail SKU is small, but the marketing value is high. It’s a well-proven strategy.

    This is especially true at Amazon, which is touted as having “Earths Biggest Selection” and as being the place where people can “find, discover and buy anything” they may want to online. The long tail is an incredibly powerful marketing vehicle for Amazon. People go to Amazon because they know they will be able to find what they are looking for.

    The long tail allows the company to efficiently draw in new customers and upsell to existing customers. For example, a housewife from Topeka, KS may be looking for the 45th flavor of Jello for her new dish for the church bazaar. Her local store can’t economically stock every possible flavor of Jello. If they don’t have it, she can go online to find it and be directed to Amazon, thanks to their strong search presence. Once she finds it there - and she will find it there - she then signs up for an account if she doesn’t have one, provides her address and inputs her credit card information. Customer acquired! Even if Amazon only breaks even on the Jello, it is an inexpensive means to engage new customers.

    The long tail also allows Amazon to grow the purchase volume of existing customers. It uses its marketing engines to develop recommendations, collect customer behavior and send targeted emails to customers. As customers respond to these marketing programs by making purchases, Amazon engines become smarter and market even more precisely to these customers. Over time, customer just expect Amazon to have what they need. The long tail plays a key role in this.

    Curation in online commerce, on the other hand, is a very different, perhaps riskier approach. However, for certain smaller platforms or startups, it may be a necessity for differentiation and survival. One way to curate is to provide strong private label products or proprietary content. Done well, this can provide outstanding customer value in ways that larger platforms cannot. But, curation is fraught with peril. Get it wrong by either having the wrong products or not adding value, and there is a high cost, because you lose your credibility. And once credibility is lost, it is very difficult to get it back.

    KC: So when Netflix shortens its tail - and to be fair, it still has a pretty long tail of movies and TV shows - it is making a calculated gamble that the best way to differentiate itself is through proprietary content (its version of private label) that it believes will make more of a difference than a longer tail/deeper selection. Of course, Amazon also is investing in private label content ... so there is no letup in the battle, which is taking place on a number of fronts.

    The question is, when does curation make sense? And when does it not?

    TF:
    I do think the adjustment to curation makes sense for startups or other players directly competing with large platform like Amazon. This is where food and other specialty retailers have an opportunity to differentiate vs larger platforms. They need to begin to think of themselves as trusted sources of information, not just sources of product. You’ve said that many times on MNB, and we’ve stressed that together in the Innovation Conversation. The larger platforms are going to continue to take share by helping people buy things. They do that via long tails, free shipping and innovative functionality. Retailers will have to keep pace with these innovations to remain relevant to their shoppers. But they can maintain and extend their differentiation by being the most trusted sources of information for their customers.

    KC: I guess it is the same as in the bricks-and-mortar business - if you can't compete on one level, you have to embrace the things that make you special and turn them into your differential advantage. Trying to be what you're not never is a good option, and is the fastest way to break faith with the shopper.

    But in a larger sense, is it inevitable that even a seeming fundamental of the e-commerce business such as the "long tail" is going to get challenged as the venue matures?  (Even though it is hard to think of e-commerce as mature…)  Because I guess that if the "long tail" is one fundamental, the notion of "curation" is another one … even though they would appear to be at odds with each other.

    TF:
    I don’t think maturity makes the challenge to the long tail inevitable. I think a move toward curation becomes inevitable because Amazon and the early e-commerce players have developed an insurmountable long tail lead. So, for new entrants, it almost has to be about curation. I also think that better tech tools will enable larger platforms, or even grocery stores or CPG manufacturers to curate products for their customers. Good recommendation engines, usage guides and subscription/replenishment platforms will enable retailers and brands to both curate products and deliver great service at the same time. Think of it as locking in customers’ minds with functional tools and their hearts with valuable expertise and experiences.

    And the Innovation Conversation will continue...

    KC's View:

    Published on: April 20, 2016

    Canada retailer Sobeys announced yesterday that Beth Newlands Campbell has joined the company as president of its Atlantic/Ontario business unit.

    Newlands Campbell is the former president of Delhaize-owned Food Lion, and also was an executive at Delhaize-owned Hannaford Supermarkets in Maine.

    In a prepared statement, Sobeys Inc. president/CEO Marc Poulin said, "Beth's diverse experience and proven record in organizational growth and strategic planning will support all aspects of our business in Atlantic Canada and Ontario. Her passion for food, customer service and serving her community positions her well to continue advancing our mission to help Canadians Eat Better, Feel Better and Do Better."
    KC's View:
    I think this is a really smart move on Sobeys' part, since Beth is one of the smartest and most accomplished executives I've met in the food business.

    She also, it should be noted, comes from the Ron Hodge school of retailing, which has brought us such executives as Shelley Broader (now CEO of Chico's), Meg Ham (president of Food Lion), Cathy Burns (COO of the Produce Marketing Association), Stephen Smith (CEO of LL Bean) and Steve Campbell (president/founder of the Pro-voke agency).

    Beth is the kind of executive who won't be leading from some corporate tower. She'll be out in the stores, getting a feel for the company's employees, customers, and the communities it serves. Sobeys is a multi-faceted company that can use such a leader, and I'm looking forward to how she helps it evolve.

    Published on: April 20, 2016

    The Oregonian reports that Green Zebra Grocery, the healthy convenience store that is the brainchild of former New Seasons Market CEO Lisa Sedlar, will open its second store this week, in Portland's Lloyd District.

    The 8,000 square foot store is positioned in such a way that Sedlar believes that fully half its customers will walk, bike or take the city's public transportation system there.

    The story notes that Sedlar opened the first Green Zebra in October 2013. A third store is scheduled to be opened on the campus of Portland State University later this year.
    KC's View:
    It has taken Lisa Sedlar about two and a half years to get this second store open, which is certainly longer than she expected ... but the good news is that the time has been well used to hone the marketing and merchandising approach used by the original unit in North Portland.

    I've always liked this store, and think that it is noteworthy that as people talk about Whole Foods' new 365 concept as trying to imitate and massage the Trader Joe's experience, Green Zebra actually tried to do something wholly original - offering strong foodservice, a more than adequate grocery selection, and a cool, effortlessly healthy vibe.

    By the way ... I have a soft spot for Lisa Sedlar because she has a soft spot for Jean Luc Picard ... which you can read about here.

    Also, Lisa came to the class I teach at Portland State during the summer a couple of years ago, and I talked about it here.

    Published on: April 20, 2016

    The Seattle Times reports that in the year since Amazon launched its Home Services business, competing with the likes of Angie's List, it has expanded it to 30 metropolitan areas. According to the story, while it does provide specifics, "Amazon says it has done well, with orders growing more than 20 percent per month since the marketplace launched in March 2015 in four metropolitan areas."

    The Times notes that this is yet another way for Amazon to expand its ecosystem as it looks to become "the place where everybody goes for purchases or services. The company, of course, takes its cut — a 10 to 20 percent commission per job in the case of home services, depending on the complexity of the order."
    KC's View:

    Published on: April 20, 2016

    Target Corp. said yesterday that "transgender employees and customers could use the bathroom that corresponds with their gender identity," not the gender of their birth, according to as Reuters story, which notes that this makes Target "the first big retailer to weigh in on an issue at the center of a heated national debate."

    Prompting the announcement is a controversial North Carolina law mandating that transgender people have to use bathrooms corresponding to their birth gender, not gender identity. This law - specifically designed to supersede Charlotte, NC, legislation - is seen by many people as a direct attack on the LGBT community, and there have been several states where similar laws have been under consideration. Proponents of the state law say they are doing it to protect privacy rights and protect women and children from sexual predators.

    The Reuters piece states that "Target spokeswoman Molly Snyder said the retailer had already adopted an inclusive stance toward transgender people, but that given the questions it had received on the issue, 'we felt it was important to state our position'."

    In fact, the law does not affect private sector businesses, but well over a hundred have gone on the record as saying that they find the law to be in direct opposition to their corporate values.
    KC's View:
    I said this last week ... that while it can be dangerous for businesses to wade into political debates, it sometimes is necessary, especially when those debates also are cultural in nature. This is one of those cases, when a law seems so rooted in prejudice that companies simply cannot let it go unchallenged.

    Published on: April 20, 2016

    • CVS yesterday announced a partnership with e-commerce service provider Curbside, "to launch CVS Express, a digital solution offering consumers a new level of seamless convenience. CVS Health is also investing in Curbside, demonstrating the company's commitment to driving further innovations that will help customers save time and money while pursuing a healthier lifestyle ... With CVS Express, customers can make mobile, in-app purchases from their local CVS Pharmacy and have those products delivered directly to them when they pull up to the store, all in about one hour with no markups or added costs for convenience."

    Currently available in Atlanta, San Francisco and Charlotte, NC, CVS Express will roll out to additional markets later this year. It is available for over-the-counter items, but not prescriptions.
    KC's View:

    Published on: April 20, 2016

    • The Associated Press reports that "McDonald’s is testing bigger and smaller versions of its Big Mac as the world’s biggest hamburger chain pushes to revive its business. The company says it’s testing a ‘'Grand Mac' and 'Mac Jr.' in the Central Ohio and the Dallas areas, and will see how they do before deciding on a national rollout."


    • The Wall Street Journal reports that Visa Inc. is "launching software that will shave as many as 18 seconds off the time it takes to make a payment" using the new chip-enabled debit and credit cards. At the same time, Walmart says that it has cut off 11 seconds from the average chip card transaction time by eliminating "a prompt that asked shoppers to confirm the amount of the transaction."

    The story notes that "the moves are a reflection of the widespread consternation that has greeted the new cards, which offer better security than the older ones but require more technology that slows transaction speeds."


    • Add Tops Friendly Markets to the list of retailers saying it will "source 100% of our private label eggs locally from chickens in cage free housing by 2025, based upon available supply."
    KC's View:

    Published on: April 20, 2016

    • Kroger said yesterday that it has promoted Bill Green, director of regional operations for its Atlanta division, to be VP of operations for the company's Columbus division.


    • Supervalu announced that it has named former C&S Wholesale executive vice president, James Weidenheimer, as its new EVP Corporate Development and Chief Innovation Officer.

    Supervalu also announced that COO Bruce Besanko has been given the additional role of CFO.
    KC's View:

    Published on: April 20, 2016

    ...will return.
    KC's View: