retail news in context, analysis with attitude

MNB Archive Search

Please Note: Some MNB articles contain special formatting characters, and may cause your search to produce fewer results than expected.

    Published on: August 4, 2016

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, Kevin Coupe here and this is FaceTime with the Content Guy.

    While the class that I teach is still in session back at Portland State University in Oregon, I've made a brief trip this week to Burlington, Vermont. I have the pleasure of speaking and moderating panels at a Customer Days conference being held by MyWebGrocer, at which retailers and suppliers are coming together to talk about common problems and forge solutions.

    Full disclosure: MyWebGrocer is a longtime and valued sponsor of MorningNewsBeat. We have a lot of history together, and a shared understanding of how to compete in a climate that is challenging and constantly shifting.

    While we've had some wonderful speakers and panelists, perhaps the most provocative speaker was the keynoter, Saj-Nicole Joni, who is the co-author of "Get Big Things Done: The Power of Connectional Intelligence," among other works. Saj-Nicole was just extraordinary and, I must confess, the kind of person who makes me realize how little I have achieved in my life. Among other things, she trained to be a classical ballet dancer, is a pianist and a foodie, has a black belt in Aikido, and when she joined the math faculty at MIT when she was 24 years old, she was not only the first woman to be on that faculty, but she was working in a building where there was not one single women's restroom. In other words, a trailblazer ... and these days she is CEO of Cambridge International Group. (She also is often described as a "CEO Whisperer.)

    One of the things she talked about was the need for leaders in our society to take hold of and embrace the often dissonant forces that exist in our society and that, though they might seem to be trouble-makers, these are actually the people who drive business forward rather than in reverse, and cause truly innovative changes to take place.

    Saj-Nicole told this great anecdote about a law form called Skadden Arps where, unbeknownst to senior partners, the first year lawyers banded together and created a private social network that they use to help each other in the same way that they did in law school. It was, she said, a perfect example of connectional intelligence - that the whole was, in fact, greater than the sum of the parts.

    Now, at a certain point the managing partner at this law firm was running the numbers, and he found that billable hours for the first year lawyers were down, and he went to the partners to find out why. But rather than complain about the new lawyers, the partners said that they were producing the best work of any group of first year lawyers ever hired. What they discovered was that by disrupting the conventional system and using a social network to connect to each other, they were able to be far better lawyers... and far more efficient. So what was the law firm to do? Shut down the network, and reduce their efficiency - which might improve margins but also would make it a less effective firm?

    Of course not. There's only one real solution, which is to figure out how to compensate while maintaining the improved levels of effectiveness and efficiency. (Of course, when I say there's only one real solution, that's not true. Some firms probably would have shut down the network, choosing to return to the past rather than embrace the future. Saj-Nicole didn't put it this way, but I will. That's called ignorance.)

    There is, of course, a corollary in the retail business. What happens when a bricks-and-mortar store - in which people are compensated based on sales and where traditional profitability measurements include things like front end impulse sales - starts to see sales shift to online, which can have a negative impact on some folks' compensation as well as reduce impulse sales because there is less traffic. This isn't hypothetical - I've talked to numerous companies over the years where this has been a real concern, and even a reason to question whether e-commerce is a place to be. The smart ones, of course, figure out how change the culture and the financial benchmarks to embrace the change ... because they understand that purchases from them - no matter where made - are purchases not made someplace else.

    Saj-Nicole made the point that yes, we live in a world where there is more conflict, more tension, greater chaos, and higher noise levels ... but we actually have to embrace that, because it is out of such a climate that true innovations emerge. Business leaders know that they must embrace this climate, figure out how to harness these dissonant energies, and then find the opportunities within them.

    I think that she's saying that this is the difference between institutions that are sustainable and those that are not. And while some would make this all about technology, she said that technology is just the tool - that it really is all about human beings and what they are capable of achieving, as long as they are not afraid of the unknown.

    And besides, you can't put the horse back in the barn. It just isn't possible.

    Not that some people don't want to try. There always have been people for whom the future is a scary place.

    Saj-Nicole told a wonderful story about Benjamin Franklin, who in the early days of our nation's development was actually our first Postmaster General. What I didn't know was that during his tenure, Ben Franklin set up a system of relays that allowed people to send a message to New York and get a response in 24 hours. And while this was amazingly disruptive for the time, there were, inevitably perhaps, those who wondered if that kind of progress was a good thing, if it was really necessary.

    I suspect Ben Franklin, if he were alive today, would be a blogger. He'd love it ... and I suspect that he'd also love"Get Big Things Done: The Power of Connectional Intelligence," co-authored by Saj-Nicole Joni, one of the best speakers I've heard in a long time.

    That's what is on my mind this Thursday morning, coming to you from the MyWebGrocer Customer Days event in Burlington, Vermont ... and as always, I want to hear what is on your mind.

    KC's View:

    Published on: August 4, 2016

    by Kevin Coupe

    The New York Times has a story about a meal kit business that has decided to make the box part of the value equation.

    The company is called Fresh Realm, and the story says that it has developed reusable - not recyclable - packaging that solves the problem of debris left over after the kit has been opened and the meal made.

    "Packaging is perhaps the most critical element of the meal kit business, which must ensure that raw meats and vegetables get to the consumer without being contaminated or looking as if someone played soccer with them," the Times writes. "So any tweak to reduce the insulation needed to maintain proper temperatures or the plastic that protects precut food from discoloration and contamination requires judiciousness and a good bit of innovation."

    Fresh Realm's boxes "are 17-inch-square cubes made of polyurethane. Inside, five drawers house metal plates that help maintain the desired temperature. The drawers can hold up to four grab-and-go meals or the ingredients for two meal kits ... The boxes are delivered by FedEx. Once the food is removed from the box, the customer just puts the container back together and slaps on a return label. FedEx picks it up and returns it to FreshRealm. The company then sanitizes the box and puts it to use again."

    And not only has Fresh Realm "made its box a central selling point of its delivery service," but it also "has also started providing its box system to competitors."

    Smart idea ... and showing a remarkable social conscience by extending its advantage to other players in the business.

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

    Published on: August 4, 2016

    The Wall Street Journal reports that Walmart "is in talks to buy online discount retailer Jet.com Inc., according to people familiar with the matter, escalating its costly quest to compete head-on with Amazon," though Bloomberg has been cautioning that the deal could end up just being a $100 million investment in Jet by Walmart.

    A deal, the Journal writes, "could give Wal-Mart’s e-commerce efforts a much-needed jolt as the world’s largest retailer seeks to grow beyond its brick-and-mortar storefronts with speedy home delivery from a network of massive suburban warehouses."

    The story notes that Walmart "has pledged $2 billion to boost e-commerce sales, building new fulfillment centers and supporting a two-day free shipping service that targets Amazon’s popular Prime service. It has also tried to goose sales with local grocery delivery and curbside pickup services. But online growth has slowed for nine straight quarters."

    Meanwhile, Jet has had its own growing pains. While it was launched with more than $500 million in investment capital and has been valued at more than a billion dollars, the one year it has been in business has been marked by some significant strategy shifts - like eliminating that $50 annual membership it first instituted - and discounts that were not always as steep as originally projected.

    Jet was launched by Mark Lore, who earlier in his career created diapers.com and its parent company Quidsi, which he sold to Amazon for $550 million in 2010.

    The Journal writes that "for both Jet and Wal-Mart, Amazon’s frenzy of warehouse construction and fast delivery—as quickly as one-hour—have proved formidable. The Seattle -based online retailer has logged three straight quarters of record profit while locking in an estimated 60 million members to its $99-per-year Prime service, cultivating a loyal customer base and giving consumers fewer reasons to shop at traditional stores."
    KC's View:
    I had a chance to chat with Tom Furphy - my partner in "The Innovation Conversation" - about this, and we both agreed that in many ways, this says more about Walmart's troubled e-commerce platform than it does about Jet. Walmart simply has been unable to get traction in e-commerce, which is why some sort of deal makes sense ... though it remains to be seen how Jet's branding - or Walmart's online branding - might be affected by a deal.

    There are two major things that Walmart would get in a deal. One is Jet's online algorithm package, which encourages consumers to load up their shopping carts and getting bigger discounts with bigger basket sizes. (This is different from Amazon's approach, which uses Prime to encourage frequent transactions in which the size of the purchase is irrelevant.) And the other is Jet's marketplace business - no small advantage, since Jet has been more successful in getting other retailers to use its platform to make their own online sales. (Buy from Jet, and you may get a delivery from another retailer. it is similar to Amazon's approach to the business, though from my experience, I think Jet is less transparent about it.)

    Three billion dollars is a lot of money, and I am not persuaded that the act of putting two less-than-successful e-commerce businesses together is the best way to compete with e-commerce leader Amazon. What I do know is that if this deal goes through, it will be like Groundhog Day for Lore and his early investors, who also did pretty well when they sold their earlier business to Amazon. I guess we'll have to wait another half-dozen years or so to find out if he builds another e-commerce platform and then sells it to Google.

    The more I think about Walmart's e-business model, the more I have to wonder if it is not taking advantage to the greatest extent possible the biggest advantage it has - tons of stores in close proximity to its customers. That's something Amazon doesn't have, and yet it seems sometimes that Walmart wants to be Amazon rather than just the best Walmart.com it can be.

    Published on: August 4, 2016

    The Democrat & Chronicle reports that Wegmans "plans to make a greater push into North Carolina, a move that would put it up against some of the largest grocery store chains in the country trying to take advantage of a weak market." Kroger and Publix also are looking to expand their footprints there.

    MNB fave Burt Flickinger, managing director of the Strategic Resource Group, tells the paper that this move could "serve as a jumping off point for Wegmans into other areas of the southeast." Flickinger says that " "Wegmans could double the current size of its corporate sales just by filling out the region between Virginia, the Carolinas, into Tennessee and Georgia and north Florida."
    KC's View:
    The smile on my face is because I'm going to have plenty to write about for the foreseeable future as these tough competitors square off. Yippee.

    Published on: August 4, 2016

    The Seattle Times reports that pet supply retailer Petco has been remodeling stores and making changes that include "a concierge desk where customers can get advice on pet nutrition or training, or schedule grooming appointments and training classes; a demonstration area where customers can sample new products; and a 'Critter Connection' area where customers can play with their pets and test supplies."

    According to the company, the goal of the redesign is "foster more connections with store employees and other pet owners" and highlight "services that can’t be purchased online,” such as grooming training and personal consultations."
    KC's View:
    If companies think stores can stay the same even in the face of heightened competition from online, I think they're making a mistake. Petco is doing what we often talk about around here - going beyond being a source of product and growing its ability to be a resource for shoppers.

    Published on: August 4, 2016

    The Los Angeles Times reports that "a report published Tuesday in the Journal of the American Medical Association (JAMA) found that only about 18 percent of participants in the National Health and Aging Trends Study got health information online in 2014. That pales in comparison with the approximately 60 percent of adults of all ages who have told the Pew Research Center that they consult Dr. Google at least once a year, including the 35 percent who said they rely on the web to diagnose their own ailments or the maladies of people they know."

    Among the more than 7600 Medicare beneficiaries who were part of the study, "only 16 percent said they went online to learn something about health. In addition, 8 percent said they filled prescriptions online, 7 percent used the internet to get in touch with their doctors and 5 percent dealt with their insurance claims on the web."
    KC's View:
    I'm not sure that avoiding self-diagnosis after doing research online is necessarily a bad thing; I know some people who are constantly telling people about all sorts of serious maladies they think they've contracted because they'd rather go on Google than actually see a medical professional. (For the record, they almost always mis-diagnose themselves.)

    But I do think two things. First, the reluctance by today's senior citizens to use this technology for medical advice opens the door to retailers to serve as trusted advisors. And second, this is going to change, if only because tomorrow's senior citizens will be more facile with technology (though hopefully smarter about not diagnosing their own problems).

    Published on: August 4, 2016

    • Kroger has announced that next Tuesday, August 9, will be a nationwide hiring day in all of its stores, and that "This is the second one-day hiring event Kroger is hosting this year. The company hired more than 11,496 new associates during its May 14 event. Kroger plans a third hiring event, open exclusively to military veterans and their family members, in November."

    Interested candidates may apply at jobs.kroger.com and then return to a store on August 9 between 3 p.m. and 8 p.m., no appointment necessary.
    KC's View:

    Published on: August 4, 2016

    • Academy Sports + Outdoors, the sports, outdoor and lifestyle retailer, announced that it has hired Michelle J. Gloeckler, most recently EVP, Consumables, Health & Wellness at Walmart in the US, to be its new Executive Vice President, Chief Merchandising Officer and President.

    At Academy, Gloeckler joins J.K. Symancyk, the former president of Meijer, who joined the company as CEO last year.
    KC's View:

    Published on: August 4, 2016

    A 1 a.m. editing error yesterday led to a passage in Kate McMahon's column about Nathan's that said the company had 45,000 restaurants. In fact, Nathan's products are sold in more than 45,000 locations, including supermarkets, but Nathan's itself has around 300 stores.

    And one other thing. East coast readers may have seen the headline to Kate's story as saying, "Authenticity Cannot Just Be An Adjective." I wrote that headline, and I realized after the story had been posted that, in fact, the word "authenticity" is not an adjective. It is a noun. So I changed the headline to "Authentic Cannot Just Be An Adjective." Which is more accurate in a number of ways.

    Mea culpa, mea culpa, mea maxima culpa.
    KC's View:

    Published on: August 4, 2016

    We got the following email about our story the other day concerning the robust nutritional merits of cockroach milk. MNB reader Margi Prueitt wrote:

    WAAAAY more than I needed to know and I hope I never need it!

    Not a question of need. The real question is, could a company ever brand it in a way that could get you to want it?




    On another subject, from another MNB reader:

    Your reader is absolutely dead on about the long term effects of BOGO’s on both the product’s producer or manufacturer, the customers’ long term reactions, and the impact on the retail chain itself.  Look at the soda brands marketing strategies, although not BOGO the retail prices are heavily discounted and after time they now move 90% of their volume on heavy deal. While they may not lose share due to advertising they have definitely trained an overwhelming percentage of their customers.  Low, low pricing works if that is the total focus of a chain and they are heavily private label, for example Aldi’s.  My point is retailers need a distinctive niche in order to maintain their customer base.  BOGO’s are a poor long term niche to occupy.  Kroger, Wegmans, and  Aldi’s are examples of chains who know what their niche is and excel at that niche while evolving as the market changes to maintain their niche.




    I suggested the other day that Whole Foods seems to have so many different things going these days it is as if they're throwing spaghetti against the wall to see what sticks. MNB reader Jason Lambie responded:

    I agree.

    Seems like some desperate throws of spaghetti, darts, spitballs, and whatever they can get their hands on to throw.  Instead of banging their chest about being the first and largest natural foods retailer, they should’ve been paying attention to everybody else who had Whole Foods in their sights.  As you always say, it’s about differentiation and if you don’t bring something unique and extra to the table, you’re probably not at the table anymore, and more on the menu.  Had to steal that …. One of the best lines I’ve heard in a while.


    I stole the line from Craig Ostbo. But I agree.
     



    On the subject of cashless restaurants, an MNB reader the other day wrote:

    “My brother-in law and his wife recently opened an upscale Italian restaurant in Loveland, OH and they shared that close to 90% of their sales are credit card. One of the downsides of this though is that they have to keep a significant amount of cash on hand to allocate the tips each night. Maybe they should consider just adding the tip allocation weekly so that they are not dipping into cash flow awaiting payment from credit card transactions.”

    Prompting MNB reader Kelsi Ward to chime in:

    I’d be surprised if he’s ever worked in a restaurant. Sure, tipping wait staff weekly more closely resembles a standard paycheck model, but it’s so far from the industry standard and the typical reward/recognition model that works at restaurants. I think it would actually de-incentivize staff to give customers “special” treatment on a daily basis. When I served in high school/early college it was ideal to see the fruits of my labor at the end of the night in tips. If I had to wait and collect this all on a given day I would most likely not go out of my way to stay and spend extra time with tables because it would be harder to see the return on the extra effort. While it might help the restaurant, I think the end result would hurt patrons who currently benefit from servers who try their best with each table for the immediate pay out.




    And, on the subject of the nation's most popular roadside eateries, one MNB user wrote:

    I'm calling bull...on the article from Eater about "road trip destinations".  I know you're just reporting it but let's take a critical look at the list's credibility.  Aunt Annie's and Cinnabon?  Do they even exist to any meaningful extent outside of malls?  I'm skeptical as to how these results were compiled or interpreted.  I get the coffee shops being at the top of the list but have a hard time believing Taco Bell wouldn't make the list for example. Also I wonder how this list would be different if it included C-stores/Truck stops?  Bottom line, strictly my opinion but I don't think this list has anything to do with "road trips" and not a strong correlation with "dining".  The cynic in me thinks the folks at Foursquare worked with with the folks at Eater to gin up some meaningless fluff content.

    Not sure I agree. I haven't done a scientific study, but I have driven cross country three times in the past 13 months (with a fourth trip coming up shortly) .... and I've seen a lot of Aunt Annie's and Cinnabons out there. You may underestimate the degree to which highway authorities have plugged these into rest stops, almost trying to recreate the mall experience.

    Now, to be clear, I avoid both of them.




    And, we got this email about Michael Sansolo's column this week:

    I’m intrigued by your piece today on Pokemon Go. On the one hand, love there is an educational element to it and as you say, actually gets people off their couches and outside to play their games!

    As it relates to retailers and retailing, one of the inherent risks with something like Pokeman is “the fad factor.” Retailers need to have the keen foresight to distinguish between fads, like “Lite” (excluding beer) and trends like Organic. In a penny business fads can be dangerous as even with the most nimble, speed to shelf takes time and inventory in a passed fad is lost money. While Pokemon Go has taken the Country by storm, my bet is a month from now those who react to it will find plenty of purchase opportunities on clearance shelves.
    KC's View: