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    Published on: August 11, 2016

    Hi, I'm Kevin Coupe, and this is FaceTime with the Content Guy.

    One of my favorite people in the food business, Lisa Sedlar, has just recently opened her second Green Zebra store, in Portland's Lloyd District ... and I think it is a winner.

    Green Zebra tends to be described as "Whole Foods meets 7Eleven," but this new store highlights the degree to which this is an overly facile characterization. While it may be roughly the size of a large convenience store, and may have a strong emphasis on organic, healthy and local products, Green Zebra in fact seems to go beyond the boundaries of what definition would imply.

    When I visited the new Green Zebra - which opened its first store in North Portland in 2013 - I was impressed with the enthusiastic crowds lining up to place lunch orders. Only open a few months now, it seems to have been embraced by a still-developing neighborhood of apartments and businesses (though Sedlar concedes that so far, weekdays tend to be a lot busier than weekends). There's also a strong breakfast and dinner business - all driven by the fact that the food looks and tastes great.

    While organic products and sustainability clearly are a high priority for Green Zebra, there are no concessions to the notion of taste - this is a store designed for Portland foodies. (Note: I had one of the best tuna melts of my life there, spiced with jalapeños and served on thick and delicious artisan bread. In fact, my mouth waters just thinking about it.)

    There also is a strong focus on pricing discipline. In the wine department for example, there is a commitment not to carry wines that cost more than $20 per bottle - even though this means that there are more wines from outside Oregon than one might expect, Green Zebra feels strongly that it must not be identified as a high-priced experience. I think it is pretty successful in this effort.

    The grocery selection is tightly edited, with every inch calculated to provide sufficient margin; when you're operating an 8,000 square foot store, there isn't a lot of room for error.

    The produce department is outstanding, with fruits and vegetables from local farms and a commitment to sampling that stimulates the eye and palate.

    There's also a small bar offering beer and wine by the glass ... including a machine that allows Green Zebra to offer "crowlers" - which essentially are beer growlers made out of large aluminum cans. (To see how they work, click on the video box.) I'm told that Green Zebra at this point may be the only supermarket in the world with such a machine, and it provides both entertainment value and a quality product.

    To see more of the Green Zebra experience, check out the photos included with this story. But know this ... I'm extremely excited that the next Green Zebra is scheduled to open before the end of the year on the campus of Portland State University - which is where I teach summers, and where I rent an apartment just off campus. Which means that next summer, I know exactly where to go to get a crowler of fresh beer from the tap, affordable wine, and a mean tuna melt.

    I can taste them already.

    That's what is on my mind this Thursday morning. As always, I want to hear what is on your mind.


    KC's View:

    Published on: August 11, 2016

    by Kevin Coupe

    The New York Times has a story about how in the UK, "a crop of bookshops is rebelling against frenzied online engagement and is creating environments where the real-life, internet-free book browse is the most effective way to expand your social and professional networks. And in countering the internet overload, some stores are proving to be among London’s hottest hangouts."

    The move is a kind of statement against modern physical bookshops in which wifi access and coffee shops have been seen as the best way to create a welcoming and attractive physical environment. But in the UK, where "quaint, old-fashioned bookshops" have long provided a traditional experience where one can "browse uninterrupted" and "disconnect from the world," the more modern experience is seen by some as a kind of social heresy.

    "Leading the rebels is Libreria Books in London’s East End, which is a Wi-Fi- and coffee-free zone," the Times writes. "It was opened in February by Rohan Silva, a former policy adviser to the former prime minister David Cameron, and co-founder of Second Home, a members’ club providing a work space for entrepreneurs.

    “'We’re celebrating human curation over algorithmic rhythms,' said Mr. Silva, who was spurred to open his shop after experiencing a common affliction for London’s bibliophiles — the repetitive, grating ring tones of smartphones disrupting the tranquillity of his bookshop experience. 'We wanted to get people using their human intuition when they shop for books. You can get Wi-Fi anywhere now, it’s not necessary in a bookshop'."

    This is, I think, very smart. It won't be for everyone, but doing the opposite of what everybody else is doing, especially in a way that plays both to local tradition and temperament, is a great way to differentiate a business.

    And, in its own way, an Eye-Opener.
    KC's View:

    Published on: August 11, 2016

    The Cincinnati Business Courier reports that Walmart is challenging Kroger in the e-commerce battlefield right in its own backyard, bringing its click-and-collect service to four stores in the Cincinnati market. This will compete with the dozen locations in the area where Kroger is offering a click-and-collect service.

    The story suggests that "Wal-Mart has a twist that gives it an edge on Kroger in the convenient shopping battle. Wal-Mart’s service is completely free. Kroger charges $4.95 per order, but the first three orders are free."

    The story notes that "Kroger and Wal-Mart are fierce competitors in the grocery business. Kroger has been rapidly gaining share from Wal-Mart in recent years. Kroger has increased same-store sales minus inflation by an average of around 3 percent each quarter, according to a recent Goldman Sachs study. Wal-Mart’s same-store sales less inflation averaged a decline of about 1 percent per quarter. And Goldman Sachs found that Wal-Mart’s prices are only about 1.2 percent cheaper than those at Kroger, where selection and service are considered to be superior."

    Walmart has brought click-and-collect to "several hundred" stores around the country, the story says, while Kroger is offering it at 269 stores in 25 markets around the country.
    KC's View:
    When I talk to people about this battle, the consensus seems to be that Kroger has the competitive advantage over Walmart and overall, perhaps nowhere more than in Cincinnati, where there is a lot of hometown pride in the company. But the one thing Kroger cannot do - and won't do, I'm sure - is underestimate the degree to which Walmart seems to be committed to the e-commerce category in general.

    Walmart's folks know that in many places, longtime competitive advantages have been eroded by retailers that have figured how how to be sharp on price, right on selection, and strong on convenience and value (in all the different ways that these can be defined). Management there seems to be committed to doing whatever is necessary - even spending $3.3 billion on an as-yet unproven startup - to counteract these trends.

    It's a jungle out there, and it only is going to get tougher for everyone to survive.

    Published on: August 11, 2016

    Kings Super Markets, Inc. and Balducci’s Food Lover’s Markets announced yesterday that they have been sold to KB Holding, Inc., described as "a Delaware-based investment firm affiliated with GSSG Capital," by Angelo Gordon & Co. and MTN Capital Partners LLC, which acquired Kings in 2006 and Balducci's in 2009.

    Terms of the deal were not disclosed.

    The announcement says that existing management of the two chains will remain in place, and the the investment is meant to "lay the foundation for expansion now and into the future."

    The deal reportedly includes 25 Kings stores and six Balducci's units, as well as several smaller "express" Balducci's locations.
    KC's View:
    The good news about this is that the deal seems largely like a financial transaction that will have little impact on the good (and hard) work that Kings CEO Judy Spires is doing, bringing back a company that had once been a trend-setter but had fallen into a kind of competitive disrepair under previous ownership. She's really smart and really competitive - the company's owners just have to give her cash and room to maneuver.

    Published on: August 11, 2016

    The New York Times reports on a new study of retailers in the US and Europe that seems to indicate that self-service technology may be helping to turn law-abiding consumers into thieves by making it easier for them to take products without paying for them; the report says that "the use of self-service lanes and smartphone apps to make purchases generated a loss rate of nearly 4 percent, more than double the average."

    According to the story, "The scanning technology, which grew in popularity about 10 years ago, relies largely on the honor system. Instead of having a cashier ring up and bag a purchase, the shopper is solely responsible for completing the transaction. That lack of human intervention, however, reduces the perception of risk and could make shoplifting more common, the report said.

    "Studies have been inconclusive about whether the systems actually promote more pilfering, but researchers believe they are a gateway for shoppers to act in ways they ordinarily would not."
    KC's View:
    I find this study to be distressing and depressing. I guess I don't really doubt its conclusions, but I desperately want to ... it really bothers me that we live in a society where otherwise good and decent and lawful people will commit crimes just because they can.

    In fact, the more I think about it, the more I want to challenge the basic premise. Maybe the people who are stealing are doing so not because systems make it possible, but because their essential nature is to be thieves ... they just haven't engaged in that behavior because the risks are too high. Technology may not promote such behavior as enable it ... which is a different thing.

    Though I have to admit that even these caveats don;t make me feel better. I'm still distressed and depressed by the study.

    Published on: August 11, 2016

    The New York Times has a piece by technology columnist Farhad Manjoo about how Amazon, a company that tends to be highly secretive about its strategies, tactics and even vision, " has left a trail of clues suggesting that it is radically altering how it delivers goods. Among other moves, it has set up its own fleet of trucks; introduced an Uber-like crowdsourced delivery service; built many robot-powered warehouses; and continued to invest in a far-out plan to use drones for delivery. It made another splash last week, when it showed off an Amazon-branded Boeing 767 airplane, one of more than 40 in its planned fleet.

    "These moves have fueled speculation that Amazon is trying to replace the third-party shipping companies it now relies on — including UPS, FedEx and the United States Postal Service — with its homegrown delivery service. Its logistics investments have also fed the general theory that Amazon has become essentially unbeatable in American e-commerce — no doubt one reason Walmart, the world’s largest retailer, felt the need this week to acquire an audacious Amazon rival, Jet.com, for $3.3 billion."

    But Manjoo doesn't think this is entirely accurate: "First, it’s not trying to replace third-party shippers. Instead, over the next few years, Amazon wants to add as much capacity to its operations as possible, and rather than replace partners like UPS and FedEx, it is spending boatloads on planes, trucks, crowdsourcing and other novel delivery services to add to its overall capacity and efficiency.

    "Amazon’s longer-term goal is more fantastical — and, if it succeeds, potentially transformative. It wants to escape the messy vicissitudes of roads and humans. It wants to go fully autonomous, up in the sky. The company’s drone program ... is central to this future; drones could be combined with warehouses manned by robots and trucks that drive themselves to unlock a new autonomous future for Amazon."

    To be sure, this is a somewhat fantastical and long-term vision; but Amazon founder Jeff Bezos, after all, is a guy who has invested in a space flight company. And the column is worth reading here because it outlines not just what the strategic vision may be, but the thinking behind it.

    But here's one more tease, from Manjoo: "If Amazon’s drone program succeeds (and Amazon says it is well on track), it could fundamentally alter the company’s cost structure. A decade from now, drones would reduce the unit cost of each Amazon delivery by about half, analysts at Deutsche Bank projected in a recent research report."

    Check out the column here.
    KC's View:

    Published on: August 11, 2016

    • The Wall Street Journal has a story about how Walmart's $3.3 billion acquisition of Jet could jeopardize Jet's ability not to charge sales tax in most states.

    The reasoning is pretty simple. "A 1992 Supreme Court ruling allows online retailers to avoid collecting sales taxes in states where they don’t have a physical presence like a warehouse, a local store or office," the Journal writes, which has allowed Jet, a company with limited physical facilities to this point, to say that it was cheaper because it did not have to charge such taxes. But Walmart has physical facilities everywhere, so that advantage could be erased.

    Experts say that to some extent, it may depend on how the deal is structured. But the larger likelihood is that Walmart and Jet believe that whatever the tax implications, the two companies are stronger together than apart as they try to compete with Amazon.


    Recode reports that when Walmart purchased e-commerce startup Jet for $3.3 billion, it locked in Jet founder Marc Lore for at least five years, with the contract stipulating that "if Lore doesn’t stay for all five years, he’d forfeit a chunk of his giant payout both in cash and stock. A portion of the $3 billion in cash Walmart is coughing up will be paid out over five years. The same goes for the additional $300 million in stock tied to the incentive plan for Lore and other Jet executives."
    KC's View:
    I wonder what the betting odds might be that Lore will remain happily within the Walmart system for five years. When you;re talking about hundreds of millions or billions of dollars, exactly how much is a "chunk?" And once you have a certain amount of money - let's say a hundred million bucks - how important is it to stick around a place if you're not happy?

    I'm just asking.

    Published on: August 11, 2016

    Reuters reports that Walmart de Mexico "has agreed to sell its Suburbia clothing chain to El Puerto De Liverpool for about $852 million," as the company endeavors to streamline operations there. The Suburbia chain consists of 119 stores.

    According to the story, "Wal-Mart's international division, which contributes roughly one-third of the company's total annual sales of nearly $480 billion, has divested some non-core businesses across Chile, Mexico and Canada in the past two years."
    KC's View:

    Published on: August 11, 2016

    • The Baltimore Sun reports that Lidl, the European discounter with plans to begin opening stores in the US by 2018, has announced its plans to open an 800,000 regional headquarters and distribution center in Perryville, Maryland, about 45 miles northeast of Baltimore.

    Lidl's initial focus, from all reports, seems to be on the eastern US, where it conceivably compete with such players as Aldi, Giant, Stop & Shop, Food Lion and Save-A-Lot, among others.
    KC's View:

    Published on: August 11, 2016

    • In Minnesota, the Star Tribune reports that Target Corp. has hired Preston Mosier, a former Amazon executive, to be its new senior vice president of fulfillment operations.

    The Star Tribune writes that "Mosier will report to Arthur Valdez, a 16-year Amazon veteran who joined Target this spring to be its chief supply chain and logistics officer. Amazon initially sued Valdez when he took the job with Target, worried that he would spill trade secrets and alleging that he violated the online giant’s noncompete clause. A Target spokeswoman confirmed that the two parties have settled the issue. Terms of the agreement are confidential, she said.

    "That will not be an issue for Mosier, who worked at Liquidity Services, an online auction marketplace, for five years after leaving Amazon, where he led the start-up and operations of various fulfillment centers."
    KC's View:

    Published on: August 11, 2016

    John Saunders, the longtime and highly accomplished ESPN and ABC sports play-by-play announcer, commentator, studio anchor and host of "The Sports Reporters" on ESPN, has passed away. He was 61, and the cause of death has not yet been announced.

    Sportswriter Mike Lupica has a lovely piece about Saunders that you can read here; we should all live lives that allow us to be remembered so fondly.
    KC's View:

    Published on: August 11, 2016

    Got the following email about the Walmart-Jet deal:

    Having worked at Walmart last year, the Jet acquisition will help Walmart on the technology side, but the impact will be minimal for many reasons, and here are a couple:

    More people use Amazon to start a product search (over 30%) than Google.  This is a huge advantage, and a Jet-Walmart combo has no impact on this because as you mentioned, Amazon is operating in a different sphere.

    Amazon has a distribution network that Walmart can’t match (for consumer orders).  Yes, Walmart has lots of stores, but they don’t know what their inventory levels are.  A Walmart associate told me their store inventory was 50% accurate, but they don’t know which 50%.  This isn’t only a Walmart problem, as most retailers are in the same boat.  The same thing would happen to Amazon if they opened up their warehouses and had thousands of random consumers roaming through the aisles, picking stuff up and putting it back somewhere else.

    I’ve used Jet, and it’s OK, but right now, nothing beats the ease of use of Amazon, not just the app, but the whole experience.  Amazon has earned my trust.  I don’t know what Walmart, or anyone else for that matter, can do to overcome this.


    Agreed. And once again, I refer you to the Farhad Manjoo piece in the New York Times about this subject that can be read here.

    Along the same lines, we got the following email from MNB reader Maurine King:

    I appreciate your comments so much regarding e-commerce which I do follow.  I am a Star Trek fan…and also remember a cartoon from way back called The Jetsons.  It was a family that lived in the sky and worked three days a week.  They had a robot maid called Rosie who was the best!  I remember Mr. George Jetson talking to his boss and looking at him on a screen as he spoke to him.  Who would have ever thought we would be able to do the same thing…which we can now, thanks to Facetime!  What was “futuristic” is here to stay!  Just couldn’t help but share where we once were and where we are headed in the future!




    On the subject of the coming Wegmans-Publix battle in Richmond, one MNB user wrote:

    This should be very interesting indeed. I’ve visited several Wegmans’ before, but I’ve competed with Publix. I worked for a retailer headquartered in Birmingham several years ago, and when Publix entered that market, we studied them inside and out in preparation for their entry into the market.

    Where Publix shines, at least in my opinion, is in their operational execution, their stores are always conditioned, well-staffed and there is a sense of urgency in the way their employees go about their business. Especially on the front end, and they keep all their perimeter shops well-staffed…especially their bakery which sets the stage for the balance of a shopping trip. They don’t blow you away with variety or complex merchandising techniques, so their stores are not visually interesting, or exciting. They just do what they do really, and I mean really well.

    And that can win the higher income, well-educated consumer in many markets where competition is leveraged from a labor standpoint, or against those retailers that operate in an operationally restricted mode.
     
    Wegmans is a completely different ballgame. Wegmans’ stores are visually stimulating, their display techniques and variety are complex…which necessitates a great deal of conditioning, therefore labor to maintain. And by all accounts, their customer service is stellar. It will be interesting to see a well-oiled operations driven company like Publix  go up against a merchandising driven company with outstanding operational execution like Wegmans.

    It’s a great win for the customers in the Richmond market.





    On another subject, from another reader:

    Regarding the Hampton Creek mayo story, where people associated with the company may be posing as customers and “hyping” sales by purchasing and requesting the product – am I the only one who recognizes this possible behavior as unsurprising?

    I spent many years (pretty good ones, I might add) in the “trenches” of retail 30 or more years ago, and began by working at store and district level in my region doing the kind of hands-on service and store activities that were common in those days. Before there were corporate planograms or easy access to POS data, stores mostly used individual store sales as guidelines for space and trusted both brand and third party supplier reps to keep their shelves up to date with new items. There were rules of behavior, but it was a daily form of trench warfare that was much more local and personal than the headquarters-based systems in place today. And it was common, as a rep for what might be a marginal product at risk of deletion, to buy some to generate movement. If the item was important enough and there was enough invested in its success, there were crude but common efforts to engage friends, neighbors, relatives – all to ask for the product, to raise its visibility, or to buy a couple to hype its movement. Usually there was a goal – a coupon drop, and FSI, a TV campaign – that was scheduled to support the item and we had to work to keep it cut in on the shelf until the media cavalry arrived.

    This story sounds like a difference of degree, certainly, and for a different purpose. But the method sounds awfully familiar.

    Sometimes I feel like I woke up from a nap with the TV on and the world is running a black-and-white movie from about 1946. The characters are cardboard the plot is simplistic, the action is jerky, there are no special effects – but you can recognize all the devices and maybe even a few actors and you feel like you have seen this before. There are new things under the sun – but also a lot of old ones that keep coming back.

    KC's View: