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    Published on: August 15, 2016

    by Kevin Coupe

    The New York Times over the weekend had a story about a new food delivery app called Combrr, which is designed to allow beachgoers on Rockaway beach in Queens "to buy items from concession stands from their towels, avoiding lines that lately stretch clear across the boardwalk ... Combrr, which is expected to appear soon in the Apple App Store, will initially deliver food from two vendors: CitySticks and Breezy’s BBQ. At first, just two people will deliver orders, biking up and down the boardwalk and traipsing across the sand. By next summer, its creators envision hiring more than a dozen runners to deliver from all three Rockaway Beach boardwalk concessions, and from nearby restaurants."

    The story goes on: "Combrr works a lot like Uber: Customers drop a pin at their location. Vendors can accept or decline an order, and customers can track its progress from the app. There’s a $5 delivery fee, and the entire transaction, including the tip, is done digitally, bypassing the city’s requirement for a permit to sell items on the beach.

    "But in addition to geolocation technology, Combrr relies on customers’ selfies and instructions. A sample note: 'We’re wearing pink bikinis sitting under a polka-dot umbrella on 99th'."

    I can remember as a kid seeing guys walking up and down the beach out on Long Island with coolers of ice cream, but this clearly takes that time-honored pastime to a new level.

    Here's the quote that grabbed me from the Times story. Matthew Blance-Stephany, one of the partners who developed the app, says that "everyone has been talking about" doing something like this. But, "We’re the ones doing it.”

    And that's how technology creates jobs. And businesses. And an MNB Eye-Opener.
    KC's View:

    Published on: August 15, 2016

    USA Today has a story about how a number of the nation's bricks-and-mortar retailers are closing hundreds of stores this year, as they face heightened competition both from physical and virtual competitors.

    Among them: Macy's, which is closing 100 of 675 stores because of "falling profitability;" Sports Authority, which is closing all of its 460 stores after it declared bankruptcy but failed to restructure its debt or find a buyer for the company; Walmart, which is closing 269 stores around the world, including 154 in the US that were profitability-challenged and did not fit into its broader strategic goals; Aeropostale, which filed for bankruptcy in May and said it would close 113 of its 739 US stores and all 41 of its stores in Canada; Kmart-Sears, which is closing 68 Kmart stores and 10 Sears stores in addition to the closure of 50 other units announced earlier this year; and Ralph Lauren, which said it would close "at least" 50 stores this year as it tries to create a leaner, more nimble organization.

    Not all of these chains are facing the same issues, catering to the same customers, or choosing the same strategic paths, of course.

    Even as Walmart closes stores, it is investing $3.3 billion in the acquisition of e-commerce startup Jet, which it hopes will make it more competitive with Amazon.

    In the Chicago Tribune this morning, business columnist Phil Rosenthal has a piece in which he writes that it "turns out that making Macy's more efficient — swallowing up other department store chains and capitalizing on economies of scale — made its stores less interesting when being interesting was what was needed most ... If you've been to one Macy's, you feel like you've been to them all, and a consistency one might find welcoming when choosing a fast-food place to eat or a place to stay on the road does little for department stores streamlined into dull adequacy."

    Dull adequacy. Ouch.

    Meanwhile, the Wall Street Journal this morning has a story about how Home Depot and Lowe's "appear to have built a retail oasis mostly walled off from the reach of online behemoth Amazon ... Executives from the home improvement chains cite a litany of favorable housing trends for their good fortunes. New households are being formed and housing turnover remains steady. Millennials are even willing to buy homes, albeit six years later than normal, according to Home Depot. All that spurs trips to large chains to pick out appliances and paint colors, and plan projects around the home."

    However, the Journal also notes that neither home improvement chain can take these trends for granted: "A UBS survey in June found that 11% of consumers planning a home improvement project themselves planned to buy something from Amazon. That is far behind the 36% who said they planned to shop at Home Depot and the 21% at Lowe’s, but up from just 7% a few months back."

    Rosenthal's column in the Chicago Tribune suggests that what physical retailers have to do is "bring back the wow factor. Make them fun. Make them entertaining. Make them destinations in and of themselves. Use the real estate to plant a flag, the staff and space to give consumers an experience that sells the chain as much as the merchandise.

    "There's an opportunity — and necessity — to bond with would-be customers in all the ways that online clearinghouses can't touch despite being at everyone's fingertips."

    The problem, he suggests, can be summed up in one question: "How often is a visit to Macy's fun?"
    KC's View:
    There will be some who will suggest that the bricks-and-mortar retailers are suffering at the hands of e-commerce companies that are, in the end, killing jobs and wrecking America in the process. But it seems to me that these retailers are suffering from their own ability to change with the times, to sense and act on new trends, and find new ways to be relevant to the shopper.

    I feel bad about it, but I cry no tears for Macy's, for example. I wonder how many small stores it put out of business because of its ability to buy better and cheaper, and market more aggressively? How many people lost jobs when it acquired companies and found efficiencies that allowed it to cut staff and costs? The problem is that at some point, the hunter almost always becomes the prey ... and the companies that are closing stores and trying to figure out next steps simply were not ready for the moment.

    Published on: August 15, 2016

    The Wall Street Journal has a story about how, despite all its efforts to turn around its grocery business, Target continues to find that its shoppers "aren’t visiting often enough to buy the retailer’s fresh meat, fruits and vegetables before they spoil."

    The result, the story says, is that perishable foods are, in fact, perishing ... and taking profitability with them. At the same time, Target says that "customers were making fewer trips for smaller purchases."

    According to the story, "Target’s board of directors has been wary of capital-intensive options to improve groceries after being unable to generate meaningful returns from previous investments, according to people familiar with the matter.

    "The issue, in part, is that Target’s supply chain wasn’t built to transport items with a short shelf life. Perishables currently are funneled through one of the company’s four food distribution centers or through infrastructure owned by C&S Wholesale Grocers."

    That said, defenders of Target's current positioning say that it is still in the early stages of re-inventing its approach to grocery, and that the company has to be given time to change the way it operates, which it hopes will change its image, resulting in a change to shoppers' habits and, finally, higher profitability.

    But COO John Mulligan describes the current problem this way: "We sit in the middle. We’re not really special and we’re not a full grocery. And so we’re sitting in the middle of no man’s land."
    KC's View:
    "We're not really special?" That's a helluva way to describe a retail business ... especially your own retail business.

    Mulligan, it seems to me, pretty much summed up in 26 words all the reasons a retail business might not survive.

    Yikes.

    Published on: August 15, 2016

    The New Yorker, as is typical for the magazine, has an excellent think piece about Walmart's $3.3 billion acquisition of Jet, which it frames as being one way for Walmart to have access to the entrepreneurial sensibilities of Marc Lore, who founded Jet as a competitor to Amazon.

    However, in creating Jet's customer culture from scratch, Lore has positioned the company in some ways as being both the anti-Amazon and the anti-Walmart. And now he has signed a deal that reportedly will keep him inside Walmart for at least five years ... and Walmart CEO Doug McMillon has specifically described Lore's "entrepreneurial spirit" as central to the deal.

    "The question is whether that spirit will last, and, if so, for how long—even with Lore at the helm," the story says. "In any acquisition of this size, questions invariably emerge about what business-school professors call 'integration' - the acquirer’s ability to absorb another company without losing whatever it was that made the target company successful. Corporate culture, though nebulous and ill-defined as a concept, is seen as central to whether deals work or not."

    The story goes on:

    "Jet was able to use its generous venture-capital funding, and a lack of interest in becoming immediately profitable, to be generous to its employees; Walmart, on the other hand, is known for being stingy in the interest of generating profits. When it expanded its Silicon Valley presence to try to better compete for tech employees, an executive - the person Lore will be replacing as head of Walmart’s e-commerce operations - told the Times, 'We are of Walmart and Silicon Valley at the same time. So we have a great cafeteria, but we don’t pay for all your food'."

    You can read the entire piece here.
    KC's View:

    Published on: August 15, 2016


    • The Financial Times also has an analysis of the Walmart-Jet deal, and says that one reading of the tea leaves suggests that "Lore’s job is less about trying to catch up with Amazon and more about competing against its traditional rivals of Target and Costco to be the second-most-visited site in the US — currently held by eBay."

    And, FT writes, "The challenges for Mr Lore will be manifold. He will need to balance his time running Jet.com with Walmart’s e-commerce operations, which is more complex than simply investing in its online site. Like other traditional bricks-and-mortar retailers, successfully integrating e-commerce with physical stores is crucial."

    One venture capitalist puts it this way: "Avoiding organ donor rejection is the challenge. You need that different DNA, but is it so different that it doesn’t work?”
    KC's View:
    Good question.

    Published on: August 15, 2016

    The Fresh Market, which is undergoing a rebuilding program under new CEO Rick Anicetti and new ownership by Apollo Global Management, announced that it has chosen Supervalu as its new wholesaler, with Anicetti saying that its "experience in wholesale grocery and logistics capabilities aligns well with our strategic vision."

    According to the announcement, "The parties intend for Supervalu to become The Fresh Market’s primary distributor upon the transition of The Fresh Market’s current distributor relationships. Supervalu anticipates it will begin serving some of The Fresh Market’s stores in the fall and will take on additional stores as the transition continues."
    KC's View:

    Published on: August 15, 2016

    • The Dallas Morning News has a story about why Walmart's efforts to get traction in urban markets - other than Dallas, where it has been successful, as it happens - has been blunted by tough competition (like from HEB) and a variety of other factors.

    And it includes a pretty interesting graphic presentation ... and you can see it all here.
    KC's View:

    Published on: August 15, 2016

    • The Chicago Tribune reports that Mondelez International has announced " agreement to buy the license to make and distribute Cadbury biscuits from U.K.-based Burton's Biscuit Co ... The cookies will continue to be manufactured in Burton's factories under a co-manufacturing agreement, the release said."

    Terms of the deal, which is subject to regulatory approvals, were not disclosed.


    • Dollar General last week announced that it has opened its 13,000th store - in Birmingham, Alabama - and it said the store is just one of 900 planned new stores in 2016 in the 43 states it serves.
    KC's View:

    Published on: August 15, 2016

    • Actor Kenny Baker died over the weekend at age 81, of lung disease. While most people may not know his face or name, the fact is that he played one of the most beloved characters in all of movies - he was the three-foot-eight-inch actor who was inside robot R2-D2 in the first six Star Wars movies.
    KC's View:

    Published on: August 15, 2016

    We had a story the other day about a study suggesting that self-checkout systems promote lawlessness - that otherwise honest people, when given the opportunity to check themselves out at the store, are more likely to steal.

    I commented:

    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.


    MNB reader Randy Adams responded:

    I agree with your statement. I don't think an honest person is going to steal just because it easy to do so. Folks who had to risk getting caught shoplifting can now simply ghost scan and achieve the same results.

    From MNB reader Evan Fox:

    These study results are indeed disheartening. I wonder, though, how the self-checkout fraud stacks up against the labor plus the notorious employee shrink in staffed lanes.

    MNB reader Rich Heiland wrote:

    I have to admit that when I saw the article about self-scanners stealing it really brought me up short. My wife and I have used that option at our local Kroger, Walmart and Home Depot and it never crossed my mind that people would use it as an opportunity to steal. But even after reading the story twice, I had to wonder if the problem really is that big.

    I have had several clients who, when faced with "leakage," wanted to jump to all kinds of security measures to prevent it. My question always was "do you know, do you really know, just how big a problem this is and whether it needs a solution?" My reason for asking was that the solutions would cover every customer, sending the message "we value your business, but we really don't trust you." I would ask my clients a question they often struggled with: "Is this leakage simply a cost of doing business in a way that creates a WOW! customer experience?" If the option is to put a wet blanket of mistrust over the experience for all your customers, is that really a solution?

    I for one hope the self-scanning is here to stay.


    From another reader:

    Does Self-Checkout Promote Lawlessness or does the retailer make the system too complicated?  At my local Home Deport your only choice is self-checkout.  Their system is different form Lowes, Kroger and everyone else.  A retailer’s cashiers should go through extensive training on store systems operations.  Yet they assume that the customer has had the same training, and force them to the self-check for “labor” savings.  The 4% maybe due to thief or poor customer training on the retailer’s part.

    And another:

    I was one told by a loss prevention person that 10% of the people will never steal from you, 10% will always steel from you and the other 80% will do what the environment allows.
     
    Yes, distressing.


    And from MNB reader Robert Dyer:

    Well, it is about time some non-bias research has come out on this.  While at Walmart, I witnessed long lines at the self-checkout area while the manned checkouts had no lines; and the people did not want to do to the manned checkouts when invited.  Why do you think that would be (dripping sarcasm)?  And in a lot of market areas, the shrink numbers are exploding vs. previous year trends.

    I agree with you that it is a disappointing and distressing realization of the state of society.





    And finally, on another subject - my cross-country drive last week - one MNB user wrote:

    Kevin, go glad you touted the wonderfulness this country has to offer.  While I’ve never driven cross-country, I do drive a lot (often taking different routes and side roads) and travel a lot, and I love it (both the travel and the country).  I also wanted to comment on the pictures of your meals.  It occurred to me that you probably dine out alone when making a trip like this and seem to relish trying new places and meeting the “locals”.  I hear too many people I know and work with who “just grabbed something from McDonalds/Taco Bell/Panera/etc” because they feel that eating alone is strange or that people will look at you funny.  You’d probably agree that they are so, so wrong. 

    Life is made up of experiences, whether that be in visiting a city you’ve never been to, a new state, a restaurant, or a walk on a forest trail.  Not taking advantage of what is out there, to me, is akin to locking yourself in your room and shutting down.  Enough of my rant.  Glad you had a safe and enjoyable trip.


    On the other hand ... when spending the night in Rawlins, Wyoming, last week, I decided to have dinner at a local spot, Penny's Diner. I walked in looking forward to nothing more than a great sandwich, maybe a shake, and a piece of pie. And pretty much everything I ordered was inedible, and the service was lousy.

    Just think it is important not to over-romanticize local spots. Most of them are pretty good, but some of them are just awful.
    KC's View: