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: February 2, 2017

    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.

    I've been on the road for the last week or so, starting in Los Angeles where I had the privilege of spending Friday morning teaching at the excellent Food Industry Management program run by the USC Marshall School of Business in Los Angeles. A great bunch of people - thoughtful, willing to ask provocative questions and not accept easy answers, and reassuring in the sense that one gets the feeling that if this is the quality of the next generation of leadership, the food industry is in good hands.

    From there, I drove to Scottsdale, Arizona, for the Food Marketing Institute (FMI) Midwinter Executive Conference ... but rather than stay in the official hotel, I chose to take a room at Moxy, a new format operated by Marriott. Moxy is not designed to appeal to business travelers like me, but rather to a younger, definitely hipper class of traveler. But I wanted to experience it for myself, because I'm intrigued by the trend in the hotel business of creating a range of differentiated formats that will appeal to people who simply don't think that yet another beige room is the best way to go. (I may be older than their target customer, but I've spent enough time traveling to feel exactly the same way.

    What I found at Moxy was a vibe that was somewhere between a frat house and a youth hostel, though a lot nicer than both ... I backpacked around Europe a bit when I was young, and can't say that I have any yearning to relive the hostel experience...) Walk in the front door, and you can't quite tell where to check in ... until it becomes clear that the person tending bar also is checking in guests. Worked for me ... and it also enabled me to learn that they had several local craft beers on tap at fairly cheap prices.

    You'll get a little bit more of a tour in the video and the pictures, but suffice it to say that the room was unique, dominated by a beanbag chair the size of a small car ... pretty comfortable to sit in, if a little difficult to climb out of. (At least for me.) The room was kind of funky, with interesting artwork, a working guitar, and no closet or dresser ... just hooks that ran along the length of the wall.

    The bed was plenty comfortable, and the bathroom had a stall shower - which I absolutely love in hotel rooms. Interestingly, the flat screen television only allowed access to about 10 local channels - no cable networks, including no news ... which wasn't necessarily a bad thing considering how things were transpiring back in DC. I wondered about this, and finally realized that this is probably because most younger people bring along their own entertainment ... and the TV did allow the guest to hook into Netflix or a bunch of other entertainment options.

    Moxy isn't for everybody, and isn't even necessarily for me ... but that's sort of the point. Marriott, in testing out this concept, isn't shooting for a lowest common denominator experience, because they know that these days, that'll only get you so far.

    I think we're going to see a lot more of this going forward, and I think it serves as a strong lesson to every retail segment, but especially the food business. It is critical, I think, not to offer the retail equivalent of just another beige room. It is critical to be constantly testing different kinds of formats with different kinds of appeal .... even if they don't completely work, they'll provide a level of learning that you might not get in any other way.

    This, of course, is especially important at a time when there is so much more competition, including the kind that comes from online merchants such as Amazon. Compelling shopping experiences become more important than ever ... and so does attacking the challenge with moxie.

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

    KC's View:

    Published on: February 2, 2017

    by Kevin Coupe

    Anheuser-Busch InBev has produced a Super Bowl commercial for its Budweiser brand, which also can be seen on YouTube and at left, with implications that could plunge it right into the middle of the ongoing immigration debate.

    Called "Born The Hard Way," the minute-long commercial gives us a glimpse of the arrival of Adolphus Busch in the US from Germany in 1857. At one point, Busch is accosted by people - presumably Americans who themselves must've been the descendants of immigrants - who shout, “You’re not wanted here,” and “Go back home.” (He gets a lot warmer welcome when he arrives in St. Louis.)

    The Los Angeles Times notes that the commercial was first conceived in early 2016, and shot last October - before the election of Donald Trump to the US presidency. The Times also notes that "the commercial has racked up more than 2.6 million views on YouTube ... It has drawn a lot of attention, with some hailing the pro-immigrant storyline and others decrying it."

    Count me among the people hailing it. I think it is good to be reminded of the kinds of contributions that immigrants and the children of immigrants make to our country - in science, technology, culture, arts, athletics, food, wine, and yes, beer.

    Of course, one marketing professor - Russell S. Winer, of the New York University Leonard N. Stern School of Business - suggests that most Americans “will like the ad, as they don't think of immigrants from Europe the same way as immigrants from Africa or Muslim countries in the Middle East."

    That may not stop some people from criticizing the ad, which is made by a company based in Belgium for a beer brand that has its roots in Germany. But then again, those people probably have forgotten that they are the descendants of immigrants as well.

    Enjoy the commercial. In its own way, it is an Eye-Opener.

    KC's View:

    Published on: February 2, 2017

    The Northwest Arkansas Democrat Gazette reports that Walmart is taking yet another stab at creating a convenience store format, opening a new one this week in Rogers, Arkansas, that is at the entrance of a Walmart Supercenter.

    The 2,500 square foot building, according to the story, "offers a hot food bar where customers can grab paninis, nachos, hot dogs or sausages. There is a walk-in cooler stocked with domestic, imported and craft beer. The store also includes a soft-serve ice cream machine with multiple flavors. Wal-Mart has even stocked the store with a few grocery staples like milk, eggs, frozen meals and pizzas. In addition, pre-made sandwiches and salads are available."

    The story goes on: "It's not unusual for Wal-Mart to test smaller-store formats. The company began opening Wal-Mart Express stores with an average size of 12,000 square feet in 2011, but decided to close 102 of them across the U.S last year. Wal-Mart also has opened college campus stores ranging from 3,000 to 5,000 square feet, although some of those have closed as well ... Last year, the retailer began testing a concept called Wal-Mart Pickup and Fuel in Huntsville, Ala., and Thornton, Colo. In addition to fuel stations and convenience selections, customers also can order groceries online and pick them up at those stores the same day."
    KC's View:
    Walmart has been pretty relentless about testing small store concepts, even after results that have been less that satisfying. They keep trying ... it is sort of like Groundhog Day.

    One reason may be that they see these small stores as being potentially an important link in any chain that connects its e-commerce business to consumers; if it can create a successful c-store format that also could serve as a delivery depot for products sold online, it would be seen by some as a legitimate response to Amazon's approach.

    Published on: February 2, 2017

    Fortune reports that Walmart, Target and Best Buy are among the major US retailers joining together to put "pressure on the Trump administration not to push its proposed so called 'border adjustment tax' on imports it says will cost everyday Americans hundreds of dollars a year."

    According to the story, these retailers are part of a group of more than 100 that have created "the new Americans for Affordable Products group, which has the backing ... of the National Retail Federation and the Consumer Electronics Association and whose creation was announced on Wednesday. The group also includes food and beverage and automotive companies and trade organizations."

    The target is not just a tax on products originating in Mexico, but a border adjustment tax (BAT) that would be imposed on all imports. "The BAT," writes. "is a part of the U.S. House Republican tax reform proposal, that would impost a 20% levy on imported goods. The tax, which aims in part to finance President Trump's proposed wall along the Mexican border could be particularly painful for retailers: Some 97% of all clothing and footwear sold in the U.S., and more than 90% of electronics, are imported. Items like sugar, coffee and many foods could also be hit."

    The story goes on to say that "the Congressional Republicans' plan wants to eliminate tax incentives that spur American companies to move overseas, reduce the corporate tax rate to 20% from 35% with a view to spurring production in the US." But, retailers point out that they "cannot easily or quickly switch to domestic sources because they don't exist for many goods bought by U.S. consumers. The group estimates that if passed, the BAT will cost American households up to $1,700 a year . What's more, with soft sales at many chains and higher labor costs, many retailers' profit margins could take massive hits."
    KC's View:
    Some folks seem to think that for business, it'll all be a wash - that higher costs on products will balance out against higher profits that come about as a result of lower taxes. The question is whether this same sense of balance will be felt by consumers, or whether product prices will be offset by lower personal taxes.

    While I'm as much in favor of lower taxes as the next guy, what always occurs to me is that while federal taxes may go down, my state and local taxes could go up ... the burden doesn't get eliminated just moved ... and still, ultimately, ends up on the consumer's back. In addition to the higher prices. And so while it might look like it'll all be a wash, I'm not persuaded that it won't affect retailers' bottom lines.

    Published on: February 2, 2017

    Unata and Brick Meets Click are out with an annual report about projected growth in the e-grocery business, suggesting that "31% of U.S. shoppers are likely to order groceries online in 2017, up from 19% of shoppers that bought groceries online in 2016." In addition, the report says that "80% of shoppers who bought groceries online in 2016 plan to do so again in 2017."

    In addition, the report says that "68% of shoppers who shopped online last year said that they are ‘somewhat’ or ‘very’ likely to switch grocers to one with a better online shopping experience," which points to the importance of having both a differentiated and compelling online experience.
    KC's View:
    This study comes out the same week as Nielsen does one saying that within a decade, 20 percent of total grocery store sales and 40 percent of center store sales will be digital. You'd think that this stuff would get retailers' attention.

    While I tend to be in the camp of people who think that e-grocery will be an enormous long-term success, and that we're very much in early days right now, I do have to offer one caution. These are all projections. Sure, they're based on research, and the people doing the research are smart people. But they're projections.

    In other words, guesses. (Good guesses, though. I think.)

    Published on: February 2, 2017

    • The San Francisco Chronicle reports that Walmart has agreed to pay close to a million dollars to settle a lawsuit charging that it sold products labeled as “biodegradable” or “compostable," but were in fact plastic.

    The story says that "the selling of items with disingenuous labeling is in violation of California law ... The judgment bans Walmart from selling plastic products labeled biodegradable or compostable, unless such claims are backed by scientific certification."

    As part of the agreement, Walmart did not have to admit any guilt.
    KC's View:

    Published on: February 2, 2017

    • The new New Seasons Market on Mercer Island, Washington, has partnered with Amazon to provide delivery of its products to Prime Now customers in Seattle-area communities that include Bellevue, Issaquah, Laurelhurst, Renton and West Seattle. Other Seattle retailers teaming with Amazon to deliver to Prime Now shoppers include PCC Natural Markets, Uwajimaya, Bartell Drugs and a number of local restaurants.

    One-hour delivery is $7.99 and two-hour delivery is free. New Seasons Market is available through Prime Now from 8 a.m. - 10 p.m. seven days a week.
    KC's View:
    This move enables New Seasons to have a footprint that extends beyond the neighborhood where it currently is operating, which is a smart move since the goal is for New Seasons to be operating in more neighborhoods in Washington State. This is a good way to spread the word and generate some incremental business that they might otherwise not get.

    I'm always a little leery about the Amazon Prime connection, just because I worry about retailers teaming up with the enemy. But I get the impulse, and trust that my friends at New Seasons are being vigilant about making sure that their business remains their business.

    Published on: February 2, 2017

    • The National Retail Federation (NRF) is out with a study predicting that love is going to be a little less costly this Valentine's Day: "US consumers are expected to spend an average $136.57, down from last year’s record-high $146.84. Total spending is expected to reach $18.2 billion, down from $19.7 billion last year, which was also a record."
    KC's View:

    Published on: February 2, 2017

    Black Enterprise writes about Starbucks' decision to name three new members of its board of directors - Rosalind Brewer, an African-American who is the former CEO of Sam's Club; Satya Nadella, an Indian-American who is the CEO of Microsoft; and Jorgen Vig Knudstorp of Denmark, who is executive chairman of the Lego Brand Group.

    The move, Black Enterprise writes, makes the Starbucks board "one of the most diverse boards in the nation ... Starbucks will now have a board of 14 people, with 29% being female and 36% as ethnic minorities."

    “I’ve tried to create an environment within the board that would be culturally similar to that of the company,” says Starbucks chairman Howard Schultz. “People with like-minded values, domain expertise, diverse and deeply committed to transparency with a comprehensive understanding of our aspirations."
    KC's View:
    You have to give Schultz credit. He doesn't just talk the talk.

    Published on: February 2, 2017

    I took the Amtrak from Seattle to Portland yesterday, which gave me plenty of time to go through all the emails I've gotten while traveling the past week or so.

    I wrote yesterday that I was surprised by the fact that executives to whom I'd been speaking had not requested lists of products that they sell that originate from Mexico or have ingredients from Mexico, which struck me as potentially important if the Trump administration establishes some sort of border tax on Mexican imports.

    This prompted one MNB reader to write:

    I’d guess that the reason the executives you spoke with haven’s asked their people to compile a list of their products that are produced in Mexico is because they already have that list. I think it’s safe to assume that any executive knows exactly where any of their products are produced.

    I think you'd be surprised. In fact, I've talked to people who have told me that most retailers, if asked for an exhaustive, complete list of all the vendors with which they do business, actually cannot come up with that list. (CEOs tend to think the list exists, until disabused of that notion by the CFO.) This is a real problem when it comes to food safety, when such a list is critical to making sure that traceability is easy and insurance coverage is sufficient. But it also suggests to me that the list you think is so readily available probably isn't.

    On the subject of the new Mr. Clean ad that Kate McMahon wrote about yesterday, one MNB reader wrote:

    I found the Mr. Clean ad very funny; I loved it.  Is it sexist and demeaning? Yes.  But I choose to look at it from a broader perspective.  As a girl, I grew up in the sixties where I was taught that men and women were supposed to be equal.  But I ended up in a relationship (now former relationship) where I was expected to do all the ‘woman’s work’ despite working full time and carrying a second part-time job.  I see the ad as promoting a bigger message:  that a relationship is a partnership.  And when both partners help each other out, it makes for a more successful relationship.  I can overlook the tight pants and sexy moves if it teaches even just one person it’s OK to roll up your sleeves and pitch in – at home or at work.

    We took note the other day of a new Food Marketing Institute (FMI)/Nielsen report about the "Digitally Engaged Food Shopper" analysis, designed to "offer a comprehensive look into the behaviors, motivations and expectations of the digitally engaged food shopper. Initial findings from this study show that within the next decade, online food shopping will reach maturation in the U.S., far faster than other industries that have come online before."

    One of the findings ... "Center Store Migration: Center store categories are already migrating online and this migration is expected to continue."

    MNB reader Paul J. Sullivan had a thought:

    Interesting findings it total but I think that point should concern the management teams of those heavily leveraged supermarket operators who have become dependent on  other revenue streams (slotting, incentives, etc..,) from center store product groups. As those business migrates to other channels, those dollars will follow with no likely replacement.  Could be the start of the thinning of the herd.


    Got the following email about the potential border tax:

    Mexico’s Peso has depreciated 21 % in the last year. The USA is the world’s largest Food exporter and Mexico is a top destination for Made in the USA food products. USA Food manufacturers have been forced to raise prices significantly, depressing sales to Mexico. Walmart is Mexico’s largest private employer and number 1 retailer.

    Annual Walmex sales at year ago exchange rates were $25 billion, at current exchange rates now $20 billion, surely a contributor to layoffs in Bentonville.

    Home Depot, HEB, and Costco also manage billion dollar businesses in Mexico.

    In general, Mexicans appreciate the USA and embrace our retailers and products.

    However, there are already rumblings of boycotts. May I politely ask: Who benefits from a trade war?

    There are a lot of folks asking the same question, but not necessarily as politely.

    MNB reader Jim Veregge had some thoughts on the same subject:

    Kevin, thought I’d weigh in on the subject of Tariffs, Import Taxes and other Regulations coming from and going into Mexico.  Thought I’d share a fact that many Americans (outside of the grocery industry) are unaware of.

    Currently, for consumer grocery products going down into Mexico from the United States, Mexican regulations require that each individual item has to be taken out of the case and individually stickered with different versions of information depending upon how far into Mexico that the product is eventually being shipped. The cost that suppliers and import-export companies are having to spend to comply with these Mexican regulations for many products can run up to 20% or more of the cost of each item stickered, causing many products to be uncompetitive in price versus other products.

    In light of this, having the U.S. consider enacting tariffs on products coming up from Mexico when our products going down there are basically being “taxed” with additional regulations does not seem to be quite as egregious as some are stating…..

    MNB reader Tom Murphy had an idea for what stores should do if border taxes are instituted:

    In store signage: “This price increase brought to you by the Trump administration”!

    Regarding Walmart's testing of an organic restaurant in one of its Florida stores, one MNB reader wrote:

    Not sure of the prices that this restaurant charges but it could lead to Walmart carrying even more “healthy” better for you products and start to draw a crowd they are currently low in – High Household incomes  - even if only on a once and a while basis.

    We had a piece recently mentioning that one can actually sign up for Amazon Prime on a month-to-month basis, prompting MNB reader Tom DeLuca to write:

    Wow – monthly installments to Prime would definitely be impactful to driving memberships…which impacts traffic and sales.  The ability to buy two months of membership in Nov and Dec would drive a big shift away from brick and mortar retailers.

    I recently did a piece about why I think parking meters are going to become obsolete ... they represent a desire on the part of many communities to charge people to shop[ on Main Street, which seems silly and counter-productive in an environment where Main Street is under attack by online retailers.

    MNB reader Mark Woodgerd had a thought:

    Parking meters aren’t about the revenue they produce as much as they are designed to keep the parking spaces turning.  If parking is free on Main Street then all the spaces quickly become filled up with office and store workers  who will be there 8-10 hours a day making it so there will never be a parking spot for someone that only wants to run a quick errand or grab lunch.  Most meters are web connected now (at least in my town) so that paying is just a couple taps on your smart phone and you can add an extra 15 minutes if you are running late. 

    You still have to pay but the convenience may make it worthwhile.

    I have no problem with putting time limits on spaces. Say that spaces are for two-hour parking only, and you get a ticket if you stay too long. But, if you can show a receipt from a local store that totals more than $100, say, that was given to you during that period, you get top rip up the ticket.

    MNB reader Terry Mullery wrote:

    Where I reside, Minneapolis, both Macy’s and Barnes & Noble just announced closing of their downtown stores. All that remains is a Target, and that is for the Target corporate employees to shop.  I agree that retail will dry up downtown, and partly because of the inconveniences of downtown shopping.  However, the city governments rely on the income and will not do away with them for as patrons of banking, city/county services, restaurants, and bars need a place to park.  If the restaurants and bar owners had a choice, they would probably like to see the meters go away.

    And, from another reader:

    Here in Sacramento we have new downtown arena for the Sacramento Kings.  To help pay for the arena the city leveraged the parking revenue from city owned parking lots/structures.  They also have gone to a dynamic pricing model for the street parking meters (which can be done using an app and paying with a credit card) whenever the Kings are playing, concerts, special events etc.

    I can tell you that we rarely even think to drive to downtown Sacramento due to the idea that you have to pay to spend money downtown?  How archaic is that?  Like you said in your column cities, malls, etc. should be doing everything to make it easier to get people into their venues and spend money.

    What is sad in downtown Sacramento now is that the local dry cleaners, hardware store, mom-and-pop store will be slowly going out of business because it is much easier to go somewhere where the parking is free and available.

    Parking meters represent old world thinking, not appropriate to a new world of competition. As in so many cases, the meter is running on how much time is left for institutions to respond in appropriate ways, or be rendered irrelevant by the future.

    We recently had a piece about Whole Foods closing some internal food production facilities and outsourcing the work, and one MNB reader wanted to weigh in:

    Your take on the news of WFM closing their internal production facilities seems to me like the wrong way to think about the decision. In a food industry where food safety expertise is at a premium and no corners can be cut, outsourcing to a partner who is focused exclusively on being the best, safest producer of prepared foods may not be a sign of WFM compromising its values, but instead o them realizing that someone else is even more adept at fulfilling their priorities. Let them focus on being fantastic retailers, while other focus on being first-rate, food-safe manufacturers!

    On another subject, got the following email from MNB reader Ryan Murphy:

    I enjoyed reading your take on the NYT article “How Netflix is Deepening Our Cultural Echo Chambers.”  There’s absolutely a lesson here for retailers.

    The article hits on a foundational principle of modern business – greater segmentation leads to greater profits.  Boosted by technology and big data, mass customization allows businesses to serve an ever increasing number of niches that are narrower and narrower.  A great marketer once told me that the Holy Grail of marketing is the ability to narrow a market segment to an individual.  Think about how Amazon does exactly this.

    For retailers, the days of the single grocer serving a community are long gone.  It took me less than a minute to identify 15 different food retailers within five miles of my home.  While there is overlap in the customers each one serves, the successful retailers are pretty clear on the segment(s) they target.  I believe the strongest differentiator is based on economics (Aldi vs. WFM), although selection, service, convenience, etc. certainly hold weight as well.  The retailers who are not successful are the ones stuck in the murky middle and it shows.

    Retailers pride themselves on serving their community.  Yet by designing their business to exploit certain segments, the definition of the “community” they serve changes.  The primary focus is no longer the general population surrounding their store but a slice of that population.  This may help explain the existence of food deserts in populated areas – lots of people but missing the segments that attract retailers.

    So if one buys the argument that Netflix deepens cultural echo chambers, the same may also be true of retailers.  I’m not sure what, if anything, a retailer should do other than be aware that they are a part of this same cultural phenomenon that seems to be gaining steam.

    Responding to my enthusiastic review of the Amazon series, "The Man In The High Castle," one reader wrote:

    I too have watched all of the episodes of this compelling series and like you, don’t fully understand it all. It is troubling to watch but I can’t turn away. Seeing how much our society is changed under both Japanese and German rule is disturbing. The blatant propaganda that is pervasive in the American Reich and the countless ways Americans were forced to adapt in the West is troubling.  Even the mournful opening "Edelweiss" song can bring a tear to the eye and completely adds a new dimension to the version Christopher Plummer sang in "Sound of Music."

    I give high marks (no pun intended) to the creative team for the visuals that convey how complete the American surrender is as part of this series (swastikas everywhere). I’ve never read the book but I’m sure looking forward to the next season.

    Season three should be very interesting, since it will be the first season produced in the current political climate.
    KC's View: