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    Published on: February 3, 2017

    by Kevin Coupe

    Amazon yesterday released its Q4 numbers, and it had a 55 percent increase in profit, to $749 million, from $482 million during the same period a year ago. However, the increased revenue was on a sales increase that disappointed analysts - it was up 21 percent to $43.7 billion, from $35.7 billion a year earlier.

    (Where I come from, a 21 percent increase in revenue is nothing to sneeze at. But stock analysts are notably unreasonable about such things.)

    Still, that is not the number that grabbed my attention.

    Slice Intelligence, which mines receipt data, came out with a report saying that Amazon alone accounted for 53 percent of the growth in e-commerce during 2016. This actually means that Amazon is gaining momentum ... in 2015, its sales represented a mere 40 percent of e-commerce growth.

    Indeed, Slice said that Amazon accounted for 43 percent of total online revenue last year, and 38 percent of holiday receipts.

    Best Buy came in second on this last metric. It accounted for 3.9 percent of receipts.

    Eye-Opening, huh?
    KC's View:

    Published on: February 3, 2017

    by Kevin Coupe

    I was in Seattle early this week and walked by the new Amazon Go store, which got a lot of attention recently when Amazon released a video illustrating how it was going to be a checkout-free shopping experience.

    (You can check out our original story about Amazon Go here.)

    Alas, I could not go in. For the moment, the store is in beta testing, and admission is restricted to Amazon employees.

    But I did notice something interesting that was worth pointing out. And you can see in the accompanying pictures, Amazon seems to be putting foodservice front and center in the store, to an extent I never would've expected.

    There are chefs and kitchen facilities lining the front of the store, easily visible through the front windows. The store may be in beta testing, but they're all busy.

    You can see from the signs that Amazon Go is focused on the meal experience. There are unlikely to be any service departments, but there look to be plenty of options for fresh, prepared - and packaged - foods.

    I'm intrigued, not least because this does not seem to be part of Amazon's skill set. It is fascinating that the Amazon folks are stretching in this particular direction, and it may be just as interesting to see what it comes up with in this segment as it will be to see how the whole no-checkout thing works.

    Very, very interesting. And definitely an Eye-Opener.

    KC's View:

    Published on: February 3, 2017

    In Minnesota, the Star Tribune reports that Target, reeling from declining holiday sales and traffic, has decided that this is the time to back off its "innovation agenda" and "double down on its core business." The story says that "many of the initiatives being halted were launched during the watch of CEO Brian Cornell, but at a time when the company was seeing sales growth. In the last nine months, store traffic and sales have been on the decline with grocery and electronics being particular soft spots."

    According to the story, Target "has killed Goldfish, a secretive e-commerce start-up it green-lighted a year ago, and has shelved a prototype for a robot-infused store of the future that was slated to soon be built, according to four sources familiar with the matter.

    "Other smaller projects from the innovation team also have been eliminated or reduced in recent weeks.

    "The cutbacks have left some within the company unsettled about Target’s long-term plans for growth and innovation, especially as more consumers are flocking to Amazon."

    The company says that it is still committed to finding innovative approaches to various segments of its business, but that this is just a matter of pausing to evaluate its business and making tough choices.
    KC's View:
    The problem is that while Target is retrenching, everybody else is going to be innovating. Nobody is going to wait for Target to catch up. I think it is important to do both. To do otherwise is to concede a kind of defeat.

    Just in general, I hate it when companies start to talk about getting back to fundamentals. For the most part, fundamentals are table stakes. If you're not doing all the basic, core stuff right, it is a little late to get back to them.

    Published on: February 3, 2017

    Bloomberg reports that General Electric, Boeing and Pfizer "are among about two dozen companies that have formed the 'American Made Coalition,' a group representing makers of domestic goods that will promote efforts to overhaul the U.S. tax code. They say the so-called border-adjusted tax would help U.S. manufacturers compete with products made overseas, giving a boost to President Donald Trump’s goal of increasing factory jobs."

    The formation of the group is seen as a direct response to the decision by 120 trade groups and retailers - including Walmart - to back a campaign called "Americans for Affordable Products" that is designed to fight against any border tax.

    “I respect Wal-Mart, but we’re going to have a different perspective on tax reform as Wal-Mart,” says GE CEO Jeffrey Immelt. “I think all of our voices need to be heard.”

    According to the story, "Opponents of the border-adjusted tax say it would force companies to pass the increases to customers -- boosting prices for everything from food and clothing to gasoline and auto parts -- without sparking a resurgence of domestic manufacturing." Supporters of a border tax say that "the proposed tax changes would help domestic manufacturers and contribute to Trump’s goal of boosting jobs in the US."
    KC's View:
    I believe in encouraging American companies to actually make products in America. I'm no tax expert, nor am I an economist, but I kind of wish there were a way to create incentives to make things in the US without taxing imported products, which a reasonable number of people seem to think will help create a trade war.

    Published on: February 3, 2017

    No, it isn't the Super Bowl, which will take place on Sunday. Though with any luck it will be a good game. (The New England Patriots are three point favorites over the Atlanta Falcons. I'm taking the Pats.)

    In fact, for some of us, the best news out of Houston this week is the fact that In-N-Out, the iconic burger chain, reportedly is looking for locations there.

    The Orange County Register reports that the expansion plans come almost six years after the chain first decided to expand into Texas, with a fleet there that now includes 32 restaurants in Dallas/Ft. Worth, San Antonio and Austin. (It has a total of 321 locations.)

    The company only will say that while it is true that it is considering the possibilities, it is premature to speculate.

    But when it comes to In-N-Out coming to town, speculation is a favorite pastime of its fans.

    The Register writes, "For years, In-N-Out has steadfastly remained a regional chain despite having a legion of coast-to-coast cravers begging for expansion outside its core Western market. When it opened its first two restaurants in Texas in May 2011, it was a major milestone for the brand. To ensure quality in Texas, In-N-Out built a second meat commissary in the state.

    "Today, Texas is home to 32 In-N-Out restaurants with two more locations opening soon in Denton and San Antonio, according to its website. After expanding to Texas, In-N-Out created more growth buzz in 2015 when it entered a sixth state, Oregon."
    KC's View:
    Yippee ki yay!

    Published on: February 3, 2017

    NBC News reports on while Amazon "currently has around 45,000 robots in distribution centers across the country," the number is about to grow, since the company "was just granted a patent for a robot that can pack orders, potentially speeding up the fulfillment process ... The retailer already relies on Kiva robots in some of its fulfillment centers to do some of the heavy lifting, bringing shelves of items to humans who fill boxes."
    KC's View:

    Published on: February 3, 2017

    Reuters reports that Macy's and JC Penney have settled a five-year-old lawsuit that charged JC Penney with interfering with an exclusive merchandising agreement that Macy's had with Martha Stewart. Terms of the settlement were not disclosed.

    According to Reuters, JC Penney lost the case initially and was ordered to write Macy's a check for $3.5 million. Both sides appealed the decision, but this settlement ends the appeals process.

    Ironically, the whole thing started with Ron Johnson, then the CEO of JC Penney, made the deal with Martha Stewart as part of his overall efforts to turn around the retailer. Johnson's strategies were not working, and he was fired in 2013.

    The only people sorry to see this thing come to an end will be the lawyers, who are going to have to give up all those billable hours.


    USA Today reports that D-I-Y retailer Lowe's has announced that it plans to hire more than 45,000 seasonal workers to help it get through the springtime rush. According to the story, "The seasonal jobs will include loaders to get products into the hands of shoppers who order online, as well as cashiers, sales people and assemblers who can help put together products for consumers browsing at an actual store."

    The story notes that "there’s a chance that some of the temporary positions may become permanent. Last year, almost 50% of Lowe’s seasonal staff went on to become part-time or full-time employees."


    Barron's reports that while Chipotle saw a 25 percent increase in same-store sales during January, that was not necessarily the good news that one might ordinarily assume.

    In fact, sales were up 25 percent because they were being compared with one of the worst months in the company's history, when it was still reeling from food safety issues that called into question the quality of its food, damaged its brand equity, and threw the brakes on its growth plans.

    This growth "won’t come close to bringing the company back to its former glory," Barron's suggests, and it could be running out of time.

    Anyone who thinks that food safety is not the food industry's number one issue needs to reread all the stories about how Chipotle has been severely damaged by its missteps.
    KC's View:

    Published on: February 3, 2017

    Content Guy's Note: I am aware, largely because of the all the email I get, that not everybody who reads MNB likes it when I include stories about the intersection of business and politics. I'm also aware that my subscription numbers tend to go way up when these stories appear.

    For the record, my goal is always to be relevant, even when it takes me into areas that can be tricky and controversial. In fact, especially when we go into those areas. Like it or not, the current political situation is one in which there will be relevant stories about business and politics, and I'm going to try to cover them as fairly and objectively as I can, while still bringing as much attitude as I can to commentaries where appropriate.

    But, I've also decided that when it makes sense, I am going to segregate many of those stories into this new section. That way, if you don't want to read them, you can skip right over them. That's not to say that there won't be stand-alone business/political stories ... but it is going to depend on what I think about the stories and how important I think they are. (For example, I played the story about a pro-border tax coalition on its own because it seemed fair after I played the story about anti-tax efforts the same way.)

    I recognize that this won't make everybody happy. That's okay. I always think that my job isn't to tell you the stories you want to read, but rather tell you the stories I think you need to know.

    Plus, I'm fascinated by this stuff.

    One other thing. As in FastNewsBeat, brief, occasional and sometimes gratuitous commentary will be italicized…


    • Uber CEO Tracy Kalanick announced yesterday that he is withdrawing from President Donald Trump's economic advisory council after an uproar over an executive order restricting immigration into the US from seven predominantly Muslim countries caused many Uber customers to delete its application from their smartphones. (It didn't help that chief rival Lyft not only denounced the executive order, but pledged a million dollar donation to the American Civil Liberties Union.)

    The New York Times writes that "Kalanick’s exit from the advisory council underscores the tricky calculus facing many Silicon Valley corporate chieftains who try to work with the new administration. On one hand, many tech executives have openly tried to engage with the president, a path that is typically good for business. Yet Mr. Trump’s immigration order has been so unpopular with so many tech workers — many of whom are immigrants themselves and who advocate globalization — that they are now exerting pressure on their chief executives to push back forcefully against the administration."

    The Times also writes that "other corporate chiefs, including Elon Musk of Tesla and SpaceX, and Mary Barra of General Motors, are also on the president’s economic advisory team. Mr. Musk said on Twitter this week that the group of economic advisers planned to come to some sort of 'consensus' on immigration, and to influence Mr. Trump by engaging directly with him rather than cutting off ties completely."


    • The New York Times this morning reports that Nordstrom has decided to cut its ties with Ivanka Trump-branded products.

    However, the store says it isn't making the decision for political reasons. Rather, it says that based on the brand's performance, it was decided not to carry any of her products.

    However, the story also notes that social media reaction forced Nordstrom to defend carrying her products in the days following the election; it said that carrying the products was a fashion and business decision, not a political calculation.

    Ivanka Trump-branded products are still carried by Macy's, which stopped carrying her father's shirts and accessories after he described Mexican immigrants as “killers” and “rapists" when he declared his candidacy.


    • The Wall Street Journal reports that yesterday, "hundreds of similar delis, bodegas and small New York City businesses owned by Yemenis closed for the afternoon." The story says that "the business owners and employees were protesting President Donald Trump ’s executive order that temporarily restricts Yemenis, and people from six other countries with predominantly Muslim populations, from entering the country. Mr. Trump has said the measure was necessary to protect the U.S. from terrorists."

    The Journal story also says that "according to the U.S. Census Bureau, there are nearly 42,000 Yemenis in the country. Organizers of Thursday’s rally say there are at least 3,000 Yemeni-owned groceries in the region, though no one has an exact number ... The closures of Yemeni grocery stores were exceptional for a kind of business that is known for being open long hours. It is a running joke that some shops don’t even have keys, said Abdul Mubarez, 56, who owns an ATM company and is among those helping to lead the protest ... Before getting into the ATM business, Mr. Mubarez owned 10 stores in midtown."

    To be honest, I don't give a damn about overpriced stiletto heels and handbags, and I'm not really worried about whether Tracy Kalanick is misunderstood or not, or whether he gets to serve on a White House council. These people will all survive.

    I find the story about the Yemeni grocers to be much more compelling, and far more deserving of attention. The Journal - hardly a liberal rag, by the way - tells the tale of one hard-working grocer who is deeply concerned that he is now unable to bring his wife and daughter to the US after spending significant time working on the immigration process. I'm not sure that closing down in protest actually will get anything done, though it certainly has gotten some media attention. Maybe that's worth something.

    Businesses need to step carefully because in the current climate, people and opinions are so polarized that there isn't a helluva lot tolerance. That's too bad. But I think we need to be equally worried about how people who don't have a lot of options, don't have a lot of lobbying juice, who have done everything right, and who have a deep and abiding belief in what this country represents, are being affected.

    KC's View:

    Published on: February 3, 2017

    On the subject of the immigration ban, and the Budweiser commercial we posted yesterday that illustrated one kind of immigration experience - that of one of the founders of Anheuser Busch - one MNB reader wrote:

    I think the ad is terrific. Adolphus Busch arrived legally and was eager to adopt to our culture and way of life. He immersed himself into the capitalist attitude and did not wait for a government handout to make something of himself.

    You might want to be careful about using such a broad brush.  You may get some intolerance on you.
    KC's View:

    Published on: February 3, 2017

    As I mentioned yesterday in FaceTime, this has been a busy week-and-a-half. It started with going to Los Angeles, where I taught on Friday morning at the excellent Food Industry Management program run by the USC Marshall School of Business. While all the people taking the class are industry professionals, they also were almost all millennials, which means that they have an entirely different perspective on life and business than I do. I always find that to be both energizing and challenging.

    That's why I love spending my summers teaching at Portland State University in Oregon ... it is why I spent time not long ago in the business school at the State University of New York (SUNY) at New Paltz ... and why, whenever I'm asked and scheduling allows, I'm happy and privileged to teach classes at Cornell University and Western Michigan University and the University of Florida at Gainesville and others.

    It isn't that I know so much. It is just that maybe I have a different perspective than some of the other folks who guest lecture there. Besides, I have a selfish motive ... which is that I probably learn a lot more from them than they learn from me.



    From Los Angeles I drove out to Scottsdale, Arizona, for the Food Marketing Institute (FMI) Midwinter Executive Conference ... then flew up to Seattle for two days ... then took the Amtrak down to Portland for two days .... and as you read this, I'm heading to Chicago for the weekend. Mrs. Content Guy is meeting me there, and Saturday night we're seeing the closing night performance of "Prelude to a Kiss," a revival of the Craig Lucas play in which our son, David, has the male lead. (He gets the girl! Yippee!)

    This is a long way of saying that I haven't seen any movies to review this week, nor have I finished any books. (I'm about halfway through the new Reed Farrel Coleman novel, "What You Break," but it doesn't come out until February 7, so I can'y write about it until next Friday. Which I will.

    But while I haven't got any movies or books to write about, I am happy to report that while in Seattle, I did what I always do - I went to Etta's and saw Morgan, who I have written about enthusiastically in two books and frequently here on MNB. For newer readers, let me explain it to you this way ... while I don't get to Seattle more than once or twice a year, and sometimes an entire year can go by without visiting one of my favorite cities in the US, I always feel like a regular when I go to Etta's. The first time I went there was close to 20 years ago, I think, when I wandered in off the street on a cold and rainy Seattle evening. I sat at the bar, had a crab sandwich a couple of glasses of wine, and chatted with Morgan. The second time I went there, which had to be months later, Morgan remembered me, poured me a glass of red wine without asking, and that was it. I always sort of feel like Norm in "Cheers," and this is a valuable lesson to every business. The goal should be to make every customer feel like a regular ... because that's one of the best feelings in the world.

    So I went to Etta's early this week with my friends Tom Furphy and Mike Burrington, sat at the bar, and Morgan didn't disappoint. He brought out a bottle of the 2013 Gun Metal blend - 50% Cabernet, 43% Merlot and 7% Cabernet Franc - from Washington State's Guardian Cellars, and it was amazing. It was ripe and rich and smooth, and while it may not have been the ideal wine to pair with the crab sandwich I ordered, it somehow was perfect. As was the early evening in general.




    That's it for this week. Have a great weekend, and I'll see you Monday.

    Slàinte!
    KC's View: