business news in context, analysis with attitude

Published on: February 9, 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.

There are a number of reasons that I'm looking forward to next week's National Grocers Association convention in Las Vegas - beyond the fact that it is likely to be a lot warmer in Vegas than in Connecticut.

For another thing, as you may have noticed from reading the ample number of mentions here on MNB, Michael Sansolo and I will be hosting a party on Monday night at the Mirage, sponsored by PepsiCo, EJ Gallo and Anheuser Busch. And if there is one thing that we like to do, it is host a party. If you're at NGA next week, I hope you'll join us.

Finally, I'll also be moderating a panel discussion on Monday morning that I think will be interesting ... it will be based on conclusions reached in a new Nielsen study that focuses on the things that independent retailers do better, as well, or not as well as chain retailers.

One of the things we'll be focusing on in our conversation is the connection and differences between the human aspect of customer relations and the personalization that technology enables. One presumption is that independents do a better job when it comes to making personal connections, but that the technological aspect is one that remains an opportunity that needs to be exploited.

I think this is true, but with some caveats.

First, I think that independents have to be careful not to take the whole "we're small and we're local and therefore we offer better customer service" thing for granted. One of the things that I am hoping to discuss on Monday is how cultures are created that make this part of a company's DNA. That's of critical importance, I think. Employees have to feel engaged and invested if they are to be a company's best ambassadors.

The other thing is that there is no excuse for an independent retailer not to be looking for ways to use technology to better connect to shoppers before they come to the store, after they've been to the store, and while they're in the store. They certainly cannot compete with Amazon's technology advantages, or its selection, or even its prices ... not if they are going to have a profitable and sustainable business model.

But they have to find ways to be compelling that will resonate with the shopper. That means partnering with manufacturers for appropriate assortment and definitely not trying to be all things to all people, developing relevant digital platforms and figuring out approaches to replenishment, and figuring out how to best create a differentiated narrative around areas such as health and wellness.

Anyway, that's what we'll be discussing next Monday morning at NGA. If you're in Vegas, I hope you'll get yourself a big cup of coffee and join us.

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

Published on: February 9, 2017

by Kevin Coupe

The Washington Post has a story this morning about how bank tellers may end up being the next blacksmiths and buggy whip manufacturers.

One indicator: "Bank of America has opened three mini-bank branches­ since the new year that have ATMs and video­conferencing but no people. Two opened in Denver and one in Minneapolis.
In addition to the ATMs, the new robo-banks - called automated centers - allow customers to make a video­conference call to a Bank of America employee at another location to discuss more complicated money issues."

Robo-bank customers “can have a one-on-one conversation to get a mortgage, plan for retirement, open a small business or get a car loan,” according to Bank of America spokeswoman Anne Pace. “This is just a test. We haven’t rolled these out extensively. We are going to see how these go, see what we learn and make a decision from there.”

The new branches, the Post writes, "are part of a revolution in U.S. banking in the past few years as companies seek to save money by reducing the number of branches — and tellers and managers. Banks also are attempting to stay current with technology, which is moving toward handheld devices ... Robo-banking is also part of Bank of America’s strategy to expand its presence into harder-to-reach areas. At a fraction of the size of its traditional branches, the robo-banks save on real estate as well as personnel."

In addition to potentially saving on labor and real estate costs, the new robo-banks also seem to be a recognition of demographic shifts. To the millennial generation, bank tellers must seem like some sort of quaint anachronism, and that attitude isn't likely to lessen with age. Like every business, banks have to adjust.

In fact, the Post writes, it is likely to accelerate: "Bank of America is working on voice recognition technology called Erica (as in Bank of Am-ERICA) that will allow people to do virtual banking by voice with a computer, much as people use Amazon Alexa to order books or Apple’s Siri to ask questions on an iPhone."

It'll be an Eye-Opener.

Published on: February 9, 2017

Whole Foods, facing a 2.4 percent decrease in same-store sales for the first quarter, said yesterday that it will decrease its US store count for the first time since the recession of a decade ago and also will scale back expansion plans.

CEO John Mackey said yesterday that the company will close nine stores, primarily older, smaller stores in Colorado, California, Illinois, New Mexico, Utah, Arizona and Georgia.

The Wall Street Journal writes that "last year, Whole Foods said it saw potential to add more than 1,200 stores in the U.S. The company abandoned that target Wednesday, as executives said they would wait to see how a round of about 100 stores that have opened recently, or are set to open, perform before making growth commitments ... The moves come during a tumultuous time for Whole Foods and the food retail business. Mainstream supermarkets and other retailers have greatly expanded their natural and organic offerings, an arena that Whole Foods long dominated since its founding in 1978."

Mackey said Whole Foods is trying to adapt to a world where “the more conventional, mainstream supermarkets have upped their game…the world is very different today than it was five years ago." But he also said, according to CNBC, that the company does not want to "compete in the race to the bottom as consumers have ever-increasing choices for how much and where they shop."

The scaling back of expansion does not appear to have any impact on its plans to open more "365 by Whole Foods" stores.

Published on: February 9, 2017

The Chicago Business Journal reports that Target is putting more eggs in the small-store basket, opening yet another one of its neighborhood stores in the Chicago market. The story says that when it opens later this year, "it will become the third neighborhood Target to open on Chicago's near north side in just the past 18 months."

According to the story, "The recent Chicago neighborhood openings are part of a new high-priority game plan at Target to grow in dense urban markets with stores featuring a carefully curated array of merchandise designed to meet the needs of customers making quick runs to the store.

"The 31,000-square-foot Lakeview Ashland store will include a mix of health and beauty products, men's, women's and baby apparel, toys, sporting goods, home decor items for apartment dwellers and a CVS pharmacy. Target currently operates 32 of these neighborhood stores in Chicago and other markets, and it plans to open 33 more in 2017, 2018 and 2019."

Published on: February 9, 2017

Limited assortment chain Aldi plans to spend $1.6 billion to upgrade 1,300 US stores and make them "a little more posh, part of a plan to steal market share from the big supermarket chains," Bloomberg writes.

However, the upgrading of the facilities will not mean an increase in prices, the company emphasizes. The story says that "the remodeling comes as supermarkets are competing fiercely with Wal-Mart and Amazon to draw customers with lower prices, streamlined selections and even services like delivery. Aldi’s plans may allow it to steal share from foodie favorites such as Whole Foods Market Inc. and Trader Joe’s."

“We’re becoming more and more mainstream with more customers,” says Aldi US CEO Jason Hart. “We’ve got older stores. We need to get up to date.”

The improvements reportedly include sleeker refrigeration, wider aisles, and expanded selection in organics, fresh meat, and alcohol.

Published on: February 9, 2017

• Reuters reports that Walmart is "throwing its weight as the world's largest retailer behind its struggling British arm Asda after admitting it was too slow to respond effectively to the threat posed by the discount supermarkets."

The story says that Walmart "will provide further firepower by ensuring Asda leverages the parent's purchasing strength in everything from refrigerators to own-brand products and real estate to drive down prices and costs, said Scott Price, chief administrative officer of Walmart International."

Published on: February 9, 2017

• Thanks to Tom Gillpatrick, who sent me a link to a recent Washington Post story about how "a recent survey by the Oklahoma State University Department of Agricultural Economics finds that over 80 percent of Americans support 'mandatory labels on foods containing DNA,' about the same number as support mandatory labeling of GMO foods 'produced with genetic engineering'."

What's interesting about this is that all foods contain DNA - it is in pretty much every living organism.

The Post writes that "the Oklahoma State survey result is probably an example of the intersection between scientific ignorance and political ignorance, both of which are widespread. The most obvious explanation for the data is that most of these people don’t really understand what DNA is, and don’t realize that it is contained in almost all food. When they read that a strange substance called 'DNA' might be included in their food, they might suspect that this is some dangerous chemical inserted by greedy corporations for their own nefarious purposes."

Published on: February 9, 2017

• Bloomberg reports that "Apple Inc. has hired Timothy D. Twerdahl, the former head of Amazon.com Inc.’s Fire TV unit, as a vice president in charge of Apple TV product marketing ... The moves suggest a renewed focus on the Apple TV and on providing more content for the device, an effort that has been stalled in the past by failed negotiations."

According to the story, "Twerdahl comes to Apple with significant experience in internet-connected TV devices. Prior to his tenure at Amazon, he was an executive at Netflix Inc. and later a vice president in charge of consumer devices at Roku, a streaming video box developer. Twerdahl’s experience could bolster Apple’s efforts in video content and living room devices at a time when the company is looking for new categories of revenue to augment iPhone and iPad sales."

Published on: February 9, 2017

...with brief, occasional, italicized and sometimes gratuitous commentary…

• The Seattle Times reports that Nordstrom's decision to no longer carry Ivanka Trump-branded merchandise "blew up into a national brouhaha Wednesday after President Donald Trump attacked the company on Twitter," writing:

My daughter Ivanka has been treated so unfairly by @Nordstrom. She is a great person -- always pushing me to do the right thing! Terrible!

Nordstrom said its decision to drop the brand was a matter of business, not politics - it had stopped selling, the company said, and was part of a routine culling of brands that no longer perform well enough to stay on store racks. However, executives at Ivanka Trump's company said that sales were "significantly" up last year.

While Ivanka Trump has said that she no longer has an active operating role at the company, she retains ownership.

The Times writes that "Neiman Marcus and Belk also reportedly are dropping the Ivanka Trump line from their stores. T.J. Maxx and Marshalls are reportedly distancing themselves from the brand, with employees at the stores getting instructions to throw away the brand’s signs and mix Ivanka Trump merchandise with other brands ... Trump critics are pressuring Macy’s to drop the line as well.

"Nordstrom’s decision to stop carrying the line led to calls for a boycott of the retailer from Trump supporters. Earlier, the retailer had been the subject of a boycott call from anti-Trump activists who wanted the retailer to drop the Ivanka Trump line."

While President Trump's decision to post the criticism of Nordstrom on his Twitter account was criticized by some for mixing business and government to an unacceptable degree, White House press secretary Sean Spicer characterized the original comments as a defense of family: "He ran for president, he won, he’s leading this country. And I think for people to take out their concern about his actions or his executive orders on members of his family — he has every right to stand up for his family and applaud their business activities, their success.”

But the Wall Street Journal writes, "Some ethics experts said the tweet highlights pitfalls in Mr. Trump’s approach to navigating potential conflicts of interest involving his family’s business and the presidency. His Twitter messages, which he has operated under @realDonaldTrump, also appear under an official @POTUS account."

One can only guess what Trump will post on his Twitter account when Taco Bell decides to no longer sell its new Trump Taco Bowl menu item because of declining sales.

Okay, let's get real about this for a moment. It strikes me as entirely credible that Nordstrom is making a business decision here, not a political calculation. After all, they're in the business of selling stuff, and if Ivanka Trump's stuff were still selling, they'd want to have it in stock.

But ... if we want to take the position that this is a political move, I can't really blame Nordstrom. At some level, because of the unpredictability of the Twitter storms that emerge from the White House, it seems like a reasonable decision to get as far from the Trump brand as possible. Companies may take a short-term hit, but in the long run, they may be better off getting some distance.


• Athletic clothing manufacturer/retailer Under Armour found itself at the center of a social media storm this week when its CEO, Kevin Plank, gave an interview to CNBC in which he described President Donald Trump as "a real asset" to the country. He made the comments after participating in an executive advisory group that met with Trump.

Almost immediately there was a backlash on social media, the New York Times writes, "with many expressing their displeasure using the hashtag #boycottUnderArmour."

And the Times writes that Under Armour also got some criticism from Stephen Curry, point guard for the Golden State Warriors and a paid spokesman for the brand. "I agree with that description, if you remove the ‘et'," Curry said.

The Times adds that "Curry, who is under contract with Under Armour through 2024, signaled his willingness to leave a company that did not align with his values by saying, 'There is no amount of money, there is no platform I wouldn’t jump off, if it wasn’t in line with who I am'."

The tumult forced Baltimore-based Under Armour to release the following statement: "We engage in policy, not politics. We believe in advocating for fair trade, an inclusive immigration policy that welcomes the best and the brightest and those seeking opportunity in the great tradition of our country, and tax reform that drives hiring to help create new jobs globally, across America and in Baltimore."

Note to the folks at Under Armour: You can't engage in policy these days without engaging in politics. It is a fact of life.

Published on: February 9, 2017

Peter Brennan, the president of Daymon Worldwide from 1994 to 2006, passed away on Monday. He was 69.

Brennan retired from Daymon in 2008.

The family has requested that donations be made in his name to the Meals on Wheels of Greenwich or the Cleveland Clinic, Neurological Disorders.

Published on: February 9, 2017

Got the following email from an MNB reader about Starbucks' stated opposition to Trump administration policies:

All I really wanted was a great cup of coffee from Starbucks…not a social or political thought partner. I think sometimes Starbucks forgets that their customers are not always the same demographic as their associates.

Looks like Dunkin Donuts and more local coffee brewers will be getting my family's business going forward. (My family has been a loyal "couple cups a day" customer of Starbucks on our college campuses, home city, airports and at work…shared app/cards and auto reloads…we were all in, baby.)

This stance for me has nothing to do with agreeing with Trumps executive order on immigration or not. It is about my personal desire for entities/brands to turn down the volume on the political rhetoric that is causing such divide in the country.

I get your point about companies turning down the political rhetoric, but the stories we've seen lately about Nordstrom and LL Bean suggest that even the companies that are just trying to do business end up being victimized in the current toxic political climate. I suppose some companies would argue that rather than being reactive to what happens to them, they might as well stake out a position and be pro-active.

As for Starbucks specifically, it seems clear that the company is gambling that the net result will be that there are more customers who agree with it than do not.