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    Published on: February 13, 2017

    by Kevin Coupe

    During a recent trip to the west coast, I decided it was time to visit the two "365 by Whole Foods" stores that I had not yet seen.

    You may remember that last summer, I visited the Lake Oswego, Oregon, edition of the store, the second to be opened. You can read my impressions here. And so, over the course of a week, I visited the first store opened, in the Silver Lake section of Los Angeles, and the third, in Bellevue, Washington.

    And to be honest, I wasn't any more impressed.

    Oddly enough, of the three that I've seen, it is the original store, in Los Angeles that I liked the best. It may because it seems to have more natural light, which makes it a brighter, more friendly shopping experience. And it is the last of the three opened, in Washington, that is least impressive; that may be because it essentially in the basement of a mall, in a location that other retailers turned down before Whole Foods decided to take it.

    You can see pictures of the Los Angeles store above, and the Washington store below.

    My problems with the format remain the same as last year. In talking about the "365" format, Whole Foods has said that it wanted to address its "whole paycheck" image with lower prices, create a store that is more appealing to millennials, and develop a stronger use of technology within the store.

    I think they miss on all three counts.

    Indeed, if the prices are significantly lower than in a traditional Whole Foods, I don't think they do a good enough job promoting them within the store. I know from talking to millennials that they aren't entirely won over by the format, and I think the technology is cursory at best.

    Employees at the Bellevue store told me that things are slow, but that expectations are that they'll pick up.

    I am not persuaded.

    It is possible that Whole Foods will learn so much from these three stores that the next ones will be a different animal. But I'm not expecting much ... because to this point, "365 by Whole Foods" has not, in my estimation, managed to address the problems that the company identified as the issue.

    KC's View:

    Published on: February 13, 2017

    by Kevin Coupe

    LAS VEGAS - The National Grocers Association (NGA) launched its 2017 convention here yesterday with an appearance by former Speaker of the House John Boehner (R-Ohio) in which he talked about the presidency, policy, and politics - all of which seemed to be top of mind for independent grocers in the audience.

    The Presidency - Boehner said that the country should expect a Trump presidency to be every bit as "chaotic, noisy and controversial" as the Trump campaign was," and that it is hard to know exactly what he will achieve. "He is the least ideological" president in memory, he said, = - a little bit Republican, a little bit Democrat. "Actually, we don't know exactly what he is, other than a populist."

    Policy - Boehner said that he expects tax reform to be at the top of the list in terms of legislative achievement this year, and that some sort of transportation/infrastructure bill probably would be forthcoming "sooner rather than later." As for repeal and replacement of the Affordable Care Act, Boehner said that it was critically important that the GOP have a bill ready to go. He noted that Republicans have never put up a health care bill, and so if they are going to repeal the Democratic version, they'd better have a legitimate replacement. He also said he expected there to be more talk than action about a border adjustment tax.

    Politics - Boehner also expressed a certain skepticism about the ability of the House of Representatives to accomplish anything; even though the GOP has the majority, he said, there are some 40 "right wing goofballs" who aren't willing to vote for anything. Which could, he said, end up getting in the way of immigration reform in the long run.

    In other NGA news...

    • The Thomas K. Zaucha Entrepreneurial Excellence Award was presented to Roger Lowe, Sr., President/Chairman of the Board, Lowe’s Markets.

    Since 2009, the Thomas K. Zaucha Award, presented by Mondel z International and named after NGA's first president and CEO, has been presented annually to recognize an independent grocer that exemplifies persistence, vision, and creative entrepreneurship.

    • The Thomas F. Wenning Pinnacle PAC Award was awarded to Chris Coborn, president and CEO of Coborn’s Inc.

    The Thomas F. Wenning Pinnacle PAC Award was established in 2014 and is presented to an NGA member who helps advance the role and presence of the independent grocer and NGA in government and political affairs.
    KC's View:

    Published on: February 13, 2017

    The Seattle Times reports that Amazon is rolling out what is described as a free consultation service using in-house experts to "help customers build out a connected home."

    According to the story, "The Smart Home Consultation advisers come to consumers’ homes to demonstrate smart home products, including the hugely popular Echo line of devices, and make personalized recommendations on what gadgets to buy."

    The service reportedly is available in Seattle, Portland, San Francisco, San Diego, Los Angeles, Orange County and San Jose, Calif., and comes "amid a big push by Amazon to give Alexa, its voice-activated digital assistant, an edge in a brewing war among tech companies for dominance in the artificial-intelligence market."
    KC's View:
    Of course, it should come as no surprise that in Amazon's opinion, the smartest home will be the one most efficiently and effectively connected to its own site, so that everything needed or wanted for the home is instantly made available.

    The Times puts it this way: "The consultation service also serves another Amazonian ideal: reduce any friction that might impede shopping. The emerging field of home automation is confusing to many consumers, and not everything works very well, making customized recommendations valuable."

    Bingo. It isn't just being a source of product. It is about being a resource for information.

    Published on: February 13, 2017

    Crain's Chicago Business reports that Sears CEO Edward Lampert is saying that he expects the company to have a fourth quarter loss of at least $535 million, "including an impairment charge related to the Sears trade name of $350 million to $400 million."

    It is that last part that is instructive.

    What it means is that Sears' fortunes have declined so precipitously that the company's brand name is worth less that it used to be.

    This is, Crain's writes, "the second consecutive year Sears has written down the value of its name. Last year, the retailer posted a $180 million impairment charge related to its name's declining value as part of a fourth-quarter loss of $580 million."

    In related news, Pacific Business News reports that Sears "aims to wring out $1 billion in savings in 2017 as a part of its long-term restructuring plan, and much of that total could come from additional closures of struggling retail stores."
    KC's View:
    The folks at Sears just keep digging and digging and digging, and the hole the company is just keeps getting deeper and deeper and deeper.

    Published on: February 13, 2017

    The New York Times has an interesting story about how Amazon is turning the city of Seattle into a laboratory "for its expanding array of unconventional experiments in bricks-and-mortar retailing." This is hardly the only change that Amazon has brought to the city, the story notes, saying that its "success in online commerce has transformed Seattle by bringing jobs, wealth and an almost insatiable appetite for office space — along with grumbling about how expensive the city is getting."

    The Times writes that "Amazon isn’t alone in using Seattle, home to Starbucks and other major retail brands, as a proving ground for new ideas in stores. But it is the main attraction among people focused on innovation in the category."

    One expert puts it this way: "“I look at Seattle as the center of the retail universe."

    Fascinating story, and you can read it here.
    KC's View:

    Published on: February 13, 2017

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

    • The Seattle Times reports that "PCC, in a partnership with Instacart, is testing curbside pickup at the co-op’s Bothell location." The story says that "PCC is using its Bothell location, which opened last summer, to experiment with various ideas such as an open kitchen and having cash registers toward the perimeter of the store so they’re not the first thing people see when they walk in ... The co-op also partners with Instacart and AmazonPrimeNow for online shopping and delivery."

    PCC is interesting to watch because it is trying so many different options ... but it also sort of creates the image of a company that isn't quite sure what it wants to do.

    • The Seattle Times reports that Amazon CEO Jeff Bezos, not usually loquacious when on Twitter, used the social media site last week to deny a report in the New York Post "that claimed Amazon has plans for a bigger version of its experimental, cashierless Amazon Go store, operating the supermarket with as few as three employees, topping out at 10."

    Bezos tweeted that “whoever your anonymous sources are on this story … they’ve mixed up their meds!” And he also, the Times writes, "disputed another claim in the story: that as it eyes the grocery sector Amazon is aiming for operating profit margins exceeding 20 percent, whereas margins in the grocery business tend to hover around the low single digits. 'If anybody knows how to get 20% margins in groceries, call me! :),' Bezos cheerfully tweeted."
    KC's View:

    Published on: February 13, 2017

    • Dunkin’ Donuts announced that it plans to begin testing a streamlined menu in some 200 US stores, eliminating less popular items in an effort to be more efficient.

    CEO/chairman Nigel Travis said during a recent earnings call that Dunkin' Donuts wants "to get a little leaner to run faster."

    • Dollar General announced that it has expanded its presence into its 44th state with its newest store in Hankinson, North Dakota. Another six stores are expected to be opened by the company in the state over the next few months.
    KC's View:

    Published on: February 13, 2017

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

    • Consider it an advisory to anybody in the business of selling stuff to consumers.

    The New York Times has a story about how "these days, a shirt is not always just a shirt, and a store is not always just a store. Handbags, dresses and other ordinary items - and where they are bought - have become politicized, turning shopping decisions into acts of protest for the millions of people in pro- and anti-President Trump camps. Under Armour, L.L. Bean, T.J. Maxx and many other companies have already been pulled into a sort of ideological tug of war."

    The story goes on to say that "=many retailers and brands would clearly prefer to fly below the political radar and stay away from the outrage on Twitter and Facebook. Calls or emails sent to a half-dozen of the country’s largest department stores about how they are handling (Ivanka) Trump’s products, for example, resulted in either no comment or carefully neutral statements. None of the stores agreed to discuss how they made decisions around Ms. Trump’s merchandise or details about sales of the products.

    "But many of these companies — like L.L. Bean and Macy’s — still find themselves in the eye of a social media storm."

    And all of them, the story suggests, will have to face a new reality: "Companies are now being swept up into this political consumer activism in a way that they have not been in the past,” says Maurice Schweitzer, a professor of operations, information and decisions at the Wharton School at the University of Pennsylvania.

    Some folks disagree with me, I continue to believe that however they feel about Trump, businesses have to be prepared to deal with the possibility that Trump decides to post a Tweet about them. The message could be positive or negative, some customers will be pleased and others will be aghast. But businesses have to be prepared.

    Newsweek has a story about three companies that it says are almost certain to be adversely affected if the US government decides to place "a 20 percent tariff on goods imported from Mexico." While it remains uncertain whether the Congress will eventually get behind such a proposal, President Donald Trump "seems intent on fulfilling many of his campaign promises, which seem to include a trade war with Mexico in the form of stricter border controls, import taxes, and pressure on American companies to not outsource jobs."

    Of the companies that would be affected by such a tariff, Newsweek writes, Walmart would be at the top of the list.

    "Outside the U.S., no country is more important to Wal-Mart than Mexico," the story says. "About one-fifth of the company's stores are located south of the border, and Wal-Mart's imports rely on many products imported from Mexico ... With 2,379 stores, Wal-Mart is only the largest retail chain in Mexico, but animosity seemed to be building against it, as seen on  Twitter  under the hashtag #Adios WalMart.

    "Groceries also make up the majority of Wal-Mart's sales, and agricultural trade across the border is strong. Mexico would likely implement a border tax, testing Wal-Mart's North American supply chain and causing higher prices."

    Two other companies mentioned in the Newsweek article as vulnerable to such a tariff would be Chipotle, which would be tremendously affected because of the vegetables - especially avocados - that it imports from Mexico, and Constellation Brands, which imports Corona and Modelo bands from Mexico.

    Reuters reports that "Trump-branded consumer products have suffered new blows, with U.S. retailers Sears Holdings Corp and Kmart Corp discontinuing online sales of 31 Trump Home items." The two retailers said it was not a political decision but rather "part of a push to focus their online business on the most profitable items."

    I don't know about you, but I find this funny on several levels. First of all, I'm not sure how being removed from Sears and Kmart is a bad thing. And second, what the hell were Trump-licensed brands doing there anyway? Sounds a little downscale for a the Trump brand...

    Reuters reports that Amazon, in its annual regulatory filings, warned "that government actions to bolster domestic companies against foreign competition could hurt its business, and that “'trade and protectionist measures' might hinder its ability to grow."

    The comments were seen as a "possible reference to US President Donald Trump’s 'America First' agenda."

    A "possible" reference? That strikes me as an understatement...
    KC's View:

    Published on: February 13, 2017

    Al Jarreau, whose work spanned the worlds of jazz, pop and R&B, winning six Grammys and selling millions of records, died yesterday. He was 76.
    KC's View:

    Published on: February 13, 2017

    From one MNB reader:

    I'm writing about your recap of Whole Food's new relationship with dunnhumby, You wrote, "I'm sure that one of the attractions for Whole Foods is the fact that Kroger did so well using dunnhumby technology, but Kroger had this success over a decade. Whole Foods doesn't have that kind of time. The success of this pairing will depend to a great extent on speed of execution, and Whole Foods' ability to integrate the dunnhumby offering into things like its nascent frequent shopper program."

    Actually, Whole Foods' situation is fairly comparable to Kroger's, from over a decade ago. When dunnhumby began working with Kroger, Kroger had been suffering consecutive quarters of negative same-store-sales. Wal-Mart was booming, and many industry observers thought Kroger wasn't going to survive in the years to come. While improved results weren't immediate, it only took 2 - 3 quarters to reverse Kroger's negative SSS trends. And it wasn't a fluke, as Kroger's trends has been continuously positive since then.

    My sense is that three factors made a difference: (1) Kroger's deep executive-level commitment to focusing on the customer and to the partnership with dunnhumby. Dave Dillon, then CEO, was reported to have said "I've bet the company on it." (2) A desire to change the company culture by putting the customer at the center of decision making at every level. (3) A willingness to fully enroll suppliers in the change by revealing a level of customer data and targeting capability that was previously unheard of. Underlying all of this was the (rare) combination of confidence, curiosity, and humility among key members of Kroger's executive team.

    If Whole Foods' leadership is willing to go all in, run their business for their customers instead of Wall Street, inspire their organization, and enroll their suppliers, they should do very well with dunnhumby.

    Responding to last week's piece about robo-banks, one MNB reader wrote:

    It seems to me that bank tellers are already obsolete. I bank at a credit union out of state and have not stepped foot in a bank for my personal banking in about 20 years. Even the loan process for my last several cars was handled electronically.
    KC's View: