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: March 6, 2017

    by Kevin Coupe

    The Washington Post has a story about how there are emerging concerns about the impact that "robotic voice assistants" - such as Amazon’s Alexa, Google Home, Microsoft’s Cortana - are having on children's ability not just to obtain information, but also to interact with actual human beings.

    "Many parents," the story says, "have been startled and intrigued by the way these disembodied, know-it-all voices ... are impacting their kids’ behavior, making them more curious but also, at times, far less polite ... Boosters of the technology say kids typically learn to acquire information using the prevailing technology of the moment — from the library card catalogue, to Google, to brief conversations with friendly, all-knowing voices. But what if these gadgets lead children, whose faces are already glued to screens, further away from situations where they learn important interpersonal skills?"

    The premise is that these assistants are creating two tendencies on the part of children. One is that they ask simple questions and expect simple answers, with no room for nuance and complexity. The other is that they become entitled, losing the ability to interact with other people in ways that are polite and civil, with a degree of emotional intelligence.

    The result of both tendencies is kids that see relationships as transactional rather than personal.

    It strikes me as critical that parents take responsibility for the ways in which their children develop intellectually and emotionally; if their kids seem to be demanding and rude in their interactions with AI assistants, then it is up to parents to explain why it is important to say "please" and thank you" whenever talking to them. (I always do this, and endeavor always to speak to Alexa in the same tones that I would use when talking to another person.) And rather than just allowing children to get all their information from the Echo or Google Home, it is important from time to time to unplug the damned thing and make kids do a little more research and get a sense of nuance and context.

    AI is a tool. An increasingly valuable tool, to be sure, but only a tool. Parents have to teach kids how to use these technological tools in the same way as they would teach them how to use a hacksaw or a hammer.

    And by the way, parents also have to teach kids how to interact with other people. How to be pleasant, how to be civil, how to be compassionate and curious and empathetic. How to say please and thank you. Meet a kid who has none of these skills, and the odds are pretty good that the parents don't have them, either, and the existence of AI matters not a bit.

    As it happens, we live in a world where civility and nuance are in short supply. I don't think that is the fault of AI. But perhaps it will serve to open our eyes to an alarming trend.
    KC's View:

    Published on: March 6, 2017

    The Washington Post reports that "unusual weather in the Southwest could cause a nationwide salad shortage later this month. But that’s just the tip of the iceberg (lettuce): Scientists say the weird weather is probably caused by climate change — which means these sorts of problems are likely to happen again."

    There have bee two distinct phenomena, "in Arizona’s Yuma County and California’s Salinas Valley, the two places where the United States grows most of its leafy greens. In Yuma, the lettuce harvest, which usually runs from November to April, wound up early because of unusually warm weather. And in central California, which typically picks up the harvest once Yuma is done, heavy precipitation delayed some plantings."

    Both, the story says, "have a link to atmospheric warmth," according to scientists.

    The story goes on: "Incidentally, these sorts of cascading disruptions aren’t just limited to lettuce — or even to the United States. Britain recently suffered a widely publicized shortage of iceberg lettuce, zucchini, broccoli and cabbage, brought on by extreme weather in Europe’s 'salad bowl,' Spain.

    "Closer to home, fruit growers across the Northeast and Midwest have expressed concern that unusually high and fluctuating temperatures could cause crops like apples, cherries, plums and grapes to develop too early and expose them to spring freezes. The Progressive Farmer recently warned that 'almost off the charts' temperatures in Kansas and Oklahoma could put early-growing winter wheat at similar risk, plus expose it to warm-weather pests and diseases."
    KC's View:
    The Post story goes on to say that "the National Climate Assessment estimated that California and Arizona will have gained 70 extra hot nights per year and 12 to 15 additional consecutive days without rain by the end of the century, because of warming." The implication is that these trends inevitably are going to have an impact how what we grow and eat, which will, of course, affect that food store sell.

    I think this is worthy of attention, and of a public policy approach that tries to figure out how best the planet can deal with climate change, regardless of the degree to which people think it is caused by human behavior. This would not include the proposed defunding of research programs - like that run by the National Environmental Satellite, Data and Information Service - that track and forecast weather systems with short-term and long-term implications ... including, as it happens, for the food on Americans' tables.

    Published on: March 6, 2017

    Business Insider reports that as McDonald's begins to implement its plans to roll out a national mobile ordering-and-payment system, one of its goals will be to avoid the problems suffered by companies such as Starbucks and Chipotle, where high usage rates have resulted in some delays and even customer walkouts.

    Mobile ordering, the story says, "is expected to be a $38 billion industry by 2020, accounting for more than 10% of total fast-food sales, according to a BI Intelligence report. However, if chains want mobile ordering to succeed, it isn't as simple as just adding an app. These chains will need to create an entirely new ordering experience, inside and outside of the store."

    And, it goes on: "Mobile ordering has the potential to revolutionize the fast-food industry, but it's not a band aid fix that chains can simply slap on with an app update. Instead, as many chains are realizing now, it's something that can cause just as many problems as solutions."
    KC's View:
    There seems to be considerable evidence out there that mobile ordering has created these sorts of traffic problems at various retailers, but in my view, this would be classified as a first-world problem. No argument that the issues have to be dealt with, but having to deal with these problems strikes me as a lot better than having to deal with too few customers and orders.

    For the record, I use my Starbucks mobile ordering app frequently, and rarely have had any sort of problem. Maybe I'm just lucky.

    Published on: March 6, 2017

    National Public Radio has a piece about Blue Bunny Books, described as "an independent bookstore that specializes in children's books" that also happens to be about a mile up the road from the new Amazon Books store that opened last week in Dedham, Massachusetts, about 20 miles southwest of downtown Boston.

    According to the story, "Store owner Peter Reynolds, a children's book author, said he was a little worried when he heard Amazon was moving into town. 'Oh, yes. The minute that the news came out, I got hundreds of emails from friends and fans across the country and the world ... And at first my heart sort of sunk a bit, but I realized quickly the response from our friends was what you have in your independent bookstore is very, very different than what Amazon is providing, and I think that we're going to be OK'."

    The story goes on to say that "Blue Bunny Books has been around for about 14 years and also offers online sales and a coffee shop in store ... Reynolds said his store is often a gathering place for the community. He hopes the unique atmosphere will keep customers coming to independent bookstores like his."

    Amazon Books, on the other hand, is a "5,800 square foot store that offers a book selection based on the best-sellers on Amazon's website as well as proprietary technology such as Kindle ebook readers, Fire TV streaming devices, and Echo speakers."
    KC's View:
    I would suggest that Peter Reynolds go watch You've Got Mail, because his plight seems similar to that suffered by Kathleen Kelly (Meg Ryan) in that movie by the great Nora Ephron.

    I hope he's right. I really want him to be right. But the one thing Reynolds has to avoid is any sort of complacency ... because Amazon Books is capable of eroding his customer base over time. He has to play a little bit of offense and a little bit of defense, and do things that Amazon Books can't and won't do. And he has to do it every day.

    Published on: March 6, 2017

    The New York Times had a story over the weekend about how "blockchain" - described as "the buzzy, bewildering technology behind cryptocurrencies like Bitcoin" now is being "applied to real-world problems like tracking pork chops, shipping containers and footwear with a speed and security not currently possible."

    The story frames the subject this way:

    "At its heart, blockchain simply refers to a bookkeeping method that 'chains' together entries so that they are very difficult to modify later. It provides a way for large groups of unrelated companies to jointly keep a secure and reliable record of their transactions ... The most immediate business opportunities are in the financial world as a tool to track and trade stocks, bonds and other assets. But in the next week, Maersk, the global shipping giant, is expected to announce it is using IBM’s version of the blockchain to track the avocados, flowers and machine parts it carries on its enormous cargo ships. Last month, the government of Dubai said it was working with IBM to trace the goods flowing through its ports."

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

    Published on: March 6, 2017

    Fascinating story over the weekend in the New York Times about how "Uber has for years engaged in a worldwide program to deceive the authorities in markets where its low-cost ride-hailing service was resisted by law enforcement or, in some instances, had been banned.

    "The program, involving a tool called Greyball, uses data collected from the Uber app and other techniques to identify and circumvent officials who were trying to clamp down on the ride-hailing service. Uber used these methods to evade the authorities in cities like Boston, Paris and Las Vegas, and in countries like Australia, China and South Korea."

    While the Greyball program is said to have originally been designed as a tool that would protect Uber drivers from questionable passengers, Uber execs then began to see it as way to protect the company from local regulators endeavoring to make sure that Uber lived with the boundaries of the law.

    The Times goes on to say that "at a time when Uber is already under scrutiny for its boundary-pushing workplace culture, its use of the Greyball tool underscores the lengths to which the company will go to dominate its market. Uber has long flouted laws and regulations to gain an edge against entrenched transportation providers, a modus operandi that has helped propel it into more than 70 countries and to a valuation close to $70 billion."

    The Times also writes that while Greyball was approved for use by internal lawyers at Uber, "outside legal specialists said they were uncertain about the legality of the program. Greyball could be considered a violation of the federal Computer Fraud and Abuse Act, or possibly intentional obstruction of justice, depending on local laws and jurisdictions, said Peter Henning, a law professor at Wayne State University who also writes for The New York Times."
    KC's View:
    Uber has had a really bad month or two. They get criticized for being Trump-sympathetic, and Lyft reaps the benefits of defecting customers. The CEO, Travis Kalanick, has gotten a lot of criticism for a dubious management style. And now this.

    I like companies that push the envelope, but I am not at all sympathetic to those that break the law. These days, I use Lyft. Like a lot of people, I've deleted the Uber app from my iPhone. Hard to imagine how they'll get me back.

    Published on: March 6, 2017

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

    • The Wall Street Journal has a story saying that Amazon "could inflict roughly the same amount of cumulative pain on its competitors over the next three years as it did over two decades as a public company ... If its now massive North America segment continues to grow at 25% a year, it will take only three more years for Amazon to add another $76 billion in annual revenue. That could deliver a swift blow to a U.S. retail industry, already wilting from Amazon’s aggressive expansion."

    The story concedes that at some point Amazon's growth will have to slow, but suggests that "even when Amazon stops expanding, the damage to industry margins may be irreversible. Online sales come with significantly lower margins, primarily because companies can’t reduce shipping costs by selling more stuff. The willingness of Amazon investors to tolerate low margins has enabled a shift in retail to this high-cost distribution method from having customers visit physical stores.

    "There are a few retailers that have managed to chart a strategic path away from the Amazon steamroller and their shares should continue to command a premium to peers. For the rest of the industry, Amazon’s growth rate will determine whether things get bad or really bad."

    One has to keep the notion that Amazon's growth is going to "slow down" in context. The Journal also writes that "analysts predict the growth rate for Amazon’s North America segment will slow to 16% in 2018 and decelerate in each of the following years." Take note of that - a slowdown will be to a 16 percent growth rate. Most retailers would be thrilled to have a growth rate that is a quarter of that.

    Seeking Alpha reports that Amazon has shut down an online cable store where it was allowing consumers to purchase internet and cable TV packages from local providers and then schedule installation. The cable store opened about a year ago, first with Comcast, and later adding Frontier. But no other services joined in to make the store more robust.

    No surprise here. This is not a place where Amazon was necessary - in most communities, I think, it is pretty easy to find your cable provider. Harder to get an appointment, but easy to find. Plus, I'm not sure that cable providers liked the idea of user reviews being posted on the site.
    KC's View:

    Published on: March 6, 2017

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

    • In upstate New York, the Democrat & Chronicle reports that "some local grocers and national retailers are taking a harder look at what’s in their trash to increase the bottom line by diverting food from landfills and to those most needing it." One of them, Wegmans, "joined an effort late last year with several businesses and the Environmental Protection Agency and Department of Agriculture to cut food waste in half by 2030."

    "Food waste has taken a front and center stage because, quite frankly, it's the largest amount of what we are finding in our trash these days," Jason Wadsworth, sustainability manager at Wegmans, tells the paper. "It's also how we can make the most significant change, not only for what's ending up in landfills but for our communities."

    The story says that "Wegmans is among five grocers committed to reducing food waste 50 percent by 2030 with the U.S. Department of Agriculture and the EPA. Walmart, which has announced plans to eliminate its food waste by 2025, was the only other grocer in the program that has local operations. PepsiCo., General Mills, the Kellogg Co. and the Campbell Soup Co. were other notable firms joining the challenge, announced under the Obama administration ... Wegmans has not been informed of any changes to the program under the Trump administration, but it is awaiting a little more direction from federal agencies."

    USA Today reports that Canada-based Hudson's Bay is running into road blocks "as the company struggles to get the necessary financial backing" to acquire Macy's.

    The problem: "Investors have been skittish about a deal that would ground them in shopping malls at a time when customers are deserting those centers to browse online."

    This shouldn't be a surprise. The wisdom of investing in old-world business models is questionable, at best.

    • Home Depot announced last week that it plans to hire more than 80,000 people this year - some of them seasonal part-time, and some of them full-time and permanent - as it heads into the spring, which traditionally is a busy time for the D-I-Y retailer.

    • The Chicago Tribune reports that General Wireless Operations, the RadioShack successor created by a partnership between Sprint Corp. and the defunct retailer's owners, is preparing to file for bankruptcy, according to people familiar with the matter ... The bankruptcy would deal another blow to the RadioShack brand, an almost-century-old source of electronics that struggled to compete with online merchants and big-box retailers. The General Wireless venture was designed to help the RadioShack name live on following the demise of the original chain. But pressures on the business, including sluggish foot traffic at shopping centers and a shift to e-commerce, have persisted.
    KC's View:

    Published on: March 6, 2017

    Doug Campbell, Sr. Vice President of Merchandising and Marketing at Albertsons, said last week that the Houston and Southern divisions of Albertsons Companies would be combined into one division responsible for 161 stores.

    The shift is effective mid-June.

    In his memo to staff, Campbell wrote that "concurrently, the Supply Chain team announced that we would transition support of our combined division’s stores out of our Roanoke facility in North Central Texas and the Telge distribution center will cease operation later this summer.

    "The Southern division president, Dennis Bassler, will continue to serve as division president, and Sidney Hopper, our current Houston division president, will continue to oversee our 43 Randalls stores here as President and General Manager. Rick Sinconis has been selected to lead the Louisiana district’s 19 stores as their Vice President and General Manager.

    "Going forward, marketing and merchandising functions will be managed from our Southern Division Office. Our three Randalls district operations teams will continue to be based in Houston, and our Louisiana district will be operated from Baton Rouge."
    KC's View:

    Published on: March 6, 2017

    I love this email from an MNB reader who points to some important generational differences:

    I'd love to see the numbers on the proportion of people under 30 who have dealt with a real, live bank teller in the past 12 months. For that matter, how many people under 30 have more than $50 in their wallets right now? My hunch is that it is an exceptionally low proportion of young people on both accounts, between many young people paying for everything with plastic and most of them depositing and paying checks and bills electronically.

    Speaking as someone who is 30... I have had an online only bank (Ally Bank) for the past six years, since a I moved to an area where BoA lacks branches. The fees, rates, and customer service are all MUCH better than Bank of America ever offered me. I can deposit checks by phone and get reimbursed for my ATM fees every month. Simply put, the service is great, and the lack of B&M branches is not a big deal to me... In fact, the only thing I would ever use brick and mortar bank for would be to get $2 bills and half dollars (great way to be remembered by tipping ahead of time at a busy bar), but I can live without those, especially if doing so gets me better service and better rates.

    We had a story the other day about the impact that e-commerce has on impulse purchases, and what some companies are doing to compensate, which prompted one MNB reader to write:

    I work for one of the companies that is touting among other elements of our online presence an increased order size compared to in store.  I also have several peers at other retailers in the same boat, and we are worried.  It stems from how we are measuring ourselves and each other.  It is correctly seen that we must be a success in the online environment and a lot of political and institutional horsepower is put towards the efforts.

    Along with this attention comes the need to ensure the effort is successful, and sometimes the right KPIs aren't the ones that are touted.  Basket size is an easy first stop because it is easy to measure, easy to understand, and due to many in the arena adding fees to smaller orders the metric is nearly guaranteed to be higher.  In many cases we see total store order size neutral or declining due to weekly shops going online and fill in shops still being done in store.   We are seeing a decline in the penetration of traditional add on or impulse items.

    It is the new world of meeting our customers' needs in an omni-channel environment combined with the old world challenges or self-fulfilling prophesies and cherry picking KPIs.  Our concern is around how we get our leaders to listen a couple minutes longer to information that takes a bit longer to understand.  We need to put efforts on how to enhance the online experience to include better affinity suggestions, personalized recommendations, and a smoother experience to get these extra items back in the cart, but we can't do this until we leverage better analytics and our leaders hear the complete story.

    Finally, on Friday MNB took note of a Washington Post report that Jeff Bezos, founder/CEO of Amazon as well as the owner of the Post and a commercial space exploration company called Blue Origin, has been "circulating a seven-page white paper to NASA leadership and President Trump's transition team about the company's interest in developing a lunar spacecraft with a lander that would touch down near a crater at the south pole where there is water and nearly continuous sunlight for solar energy. The memo urges the space agency to back an Amazon-like shipment service for the moon that would deliver gear for experiments, cargo and habitats by mid-2020, helping to enable 'future human settlement' of the moon."

    So naturally, MNB reader Bruce Wesbury responded:

    Guarantee he will not put himself on the first rocket… chicken.

    Ah. That's what I like. Nuanced, informed commentary.

    You have no idea if Jeff Bezos is a chicken or not. But since you think that Amazon is intrinsically evil, you jump to that conclusion.
    KC's View: