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    Published on: March 8, 2017



    Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.

    This week's topic:

    And now, the Conversation continues...


    KC: So you’ve just returned from a trip to Disney World with your sons, and I’m curious about some of the technological innovations you found there, and how they might be relevant and adaptable to the retail business. One of the most interesting things I’ve read about is the introduction of the Magic Band, which seems to be enormously versatile in its applications. How exactly does it work, and how did it interact with various components of the park experience?

    Tom Furphy:
    Our oldest is a high school senior and this year he wanted to go to Disney World one more time as a kid. My wife and daughter were there the week before for the national cheerleading championships. It’s not a short hop from Seattle and we knew they would not be interested in flying right back and into the mayhem of Disney. So it was a great opportunity for me to bond with my boys.

    Several weeks before the trip we were prompted to visit the My Disney Experience website. Once there we set up a user account for the family and individual profiles for the family members. We had been to Disney about four years ago, so much of the necessary information was already in there. I was able to tell Disney that my two sons and I would be traveling together. We linked ourselves to each other and to our hotel reservation and park tickets. Our entire itinerary could then be shared digitally between us.

    As part of the sign-up process we were prompted to select our Magic Bands. These are RFID wrist bands that were to be used throughout our visit for entry to the parks and attractions, paying for goods and services and even as our key for entry into our hotel room. We could each select our own color which gave it a nice element of personalization. The bands were shipped to us in a very professionally designed box with our names printed next to each band. All of the included collateral was personalized with our names and our trip details.

    Disney also prompted us to download the My Disney Experience app before our arrival and to book our Fast Passes in advance. Fast Passes allow park visitors to bypass the lines for a ride within a scheduled one-hour window. We could book three fast passes per day ahead of time. Then, once we used the three in a given day, we could book one more at a time through the app.

    KC: Okay, you're almost making me wish I had an excuse to go to Disney. Almost. These tools all sound great, but did you actually use these tools once you were on the premises? Did they make the experience more palatable?

    TF:
    We used the app constantly to manage our Fast Passes, check wait times for rides, book dinner reservations and even to navigate the parks and transportation systems. It was our trusted assistant throughout the trip, enabling us to mitigate many of the pain points usually associated with a trip to Disney.

    The Magic Bands and digital Fast Passes were great. We used our three allotted passes early every day, then had no trouble getting at least three more each day. Using the app’s wait times as a guide, we never had to wait more than 40 minutes for rides where we didn’t have Fast Passes. It was one of the busiest weeks of the year at the parks, but the technology made it bearable.

    Another historical pain point at Disney is booking dinner reservations and wait times at the restaurants. We easily could search for restaurants in the app, by location, targeted time to eat, type of cuisine and price levels. It was a snap. We sat for dinner every night within ten minutes of arriving at the restaurant.

    KC: I can imagine that some folks would be concerned about the lack pf privacy - that the use of this technology also meant that Disney knew where you were at virtually every moment. Was that ever a concern to you?

    TF:
    No. We were fairly confident that Disney would not use our personal information in any nefarious ways. In fact, we ended up quite impressed by the personalization that the app and Magic Bands enabled.

    When we first arrived, there was a slight issue with our bands. We visited my mom for a few days before Disney, so we did not check into Disney transportation at the airport or into our hotel before entering a park the first time. Because of that, we had trouble entering Magic Kingdom our first day because Disney had not validated that we were the people the bands were assigned to. We must have missed this required step somewhere. So, after waiting in line for about ten minutes to enter the park, we had to detour to Guest Relations for another 40 minutes to get verified. Not an ideal start to the visit, but we assumed it was our mistake.

    To my surprise and delight, about ten minutes after entering the park I received a text message that asked if it was ok to receive communications during my trip this way. I said yes. Then I got a text back apologizing that I had to go through the extra wait and awarding us two more Fast Passes for the day! This turned a potential negative experience into an amazing positive one!

    There was one other time when we showed up about ten minutes early for our Fast Pass window at Tower of Terror. When the sensor did not turn green, the park attendant addressed us by name, welcomed us to the ride and allowed us to enter. Such great service.

    All in all, the app and the Magic Bands addressed many of the largest pain points of visiting Disney. Not only did it make them more bearable but they actually turned most of them into positive, personal experiences.

    KC: One of the things that is interesting to me is how Disney seems to have integrated old technology with the new.  For example, I gather that they still have old-fashioned animatronic figures in the Hall of Presidents, and rides such as Pirates of the Caribbean and The Haunted Mansion don’t seem to have changed much over the years.  And yet they have the Magic Band and the Fast Pass, because it was Disney’s sense that people want new technology to help them see attractions that feature old technology.  Is there a broader business lesson here?

    TF:
    Absolutely. Technology was used to support the traditional experience. There was very little new technology used in the attractions. But using technology to support the experience made the experience markedly better.

    Think about the applicability to retail. Of course technology is important for e-commerce delivery, auto-replenishment and click and collect. But there are also many ways that technology could be used to drive personalized experiences before, during and after the traditional trip to the store.

    For example, imagine customers tapping their smartphones on a sensor at the deli counter. No more paper number tags. Associates could address customers by name. And their preferences for thick or thin slices or dietary restrictions could be displayed to the associate.

    Or maybe a customer is watching a chef demonstrate a cooking technique. The app could sync a tutorial on the technique and load a recipe and shopping list right there. Or perhaps a fish monger is sharing information on a new species they are carrying. The shopper could sync the information and take it home, perhaps with reference to cooking instructions.

    And for all of this, the retailer would have a record of the interactions and could follow up on them later. Was the shopper happy with their purchase? What other items might go well with the selection? These communications could be managed de-centrally by dedicated store personnel. Or a retailer could staff concierge service reps centrally. Ultimately, many of these interactions could be transitioned to AI as a result of machine learning.

    It’s all about weaving technology into the traditional human experience. Human interactions can be supported and tracked with technology. Then they can be enhanced by using the technology to follow up and add value. It’s a way to scale the human touch.

    KC: There was a story in Fast Company a couple of years ago about Disney’s technology initiatives revealing that, in fact, making these changes to the park experience was very difficult because the division’s culture actually is change resistant - "built to be industrial and resilient, for consistency and volume; it’s not built for change.”  It has to be heartening to smaller, less innovative businesses that even Disney, where so-called “imagineering” is a near-sacred function, has trouble embracing change sometimes.

    TF:
    This is what our industry grapples with every day. We would not survive without scale, consistency and efficiency. It is imperative. But that alone will not guarantee that incumbents and the status quo will survive.

    Disney had significant pushback from the Imagineering group, operations and corporate IT. To get past this, they recruited best of breed outsiders from design and technology to help them envision the solutions and to push through the resistance. Ultimately, this is what enabled them to be successful.

    In our last Innovation Conversation, we talked about agility and using interchangeable services on the platform of a retailer. We said that these services work together to form an ecosystem to enable the retailer to perform well beyond its own capabilities. For a traditional retailer, it is absolutely possible to keep the core tenets of your business in place – your merchandising strategy, your customer service philosophy, your supply chain and your operational controls – all while allowing for the configurable parts of the business to be innovated.

    Think of the pain points in your store. Think about the customer! Then work backward to figure out how to leverage technologies to turn those pain points into positive points of differentiation. Don’t get caught up in long decision cycles. Foster a culture of experimentation. Try things, measure and iterate quickly. You shoppers will reward you for it.

    The Conversation will continue...

    KC's View:

    Published on: March 8, 2017

    by Kevin Coupe

    The Boston Globe reports that vegan meal kit company Purple Carrot has come up with what it hopes will be an irresistible offer for New England consumers - a meal kit that allows shoppers to eat like local football hero Tom Brady.

    According to the story, "Purple Carrot launched a new subscription Tuesday in partnership with Brady’s company, TB12, featuring plant-based recipes that are gluten-free and limited in soy and refined sugars.

    "For $78 a week, subscribers to TB Performance Meals will get ingredients for three meals, designed to feed two people, that are either recipes the five-time Super Bowl champ has eaten himself with his family or inspired by his food regimen."

    Among the offerings: "White lentil risotto with winter roasted vegetables, meyer lemon and cashew gremolata."

    As much as I dislike the New England Patriots, Tom Brady and Bill Belichick, I've always admired the team's approach to organization and its achievements. (At least the achievements that came through legal means.) So I think this is a really good, really Eye-Opening idea for Purple Carrot, which is looking for ways to differentiate itself in the meal kit market.

    As a Jets fan, I was surprised and impressed to see that my favorite football team also has decided to link up with food companies to offer delivered food that reflects the dietary habits of its players - Burger King, Krispy Kreme, and Taco Bell. (When management reportedly was asked why McDonald's wasn't on the list, the response was, "Too healthy.")
    KC's View:

    Published on: March 8, 2017

    Penn Live has a story about a new Weis Markets prototype in Hampden Township, Pennsylvania, that has an expanded focus on the food experience, featuring a craft beer-centric pub, ice cream parlor, and an expanded foods-to-go selection.

    Conceding that Weis is a middle-of-the-road chain facing off against bigger competitors such as Wegmans, Ahold and Walmart, CEO Jonathan Weis said that the store represents a desire to be "on trend. We want to be interesting, not boring or dull. We just have a philosophy that we're not going to be afraid to fail."

    Among the features of the new store: a pub with a rotation selection of draft beers and a growler station, a food court with "sushi made in store as well as fresh cooked meals," "a grill counter with burgers, paninis and grilled vegetables," an "Asian food Wok station and Chobani Yogurt creation bar," "more than 1,900 organic and gluten-free grocery, dairy and frozen products," and a click-and-collect approach to e-commerce.

    The company says that features will be rolled out to other stores as deemed appropriate.
    KC's View:
    While I appreciate the honesty, I think that leadership has to be careful about describing the company as being "middle-of-the-road." If they want to say that the company traditionally has occupied that space, that's fine ... but then they have to make clear that the current strategy is to get out of the mushy middle and more clearly define who the customer is and what the customer's driving needs are.

    This store strikes me as a strong first step. But I think that, to quote Tom Furphy from our Innovation Conversation above, it is critical to "try things, measure and iterate quickly." Shoppers will reward them for it.

    Published on: March 8, 2017

    Temkin Group came out yesterday with its annual Experience Ratings, designed to benchmark the best customer experiences provided by large organizations, concluding that "supermarkets and fast food chains took nine of the top 13 spots, with Publix, Chick-fil-A, and H-E-B claiming the top three positions."

    According to the study, "The other companies at the top are three fast food restaurants (Hardees, Chipotle Mexican Grill, and Subway), three supermarkets (Hannaford, Food Lion, and Trader Joe's) three retailers (QVC, BJ's Wholesale Club, and ACE Hardware) and a bank (Regions)."

    Perhaps not surprisingly, health care plans, internet service providers, and Spirit Airlines were in the bottom 10.

    The criteria for the rankings are described as how well the experience meets customers' needs, how easy it is for customers to do what they want to do, and how customers feel about the experiences.
    KC's View:
    What I found most interesting about this study's conclusions is that there are six food retailers tied for 14th (out of a total of 314 companies ranked) - Sam's Club, Winn-Dixie, Save-A-Lot, Wegmans, Kroger, and ... wait for it ... Amazon Fresh.

    I'm not quite sure what this means, since these are about as disparate group of retailers as I can imagine. I would imagine that Save-A-Lot and Amazon Fresh would have to feel pretty good about being ranked with Wegmans and Kroger...

    Published on: March 8, 2017

    The Portland Press Herald has a story about how Ahold Delhaize-owned Hannaford has "launched a program to put irregular-looking produce in 15 stores throughout southern and midcoast Maine, rather than into the waste stream."

    According to the story, "Fruits and vegetables that have superficial flaws are set aside and put in the 'misfit' display at the Hannaford store in Yarmouth. The produce is perfectly good on the inside, but is oddly shaped or has some scarring on its skin, and is sold for as much as 30 percent off."

    The story notes that "Maine is the second state where Hannaford has rolled out the program." The company launched a pilot program in Albany, New York, "where 14 stores have so far 'rescued' more than 100,000 pounds of produce from the compost pile."
    KC's View:

    Published on: March 8, 2017

    CNN reports that Starbucks' original Roastery store in Seattle "has begun selling two new specialty drinks made from beans aged in whiskey barrels. Starbucks will be selling bags of those coffee beans as well."

    The company said that "the beans are 'hand-rotated frequently' over a period of several weeks to make sure they all come into contact with the barrel and absorb the flavor of the whiskey. The roasting burns off the actual alcohol. But Starbucks says that the whiskey flavor and smell remains."

    The story notes that Starbucks is not the first to this concept: "Jack Daniel's has a special Tennessee Whiskey Coffee that it launched last December. Brown-Forman, the owner of Jack Daniel's partnered with New Jersey-based World of Coffee on it." And, "Death Wish Coffee was selling Barrel Brand Coffee a few years ago -- coffee in four different varieties that are aged in whiskey, rye, rum and wine barrels." And, "a company in Colorado called Whiskey Barrel Coffee also sells coffee that, as its name implies, was aged in whiskey barrels."
    KC's View:
    The alcohol may have burned off in the roasting, but I'm guessing that I don't want to be drinking this stuff while writing MNB in the morning...

    Does sound good, though. And an example of food innovation.

    Published on: March 8, 2017

    The New York Times reports on how "the hotel business is diversifying," as "more travelers are seeking homey surroundings at Airbnb and HomeAway and turning to boutique hotels for their non-cookie-cutter designs. (According to STR, a hotel research firm, domestic occupancy rates in boutique hotels rose to 75 percent in 2015 from 67 percent in 2010.) That is one reason some retailers and designers see an opening for their hotel concepts."

    Williams-Sonoma-owned West Elm is walking through that opening. The retailer, which "sells modern furniture and accessories online and in nearly 90 stores nationwide, has created model hotel rooms. Next year, it expects to begin opening boutique hotels in five cities, including Detroit, Charlotte, N.C., and Savannah, Ga." The company also is said to be "looking to create a network of local artists at each location who would display their work at the hotels."

    Another example: "Tommy Hilfiger, whose designs include apparel, luggage and linens sold at Macy’s, Kohl’s and online, purchased the Raleigh Hotel in Miami Beach in 2014 and is developing it in conjunction with the Dogus Group, a Turkish conglomerate. Mr. Hilfiger is scouting a second location in Los Angeles."

    You can read the entire story here.

    It is interesting to see where disruption is coming from ... and ought to wake food retailers up to the possibility that at some point they may find themselves competing with an unexpected entity. Eataly, from Mario Batali, is an upscale example ... but is it possible that some celebrity chef or well-known restaurant could start a food market or chain with more mainstream appeal?
    KC's View:

    Published on: March 8, 2017

    • The Tennessean reports that delivery service Instacart has expanded into the Nashville market, allowing consumers to shop online at retailers that include Publix, Whole Foods, Costco and Petco and then pick a delivery window "anywhere from one hour to later in the week ... Instacart’s delivery fee is $5.99, or customers can opt for an annual membership for $149, which waives the delivery fee."


    Internet Retailer reports that UK retailer Tesco, having only last year gotten into the click-and-collect business after years of providing deliveries, has decided to expand the service so that anyone who orders before 9 am able to pick up their food after 12 noon. To this point, customers ordering before 1 pm were able to pick up after 4 pm.

    The service will be available at more than 300 stores in the UK.

    The story says that "in the last year the number of people using the service has grown by 20% – with 10% of all such orders picked up on the day they were ordered."
    KC's View:

    Published on: March 8, 2017

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

    • The Wall Street Journal this morning reports that Coca Cola, in order to smooth out the supply chain in six small countries including Vietnam and Chile, has is "encouraging mom-and-pop stores to use a mobile app to replenish shelves with cans and cases on demand.

    "Proprietors can send a request for, say, two cases of Coke and one case of Fanta, to local distributors, which bid on the deal. They promise a price and certain time period for delivery and then enlist help from gig workers with motorbikes to bring the products to the stores."

    According to the story, "The technology, which came out of a startup incubation program Coke started in 2014, has helped the beverage giant address an out-of-stock problem that cuts into sales for stores and suppliers."

    To me, it is the last graf from this story that is most important - the use of an incubator program to develop new solutions to old problems. Very smart.


    • The Wall Street Journal reports that "RadioShack’s owner is preparing to seek bankruptcy protection for the second time in as many years, according to people familiar with the matter, as the 1,500-store chain looks to further shrink to survive.

    "Parent company General Wireless Operations Inc. is in discussions with partner Sprint Corp. and potential strategic investors about reducing the chain’s footprint and could file for chapter 11 protection as soon as Tuesday."

    Dead company walking.
    KC's View:

    Published on: March 8, 2017

    We had a story yesterday about how dairy farmers in Wisconsin are worried about Trump immigration policies that could threaten their financial viability. USA Today wrote that "by some estimates, up to 80% of the hired help on large Wisconsin dairy operations is immigrant labor and a large percentage of those workers are undocumented ... Without the foreign-born help, many farmers said they would be forced to quit milking cows because not enough other people are willing to accept such physically demanding jobs for $13 an hour."

    One MNB reader responded:

    Just want to make sure I understand the situation.  Trump’s crack down is on illegal immigration.  Therefore if Dairy farmers feel threatened, it is because they are hiring illegal immigrants (undocumented workers) to do work.  If Dairy farmers are hiring illegal workers, that is against the law.

    I understand that we, as a nation use immigrant labor, but I truly think the capital system will prevail because if Americans won’t do this job for $13 an hour than perhaps the public is artificially paying too little for milk and cheese?  So dairy farmers will have to charge more so they can pay more.  Then the factories will have to pay more to retain those American workers that want to leave to be paid more at the dairy farms.

    So are the dairy companies paying their fair share of the taxes, wages, benefits for those undocumented employees?  Are we paying more in health insurance as a public because their workers are not documented?  I don’t have the answers, which is why I am asking, but certainly seems like the media (USA Today specifically here) is not weighing both sides of the issue, but instead condemning Trump’s “hard-line stance on undocumented workers is threatening large dairy farms that rely on immigrant labor…”


    First of all, USA Today wasn't taking a position on the issue - just reporting the concerns of a specific industry segment. They didn't condemn anything.

    Second, it always been my understanding that companies actually pay taxes on undocumented workers.

    But your essential point is right. It is ironic when an industry complains about the fact that the government is going to enforce laws that will impact their illegal activities.

    I also think that you put your finger on another critical point - that nobody knows what anything really costs. There could be an enormous wake-up call coming for consumers everywhere.

    From another reader, Timothy Deck, on the same subject:

    I have been reading your column for over 10 years and agree with most all of your views and comments. You are spot on. But I am always challenged with thinking outside of the box, and I think this is one area in which we as society need to take a hard look at this situation. Farmers need workers to do this hard labor that most Americans no longer are interested in performing. Most all farmers rely on migrant workers (whether they are documented or not). Let’s look outside the box on this issue.

    We currently have 2.2 million people incarcerated in state / federal prisons. Many of these prisons are located in rural America. Why not put them to work? Why not create an environment in which they can reduce their time in prison base on labor hours worked on the farm. The farmer pays the prison system for their labor at the current rate they are paying undocumented workers. I would say this is a win, win situation.




    Got a bunch of emails regarding the Coke commercial we posted yesterday. Entitled "Pool Boy," the ad portrays a brother and sister, each of whom is fixated on the rippling abs of the fellow working on their pool. Each wants to bring the guy a cold Coke ... but neither is quick enough.

    I thought it was refreshing to see this acknowledgement of diversity.

    MNB reader Khana Ramey responded:

    Thanks for the reference to a fun and uplifting video. I agree with your assessment. ... waiting for the view to come in from someone complaining about objectifying the male body.

    Another MNB reader wrote:

    Let's hear it for cougars!

    A few minutes later, this same reader followed up:

    I thought some more about this and the issue is more about of sexuality I think than diversity. My comments are not based on any sense of personal morality. I am a bit surprised an America icon with a "family" image would even in a humorous vein take on teenage sexuality, homosexuality and parental sexuality. My first reaction is this is funny. But what is important is what does the target audience think?  I guess media selection here is the key.

    Agreed. I think there will be some places where this commercial will not play. But I also think that young people - Coke's sweet spot - tend to be far more tolerant and open-minded than their elders. There's stuff that old folks agonize about that in just a few years, these young people will wonder what all the fuss was about.

    I think Coke is hitting precisely the target at which it is aiming.




    Got the following email about our story regarding how Jeff Bezos is strategizing about how to create a supply chain to the moon, planning for a time when people actually are living there:

    When THIS is the headline about your competitor, it is time to THROW OUT all things conventional…I don’t pretend to have the answer, but one thing I know:  inertia isn’t it…

    Agreed. Absolutely.
    KC's View: