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    Published on: March 28, 2017

    by Michael Sansolo

    Understandably there are MNB readers who believe we write a little too much about the competitive threat posed by Amazon. No doubt they won’t be thrilled to hear this, but that’s not the only dark cloud on the horizon.

    So brace yourself.

    There were two incredible examples of potential storm clouds this offered up last week at the annual food marketing conference run by Western Michigan University and both should have you reaching for your umbrella.

    Start with the twin German hard discounters Aldi and Lidl, both of whom are revving their engines for an attack on the US market. The session, led by industry veterans Bill Bishop and Bill Bolton, detailed the impact both of the companies have had in markets around the world, biting off market share and hammering profit margins.

    What made the session especially eye opening were two key points. First, the new and stunningly more attractive stores being opened by both companies, giving them a greater presence in fresh products and making them an even more significant competitor. In other words, what you’ve seen from both these companies in the past is not what you will see in the very near future. Aldi and Lidl are becoming much more than price merchants.

    Powered by those new stores, Bishop and Bolton made the second significant point; they project that the two companies combined are aiming for about $50 billion in annual US sales in just a few years.

    In other words, the German retailers are hoping to bite off an enormous chunk of sales in a slow-growth market. That’s going to mean a lot of pain if they succeed because those sales have to come from somewhere.

    That alone would be eye opening, but another speech at the conference raised a completely different specter. Kevin Hartman, head of analytics for Google, offered a startling glimpse into the world of the search engine giant and what the future of computing may entail.

    Consider that Google says today we’re only using about 1 percent of the computing power possible, which means that big data, the internet of things and topics I cannot even imagine still have vast possibilities of future growth. Hartman also explained that the cost of computing power today is a fraction of what it was five or 10 years ago, which makes so many of these new things possible.

    Google’s goal, he says, is something marketers have long wanted to achieve: knowing what customers (or users) wants before they even ask. So that freaky ability of Google to fill out a search for you after you’ve typed just a few letters is going to get even freakier and faster.

    Hartman sounded a caution that’s worth considering: patience is no long a virtue. As he put it, “companies that follow trends may never catch up.” Fortune and the future, it seems, will favor the bold.

    That list of the bold apparently includes names like Amazon, Aldi, Lidl and Google. Where’s your name?

    Michael Sansolo can be reached via email at . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.
    KC's View:

    Published on: March 28, 2017

    by Kevin Coupe

    I was interested to read a piece in Fortune about what, in the opinion of certain prominent CEOs, is the most important thing to look for in a job candidate. "While it’s safe to assume most businesses want talented, competent, engaged workers," the story said, these CEOs said that "in addition to the technical skills required to do a specific job ... they often were looking for the softer, less tangible abilities, such as 'culture fit,' 'enthusiasm,' and 'curiosity'."

    For example, Danny Wegman, CEO of Wegmans, said: “We look for people who genuinely care about others and are happy to serve in whatever ways are necessary. We can teach just about any other skills they need. We also look for high standards. If we’re to sell the best products in the world and have the best service in the world, we need a team committed to high standards. If we can find these two traits, we’re off to a pretty good start."

    Jerry Stritzke, CEO of REI, said: “We’re looking for people who love the outdoors and want to align their skills and experience with this purpose. We look for people who connect with customers because, as a co-op, our members play a big role in everything that we do. And we also want people who come to the co-op already living by our core values and beliefs.”

    Todd Jones, CEO of Publix: “We can teach people the technical skills, but what makes an ideal candidate is someone who is committed to serve others. We look for people who are passionate about connecting with the hearts and minds of their customers and their co-workers.”

    Now, to be perfectly honest here, I have almost no experience hiring people. I've had jobs in which people reported to me, but they almost always were people who were with the company beforehand and just ended up working for me. For the most part, though, I've always been something of a free agent even when working in traditional companies; Mrs. Content Guy says it probably is a good thing, since I don't play well with others.

    But the other three people who write regularly for MNB - Michael Sansolo, Kate McMahon, and Tom Furphy - all have lots of experience hiring people. So I reached out to them to see what they looked for in job candidates.

    Michael Sansolo, who hired people when he was editor of Progressive Grocer as well as a senior executive at the Food Marketing Institute (FMI), told me, "Since most candidates who came to me were already vetted for basic skills, I was always looking for great attitude (you can't teach attitude) and I asked them to give specific examples of how they dealt with specific difficult circumstances."

    Kate McMahon, who during a long journalism career was the arts editor for the New York Daily News, said that for her, the key quality to identify was "integrity. It is a core quality that is obviously mandatory for a responsible journalist, and should be for any position - from the front lines to the executive office."

    And Tom Furphy, who has run a bunch of businesses - including Amazon's CPG business and Amazon Fresh, as well as, at the moment, Consumer Equity Partners, Ideoclick, and Replenium - said, "I’ve tended to hire 'disruptors,' which is a horrible descriptor actually. They need to be aligned with the goals and culture of the organization, for sure. But a disruptor is driven to do things better, and often completely differently, than they’re being done today in order to provide a step change in the value of the service that the organization provides.

    "They have to be curious; they have to want to ask 'why.' They also have to have the courage to propose “why not” and to articulate a compelling argument.

    "They have to be smart - they must exhibit the mental capacity to figure things out. They need to be able to identify the root of a problem or opportunity and then to support the design and implementation of the solution.

    "And, they have to be able to knock down walls when required, but also know when to respectfully disagree and commit to the determined solution."

    Like I said, I have very little in my experience that allows me to add to this discussion. But I know it is important, and I'm lucky enough to work with people who have vastly more experience than I do.

    It is an Eye-Opener.
    KC's View:

    Published on: March 28, 2017

    The National Association of Convenience Stores (NACS) and the National Grocers Association (NGA) have announced that NGA is aligning its Fall Leadership Meetings, comprised of the Trading Partner Business Sessions and its Financial Management and Technology Conference, with the big NACS Show that takes place in Chicago on October 17-20.

    The NACS Show is one of the 40 largest tradeshows in the United States, traditionally attracting more than 23,000 attendees from 60-plus countries to a show that features four days of general sessions, 50 education sessions and more than 1,200 exhibiting companies in a nearly 410,000 net-square-foot exhibit floor.

    In the official announcement, NACS and NGA said that "the strategic partnership brings together the leading small format and independent retailers to explore emerging trends in foodservice, consumer packaged goods, retail motor fuels, consumer-facing technologies and operating best practices."

    NACS said that NGA is the third major trade association to partner with the NACS Show. The Petroleum Marketers Association of America (PMAA) and Petroleum Equipment Institute (PEI) have previously co-located their programming and expositions with the NACS Show. Conexxus, the stand-alone spin off of the NACS Technology Project, also is aligned with the NACS Show.

    MNB had a chance to pose several questions to NGA President & CEO Peter J. Larkin, and NACS President & CEO Henry Armour ...

    MNB: Is this a tacit recognition that independent supermarket owners have more in common with convenience store owners than with the largest chain supermarkets? How would you characterize their similarities?

    Peter Larkin:
    While I wouldn’t necessarily characterize independents as having more in common with convenience stores than large supermarket chains, I’d say that there are many similarities. For example, a lot of our members and large chain stores operate convenience stores and they have similar needs for educational resources that we can help provide by working with NACS.

    Both independent supermarkets and convenience stores are vying to serve their consumers in a very competitive marketplace that is always changing – new technologies, services, and consumer goods and products are constantly being introduced – staying ahead of consumer demand is crucial to being a successful operator.

    Henry Armour: If anything, it reinforces the value of convenience. The NACS Show is successful because it focuses on solutions for a variety of small-format operators, from independents to some of the largest retailers in the world. Our two organizations have very similar education programming, whether sessions on payments, labor productivity or consumer trends. Add to that our 410,000-square-foot expo and it’s a great fit for our combined retailer membership. And for the supplier community, we have just made it more convenient for them to reach key buyers.

    MNB: One of the things that also occurs to me about this announcement is that it also reflects another reality - that format really is not that important a concept to consumers, and is much more of an issue to operators. Would you agree? Is this confluence of events designed in some ways to reflect this modern competitive reality?

    I’d agree with that assessment. Consumers are looking for convenience to fit their lifestyle. What that looks like may vary from market to market, but independents are agile enough to quickly address those shifting needs of their consumers within their communities.

    Armour: You’re absolutely right. Consumers care if a store fits their needs and solves their problems.

    MNB: Structurally, how will this work? Will the NGA conferences run concurrently with the NACS Show, or will they run one after the other? How will it cost out for attendees? And will all attendees of any of these shows have access to all of the events and exhibits of the other shows?

    NGA will be kicking off its Fall Leadership meetings with the Trading Partner Business Sessions program from October 16 – 17, while the NGA Financial Management and Technology Conference workshops will run concurrently with some of the education at the NACS Show from October 18 - 19. NGA Fall Leadership retail and wholesaler attendees will have full access to NACS Show education workshops and expo floor. And of course, NGA will continue to hold its regularly scheduled programs, such as The NGA Show, which will be held February 11 – 14, 2018 at the Mirage Hotel and Casino in Las Vegas.

    MNB: Is this just the beginning of what NACS and NGA hope will be more collaborations down the road? (There also is the inevitable question about a merger…?)

    We often collaborate with NACS, whether it’s on public policy initiatives or educational programs because of the synergies shared between our memberships. And as you know, we already collaborate with many other industry trade associations – simply put, this is just collaboration opportunity for NGA members.

    For over 30 years, NGA’s sole mission is to strengthen and advance the independent supermarket industry – this continues to be our steadfast mission, and we’ll look to work with industry partners that are mutually beneficial where there might be opportunities to do so.

    Armour: Our organizations have worked with each other and we are comfortable with each other on a number of levels. This agreement is a perfect opportunity to work together more closely when there are mutually beneficial reasons to do so.

    MNB: Finally, how would you envision that this new combination will help that independent supermarket operator, or independent c-store operator, be better and more relevant in serving his or her customer?

    It brings more and varied resources to the table to help retailers find new ideas, new products or services or new connections. And there is definitely strength in numbers in terms of suppliers bringing new, innovative solutions to small-format retail first.

    Larkin: The supermarket industry is a highly competitive marketplace but as we’ve seen recently, independents are competing against a vast variety of formats so having the opportunity to see new products and services as well as ways to serve the consumer is ultimately the end goal.
    KC's View:
    I think this is a very smart move by NACS and NGA, mostly because - as I said in one of my questions - consumers don't really give a damn about format. Those boundaries are largely created by business, and they're falling as consumers behavior changes.

    Let's be clear. The US Department of Agriculture (USDA) Economic Research Service has crunched the numbers, and traditional supermarket share of total grocery expenditures is dropping, and there's no reason to believe that trend will change. Consumers want what they want, and they make their purchases at places that strike them as delivering value and providing convenience (though not, I think, just convenience in the geographic sense ... so much more goes into that these days). It simply makes sense for NGA and NACS to align their organizations where they can, simply because their interests and targets are aligned.

    Published on: March 28, 2017

    The Wall Street Journal reports that Amazon is delaying the public opening of its checkout-free Amazon Go store in Seattle, citing the need to work through technical glitches.

    The technology-heavy convenience store was scheduled to be opened by now, but there have been issues that have slowed down the process.

    To this point, the store only has been open to Amazon employees, giving the company the ability to test the cameras, sensors and algorithms used to allow people to walk out of the store without going through a checkout and be automatically charged for their purchases. The big problem, apparently, is that when more than 20 people are in the store, the sensors get confused.
    KC's View:
    Since it is a pretty good guess that this store often will have more than 20 customers at a time, it makes sense to get it right. (You don't want to open it to the public and then close it down when the technology doesn't work.) The process may be a little more public than Amazon ordinarily would like, but they're not going to be worried about people like me being impatient. They know, to quote something my mom used to tell me, that "patience is a virtue."

    Published on: March 28, 2017

    Really interesting piece in the Wall Street Journal about how products are priced on Amazon - an issue that may grow to be of even greater importance now that Walmart is investing billions in its e-commerce initiatives and depending on price, at least to some degree, to be a differentiating advantage.

    An excerpt:

    "Just beneath the placid surface of a typical product page on Amazon lies an unseen world, a system where third-party vendors can sell products alongside Amazon’s own goods. It’s like a stock market, complete with day traders, code-slinging quants, artificial intelligence algorithms and, yes, flash crashes.

    "Amazon gave people and companies the ability to sell on in 2000, and it has since grown into a juggernaut, representing 49% of the goods Amazon ships. Amazon doesn’t break out numbers for the portion of its business driven by independent sellers, but that translates to tens of billions in revenue a year. Out of more than 2 million registered sellers, 100,000 each sold more than $100,000 in goods in the past year..."

    If you want to know how it works click here.
    KC's View:
    Where this gets interesting, especially in view of heightened competition to Amazon, is where it is said that "the point of Amazon ... isn’t to offer a consumer the absolute lowest price possible; it’s to offer the lowest price possible given the convenience that Amazon offers."

    Is there a tipping point at which Amazon's complicated algorithms could become less attractive than a different approach taken by Walmart? It is going to be interesting to find out.

    Published on: March 28, 2017

    Fast Company has a piece about the new format Target store that we've all been hearing about, described as "one-half boutique retail store" and "one-half grab-‘n’-go warehouse." This new format - the first is slated to open in a Houston suburb later this year - "is the large-format Target of the future—the remake of the Target that we all know. And over the next two years, the company will spend billions updating 600 stores nationwide to mirror this model," hoping that it is "just the thing to keep big-box stores relevant in the age of Amazon."

    From one entrance, the story says, "Target will appeal to slow shoppers, by creating a more browsable retail experience. Walking through new, curved aisles rather than a grid that starts at the door, customers will see gleaming merchandise tables that look straight out of Nordstrom or Macy’s." From the other, "Target is appeasing the on-demand economy. It will offer a quick way to grab your online order or a bottle of wine for dinner. While this door features a few merchandise tables, too, you’ll be able to beeline to customer service and pickup ... or reach the groceries and wine with minimal fuss. And for people who don’t even want to set foot inside the store, this side of Target will feature dedicated spots to park where employees will bring your online orders out to you."

    Sketches are available on the Fast Company site, and you can access them here.
    KC's View:
    I think design is important ... but Target also has to figure out what products it is going to sell that will differentiate it in the marketplace.

    There's an old Jimmy Buffett song that has, in the chorus, the line, "My whole world lies waiting behind door number three." Somehow, Target has to convince not just its own customers of that, but people who used to be its customers, and people who are not yet its customers.

    Published on: March 28, 2017

    The Chicago Tribune had a story the other day about an industry in which companies are trying to adapt to changing technological and cultural realities, in which many companies already have bitten the dust, and in which the ones that are holding on are seeking new ways to be relevant to their customers.

    The dry cleaning business.

    Apparently, "hundreds of dry cleaners in Illinois have closed in the past two decades." In part, that's because people get dressed up less to go to work, but also because clothing manufacturers have replaced "silk, wool and other delicates with cotton and polyester blends that hold up to laundering in standard washing machines." Indeed, even "no smoking" rules in most public places mean that clothes that do require greater care can go a lot longer between dry cleanings. Environmental regulations also have created new challenges. And, immigrants who started dry cleaners have found that their children have no interest in keeping the family business alive.

    Many of these companies are trying new things, "marketing other services, like laundry for a wider array of clothing beyond the usual dress shirts, as well as cleaning rugs and other home goods, and they're looking for ways to make drop-off and pickup more convenient and faster for consumers. Some are touting environmental credentials, trying to operate more efficiently to pass savings onto customers, and finding inspiration from strategies used in the restaurant and retail industries."

    One Illinois dry cleaner has instituted a system that "keeps profiles on its customers and when they visit a store, the cash register shows the cashier a range of stars assigned to that customer, from one to five, depending on how regular that customer is. Each customer also receives an email after each transaction and is asked to rate the service on a scale of zero to 10."
    KC's View:
    In other words, dry cleaning businesses - and I assume that this is to some degree a nationwide phenomenon - are facing the same challenges as every other retail business. Which isn't really surprising .... there are very few people who should feel like their business models cannot be disrupted. (A pretty good rule of thumb is that if you feel you can't be disrupted, you need to get a second opinion.)

    Interestingly, both Michel Sansolo and I have done separate stories over the years about dry cleaners that delivered on their value propositions ... which you can read here and here.

    Published on: March 28, 2017

    Total Retail features coverage of a session at the ShopTalk conference last week at which Marc Lore, founder of and now president and CEO, Wal-Mart E-Commerce U.S., discussed why he'd sold his company to Walmart.

    "“As a startup, you’re selling pieces of the business along the way to venture capitalists," he said. "Did you sell the vision that you sold to your customers and employees? Wal-Mart accelerated the vision to reach our goals for customers and employees. Wal-Mart offered us the capital to do that. It ended up being a no-brainer.”

    In addition, Lore expressed enthusiasm for Walmart's core cultural values, and for the company's willingness to change the way it does business to adapt to online realities.

    “It’s incredibly challenging for a legacy retailer to hand over the keys to a startup” he said. “You need executive buy-in. Doug McMillon was a benefactor from the beginning. It [acquiring Jet] was a risky, bold move at the time, but it’s working out well so far. I’m hoping to continue to prove Doug and the board correct.”

    And, Lore added, "“Doug and the exec team have delivered on their promises. I’ve been so impressed with the values of the company. It operates with the highest integrity. I’ve been completely converted on the value system having been in the door.”
    KC's View:
    There is no question that Walmart is allowing Marc Lore to take the company outside its traditional comfort zone, not just in terms of e-commerce but also in terms of acquiring companies with a somewhat more aspirational approach to retailing than Walmart generally has taken. But I am persuaded that the only way to succeed these days is to to that - go beyond traditional comfort zones to find new ways to be relevant to shoppers.

    Published on: March 28, 2017

    Business Insider has a story about a Barclays analysis of Whole Foods that suggests it "has lost as many as 14 million customers in the past six quarters" - many of them to Kroger.

    Here;'s how the analysis is described:

    "Kroger - a conventional grocer not known for organic offerings - has not historically been regarded as a significant threat to Whole Foods.

    "But in recent years Kroger has ramped up its supply of organic foods in a bid to steal market share from Whole Foods and other niche grocers such as Sprouts Farmers Market and Fresh Market.

    "Kroger now devotes several aisles in its stores to organic and natural foods and offers a variety of organic meat and fresh produce. The chain has its own line of organic goods under the 'Simple Truth' brand, and it's prices are about 15% cheaper than Whole Foods' prices, according to a study last year.

    "The expansion into organics has paid off. Kroger's sales of organic and natural food totalled $16 billion in the past year, compared to $15.8 billion at Whole Foods, according to Barclays."
    KC's View:
    What I think has to be concerning to Whole Foods would be the possibility - maybe even the probability - that they'll never get these shoppers back. Whole Foods will have to do something extraordinary to lure those shoppers back inside its stores, and it doesn't have a big window in which to make that play.

    Published on: March 28, 2017

    • In Minnesota, the Star Tribune writes about how more and more food retailers are turning to nonfood items as a way to entice shoppers into their stores: "This week, Aldi reached into Ikea’s bag of tricks and offered an upholstered chair in a box for $70, an ottoman for $40 and leaning bookshelf for $40. Cub Foods is currently selling ­freezers for $199. Hy-Vee’s newest Twin Cities stores entice shoppers with departments devoted to cosmetics, clothing and wellness supplements."

    The reason is fairly simple. Supermarkets have discovered that nonfood stores increasingly turning to grocery items as a way of driving traffic and sales, and so they're seeing the advantage of turning the equation around. "That’s causing supermarkets to look for new ways to attract shoppers," the story says. "Retailers such as Aldi have learned if they can get an aggressively good price on a desirable item, consumers will buy it, even if it’s an oddball thrown into the regular mix."

    Bloomberg reports that Tesco is close to finalizing a settlement with the UK's Serious Fraud Office over the 2014 overstatement of revenues and understatement of costs that plunged the company into a financial crisis. According to the story, the deal is likely to include a fine that is the equivalent of more than $1 million (US).

    According to the story, "The probable deal would take the form of a deferred prosecution agreement, which lets a company avoid prosecution in exchange for terms such as paying a fine and helping with individual prosecutions. It's possible Tesco could be subject to ongoing monitoring. However, that management overhaul and the fundamental change to its processes -- including how it deals with suppliers -- means it may get away with a more or less clean break."

    • Sealed Air Corp. has agreed to sell its Diversey Care food safety/hygiene/cleaning business to private equity group Bain Capital for about $3.2 billion.
    KC's View:

    Published on: March 28, 2017

    ...will return.
    KC's View:

    Published on: March 28, 2017

    The Final Four is set in the NCAA Women's Basketball Tournament, where on Friday it will be UConn vs. Mississippi State, and Stanford vs. South Carolina.
    KC's View:
    BTW ... apologies for my screwing up the men's final four teams yesterday ... I was writing it at 1 am because I had an early plane to catch, and fixed it as soon as I was alerted to my mistake.