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    Published on: April 10, 2017

    by Kevin Coupe

    This morning's Eye-Opener is not a single story. Rather, I just want to point out the degree to which disruption is a factor in so many of this morning's stories.

    We have a story about how bricks-and-mortar retail weakness is changing the labor equation ... eliminating some jobs but creating others. We have another story about new shipping services are being created that will allow traditional retailers to be more competitive with Amazon.

    We have several stories about Walmart trying to disrupt itself from within, both online and in-store. And we even have a story about generational disruption, from the perspective of a 17-year-old.

    It is, I think, an important and Eye-Opening message. Disruption is everywhere. People and companies can complain and whine and yearn for yesterday. Or they can do whatever is necessary to be relevant to customers today and tomorrow.

    Granted, while it may be a simple choice, it rarely is a simple process.

    But it is unavoidable, I think.
    KC's View:

    Published on: April 10, 2017

    The Washington Post reports on how "general merchandise stores shed 34,700 jobs in March, the government announced Friday, the single most disappointing figure in a generally disappointing jobs report."

    While the retail sector is described as having been a reliable generator of new jobs since the recession, the Post notes that "this is the second month in a row that retail payrolls have registered substantial losses - a possible sign that larger structural changes are in the works."

    Part of the issue if that people have changed how they shop, with e-commerce playing a big role in the shift. If people are going to shop on their computers and mobile devices, rather than going to stores, then those store simply are not going to need as many employees. Either stores close, in which case people lose their jobs, or even the stores that remain open cut back on labor as a way of reducing costs.

    However, while "e-commerce may cause a drop in retail jobs," it also can cause "a rise in warehouse, distribution and transportation jobs."

    Diane Swonk, CEO at DS Economics in Chicago, tells the Post that the decline in retail jobs growth “is not a reflection of a consumer than can’t spend, but rather of how they spend. Retail is one of the largest employers in the country, and it’s going to go through a pretty massive secular restructuring. We shop differently now, and no one has the right model.”
    KC's View:
    One interesting note in the story is how, while retail jobs were down by 30,000, restaurant jobs were up by 20,000 ... which one expert says reflects a shift in consumer desires: they used to want to pay for things, but now they want to pay for experiences.

    Maybe if more traditional retailers though that way, they'd be seen as worth visiting by more shoppers.

    Published on: April 10, 2017

    The Wall Street Journal reports that as Amazon continued to cast "a bigger shadow across the retail world and the shipping market," with competing retailers "rushing to offer faster, cheaper delivery to keep customers from flocking to Amazon Prime," shipping companies "are vying to help small retailers compete."

    These smaller retailers, "ranging from retail startups to midsize national chains that can’t afford to match" the offers tendered by companies the size of Walmart and Amazon, are seen as a kind if "lifeline" by shipping companies - especially because Amazon is investing in myriad ways to handle more and more of its own shipping and logistics needs.

    The Journal writes, "It is a shift in strategy for companies like FedEx Corp. , which until recently tailored their e-commerce services mainly to giant retailers needing to quickly process thousands of shipments a day. Now, they are betting even tiny online storefronts will pay for access to nationwide networks of warehouses, trucks and planes that can whisk online orders to customers’ doorsteps in less than 48 hours - even if Amazon’s growing same-day delivery service remains out of reach for most."

    It isn't just big shippers hoping to cash in. "Newer entrants include startups like ShipBob, which runs fulfillment centers in Los Angeles, Chicago and Brooklyn, and Red Stag Fulfillment, operating out of three facilities in Tennessee and Utah," the Journal writes. "These companies pool orders from hundreds of customers to negotiate lower shipping rates than the retailers could get on their own."

    One of the things that these shippers - from FedEx and UPS to startups like ShipBob - offer is an ability for retailers to avoid outsourcing their fulfillment business to Amazon, which they are convinced is not focused on their success, but its own.
    KC's View:
    The good news is that even as small retailers face enormous challenges, it creates opportunities for people and companies of an entrepreneurial bent to find ways to help them.

    None of this is easy. But it is necessary. At least, if survival happens to be a priority.

    Published on: April 10, 2017

    Really good piece in the New York Times over the weekend by 17-year-old Jonah Stillman, who recently joined the advisory board of Blackboard, an educational software company. Invited to attend his first meeting, Stillman was enthralled and engaged ... until he got an unexpected criticism from a vice president named Craig Chanoff during a break in the session. Chanoff told him that if he wanted to be successful, Stillman had to stop texting friends and checking his Twitter feed during the meeting.

    Stillman writes that he felt like an idiot...

    "But I was also quite angry. The thing is, I hadn’t checked my Twitter feed for over two hours. I’d been taking notes.

    "I walked down the hall and began to think. I realized that my friends and I are glued to our phones all day long. That’s just the way we are. Phones are crucial to our identities and lifestyle. Telling people in my generation to put our phones away is not a solution. Just ask our teachers how that has worked for them.

    "Even so, the workplace is not ready for how often we are going to pull out our phones. Rather than fight it, I think the other generations are going to have to learn to let go and adapt to us. The reality is that social media breaks take less than 15 seconds and can be re-energizing. That’s less time than the widely accepted practice of taking breaks for coffee or snacks.

    "That said, there is no denying that we will need to be mentored so we know when even a 15-second break is unacceptable. The good news is that teachers have been trying to coach us about this for years. We can learn and we can adapt, if the other generations adapt, too.

    "What really upset me at the meeting was the assumption that by pulling out my phone, I wasn’t paying attention. I’m a digital native. My friends and I have only known a world where phones are smart. My iPhone is a computer, and it’s natural to take notes on it.

    "I thought I was being diligent, yet they thought I was being rude. I even thought I was being efficient by quickly looking up something online and not missing a beat, and they thought I was playing video games. Clearly, my generation cannot assume the older generations know how we use technology."

    The good news is that when Stillman explained what he'd actually been doing, the company turned it into a positive. (He probably had the best notes on what had been discussed, and could easily email them to other attendees.)

    But this is a relevant look at a generational gap that needs to be bridged, and an understanding that older folks need to have about how younger people work and engage. You can read it in its entirety here.
    KC's View:

    Published on: April 10, 2017

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

    Arkansas Online has a story about a Walmart Supercenter in Lane Nona, Florida, just south of Orlando, which " is one of two concept stores the retailer has opened this year along with a similar supercenter located in the Houston area. The Lake Nona store, which opened Jan. 25 and is located in a growing community within Orlando’s city limits, is being tested to determine whether the retailer will roll out the prototype at other locations across the country.

    "There are a few tech-based features available in the store. The most prominent is Wal-Mart’s Scan & Go, which allows customers to scan items with their mobile phones as they shop and pay for them through a mobile app to skip the checkout line. A version using a hand-held device also is available."

    The story goes on: "Wal-Mart also included an interactive table in Lake Nona’s electronics department, which allows customers to swipe their hand to learn about a product. Projectors located overhead sense hand movements and determine the direction a customer wants to go in their search for information.

    "The store has a large touch screen in the toy department, giving customers a chance to sift through the retailer’s instore and online catalog. A series of questions — like a child’s age and gender — help narrow choices and selections are either on the store’s shelves or available online. If the selection is only available online, customers can purchase the product through the mobile app."

    The story says that Walmart continues to believe that the supercenter format can help meet consumer expectations, "providing Wal-Mart with a brick-and-mortar tool to help marry online and in-store capabilities for customers."

    Analysts who have seen the store seem to conclude that while this may not be the perfect Walmart, it is a very cool Walmart ... and a step forward in the way Walmart approaches bricks-and-mortar retailing. Which is important, because Walmart has to up its game in physical retail even as it invests billions in the online arena.

    • The Los Angeles Times has a piece about how Walmart "is belatedly but aggressively expanding its e-commerce business to keep pace with the seismic shift in consumer shopping from brick-and-mortar stores to the Internet ... With nearly a half-trillion-dollars in annual sales and 4,700 U.S. stores, Wal-Mart has been buying online retailers, slashing shipping rates and rolling out new ways for in-store customers to do more of their shopping at and its other websites."

    While "Wal-Mart’s effort to tap that online growth often is portrayed as a direct attack on Amazon," the story says, Wal-Mart "prefers to frame its strategy as capturing more of the e-commerce market by blending its in-store, online and mobile-app offerings so that customers can easily move from one to the other to make purchases. If it snatches business from Amazon in the process, all the better."

    The Times says that the new focus reflects simple math - traditional bricks-and-mortar retailing is growing at less than two percent a year, while e-commerce is growing 16 percent a year.

    It is important to remember that e-commerce is growing on a much smaller base, though that is not to suggest that the difference in vitality is in any way illusory. I suspect that the e-commerce growth may accelerate, since Walmart suggests that its new aggressiveness in terms of buying up smaller online retailers and developing new online programs is just beginning, and that aggression is likely to translate into even greater segment growth.

    • The Associated Press has a story saying that David Cheesewright, president and CEO of Walmart International, recently said in a speech that "he was optimistic about the future prospects of his company's digital business."

    There are, he said, four reasons.

    First, a "multiplier effect on sales from having a brick and mortar footprint and online presence." Second, global scale that "provides great access to product and an ability to price aggressively. also provides access to an even wider range of product."

    Third, the belief that " has Smart Cart proprietary technology that adjusts prices in real time based on proximity of product to the shopper and shipping costs." And finally, infrastructure: "By giving customers the flexibility to choose when, where, and how to shop, WMT is able to better serve customers in a way pure online players cannot," Cheesewright said.

    I continue to believe that there remains a fundamental difference between Amazon and Walmart. Walmart is in the business of selling as much stuff to people as it can, and Amazon is in the business of creating an ecosystem that includes everything from commerce to streaming NFL games. I'm not saying which business model will win out ... though I personally have a preference fro the Amazon approach ... nor do I think that there can be only one winner in this epic battle.
    KC's View:

    Published on: April 10, 2017

    Variety reports that Twitter has dropped its lawsuit against the federal government that "sought to block the Department of Homeland Security’s efforts to discover who is behind a Twitter account critical of the Trump administration’s immigration policies."

    The decision came after the government dropped "its summons to the social-media company demanding the information."

    The story notes that "Twitter had sued the Trump administration Thursday over attempts by the DHS and U.S. Customs and Border Protection to discover the identity of the user behind @ALT_USCIS, which has criticized the immigration policy of the current administration since it was created in January 2017."
    KC's View:
    If the administration is going to court to discover the identities of everyone who is critical of it, it is going to spend an awful lot of time in court.

    Published on: April 10, 2017

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

    • The Florida Times-Union reports that convenience store chain Wawa is breaking ground for its first two Jacksonville-area stores, with expectations that there could be as many as thirty more in the market.

    Last year, Wawa indicated that it "plans to open six stores here in 2017, 10 in 2018 and two to four a year after that," the story says.

    • The Associated Press reports that KFC has announced that by the end of the year, the chicken served at its more than 4,000 US restaurants will be free of "certain antibiotics."

    According to the story, KFC "is working with more than 2,000 farms around the country to stop using antibiotics important to human medicine. Antibiotics specific to animals may still be used to treat diseases in the chickens."

    The AP also says that KFC actually is a little late to the game, that "Chick-fil-A has said that by 2019 it will only serve chicken that has never been given any antibiotics ... and McDonald’s Corp. has stopped using chickens raised with antibiotics important to human medicine for its McNuggets."

    While meat producers "give animals antibiotics to make them grow faster and prevent illness," the story notes, health officials "have said that it can lead to germs becoming resistant to drugs, making antibiotics no longer effective in treating some illnesses in humans."

    Wait. I'm still trying to get my head around the notion that what KFC serves actually is chicken...

    • The New York Business Journal reports that Fred's Inc. has "committed to buying up to 1,200 Rite Aid pharmacy stores," which should be "a big help to Walgreens, which needs to win Federal Trade Commission approval of its $9.7 billion mega-merger with Rite Aid."

    Walgreens has set a three-month deadline "for the FTC to either block the merger or let it go forward."
    KC's View:

    Published on: April 10, 2017

    • The Associated Press reports on rumors that Mondelez chairman/CEO Irene Rosenfeld, after three years of declining revenue, may be on her way out, as the board of directors has discussed possible replacements.

    The story notes that "Rosenfeld has been the company’s CEO since 2006 and became chair in 2007. The company was split off from Kraft Foods in 2012."
    KC's View:

    Published on: April 10, 2017

    We had a story last week about how major retailers like Walmart have their own CSI-style operations, which prompted MNB reader Gail Nickel-Kailing to write:

    I assume that because 1) they are not law enforcement agencies (city, state, county, federal) that they don’t have to operate under the same legal constraints developed to protect personal rights, 2) since they are not “accredited,” they may be using methods, procedures, systems that might not be approved under accreditation. (This only raises a question because we don’t know… )

    The services you list range from extracting information from a damaged hard drive - something that data recovery companies do all the time - to tracking on employee behavior to check to see if any laws are being broken. 

    I don’t fault companies for feeling they have to go the “do it yourself” route if there are not properly accredited organizations with enough bandwidth to provide services, but who’s ensuring our civil liberties - and our data - are being protected?

    Just a little concerned here…

    We had a story the other day about how "Amazon is launching something called Amazon Cash, described as a service 'that allows consumers to add cash to their balance by showing a barcode at a participating retailer, then having the cash applied immediately to their online Amazon account'."

    One MNB reader responded:

    I think it's hard for us that have bank accounts to fathom life without one. My brother was one of those paying a percentage to cash his paycheck. I have stood in line at the Dollar Tree and watched people pay hundreds of dollars to load a pay card. The cashier told me they always buy things in addition to loading the card. So maybe that's why merchants will work with Amazon Cash ...

    From another reader:

    Walmart addressed this “unbanked customer” opportunity a few years ago with their Walmart MoneyCard.  Customers can cash their paychecks to the card and not incur any check cashing fees, as well as load additional cash to it.  The card is then usable for online purchases.  Sounds like it is Amazon playing catch-up for a change …

    Regarding completely automated bank branches being tested by Bank of America, one MNB reader wrote:

    I recently stopped in my local BOA bank to handle some banking needs that I generally prefer a teller to handle.  When I walked up to the counter and presented my banking, the bank teller politely told me I could do all that I wanted done outside at the ATM.  I responded that I would have but there were already three people in line for the ATM and I saw that she was not busy.   The banks are definitely trying to steer customers away from direct person-to-person interaction, unless you want to apply for loans or make some investments.

    MNB reader Ben Kizer had a thought about our story looking at how UPS finally is getting into the Saturday ground delivery business:

    I very much enjoy Morning News Beat and as I celebrate my 33 year in consumer sales, change still seems to be the only constant in this business.  I for one hope we don’t see Sunday deliveries.  Sunday should be a day for Church and Family.  In fact, I wish more businesses would go the way of Chick fil a and Hobby Lobby and close on Sunday.   

    Like it or not, that horse is out of the barn.

    The thing is, not everybody goes to church, and some people need to be able to do shopping and errands on Sundays so they can take care of their families.

    A business can choose not to do business on Sunday if it wishes, and a consumer can choose not to get Sunday deliveries or not to go to the store on those days.

    Finally, in a discussion of how its position on public bathrooms - saying that people can go to the restroom reserved for the gender with which they identify, as opposed to their birth gender - has hurt Target, I conceded that I may have misread the degree of opposition ... but said that this probably is because I am a Northeasterner with urban predilections.

    Prompting one MNB reader Jim Martin to write:

    I'm a child of the northeast with heavy urban influences, Brooklyn and North Jersey, and I completely disagree with your position on this subject.

    Fair enough. It would be a mistake to suggest that urbanites are homogeneous in their views, and that certainly was not my intention.
    KC's View:

    Published on: April 10, 2017

    Sergio Garcia, after 73 attempts to win a major golf championship, finally nailed one down - the 2017 Masters, which he won in a playoff against Justin Rose by two shots.
    KC's View: