business news in context, analysis with attitude

Published on: June 30, 2017

by Kevin Coupe

Fast Company has a piece about the new Amazon Echo Show, which costs $230 and offers - in addition to all the voice activation capabilities embedded in the regular Echo/Alexa family of devices - a seven-inch video display with a variety of uses.

"While Amazon envisions the Show being used in your bedroom and living room," Fast Company writes, "make no mistake: it’s optimized for your kitchen counter, where that 7-inch display is likely to be a crucial assistant in helping prepare meals and stock your fridge and cupboards."

According to the story, "Many of us have turned to online videos to learn how to make new things in the kitchen, and the Show will be perfect for that, especially if there’s a skill that lets you back up or pause the video using voice commands. Right now the Show is mainly a front end for Amazon’s Prime video, but the video selection will grow as third parties create new skills."

Indeed, the kitchen is seen as crucial to the Echo Show's success - "it’s where people tend to spend a lot of time and make plenty of purchasing decisions," as Fast Company correctly observes.

I'm in Portland, Oregon, right now, beginning my summer adjunctivity at Portland State University ... so I wasn't at home in Connecticut when our Echo Show arrived at the door on Wednesday. My 22-year-old daughter was, though ... and she's having a great time playing with it.

We'll report back as events warrant. I'm sure it'll be an Eye-Opener.

Published on: June 30, 2017

Colloquy is out with its annual Loyalty Census, concluding that "US consumers hold 3.8 billion memberships in customer loyalty programs," suggesting that "membership growth continues, but has slowed to 15% compared to the 26% growth rate achieved in the 2015 Census when total memberships were 3.3 billion."

The report goes on to say that "the new consumer survey research from the 2017 Census shows that 53% of U.S. consumers identified 'easy to use' as the main reason for participating in a loyalty program, topping 'gives me great discounts' (39%) and 'easy to understand' (37%), among other reasons.

"Conversely, the top reason given for abandoning a program was 'it took too long to earn points or miles;' a concern cited by 57% of respondents."

In addition, Colloquy says, " The survey research shows that across all sectors the top motivator is, I love the brand, company, retailer or service – purely emotional."

While "the retail sector accounts for 1.6 billion reward program memberships, making it the largest slice of the loyalty pie," memberships among grocery shoppers has "dropped to 142 million, compared to 188 million in 2015, continuing a downward trend in three consecutive Census reports. The 24% decrease is due in part to mergers and acquisitions within the industry."

Published on: June 30, 2017

Yesterday MNB took note of an Associated Press story about how "hundreds of inventors have flocked to Walmart’s headquarters in Bentonville" to "take part in Walmart’s fourth annual 'Open Call' Wednesday," competing for shelf space in the retailer's stores. Amazon, the story pointed out, was holding a similar event at the same time, but a Bloomberg story follows up and puts the Amazon event into great context.

"For years, Amazon.com Inc. was the go-to place for online merchants," the story says, but increasingly, "the e-commerce behemoth has competition for the hearts and minds of millions of mom and pops. Wal-Mart Stores Inc. is successfully courting many of the same merchants. Alibaba Group Holding Ltd.'s Jack Ma was in Detroit last week dangling millions of Chinese web shoppers before U.S. businesses. In July, EBay Inc. will host its annual seller celebration in Las Vegas."

The Bloomberg story goes on to point out that third-party merchants are "responsible for about half of all the merchandise sold on Amazon," but many may be finding the site to be almost too crowded and robust for comfort; Walmart, on the other hand, is early days when it comes to a third-party marketplace, and may appear to be a friendlier place to do business, especially with Marc Lore now running its online operations.

"Amazon can ill afford to alienate the more than 2 million merchants hawking goods on its site," Bloomberg writes. "A robust marketplace is key to Amazon's success: merchants competing to sell the same things keep prices low, and those constantly introducing new products keep inventory fresh. That's helped Amazon attract more than 300 million shoppers around the world." Which is why Amazon's event this week was "basically a warm-and-fuzzy sales pitch: stick with Amazon and we'll show you how to access billions of shoppers, including in hard-to-crack markets like China and Brazil."

Published on: June 30, 2017

The Wall Street Journal reports that CVS, "three years after eliminating tobacco products from its shelves and adding 'health' to its name," now is going even further "and moving most junk food away from the storefront, banning sales of low-protection sunscreens and eliminating foods containing artificial trans-fats."

These changes, the story says, "are part of CVS’s effort to stand apart from rivals by focusing on health-care goods and services, said Helena Foulkes, who runs the company’s retail business. It puts the company on a different path than its main competitor."

That competitor - Walgreens Boots Alliance - says "it isn’t a retailer’s job to keep shoppers from their vices and that consumers should be able to make unhealthy choices if they want to," the Journal writes.

The story goes on to note that "CVS’s latest moves are subtle. It will still sell candy bars at the front register but is moving the main snack aisle, with its bags of candies, sweets, chips and other munchies, to the middle of the store. Candy accounts for roughly 5% of overall drugstore revenue, according to Nielsen ... CVS says it thinks consumers largely are seeking healthier options and won’t be deterred by the changes. It is gradually rolling out its new format; just four U.S. stores, including the one in North Arlington, have received the makeover so far. CVS plans to put the new format in several hundred of its 9,700 stores by 2018."

Published on: June 30, 2017

Walgreens Boots Alliance and Rite Aid yesterday announced that they have called off their merger, first announced in October 2015, because of continued resistance from federal antitrust regulators. Instead, the companies said, Walgreens will outright buy 2,186 of Rite Aid's 4,600 stores, as well as three distribution centers, for $5.18 billion.

The New York Times writes that "the new agreement between Walgreens and Rite Aid annuls not only their planned merger but also the sale of some Rite Aid stores to Fred’s Inc., a related transaction that was intended to help Walgreens and Rite Aid win antitrust approval."

And, the Times says, "the end of Walgreens’ bid to buy Rite Aid outright, and its replacement with a smaller transaction, highlight how regulators remain concerned — even under an administration that has pledged lighter regulation of business — about mergers creating dominant players in some sectors."

The new deal still has to be approved by regulators.

Published on: June 30, 2017

The New York Times has decided to put its ample NYT Cooking website behind a paywall, Reuters reports, as it does what so many newspapers are trying to do - "leverage their digital presence" and find ways to monetize their assets.

According to the Reuters story, "The subscription will cost $5 per month. Currently, the NYT Cooking app offers unlimited free access to all recipes on the site. But with the introduction of the subscription, non-paying users will not be able to access a majority of the site's recipes and will lose access to any previously saved recipes, which will be moved behind a paywall ... New York Times subscribers will have full access to NYT Cooking for a limited time, though there is no timeline for when the subscriptions will be separated."

Reuters reports that a Times spokesperson says that "NYT Cooking subscribers will be able to use all of the site's recipe box tools, such as private notes and adding recipes from third parties. The site is exploring ways to integrate voice-activated devices such as Apple's Siri and Amazon's Alexa."

Published on: June 30, 2017

The Washington Post has a piece about Claire's - a mainstay of malls all over America, offering a inexpensive haven "for mall-roving pre-teens in search of charm bracelets ($7.99 for five), ombre glitter headbands ($5.99) and pom-pom-topped pens ($4.99)."

After nearly six decades in business, the story says, "Claire’s is facing an uphill battle to stay afloat. The retailer — which says it has pierced 94 million ears, more than any other company — has reported 11 consecutive quarters of declining sales and racked up more than $2 billion in debt, prompting speculation among analysts that it could be among the next to face big trouble," joining the bankrupt likes of BCBG Max Azria, Rue21, Wet Seal and the Limited.

According to the Post, "It’s been a confluence of bad news for the Chicago-based chain, which has long relied on groups of girls coming into its stores with their weekly allowances or birthday money. Fewer Americans are going to malls these days, and those who do increasingly are shopping at fast-fashion chains like H&M, Forever 21 and Zara, all of which have boosted their accessories sections in recent years. And although Claire’s, which also owns the accessories brand Icing, has built up its website in recent years, analysts say online shopping is a tricky proposition for the company’s young shoppers, many of whom don’t have access to a credit card."

Published on: June 30, 2017

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

• CNBC reports that Amazon's $13.7 billion bid for Whole Foods, if it is successful, could "have a bigger impact on food retailers than Wall Street has been discussing" because it has "triggered a reaction in the market-perceived credit quality of many of Whole Foods' peers."

An analysis from S&P Global Market Intelligence said that "the average one-year probability of default for the U.S. food retail industry, as measured by S&P, immediately jumped in risk after the acquisition was announced ... The median one-year probability of default for what S&P has classified as food retail companies was 3.73 percent on June 15, and it heightened by 14 percent to 4.26 percent on June 16, S&P Global said." June 16, as it happens, is the day that Amazon's bid for Whole Foods was announced.

This all matters, of course, but it cannot be the stuff that retailers focus on. Instead, they have to focus on the customer - figuring out what they need and want, what the pain points are, and working hard to address these issues. The default they have to worry about is when consumers see them as being irrelevant to their lives. That's a default from which it is almost impossible to recover.


The Wall Street Journal reports that one of the results of Amazon's bid to acquire Whole Foods has been a move by various grocery delivery services to acquire new bricks-and-mortar retail customers.

"The stakes are all the higher for companies such as Instacart Inc., Peapod LLC, Shipt Inc. and FreshDirect LLC to deliver not only fresh food—but continued growth," the Journal writes. "Midwestern grocery chain Schnucks Markets Inc. (was) expected Thursday to announce its partnership with Instacart for online delivery will extend to most of its 100 stores by next month. Ahold Delhaize’s Peapod is expanding its push into New York City, a key market, after spending more than $94 million on a warehouse in Jersey City, N.J., in 2014."

Meanwhile, "Shipt, which delivers food orders for retailers including Costco Wholesale Corp. COST -0.93% , Meijer Inc. and Whole Foods, intends to almost double its markets by next year, from 51 to 100. Founder Bill Smith says the company’s expansion is targeting suburban customers in less saturated regions like the South and the Midwest to gain an edge."

Published on: June 30, 2017

• Amazon's Prime Day this year - a now-annual event when it offers new deals and promotions as often as every five minutes as a way of drumming up business during a traditionally slow e-commerce period - will be July 11 ... except that this year it will begin three hours early, at 9pm on July 10.

CNBC writes that "this year, the e-commerce giant is once again upping the ante, proclaiming that there will be 'hundreds of thousands of deals' on July 11. About 40 percent of this year's 'Lightning Deals' will come from small businesses and entrepreneurs, the company said."

Published on: June 30, 2017

• Whole Foods has announced that it will open its first "365 by Whole Foods" store in New Jersey, a 33,000 square feet unit on the  Weehawken waterfront, just across the Hudson River from Manhattan. The store is expected to open in the fall of 2018.


• The Charlotte Observer reports that The Fresh Market "has branched out into the increasingly popular meal kit craze," launching a "Little Big Meal" program with kits for $25 or less that "include pre-packaged fresh ingredients for a variety of make-at-home meals (like easy enchiladas and chicken al fresco) for four people."

Published on: June 30, 2017

• Weis Markets announced yesterday that it has hired Ron Bonacci, most recently director of marketing at Lubbock, Texas-based United Supermarkets, to be its new VP of marketing and advertising.

Published on: June 30, 2017

Got the following email from MNB fave Glen Terbeek:

I get a kick out of all of the commentary regarding the Amazon acquisition of Whole Foods. It is all centered on the impact it will have on the current food industry. And for sure it will. But I believe that the Amazon's objective is far greater than food.

It was only 30+ years ago that a discount department store (Walmart, that "alternate format") started selling 850 food store, high volume items at low prices to divert 2 to 3 times a week grocery traffic to their stores. After all, if they sold one shirt or other item during that “food” shopping trip, they got their losses back. They focused on the winning the shoppers’ traffic, getting shoppers in their stores. They expanded that concept to offering a complete food store within their stores to become the largest food store chain in the US. That traffic for sure has helped the other categories in the store as well.

The combination of Whole Foods’ strong value added store image and brands plus the ability of getting any national brand for pick up or home delivery via Amazon will be a hard shopping experience to beat for food retailers. But as importantly, it will only enhance the reason for shopping via Amazon for any item the shopper may want. It will build the shoppers trust and therefore traffic at Amazon. Why go any place else? Therefore, I believe that the merger will have as much impact on non foods retailers as it does on supermarkets.

What will the retail industry (or should I say the shoppers' industry) look like in the next 30+ years (if it takes that long)?

It will be fun to watch!

On the same subject, another MNB reader wrote:

As a consumer as well as making my living for 25+ years in the  natural products industry, I’ve watched this amoeba with delight.

Whole Foods had a mission to educate the world about better nutrition.  Phase one accomplished, to the point where their competitors started to beat them at their own game.

Whole Foods had a core value stating commitment to the planet through more ethical sourcing of food and raw materials.  Education mission accomplished, it’s becoming mainstream after being considered fringe and weird for decades.

Whole Foods stated they were committed to truth in labeling of genetic modified organisms in foods and body care.  That’s more complex, but they made GMO a nearly mainstream word, the average American has now heard of GMO’s. 
 
Amazon has broken all kinds of mental barriers and thinks outside the box as it’s MO.
 
I’m thrilled – two trailblazers merging forces.  Excited for what’s to come.

On the possibility, apparently unlikely, that Walmart could make a competitive bid, MNB reader Hy Louis wrote:

Imagine being a Whole Foods employee and you find out you have been bought out by Walmart.  That would be like being a student at Harvard and finding out Harvard was sold to the University of Phoenix.  IMO Whole Foods shoppers and employees have little respect for Walmart.  Amazon would get the last laugh.

From MNB reader Rick Werner:

One element of the acquisition I haven’t heard much about is the location of the WF stores.  I don’t have data to support this, but I would venture to guess that WF stores are surrounded by people who OVER-index on Amazon use.  That is, there is strong overlap in the two customer bases and specifically the WF locations and where Amazon shoppers live. 
 
Combine that idea with the presumption that many WF stores are larger than they need to be for today’s declining retail environment.  These stores could be the distribution centers that Amazon needs to reach many of it’s customers and without too much investment of time and money.

This MNB reader is skeptical:

I'm finding it fascinating that people aren't discussing how much Amazon is paying for Whole Foods since Whole Foods has a really small footprint. If you look at the Safeway/Albertsons merger, Albertsons paid $9 billion for roughly 1800 stores. I'm sure brand name/power was factored into the sale but wow, Amazon is really drinking the Whole Foods Kool Aid.

We rarely shop Whole Foods due to price, selection, and location. If Amazon wanted a footprint, I'm guessing they overpaid for a toe print.

You could be right. But I would caution you that it is important not to assign too much importance to how you shop. I can't afford to shop much at Whole Foods, either ... but that doesn't mean the deal will be a failure.




Regarding how Kroger is responding to dual challenges from the Amazon-Whole Foods deal and Lidl's US invasion, one MNB reader wrote:

A financial analyst asked a senior Kroger exec about the impact of Lidl. I'll paraphrase, but basically the Kroger exec said that he was glad that Lidl finally opened, so Kroger could see what Lidl had to offer. He mentioned that Kroger took all competition seriously, but they were very used to competing with similar stores ( Aldi & Sav A Lot). Kroger faces more challenges competing with retailers that offer broader assortment like Walmart (and Amazon!).

In my opinion, Sav a Lot, Aldi, and Lidl will grow in USA, but really through a huge building spree versus consumer gravitation to the format. Can anyone tell me what new and exciting innovation that Lidl will bring that will cause our family to add a Lidl trip to a list that already includes Publix, Costco, Target, CVS, Trader Joe's, Whole Foods etc.

From another reader:

I have been following this story for some time, and while Kroger continually gets pounded by Wall Street, they keep their eyes on the prize - the customer!




On another subject, one MNB reader wrote:

Reading "The $15 Minimum Wage Debate" got me thinking. If you raise wages so workers can afford to pay for food, rent and goods, it makes goods more expensive, which impacts jobs. Using “the market” to determine wages keeps costs down, which impacts workers’ purchasing power. These realities are generally accepted by everyone, regardless of political leaning.

In either situation, the worker ultimately bears the brunt. Yet, many of our elected leaders are seeking to reduce government aid to the poorest (and even middle class) by cutting funds for public education, food assistance, and Medicaid to name a few. Why do so many people have an issue with the government trying to ease financial burdens for individuals? Aren’t we about life, liberty and the pursuit of happiness?




We got a number of emails yesterday responding to Seth Mendelson's critique of Target.

One MNB reader wrote:

I won't be the first to suggest Target should participate in its replacement program for its stores.

Or the last.

From MNB reader Melissa Setser:

I have to agree with Seth.  The purportedly highest volume Target in my DMA is a couple miles from my office.  I went a few days before Father’s Day to pick up a few things.  The place was decimated—from women’s clothing/swimwear, all the way over to the home goods section (which used to have some fun/trendy/inexpensive items—nope, not any more).  I thought about wandering through the shoe aisle (I work for a shoe retailer)—and it was such a disaster I could hardly stomach the thought.

So many retailers have taken an eye off the basics in the e-comm shuffle, it’s a real shame.  I was looking forward to spending 45 minutes meandering, probably buying a few things that weren’t on my list, and generally being able to enjoy the experience.
 
Here’s another one:  I recently went to 2 stores TRYING to spend my $$ at b/m instead of ordering online.  Styles/fashion were so out of date, and out of stock, I found nothing.  Came back to my office, ordered exactly what I wanted and it showed up 2 days later at my house. 
 
What b/m retailers bring (and the reason I still believe Nordstrom will survive/thrive) is the human element—and if we aren’t differentiating ourselves from the less profitable e-comm by providing the human element, ultimately b/m loses…

Many bricks-and-mortar stores are not being killed. They're committing suicide.

From MNB reader Neil Brown:

Seth's commentary regarding his recent visit to Target resonated with me, since I also visited a local Target (Arden, NC - near Asheville) for the first time in over a year. The task seemed simple enough...find some simple clothes for my wife to wear around that are not necessarily top fashion (we are in our 60s), but which also didn't scream out for negative attention. We had accomplished this mission at various Target outlets many times over the years.

On this visit, several things hit the potential customer right in the face: (1) where are all of the customers, (2) summer just started last week, so shouldn't there be some summery items in the Seasonal section, and (3) what a friggin' mess! To the store's credit, there were over a dozen associates speedily trying to fill the holes on the shelves, especially in women's clothing. This latter area was an absolute pigsty, with items just thrown onto shelves without folding and others lying on the floor where they had fallen. The store would have been far better off redeploying some associates into basic folding and other presentation skills. Interestingly, the men's clothing section was neat and tidy, which I attributed not to men's basic cleanliness (let's not be ridiculous!) but instead to a complete lack of men browsing.

On the positive side, there was essentially no wait at the two checkout registers that were open.

Additional sidebar to Target - when there are competing items in a narrow niche and comfort is a sought-after attribute (as in folding camping chairs), why not have a sample of each on display so customers can test them out? Big Lots, about 100 feet from this Target, took that approach and landed the sale from us.

Yes, Target certainly has fallen from where I first encountered it thirty years ago.

From MNB reader Anne Maas:

I grew up in MN and spent eight years early in my career at Target's corporate office. I had immense pride working for them and loved everything about the company.

After moving to NH in 2004 and now living in NJ since 2014 I sadly am always disappointed with their stores. I have shopped multiple stores in both states and the experience is consistently poor. There are rarely baskets or carts available, out of stocks are the norm, merchandising is sloppy, store team members are rarely friendly and the restrooms are deplorable. I DREAD having to ever use them.

This past weekend I was visiting MN and shopped in two separate Target stores during my visit - Southdale in Edina and the Quarry in NE Minneapolis. Both stores were beautifully maintained, any out of stocks were unnoticeable and the restrooms were spotless. I didn't interact with any team members so I cannot comment on them.

Perhaps the poor store experiences I've encountered are isolated to the Northeast and are regional management issues. I'd be curious to know the location of the store Seth's blog is based upon.

I wish the company would ensure all stores would have the same requirements and be held to the same standards as those that are in close proximity to the headquarters.

When a company's best stores are the ones in headquarters' back yard, I think it proves very little.

From still another reader:

The commentary on Target by Seth Mendelson really nailed Target’s issues.  Our household should be in Target’s wheelhouse, married, urban household with a 2 ½ year old kid.  Unfortunately for Target, my wife stopped shopping there when our child was 6 months old.  She would come home fuming after finding 40% of the shopping list was out of stock in the store.  Need help while you are at Target, good luck.   She would come home so frustrated, when you have a young kid you can’t wait for certain things, diapers, wipes and baby food are essentials. 
 
Target pricing, location and selection lured her in, the lack of inventory and lack of help ensured we don’t shop there anymore.  Just too many better options in the world today.




And finally, responding to yesterday's story about how President Donald Trump launched a Twitter attack on Amazon, writing on the social media platform that Amazon isn't "paying internet taxes (which they should)." It was, in fact, an inaccurate accusation - Amazon appears to be in full compliance with existing law, collecting state sales taxes in the 45 states have such taxes.

MNB reader Roy St.Clair wrote:

Trump accusing anyone of anything to do with taxes…oh that is really rich.

Published on: June 30, 2017

I'm not sure how to react to the latest and fifth season of "House of Cards" on Netflix. I've always been a big fan of the saga of Frank Underwood, the conniving and power-hungry politician played by Kevin Spacey, whose character and mode of operations can be best defined by his initials.

The thing is, events seem to have caught up with "House of Cards," and so the areas in which the series' plots might seem to be pushing the envelope now can seem almost tame by comparison. There are places where the series go too far, as when it posits that Underwood and his wife, Claire (played with chilling Lady Macbeth effectiveness by Robin Wright), could run as a ticket for the presidency and vic-presidency. But then there are moments where plot turns seem almost prescient, especially when you consider that this newest season's episodes were largely concocted before the Trump presidency.

There are ways in which "House of Cards" has been too deeply cynical about politics, even for me. I can't help myself; I believe (or hope) that there have to be some people in government who are more focused on the needs of the people than they are on the accumulation of power and influence. (I am proven wrong on this almost every day. I am, apparently and unexpectedly, a cockeyed optimist.)

That all said ... I find "House of Cards" almost impossible to turn away from ... not exactly like a train wreck because it is so effectively written, produced and acted, but because it is such a unique combination of over-the-top high drama and low soap opera, with satire and comedy thrown in. Almost every episode has a "holy crap" moment, and they're worth waiting for.

The new season, which focuses on a presidential campaign that makes Bush-Gore look tame and decisive by comparison, has two wonderful additions to the cast - Patricia Clarkson as a mid-level government bureaucrat who has a deep and mysterious understanding of how the levers of power are operated; one gets the sense that she was there before the Underwoods and will be there long afterward, and that it is because of people like her that government actually works ... as much as we hate that reality. She personifies the notion of invisible power and influence, and Clarkson is wonderful.

And, Campbell Scott plays Mark Usher a political operative who understands that the names and political parties change, but the realities and limitations of power never change. Scott is the son of George C. Scott and Colleen Dewhurst, and in some ways he seems to be channeling his dad in this performance ... and I say that as a high compliment.

"House of Cards" pushed its luck sometimes, but I find myself hoping for a season six. Mostly because I want to know how it all turns out in an alternative universe that sometimes seems uncomfortably familiar.

Published on: June 30, 2017

Independence Day - July 4 - is next Tuesday, and so I'm going to turn it into a four-day weekend. MNB will be back on Wednesday, July 5.

Have a great weekend.

Sláinte!!