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    Published on: September 7, 2017

    This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

    Hi, I'm Kevin Coupe and this is FaceTime with the Content Guy.

    Late in August, while I was taking a few days off, Starbucks announced that it was closing down its online store. Now, this sort of surprised me, since I am a longtime customer of that store - for years, I’ve had a subscription to the Verona blend, getting two pounds, ground, delivered to the house every month. This way, I don’t have to worry about running out … and more importantly, I don’t have to worry about Mrs. Content Guy running out if I’m off gallivanting someplace.

    I reached out to Starbucks and asked what the rationale behind the closure was; the online store has been doing business since 2011. I got an email, saying, in part:

    We’re continuing to invest in amplifying Starbucks as a must-visit destination and are looking across our portfolio to make disciplined, thoughtful decisions. This includes doubling down on our digital relationships with our customers to further elevate our digital flywheel through our mobile app and our Starbucks Rewards loyalty program. Continued integration of these digital and mobile customer connections into our store experience is among the highest priorities for us and to enhance that focus we’ve looked for ways to simplify our current efforts.

    To that end, we can confirm we’ve decided to close our online Starbucks store effective October 1, 2017. Frequent customers of the site will be kept up to date on product availability and we’ll continue to offer promotions and specials until that time. Going forward, we will shift product availability to external sites managed by CPG channels (including our grocery partners).

    I am intrigued. But not persuaded.

    By telling me that I have to go to a Starbucks store to get my bagged coffee, or a supermarket, or even Amazon, isn’t Starbucks actually interrupting what has been a smooth and, frankly, near-captive relationship? Isn’t Starbucks opening the door to another brand possibly getting my business?

    If I go to the supermarket to buy my bagged coffee, as they seem to be suggesting, I may choose another brand … because there are a lot of options. Or, maybe I’ll find another company that offers subscriptions, like Stumptown, which I drink when I’m in Portland during the summer.

    I understand the power of mobile … and in fact, I am a frequent mobile user at Starbucks. But it strikes me that these are two entirely different customer interactions, and Starbucks is giving up on one of them. Unless, of course, they’re planning on allowing me to use mobile to have a subscription, but I’m not sure how that would work, and when I asked the question, Starbucks didn’t get back to me.

    Maybe the whole subscription business simply isn’t profitable, and costs Starbucks far more than it is worth. Maybe I’m the only person in America who had a subscription on its site, and it was time to put the program and me out of our misery. But I don’t think so.

    Here’s the thing. Unless I’m wrong here, Starbucks seems to be trying to tell me that it wants me to buy its products the way it wants me to buy its products … not the way I want to. As other companies try to shrink the distance between shopper and shop, they appear to be lengthening it, or at least throwing up barriers. It seems counterintuitive, and risky.

    I don’t get it.

    Then again, if it doesn’t work out, maybe Howard Schultz will decide to re-take the CEO reins and reassert himself by reopening the online store.

    That’s what is on my mind this morning and, as always, I want to hear what is on your mind.

    KC's View:

    Published on: September 7, 2017

    by Michael Sansolo

    We talk a lot about how to make the ordinary something extraordinary, eye catching and special. With that in mind there’s a curious lesson from the small city of Killarney in western Ireland.

    Thanks to modern technology phone booths have essentially become useless and increasingly scarce. But Killarney found a way to make them relevant and incredibly useful, at least under certain circumstances.

    Throughout Killarney the phone booths have been converted into defibrillator stations, complete with clear signage, instructions and warnings not to mess with the machines unless they are needed.

    So sure those booths aren’t going to get the traffic they use to have from callers or superheroes needing to change outfits. Then again, they may save a lot more lives.

    Remaking something old and obsolete into something new and important seems like an Eye-Opener, especially in unsettling times.

    KC's View:

    Published on: September 7, 2017

    The Associated Press reports that department store chain Kohl’s plans to open up 1,000 square foot Amazon shops in 10 of its stores, in Chicago and Los Angeles, where shoppers “will be able to buy Amazon Echos, Fire tablets and other gadgets … Customers can also ask to have an Amazon employee come to their home and install a device or suggest products to buy.”
    KC's View:
    Interesting, I think, on all sorts of levels.

    One is that Amazon clearly is making strategic alliances that it believes make sense within the department store business - first with Sears, to sell Kenmore appliances, and now with Kohl’s. This all happens as it continues to open bookstores in select locations, is testing food store concepts in Seattle, and has acquired Whole Foods.

    I’m a trained observer. I think there’s a pattern here.

    It also is important to look at the deal from the Kohl’s side; the folks there clearly have decided where the winds are blowing, and they want to tack in that direction.

    BTW … it is important to note that at the same time as the Amazon-Kohl’s deal was being reported, Bloomberg wrote that Home Depot “will sell goods online via voice commands through Google Home and the Google Express website and mobile app,” in a deal similar to one struck with Walmart last month.

    Lots of wind.

    Published on: September 7, 2017

    Starbucks announced that it has named Rosalind Brewer, the former president/CEO of Walmart-owned Sam’s Club, is joining the company as its new COO.

    Analysts say that Brewer’s Sam’s Club experience “in making changes … to bring the retailer more in line with trends around health and wellness,” as well as expanding the business’s omnichannel presence, will serve her well at Starbucks, according to a CNBC story.
    KC's View:
    Y’think maybe I can get her to bring back my coffee subscription?

    Published on: September 7, 2017

    Raley’s announced yesterday that California-based Raley’s has launched what it is calling “a new, one-of-a-kind shelf tag program to help customers combat some of these obstacles in the grocery store and more easily make informed food purchasing decisions … For ease of use, the icons are placed directly on the price tag. The top two icons are shared on the tag in-store … As a part of Raley’s click-and-collect service, eCart, online shoppers can sort for products using the Shelf Guide icons to quickly find products that meet their health and wellness needs on More than 13,000 items in center store have at least one icon.”

    The company said that its Shelf Guide “combines current food trends and leading research to set strict standards for packaged food claims and provide label transparency. The new tool differs from other shelf tag programs by taking a closer look at packaged ingredients, food processing and nutrition. Using simple and colorful icons, Raley’s Shelf Guide helps customers quickly interpret whether a product meets their needs, without having to analyze multiple labels. Raley’s has even created two of their own shelf tag descriptions – making it easy for customers to find food that is minimally processed and nutrient dense.”

    Raley’s said that the guide is a response to Nielsen data showing that “59% of grocery shoppers experience difficulty in understanding nutrition facts on product packaging,” while “recognizing ingredients ranks first for consumers in terms of what influences their decision to purchase a food or beverage.”
    KC's View:

    Published on: September 7, 2017

    The Wall Street Journal reports that there seems to be some evidence that Amazon’s ownership may have led to increased traffic at Whole Foods.

    According to the story, “Several Whole Foods employees said they have noticed an increase in sales at their respective stores since the merger, beyond the expected back-to-school rush. A J.P. Morgan & Chase Co. analysis of four days of car traffic to Whole Foods stores found visits were up compared with averages before the merger and during comparable periods over the previous three years.”

    The Journal goes on to report that “Whole Foods hasn’t added to the list of items marked down after the merger last week, but some stores have added larger orange signs advertising the discounts. A Goldman Sachs survey of roughly 90 items found that 20% were marked down last week, with produce down by 31%, packaged goods by 20% and refrigerated items by 19% from before the merger.”
    KC's View:
    One thing I’ve noticed in my local Whole Foods is that the inside-the-front-door display of Alexa-enabled Echos and Dots has gone away; apparently this was just an opening gambit, designed to get people’s attention in the days immediately following the completion of the acquisition.

    There will be the impulse on the part of the media and analysts to micro-analyze every day of Amazon’s stewardship at Whole Foods. (I’m sure I’ll be guilty of this myself, though I’ll try to resist.) This will be a mistake. There will be steps and missteps, and we shouldn’t overstate the importance of the former or the implications of the latter.

    Published on: September 7, 2017

    • Massachusetts-based BJ’s Wholesale Club announced that it is launching two new websites “dedicated to showcasing the value, quality and assortment of its two exclusive brands, Berkley Jensen and Wellsley Farms. This is the first time the company has created dedicated ecommerce sites for its exclusive brands.”

    According to the story, “The sites … will showcase a broad assortment of both brands, showcase the stories behind the products and create a shoppable, dedicated experience for both brands. Members will also be able to access Pick Up & Pay to reserve select non-perishable products online and pick up in-club in as little as two hours.”
    KC's View:

    Published on: September 7, 2017

    CNBC reports that as traditional supermarket companies look to find ways to compete with Amazon, one of the approaches has been to seek out alliances with meal kit companies that have created their own level of disruption. One example - a report that Albertsons has considered an acquisition of Plated, a meal kit start-up business. (Neither Albertsons nor Plated has commented on the report.)

    In addition, executives at two other meal kit companies - Green Chef and Home Chef - have said they are open to being acquired, with one described it as a “frenetic” marketplace.
    KC's View:

    Published on: September 7, 2017

    • The New York Times reports that Toys R Us “has hired restructuring advisers from the prominent law firm Kirkland & Ellis as it tries to cope with hundreds of millions of dollars of debt coming due, according to two people briefed on the matter … Among the options that the retailer, which is owned by private equity firms, is considering includes filing for bankruptcy … Toys “R” Us must find a way to pay back about $400 million in debt as it tries to increase sales in the upcoming holiday season.”

    Bloomberg reports that Gap Inc. plans to close hundreds of Gap and Banana Republic stores around the country, while opening and putting more focus on its Old Navy and Athleta stores.

    The rationale is that the company needs to “concentrate on the most promising growth drivers for the company: e-commerce, value-priced products and activewear. Those are all areas where the Gap and Banana Republic brands have struggled. As a result, the company plans to shutter 200 poor-performing locations of those two chains, while opening 270 new Old Navy and Athleta stores.”
    KC's View:

    Published on: September 7, 2017

    • Ken Martindale, the president/CEO of Rite Aid, is reported to be stepping down to take the job as CEO of GNC. At the same time, Bryan Everett, Rite Aid’s EVP in charge of store operations, has been appointed to the newly created position of COO of Rite Aid stores. 
    KC's View:

    Published on: September 7, 2017

    On Tuesday, we pointed out that CEOs from a number of companies were asking President Trump not to dismantle the the Deferred Action for Childhood Arrivals (DACA) program, which was instituted by President Obama as a way of guaranteeing the children of undocumented US residents that they would not be deported. Subsequently, President Trump announced that the program would be ended, though he gave the US Congress six months to legislate a replacement, and then, several hours later, announced that he would ”revisit” his decision if Congress could not do so.

    The original story prompted this email from an MNB reader:

    This situation is unfortunate but we need to maintain our borders, control immigration and follow the law. The 800,000 illegals would not be here if President Obama had enforced existing immigration laws. This is plainly Obama’s failure where he admitted he did not have constitutional authority to pass a law and DACA is not a legal law. The children’s parents wouldn’t have come here, if Obama hadn’t encourage the various Central and South American countries to send their citizens here through Mexico. These people may not have come here. To make it more enticing they were given a free ride on the backs of taxpayers. These companies that are left wing progressive and these people mean cheap labor for them and futures democratic voters. It seems these CEOs are less about America and jobs for Americans. What about all the people who have gone through the legal immigration process to become citizens or to work here and spent years doing so? While it is too bad these children are in this situation because of their parents poor judgement and Democrats (and some Republicans) failure to reform the immigration policy legally. I voted for President Trump as did many other Americans. We want America to Be Great Again. Apparently Americans agreed with his position on immigration and draining the swamp.  Maybe (the swamp) Sanders, Obama, the Bushes and Clintons (pay for play) would be willing to give all the money they made while they were public servants (getting rich) to support the less fortunate in developing countries so these people would not risk their lives or lose them coming here illegally.

    Just a few points here, if I may. (I can’t help myself.)

    A lot of the children covered by DACA have been here far longer than eight years, so it is not entirely Obama’s fault.

    It is true that there is an argument about whether or not Obama had the constitutional authority to promise these children that they would not be deported. But if I understand the situation correctly, it is, in fact, an argument - some legal scholars think he did, and some think he did not. And, in fact, the Supreme Court has not ruled on the constitutionality issue. So it remains an argument without concrete resolution.

    Yes, the constitutionality was being challenged by a number of states Attorneys General. But there were almost as many prepared to defend DACA, and they’re planning to go to court to do so even now.

    I’m not sure it is fair to say that they were being given a free ride on the backs of US taxpayers. Many of the people covered by DACA actually have been paying taxes, not to mention serving their country and communities, and contributing to the nation’s economic well-being.

    I find it kind of offensive when people suggest that, in this case, CEOs who disagree with them and make a reasoned argument care “less about America and jobs for Americans.” That strikes me as drawing with an incredibly broad brush, and comes perilously close to suggesting that any opinion at variance with yours is somehow un-American. They are simply advancing an argument - supported by some, but admittedly not all, economists - that these folks actually help to support our economy, not hurt it. They think that one of the ways to keep America great - as opposed to making it “great again” - is to embrace these immigrants, not punish them. You can disagree with them, but don’t question their patriotism.

    (By the way, there are a lot of people in the food business, which depends on the health of the agricultural community, who are very worried about the DACA repeal. The CEOs objecting to the Trump administration’s policies on this are not just liberal-leaning tech types, but people from all sorts of business sectors, many of them traditionally conservative.)

    You’re right that many people voted for Trump. About three million fewer than voted for Hillary Clinton. This is not to suggest that he is an illegitimate president; he won the Electoral College vote, and that’s how the game is played. But I get tired of either side of the aisle suggesting that they have a mandate when they have nothing of the sort. I just wish they’d all compromise a lot more about issues that actually matter and try to score cheap political points a lot less.

    For the record, I actually would prefer a nuanced, reasonable immigration policy that is in keeping with basic American values and that reflects modern economic realities … and I’d like it to be voted on by the Senate and House of Representatives and then signed by a President. I have no idea if this is possible, but maybe being given a six month deadline by the White House will be a way to get the disparate parties to strike a deal. I hope so.

    I say all this not because I want to get into a political argument with you, but just because I think it is important to recognize that this is a complex discussion, and that there is another side to the argument - lots of people, maybe almost as many as agree with you, and maybe more than agree with you, feel differently. You can’t just dismiss them, or demonize them. Actually, I guess you can … but that simply doesn’t advance any sort of understanding of the issue, much less get us anywhere near a compromise or resolution.

    It was interesting to read a new Wall Street Journal/NBC News poll saying that "more than three-quarters of Democrats, but less than one-third of Republicans, said they felt comfortable with societal changes that have made the U.S. more diverse.” And, there’s another poll, from the Public Religion Research Institute and the Atlantic, saying that almost half of white, working-class Americans say that “things have changed so much that I often feel like a stranger in my own country.”

    These are not small numbers. It reflects a social, cultural and economic divide that sometimes seems impossible to bridge. In my opinion, one cannot begin to do so by trying to minimize these feelings, or characterizing the people who feel that way as “deplorables.” That’s just plain stupid. But you also can’t ignore the fact that a significant percentage of the country does not feel the way you do, and you shouldn’t dismiss those people as un-American.

    We had a story and commentary yesterday about the importance of small format stores, and how retailers have to figure out how to shrink their offerings in order to keep pace with an increasingly urban America.

    To which MNB reader Mike Griswold responded:

    Great points about store formats. There are very few work related topics that keep my up at night, but this is one of them. My concern is that too many retailers store designs for 2018, 2019 still look like stores from 2010-12. Retailers must have more space for e-comm fulfillment in their store designs.

    “What we’ve got here is failure to communicate. ” Store design teams must be working with supply chain and store operations to better understand the growing requirements of in-store fulfillment.

    MNB reader Glenn Cantor wrote:

    Retailers with large stores don’t necessarily have to re-invent themselves by developing small stores.  Instead, they should start with compartmentalizing the shopping experience (and path to purchase) within their larger stores.  Separate entrances and checkout areas would make it easier for shoppers meet the needs of specific shopping trips.  In a sense, store pick-up already does this.

    MNB reader Burt Thomas wrote:

    With regards to the article in Wednesday’s MNB with Kevin Kelley and “think small” I don’t believe many traditional retailers will want to go small and give up potential new item funding $’s with a smaller selection of items on the shelf. Many of these retailers have budgeted new item funding into their bottom line that they may not be able to make up by going small. They will certainly need to change their model to be successful and survive the pressures coming from every direction.

    You betcha. I would argue that any retailer keeping a large store format alive just because it allows it to collect more slotting and promotional allowances has already lost the war. They may win a few battles, but making money on the buy and not the sell will be an increasingly perilous way to go to market at a time when smart retailers are figuring out how to be more targeted about how they reach out to customers.

    And, from MNB reader Howard Carr:

    While I do not disagree with your idea that these grocery operators should start thinking about smaller footprint operations, how do you respond to the level of adoption from the buying public to the Wegman’s 100,000 sf and larger format, which has proven to be hugely successful?
    I am of the belief that the retailers and the food manufacturers need to drill down into what the buying public wants, and WHERE they want it.  If the customer is going to shop more frequently and purchase more “fresh” product, then the smaller fresher concept is more likely to survive into the future as we enter a time period of re-urbanization where more smaller households shop more frequently for smaller amounts of product each time.  However, that lifestyle will not hold true for larger family units, especially with two working parents.  There is just not enough time in the schedules of today’s family units to allocate enough time to grocery shop more frequently.  The need for this diminishes even more due to better food storage facilities within our homes (refrigerators and freezers).

    I’m certainly not saying that all stores need to be small, or big, or even medium. What matters most is what they carry, not how big they are …. though I do think the vulnerability of center store to e-commerce will mean that large stores will be less necessary in a lot of locations and to a lot of people.

    Regarding the impact of automation on the economy and employment, MNB reader Jessica Duffy wrote:

    I was just having this conversation with my son the other day. What automation should theoretically do is reduce the need for people to be stuck in tedious, monotonous, boring, and potentially more dangerous jobs for 8 hours a day, while opening up more work for sourcing, programming, fixing, and producing those robots – hopefully work that will be more productive and fulfilling and safe than traditional production and retail jobs. The key of course is education and training of those who would need to be routed differently to be able to take on those new jobs.

    You’re right … but this won’t happen by itself. We need companies and government working together to address this issue, with a strong and coordinated public policy approach.
    KC's View:

    Published on: September 7, 2017

    Amazon announced this morning that it has begun the search for a second headquarters city in North America that it said “will be a full equal to Amazon's headquarters in Seattle, and is expected to grow to 50,000 employees as part of the company's ongoing job creation,” and that it is prepared to invest more than $5 billion in construction and operation of the new facility.

    The company has started the process with an request-for-proposals from local and state governments.

    Amazon’s preferences for what it is calling “HQ2” is a metropolitan area with more than a million people, a “stable and business-friendly environment,” “urban or suburban locations with the potential to attract and retain strong technical talent,” and “communities that think big and creatively when considering locations and real estate options.” HQ2, the company says, “could be, but does not have to be … an urban or downtown campus … a similar layout to Amazon's Seattle campus … (and) a development-prepped site. We want to encourage states and communities to think creatively for viable real estate options, while not negatively affecting our preferred timeline.”

    To put this into context, in Seattle Amazon has 33 buildings occupying 8.1 million square feet and hosting more than 40,000 employees and responsible for the creation of more than 53,000 additional jobs in the community as a result of its direct investments.
    KC's View:
    I think we can stipulate that whatever location they pick is likely to see a major real estate boom, along the lines of what has happened in Seattle.

    For selfish reasons - I haven’t bought a place there yet - I hope they don’t choose Portland, Oregon. I would guess that they’ll be looking to open HQ2 someplace other than the Pacific Northwest, and I’d think that New England or a Mid-Atlantic state would be a likely possibility. The governor of Connecticut - a state that most businesses are abandoning, and where many communities are experiencing fiscal crises - ought to be at Jeff Bezos’ door this morning, offering to wash his car and drive his kids to school if that’s what it takes to land this project.

    It is interesting that they say “North America” and not “US.” I wonder if that means that a Canadian city could be in the running.

    Big announcement, with a lot of big implications.