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    Published on: September 11, 2017

    by Kevin Coupe

    The Wall Street Journal reports that Nordstrom plans to open a new format in West Hollywood, California, “ that is a fraction of the size of its typical locations, where shoppers will be able to enjoy services such as manicures and on-site tailoring. Something it won’t carry: clothes.”

    At 3,000 square feet, the store - called Nordstrom Local - “will contain eight dressing rooms, where shoppers can try on clothes and accessories, though the store won’t stock them. Instead, personal stylists will retrieve goods from nine Nordstrom locations in Los Angeles, or through its website. The stylists can also pull together looks for shoppers through a ‘style board’ app … In addition to manicures, Nordstrom Local shoppers will be able to order wine, beer, coffee or juice from an in-store bar, and those who place orders on by 2 p.m. can pick them up there that day. They will also be able to return items at the store that they bought online or from other Nordstrom locations. Tailors will be available for alterations or to help members of Trunk Club, an online clothing service that Nordstrom acquired in 2014, select fabrics for custom garments.”

    I usually write that retailers need to be a resource for shoppers in addition to being a source of product, but this sort of takes it beyond even what I was thinking.

    But then again … this is an interesting approach for Nordstrom, which has said that it still plans to open traditional stores. It allows Nordstrom to create a presence even in places where it does not have big stores, as well as find different off-ramps from the so-called “last mile” between its operations and the shopper.

    What’s interesting is that I was just reading a piece in Re/code in which Scott Galloway - professor of marketing at New York University’s Stern School of Business, and founder of digital intelligence firm L2, about whom I reported when he spoke at MyWebGrocer’s recent Customer Days event - predicted that Nordstrom is a likely next acquisition for Amazon.

    You can read that story here.

    And it occurs to me that Nordstrom Local is the kind of innovation that almost might make Nordstrom more attractive to Amazon… the kind of innovation that, if it works, could be scalable and would fit right into Amazon’s plans.

    Which is my idea of an Eye-Opener.
    KC's View:

    Published on: September 11, 2017

    The Wall Street Journal had a story over the weekend about the enduring success of Costco’s Kirkland private label brand, which the company says represents a quarter of its $118.7 billion in annual sales, and the percentage is growing.

    According to the story, “The pressure manufactures face from private brands is set to increase. Building successful store brands is a priority at Wal-Mart Stores Inc. and Inc. as they battle to boost margins and attract shoppers. After Amazon acquired Whole Foods, it quickly added the grocer’s store brand, 365, to its online food offerings. Wal-Mart and its warehouse chain, Sam’s Club, are reworking and adding to their store brands.

    “Though Costco’s stock price has suffered amid investor fears that its e-commerce operations aren’t ready to go head-to-head with Amazon, the retailer has kept sales growing, in part by using Kirkland to pressure manufacturers to lower prices and bring products to shelves that can’t be purchased elsewhere.”

    As successful as Kirkland has been, the story says, “Costco doesn’t aim to become a store that only sells Kirkland products, said Costco finance chief Richard Galanti. Shoppers expect to find brands they know at Costco, and Kirkland looks like a better value next to a higher priced branded version, he said.” While Costco carries 3,800 items on average, the retailer “often introduces a new Kirkland product when its buyers or executives believe a brand isn’t selling at the lowest possible price.”
    KC's View:
    It is all about differentiation, and to Costco, private label always seems to have been more about creating an alternative to national brands than a me-too version.

    Published on: September 11, 2017

    There continue to be a number of stories about Amazon’s announced search for a second headquarters city, where it is prepared to spend $5 billion and create 50,000 new jobs:

    • The Seattle Times has an editorial in which it suggests that Amazon’s decision to look for a second headquarters city - and apparently not even inform Seattle city officials of the decision before it was announced - reflects a lack of engagement by lawmakers and bureaucrats there with the success of their biggest employer.

    “Seattle’s current political leaders must recognize that poor planning and anti-business posturing come with a heavy price,” the editorial says. “Their politicking creates uncertainty for job creators and was a factor in Amazon’s decision to look elsewhere to expand.

    “Amazon’s growth, while a source of pride to most, has not been easy for the region. City leaders’ failure to adequately plan for the residential, commercial and traffic growth it permitted created an environment where Amazon was blamed for Seattle’s growing pains.

    “Other cities crave the diversity, prosperity and clean, good-paying jobs that Amazon brings. Seattle City Hall used tension over Amazon’s growth and wealth creation as leverage, to fulfill developer wish lists and advance labor’s political agenda, including an income tax that’s illegal under state law.”

    Now, the editorial says, “State and local government and business leaders must respond by assuring Amazon, other large employers and entrepreneurs that Greater Seattle still has the capacity, talent and desire to enable their companies’ growth … Amazon should help by explaining what its hometown can do to better support fast-growing, large-scale companies.”

    Whatever city wins the HQ2 sweepstakes, the editorial goes on to say, “may pay a steep price to attract Amazon, it will benefit from the talented people the company hires from across the country and globe. They will bring a cultural and intellectual richness, as well as economic growth that Seattle has at times taken for granted. Tens of thousands of non-tech jobs will follow, along with all manner of hotels, restaurants and microbreweries.”

    • The Wall Street Journal reports that “Amazon accounted for more than half of the Seattle office space created over the past year and a half, and the city’s commercial real-estate vacancy rate is already lower than the national average, according to commercial real-estate firm Colliers International. The unemployment rate for the county is below the national average, according to the latest available data. Meanwhile, home prices in Seattle have risen 47% to an average of $667,488 since 2007, according to the Cost of Living Index by the Council for Community and Economic Research.

    “The online retail giant said its next headquarters should be located in a walkable transportation hub with good access to an educated workforce and universities. A second headquarters would also give Amazon a chance to spread its economic clout and political constituency. Proposals are due next month, Amazon said.”

    • Meanwhile, Washington Post columnist Steven Pearlstein has a piece suggesting that what Amazon seems to be doing is bringing jobs to where the workers are, as opposed to bringing workers to the jobs.

    “Rather than wait for Seattle to solve its housing and congestion problems, Jeffrey P. Bezos, Amazon’s chief executive (and the owner of The Washington Post) decided to help create another Seattle someplace where his company’s spectacular growth can be more easily and inexpensively accommodated.

    “The economic argument for moving the workers to the jobs is that workers are more productive and innovative in companies located in cities dense with people and other companies. Some of the benefits from ‘agglomeration’ have to do with the ease with which companies can find a wider range of competing suppliers. Also the ease with which companies and skilled workers can find each other. In a high-tech economy, in particular, the biggest effect may come from the ease with which workers and firms learn from each other and come up with new ideas and disseminate that know-how.”

    But, Pearlstein writes, while this can create highly productive and innovative “super cities,” simply piling on more people and companies can stress out their infrastructures to the point where it becomes problematic and incredibly expensive - in a sense, there are diminishing returns.

    “One reason that such cities became such economic engines is that they were viewed as desirable places to live by the well-educated, ambitious professionals who start and populate innovative companies — the ‘creative class’ … These cosmopolitans have a strong preference for urban centers that offer ethnic diversity, cultural sophistication and walkable neighborhoods with vintage housing stock, good restaurants and an undercurrent of hip and cool. The last place this elite would want to live is in an urban jungle of cement canyons and high-rise towers.

    “There is an alternative, of course, to making highly productive dense cities even denser: Create more of them.”
    KC's View:
    I’m intrigued by Pearlstein’s thesis, especially because it tends to fit in with broader conventional wisdom about the growing urbanization of America. It strikes me as good public policy if this urbanization can be spread out, with more cities reaping the benefits.

    Published on: September 11, 2017

    FoodDive has a story about a study released by the US Department of Agriculture (USDA) into likely issues related to a system in which the food industry would be transparent about GMO disclosures though the use of smartphones scanning QR codes.

    According to the story, the report says that while 88 percent of consumers have at least some access to a smartphone, there was a broad lack of awareness that they could use the technology to access information, or even which applications on their smartphones they could use. In addition, few supermarkets seem to have the technology available to allow people without smartphones to get GMO information they may want, and may don’t even have WiFi technology.

    According to the story, “This study was mandated as part of the GMO labeling law, which was signed by President Obama last year. One of the more controversial aspects of the law, which requires manufacturers to specifically label genetically modified ingredients, allows this label to be just an electronic or digital link on the package. Many opponents argued this electronic disclosure, which could be a smartphone-scannable QR code, was not sufficient. A provision was added that required this study to look into the label's challenges and issues.”
    KC's View:
    I’m not sure that the rules are sufficient for now, but certainly the growth in smartphone usage means that they will be soon. But, I do think that responsible retailers and suppliers should be willing to invest in the educational effort necessary to make sure that people know where the info is and how to access it. That would be the responsible thing to do … it would be a hollow effort to make the information available but not do anything to publicize it.

    Published on: September 11, 2017

    The New York Times has a story about how Amazon is simultaneously hiring enormous numbers of employees while also being “on the forefront of automation, finding new ways of getting robots to do the work once handled by employees.”

    An excerpt:

    “Perhaps no company embodies the anxieties and hopes around automation better than Amazon. Many people, including President Trump, blame the company for destroying traditional retail jobs by enticing people to shop online. At the same time, the company’s eye-popping growth has turned it into a hiring machine, with an unquenchable need for entry-level warehouse workers to satisfy customer orders.

    “Amazon’s global work force is three times larger than Microsoft’s and 18 times larger than Facebook’s, and last week, Amazon said it would open a second headquarters in North America with up to 50,000 new jobs.”

    But, there is an other side to the story, that “ Amazon is also on the forefront of automation, finding new ways of getting robots to do the work once handled by employees … Amazon now has more than 100,000 robots in action around the world, and it has plans to add many more to the mix.”

    It is a fascinating dynamic , and you can read about it here.
    KC's View:

    Published on: September 11, 2017

    • Kroger said on Friday that its second quarter sales were up just 3.9 percent, to $27.6 billion, with same-store sales up 0.7 percent. Q2 net income fell to $353 million from $383 million during the same period a year ago.

    • Multiple press reports say that Kroger is planning to open its first restaurant - dubbed Kitchen 1883 - in October, in its Union, Kentucky, Marketplace store.

    Kroger job listings say that the restaurant will feature "a made-from-scratch menu, hand crafted cocktails with a family friendly atmosphere,” serving lunch, dinner and weekend brunch.

    The Hill reports that some 7-Eleven locations in Florida late last week were “offering free cases of bottled water after Florida's Attorney General office reported thousands of calls about price-gouging at stores across the state … Some Florida residents posted evidence of the alleged price-gouging on social media, shaming the chain for signs advertising cases of water for more than $20.”

    7-Eleven blamed the gouging on independent franchisees, and said, “We do not condone the behavior identified by the Attorney General of Florida and are aggressively taking steps to resolve this issue with the identified stores.”
    KC's View:

    Published on: September 11, 2017

    • Ahold Delhaize announced that Wouter Kolk, Brand President of Albert Heijn, has been named the company’s COO Europe and Indonesia effective January 1, 2019, succeeding the retiring Pierre Bouchut.

    At the same time, Xavier Piesvaux will be appointed Brand President Delhaize Belgium and Luxembourg effective September 11, 2017, succeeding Denis Knoops.

    • The Chicago Tribune reports that Kraft Heinz has named 29-year-old David Knopf to be its new CFO, succeeding Paulo Basilio, who has been named zone president of the company's U.S. business. Knopf is a former Goldman Sachs executive who “joined Kraft Heinz in July 2015 when Kraft Foods merged with H.J. Heinz Co.”

    The Tribune notes that “Knopf's promotion to CFO at such a young age is firmly in line with the culture of Kraft Heinz, which is co-headquartered in Chicago and Pittsburgh. The company, backed by Warren Buffett's Berkshire Hathaway and Brazilian private equity firm 3G Capital, is known for being a place where ambition and results are valued over experience.”
    KC's View:

    Published on: September 11, 2017

    Last week, when writing about Amazon’s search for a second headquarters city and the speculation about where it might end up being, I commented, in part:

    I have to wonder if many of the emails and stories are missing one point that could be important to Amazon. I think that it will be looking for a state or community that it sees as being in synch with its own political and cultural priorities. That would mean being friendly to minorities and immigrants, and being progressive in its relationship with the LGBTQ community. It would mean a place that is not mired in divisive debates about bathroom access, or about the meaning of confederate statues, or about whether immigrants play a critical role in the country’s growth. It probably means a blue state, or at least a blue community (like Austin) that happens to be in a red state.

    Which prompted one MBNB reader to write:

    I'm sorry but even after having met you in person and thinking here's a guy I'd like to have a beer with and trade retailer theories with I find myself wanting to unsubscribe.

    Perhaps the reason many of your readers (and the ones you published made points similar to mine) didn't mention politics is they're tired of it and don't need to talk about it in the context of stories like this. I get it - we're on different sides of the aisle and perhaps we differ on some things but so do many of my friends and family and we're frankly exhausted with the conversation. Especially in light of Texas and what's about to take place in FL perhaps there are more of us than you may believe that just want to move forward as a nation, a family, a group of neighbors etc. Injecting politics into every conversation simply pushes us apart, not together and perhaps having the luxury of a bully pulpit should cause you to think more about where to inject politics and not.

    Was it a fair point to make? Perhaps? Necessary for the story to have it called out? Perhaps not, given most of us thought of that already. Just thinking we all need to do our part to have productive, collaborative conversations and not sure this is one of them - regardless of political or socioeconomic background.

    I don’t think I was straining to bring politics into a story where they were not relevant. I think the concerns I listed would be top-of-mind for Amazon in this case … and my job, as I see it, is to think about stuff, sometimes from a different point of view than other people, and then write about it. (I hadn’t seen blue state/red state politics mentioned in any of the stories that I read.) I thought it was a legitimate point and should be made.

    I don't think much about promoting only productive, collaborative conversations … I think a lot more about provoking people into thinking about issues in different ways.

    I’m sorry if this makes you want to unsubscribe, but I don’t know how else to do my job. But even if you unsubscribe, I’d still like to have a beer with you sometime.

    We’ve had a couple of stories and a number of emails about how 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.

    I think this email speaks to the problems that a lot of companies have:

    We can’t find enough people to work in our two factories. Many of our workers are Hispanic, and we would love to hire many more. All of our team members are tireless workers, sticklers to quality, follow guidance and are loyal to the company. If we could hire 15-20 more just like them they could start on Tuesday (Mondays are a bad day to start a new team member).

    The candidates we are seeing are problematic: many can’t pass a drug screen, have felony convictions, and often they don’t even show up for the interview, or for their first day on the job. We know a company down the street that has no trouble hiring, and when I asked our HR and Production leads they said it was because almost all of their workers are undocumented. This company has become known as one of the places to go if you don’t have papers. We won’t do that, but it is tempting.
    It would seem to make a lot of sense that if companies like ours could bring on workers and help them get the process of documentation started it would be a win-win. The people would be working, they would be paying taxes, and they would have expressed an interest to work within a system, and even become part of it.
    I suspect I am naïve about all of this, but the lack of available labor is about to become a crisis for us, and we need solutions.

    You don’t sound naïve to me. You sound realistic about an economic issue that is likely to become a much bigger problem, and to which the government only seems to have political solutions.
    KC's View:

    Published on: September 11, 2017

    In Week One of the National Football League…

    NY Jets 12
    Buffalo 21

    Pittsburgh 21
    Cleveland 18

    Oakland 26
    Tennessee 16

    Philadelphia 30
    Washington 17

    Carolina 23
    San Francisco 3

    Jacksonville 29
    Houston 7

    Arizona 23
    Detroit 35

    Atlanta 23
    Chicago 17

    Baltimore 20
    Cincinnati 0

    Indianapolis 9
    Los Angeles 46

    Seattle 9
    Green Bay 17

    NY Giants 3
    Dallas 19

    In the US Tennis Open Men’s Singles Championship, Rafael Nadal defeated Kevin Anderson 6-3, 6-3, 6-4, achieving his third US Open championship and his first since 2013.

    Sloane Stephens, who not that long ago was ranked 934 among women professional tennis players, defeated Madison Keys in straight sets, 6-3, 6-0 to win the US Open Women’s Singles Championship in the first all-American women’s final at the Open since Venus and Serena Williams played each other in 2002.
    KC's View: