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    Published on: September 21, 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.

    Just got back from taking the dog for a long walk, and I’m sitting in my backyard having a cup of coffee … and it is coffee that I want to talk to you about this morning.

    A couple of weeks ago, I used this platform to talk about the fact that Starbucks is shutting down its online store this month. I had a problem with this for both personal and professional reasons. The personal issue was simple - I’ve had a subscription for years for two pounds of ground Verona coffee to be delivered to the house, and in shutting down the store, Starbucks is cancelling all subscriptions.

    Which leads me to my professional objection. There’s an old saying that it costs a lot less to keep a customer than to get a new one, and subscriptions are the ultimate way to create a captive customer. Which is an advantage that Starbucks is giving away … the company says I can buy my coffee in supermarkets, which makes no sense since it’ll be displayed next to dozens of other coffees and I might buy one of those instead, or I can go into my local Starbucks and buy it there, which I always could’ve done, but chose not to. I loved the convenience of a subscription, but Starbucks apparently has decided that it wants me to buy its coffee the way it wants me to buy coffee, not the way I want to buy coffee.

    What Starbucks has done is open a window and allowed its competition to vie for my business.

    Not a great idea, I think.

    Now, I’m lucky. Because I have this platform, I wrote about this issue and the mistake that I think Starbucks is making, and I got an email from the City Girl Coffee Co of Duluth, Minnesota, offering to send me some coffee and letting me know that they have a subscription program. I said, sure, go ahead. Why not?

    It is not my habit to do free commercials for folks, but I’m going to make an exception this morning. The folks at City Girl sent me a pound of their Blondie: Brazil Fazenda Helena, and it is terrific. Not only does it taste good, but it makes us feel good … since all the coffee made by the company is sourced from women-owned farms, a portion of every sale is donated to nonprofits that support these women in their countries of origin, and City Girl itself is a certified women-owned business.

    All good stuff. I may have to get myself a subscription.

    Starbucks, I think, made a mistake by opening a window that allows its competition to get into the game. That’s not how you play to win.

    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 21, 2017

    by Kevin Coupe

    There are a couple of city-oriented stories to which I want to draw your attention this morning…

    First, Business Insider reports that there is another city that wants to get into the Hunger Games-style competition to be Amazon’s second headquarters city.

    Seattle. Which also happens to be the home of its first headquarters.

    According to the story, “Bruce Harrell, during his recent short-lived role as mayor of Seattle, signed an executive order stating the city's intent to compete for Amazon's second headquarters.”

    The story notes that Seattle has good reason to make a bid - Amazon says that it will invest $5 billion in what it calls HQ2, and will hire some 50,000 employees. More than a hundred states and communities are said to be preparing proposals.

    However, the story also notes that a successful bid by Seattle - which is at best extremely unlikely - could be “ truly cataclysmic.” While Amazon has driven a lot of growth in Seattle, that growth also has led to gridlock, traffic, and near-unaffordable housing prices.

    What this particular story doesn’t say is that a lot of people think that Seattle’s political and governing class long has been a little ambivalent about Amazon, which is part of the reason it is seeking a second headquarters city. (I have another theory about this. I wonder if it is at least possible that Jeff Bezos figures that inevitably his company will be broken up, and so it makes sense to have a second headquarters so that a physical spinoff is even easier. Just wondering…)

    The second story actually is an editorial from the New York Daily News, which excoriates Mayor Bill de Blasio for wanting to attract Amazon’s HQ2 to New York while simultaneously doing everything he can to prevent Walmart from opening stores in the city because it threatens mom-and-pop stores.

    Amazon, the piece says, is “as big a threat to mom-and-pops, if that’s your barometer, as Walmart ever was. Accounting now for 43% of online sales, Amazon is snatching dollars consumers used to spend at brick-and-mortar bookstores, drug stores, hardware stores, you name it.” Sure, Amazon will hire lots of people, “but de Blasio is fooling himself if he thinks they’re on a dramatically different wage-and-benefit plane than Walmart’s.”

    It is, the Daily News writes, good that “de Blasio recognizes the brilliant Amazon opportunity, warts and all. Also too bad that low-income city shoppers who could have used a Walmart price break never got the chance.”

    Eye-Openers, I think.
    KC's View:

    Published on: September 21, 2017

    The Wall Street Journal reports that now that Whole Foods is owned by Amazon, it is speeding up the process of centralizing the way it makes buying decisions and changing some of the ways in which it deals with vendors.

    According to the story, “Under the changes planned to begin in April, Whole Foods’ 470 locations will no longer allow brand representatives to promote their products or check to make sure they are stocked and displayed correctly.
    Whole Foods also is centralizing much of its decision-making regarding the assortment of products across the country. Instead of allowing brands to frequently pitch their products to individual stores or regions, Whole Foods executives in its Austin, Texas headquarters will choose a higher percentage of the items stores carry.”

    The Journal writes that Amazon is hoping that it can drive higher sales at Whole Foods, which it recently bought for $13.7 billion, by standardizing its processes and prices, and it expects to make these changes front and center during its quarterly management meetings next week in Seattle.
    KC's View:
    It seems to me that Amazon may be walking a bit of a tightrope here - it wants to impose greater discipline on Whole Foods in a way that will help it attract more shoppers, but it doesn’t want to make changes that it affect Whole Foods’ essential value/values proposition. Whole Foods always has been a place where small, entrepreneurial suppliers could not just find a home by dealing with stores and regions, but also could find a place where it would have a voice to explain their products to shoppers. I’ve always thought of that as being a differential advantage, and I think they have to be careful about it - this could disenfranchise not just some suppliers, but also its own employees, who may not cotton to losing some of their autonomy.

    One thing intrigues me, though it may just be an issue of the language being used by the Journal, which writes that this is part of a “continuing push to operate more like a traditional market.” It seems to me that one of Amazon’s differential advantages has been its willingness and ability to not just avoid tradition, but stomp all over it. Hard for me to imagine that the purchase of Whole Foods has somehow prompted Amazon to embrace tradition now.

    Published on: September 21, 2017

    Albertsons announced yesterday that it is acquiring the meal kit service Plated, which the company said “advances a shared strategy to reinvent the way consumers discover, purchase, and experience food.”

    Terms of the deal were not disclosed. Plated will operate as a wholly owned subsidiary of Albertsons; the purchase is expected to close later this month.

    In the announcement, the companies said: “In teaming up with Plated, Albertsons Cos. adds a meal kit company with leading technology and data capabilities, a strategic step for the company as it continues to focus on innovation, personalization, and customization. Together, Albertsons Cos. and Plated will leverage their diverse and complementary strengths to serve customers in a way that appeals to the evolving lifestyles and food preferences of people across the country. Among the key projected outcomes of this deal is for Plated to become the first omnichannel meal kit offering with national scale.”

    Bloomberg writes that “the Albertsons deal represents a similar strategy to that of Inc., the e-commerce giant that has rocked the food industry this year. In June, Amazon agreed to buy health food retailer Whole Foods Market Inc. for $13.7 billion. A month later, it filed a meal-kit trademark application for prepared food kits.”

    In a statement, Albertsons chairman/CEO Bob Miller said, “Plated knows its customers better than anyone, and together we will accelerate our ability to serve them.  We are excited to offer our customers more online options and fresh, quality ingredients along with distinctive recipes at their doorstep or through traditional shopping trips.”

    And Josh Hix, co-founder/CEO of Plated, said, "Joining Albertsons Companies presents an amazing opportunity to accelerate our positive impact on the future of food in America by making fresh, delicious food more widely available … There’s tremendous upside for Plated's customers whose experience with our brand will only get better. As meal kits continue to gain traction in the marketplace, we believe the winning formula combines choice, flexibility, culinary expertise, and the ability for customers to buy across channels--all of which we are now singularly positioned to deliver in collaboration with Albertsons Cos.”
    KC's View:
    Albertsons won’t be the first retailer to offer meal kits - Kroger and Whole Foods both do it to varying degrees - but it has the potential to roll this out in all its bricks-and-mortar stores pretty quickly. I think this is a very smart move, and a potential game changer for Albertsons … and I suspect it could prompt other, similar moves by other retailers. (The folks at Blue Apron must be wondering exactly why they went through an IPO which has proven to be an enormous disappointment when they could’ve just waited to be acquired.)

    Published on: September 21, 2017

    The New York Times reports that Amazon has said that it is “reviewing” its site after media reports in the UK that its “frequently bought together” algorithm was actually suggesting bomb-making ingredients.

    “The news report is the latest example of a technology company drawing criticism for an apparently faulty algorithm,” the Times writes. “Google and Facebook have come under fire for allowing advertisers to direct ads to users who searched for, or expressed interest in, racist sentiments and hate speech. Growing awareness of these automated systems has been accompanied by calls for tech firms to take more responsibility for the contents on their sites.”

    The British are particularly sensitive to this issue, the story says, because “authorities are investigating a terrorist attack last week on London’s Underground subway system. The attack involved a crude explosive in a bucket inside a plastic bag, and detonated on a train during the morning rush.” However, this is not just a UK issue. The Times writes that it “found that similar algorithms may be at work in the United States.

    “In one instance, a search for magnesium ribbon — a product that can be used to make a crude fuse — yielded a suggestion for two powders that explode when mixed together in the right proportions and then ignited. A second search yielded a suggestion for two out of three ingredients necessary to make gunpowder.”
    KC's View:
    That’s the thing about an algorithm - it does the math, but it doesn’t have a heart, nor common sense. I think Amazon’s only mistake here is saying it is “reviewing” the situation. (Sounds like Fagin from “Oliver!”) What they ought to have said is that they’re changing the algorithm immediately, and working on a fix so it doesn’t happen again.

    Stuff like this cannot be dealt with hesitantly. You gotta be firm and fast.

    Published on: September 21, 2017

    • The Financial Times reports that “Amazon is working on its first wearable device: a pair of smart glasses that would allow its virtual assistant Alexa to be summoned any time, anywhere, according to people familiar with its plans. The device, which would tether wirelessly to a smartphone, is designed to look like a regular pair of spectacles so that it could be worn comfortably and unobtrusively, the people said. A bone-conduction audio system would allow the wearer to hear Alexa without having to insert headphones into their ears.”

    In addition, the story says, Amazon is “expanding its smart home hardware line-up with a new home security camera system. The internet-connected camera would tie into its Echo products, for instance allowing people to view the video feed on Echo Show’s screen, and letting Amazon customers see when their orders from the site have been delivered to their doorstep.”

    One or both products could be available by the end of the year, FT writes.
    KC's View:

    Published on: September 21, 2017

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

    • The Boston Globe reports that Roche Bros. which has been breaking out of its suburban tradition with stores in urban centers - especially its Downtown Crossing store in Boston - plans to open its third Brothers Marketplace store in Waltham, Massachusetts. The other two operate in Weston and Medfield.

    The Globe writes that at at 8,500 square feet, this “will be less than one-third the size of a typical Roche Bros. supermarket,” and will be located in the ground floor of a housing development. It is scheduled to open next spring.

    I love the Roche Bros. small stores … they are a wonderful example of how companies are adapting to new urban realities and opportunities.
    KC's View:

    Published on: September 21, 2017

    Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

    Reuters reports that Walmart, Target and PepsiCo have joined a coalition of 800 companies “calling in a letter for U.S. legislation to protect immigrants brought into the country illegally by their parents from deportation … The retailers and other companies asking Congress to pass a permanent replacement for Deferred Action for Childhood Arrivals, or DACA, reflect broadening pressure on political leaders to find a solution for the roughly 800,000 immigrants known as ‘Dreamers’.”

    A similar letter from a smaller group - largely made up of technology companies - was aimed at persuading President Donald Trump not to DACA through executive order; it failed, though Trump subsequently said that he would revisit the issue if Congress failed to come up with a permanent DACA solution. The new letter comes from a much larger group of companies from a broader number of sectors.

    “The DREAM Act, first introduced in Congress in 2001, would provide Dreamers with a way to become U.S. citizens after first becoming permanent residents,” the Times writes. “DACA, a set of executive actions introduced by President Barack Obama in 2012, didn't include a pathway to citizenship, which would require an act of Congress. Some conservatives in particular object to offering citizenship to DACA recipients.”
    KC's View:
    The Dreamers have done nothing wrong - they were brought here by their parents, and the vast majority of them, as I understand it, have worked hard, gone to school, pay taxes, and know America as their home. They are, in my opinion, a lot more reflective of the American dream and promise than the small minority of people who think it is okay to march with torches and be rhapsodic about a time when white males dominated the landscape. I applaud the technology companies who have led the way on this one, and companies like Walmart who are hoping to preserve their dreams.

    Published on: September 21, 2017

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

    • Lillian Ross, who had a legendary career as a writer/reporter for The New Yorker - she was hired in 1945, and wrote her last piece for the magazine in 2011 - has passed away at the age of 99.

    In The New Yorker, it is written that she “was not just a contributor but a creator—one of those whose style and tone became a standard to which later writers aspired. That tone—acutely observant, intimate, and very frequently amused—emerged in some of her earliest and best-known pieces, including her Profile of Ernest Hemingway and the five-part series on the making of John Huston’s The Red Badge of Courage. (The Xeroxes of her articles made for distribution in the nation’s journalism classes, if piled on top of one another, would reach to the moon.) She was a master of the Talk of the Town form, with its comic distillation of social mores.” Her profile subjects ranged from Ernest Hemingway and John Huston to Robin Williams and Lin-Manuel Miranda, but one of her best-known pieces was “The Yellow Bus,” in which she accompanied a class trip of twelfth graders from an Indiana town with a total population of 355, as they visited New York for the first time.

    One of the best books of its kind is “Reporting,” which is a compilation of Lillian Ross pieces from The New Yorker … I heartily recommend it.

    Variety reports that Jake LaMotta, the onetime world middleweight boxing champion known as the “Raging Bull,” and who was the subject of the 1980 Martin Scorsese/Robert De Niro movie of the same name, has passed away. He was 95.

    The story notes that “after retiring from the ring, LaMotta continued to entertain as a comedian, actor, and bar manager. His credits include playing a bartender in the 1961 film The Hustler, starring Paul Newman and Jackie Gleason.

    ”Raging Bull” is simply one of the best American movies ever made, featuring one of the best performances ever by an actor … and if you’ve never seen it, you should.
    KC's View:

    Published on: September 21, 2017

    Yesterday, we took note of a CNBC report that just weeks after announcing that it will begin selling Amazon’s Alexa-powered devices and Kindles at 10 of its stores, department store chain Kohl’s said that some of its stores will begin accepting Amazon returns, packing and shipping eligible items to Amazon fulfillment centers for free. And, not only will Kohl’s take Amazon returns, but it also will designate certain parking spaces near store entrances as being specifically for Amazon customers making returns.

    I commented, in part:

    There’s a part of me that thinks that while Kohl’s appears to be bending over backwards to accommodate Amazon and its customers, what it really is doing is bending over forward, and the long-term result is inevitable.

    Partnerships can be important … but Kohl’s in this case is not just selling devices that will allow people to buy the products it sells from Amazon, but now also is giving its competitor’s customers preferred parking. I think the message to its traditional customers is pretty clear … and not helpful in terms of its long-term credibility.

    One MNB reader wrote:

    The funniest thing I’ve heard from Amazon is that Kohl’s will do their returns at some locations. Have you ever tried to return anything to Kohl’s???

    It’s one of the worst.  Find the back corner of the store, stand in line (always a long line), then watch them “harrumph” their way through your return!

    The only place worse to return something is to Target – but at least their customer service desks are up front.

    I would love to do a study on how much UNWANTED merchandise people now own because no one really wants to go through the hassle of shipping things back – and going to a Kohl’s isn’t a much better prospect.

    I know online shopping is the only way forward – but I truly feel we’ll still have decent stores out there because people want to buy something and take it back easily if it doesn’t work out.
    Nordstrom is the best at this!  I actually think their no-merchandise stores idea can work – because they have a great selection on line and returning is easy.

    From another reader, Bob Overstreet:

    I think that the partnership between Kohl’s and Amazon is a great idea.  I actually like Kohl's, but the only time I have been in their stores is picking up on line orders.  Each time I picked something up, I bought something else in the store.  If they put the pick up in the back of the store and make (potential)  customers walk a gauntlet of good buys, they will benefit.  I also think the preferred parking will make other Kohl’s customers ask “what is Kohl’s doing with Amazon.”  I would expect to soon see a Kohl’s online store soon on too.

    And from another:

    It struck, me as I read this story, that there is no way for Kohl’s to enforce the Amazon preferred parking. I don’t shop at Kohl’s but if I ever see Amazon preferred parking in front of a store where I do shop, if I’m unable to think of another store to make my purchase, I will park in the Amazon parking out of spite.

    You probably park your SUV in the spots reserved for fuel efficient vehicles, too.

    We also had a story yesterday about Halo Top ice cream, which is low-calorie and where the founders developed a business model that is low on infrastructure and big on being nimble. One MNB reader, Cindi Sandy, wasn’t impressed:

    I do not know of one person that actually likes this stuff.  It’s terrible.

    I’d never eaten it, so last night I asked my daughter to go out and pick up a couple of pints - Cookies & Cream and Red Velvet - for us to try.

    The general agreement here was that it wasn’t all that bad - very thin, but the attraction to my daughter and her friends seem to be the ability to eat a pint in one sitting and only take in 350 calories or so.

    Me, I’d rather eat two or three tablespoons of Graeter’s. Especially the Blueberry Pie flavor they just brought out.
    KC's View: