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    Published on: October 16, 2017

    by Kevin Coupe

    When I read this story in the New York Times, my first thought was that it was a perfect Eye-Opener.

    My second thought was that Arthur Ochs Sulzberger must have rolled over in his grave when this story got published in the Times.

    The story was about condoms. But more than that, it was about disruption of an industry that in some ways had calcified. The Times noted that “condoms get a bad rap for being a bad wrap,” and that “men often complain of discomfort, diminished sensation and poor fit. A recent federal study found only a third of American men use them,” which isn’t good seeing as they are “the only birth-control method that protects against most sexually transmitted diseases.”

    This is where the disruption comes in.

    Because the story was really about how a number of companies, spurred on by relaxed standards set by the US Food and Drug Administration (FDA), are testing new technologies that could address customer complaints and deal with the public health issue.

    “A competition sponsored by the Bill and Melinda Gates Foundation sought ideas for more pleasurable condoms in 2013 but has not yet brought one to market.,” he story says. “While some winners are still pursuing prototypes, others have given up.” One of these was something called an origami condom, described as “pleated to allow movement inside.”

    And then there’s the “Boston-based company (that) has begun selling custom-fit condoms in 60 sizes, in combinations of 10 lengths and nine circumferences.” The company provides online “a print-at-home fitting kit that men use to determine the right size to order.” (The reason this is important, according to the story, is that most condoms were designed with men’s imaginations in mind, not reality.)

    Like I said, an Eye-Opener.

    But, in think about this story, I recalled an ad that I hear a lot on satellite radio, for something called the Third Love bra, which actually sells some 59 sizes of bras, with 15 additional sizes in development. The big thing about the Third Love bra, apparently, is that it comes in half-cup sizes. (The commercial makes the salient point that if shoes come in half-sizes and various widths, why shouldn’t bras? Good point. Never thought about it. I guess the same could be said for condoms…)

    I did a little research, and found a Chicago Tribune story about the company, and how its founder, Heidi Zak, says that “more than 500,000 women remain on the company's waiting list for bras in sizes like 44G and 46K.”

    The Tribune writes that “Zak is among online retailers who are culling customer complaints, preferences and measurements and arriving at the same conclusion: American women, who on average wear about a size 16, need bigger sizes.”

    The story goes on: “Instead of taking one size - 34B - and sizing it up or down, Zak started from scratch, measuring hundreds of women of all sizes and recording their dimensions. She created a Fit Finder quiz, which is still the first thing customers encounter on the company's website, to gauge such things as body shape, height and breast shape. More than 4 million women have submitted their measurements, providing countless data points for Zak and her team to mine.”

    "This entire business is data-driven," Zak says. "And ultimately it's about one thing: Being inclusive and serving all women.”

    The lesson is not about condoms or bras, it seems to me. The lesson is that retailers looking to compete in hostile territory and differentiate themselves would do well to identify underserved markets and mine them for opportunities.

    The results could be Eye-Openers.
    KC's View:

    Published on: October 16, 2017

    The Boston Globe has a story about “a wave of grocery stores coming to housing developments around the region. From the South End to Waltham, builders looking to fill their ground floors with businesses that double as amenities are teaming up with grocers who want easy access to an upscale clientele. The result: A new hybrid, something between the corner grocers of old Boston and the vast supermarkets of suburbia.”

    Among the local retailers exploiting this opportunity are Whole Foods, Roche Bros., and Trader Joe’s, as well as Stop & Shop’s bFresh division, with Star Market, Stop & Shop and Market Basket all in various stages of planning for urban/neighborhood stores where they can banner up.

    “For grocery stores, having residents upstairs provides a built-in customer base, and typically one apartment building leads to another, putting more customers within walking distance,” the Globe writes. “They can anchor not just a building, but a neighborhood.”
    KC's View:
    With the growing urbanization of America, and the desire on the part of any retailer that is paying attention to find differentiated ways to connect with its customers, this approach makes a lot of sense. The notion of anchoring not just a building, but a neighborhood, is almost poetic … it speaks to not just relevance, but resonance.

    To me, to see what is possible, one should look no further than the Roche Bros. store at Downtown Crossing in Boston. Sure, they had the advantage of it being the busiest intersection in the city. But Paul McGillivray and his team there put together a store that was enormously innovative, differentiated not just from everything else in the neighborhood but everything else in the chain.

    Downtown Crossing is just one example. What Roche is doing with its Brothers Markets, and Stop & Shop is doing with bFresh, both are examples of how to attack the market from a different direction. Some will work, and others won’t. But doing the things the way they’ve always been done strikes me as not being an option.

    Published on: October 16, 2017

    The New York Times has a story about the recent Smart Kitchen Summit in Seattle, which “brings together people on the front lines of kitchen technology to try to figure out how to move the digital revolution deeper into the kitchen.”

    There seemed to be a general consensus that “it was only a matter of five to 10 years before artificial intelligence had a permanent seat at the dinner table.
    The coming kitchen technology, they said, will go well beyond a screen on the refrigerator door that allows you to check the weather while you search recipes and update the family calendar.

    “Your power blender may be able to link to a device on your wrist that’s been tracking your diet, then check in with your freezer and your kitchen scale. It could set up the right smoothie recipe based on what’s on hand, how much weight you’ve gained and which fruit you prefer. Your oven will be able to decide how and when to start roasting the salmon, then text the family when dinner’s ready. Your refrigerator may be able to place a grocery store order, based on a careful study of how much you like to pay for certain items, whether you want them organic and whether peaches are in season.”

    And, the story suggests, “Artificial intelligence will eventually understand your cooking needs so well that you need only tell a device that you’d like to make your grandmother’s chicken and noodles on Thursday, and all the ingredients will be ordered, paid for and delivered in time to cook.”

    However, the Times writes, “much of this is still just a glint in an engineer’s eye. To truly connect everything in the kitchen, technology and recipes will have to be standardized in such a way that food can be tracked from the farm to the plate.” At the same time, “None of technical solutions seemed to account for how a cook might consider the ripeness of a pear, or thrill from creating a new recipe out of a pile of fresh chanterelles. The sense of satisfaction in learning a new dish or getting better at something didn’t seem to be part of the kitchen of the future.”
    KC's View:
    It is a pretty good guess that none of the technical solutions accounted for non-technical issues because it was technicians who were developing them. They have a natural bias.

    From my perspective, I tend to think that these two approaches can exist side-by-side. Artificial intelligence can help people have the time and information to engage in non-technical activities and explore other facets of the kitchen experience. Not everybody will take advantage of the opportunity, but I think it is mistake to simply assume that these two approaches are mutually exclusive.

    Published on: October 16, 2017

    The Wall Street Journal has a piece worth reading about how Amazon’s bricks-and-mortar bookstores, of which there are about a dozen, may offer up clues as to what it plans to do with Whole Foods now that it owns the food retailer.

    A prime example - pun intended - would be its ability to use dynamic pricing to offer better prices to members of its Prime program than to non-members.

    In addition, unlike traditional retailers, Amazon encourages showrooming, which is the practice of comparing prices while in the store and actually making the purchase online.

    “Most traditional retailers use decades of in-store sales data to inform their selection and pricing,” the Journal writes. “With Amazon, online sales data drives decisions. Amazon is beginning to reap information about Whole Foods sales online after introducing the grocer’s private-label goods on the online retail giant’s site immediately after the acquisition.”
    KC's View:
    One of the interesting things about this story is that the Amazon Books stores apparently are pretty good at some level of localization and customization - the selection in Chicago will be different from that in Seattle, for example - while at the same time there have been reports that under Amazon’s ownership, Whole Foods plans to do less local sourcing and put more emphasis on centralization. This would be a mistake, I think, and maybe if Amazon Books over any clues to Whole Foods’ future it is that it is likely to loosen the reins when it makes sense, and tighten them when appropriate.

    Which, by the way, makes Whole Foods potentially more competitive, not less so.

    Published on: October 16, 2017

    Two new stories illustrate how different kinds of companies are getting into the branded content business, albeit with different approaches.

    • Walmart Canada reportedly will launch a new YouTube series entitled “Upstairs Amy.”

    AdWeek reports that the series “follows the lives of three modern women and is about millennial parents and the differences between what their lives are now and what they thought they’d become. The titular Amy has moved apartments with her family and enlists her friend’s help to find out more about her fabulous new neighbor. They document their search in a series of YouTube videos—one of the main characters is an accountant turned YouTuber—and the series incorporates actual social media influencers.”

    Appliance manufacturer Hamilton Beach is partnering with Walmart on the series, and “will be featured throughout the episodes, in influencer call-outs online and featured links on Walmart Canada’s site.”

    • Meanwhile, Apple will bring back a 30-year-old Steven Spielberg series, “Amazing Stories,” in what the Associated Press describes an an “attempt to build an online video subscription service to challenge the digital networks operated by Netflix, Amazon, Hulu and HBO.”

    Apple reportedly has earmarked $1 billion to spend on original content over the coming year. Presumably, the new “Amazing Stories” will be available exclusively on iTunes.

    The original series, AP writes, “aired on NBC from 1985 to 1987 and won five Emmy awards for its mixture of science fiction and horror episodes, although the series was never a big hit in the ratings.”
    KC's View:
    I have to admit to not being turned on by either approach.

    I think Walmart is smart to get into the differentiated content business, but the way this is described it just sounds like a gussied up commercial. I think there will be limits to how much people want to spend time being sold stuff, even if indirectly and obliquely.

    As for Apple … I wish they’d done something other than dust off a series that it three decades old. It just doesn’t strike me as very inspired.

    Published on: October 16, 2017

    The Upshot column in the New York Times over the weekend looked at the subject of dynamic pricing, or adjusting prices up whenever demand seems high. The story notes that University of Chicago economist Richard H. Thaler has just won a Nobel prize in economics based in part on a recent study suggesting that “the simplistic Economics 101 version of how markets work - in which a seller raises prices however much it takes to match demand - can be inefficient, or offend people’s moral sensibilities, or both.

    Thaler’s basic position in this: “A good rule of thumb is we shouldn’t impose a set of rules that will create moral outrage, even if that moral outrage seems stupid to economists.”

    You can read the story here.
    KC's View:
    Thaler tells the Times that it is a pretty good rule - in life and in economics - that “if you treat people in a way they think is unfair, then it will come back and bite you.”

    That’s pretty good life and business advice.

    Published on: October 16, 2017

    • The New York Times has a story about how Amazon is doing a full court press on lawmakers in Washington, DC, focusing on “a branding campaign of jobs creation and support for small businesses, promoting the upsides of its major expansion in media, groceries and transportation.” Amazon is said to have increased in DC lobbying staff from 60 to 83, and “is also on its way to surpassing its previous high for lobbying spending: $11.3 million last year.”

    The reason is simple: “Facing greater skepticism about its growing power over retail, including from President Trump, Amazon is following the well-worn path of oil, pharmaceutical and even other large tech companies, which try to bend policy in their favor by enhancing connections with federal officials.”
    KC's View:

    Published on: October 16, 2017

    • The New York Post has a story about how retailers increasingly are turning to own-label products as a key differentiator in a highly competitive market. “Sales of private brands at big chains like Walmart, BJ’s, Dollar General and Target grew 4.6 percent last year compared to the 1.1 percent increase for national brands, according to the Private Label Manufacturer’s Association,” the story says.”

    • The Washington Post writes about a startup company called start-up Happy Returns, which it describes as being “among a growing number of companies trying to bridge the gap between online purchases and in-store returns. returns can now be dropped off at Kohl’s or Whole Foods stores, where employees will pack and ship them free. And Walmart last week announced that its revamped mobile app will make it possible for customers to return items in-store in about 30 seconds.”

    These moves reflect a basic reality: “Even as Americans do more of their shopping online, about half of consumers say they prefer to make their returns in a store, according to data from Narvar, a firm that focuses on online customer service. (Among shoppers in their 20s, that figure was higher: 55 percent.) People may want to buy clothing, shoes, even groceries from the comfort of their homes, but when it comes to returning the ones they don’t want, many would rather do it in person.”
    KC's View:

    Published on: October 16, 2017

    One MNB reader had some thoughts about the strategic decisions that Kroger seems to be undertaking:

    It is impossible to overstate my respect for everything Kroger has managed to do in the last decade or so. But at the same time, it is possible it is veering off a good path with its latest moves as noted in your Friday article prompted by Cleveland Research.

    Kroger is indeed putting more pressure on suppliers – which is a Walmart sort of move, and sooner or later raises everyone’s costs. In my opinion, in a world where the real competitive threat is probably less about Walmart than it is about Amazon, differentiated retailing, and the myriad of changes fueled by a new generation of shoppers , Kroger has not yet totally refocused on anything sufficiently different. As long as the slotting money of new items is more important than the item itself, as long as the buyer is focused on buying and not on the shopper, Kroger will be unable to break free of its own historical behavior.

    Not too many years ago a little company in Arkansas dropped all its trade dollars into the cost of goods and built an empire on efficiency.  Which, like all empires, changed when it got big enough. Just sayin’.

    And private label is all very well but tasting your own product in a cutting ceremony is literally the sound of one hand clapping. Kroger is not Trader Joe’s or Aldi and certainly not Lidl. Kroger may well be right to benchmark against European own-brand penetration levels as an aspiration, but it is risky to rig the system to try and force it on consumers. Go ahead and compete on the shelf, I am all for that – but there is a lot of evidence that US consumers are not yet quite the same as Europeans.

    At the same time, suppliers are even more guilty- constantly bringing “me too” items and line extensions to market that add little value and mostly just increase inventory and the frustration shoppers feel navigating a vast physical pile of stuff to find the few things they actually want or need.

    One of these business models will break, sooner or later. Suppliers will stop bringing the money – or the retailers will stop accepting the endless pointless item extensions. Whoever moves first will have a cleaner business, a cleaner balance sheet, and a chance to do things a different way. Until then, the disruption will continue to come from outside.

    On another subject, from another reader:

    Kevin, you make a great point about the Grocery industry has an opportunity to do more with the fact that they contribute heavily to their local economy. I would suggest that this can go a step deeper as part of adding context to what these retailers mean when they say they are part of the community.

    I like to think that I grew up in the industry like I suspect many readers have. I started working in the retail business at 17 and have remained there ever since. For me, the community was the coworkers that I became friends with and interacted with daily. As I moved up and gained more insights into the community involvement, I thought the term was code for the donations to charitable causes both in terms of product and services. When I watched as store managers frequently took time to serve individual customers by personally delivering a shopping order for a loyal customer that couldn’t make it to the store I gained further understanding. In other words, because I grew up inside the industry, I always saw community involvement as giving to the community in some way and that is a part of it but as I have learned, it is only one aspect.

    Because I worked in the stores, I developed many habits that made it so that I was not welcome to do the shopping or go along on the trips. My switching of products, as I knew many were the same or insisted that we use the one I sold, and  cleaning or facing the stores was too much for my wife to take if we were together. She was very happy to take that responsibility to “let me come home from work” as she would politely tell me. I think I just drove her nuts.

    All of this changed as I learned to compartmentalize that part of my life a little better so I could help out. What I have learned as I am now welcomed to come along on the shopping trip is the way an average shopper might view the store as part of the community. It may seem obvious to some but I didn’t realize the very genuine connection that my wife feels to many of the workers at the grocery store. From Anna in the deli that knows my wife and her work /shopping schedule in addition to her usual orders to Steve in frozen that makes sure she can get the Veggie burgers my daughter likes when she is home from school for the summer, it’s a weekly part of her life to visit these friends in the community.

    When I came to this realization, I asked if this was part of the reason she was adamant that she did not want to do more shopping from Amazon or home delivery options I had suggested to save time in a busy schedule. Or if this was in part why she was so frustrated when I would try to get her to go to new stores in the area for the shopping as I thought they were great stores. I learned a lot about what her answer to “I just like this store better” was really saying. The shelving layout or great merchandising, the layout, the ads, none of those things really made the big difference to her. The differentiator that had to be earned and was hardest to replace is Anna and Steve.

    On the subject of the Boy Scouts being willing to admit girls (a move that some believe has more to do with finances than anything else), one MNB reader wrote:

    This topic has made for some interesting conversations in our family as my wife earned the Gold Award as a Girl Scout (Girl Scouting’s highest honor) and our younger son is an Eagle Scout.    All four of us (me, my wife and both sons) have been involved in Scouting as both members and volunteers.

    Interestingly (but not surprisingly to me), my wife and son share the same opinion on this topic and believe the Boy Scouts organization is misguided in its efforts to encourage the membership of young girls.

    Boy Scouts can provide excellent opportunities for all its participants and all of us worked with numerous female volunteers in Boy Scouts.  Both my wife and son agree that in order to increase their odds of success in life, girls need more examples of both older girls and women as role models, not only in Scouting, but also in other areas of life.   No matter how hard they try, the  Boy Scouts will likely never provide the ratio of female leaders in its program that would be best suited for young female “Boy Scouts”.

    You might also be familiar with the Boy Scouts’ Venturing program that is suited for both young men and women aged 14 and up and has been co-ed for almost 50 years.   After completing his Eagle Scout requirements, our younger son attended Philmont Scout Ranch for a week with a co-ed Venture Crew and had an excellent experience hiking in the mountains of New Mexico.   He said that both genders in the group were equally capable and everyone worked together well.

    But, from MNB reader Mary Schroeder:

    There’s a certain status assigned to those men who attained the Eagle Scout designation.  It applies in employment as well as socially.  There hasn’t been an equivalent for girls until now.

    I say, on behalf of the WMPG (World’s Most Perfect Grandchild - a girl), Bravo to the Boy Scouts.

    The playing field just got a tiny bit more even.

    Loved this email from MNB reader Steve Colditz:

    Boy Scouts has Financial problems?  Don’t sell popcorn. Sell Thin Mint cookies.

    Problem solved.

    KC's View:

    Published on: October 16, 2017

    In the Major League Baseball National league Championship series this weekend, the Los Angeles Dodgers defeated the Chicago Cubs 5-2 and 4-1 to take a 2-0 game lead in the best-of-seven series.

    And, in the American League Championship Series, the Houston Astros defeated the New York Yankees 2-1 and 2-1, also taking a 2-0 game lead in the best-of-seven series.

    And, in Week Six of National Football League play…

    Chicago 27
    Baltimore 24

    Green Bay 10
    Minnesota 23

    San Francisco 24
    Washington 26

    Detroit 38
    New Orleans 52

    Miami 20
    Atlanta 17

    Cleveland 17
    Houston 33

    New England 24
    NY Jets 17

    Tampa Bay 33
    Arizona 38

    LA Rams 27
    Jacksonville 17

    LA Chargers 17
    Oakland 16

    Pittsburgh 19
    Kansas City 13

    NY Giants 23
    Denver 10
    KC's View: