retail news in context, analysis with attitude

Published on: April 2, 2018

by Kevin Coupe

This story is not about politics.

(I say this to assuage MNB readers who hate it when I veer into that lane, though I would argue that I only do so when events and business-related stories warrant. But more about that in “Your Views,” below.)

But again, this story is not about politics. It is, however, about power. More specifically about a shifting balance of power about which marketers need to be aware.

This demonstration of what essentially is consumer power came last week when Fox News host Laura Ingraham taunted 17-year-old David Hogg - a survivor of the Parkland, Florida, school massacre and a leading spokesman for the gun control movement launched in its wake - for having been rejected by four colleges and whining about it.

It is true that Hogg had been turned down by those schools; he’d mentioned it when asked by interviewers what his post-massacre life was like. Whether that qualified as “whining,” I suppose, is a matter of opinion. (I don’t think so. Hogg also got into a bunch of schools. Such is the life of a 17-year-old high school senior.)

Hogg then called on advertisers to pull their commercials from her show, and a number of companies - including Liberty Mutual Insurance, Office Depot, Nestle, Joseph A. Banks, Expedia, Hulu, Johnson & Johnson, Nutrish pet foods, TripAdvisor, Wayfair, and Jenny Craig - did.

Ingraham apologized “in the spirit of Holy Week.,” Hogg wasn’t impressed, and said so. “A bully is a bully,” he said.

The New York Times writes that “Hogg said he has grown accustomed to being criticized, often ruthlessly. But to hear a prominent television host mock his college rejections was ‘extremely frustrating,’ he said. ‘I’m not going to stoop to her level and go after her on a personal level,’ he said. ‘I’m going to go after her advertisers’.”

Forget about the politics of the situation. (That’s hard to do, I know.)

I would submit that the Eye-Opening non-political lesson from this situation is that young people are engaged, activist, and schooled in the ways of social media - they know what they want to say, and they know how to say it for maximum impact.

Companies that pick a fight with them, or choose sides against them, are venturing into unknown and dangerous territory.

BTW…according to the Times, Hogg says that he’s been rejected by University of California, Los Angeles; University of California, San Diego; University of California, Santa Barbara; and University of California, Irvine; he’s been accepted by Cal Poly, San Luis Obispo; California State University, San Marcos; and Florida Atlantic University, but has not decided which school he’ll attend. Hs has a 4.1 high school GPA.

Published on: April 2, 2018

There have been numerous follow-up stories over the past few days about the Twitter storm unleashed last week by President Donald Trump in which he took aim at Amazon on a number of fronts, accusing the company of being a tax cheat and taking advantage of the US Postal Service (USPS) and driving it into insolvency.

• The Los Angeles Times writes:

“Amazon isn't killing the post office. Since signing a landmark contract in 2013 to expand their business relationship and deliver packages on Sunday, revenue has ticked up; losses are down; and shipping is just about the only growth segment in the mailbag.

“The Postal Service is saddled by larger issues. Sure, there's the internet, and nobody is sending postcards anymore, but the big financial dilemma is the agency's yearly obligation to set aside cash to cover healthcare costs for future retirees. This accounts for billions in losses. U.S. mail is also required to cover every American, employing carriers who roam neighborhoods six days a week (or seven, if Amazon has a package ready).”

Indeed, the LA Times writes, the USPS has said that it makes money on its deal with Amazon.

• The New York Times reports that “in its latest annual report to the Securities and Exchange Commission, Amazon said it paid $957 million in income taxes in 2017.” Amazon collects sales taxes in every state that levies them, though it does not collect sales taxes for third-party sales on its site, and there have been issues - previously reported here - about the collection of sales taxes for local communities.

• The Times goes on to note that while there are limits on how much Trump can punish Amazon, he “could push for probes of consumer protection, privacy and antitrust issues. He could also step up his support for allowing states to collect sales tax on third-party purchases from Amazon, or seek to have the Postal Service charge more to deliver packages. And he could thwart Amazon's aspirations to win a multibillion-dollar Pentagon contract for cloud services.”

• Trump has made clear that his attacks on Amazon have been prompted by the fact that Amazon founder/CEO Jeff Bezos owns, in a personal investment, the Washington Post. Last week, he demanded that the Post be forced to register as a lobbyist.

• Politico writes that “Trump's attacks on The Washington Post come as a story about the damage being done to the president's family real-estate and marketing business by porn star Stormy Daniels and special counsel Robert Mueller's probe was leading the paper's website Saturday morning.”

Post officials have said that Bezos plays no role in the paper’s editorial coverage.

• Fox Business writes that “targeting Amazon on anti-competition grounds would be difficult, requiring an overturn of the principles that have guided U.S. antitrust enforcement for decades, policy experts say … Current regulations typically only kick into effect when a company is dominant in one market or is hurting consumers -- neither of which experts think currently apply to Amazon. While Amazon has about 43% of the U.S. e-commerce market, it is still less than 4% of total U.S. retail, according to eMarketer.”

• Investopedia writes that Bill Simon, the former CEO of Walmart, “is calling on Congress to consider breaking up online retail behemoth Amazon,” saying that it is “destroying jobs, and it’s destroying value in the [retail] sector … They’re not making any money and they’re putting retailers out of business.”

The story quotes Simon as saying that “while large, national big-box chains including Costco can adjust to Amazon’s pressure, small retailers and specialty chains are getting hurt: ‘You see what’s happened to Toys R Us and department stores. J.C. Penney is in trouble. That’s because Amazon sells below cost and continues to do that.”

• The New York Daily News reports that Sen. Bernie Sanders (I-Vermont) agrees with Trump’s anti-Amazon rhetoric, saying, “We’re seeing this incredibly large company getting involved in almost every area of commerce and I think it is important to look at the power and influence that Amazon has.”

• In other Amazon news, Bloomberg reports that it has changed its Washington, DC, lobbying muscle, ending its relationship with two firms - Akin Gump Strauss Hauer & Feld and Squire Patton Boggs. In their place, the story says, Amazon “hired Paul Brathwaite of Federal Street Strategies LLC and Josh Holly of Holly Strategies Inc.”

The change came a week before President Donald Trump launched a Twitter attack on the company, charging it doesn’t pay enough in taxes and is exploiting the US Postal Service (USPS).

Published on: April 2, 2018

Last Friday, MNB took note of a Wall Street Journal report that Walmart, the biggest retailer in the world, is in “preliminary” discussions to acquire Humana, a health care serves company with a $37 billion market value. Such a deal “would mark a dramatic shift for the retail behemoth and the latest in a recent flurry of big deals in health-care services … A Walmart-Humana deal would cap a series of transactions that could transform the business of managing health care.”

Fortune has a story about “how central one key demographic is to this seemingly out-of-the-box M&A move - and that’s the prodigiously sized generation of Medicare recipients.”

Consider this: “A whopping 79% of Humana’s total premiums and services revenue comes from Uncle Sam - through individual and group Medicare Advantage plans and other stand-alone prescription drug plans, according to the company’s latest 10-K filing with the SEC … Humana offers at least one type of Medicare plan in each of the 50 states.”

Talk about synergy: “That same silver-domed demo, of course, is core to Walmart: Millions of seniors not only shop at its stores but also pick up their scrips there, too. The world’s largest employer (after the U.S. Department of Defense and the People’s Liberation Army) also just happens to be the 4th largest operator of pharmacies in the U.S., with $20.6 billion in 2016 prescription drug sales, according to Pembroke Consulting … That makes Walmart-the-drug-chain bigger than Rite Aid.”

Fortune goes on: “Like CVS, Walmart has been energetically incorporating primary care clinics in many of its stores too. (That’s a direction Humana had been heading as well: It has nearly 200 clinics that it operates on its own or in joint ventures, according to Modern Healthcare.) The idea of combining these resources—and encouraging Humana plan members to get their primary care through Walmart clinics, get their meds through Walmart pharmacies, and shop in the healthy fruit and veggie aisles at Walmart groceries—makes good, simple sense.”

But there are complications.

The Wall Street Journal says that a move by Walmart to acquire Humana would force the company “to borrow tens of billions of dollars - or issue millions of shares, which could push the founding Walton family’s ownership stake below 50%.” While it is the biggest retailer in the world, and is controlled by one of the world’s richest families, it doesn’t have a lot of cash on hand - the company “ended its fiscal year in January with $6.76 billion in cash and short-term investments.”

Such an acquisition, then, could force the Walton family to make a kind of existential decision about the company’s future.

The New York Times writes that some people familiar with the discussions feel that an alliance is more likely than an acquisition: “Walmart and Humana already have some synergistic ties. Since 2010, they have sold a co-branded prescription drug benefit for Medicare recipients, which offers savings on certain drugs bought at Walmart’s pharmacies.
The two companies, one of the people briefed on the matter said, are discussing how to expand that partnership in ways that would help drive more traffic to Walmart’s 4,700 United States stores, while increasing Humana’s enrollment.

“As part of that initiative, analysts said, Walmart could open urgent care clinics inside its stores or hold community events, like bingo nights, that cater to enrollees in Humana’s insurance plans.”

Published on: April 2, 2018

The New York Times has a story about how “a global race to automate stores is underway among several of the world’s top retailers and small tech start-ups, which are motivated to shave labor costs and minimize shoppers’ frustrations, like waiting for cashiers.”

The starting gun for this race in some ways was sounded by Amazon with the opening of its Amazon Go checkout-free store in Seattle, and the story says that competitive retailers are “trying to prevent Amazon from dominating the physical retail world as it does online shopping.”

The story goes on: “Companies are testing robots that help keep shelves stocked, as well as apps that let shoppers ring up items with a smartphone. High-tech systems like the one used by Amazon Go completely automate the checkout process. China, which has its own ambitious e-commerce companies, is emerging as an especially fertile place for these retail experiments.

“If they succeed, these new technologies could add further uncertainty to the retail work force, which is already in flux because of the growth of online shopping. An analysis last year by the World Economic Forum said 30 to 50 percent of the world’s retail jobs could be at risk once technologies like automated checkout were fully embraced.”

You can read the entire story here.

Published on: April 2, 2018

Rite Aid said last week that the “waiting period under the Hart-Scott-Rodino Antitrust Improvements Act” has expired, which puts it one step closer to final approvals of its acquisition by Albertsons, expected to be completed later this year.

"The expiration of the HSR waiting period is an important step toward completing the proposed transaction with Albertsons which will create a truly differentiated leader in food, health and wellness to meet the evolving needs of customers," Rite Aid chairman/CEO John Standley said in a prepared statement. “We remain focused on combining our two organizations to drive growth, profitability and long-term shareholder value.”

Published on: April 2, 2018

The Wall Street Journal reports this morning about a new study from real-estate data firm Reis Inc., saying that “the vacancy rate in big U.S. malls increased to 8.4% in the first quarter of 2018, up from 8.3% in the fourth quarter and the highest since the fourth quarter of 2012 … Meanwhile, neighborhood and community shopping centers in 41 of the 77 areas experienced an increase in vacancy during the 12 months ending on March 31.”

The numbers, the story says, “show that bricks-and-mortar malls and shopping centers continue to be hurt by shifting consumer spending patterns, particularly the increasing use of online retail. Numerous department stores and other retailers that traditionally have been mainstays of shopping areas have been contracting or have failed … The weakness in the retail real-estate sector comes at a time of overall growth in the U.S. economy. Store and shopping center closings have been particularly painful to small cities that have been reliant on the sector for jobs and taxes.”

Published on: April 2, 2018

A Los Angeles judge has ruled that coffee sellers in California are required to comply with state law by placing a warning on coffee saying that it could cause cancer.

Reuters reports that the ruling came after a non-profit organization sued some 90 coffee retailers in the state “on grounds they were violating a California law requiring companies to warn consumers of chemicals in their products that could cause cancer. One of those chemicals is acrylamide, a byproduct of roasting coffee beans that is present in high levels in brewed coffee.”

Coffee companies in California have 10 days to respond to the ruling.

According to the story, “The lawsuit was filed in 2010 by the Council for Education and Research on Toxics (CERT). It calls for fines as large as $2,500 per person for every exposure to the chemical since 2002 at the defendants’ shops in California. Any civil penalties, which will be decided in a third phase of the trial, could be huge in California, which has a population of nearly 40 million.”

The Los Angeles Times writes that “the decision has put public health experts at odds with a state law aimed at safeguarding the health of Californians. ‘I can understand the logic of the judge, by going by the book. But I can also understand the science,’ said Mariana Carla Stern, a USC professor who studies diet and cancer. ‘From the science standpoint, there's no reason the public should worry about drinking coffee’.”

A majority of scientists say that acrylamide has to be consumed in extremely high levels to be carcinogenic, and that “it's unwise to extrapolate acrylamide studies in animals to humans because the species metabolize the compound differently.” Plus, they say, the decision does not factor in proven health benefits from drinking coffee.

Published on: April 2, 2018

CNet reports that a one Amazon-owned Whole Foods store in Austin, Texas, recently has signs offering special deals, including 10 percent off “hundreds of sale items” to Amazon Prime members.

However, the signs were only up for a day, and a company employee said that it was not a test.

Published on: April 2, 2018

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

• The Financial Times reports that China is imposing new tariffs on US food imports, including pork, fruit, nuts and wine, that could go as high as 25 percent.

According to the story, the new tariffs on “128 different kinds of products” are being positioned as being as retaliation against tariffs put on steel and aluminum imports by the Trump administration.

Everything I’ve read suggests that there is a debate within both the US and Chinese governments about the degree to which these trade battles can be beneficial to their respective countries. So far, the forces pushing for a more aggressive approach seem to be winning.


• CNBC reports that “several Toys R Us stores are scheduled to be auctioned off later this week, according to court documents filed Tuesday that were reviewed by CNBC.

“Out of the 58 ‘qualified bids’ being considered, Target and Aldi both are looking at one location in Kendall, Florida, which is near a handful of college campuses. Big Lots is bidding on five stores — in Fresno, California; Exton, Pennsylvania; Durham, North Carolina; Woodbridge, Virginia, and Indianapolis. Furniture chain Raymour and Flanigan is looking to bid on three stores — two in New Jersey and one in New York. Golf & Tennis Pro Shop, which owns PGA Tour Superstore, will bid on the same Indianapolis store as Big Lots, along with a store in Vernon Hills, Illinois. Other names on the list of bidders … include Ashley Furniture, Shoe Station, Food Bazaar and Fit Factory.”


• Food & Wine writes that “Mondelez, the global food giant behind Oreos, has promised that by the end of the month, all of the cocoa supplied for Oreo cookies will come from farmers associated with the brand’s Cocoa Life scheme, a program focused on supporting sustainable cocoa production and the welfare of the people behind it. Eventually, the company hopes to source all cocoa across its entire product range from these sustainable farmers, but for now, Mondelez sees Oreo as a big step forward.”

Published on: April 2, 2018

• Weis Markets announced it is introducing Weis 2 Go online ordering with curb-side pick-up in 25 additional stores by April 26. Once the rollout is complete, online ordering with curbside pick-up will be available in 81 Weis Markets stores.

Weis 2 Go Online Shopping is described as a system that “allows customers to order online and pay through a secure PayPal system or at the store with curbside checkout. Each order is handpicked by trained personal shoppers and then carefully stored until pick up. Customers can use their Weis Preferred Shopper cards to save on their orders and earn rewards on gas and private brand products. They can also browse the weekly online circular and add sale items to their carts. Paper and digital coupons are also accepted.”


• The Milwaukee Journal Sentinel reports that Fresh Thyme Delivers, the delivery service offered by Fresh Thyme Farmers Market, now is available in 55 of the company’s 70 stores, powered by Instacart.

Published on: April 2, 2018

• The New York Times writes about the passing, at age 92, of Andrew Balducci, who in the years after World War II persuaded his father, Louis Balducci, to leave his rented pushcart behind and transform it eventually “into an epicurean mecca that would pioneer specialty-foods retailing in New York and dominate that business for decades.”

A passage from the Times obit:

“Word of mouth made it a destination of choice for gastronomes in an era when tracking down what today is standard fare, like Italian parsley, would have required a dragnet of the city’s greenmarkets.

“Culinarians could find red chicory there, five different kinds of eggplant, direct imports of prosciutto di Parma, custom-grown broccoli rabe from Italy and, later, from California, pitahaya (a sweet pink fruit shaped like a mango) and trevigiano (a variety of radicchio) — to say nothing of arugula.
James Beard lived around the corner and shopped there for extra-virgin olive oil and Italian bread. Lou Reed bought linguine; Anna Wintour, pecorino; Uma Thurman, pesto. The conductor Michael Tilson Thomas, another regular for a time, once spotted Greta Garbo there.”


• Steven Bochco, who with TV series that he created and co-created like “Hill Street Blues,” “LA Law,” and “NYPD Blue” helped to usher in an era in which stories were more adult, language was more frank, and limits on nudity were challenged, has passed away from complications related to cancer. He was 74.

Other series in the Bochco oeuvre include “Doogie Howser, M.D.” and “Murder One.” Various obits described Bochco, without any hyperbole, as being one of the most important writers and producers in the history of television, who set the table for programs that included “The Sopranos,” ”Mad Men,” and “Breaking Bad.”


• Rusty Staub, one of the best major league hitters of the sixties, seventies and eighties in tours with, among others, the Montreal Expos (where he learned to speak French so he could talk to young fans) and the New York Mets, passed away last Thursday of a heart attack. He was 73.

Published on: April 2, 2018

In my commentary about the Trump-Amazon fight last week, I commented, in part:

I actually think that rather than picking on Amazon, Trump would be better off going on Amazon and doing a little shopping. Maybe he could find a better price for a wall, and get two-day delivery. Or, he could shop for a new legal team.

One MNB reader wrote:

Oh, you’re going to get some mail today about that one, haha!   I wonder if you’ll get more email from folks who think it’s funny or more from annoyed people telling you to stay in your lane/stick to retail, etc.

It was about 50-50.

I’d rather post the negatives.

MNB reader Jeff Roche wrote:

U R an Ass! I can’t even read an article on the industry without politics!

From another reader:

I don't read MNB for your political pokes.

And from another:

So, I see where you now are becoming like the rest of the MSM by injecting your political views in your business discussions.  Albeit, you tried to be coy.

You failed.

How about sticking to what you always do and do best?  Don’t morph into a Hollywood know it all or a faux journalist.

You know business, stick to it!

If I may respond … I have always injected my views into everything I write. That’s sort of the gig, at least as I’ve defined it for 16+ years … and in doing so, I invite people who both agree with me and disagree with me to weigh in. As you did.

For the record, I didn’t inject politics into business. Trump did. He’s talking about doing something that I think is silly, and it is my job to say so. I did the same thing - far more often and with a far harsher tone - during the Obama administration when I thought its antitrust regulators were defining competition in ways that I felt were antediluvian.

As for the crack about the wall and a new legal team, that was a joke. I like to think of myself as someone who can laugh at both Roseanne Barr and Stephen Colbert … sure, I made a joke at Trump’s expense, but I’m fairly ecumenical this way. I make jokes at everybody’s expense. Of course, my wife and kids tell me that I’m only half as funny as I think I am, so maybe I am an ass.

One MNB reader didn’t think so:

Classic Trump cronyism. His CEO friends are getting their butts kicked by Amazon because Bezos is a more innovative and better businessman than they are, and has created something fresh, new and constantly evolving. Customers love it, and it’s at the expense of traditional brick and mortar retail. These CEOs could work to compete, modernize and improve their own businesses, but instead cry “foul!” to their buddy who happens to be president.

Trump will be happy to oblige if he can because he, too, is envious that Bezos is a far superior businessman to what he was. Throw in the fact Bezos owns the Washington Post, which is firmly but fairly reporting on all the scandal and incompetency in the White House, and this story is the perfect storm illustrating Trump’s attempts to abuse power.

Okay? I’ve offered both sides.

Let’s all try to get along.



The best email I got was from the MNB reader who had a thought about a possible Walmart acquisition of Humana:

And Trump is going after Amazon?

Fair point.

Published on: April 2, 2018

• Notre Dame defeated Mississippi State 61-58 yesterday in the NCAA Women's Basketball Tournament, winning the championship on the power of a three-point shot made with 0.1 seconds left in the game by Arike Ogunbowale.

• The NCAA Men's Basketball Tournament championship game will be played tonight, as Villanova faces off against Michigan.