business news in context, analysis with attitude

Published on: April 3, 2018

by Michael Sansolo

Let’s face it; the world has gotten absurdly complex. That’s the reason there are so many issues we cover here on MNB - including some that readers question. The reality is that nothing is simple any more and we believe there are lessons to be learned from a discussion of almost anything.

That growing complexity means we need to thank about a wide range of issues differently these days, especially when it comes to thinking about long term strategy.

For instance, I can basically understand why a company like Walmart is talking to Humana health care or why Kohl’s simultaneously is allocating space to Aldi and partnering with Amazon. In each of these cases, there are interesting business ideas at play and emerging strategies on ways to get or keep customers inc retailers’ ecosystems.

But more importantly, I think we might have entered an entirely new level of strategy and that’s a challenge to all of us. Great game players - whether it’s chess, Scrabble or even baseball - understand the importance of thinking long. It’s said of great baseball managers that they are always thinking two or three innings ahead of the present, if not two or three games ahead.

Likewise, chess masters make all kinds of complex moves, at times willingly losing pieces to set up certain strategies and make certain they control important parts of the board. Like those baseball managers they are thinking many moves ahead of the current game.

Business is requiring much of the same these days especially with the growing complexity of both electronic and omnichannel commerce. To my thinking it’s why we see many unexpected alliances these days, whether it involves specific retailers aligning with Instacart or Walmart looking for different ways into the health care business. I believe people way above my pay grade are trying to strategically grab key places around the board to enable future moves.

Here’s the thing: I may not understand the strategy or goal behind all of those moves and frankly, I don’t have to because my business isn’t about running stores or selling products. MNB readers don’t have the same luxury; you are in the game. And I think that’s why it’s more important than ever to force yourselves to think strategically and look a few moves ahead, even while the here and now is screaming for your attention.

I think that’s going to put more pressure than ever on building good relationships with others who might aid that thinking. For retailers that could mean working closer with trading partners - wholesalers and suppliers - and certainly forming alliances with fellow retailers. More than ever, we all need to seek out and value honest feedback from everyone around us to prepare for whatever may come.

Heck, it even makes the strange lessons we love to find here at MNB more important because even the most remote story might provide inspiration for something that gets us thinking and acting in a new way.

It is, after all, a whole new ballgame.

Michael Sansolo can be reached via email at msansolo@mnb.grocerywebsite.com . His book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available on Amazon by clicking here. And, his book "Business Rules!" is available from Amazon by clicking here.

Published on: April 3, 2018

CNBC reports that Walmart is in talks to acquire PillPack, described as a 24/7 business that “manages prescription medications for its customers which include those with multiple chronic conditions -- all by packaging, organizing and delivering drugs.”

The cost of such a purchase is projected to be under $1 billion.

Published on: April 3, 2018

USA Today writes that despite a current political narrative that Amazon is destroying small, mom-and-pop businesses, more than two-thirds (68 percent) of small business owners say that “ Amazon has positively impacted their sales,” while 32 percent say that Amazon has “had a negative effect on their sales.”

The survey - of 2,400 small business owners in the US - was conducted by Insureon and Manta.

The story goes on:

“Of the small businesses that sell products online, 24% use Amazon as a sales channel. The only other company that broke double digits was eBay at 22% while the majority of retailers (66%) reported using their own website.

“Selling online has clearly become important to small business as 81% of the retailers that do so reported at least a moderate increase in revenue. In fact, 43% of small businesses selling online said they have ‘experienced significant revenue growth,’ while 38% experienced a moderate revenue increase. Only 19% said they did not experience any change.”

Published on: April 3, 2018

Business Insider reports on a new Barclays price study saying that “Whole Foods is 2% to 7% cheaper than Kroger for home-delivered groceries” in the Cincinnati market, while “Kroger still beats Whole Foods on in-store prices … with prices that are 14% cheaper, on average, compared to Whole Foods.”

The difference in pricing, the story and study conclude, can be traced to the fact that Whole Foods’ delivery program is being handled these days by Amazon Prime Now, while Kroger’s is being handled by Instacart.

The story notes that “the Barclays study did not account for the cost of Prime membership, however, which is $99 annually.”

Published on: April 3, 2018

CNBC reports that Boxed - which essentially is an online version of Costco, selling bulk items but without any membership fees - “is attracting lots of attention” from competitive retailers that may want to acquire the company.

One investor says he’s not surprised, since “in just three years Boxed went from $40,000 in sales to more than $100 million annually. Based on its latest funding round, Boxed is valued at around $470 million.

Chieh Huang, the 36-year-old Taiwanese-American who co-founded Boxed in 2013, says that “without naming actual names, we have had conversations with just about every retailer under the sun. International and domestic: some more serious than others.” He says that he is keeping his options open for the time being, though it has been reported that he rejected as too low a $500 million offer from Kroger.

The story notes that “delivery is free for orders more than $49, and Boxed says the goods arrive in two days or less. The average Boxed customer - 80 percent of whom are between the ages of 25 and 44 - spends about $100 on around 10 items per order. That allows the company to keep costs low by splitting shipping costs over a wide range of products, instead of just a few.”

Published on: April 3, 2018

The Wall Street Journal has a story about weak personal consumption trends during the past few months, which were up “just 0.2% in both January and February on a seasonally adjusted basis, according to Commerce Department data. This was slower than a 0.4% rise in personal incomes in both months, suggesting Americans are saving more. A separate data series showed retail sales fell for the third month in a row in February, disappointing economists who had estimated a slight gain for the month.”

These numbers all raise an issue: “The labor market is tightening, wages are rising and consumers’ take-home pay is being boosted by tax cuts.” And so, the Journal asks, “ Why, then, isn’t spending stronger?”

The reasons may simply be cyclical, but there also may be something else at play - “tightened lending standards by credit card, auto and other lenders may be squeezing consumer finances.” At the same time, “consumers with lower credit scores will find it harder to secure auto loans or new credit-card lines. One naturally would expect to see some impact on spending despite healthy incomes.”

Published on: April 3, 2018

The New York Times writes about about a trade war with China - as reflected in tariffs imposed back and forth by the two nations - could have an enormous impact on US wineries that have “spent years trying to carve out a place in the hearts of wealthy Chinese consumers. That hard work has earned them a prized sliver of what is becoming one of the fastest-growing markets for wine imports.

“China’s imports of American wine reached $82 million last year — not including bottles entering duty-free through Hong Kong — a sevenfold increase in the last decade.”

When it was looking to retaliate against tariffs assigned by the Trump administration, the Chinese government selected wine as one of the categories to be hit with an extra 15 percent tariff. That served as what the Times calls “a gut punch to winemakers marketing their wares to the mushrooming legions of young, recently wealthy Chinese.”

That 15 percent, by the way, is on top of existing taxes and tariffs that increase the cost of a bottle of wine that in the US would cost $25 to $100 in China.

The story notes that “Chilean and New Zealand wines face no Chinese levies, thanks to free-trade agreements. Australian bottles will enter the country tariff-free next year.”

Published on: April 3, 2018

Fast Company has a story about Thrive Market, described as “an e-commerce site that sells food items, from pasta to chicken to peanut butter, that are carefully selected for their nutritional value. The vast majority of products are priced below market value, typically 10%–15% cheaper than Amazon. The catch is that customers must pay an annual fee of $59.99 to get access to those bargains.”

The story focuses, however, on Thrive’s social mission: “For every customer who pays their membership fee, another membership is given away to someone in need. The company partners with nonprofits like Feeding America and United Way to identify low-income families with unstable food access. Thrive Market also allows people to apply for free memberships on its site, prioritizing low earners, teachers, veterans, and students who might not be identified by other NGOs.

“Paying members can also directly donate a portion of their savings at checkout to a family in need; Thrive Market claims it distributes grocery stipends based on these contributions to over 1,000 families each month.”

While it has taken “Thrive Market several years to scale … if it’s successful, the model could prove to be an alternative solution to the food-desert problem.” You can read the entire story here.

Published on: April 3, 2018

• Reuters reports that Walmart “has opened its first small high-tech supermarket in China, where smartphones can be used to pay for items that are mostly available on the U.S. retailer’s store on Chinese online marketplace JD.com … The outlet will stock more than 8,000 items ranging from stir-fried clams to fresh fruit, 90 percent of which will be available online, it said in a statement. Items can be delivered within a 2 kilometer (1.2 mile) radius as quickly as 29 minutes, said Walmart, which owns a stake in JD.com."

The story points out that Walmart “is expanding in China as shopping with mobile devices gains popularity in the country, and as retailers and technology companies such as Alibaba Group Holding Ltd and Tencent Holdings Ltd cut deals to integrate online and offline shopping. Walmart is also targeting more online shoppers, who spend twice as much in the United States when buying on its website.”

Published on: April 3, 2018

MNB reader Jerome Schindler wrote me yesterday about the judge’s ruling that coffee retailers have to put a cancer warning on their products:

Prop 65 - making California lawyers rich for 30 years:  The roasting process is responsible for a small amount of acrylamide in coffee.  I am sure that this is true with a large number of foods that undergo heat treatment, or that include ingredients that underwent heat treatment.  For example, many dairy foods are heat treated or made with milk ingredients that were pasteurized or dried using heat so I suspect those might be the next target.

At some point I think Congress is going to have to step in and enact federal food labeling preemption for foods regulated by FDA as presently exists for foods regulated by USDA.  Otherwise we could face a situation where a cheese pizza (regulated by FDA) has a Prop 65 warning, but a pepperoni pizza has no such warning requirement as it is regulated by USDA.

The current situation brings to mind this line from a Star Trek movie, “Beam me up Scotty, there is no intelligent life down here.”

Recent events would suggest that if the federal government tries to tell California it can’t do certain things, California will respond with a lawsuit.

Some would call it an example of the nanny state. Others would call it states’ rights, I guess.




On the subject of Amazon’s health care aspirations, one MNB reader wrote:

Ok, Amazon could be disruptive in health care (the low hanging fruit is medical products and maybe the cash/uninsured Rx biz), but with the Facebook/Cambridge Analytica debacle…how willing do you think patients are going to be handing over confidential healthcare info to an Alexa cube?  The backlash from Facebook could be huge and disruptive to the growth of FAANG companies …then again, if the media and politicians ignore it (which are key to anything becoming an issue these days), it could blow over in a few months (weeks?) as the average consumer goes back to its precious screens. 




Regarding the social media battle taking place between David Hogg and Laura Ingraham, one MNB reader wrote:

She has learned a valuable lesson in free speech. She isn't being persecuted for her speech, but her advertisers (basically employers) will be. It presents the argument to me that networks need to get back into reporting the news without bias, stop interjecting their beliefs, or posing it as questions that lead to the viewers to interpretations. It is very difficult to find news programs that tell it straight, everyone seems to have a bias one way or the other.

Actually, I’m glad that we have people like Laura Ingraham and Rachel Maddow on television … they have every right to express their opinions, and I think we’re all better off if we listen to both of them.

Where Ingraham went off the rails, in my opinion, was that she went after Hogg personally, as opposed to offering a nuanced response to his positions.

And, from another reader:

This story really shows how low we are going as a society. In my view, both sides are at fault.

What the Fox person said was rude and stupid. Yes, she should be held accountable for her words and the hurt they caused. It is freedom of speech, but a poor use of the right. When did it become OK for people in power say something rude and then provide a non heartfelt apology and act like it never happened? The damage was done. It's like saying something in court that the Judge tells the jury to ignore, but in reality, you know they are holding on to that piece of information. Rude and stupid statements should never be acceptable and considered the norm. We, as a people, should demand that we have civility and understanding in our national dialog.

On the other side, the teenager is expecting an eye of an eye. He did stoop to her level when he asked sponsors to pull their revenue and refused her apology. He is lashing out in anger, embarrassment, and hurt because of what she said. He wants to hurt her financially. What results does he expect? When will his pride be satisfied? Does she have to lose her job and become unemployable before he is happy?  Ruining someone career over a rude  statement seems extreme.

Unfortunately, social media is becoming anger waiting for a cause. It can and has been used for good, but it also has a dark side which is become more and more assertive. Just because you have thousands of "likes" doesn't mean you are right. 

We all come from different walks of life, so we will sometimes say hurtful things without meaning to.

If we can learn to forgive, we will be a much happier society. If we can put ourselves in the other person's shoes, then we will start to become a better functioning society. We may not always agree, but at least we can talk without threats of violence, financial retribution, or pent up anger.

I get your point, but respectfully disagree.

Boycotts, in fact, are in the great tradition of American democracy. They are one of the ways in which citizens/consumers can make clear their opinions, and effect change. Columnist Michael Hiltzik in the Los Angeles Times writes that “this week, as we mark the 50th anniversary of the Rev. Martin Luther King Jr.'s death (on April 4), it behooves us to remember that among his most notable efforts was the bus boycott in Montgomery, Ala., which led to federal court rulings invalidating segregation on that city's buses.”

There have been no threats of violence. The companies that pulled their advertising from Ingraham’s show didn’t have to, and Fox doesn’t have to cancel her show (and, it appears, it won’t). Free speech isn’t being threatened. In fact, in some ways it is just paid speech that is under attack.




Yesterday, MNB took note - with a certain amount of ironic glee - of a comment from former Walmart CEO Bill Simon in which he called “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 quoted 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.”

MNB reader Rebecca Warnick wrote:

The fact that the former CEO of Walmart is pretending to advocate for small retailers and specialty chains is guffaw inducing. This was my LOL for the day!

No kidding.

Simon’s comments were a crock, and all he proved that he appears to have very little sense of irony or self-awareness.




Got the following email yesterday from MNB reader Mike Bruce:

Firstly, I appreciate each and every one of your daily updates and the views you pose with them.  Sometimes I agree whole-heartedly with your position on a topic, sometimes I don’t, and when I don’t, I actually learn something after thinking through your positioning.  There are times I cringe on some of your opinions, not because of agreeing or disagreeing, but thinking of how others are taking it and how they’ll react.  And today’s MorningNewsBeat is a prime example of some of the negative responses I was expecting to see.  I’d like to point out to all the negative responders, this IS a FREE newsletter you’ve opted into, and you’re just as free to opt out if you don’t like the author’s comments.

Kevin, I hope you’ll continue sharing your unabashed views in your commentary with the news of the day.  And I hope you’ll get over having to say in every line, “this is not intended to be political”, as it’s your newsletter and you can cover any topic and any view you desire (unless it possibly runs afoul of agreements with your sponsors).  The country has become too focused on who’s right or wrong, as opposed to what IS right or wrong, and your views, IMHO, seem more focused on right and wrong, or to put in today’s over-used terms, truth or fake news.

That’s all I’ve got for today.  Thanks for sharing the news and your views with us daily, and hope you’ll continue to do so without putting too much thought to who will be offended and whether to tone down anything because of it.

Though, if you do ever get tired of this gig and the naysayer responses, I’m sure there’s a place in late night TV for you.  I understand those folks get paid really big bucks to offend everyone.  And I’d stay up late to watch you.

Well, wow.

I appreciate the vote of confidence.

I actually think it is okay that I think about who I may offend when I write MNB each day … just as I think it is okay that, having thought about it, I go ahead most of the time. I think the act of thinking about such things actually forces me to consider other people’s opinions, and try not to be be gratuitous or offensive just for the hell of it. (Though I am willing to do both things when I think it is appropriate, or just funny.)

When I write “this is not intended to be political,” it is because my goal is to avoid weighing in on political issues just because I want to. In the majority of cases, I’m only talking about politics because there is a business component to the story and I think it would be intellectually dishonest to ignore it, just because my opinion might offend some folks.

From another reader, responding to my sense of humor:

Wow...when did people become so thin skinned if they aren't the one telling the joke? Calm down people, it's a JOKE!!!

I thought your comments regarding Trump shopping on Amazon were a hoot as well as being right on target.

Keep up the great work and I for one will continue to look forward to your updates every morning.

Thanks.

Published on: April 3, 2018

Villanova defeated Michigan 79-62 last night in the final game of the NCAA Men’s Basketball Tournament, winning the championship for the second time in three years.