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    Published on: April 11, 2018

    by Kate McMahon

    Facebook founder and CEO Mark Zuckerberg endured five hours on the hot seat yesterday on Capitol Hill, taking full responsibility for his firm’s failure to protect user’s privacy.

    Trading his signature gray cotton t-shirt and jeans for a conservative suit and Facebook logo-hued blue tie, the 33-year-old Zuckerberg appeared before a rare joint hearing of the Senate Judiciary and Commerce committees. Under the glare of television lights in a packed chamber, he took his seat on a leather chair with a four-inch black foam cushion.

    Zuckerberg and his company have been under intense scrutiny in recent weeks, and his much-anticipated testimony before 44 senators was just Day One of his Washington mea culpa tour. He appears before the House Energy and Commerce Committee today.

    Zuckerberg apologized for Facebook’s mishandling of personal information from some 87 million users, which was mined by a political consulting firm linked to the Trump presidential campaign. Conceding additional issues with fake news, hate speech and Russian social media influence in the 2016 elections, he admitted “we didn’t take a broad enough view of our responsibility.”

    “It was my mistake, and I’m sorry,” he said. “I started Facebook, I run it, and I’m responsible for what happens here.”

    Zuckerberg reportedly received a “crash course in humility and charm” to prepare for his first appearance before Congress, and he appeared calm, contrite and deft at dodging questions, saying more than once, “I’ll have my team follow up with you.”

    Certain senators were harshly critical in their questioning, while others clearly did not have a tangible understanding about what Facebook is or how the social network operates.

    Amid debate about data, apps, obtuse user agreements, and even Facebook’s cooperation with Special Counsel Robert Mueller, a telling exchange with Senator Dick Durbin, the Illinois Democrat, drilled down on the key issue: privacy.

    "Would you be comfortable sharing with us the name of the hotel you stayed in last night?"  Durbin asked Zuckerberg. After an awkward pause, Zuckerberg responded, “Um, no.”

    There was laughter when Durbin then asked if Zuckerberg wanted to share names of those he had messaged this week, to which he smiled and said, “No. I would probably not choose to do that publicly here.”

    “I think that may be what this is all about,” Durbin said. “Your right to privacy. The limits of your right to privacy. And how much you give away in modern America in the name of, quote, connecting people around the world.”

    The well-prepared Zuckerberg dutifully listed steps Facebook had taken to prevent another breach such as the 2015 Cambridge Analytica debacle which reached a crescendo last month and forced his trip to Washington.

    Many in the media questioned whether Silicon Valley boy wonder Zuckerberg would “man up” and take the blame. As previously stated, I don’t think he had any choice – he is the CEO and an adult multi-billionaire, after all.

    I would agree with the early reviews that Zuckerberg handled himself well in the first round with lawmakers, even reversing a week’s long slide in Facebook’s stock price.

    It will be interesting see if House lawmakers today aggressively push the need for more stringent governmental regulation of social media companies, which Zuckerberg and his tech cohorts have resisted.

    Zuckerberg admitted Facebook has to do “a lot of work about building trust back.” I think it is imperative that Facebook prove to its 2.2 billion worldwide users (and government regulators) that it is implementing meaningful reforms and protecting their privacy.

    Putting on a suit and saying I’m sorry isn’t enough.

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    KC's View:

    Published on: April 11, 2018

    by Kevin Coupe

    Media Post reports on a new survey by Kantar’s Lightspeed concluding that 34 percent of Americans and 31 percent of Brits own a smart speaker - Amazon’s Alexa-powered system is the dominant player - with almost as many people again saying they plan to buy a smart speaker this year.

    “People who have smart speakers use them,” the story says. “Almost three-quarters (72%) of consumers use their smart speaker at least once a day with 46% of those using them multiple times a day.”

    The survey also looks at what people are using their smart speakers for:

    19% - Play music, podcasts, audio books
    15% - Set a timer or reminder
    15% - Learn the weather outdoors
    15% - Look up information online
    8% - Add appointments to calendar
    7% - Call someone
    7% - Purchase items online
    6% - Tell jokes
    4% - Order food
    2% - Take market research surveys
    2% - Order a car service

    So, only 11 percent of smart speaker usage is for buying stuff … but one has to assume that this will change and grow as time goes on and people get more comfortable with the technology. One has to think of all the other stuff that is more popular right now as gateway drugs … you play a song, you get the weather, you use the timer, and suddenly you’re ordering a pizza or placing an order at Starbucks or replenishing something you’ve bought on Amazon.

    That’s how it goes. It is an Eye-Opener.
    KC's View:

    Published on: April 11, 2018

    Walmart announced yesterday that it is working with Postmates “to help expand the retailer’s popular Online Grocery Delivery option to more than 40 percent of U.S. households. Postmates will help power the Walmart’s Online Grocery Deliveries, beginning today in Charlotte, NC with further expansion planned in the coming months.”

    According to the announcement, “With the help of Walmart’s personal shoppers and Postmates’s delivery network, thousands of Charlotte customers will be able to shop for and have fresh groceries delivered to their doorsteps. Personal shoppers must complete a three-week training program learning how to select the freshest produce and the best cuts of meat for Online Grocery customers.”

    The delivery program is in addition to Walmart’s Online Grocery Pickup service that is now available in 1,200 Walmart stores, with 1,000 more to be added this year.
    KC's View:
    I’ve been arguing here for a long time that if Walmart wanted to really compete with Amazon, it has to made big moves in terms of pickup and delivery - it requires a big statement, which is largely what it has been making lately.

    I have to wonder if Postmates is a stopgap measure while it figures out how to do this on its own, either by building a new delivery service or acquiring a company like Postmates or Instacart. I think permanent outsourcing is unwise.

    Published on: April 11, 2018

    The Cincinnati Business Courier reports that “Kroger Co. is looking to fill an estimated 11,000 positions in its supermarkets, including around 2,000 management jobs … The hiring would not include jobs created as a result of capital investment, such as temporary construction jobs or increases due to the company’s mergers, Kroger said.”

    The story says that “the hiring announcement comes as Kroger is investing $500 million in associate wages, training and development over the next three years as part of Restock Kroger.” It also comes as civil rights activist Rev. Jesse Jackson Sr., leads a protest/boycott of the company because of the closure of several stores that served minority communities.
    KC's View:
    I don’t envy Kroger having to hire that many people at a time when unemployment is low and it seems to be a seller’s market. But, if it is going to continue to differentiate its in-store experience, good people is an important component of that. (Though it isn’t just hiring … it also is about training them, getting them to understand the vision, and then being the kind of people who improve the shopping experience as opposed to diminishing it.)

    Published on: April 11, 2018

    The Chicago Tribune has a story about even as “nearly all major grocery retailers in Chicago … offer some form of delivery or pickup for increasingly tech-savvy consumers on the go,” they also are “sinking capital into their bricks-and-mortar stores and bolstering their workforces in order to survive in the area’s fiercely competitive grocery industry.”

    Kroger-owned Mariano’s, Albertsons-owned Jewel-Osco, and Aldi are all cited in the story as examples of companies that are aggressively investing “amid looming online shopping threats from Amazon and Walmart.”

    Jewel-Osco President Doug Cygan tells the Tribune that retailers have no choice but to invest in both the physical and the digital - they have to do it all, he says: “If you’re not keeping it fresh, you become a little irrelevant. What we’re seeing is people want both.”
    KC's View:
    Hard to do. Challenging to fund. And tough to meet traditional financial benchmarks while dealing with an increasingly competitive marketplace in which consumer demands and needs are constantly shifting.

    Published on: April 11, 2018

    Bloomberg reports that Walmart’s online marketplace, which is where third party vendors can sell their products, seems to be “getting more choosy … adding far fewer sellers a month compared with a year ago, according to data tracker Marketplace Pulse. The site, which Walmart created in 2009 to compete with a similar offering from Inc., now includes about 18,000 sellers.”

    According to the story, “The slowdown mirrors a deceleration in growth at Walmart’s e-commerce business last quarter, which spooked shareholders and renewed concerns about the investments Walmart is making to catch up with Amazon.”

    “We’re focused on adding the best items our customers want from the best sellers,” says Ravi Jariwala, a Walmart spokesman. “In any given month, the number of new Marketplace sellers added to our platform may fluctuate as we continuously add new items and offer customers an expanding range of choices.”

    The story notes that Amazon adds almost 3,000 third party sellers to its various global online marketplaces each day, and that “Amazon has more than 2 million sellers in the US alone.”
    KC's View:
    I suppose there is one argument that Walmart can be a preferred choice by curating the products in its marketplace; I’m a big fan of curation as a competitive strategy. (It is sort of what I do for a living.) But in this context, I have to believe that Amazon’s breadth and depth of product is an enormous advantage.

    Published on: April 11, 2018

    The New York Times has a fascinating piece about how, in the face of online competition from the likes of Amazon and Walmart that “have conditioned consumers to expect a higher level of convenience,” some in the framing business are fighting back for their own piece of the online food business.

    The piece follows David Nowacoski, a chicken and pig farmer, who “started a service that delivers locally produced meats, cheeses and vegetables across three counties in northern Pennsylvania. His start-up collects food from far-flung farms and transports it weekly to residents who place their orders online.”

    Interesting story about how not to lie down in the face of enormous and well-funded competition, and you can read it here.
    KC's View:

    Published on: April 11, 2018

    Business Insider reports about how Boxed, the online bulk retailer, has launched a new paid membership program offering “free rush shipping on orders over $20, improved customer service, price matching, and cash back on purchases” - all for $49 a year.

    Ashish Prashar, the company's head of communications, says that the program was developed because customers were "looking for deeper discounts and unique offerings and were willing pay a little to get those … "All the best services have some sort of subscription model. People will pay for that premium service if it's unique and brings value to their lives.”

    Boxed members not paying for membership must spend $50 on an order to get free shipping.
    KC's View:
    Interesting that this comes even as Boxed apparently has been dealing with interest on the part of several companies in acquiring its operations. The thing about subscription models is that they make it easier to stay connected and relevant to your best customers.

    I would think it would be in Boxed’s best interests to also ramp up some sort of aggressive replenishment program as part of its membership structure. It is all about establishing an ecosystem that prevents people from going to the competition.

    Published on: April 11, 2018

    The Washington Post has a story about how “more craft breweries closed in 2017 than any other time in the last decade,” and how, “although craft beer makers saw more growth in production than the overall market last year, the pace is slowing.”

    The reason, experts say, is that there is “an increasingly crowded playing field, leading to more closures of small craft breweries. In 2017, there were nearly 1,000 new brewery openings nationwide and 165 closures — a closing rate of 2.6%. That's a 42% jump from 2016, when 116 craft breweries closed.”

    There also is the inevitable maturing of the marketplace, plus the fact that major breweries are now buying craft brewers as a way of protecting their flanks and creating more innovation within their organizations.
    KC's View:
    This is all cyclical, and always will be. I can remember back in the mid-eighties, I was working for the now-defunct Supermarket Business magazine, and was assigned to write a category story about the beer business. I hated writing category stories of any kind, mostly because (trade secret here) they only exist so publishers can sell advertising to companies in those categories (which they continue to do today). They aren’t interesting to write or read.

    But, being a rebellious sort, I decided to embrace the moment by writing about Samuel Adams beer and the Boston Beer Company, which was pioneering the craft beer business at that point in time, and about how breweries like those could change the industry.

    (I also, if memory serves, made all sorts of references to the beer preferences of Spenser, Robert B. Parker’s creation, and quoted poet A.E. Housman: “Malt does more than Milton can,To justify God's ways to man.” My goal was to write a category story that was fun to write and read, and maybe even annoy my editors a little bit.)

    My point is this. That’s something like 35 years ago. Craft beer and brewpubs have been hot at various points during those years, and they’ve cooled off from time to time. What I know is that brewpubs that make their own beer also tend to make great food, and I’ll be a craft beer customer until I drop. Some things aren’t cyclical.

    Published on: April 11, 2018

    • Financially moribund Sears Holdings has decided to auction off 16 profitable store locations online, according to a story in the Wall Street Journal.

    The story says that “real estate services firm Cushman & Wakefield is partnering with Real Insight Marketplace , an online auction platform, to help Sears sell 16 profitable store locations. The stores, 15 of which are attached to malls, are being marketed as sale and lease-back deals, and some properties with agreements that allow modifications could be turned into self-storage, hotel or residential space.”

    • The Wall Street Journal reports on how the price of bananas - “the most widely eaten fresh fruit in the US” - have stayed relatively stable in most supermarkets even as wholesale prices have hit new highs, largely because of labor issues, floods, cooler temperatures and mudslides.

    Many retailers, the story says, “have been loath to pass their higher costs on to shoppers. For many supermarkets and other stores, bananas drive trips to the store because they are an item that most people go out to purchase rather than buy online. Most large retailers sell bananas at a slim margin or sometimes no price markup, which means higher wholesale prices are likely hurting returns for sellers that haven’t locked in prices with long-term contracts.”
    KC's View:

    Published on: April 11, 2018

    Yesterday we took note of a Wall Street Journal story about how GOP plans to cut funding for food stamps is of concern to retailers that get a lot of business who use the program.

    One MNB reader wrote:

    Kevin, as I have said before, the food stamp program is the biggest government handout by far to any industry. Ending it, or reducing it would substantially harm the majority of grocery stores in the US. I don’t understand why you would have a problem with this. Just last week you were worried about the influence the NRA has on the government. Aren’t you worried about the influence of the grocery lobby? Food kills far more people then guns, I would think you would be for better regulation.


    On the subject of edible glitter in food, which now apparently is a thing, one MNB reader wrote:

    Glitter savory food doesn’t sound like something I want to try. I know the glitter is not supposed to impart much flavor, but I find anything like this (including the edible photos) add an unpleasant taste to the product, it gives it an artificial something that I just don’t care for. I will pass.

    From MNB reader Chris Utz:

    Wouldn’t consume sprinkles…  With a possible exception made for Goldschlager.

    On another subject, from another reader:

    You expressed some skepticism that Aldi and Save-A-Lot could be a couple of the top scorers in the annual Temkin CX ratings (and that Whole Foods could score so poorly).

    At least one plausible explanation is that some chains have a very clear value proposition and consistently deliver upon it. That Value Proposition isn't always based on (higher) price points and/or vast selection. These Temkin CX results are reasonably consistent over several annual iterations. (Please see attached). Scores of most chains are also fairly tightly grouped. I'll leave it up to the Temkin folks to explain the margin of error.

    As it happens, Aldi has scored well in other customer-facing measures such as recent Net Promoter Score (while Whole Foods has fared poorly), American Customer Satisfaction Index and Consumer Reports.

    And from another:

    Your comment questioning the merits of a survey that would put Aldi as the #4 retailer deserves a response. As a food industry professional, the last half of a 40+ year tenure spent in grocery, I shop my local Aldi before my local Ahold and Wegman’s locations. Why? I know the Aldi products are the exact same quality as the other retailer’s private brands but at 20-30-even 50% less. The stores are smaller, and there is none of the nonsense around coupons, “special buys” or complicated pricing models. Just quality products at reasonable prices. Butter is butter, eggs are eggs, milk is milk. Why pay more just because you can? I can’t wait for Lidl to come to my area to continue to shake things up.
    KC's View: