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    Published on: May 3, 2018


    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.

    There was an opinion piece the other day in the Boston Globe, authored by three post-graduate students, that left me simultaneously vindicated, depressed, and a little hopeful.

    Two of the authors attend major MBA programs - one at Harvard and the other at Stanford - and they wrote that their courses “often treat front-line workers (and, increasingly, contractors) as an expense to be tolerated instead of as an asset to be valued. Their concerns and contributions are rarely discussed on campus. And when they are, the conversation tends to focus on values-driven leadership or the potential for workforce automation, not the need for a balance of power between executives and workers.”

    This doesn’t really surprise me. I’ve been long making the point here on MNB that too many companies, especially in retailing, see front line employees as costs, not as assets. Which strikes me as an enormous mistake, because front line employees are exactly that - not just on the front lines in terms of the store experience, but also in terms of interacting with customers and setting the tone for the store experience.

    Can you think of a more important job in a bricks-and-mortar retail store trying to compete with the online experience, or just the bricks-and-mortar retailer up the street or across town?

    The story argues that we’ve adopted an ideology that places shareholder and executive voices far above all others. It wasn’t always that way; part of the way that the country emerged from the Great Depression, the authors say, was through “policies that empowered organized labor, made taxation more progressive, and strengthened the social safety net.” The feeling then was that the economy would move faster and be stronger if everybody was on board, including front line, rank-and-file employees.

    Was there creative tension as this balance was created? Of course? Did organized labor perhaps become intoxicated with their own power and forget that businesses had to be thriving in order to hire more people and pay them more money? Sure. But the argument in the story is that now we’ve moved way too far in the opposite direction, and, as they see it, business schools - rather than raising the bar and challenging conventional wisdom - have bought in completely.

    The authors quote a recent survey of 10,000 Americans concluding that 80 percent of Americans — including 73 percent of Republicans — say that “companies don’t share enough of their success with employees,” while “sixty-two percent said they distrust corporations.”

    That’s not good for the economy. That’s not good for business. That’s not good for the culture.

    I feel vindicated and depressed because I’ve been arguing all this - albeit without the academic credentials and intellectual brio of MBA students - for years. Hell, last week’s FaceTime, from Dorothy Lane Market, where checkout personnel are engaged and part of a superior and compelling shopping experience, essentially was making the same point from another angle.

    Why am I a little hopeful? Because these MBA students see the problem and are addressing it, and I hope there are a lot more where they came from.

    They write:

    “Business schools must change their culture to one where the nature of the executive-worker relationship can be debated. How can we, as future shareholders and managers, restore dignity to, and share power with, frontline workers? What are the human consequences of hiring workers as poorly paid contractors instead of employees? How can we adjust the teaching of accounting, investment, and operations so students are less likely to reduce labor to a dehumanized input? If MBA students don’t engage with these questions, we risk blindly propelling another economic crisis.:”

    I know one thing. This is something that I’m going to try to talk about a lot this summer when I’m teaching at Portland State University. It just seems important.

    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: May 3, 2018


    ARTICLE TEXT



    by Kevin Coupe

    Mike Coupe’s musical moment seems to have gone flat.

    Coupe - the CEO of Sainsbury (who is not related, as far as we know, to the Content Guy) - was getting ready to be interviewed on ITV in the UK this week about his company’s proposed acquisition of almost 60 percent of Walmart-owned Asda Group for about $4.1 billion.

    He was cool. But the microphone was hot. And so, when he began to sing to himself waiting for the interview to start, it was caught on tape (which you can see at right).

    "We're in the money. The sky is sunny. Let's lend it, spend it, send it rolling along," he sang.

    CNN writes that the “incident angered unions that represent grocery industry workers.

    Tim Roache, general secretary of the GMB union, tells CNN, “It's not only crass, it's completely unprofessional and utterly insensitive. What on earth will Asda workers who are worrying about their futures think when they see this?”

    Coupe released a follow-up statement: “This was an unguarded moment trying to compose myself before a TV interview. It was an unfortunate choice of song, from the musical 42nd Street which I saw last year.”

    A few thoughts here, if I may.

    To me, this is sort of nice moment, and not as crass as some would suggest. Sure, Coupe made about $600,000 just from the increase in the Sainsbury stock price after the Asda deal was announced. But a lot of these CEO types are so cool and so rich that an extra $600,000 doesn’t mean very much … I sort of like the ideas that he was human enough to enjoy the moment. (Trust me, if I ever make $600,000 in a day, I’m going to warble a tune or two myself. In fact, I’d break into song for a lot less than that.)

    When the union guy asks what Asda employees should think, I’d suggest that they should consider the possibility that this deal, and Coupe’s leadership, might allow Asda to be more competitive in the face of growing threats from Amazon, Lidl and Aldi, and maybe even start to grow market share instead of watching it shrink.

    People have to relax.

    This could have been a lot worse. Coupe could’ve been doing a verse or two from “Money, Cash, Hoes .”

    Now that would’ve been crass.
    KC's View:

    Published on: May 3, 2018

    The Los Angeles Times reports that one death has now been traced to the consumption of E. coli tainted romaine lettuce.

    The death, in California, of an as-yet unnamed person, is in addition to what now is said to be an outbreak that has sickened 121 people in 25 states.

    The Times writes that “health officials say the contamination so far has been traced to romaine lettuce grown in the area around Yuma, Ariz. — part of the growing region that produces 90% of the nation's winter lettuce, and which has largely stopped growing the winter crop.

    “Last week, the CDC said whole head romaine lettuce from Harrison Farms near Yuma has been linked to eight cases among prisoners in a Nome, Ala., detention facility. At least a dozen other locations are under scrutiny for possible links to the remaining cases, according to the Food and Drug Administration.”

    The outbreak is said to be the worst of its kind since 2006, and health officials are saying that nobody should eat romaine lettuce unless it can be proven it is not from the Yuma, Arizona, region.
    KC's View:

    Published on: May 3, 2018

    CNBC reports that Amazon is preparing to roll out a series of Prime perks for Whole Foods customers, folding the bricks-and-mortar retailer “into a network other grocers will struggle to compete with.

    “It will give Amazon vendors, many of which are niche and small, special access to Amazon's vast shopper base … Whole Foods will begin offering Prime members an additional 10 percent off of already discounted products, sources told CNBC. They requested anonymity because the information is confidential. It has already begun to roll out other perks: free delivery of Whole Foods products to Prime members in certain locations, 5 percent cash back when members use its Visa rewards card at Whole Foods stores and exclusive member deals. It tested the latter with roses on Valentine's Day and turkey on Thanksgiving.”

    The story notes that “roughly 75 percent of Whole Foods shoppers are Amazon Prime members, but less than 20 percent of Amazon Prime members are Whole Foods shoppers, a source told CNBC.”
    KC's View:
    Y’think that this could be one of the reasons that Amazon was willing to increase the Prime membership fee by 20 percent, from $99 to $119? Seems to me that I could easily make up that $20 with a visit or two to Whole Foods…

    Published on: May 3, 2018

    Albertsons announced yesterday that it plans to more than double its private label products this year, increasing it by almost 1,400 SKUs.

    The move, the company says, “demonstrates the company’s confidence in developing exclusive products across all categories. Own Brands is Albertsons Companies’ portfolio of exclusive and trusted private label brands, including O Organics, Lucerne, Open Nature, and the extensive Signature line.”

    The new products introductions, the company says “is occurring across the entirety of the company’s … portfolio.”

    “We’ve got a lot in the pipeline—and we’re just getting started,” says Geoff White, President of Albertsons Companies Own Brands.
    KC's View:
    I continue to believe that the companies that are going to succeed in this environment will be the ones that focus on where they are different, not where they are similar. This would appear to be where Albertsons is going in this case.

    Published on: May 3, 2018

    The two African-American men who were arrested at a Philadelphia Starbucks last month, accused of loitering even though they said they were just waiting for a friend before ordering, have reached a financial settlement with the city.

    They will receive $1 apiece.

    However, the Washington Post reports, the city also agreed “to fund $200,000 for a grant program for high school students aspiring to become entrepreneurs.”

    In addition, “Starbucks announced that it had reached an agreement with Nelson and Robinson that will include an undisclosed financial settlement ‘as well as continued listening and dialogue between the parties and specific action and opportunity’.”

    Starbucks has said it regrets the incident, and will close all of its company-owned stores in the US during the afternoon of May 29 in order to conduct racial bias education programs for some 175,000 employees.
    KC's View:
    It seems to me that, though some people accused these two gentlemen of trying to make a point and score a settlement, this suggests that this was not the case. They were accused by a Starbucks employee, in essence, of waiting while black - it was an isolated case, though hardly an isolated perspective in American society.

    Is the Starbucks response a solution? Of course not. Is the grant program for high school students a solution? Of course not. But they are attempts to address the situation and create elements that can be part of a national solution.

    Published on: May 3, 2018

    Amazon is out with its first Small Business Impact Report, which it says offers “new details about the millions of small and medium-sized businesses that have chosen to grow their business on Amazon.”

    Among the bullet points in the Amazon report:

    • “Millions of small and medium-sized businesses from around the world are selling on Amazon and more than a million of them are based in the US,” and “come from all 50 states and more than 130 countries.”

    • “More than 20,000 small and medium-sized businesses worldwide on Amazon surpassed $1M in sales in 2017.”

    • “Amazon estimates that small and medium-sized businesses selling on Amazon have created more than 900,000 jobs worldwide.”

    • “In 2017, Amazon lent more than $1B to U.S-based small and medium-sized businesses through the Amazon Lending Program.”

    • “Half the items purchased on Amazon come from small and medium-sized businesses.”

    Amazon says that in 2017 alone, it “invested billions of dollars in infrastructure and technical services that help small and medium-sized businesses reach customers around the world.”
    KC's View:
    This report is more than a little self-serving, though that doesn’t dilute its accuracy. It also includes important points to make at a time when Amazon is under political attack.

    The fact is that Amazon’s role in the economy and the culture is nuanced … not all good, and not all bad. Attempts to characterize it as either one or the other are, I think, misguided at best.

    Published on: May 3, 2018

    The Washington Post reports on a survey concluding that “71 percent of the respondents would spend more money at a small business if it supported a social cause — as long as it’s positive or environmental.”

    However, “positive” would appear to be in the eye of the beholder: “Half of the consumers participating in the survey said they wouldn’t buy from a small business if the causes they supported ‘weren’t in line with the consumer’s social and/or environmental views’.”

    The story quotes entrepreneur and lawyer Chidike Samuelson as saying that “a socially active company can reap many benefits besides increasing revenue. Companies that participate in certain causes are able to recruit better talent, increase employee morale, improve their brand and attract more capital.”
    KC's View:
    Keep in mind that this is a small sample - a survey of more than 1,100 consumers conducted by Cox Business. But this strikes me as a legitimate conclusion, albeit one that probably is fraught with complexities, especially since we live in such a polarized culture. But there have to be social issues and causes that could clear the bar in terms of meriting support without alienating a bunch of customers.

    Published on: May 3, 2018

    Investopedia is out with a story in which it points to four retailers that it believes will be able to not just withstand tough competition from Amazon, but even thrive.

    They are: Target, O’Reilly Automotive, TJX Companies, and Ahold Delhaize.

    The story suggests that “Target has been surprisingly resilient, with ‘remarkably steady’ foot traffic in its department stores” … that auto parts retailer O’Reilly is in a business that Amazon cannot match for speed and access … that “TJX and other off-price retailers have the advantage of convenience, location, and the thrill of bargain hunting’” … and that Ahold Delhaize, because of its “superb in-store experience,” will “continue to attract customers back to its store.” Plus, it suggests, “Average supermarkets have relatively tight margins making grocery delivery services only profitable at larger scale, as in New York or San Francisco.”
    KC's View:
    What a crock, probably written by investment types who don’t shop and never actually go into stores.

    It was just yesterday that an MNB reader, unsolicited, wrote in about an unsatisfactory experience at an O’Reilly store and noted that the CEO of the company had said he was “unconcerned” about online competition, which you’d think any CEO would know enough these days not to say. The woods are littered with the bodies of executives who thought that e-commerce would not affect them.

    And Ahold Delhaize? I think some of its divisions do excellent work - Hannaford comes to mind - but I’d also refer you to a piece I did about a Stop & Shop store near me that offered only a D-level game hat does little to persuade the customer that this is where I should be bringing my business.

    And suggesting that delivery only will be profitable in places like New York or San Francisco? That assumes a lot, and is at best will delude grocers who are uncompetitive that they don’t need to face this challenge head-on.

    I think Target is doing okay, though I don’t think anyone would suggest that it is yet a paradigm of competitive fire and disruptive innovation, and I don’t know enough about TJX to make a judgement.

    To be clear, I think there are companies that can compete with Amazon successfully. But this piece strikes me as almost willfully ignorant about the fundamental changes taking place at retail and in the consumer mindset.

    Published on: May 3, 2018

    Reuters reports that Amazon “has made a formal offer to buy a 60 percent stake in Flipkart,” the India e-commerce company. The deal could complicate efforts by Walmart to acquire Flipkart; Walmart was said to be on the verge of buying a majority stake in the company for between $10 billion and $12 billion.

    According to the story, “Amazon’s offer could kickstart a new battle between it and Walmart, already fierce retail rivals in the United States that have reportedly dueled over at least one acquisition before. The bid also emphasizes the importance of gaining a greater foothold in online sales in India, a market expected to be worth $200 billion a year within a decade.

    “For Amazon, throwing its hat in the ring could be as much about derailing Walmart’s efforts as it would be about defending its 27 percent market share in India, consultants and investors said. The company has been pouring billions of dollars in the country to ship goods to shoppers faster.”


    • Research firm SimilarWeb is out with a study saying that Amazon generated five times as much web traffic, plus visits that lasted 2.5 minutes longer, than Walmart did in the US over the past 12 months.
    KC's View:

    Published on: May 3, 2018

    • The Washington Post reports that “for every dollar consumers spend on food, only 7.8 cents goes to farmers — a record low that reflects shifts in how Americans eat, according to the Department of Agriculture.

    “Where once consumers cooked most of their meals at home, they’re now buying just as many at cafes and restaurants. And while shoppers were once content to husk their own corn and slice their own apples, they now buy those foods — and thousands of others — pre-husked, pre-sliced and otherwise processed.”

    In essence, the story says, as more and more value is added at every step of the supply chain, it means that farmers keep getting a smaller piece. A t the same time, “economists agree that a recent dip in commodity prices, driven by a surplus of corn, soybeans and milk, has pushed the farmers’ share down in the short-term.”


    • The New York Times that the fast food industry is facing a shortage of teenagers who want to work in it, which is a problem for a business “where cheap labor is an essential component in providing inexpensive food.”

    “Since 2010,” the Times writes, “fast-food jobs have grown nearly twice as fast as employment over all, contributing to the economic recovery. But rapid growth has created new problems. Some say restaurants have grown faster than demand, causing a glut of competition that is another source of pressure on business owners.”


    CNBC reports that Macy’s “has acquired New York-based concept shop Story and named the business' founder as "brand experience officer" for the department store chain … Rachel Shechtman's responsibilities will include partnering with brands and creating better in-store experiences.”

    The article notes that “Story has worked with brands such as Jet.com and Dressbarn to curate rotating shopping experiences. The space features different themes every few months, like ‘well being’ and ‘made in America.’ A number of the items sold at Story come from local retailers and artists.”

    Terms of the deal were not disclosed.
    KC's View:

    Published on: May 3, 2018

    …will return.
    KC's View: