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    Published on: May 15, 2018

    by Michael Sansolo

    There’s a simple reason for the eye openers that appear daily here on MNB. It’s a quick and easy way to point out items that merit attention for our readers even if they appear to have little to do with our business. To paraphrase Yogi Berra, you can learn a lot by keep your eyes open.

    But opening our eyes can be upsetting because it means confronting realities that perhaps we wish weren’t real or would somehow go away if we keep our eyes closed.

    Well, open them up or else.

    Last week I had the honor of emceeing the annual Category Management Association conference and, to put it mildly, it was eye opening. Category management was never a simple topic - it challenges the industry to find a way to get the right products on the right shelves at the right prices for the right shoppers at the right moments. That’s not exactly an easy goal, which is why is still requires so much effort.

    And now, like everything else in business, it’s getting even more complex. More than ever, category management requires that suppliers and retailers together use data to make better decisions. Increasingly though, those decisions are based both on data and on understanding the consumer complexities that drive decisions made for reasons both logical and illogical.

    There’s nothing I love better than a great metaphor to make a point and I have to salute Andre Nadin, chief marketing office of Schnuck’s, for creating a great one that should remind us all just how drastically the current retail climate is changing.

    Nadin’s metaphor came from the era when dinosaurs ruled the planet until (as scientists believe) a meteor struck the earth. In sharp order, the meteor’s collision caused enormous amounts of dust (and other matter) to darken the skies, killing off plant life, which wiped out the food supply of the large herbivores. Once they died even the predatory carnivores were doomed.

    Nadin’s point was the dinosaurs were essentially the victim of incredible circumstances and likely simply noticed the sky darkening but did nothing or could do nothing (as best we know) to avoid extinction.

    None of that is really a concern of industry today except, as Nadin pointed out, “the meteor has hit and it’s getting dark.” It takes very little extrapolation to realize the meteor is e-commerce.

    Hardly a week goes by that we don’t see evidence of this meteor strike. Just yesterday we had an article in MNB about Sears. Once the largest retailer anywhere, Sears is now an afterthought beyond discussion of when the company will pack it up for good. (There is more evidence in yet another Sears story that is posted below.)

    Nadin’s point is that unlike the dinosaurs, we have some options. More than ever, companies need to embrace changes in everything from how we use data to how we recruit, compensate and manage people. Simply getting better at what we’ve always done won’t be enough. We’ll need to find new and creative ways of staying relevant and useful.

    But the first step is the simplest if possibly the most frightening. Open your eyes and recognize the world has changed. It’s getting dark out there, in here and everywhere else.

    Michael Sansolo can be reached via email at . 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.
    KC's View:

    Published on: May 15, 2018

    by Kevin Coupe

    While I was in Seattle last week for GMDC’s excellent Retail Tomorrow conference (we’ll be posting a new podcast that we recorded there tomorrow), it was fortuitous for me that Amazon announced the opening of what it called “interactive Amazon Experience Centers” in various markets around the country - including Bothell, Washington, a suburb just northeast of Seattle.

    So I went there to check it out.

    I wasn’t disappointed.

    As I wrote last week, these homes - which have been created as part of developments being built by Lennar, the country’s largest home construction business - serve as a context for the ecosystem that Amazon is creating, demonstrating how various services, such as Prime and its Alexa-powered system, come together to help consumers.

    From the front door - where there is a video-enabled Ring doorbell as well as a bluetooth-connected lock that allows the homeowner to open the door from remote locations - to the backyard, where there is a motion-activated light that includes a video camera and even a siren, the model home that I was showed was the model of efficiency and effectiveness.

    The home had various Alexa-enabled technologies, allowing people to raise and lower shades, set the thermostat, and even vacuum the rug, and turn the TV on and off, simply by talking. The garage has both a charger for an electric car and a Wi-fi-enabled automatic watering system that can be manipulated remotely.

    There are some things that aren’t as connected as I might’ve liked. The kitchen and laundry appliances won’t automatically reorder product when it gets low; one actually has to use Subscribe and Save or Dash button technology. I was a little disappointed that the gas fireplace wasn’t voice-activated (though this apparently is coming).

    A friend of mine, Frieda Caplan, wrote to me the other day asking if Alexa-powered technologies and their counterparts allow people to call 911 in a medical emergency. This was after my Seattle visit, so I had to do some research, and best I can tell it doesn’t do that yet. You can set it up to call a friend who can call 911, but not call 911 directly. (Apple’s Siri, however, appArently does have this capability.) But Frieda is right - this ought to be low-hanging fruit for Alexa-style technology.

    I was relieved to learn that you can also contract with an Amazon smart home expert to assess your existing home and install the various technologies - a necessity if one is as incompetent at such tasks as I am.

    Let’s be clear. This stuff all is cool, though not entirely necessary - I am completely capable of raising and lowering shades, vacuuming the rug, turning on and off the TV, and doing a lot of this stuff manually. And certainly the stories we all see about how some of this technology can be tapped into and manipulated by outside forces is a little disquieting.

    But it is not hard to imagine that this is where the future is going, and that all sorts of voice-activated technologies from a variety of companies - not just Amazon - will make their way into our lives. This always has been the world that “Star Trek” has shown us - just because we don’t need to make a cup of tea, but rather can just order “Earl Grey, hot” from the replicator, doesn’t mean we are less human, or less aspirational in our humanity. In fact, it is the opposite - “Star Trek” always has posited (and I have embraced) the notion that technology appropriately applied actually allows us to raise our sights, achieve more, get in touch with the better angels of our natures.

    And, I repeat, it is all cool.

    Walking through the house and playing with all the toys - and interacting not just with Lennar’s real estate salesperson, but two Amazon reps there to make the experience more accessible - I felt like I was in the future … in the same way that I felt like I was in the future when I went to the Amazon Go store.

    It is, to be sure, just one future. There are alternative, or perhaps parallel, timelines, in which none of these technologies exist, or find broad acceptance.

    But I think that a future in which progress continues to be made, in which mundane tasks are automated or made simpler, can be largely a positive one. And for that, I appreciate the fact that Amazon is giving us not just a glimpse, but also the ability to touch and feel it a bit.

    The Amazon Experience Center definitely was an Eye-Opener.

    KC's View:

    Published on: May 15, 2018

    Amazon has announced that it will open its second and third checkout-free Amazon Go stores later this year, in San Francisco and Chicago.

    There have been reports that Amazon could open as many as six new versions of the Go stores this year.

    While the San Francisco store is said to be headed for Union Square, Amazon has not commented about specific locations.

    FYI … MNB has covered Amazon Go extensively, and you can read our dissection and evaluation of the experience here.
    KC's View:
    The real question, I think, is what Amazon has planned for the Go format a year or two from now … which almost certainly is all planned out at this point. Whatever the pace of growth, it is a certainty that the cost of the technology will get lower as time goes on. That’s Moore’s law.

    Could they adapt the technology to an Amazon Books store? A 365 by Whole Foods unit? Could they license it out? All are possible … while at the same time, we’re likely to see other retailers test similar technologies developed by other tech companies.

    I’ve said it before and I’ll say it again. This advance in the store experience will end up being as important as scanning. No question in my mind.

    Retailers that don’t think about this - how to adapt to it and/or compete with it - are making a serious mistake. To steal Michael’s metaphor from this morning, it means they are seeking darkness and thinking it is just a passing cloud. They’re ignoring the approaching meteor.

    Published on: May 15, 2018

    The Seattle City Council voted yesterday to impose a new tax on for-profit companies that gross at least $20 million a year in the city - a “head tax” of $275 per employee, per year, which the city says will be used to address Seattle’s homeless problem.

    The Seattle Times reports that roughly three percent of the city’s businesses will be impacted by the head tax, which will raise about $47 million a year. More than 20 percent of that tax revenue will come from one company, Amazon, which is said to be facing a head tax bill of about $10 million a year.

    “Other companies set to be taxed include Starbucks and longtime, family-owned supermarket Uwajimaya,” the Times writes.

    The council originally had been considering a $500 per employee tax.

    The Times writes that “Seattle has been in a civil state of emergency over homelessness since late 2015. A point-in-time count last year tallied more than 11,600 homeless people in King County.

    “Proponents of the head tax say companies such as Amazon have contributed to homelessness because their highly-paid employees have driven up rents and home prices.

    “Along with the tax Monday, the council approved a non-binding resolution that calls for spending 66 percent of the new money on affordable housing, 32 percent on emergency shelter, trash pickup, raises for service workers and other needs and 2 percent on administration.”
    KC's View:
    Not being a resident of Seattle, nor a close follower of its politics and governance, it is hard for me to pass judgement on this one way or the other. I do know, from having spent a lot of time there, that the homeless problem is serious, just as it is in Portland, three hours to the south.

    My sense - and I could be wrong about this - is that part of the problem has been the lack of a nuanced strategic approach to growth … problems have bene exacerbated by rampant growth, and it sometimes seems as if the wounds on the city’s epidermis are being treated with band-aids.

    I’m not saying that Amazon is all right or all wrong about this, but I do have to wonder about the political wisdom of attacking the company at a time when it is looking for a second North American headquarters city. Companies like Amazon and Starbucks, which have redefined both retailing and Seattle, ought to be treated like respected partners, not like piggy banks.

    There is another Seattle Times piece worth reading here that looks at exactly how geographically expansive Amazon has been.

    An excerpt:

    “Amazon’s 17 largest satellite offices in the U.S. and Canada collectively employ about 17,500 people — more than the combined workforce of Airbnb, Netflix, Twitter and Zillow. Just in the last year, the company announced plans to add 10,000 more, most recently with leases in Boston and Vancouver, B.C.

    “The scale highlights the breadth of Amazon’s ambitions in a wide range of areas. It includes engineers and salespeople working on cloud computing in suburban Washington, D.C., television producers near Los Angeles, and machine-learning researchers in Pittsburgh.

    “The proliferation of offices adds another layer to Amazon’s profile in the United States. A company that grew into a major employer nationally with blue-collar warehouse jobs is, increasingly, a major regional employer of technologists and corporate salespeople, too.”

    Sounds like it has options. And, as we’ve noted here before, Amazon seems intent on not repeating mistakes that it made in Seattle as it expands and builds elsewhere.

    Published on: May 15, 2018

    USA Today has the story of another racial bias incident that broke out in a coffee shop - this time, a Coffee Bean & Tea Leaf shop in Riverside, California.

    Except this time, it was a customer causing the problem, which was caught on video and made public to millions of people on social media.

    In this case, a male customer in the store appears to insult a female customer who is wearing a black niqab (headscarf) and identifying herself as a Muslim.

    At one point he asks her, "Is it Halloween or something?" Later he says, "I don't like your religion, how's that?" and adds, "I don't want to be killed by you.”

    The shop’s employees only got involved when the barista refused to serve the man, saying that he was being disruptive and racist.
    KC's View:
    Who are these people who somehow feel they are entitled to demonstrate their bigotry out loud, and who appear to show no sense of shame when their acts and statements are being captured on-camera? It is bad enough that they have such ugliness in their hearts, but our country has hit a new low when people give voice to it and somehow feel that they’ve done nothing wrong.

    Yet another piece of evidence that retailers have to be ready for this crap to happen, with strategies, tactics and inclusive, respectful cultures that know how to respond.

    Published on: May 15, 2018

    CNN reports that “struggling” Sears has formed a “special committee” to explore the sale of Kenmore, its longtime private label appliance brand.

    It is broadly expected that the buyer will be Eddie Lampert, the investment banker who, as Sears’ chairman/CEO, largely has overseen its recent decline. Lampert has urged the company’s board to sell Kenmore, as well as its parts and home services businesses.

    Last year, Sears sold its Craftsman tool brand to Stanley Black & Decker for $900 million, and the brand now is being sold at Lowe’s.

    While Lampert has maintained that Sears can be returned to profitability, the retailer has conceded that there are "substantial doubts" that it can survive.
    KC's View:
    Seems pretty clear from here that when it is all over, Sears will be nothing but a memory and Lampert will own any brand or real estate that has value, which he’ll then sell to someone else at a tidy profit.

    At least, that’d be my guess.

    Published on: May 15, 2018

    USA Today reports that even as the retail climate becomes more fraught for more players, dollar stores continue their growth unabated.

    An excerpt:

    “In 2018, Dollar General plans to open 900 new stores. Dollar Tree plans to open 350 more namesake locations and 300 new Family Dollar sites and re-banner 50 Family Dollar locations as Dollar Tree stores. All three chains posted positive comparable-store sales growth in their latest quarters.

    “Dollar General focuses on rural areas, while Dollar Tree and Family Dollar are rooted in urban and suburban areas. All three chains try to open their stores closer to lower-income neighborhoods than superstore rivals such as Walmart.
    Gas expenses for traveling to the store, time spent shopping and product prices are all key concerns for lower-income shoppers. That allows dollar stores to flourish in an age when many retailers are getting squeezed by the competition.”
    KC's View:

    Published on: May 15, 2018

    Business Insider reports that “Amazon Fresh has informed local third-party vendors that they will no longer be able to sell their goods on the platform.”

    According to the story, “Amazon Fresh formerly allowed local third-party vendors to sell their merchandise to be delivered to members alongside their typical Fresh orders in its Local Market Seller program. The program is evolving as Amazon further expands its cheaper Prime Now grocery platform, where it is working on a Whole Foods integration.”

    An Amazon email reportedly “informs vendors that the local program is transitioning to be more retail-based, with Amazon buying product wholesale and selling it to consumers, much like a typical store.”
    KC's View:

    Published on: May 15, 2018

    • The Wall Street Journal has a story about how Target “is testing a new distribution strategy aimed at speeding up its restocking and making the retailer more nimble at stores and online as it competes with rivals like Inc. and Walmart Inc.
    “The aim is to pare what Target calls its replenishment cycle from days to hours and reduce inventory at stores, especially at the retailer’s new small-format stores and locations in denser urban areas. The approach, now in pilot mode at a warehouse in Perth Amboy, N.J., also uses the same pool of inventory to replenish stores and fulfill online orders, a departure from Target’s existing supply chain.”

    • The Seattle Times reports that Albertsons “will close two unprofitable grocery stores in Seattle’s north end next month, citing increasing costs related to city of Seattle regulations implemented over the last three years.” Albertsons said the decision was not related to the city’s passage of a corporate “head tax” of $275 per employee, per year, which the city says will be used to address Seattle’s homeless problem.

    • The Wall Street Journal reports on how collagen - typically used in beauty creams - now is finding its way into food.

    “Foods infused with collagen and touting beauty and health benefits have been popular in Japan and Europe for years,” the story says. “Now they are making a splash in the U.S., in products from coffee creamer to protein bars. The rise of collagen as a food ingredient also comes as the line between food and medicine is blurring, nutrition experts say, and consumers seek ‘functional foods’ that promise more than just nutrition.”
    KC's View:

    Published on: May 15, 2018

    …will return.
    KC's View:

    Published on: May 15, 2018

    Everybody talks about innovation and disruption, but few people talk about how to pay for it and how to set investment priorities. Hosts Tom Furphy & Kevin Coupe are joined by a power panel in a two-part Innovation Conversation podcast about this critical issue.

    Our guests include: Scott Moses, Managing Director and Head of Food Retail & Restaurants Investment Banking at PJ Solomon … Wendy Collie, the former CEO at Portland, Oregon-based New Seasons Market … and Patrick Spear, president/CEO of the Global Market Development (GMDC).

    These podcasts were recorded live in Seattle at the Retail Tomorrow Conference, held at the Microsoft Retail Experience Center.

    These podcasts can be played below, or can be accessed and subscribed to on both iTunes and GooglePlay, as can previous episodes of The Innovation Conversation Podcast.

    The Innovation Conversation Podcasts are sponsored by ReposiTrak, and brought to you by GMDC.

    KC's View: