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    Published on: May 16, 2018

    by Kevin Coupe

    Bloomberg reports that ”Uber Technologies Inc. plans to deliver food by drone in San Diego as part of a wide-reaching commercial test program approved by the U.S. federal government.”

    According to the story, “The U.S. Transportation Department said it chose 10 state, local and tribal governments and a handful of companies, including Alphabet Inc., FedEx Corp., Intel Corp., Qualcomm Inc. and Uber, to work together on commercial drone testing.”

    The story says that Uber CEO Dara Khosrowshahi says that “people should expect meal delivery in five to 30 minutes, depending on whether it comes from a drone or a human,” and says that Khosrowshahi now claims that Uber is the world’s largest food delivery company.

    That’s all interesting, and demonstrates that drone delivery isn’t limited to one well-known e-commerce company that tends to get most of the headlines.

    But what also was interesting was that Khosrowshahi made his comments at the company’s flying car conference, Uber Elevate. And the story notes that “Khosrowshahi also emphasized Uber’s commitment to electric bicycles following its acquisition of Jump Bikes last month. The business competes with several venture-backed startups offering similar services for renting bikes and scooters around cities using an app.”

    Now to some degree, these various enterprises offer “a diversion from Uber’s embattled autonomous-car program.”

    But I also found one comment by Khosrowshahi to be instructive.

    “Uber can’t just be about cars,” he said. “It has to be about mobility.”

    Boom. That’s the Eye-Opener.

    “Mobility,” it seems to me, is about being customer-focused … it is about the ends.

    “Cars” is about the means.

    And I think these days, the best way for companies to define a competitive, differential advantage is to focus on customer needs, wants and aspirations.
    KC's View:

    Published on: May 16, 2018

    In his annual letter to shareholders this week, Kroger chairman/CEO Rodney McMullen laid out the company’s mission and goals.

    Some excerpts:

    • “Kroger’s vision is to serve America through food inspiration and uplift. We are uniquely positioned to be the partner our customers turn to for their needs because meals have been our expertise for 135 years and – every day since day one – we place the customer at the center of everything we do.

    • “We have the scale, data, physical assets and human connection to win with our customers today and into the future. We are energetically creating a seamless digital experience for our customers and providing personalized inspiration to help America decide what’s for dinner. As we pursue our Restock Kroger plan, Kroger will change the way America eats.

    • “We are proactively addressing customer changes and we’re making strategic investments to create the future of retail: a seamless digital experience, customer-centric technology solutions, an enhanced associate experience, space-optimized stores and smart-priced products.

    • “One of Kroger’s differentiating strengths is our physical presence in our communities. We are part of the fabric of the neighborhoods we serve, and 135 years in the grocery business have taught us a few things about people and about food. We know that meals matter. Families that share meals together have children who do better in all aspects of their lives. Throughout our history, Kroger has always provided the food and nourishment people need to live their best lives.”

    • “Our Restock Kroger plan creates an exciting ecosystem for those who want to develop, test and scale the innovative solutions that will fundamentally redefine the food and grocery customer experience.”

    “What’s exciting about Restock Kroger,” McMullen wrote, “are several aggressive plays that we haven’t run before:
     
    “We are redeploying capital to prioritize the digital experience and a seamless shopping experience for all customers so they can choose how, where and when they want to shop with us.
     
    “We are forming strategic partnerships to grow alternative revenue streams. For example, last year we launched Kroger Precision Marketing, powered by 84.51°, to monetize the media opportunity to reach the more than nine million sets of eyes in our stores and on our digital properties every day.
     
    “We are redoubling our efforts to expand our world-class data and personalization work with 84.51°, including using data insights to optimize space in our stores for the future.
     
    “We are investing in our associates more than ever before, starting with a half-billion-dollar investment in wages for many store associates announced as a part of Restock Kroger.”

    McMullen also emphasize the fact that Kroger is taking some of the savings from new tax cut legislation and applying it to “Kroger’s new industry-leading education benefit.” which it ids calling “Feed Your Future. Under the new benefit, we expect to increase by five times Kroger’s total annual investment in associate education.”

    And, McMullen concluded:

    “Kroger has successfully competed in an ever-changing retail landscape throughout our history. We know that our success in the future will depend on our ability to see where the customer is going and to proactively address their changing preferences. Restock Kroger is our plan to do just that. We know we can accomplish Restock Kroger because it is built on a foundation of our strengths, including:

    “Kroger has more data than any of our competitors, which leads to deep customer knowledge and unparalleled personalization. We use this data to improve our customers’ experience.

    “We have incredibly convenient locations and platforms for pickup and delivery within one-to-two miles of our customers.

    “We have a leadership team that combines deep experience with creative new talent.

    “We have the scale to win with more than 60 million households shopping with us annually… And, we have an abiding commitment to uplift and improve the lives of our associates, customers and communities.”
    KC's View:
    It was the monk and poet John Lydgate (c. 1370 – c. 1451) who is widely credited with being the first one to say, “You can please some of the people all of the time, you can please all of the people some of the time, but you can’t please all of the people all of the time.”

    I bring this up not just because I’m sure some shareholders may argue that Kroger ought to be spending less money on employee benefits and more on shareholder rewards. For the record, I think that companies ought to define “stakeholder” as broadly as possible … and Kroger is absolutely correct to focus on front line personnel who make it successful.

    I also bring it up because I get conflicting signals from some folks in the MNB community about my treatment of Kroger. Just last week I got an email accusing me of being too positive in my Kroger coverage, and yesterday I got an email implying that because I write about a certain e-commerce company so much, I am ignoring the good work being done by companies such as Kroger. (You can find that email in Your Views, below, along with my response.)

    Look, here’s the deal. I think it is hard for major companies such as Kroger to make the kind of fundamental changes that may be necessary for them to be relevant and resonant in the current competitive climate. I think size, in this case, can be both an advantage and a handicap - ubiquity can help, but it also means that consistency and nimbleness can be a reach.

    I think that Kroger’s long-term commitment to data is a positive, but I also have the sense that sometimes the company is too slow to move on the kind of technological initiatives that could redefine its ability to compete.

    I think that McMullen is spot on when he says, as he did in an interview recently, that “the only thing that stays consistent is people keep eating, but the way they eat will constantly change. People are much more interested in being inspired by food and food that’s healthy for them, but on their terms.”

    That kind of differentiation is critical, in my view … but incredibly hard to achieve for a company the size of Kroger. In short, it is a mixed bag … but I’d rather bet on a company that understands the importance of internal disruption and tries to achieve it than on a company that has its head buried in the sand.

    Published on: May 16, 2018

    Amazon announced that members of its Prime program will now get a 10 percent discount on sale items and on selected other products at Whole Foods - though for the moment, the savings only are available in 28 Florida Whole Foods stores.

    A broader and faster integration had been planned, but technical issues, some of which are related to point of sale systems, have slowed things down, the Seattle Times writes.

    The rest of the US should have access to the savings program by the end of summer.
    KC's View:
    No surprise here, as the two entities have been seeking synergies wherever they can find them, whether it is selling electronics in Whole Foods’ produce department or installing pickup lockers in Whole Foods lobbies. Expect to see a lot more of this, especially because the 20 percent increase in Prime’s membership fee makes it important to show greater value.

    Published on: May 16, 2018

    The New York Times this morning that fashion retailer Lord & Taylor “is teaming up with Walmart to create an online store on Walmart.com that will offer about 125 fashion brands, including Tommy Bahama, La La Anthony, H Halston and Effy.

    “Billed by both companies as a ‘premium’ shopping destination, the new online store reflects Lord & Taylor’s desire to reach a wider audience and Walmart’s hope to attract a different type of customer.”
    KC's View:
    It is interesting to see how Walmart is dipping not just its toe, but an entire foot or two, into upscale marketing - it isn’t just Lord & Taylor, but also Moosejaw, Bonobos, and the like. It remains to be seen whether these additions will make Walmart’s online presence seem more robust, or more fractured, to shoppers; the only problem, it seems to me, will be if Walmart is defining its online business in terms of the competition instead of in terms of its customers.

    I do think that Lord & Taylor’s reputation may exceed what it actually delivers. The Times refers to it as “fading,” and I’d agree.

    Published on: May 16, 2018

    As reported on MNB yesterday, the Seattle City Council has voted 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.

    We took note of the Seattle Times report 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.

    There was some company reaction yesterday.

    From Starbucks:

    "This City continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside. If they cannot provide a warm meal and safe bed to a five year-old child, no one believes they will be able to make housing affordable or address opiate addiction. This City pays more attention to the desires of the owners of illegally parked RVs than families seeking emergency shelter.” - John Kelly, senior vice president, Global Public Affairs & Social Impact at Starbucks.

    From Amazon (which had stopped construction on one of its new Seattle buildings pending the vote, which originally was going to be on a head tax almost twice as high):

    “We are disappointed by today’s City Council decision to introduce a tax on jobs. While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here. City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better.” - Drew Herdener, Vice President, Global Corporate and Operations Communications, Amazon.
    KC's View:
    A friend of mine in Seattle, Brad Halverson, sent me a note that I thought did a good job putting the tax’s impact into a larger context, pointing out that it affects “nearly 600 growing businesses which must give $50 million/year more on top of the $63 million/year the city is already spending to address homelessness. This tax is based on annual gross revenues (not net profit). And it will include at least a dozen food/grocery store operators in the city limits.

    “Many MNB readers who’ve visited Seattle already know and admire many of these local food retailers for their innovation and can appreciate how modest grocery profits are invested back into store remodels, for job creation and risk taking in hopes of increasing sales which….well…increase consumer spending and generate more tax revenue back to the city.

    “And yet an extreme faction in the Seattle City Council believe businesses are to blame for worsening homelessness and housing prices. This while these very same elected leaders will not provide any evidence of improvement from their existing spending efforts to fix local homelessness, illegal camping in parks, drug dealing or clean-up of the growing trash heaps.

    “It’s a tone-deaf slap to many of these grocers who have given generously to their communities for many years, especially to those in need, to organizations like Mary’s Place, Fare Start and local Food Banks. It’s really more like a job killing tax.

    “Companies will think carefully about operating here with such erratic and anti-business city leaders.”

    Published on: May 16, 2018

    Business Insider reports that Walmart has decided to drop a mobile application that “let shoppers scan and pay for items with their smartphones so they could skip waiting in line at checkout registers.”

    The reason? Walmart said that “not many customers were actually using the technology.”

    According to the story, “The decision to drop the app, called Scan & Go, comes just four months after the retailer announced it would expand its test of the technology to more than 100 stores … The company said it would use what it learned from the Scan & Go test to inform other ongoing tests, such as Check Out With Me, a new service that arms Walmart employees with mobile checkout devices.”
    KC's View:
    I guess that one of the questions is, are there certain retailers that have customers more likely to embrace technology, and others with shoppers that won’t?

    Published on: May 16, 2018

    • The Wall Street Journal reports that the Pennsylvania Supreme Court is preparing to rule on the 1.5-cent-an-ounce tax imposed by the city of Philadelphia on sugar-sweetened drinks that distributors sell to restaurants and grocery stores. “Tax proponents say that sugary drinks contribute to obesity, diabetes and tooth decay and that the tax receipts can be directed to health programs or budget shortfalls,” the story says. “Beverage companies say that their products are being singled out unfairly and that the special tax is regressive and increases grocery bills … The outcome of the legal fight could have implications for other cities that have adopted or may consider similar measures, which like cigarette taxes, seek to curb unhealthy behavior through taxation.”


    • The Southside Daily reports that “a local grocer has agreed to acquire” two Farm Fresh supermarkets in Virginia from Supervalu - one in Virginia Beach and one in Newport News.

    According to the story, Chris Lee - who “currently operates two other independent grocery stores - Grand Mart in Virginia Beach and J&J International Market in Woodbridge” - plans to cut prices, expand selection, and continue to use the FarmFresh banner.
    KC's View:

    Published on: May 16, 2018

    • H-E-B has named Jag Bath as its first-ever chief digital officer, overseeing all its online operations. The company said that Bath will continue as CEO of Favor Delivery, the on-demand delivery company that it acquired earlier this year.


    • David Hahn - the former VP of Product at LinkedIn, entrepreneur in residence at Greylock Partners and, most recently, president and chief product officer at GoFundMe - has joined Instacart as chief product officer.
    KC's View:

    Published on: May 16, 2018

    Tom Wolfe, who defined the so-called “new journalism” by bringing novelistic techniques to non-fiction books such as “The Electric Kool-Aid Acid Test” and, perhaps most notably, “The Right Stuff,” and then turned to the novel with “The Bonfire of the Vanities” and “A Man In Full,” has passed away. The author, who also was well-known for his formal, dandyish attire that he himself once described as “neo-pretentious,” was 88.
    KC's View:

    Published on: May 16, 2018

    I referred above in my commentary about a Kroger story to an email I got implying that because I write about a certain e-commerce company so much, I am ignoring the good work being done by companies (such as Kroger).

    The email was from MNB reader Chris Utz:

    AMAZON, AMAZON, AMAZON….  When I read MorningNewsBeat, it seems that all you ever write about anymore is AMAZON.  The preponderance of your articles appear to be about AMAZON, or at least mention an AMAZON reference.  I have an idea.  You could rename your blog AMAZONnewsbeat.

    Perhaps modern journalism is going the way of non-AMAZON bricks and mortar retail?  If so, your audience members who don’t work at AMAZON will continue to shrink, as non-AMAZON jobs continue to dry up.  You might get some AMAZON readership from AMAZON office workers.  But probably not so much AMAZON workers in the sweatshops that are AMAZON Distribution Centers.  AMAZON Distribution Center workers are too busy emptying their AMAZON bottles, since they aren’t allowed enough time for an AMAZON bathroom break.

    The word AMAZON appeared 43 times today in your blog.  I was only able to use the word AMAZON 21 times here; and that’s including the Subject line.  Enough already!

    Have an AMAZON day!


    Fair point, I think. But…

    I’m always aware of how much Amazon gets covered here. To be honest, sometimes there isn’t much I can do about it … on some days, Amazon is relevant to a numb er of stories about innovation and disruption, and ignoring them would be punditry malpractice on my part. Often, I’ll try to group a bunch of them together in E-conomy Beat, just so it won’t become overwhelming. But it doesn’t always work out that way.

    I also think I’m aware of the mixed blessings that Amazon brings to the marketplace and the economy. But they’re perhaps the most innovative company doing business these days, and I think my coverage should be seen by anyone not working for Amazon as cautionary tales about the competitive threat.

    For the record, the word “Amazon” appears 10 times in MNB today, other than in your email.

    “Kroger,” on the other hand, appears 30 times. (Then again, who’s counting?)

    I appreciate the perspective, though … it always helps when folks make me think about such things. The one thing I don’t want to do, though, is by-the-numbers reporting and commenting. There’s enough of that out there.



    On the subject of the US Postal Service’s continuing problems, one MNB reader wrote:

    It doesn’t surprise me to see the USPS continue to post significant losses. In my view, they fail to treat the operation as a service rather than a product. (Exhibit A: Their one solution is to raise stamp prices.) Within the past several months, we have had USPS packages delivered to our neighbor’s porch (multiple times), Amazon packages marked as “delivered by USPS” arriving 1-2 days later, and a mail carrier bypassing our mailbox completely if delivery requires an extra 2-3 steps outside of the vehicle. They will claim that they cannot exit the vehicle by law, due to safety concerns…unless they are delivering a package. We live on a cul-de-sac in a small gated community with very little traffic.

    By contrast, my children know and love “Tommy Truck,” the UPS gentleman with the friendly smile who always delivers packages to our front door and even honks his horn for the kids as he drives away. We have come to love Tommy so much, we even bought him a gift card for the holidays. He knows our name, so he doesn’t deliver our packages to the wrong address. He’s as busy as the mail carrier, but he once stopped to help us unload a heavy (non-UPS) furniture delivery. I couldn’t tell you the name of our USPS carrier, and apparently, he/she couldn’t tell you our names either. Therein lies the problem…


    All excellent points, You’d think that USPS folks would realize that their jobs are endangered and that they need to go above and beyond.

    MNB fave Glen Terbeek wrote:

    One way the USPS can reduce its loss significantly is by delivering “ordinary” mail 3 days a week instead of 6. With the impact of email, on-line billing and banking, etc; our experience is that 80-90% of the mail we receive today is advertising and other non-date critical mail. Who needs every day delivery for these items? They could easily redirect half of it’s routine delivery staff to the more time critical delivery items that have higher fees. If UPS and FedEx can do it, why can’t USPS do it?




    Yesterday, MNB took note of a USA Today story about another racial bias incident that broke out in a coffee shop. This time, it was at a Coffee Bean & Tea Leaf shop in Riverside, California, where a customer confronted another customer - a female who was wearing a black niqab (headscarf) and identified herself as Muslim - and made racist comments.

    The shop’s employees only got involved when the barista refused to serve the man, saying that he was being disruptive and racist.

    I commented, in part:

    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.

    One MNB reader responded:

    Thank you, thank you, thank you for calling this out. This is something we all need to do and I applaud both you and the barista. I’m glad you have the forum you do so your commentary is seen/heard by a greater number than most of us are able to reach.



    On another subject, from another MNB reader:

    <>b>Yesterday I was in a Sears store for the first time in decades and it was a bizarre experience. My husband and I were shopping for a window air conditioner when we pulled up to the store, and he said, “This is Sears? It’s so small.” We went in and asked the young man who was on the floor to show us what they had. Nothing - they would have to order it. Then he suggested we go to Lowes (less than a mile away) because, "they always have a good selection and good prices." My husband commented that he was sending us to the competition, and he said, “that’s where I would go…”

    The conversation that followed was really sort of sad. The young man told us, “Since we’ve lost our owner, nothing has been the same. And we’re closing the store anyway…”

    We don’t like big box stores and Lowes was not a successful experience. We actually found what we wanted at our locally-owned Ace Hardware for not that much more money. And, no, ordering online was not an option… even for $50 less. Of the customer reviews given on Amazon, shipping problems/damage was pretty much the majority of low reviews. The others seemed to be complaining about noise - but then have you ever known a moderately priced window air conditioner not to be fairly noisy?



    Finally, I got this email from MNB reader Jeff Gartner, who has been reading for years here (and in both my books) about Etta’s in Seattle, and its estimable bartender, Morgan:

    We’re in Seattle visiting our middle daughter and her family. After a half day trip to Bainbridge Island and back, we went to Crabby hour at Etta’s. We dropped your name, and sat near the bar.

    Although Morgan had his Monday off, our bartender Jennifer was fabulous. So were our Limoncello spritzer drinks and our appetizers of oysters, shrimp toast and soft-boiled eggs topped with crab.

    All delicious, thanks for the recommendation.

    Jennifer knew you as the guy who includes Morgan in your blog and books. Perhaps you’ll mention her now too in your column.


    And now I have. Nothing speaks so well about a restaurant experience than consistency of excellence.
    KC's View: