business news in context, analysis with attitude

Published on: June 5, 2018

by Michael Sansolo

These days there is a very thin line between cool and creepy and our endlessly increasing reliance on electronic communication with customers makes it essential we understand that.

The following all really happened.

One day recently, my wife ordered some sneakers from Zappos, but was dissatisfied with one pair. Following the on-line company’s instructions, she took them to a local UPS store to ship them back. Within one hour of doing that she got an acknowledgement from Zappos of her return and a credit to her account.

She was floored. After all she returned the sneakers to a UPS store, not Zappos’ corporate headquarters. Obviously, Zappos and UPS have a working arrangement that informs the company when a package is on the way back so the customer experience can be completed. Like it or not, that’s the new customer expectation of service that we’ll all be up against today and tomorrow.

It was cool.

But put that speed of response into another context, and it can move into the realm of creepy.

Last weekend I was out on a bike ride when, thanks to some wet leaves, my bicycle decided to go right while I was turning left. It ended up in a bush while I skidded across the pavement, leaving elbow skin along the way.

A little more than 24 hours later Map My Ride, the Under Amour-owned app I use to track my rides, sent me a curious article titled “How to regain your confidence after a crash,” even though I didn’t report my crash to the app, didn’t post it any where on social media and didn’t talk about it on line at all. (I whined quite a bit in person!)

Let’s be honest; bike riders fall all the time so getting an article on dealing with crashes isn’t a complete bolt from the blue. But explain this: Kevin uses the same app and he told me he never saw the article on crashes. How did they know it was me who specifically needed it that very day?

In both cases, this is the new world. More than ever we are going to have to find ways to be cooler than ever without being creepy, to make customers say Wow, not Whoa. The same customer who might be delighted by recipe suggestions that fit with our tastes and preferences might be offended by products that suggest we have weight problems. One set of suggestions is cool, the other creepy, invasive and annoying.

Our customers’ expectations of service, like it or not, are being established by companies like Zappos just as our concerns about privacy are raised by Alexa, Siri and whatever. We are all part of the eco-system now and that means we need contemplate and prepare for this new world.

It’s unavoidable just as those wet leaves were for my front bicycle tire. Oh and because I haven’t whined yet, my arm still aches. Thanks for asking.


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: June 5, 2018

by Kevin Coupe

TechCrunch reports that “Uber has unveiled a number of partners and design concepts for uberAIR, the company’s planned aerial ride-hailing network. Its goal is to start testing these flights in 2020 in the Dallas-Fort Worth and Frisco, Texas, areas as well as Los Angeles. Uber is aiming for a 2023 commercial deployment.”

But for the whole thing to work, the story says that the company is “going to need what Uber is calling ‘Skyports’ — areas for these electric vertical take-off and landing vehicles to board and unload passengers.” A number of designs for skyports of various sizes were on display at the recent Uber Elevate summit in Los Angeles.

The broader goal, according to the story, is to continue Uber’s plan of creating an ecosystem in which personal ownership of cars is less important - though for uberAIR to be part if it, they’ll need to get the estimated cost-per-passenger down. (Uber says that “it will get the cost down to $1.86 per passenger mile before ideally getting to $0.44 per passenger mile.)

I have no idea if this Jetsons-like view of the world can work or will work .. especially by 2023.

But it is an Eye-Opener. And if I were a retailer looking to be relevant, I might be asking questions about how I can get one of those skyports installed in parking lot.

You know. Just in case.

Published on: June 5, 2018

Howard Schultz announced yesterday that he will step down as Starbucks’ chairman at the end of the month, after more than three decades during which he helped to redefine both retailing and coffee consumption on a global scale.

Public service - and a possible run for public office - are possibilities in Schultz’s post-Starbucks life.

“I’ll be thinking about a range of options for myself, from philanthropy to public service, but I’m a long way from knowing what the future holds,” he wrote in a memo to employees yesterday. And, in an interview with the , he said, “I want to be truthful with you without creating more speculative headlines. For some time now, I have been deeply concerned about our country — the growing division at home and our standing in the world.”

It was about a year ago that Schultz handed off CEO duties to Kevin Johnson. Now, Schultz will hold the title of chairman emeritus. Myron E. Ullman, the former chairman of J. C. Penney, will become Starbucks’s new chairman.

The Seattle Times writes that “Schultz has helped Starbucks navigate one of its most tumultuous periods this spring as the company was in the headlines for the arrests of two black men at a Philadelphia store, an incident Schultz described as deeply embarrassing. The company’s subsequent reaction — a series of policy changes and last week’s high-profile closure of 8,000 U.S. stores to provide anti-racial bias training to 175,000 employees — marked what Schultz called the start of a new era at Starbucks.”

And the New York Times adds, “Under Mr. Schultz’s leadership, Starbucks has waded into debates over social issues such as gay rights, race relations, veterans’ rights, gun violence and student debt. Mr. Schultz was an early champion of the idea of a corporate executive as a moral leader as he sought to achieve what he described as ‘the fragile balance between profit and conscience’.”

Now with more than 27,000 locations and more than 238,000 employees in some 75 countries and with operations on every continent except Antarctica - and more than $22 billion in annual sales, the company has come a long way since it was founded as a single store enterprise in Seattle in 1971. Schultz joined the company as director of marketing in the early eighties and then bought the company from the founders - for less than $4 million - with the goal of providing an Italian coffee experience to an American audience.

Key to Schultz’s strategy was making Starbucks a “third place” - a place other than the home and workplace where people could congregate, enjoy a sense of community, and, of course, drink coffee. And tea. And frappuccinos. And pretty much anything else they could think of.

Yesterday, Schultz returned to the original Starbucks, in Seattle’s Pike Place Market, and wrote a message on a wall-sized chalkboard: “This is where it all began. My dream to build a company that fosters respect and dignity and create a place where we can all come together over a cup of coffee. Onward with love.”

Published on: June 5, 2018

Bloomberg reports that Walmart is “selling a majority stake in its Brazilian unit to private-equity firm Advent International. Walmart will retain a 20 percent stake in the business after the deal, which will result in a $4.5 billion non-cash net loss in the quarter. The long-rumored sale is the latest move by Walmart to reshape its global footprint, following deals in the U.K. and India.”

The story characterizes Walmart’s Brazilian operations as “a disjointed, money-losing unit that struggled to connect with consumers, endured a revolving door of management, and couldn’t match French retailers Carrefour SA and Casino Guichard-Perrachon SA, the top two players there. The nation’s punishing recession and political upheavals didn’t help, but Walmart’s Brazilian misadventure was deep-rooted.”

Published on: June 5, 2018

The US Supreme Court yesterday ruled in favor of the Colorado baker, Jack Phillips, who refused to bake a wedding cake for a same-sex wedding, citing his religious beliefs.

Despite the 7-2 ruling in the baker’s favor, most analysts described it as a “narrow” victory, citing the specificity of the ruling and the likelihood that it has not really set much of a precedent.

Associate Justices Ruth Bader Ginsburg and Sonia Sotomayor dissented from the majority opinion, which was written by Associate Justice Anthony Kennedy.

CNN writes that the Supreme Court held that the Colorado Civil Rights Commission, which originally sued the baker, “showed hostility toward the baker based on his religious beliefs” and “showed animus toward Phillips specifically when they suggested his claims of religious freedom were made to justify discrimination.”

"The outcome of cases like this in other circumstances must await further elaboration in the courts, all in the context of recognizing that these disputes must be resolved with tolerance, without undue disrespect to sincere religious beliefs, and without subjecting gay persons to indignities when they seek goods and services in an open market," the opinion states.

The New York Times writes that “Justice Kennedy often casts the deciding vote in closely divided cases on major social issues. When the court agreed to hear the Colorado case last June, it seemed to present him with a stark choice between two of his core commitments. On the one hand, Justice Kennedy has written every major Supreme Court decision protecting gay men and lesbians. On the other, he is the court’s most ardent defender of free speech.

“On Monday, Justice Kennedy chose a third path, one that seemed to apply only to the case before the court … Though the case was mostly litigated on free speech grounds, Justice Kennedy’s opinion barely discussed the issue. Instead, he focused on what he said were flaws in the proceedings before the commission. Members of the panel, he wrote, had acted with ‘clear and impermissible hostility’ to sincerely held religious beliefs.”

The case goes back to 2012, when a gay couple went to Jack Philips’ bakery and asked him to make a wedding cake. When he refused, saying that to do so would be to support gay marriage (he reportedly also doesn’t bake Halloween cakes because of his religious beliefs), the couple filed a complaint with the the Colorado Civil Rights Commission, which launched the long legal battle that ended yesterday in Washington, DC.

Published on: June 5, 2018

• Barron’s has a story about a new study by SunTrust Robinson Humphrey estimating that “Amazon’s private label business could be worth $25 billion in sales by 2022,” or five percent of Amazon’s total revenue, “which would make it one of the country’s biggest retailers by itself.”

Indeed, Amazon’s private label sales “could be worth $7.5 billion in revenue this year”alone … and that “estimate doesn’t include Whole Foods, which would bring the total to $10.6 billion.”

Published on: June 5, 2018

• Bloomberg reports that “a Walmart store in Washington allegedly discriminated against two deaf employees by failing to provide them with American Sign Language interpreters and other accommodations, the U.S. government says.” The retailer has been sued by the “federal Equal Employment Opportunity Commission under federal disabilities bias law for allegedly failing to accommodate employees or job applicants with hearing difficulties.”

Other companies successfully sued by the EEOC under similar circumstances include McDonald’s and the Cheesecake Factory.

Published on: June 5, 2018

• The Wall Street Journal reports that “Tyson Foods is making a push into organic chicken, striking a deal to acquire the Smart Chicken brand,” a move that “ broadens Tyson’s organic offerings, as rival meat companies pursue their own deals and shift more of their poultry toward a market where sales are growing faster than conventional chicken.

“Tyson, the largest U.S. meatpacker by sales, has been migrating toward higher-profit, brand-name products, aiming to reduce its reliance on selling commodity meat, a business that tends to be less predictable and prone to market swings.”

Terms of the deal were not disclosed.


• At the same time, the Wall Street Journal writes that “private-equity firm Kohlberg & Co. is buying Tyson Foods’ Sara Lee frozen bakery and Van’s waffle businesses. Terms of those deals were not disclosed.

Published on: June 5, 2018

• Ella Brennan, matriarch of one of New Orleans’ most prominent restaurant families, and who was so deeply involved in her company’s flagship, Commander’s Palace, that she lived next door, has passed away. She was 92.

In its obituary, the New York Times writes that “Miss Brennan, as she preferred to be called, could not cook and never wanted to. Yet she was the grande dame of restaurant royalty in New Orleans whose infighting and power struggles have long been the subject of gossip and intrigue in a city as dedicated to its food as any in America.

“Restaurants mattered deeply to her — what they served, how they were run and how they treated customers — so she dived deeply into cookbooks and business books. She quizzed wine merchants and smart diners for tips on how to make her restaurants better. She traveled across the country and to Europe to experience fine dining and, along the way, developed a sophisticated palate that told her what tasted right and what needed a little more this, or a little more that.”

Published on: June 5, 2018

Regarding our piece about Amazon needing to do a better job eliminating counterfeit products from its site, MNB reader Bob Thomas wrote:

The OECD estimated the value of counterfeit goods in 2013 to be $461 Billion.  This was an increase of more than 80% over the OECD findings in 2008.  Until online retailers such as Alibaba, Ebay and Amazon get serious about the problem it will continue to grow.  The large online retailers add value (and profits) to the counterfeiters who were once only distributing on street corners and back alleys.  The “Guaranteed Genuine” approach would be a definite differentiation for an online retailer to use.

On the same subject, from MNB reader Aimee Beaufait:

I was happy to see your article about Amazon’s Counterfeit Problem. My sister (13 weeks pregnant), regularly purchases her pre-natal vitamins from Amazon. Her most recent batch of vitamins was counterfeit. Not only did she not get the nutrition she needed, but these pills also made her sick – putting her and her baby at risk.  She was lucky to have only taken these vitamins for 5 days before realizing they were fake. I’m sure many others didn’t realize this so quickly. I sure hope Amazon steps up and takes this issue even more seriously, especially when it impacts customers’ health.



Responding to the story about more deaths related to tainted romaine lettuce, one MNB reader wrote:

The question people need answered is when will they be back in Yuma harvesting romaine. And what other crops are coming from the area that might be of concern, e.g. spinach, cilantro and other row crops that lay near the ground. He cyclical nature of row crops guarantees that will be back in Yuma, it’s just a matter of time.

And since they are still scratching their heads on the exact location of the impacted soul, what’s to insure some “smart” companies from labeling “San Luis” or some other nearby town, avoiding the Yuma name. I noticed at Costco hand labeled romaine that says “from California”, but they can’t grow there all year.




We had a story yesterday about Southeastern Grocers, parent company to Winn-Dixie, Bi-Lo, Harvey’s and Fresco y Mas, emerging from bankruptcy protection, pledging to remodel stores and revitalize the brand. I was dubious … and so was this MNB reader:

I wish SEG well, but would probably prefer to plant a dollar in my back yard and hope it grows before investing in SEG...at least the dollar would still be there a year from now. They are a composite of tired brands, on the downswing like A&P. They have yet to implement basic marketing and merchandising across brands and former executives and investors have done nothing to build brand...only tried to save their way to prosperity while taking out the cash. They are the last choice for shopping when they are the only choice in town.

And this one:

Kevin, I’m really struggling with how SE Grocers feel they can be competitive going forward.  The emergence of small box formats in FL (BUC-ee’s, Wawa, Sheetz, 7-Eleven just to name  few), widely available Publix, Walmart – not to mention Target (who’s becoming less relevant everyday to FL shoppers but not as fast as SE Grocers is / will / did) – really, SE Grocers thinks a loyalty program is all they need? 

SE Grocers stores are easy to shop (since they have fewer shoppers in them than others) but are full of out-dated merchandise on shelf.
 
The best role SE Grocers plays is to stock new-to-market, entrepreneurial brands that struggle to even get a Publix buyer meeting to present.  It would be nice to see SE Grocers do well – but the pathway to long term viability isn’t clear.



On another subject, from MNB reader Yvonne Manganaro:

Regarding the piece about Hello Fresh, and meal kits in general – I don’t believe that the subscription model and pricing are the only major impediments to their growth.

Younger customers in particular are overwhelmed with the packaging that comes with them, when they are sent via FedEx or other carrier. Between the outer box, inner boxes and clamshells, ice packs, etc. – there is a perception of tremendous wastefulness. Add that to the carbon footprint of driving the meal kit to your door, and I think there is a sense that it’s wasteful. Many of the surveys I have seen are for people who have never tried a meal kit, and their objections come down to price and subscription model. However, once a consumer actually tries them, they see how much packaging is involved. 16% of millennials surveyed mentioned this concern.

Grocery stores are therefore an ideal place to solve for the customer who wants an easy/quick/inspirational meal choice, but who worries about the environmental impact. As a bonus – they’re not locked into a subscription model, either. 



We had an Eye-Opener yesterday about the growth of Audible, prompting one MNB reader to write:

As a self-professed reading nerd, something bothers me about Audible’s growth.  At the risk of sounding like a dinosaur, isn’t there something sacred about the ability to read, directly related to our society’s ability to write, and do math?  I’m all for growth, change, (r)evolution and I recognize there’s something potentially lost in our critical thinking skills if we aren’t reading.



And, on yet another subject, from MNB reader Howard Carr:

Your comment about Stew Leonard’s and Wegmans proves what I still believe, and why most people continue to go out of their way to shop in these stores.  They are an experience and they do things that others do not, and one of them is to offer SERVICE to the customers in a manner that their competitors do not.  Not to mention that their assortment of goods is not “vanilla” like too many of the other grocery alternatives out there. I would also throw Costco into this mix, because when you consider how they merchandise (the in store sampling program) and the aggressive pricing models and different products they bring to the customer, you can understand why their models will be successful for a very long time to come.



Finally, I wrote last Friday enthusiastically about a new HBO documentary, “John McCain: For Whom The Bell Tolls,” which is very much worth your time.

I wrote, in part:

McCain currently is battling brain cancer, and it seems to be a foregone conclusion that he is nearing the end of the road, though he has faced the end before and survived. But, remarkably, while McCain seems comfortable looking back, he seems anything but mournful; he hopes that he has done some good, feels that he has lived with honor, is willing to acknowledge his mistakes, and has strong feelings about the health of the nation and our politics.

McCain’s is the central voice of the documentary, but there are generous and heartfelt testimonials to his life and career from politicians as disparate as Joe Lieberman, Joe Biden, Bill Clinton, Hillary Clinton and Barack Obama. As polarized as our politics may be, there seems to be a sense even among those who may disagree with him on issues that McCain’s priority has been fulfilling the American ideal and promise.

One MNB reader challenged me:

”…heartfelt testimonials to his life and career from politicians as disparate as Joe Lieberman, Joe Biden, Bill Clinton, Hillary Clinton and Barack Obama…”

Disparate?? Seriously?

I meant disparate compared to McCain’s views. I also could’ve included Sen. Lindsay Graham, President George W. Bush, and Henry Kissinger. (And John Kerry.) There also were a lot of former staffers and campaign aides who spoke about McCain … but, now that you mention it, not a lot of elected GOP public officials talking about him on camera.