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    Published on: August 2, 2018

    There's no text version of FaceTime this week, because I think this is one of those times when the video is simply more effective than words at communicating the message.

    As always, you can access this and every MNB video by going to our MNB Channel on YouTube.


    KC's View:

    Published on: August 2, 2018

    by Kevin Coupe

    Inc. has a fascinating story about the connection between public transportation and one prominent retailer - Amazon.

    According to the story, “Amazon takes public transportation for its employees very seriously. So much so that the company says it has spent $60 million on public transit in Seattle. And the investment continues: Along with paying $5.5 million toward Seattle's streetcar in 2012, the retailer announced last week that it would invest $1.5 million to increase bus service to its headquarters.”

    Indeed, the Inc. story points out that the availability of a robust and accessible mass transit system is one of the things that Amazon has made a centerpiece of its requirements when it chooses a second North America headquarters city (dubbed HQ2).

    The story argues that this is a priority with positive implications: “Decent public transportation can make a huge difference to the quality of life in any city. Efficient public transportation, especially if there's a light rail system, gives people an alternative to driving, which cuts down on both traffic slowdowns and air pollution. Public transportation is generally safer than driving yourself. It can save employees thousands of dollars a year, especially if it allows families to forego owning a second car. Because using public transit generally involves some walking, it makes them healthier as well. It allows those who are too old, too young, or otherwise unable to drive to get around on their own. And it's good financial news for the city, generating revenues for decades to come … Besides, cities with a well-functioning transit system simply are better places to live than cities without one.”

    The word “city” is important here, since there seems to be broad agreement on the part of demographers that the US is becoming a more urban-centric nation.

    That’s something that a lot of retailers ought to be thinking about as they make plans and move forward. Many retailers are built to be of greatest service to families in the suburbs with several children, living in a house with a basement for storage, and using a minivan or SUV to get around and do shopping. But what happens to these retailers when people move to the city, have fewer children live in an apartment and don’t even own a car?

    I’m not saying that everybody in America is going to be like this. But more will, and this seems to be where the trend is going, at least for the foreseeable future.

    The question is the degree to which traditional retailers, with legacy-centric ways of doing business, will - or even can - respond to these changes.

    We know that some people are in denial about all this. One example of this was reported in the New York Times a while back, when it wrote about political efforts around the country to fight against the bankrolling of mass transit systems that have been proposed in order to deal with specific problems including too many cars clogging up city streets, pollution, and even the propensity by an increasing number of urban dwellers not to own cars. The anti-mass transit say that their position is rooted in a desire for smaller government, and government-backed transit systems require bigger government, and a deep-seeded belief that public transit is anti-freedom.

    Frankly, I think this argument is silly. Even if mass transit exists, I have the freedom not to take it. At its very core, mass transit gives people without independent means a huge degree of freedom. Mass transit is pro-freedom … and, its existence recognizes a changing reality - that people are moving to urban communities that are becoming too crowded and require alternatives.

    My point in simple. It is critical for us all to keep our Eyes Open to how the culture is changing, and keep our businesses in synch with those changes. There will be companies that will be very good at it, and there will those that will not be.

    On which ones would you want to place your bets?
    KC's View:

    Published on: August 2, 2018

    Kroger yesterday announced the launching of new program called Kroger Ship, which it described as a “new direct-to-customer ecommerce platform,” in four markets - Cincinnati, Houston, Louisville, and Nashville, with the intention of a further rollout in coming months.

    Yael Cosset, Kroger’s chief digital officer, says that Kroger Ship is “our next step in creating a seamless experience that allows our customers to shop when and how they want,” and says that it both “complements and joins our 2,800 grocery stores, 1,250 curbside pickup locations, and delivery service from 1,200 locations.”

    Kroger Ship is said to be built on the platform developed by Vitacost, an e-commerce business focused on health products and natural foods that it acquired four years ago.

    Here’s how Kroger describes the service:

    “The service offers competitive ecommerce pricing and fast and free doorstep delivery by a package carrier on orders over $35, otherwise shipping is $4.99 per order. Ship customers will experience exclusive money-saving opportunities, including promo codes and pricing deals along with the convenience of a set-and-save subscription model. During the launch phase, customers will receive free shipping - no minimum purchase required - and 15 percent off their order with a one-time-use promo code … During the first phase of Kroger Ship, customers can shop from a curated selection of 4,500 Our Brands products, which are not available anywhere else online, and more than 50,000 center-aisle groceries and household essentials that matter the most, influenced by 84.51° data and insights.”

    In its analysis, the Wall Street Journal writes that “Kroger is looking to take on Inc. and Walmart Inc. in delivering goods directly to customers’ homes and businesses in boxes through third-party carriers, a service it hasn’t competed in to date … One of the biggest challenges for Kroger and other conventional supermarkets is Amazon, which sold around $650 million in consumer packaged-food items in the second quarter this year, up 40% from the previous year, according to the One Click Retail research firm. The e-commerce giant now offers rapid delivery from Whole Foods in 20 cities to Prime members, with the service and discounts to benefit holders spurring billions of dollars in revenue from the chain’s stores.”

    In addition, the Journal writes, “Walmart bought in 2016 to expand its delivery capabilities, and is pushing into New York City in the fall. Target Corp. bought the Shipt Inc. grocery service last year and is now rolling out new delivery areas.”
    KC's View:
    I did what I always do when stories like these break, especially when my gut tells me that the hype may be exceeding the reality - I called Tom Furphy, who knows far more than I do about this stuff, and with whom I write “The Innovation Conversation” column here on MNB (as well as doing it before live audiences around the country).

    “This is a perfect competitive weapon for Kroger to compete with the Amazon of 2009,” Tom told me. “I think that when you look at other things that Kroger is doing, like its deal with Ocado, things are going to get a lot more interesting; I would expect a lot more positive innovations in the future.”

    I wasn’t surprised by Tom’s reaction, though it made me feel better to hear him say it. It reinforced my first reaction - that this sort of sounded a lot like a combination of Amazon’s Prime Pantry and Subscribe & Save offerings, which have been around for some time. In fact, Prime Pantry has always struck me as one of Amazon’s less compelling offerings, not really fitting into its broader narrative, and I fully expect that as Prime Now and Whole Foods Prime continue to evolve, we may see the slow disappearance of Prime Pantry from the Amazon portfolio.

    Sure, Kroger Ship seems designed to compete with some of what Target’s doing … but my understanding is that Target has been struggling to generate the kind of volume that it needs to make its Target Restock program viable.

    Look, let me be clear here. I think that Kroger Ship does make sense. In some ways, I see it as backfilling the company’s digital offering in a way that provides a stronger foundation for what the retailer needs to do going forward. That’s important - you need to have a solid foundation.

    But it also is important to remember that, as Tom Furphy says, these kinds of offerings can be seen as “table stakes” as retailers move forward trying to compete in a vastly changed retail environment.

    One other point, if I may.

    Yesterday, when commenting about a story suggesting that Kroger may be looking to re-enter Florida after decades without a presence in the state, I speculated that it might be possible, using its data mining and e-commerce capabilities, to actually enter a market without the traditional fleet of stores. The Kroger Ship program, with its consumer direct focus, may actually give it the kind of weapon that would make this even more feasible that I imagined just 24 hours ago.

    Just saying.

    Published on: August 2, 2018

    USA Today has a piece by “brain scientist” Jeff Stibel, writing about how massive amounts of choices can actually be intimidating and inhibiting.

    “The brain actually loathes choice, and science tells us that those who limit their choices may be on to something,” Stibel writes. “When was the last time you had to decide on one thing from a slew of choices? Maybe it was where to go on vacation, maybe what stocks to buy, perhaps what to do on a free Saturday afternoon. How did you feel when you started to consider your decision? A world of choice can make us feel elated … but only temporarily. As you collect more information and start to weigh your options, you grow overwhelmed.”

    Stibel cites a study about jam:

    “Consider the relatively insignificant decision of what type of jam to buy. Researchers Sheena Iyengar and Mark Lepper used a simple experiment to show the effect of too much choice. One day they offered shoppers at an upscale market 24 types of specialty jams, complete with free samples. About 3 percent of people who tried a jam sample also purchased a full-size jar. Then, they cut back on choices and set up a table offering only six jams. About the same number of people tasted the jam, but of this group, 30 percent purchased a jar. Sales increased tenfold by offering less choice.”

    And this is how he concludes:

    “Making good, rational choices is emotionally taxing. We are happiest when we’re sure that the alternatives are worse, when we’re sure we aren’t missing out on something better. But it’s hard to be sure about the right choice when there are too many options. Things just get, well, jammy.

    “Business owners should resist the temptation to show off everything imaginable. Amazon already is the ‘everything store’ so differentiating as the ‘only what you need store’ seems like a pretty good plan.”
    KC's View:
    This isn’t an entirely new construct. “The Paradox of Choice” made similar arguments, if I recall correctly, and it was published more than a decade ago.

    But, Stibel’s argument is worth revisiting, especially within the Amazon context. Indeed, if Amazon is going to be the “everything store,” with so much choice that it is virtually impossible to compete with it on this particular field, doesn’t it make sense for its competitors to find another way? To curate selection based on knowledge of shopping habits? To be the buying agent for the store’s shoppers instead of the distribution agent for suppliers?

    Published on: August 2, 2018

    Business Record reports that supermarket retailer Hy-Vee has opened, in West Des Moines, Iowa, “its first Hy-Vee HealthMarket store, a new concept designed to offer healthy lifestyle items and personal care items along with groceries.”

    According to the story, “the 15,700-square-foot format offers many of Hy-Vee’s original store products such as fresh produce, meat and seafood, dairy, and frozen food items. It also offers many health-related amenities, such as a full-service pharmacy, health clinic and hearing aid center, a sports nutrition area, and Aisles Online pickup.” It also has “a hydration station that features nitro coffee, kombucha and Bevi infused waters, as well as a nearly 3,000-square-foot Orangetheory Fitness center adjacent to the store.”

    Hy-Vee has said it has plans to open at least two more HealthMarkets, in Kansas City and Madison, Wisconsin.
    KC's View:
    I think it is critical for companies to test new formats and rethink their traditional go-to-market strategies. I like what Jeff Bezos says on the subject: “Failure’s not that expensive….The big cost that most companies incur is much harder to notice, and those are errors of omission.”

    Published on: August 2, 2018

    The New York Times reports that Australian supermarket chain Coles yesterday “reversed its decision to ban single-use plastic bags after its customers complained, a move that bucked a global trend to reduce plastic bag waste and prompted a social media backlash against the company.”

    The story notes that Coles had agreed to begin offering reusable plastic bags as of July 1, charging customers the equivalent of 11 cents (US) for each one. The Times writes that the decision prompted what some called “bag rage,” as shoppers rebelled and complained.

    The Times also provides some context:

    “A majority of the world’s plastic waste ends up in the sea, where, because of currents, it often becomes concentrated in subtropical gyres or ‘ocean garbage patches.’ This pollution is often ingested by marine life and can find its way into the human food chain.

    “Efforts are underway to clean up these garbage patches, by organizations like The Ocean Group — a nonprofit involving engineers, researchers, scientists and modelers — who aim to reduce the Great Pacific Garbage Patch by half in five years.”
    KC's View:
    I know that whenever this subject comes up, I get email from folks arguing that the whole idea that plastic bags are bad for the environment is a canard.

    I don’t understand this … in the sense that the more that any of us can do to reduce the use of any and all disposables is a good thing. If you have the opportunity to do anything to reduce the impact on the planet, why wouldn’t you do it?

    Published on: August 2, 2018

    The New Yorker has an interesting piece - written with tongue in cheek - about the rise and fall of Diet Coke, writing that it “helped define a novel archetype of masculinity - the bootstraps kid who’d made it big, who was cool and modern, in a suit - that would later be perverted to support crimes of the sort now finally being recognized. As an office drink and a leisure drink, a daylight beverage and an acceptable cocktail order, Diet Coke was suited to porous work-life boundaries and the leaders who learned to thrive in, and in some cases insidiously exploit, the gray areas of that new world.

    “To an astonishing extent, the age of Diet Coke - its rise, its reign, its fall - maps onto a historical bracket that began with the launch of MTV and ended with the emergence of social media: the era of the power of the image in a mainstream burnished form.”

    You can read the entire piece here.
    KC's View:

    Published on: August 2, 2018

    Reuters reports that “Walmart was sued on Wednesday by a Silicon Valley company that accused the largest U.S. retailer of stealing its technology to prolong the shelf life of produce and reduce spoilage … In its $2 billion complaint, Zest Labs and its parent said Walmart's ‘Eden’ technology to preserve fruit and vegetable freshness "looks, sounds, and functions" like its own Zest Fresh technology.”

    Zest says that it worked with Walmart for years before Walmart introduced its own version; Walmart said that it will answer the complaint in court.
    KC's View:

    Published on: August 2, 2018

    CNN reports that activist investor Dan Loeb’s firm, Third Point LLC, has acquired a more than $300 million stake in Campbell Soup, and has hired an investment banker to pressure the company to put itself up for sale.

    The story notes that “soup sales have slumped lately too. And a push into fresh and organic food hasn't panned out as well as hoped. But if Loeb wants Campbell Soup to put itself on the shopping block, he must convince family ownership that it's a good idea. Three descendants of condensed soup maker John Torrance collectively own about 42% of its shares.

    “Those shareholders may be amenable to the idea of a deal though. After all, the packaged food industry has played host to a flurry of mergers recently. Companies are trying to get bigger in an attempt to have more pricing power.”

    Both Kraft Heinz and General Mills are said to have some interest in acquiring Campbell.

    • The Wall Street Journal reports that it no longer seems to be true that young people “start out favoring mild pilsners and low-calorie beers, then graduate to harder stuff later in life, if at all. Now they are thinking about other things: taste, value, beer bellies … According to the Beer Institute, a trade group, drinkers chose beer just 49.7% of the time last year, down from 60.8% in the mid-’90s.

    “Among 21- to 27-year-olds, the decline has been sharper. Anheuser-Busch InBev SA, Budweiser’s owner, found that in 2016, just 43% of alcohol consumed by young drinkers was beer. In 2006, it was 65%.”

    In some ways, the story suggests, “big brewers are facing the same seismic shifts in taste as other large consumer-goods and packaged-food giants. Consumers, especially younger ones, are gravitating toward smaller brands marketed as healthier, more natural or made closer to home … Mass-market beer makers are losing drinkers to an explosion of spirits brands, such as Tito’s vodka, owned by Fifth Generation Inc. Craft beer brewers rode that wave, too, but their volumes haven’t come close to making up for declines in mainstream beer. More recently, craft-beer sales also have slowed.”

    • The Associated Press reports that “Molson Coors will attempt to sell pot-infused drinks in Canada, where consumable marijuana will become legal next year … The brewer said Wednesday that its Canadian division will partner with the Canadian cannabis producer The Hydropothecary Corp. to develop a non-alcoholic drink containing marijuana … Molson Coors Canada will hold a 57.5 percent controlling stake in the stand-alone joint venture. Hydropothecary will own the remaining ownership interest.”

    I was talking to someone the other day in Southern California who grows two crops - avocados and cannabis. I told him that if he could come up with guacamole that gets you high, I want to invest…

    USA Today reports that management at IHOP is saying that the marketing ploy that changed its name to IHOB, designed to draw attention to its new hamburger menu, worked.

    The company says that it “saw a ‘significant lift’ in both sales and traffic during lunch and dinner hours after the launch of an expanded burger menu on June 11,” the day that promotion kicked in. “According to Dine Brands Global's second-quarter earnings, sales at IHOP's domestic  locations open at least a year – an industry measure that takes a chain’s unit growth into account – increased 0.7 percent,” the story says.

    I won’t argue with the fact that the promotion got attention. It got me in the door (with a little urging from an MNB reader) to order a burger. However, I won’t be going back, largely because a) the burger wasn’t very good, and b) it had an unfortunate impact on my digestive system about two hours later. But maybe that’s just me…

    • The Associated Press reports that President Trump appears to be unfamiliar with what goes on in supermarkets.

    Yesterday, arguing for voter ID cards, he said, “If you go out and you want to buy groceries, you need a picture on a card, you need ID. You go out, you want to buy anything, you need ID, you need your picture.”

    The AP notes that this is only true if you want to buy alcohol, cigarettes or (in some places) cold medicine, or in the increasingly unlikely event that you want to write a check (which the National Grocers Association says accounts for about six percent of transaction.

    C’mon. He’s a multi-millionaire. I think expecting him to know what happens in supermarkets is a little too much.
    KC's View:

    Published on: August 2, 2018

    Yesterday, the MNB Eye-Opener was about how Ed Hennessey, 45, a Florida man who spent 20 years as a high school teacher but never made more than $50,000 a year, and always had trouble supporting his family and paying off his college loans, has found a new career as a shopper for Shipt.

    I commented, in part:

    Not that it is a bad thing that Hennessey has found a way to better support his family. That’s a good thing. I just think it is a shame when talented teachers can no longer afford to follow their passions because our culture so devalues the importance of great teachers. I think it is a shame when teachers have to work a second job in order to pay their bills; keep in mind that these same teachers work late into the night grading papers and preparing lessons, and that many teachers reach into their own pockets to pay for supplies because school district budgets are insufficient.

    This is the stuff I mind…Some may read the story and think it is cute. Some may read it, shrug, and move on. But I see it as an Eye-Opener of the worst kind, spotlighting exactly how crappy our society’s priorities often are.

    MNB reader Linda Porritt responded:

    I think this is a very sad testament that our society values having someone perform our own mundane tasks over someone who could make all the difference in a child’s life.  My only hope is that some of Ed’s customers are taking the time they save by having Ed doing their grocery shopping now on their children and helping to teach them life lessons.

    MNB reader Kathleen Ottaviano wrote:

    Couldn’t agree with you more, Kevin.  Like the often repeated saying, “I’m looking forward to a time when schools have all the money they need and the Pentagon is having bake sales.”

    And MNB reader Melissa Setser wrote:

    Let’s add:  Teachers are the people that we trust our precious children with, and certainly for more awake hours each day than parents spend with them.  And we can’t “afford” to pay them a good, fair wage?  Devaluing education’s importance has led and will continue to contribute to the decline of our civilization.  We have a reality TV star as President.  Enough said.

    Regarding the innovative small store formats cited in a New York Times story, MNB reader Lisa Malmarowski wrote:

    You mean like food co-ops? Locally-owned by the community stores have offered some of these things for years. But carry on talking about the ‘big guys’, we’ll just go about our business 😉

    We had a story about Kroger buying a shopping center in Florida, which prompted MNB reader Jerry Heck to write:

    I’m hearing they are buying the property for Lucky’s Market, who you probably recall they are investing in.

    Certainly possible.

    MNB reader Mark Albright wrote:

    Interesting about Kroger buying some real estate in Palm Beach County. If it is for a full line store, that would be new because their nearest distribution center is around Macon, Ga., a good 120 miles north of the Florida border. However, Kroger’s Lucky’s Market unit slipped in a couple of years ago, now has a dozen stores in Florida and is opening half dozen more a year. Their latest in St. Petersburg opened a month ago and is constantly packed. Granted, that’s a different brand and formula operated out of Colorado. But they do have quite a bit of Kroger private labels. And the money ends up in the same till.

    Finally, yesterday an MNB reader wrote in yesterday to compliment a Michael Sansolo column:

    Wow! Someone at your place with a sense of reality.  A really refreshing change from all that holier-than-thou “you have no right to feel that way” commentary we’re so accustomed to in MNB.

    My response:

    Good thing that the Content Guy has a thick skin…

    This all prompted MNB reader Terry Pyles to write:

    I have been reading MNB virtually every morning since its earliest days. I enjoy the insights, commentary, occasional offbeat articles and sharing of opinions. So thank you for all of that.

    And sometimes I just have to laugh out loud. Today was one of those days. That exchange was the very definition of pithy.

    Ah, but not everybody enjoyed it. The fellow who wrote in followed up with another email, saying:

    And an even better thing that the dictionary features your photo in its definition of the word “prig.”

    Prig? Really? Moi?

    Oh, well. Could’ve been worse. He could’ve used another one syllable word starting with p-r-i, but ending with two other letters…
    KC's View:

    Published on: August 2, 2018

    I’ve been getting emails from Portland, Oregon-area MNB readers wondering if I am going to have one of those casual get-togethers that we've done here the past few years.

    The answer is yes … and this year, I’m thrilled that it will be sponsored by Portland State University’s Center for Retail Leadership. And tonight’s the night … let’s get together at 5 pm, at Nel Centro, located at 1408 SW 6th Ave, in Portland.

    I'll plan on being there for a couple of hours, hopefully on the outside patio - and I hope that any MNB readers who'd like to stop by will do so.

    See you there.
    KC's View: