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    Published on: August 7, 2018

    by Michael Sansolo

    Predicting the future is worthless, but I feel comfortable making these two ironclad prognostications.

    First, at no time in the future will I be allowed to drive a vehicle in a NASCAR race.

    Second, at no time will any driver in a NASCAR race actually use a Prius - which is my preferred mode of automobile transportation.

    Bank on it!

    Thanks to some wonderful circumstances, I found myself in Charlotte, NC, recently with an opportunity to visit the NASCAR Hall of Fame. And incredibly, there are countless elements to that building and sport that are stunningly relevant for retail at the moment, especially as NASCAR hunts for ways to shore up its flagging television ratings and connect with younger people. (Sound familiar?)

    To be clear, I am not a big NASCAR fan and I am far more comfortable in either the Baseball or Star Wars Halls of Fame, but you can’t pass up an opportunity. Besides, the NASCAR hall simply crushes it.

    The entry to the building features all generations of NASCAR cars on a “track” that allows fans to see vehicles from decades back and get a sense of what a driver faces. There are small chunks of road material so you can touch and feel the incredible differences between the road surfaces. And there’s a small area where one can walk on a simulated 33-degree banked turn, which makes you appreciate how hard it must be to keep a car from sliding off. (Simply put, it is impossible to stand on the turn without holding the railing. Centrifugal force rules!)

    But the highlight of a visit is a chance to drive a simulated car in a simulated race. Believe me, no amount of instruction prepares you for an 800 horsepower engine. I hit the gas and immediately drove into a wall. The only way my Prius could achieve that rate of speed would be if it were dropped out of an airplane. (Oh, I got back on the track and promptly blew my engine. My fellow drivers were not much better.)

    But what interested me most was a talk with a tour guide about NASCAR’s battle for relevance. Let’s keep in mind that this is a sport with rapid fans, who can sit in the stands and use headsets to listen to drivers and their crews. Even casual fans watching on television, have access to cameras in the car showing us what the driver is seeing at 200 miles per hour.

    In other words, the sport allows a fan to get immersed.

    But as the tour guide explained, it’s no longer enough. Now NASCAR is looking at the next generation and trying to up its game. In the near future, she told me, we’ll likely see cameras throughout the car so fans can watch the driver change gears or go through anyone of their activities behind the wheel.

    What’s more, there will no doubt be apps that permit a fan to experience the thrill and terror I got in the simulator such as the incredibly bumpy apron when I steered too low and the rush of gravity when I finally accelerated correctly. Fans raised on Super Mario Kart will expect and accept nothing less. It’s probably a matter of time when fan will lose the headphones that let them listen to Jimmy Johnson and instead strap on a virtual reality device that let’s them be his co-pilot.

    There obviously won’t be a way of creating the same thrill while people steer a virtual shopping cart, but NASCAR’s changing reality is something we need consider. The “wow” experience is quickly becoming a necessity rather than a rarity.

    In other words, start your engines. It’s going to be a bumpy ride!
    KC's View:

    Published on: August 7, 2018

    by Kevin Coupe

    Just wanted to take advantage of the moment to wish Dorothy Lane Market, of Dayton, Ohio, a happy 70th birthday.

    But for the record, as impressive as the seven-decade run is - and the fact that it has been owned and operated for that entire time by the Mayne family - I think it is important to focus on what Dorothy Lane Market does, not how long it has done it.

    Longtime MNB readers know that I’m an enormous fan. (This confuses some folks who think I am in thrall only to the charms of Amazon.) But what makes DLM so special is that it may be at its core a bricks-and-mortar retail business, it never has been restricted or inhibited by the walls of its three stores. Rather, DLM has always been about the magic and imagination of great food - the look of it, the smell of it, the taste of it.

    The folks at DLM - and this applies not just to the Mayne family, but also to all of the highly committed and enthusiastic people who work there - understand that part of the magic of creating a compelling food store experience is to work resolutely and tirelessly to be differentiated in every department, in every aisle, with every product.

    And, it has just as relentlessly focused on its customers - DLM has been pioneering in its development of loyalty marketing programs that turn its customer base into a community of food enthusiasts.

    DLM was doing it long before there was an internet, long before there was an Amazon. And it ends up that this strategy and these tactics are perfect for the current competitive climate, and DLM’s three stores have continued to grow and thrive and set standards for excellence.

    Not every store can be a Dorothy Lane Market. Not every retailer can be a Norman Mayne or a Calvin Mayne. But this independent grocer is a classic example for how you don’t have to be big or omnipresent or the developer of an ecosystem to be successful in business and of service to your customers. You just have to be different and committed and passionate.

    Seventy years. Wow. That’s a long time.

    But let me remind you, one more time, of something that Norman Mayne told me, that a “reputation is something you had yesterday. Today, you have to earn it all over again.”

    I’m sure there will be a cake. (It’ll be delicious.) There will be wine. (It’ll be outstanding) There may even be some singing.

    The next morning, the folks at Dorothy Lane Market will go to work and do it all over again.

    And that’s the Eye-Opener.
    KC's View:

    Published on: August 7, 2018

    Fortune reports that Walmart has struck a deal with Gobble, a new meal kit startup, that will have it selling the company’s kits on the Walmart website. The meal kits will not, however, be in Walmart stores.

    According to the story, “The business relationship between the San Francisco-based startup and the largest retailer in the world comes after Amazon’s acquisition of Whole Foods in June 2018 sent Walmart and Kroger scrambling to improve their digital offerings … The battle over online food spending has seen traditional retailers turn to the subscriber model of companies like Blue Apron and Hello Fresh. Overall, U.S. meal-kit sales grew 40.7% last year, according to Earnest Research.”

    Fortune writes that “Gobble’s niche in the crowded meal-kit market is dishes that can be prepared in 15 minutes or less and require only one pan. Each kit contains two servings and costs about $24 … Prior to this, Walmart offered customers kit options from companies like Sun Basket, Takeout Kit, and Home Chef, allowing shoppers to try the meal services out before subscribing.”
    KC's View:
    The interesting thing here is how Walmart is for the moment limiting Gobble to its website. I’m not sure if this is because it wants to segregate its various meal kit offerings, or just wants to test it out online before giving it store space.

    I continue to be a believer in the long-term viability of the meal kit business. I was talking to someone the other day who told me that she loved the concept because it is helping teach young people how to cook. If that’s true, it would make a lot of supermarkets very happy … but they have to capitalize on it aggressively. They can’t just wait for the trend to come to them.

    Published on: August 7, 2018

    Forbes reports that the National Retail Federation (NRF) is teaming up with Amazon and other retailers “to create the Package Coalition, a lobbying group seeking to educate and give facts about the state of the USPS’s package business.” In essence, the organization has been formed to combat what the various entities involved believe is misinformation about the US Postal Service’s business model and economic challenges.

    The announcement of the group’s formation, the story notes, “came ahead of a report expected to be released later this week from a task force President Trump created in an April executive order to study the money-losing U.S. Postal Service for possible reform. Trump has also publicly
    attacked Amazon in many tweets, including calling the USPS Amazon’s ‘delivery boy’ and suggesting without any evidence that the special rate break that Amazon and other package shippers got led to the USPS’s loss.”

    There are concerns that there could be “potential package rate hikes and reduced postal service at a time when so-called last-mile delivery is a high-stakes battleground for retailers meeting the demands of growing online shopping. Key to this is the USPS’s delivery service to all U.S. addresses, especially in rural markets, which even giants like Amazon rely on.”

    USPS numbers, Forbes points out, indicate that “the shipping and package segment is indeed one big bright spot for the USPS: It’s the only segment that has seen increased revenue each year since at least fiscal 2014. By contrast, revenues from first-class mail, marketing mail and periodicals have declined over the same period, reflecting the less frequent sending of letters and cards in the age of emails and other electronic communication as well as a decline in the mailings of catalogues, print circulars and magazine subscriptions.”

    To a great extent, experts say, the USPS’s financial problems stem from unique and unreasonable pension-related demands that have been placed on it by the US Congress.
    KC's View:

    Published on: August 7, 2018

    Bloomberg has a story suggesting that if you want a hint about what Amazon may be doing “in physical retail” tomorrow, it is worth looking at what is happening in China today.

    “If you’d taken this advice, you wouldn’t have been surprised when the behemoth spent $13.7 billion last year buying Whole Foods,” the story says. “Eighteen months earlier Alibaba Group Holding Ltd. had launched Hema, a technologically advanced blend of online grocery shopping, dining and bricks and mortar.

    “Alibaba currently has 57 Hema stores, and plans to have 100 by the end of its financial year in March 2019. In five years there could be as many as 2,000. Rival JD.com Inc. has already launched its high-end response, 7Fresh, with two locations in Beijing offering all three services. It could have hundreds over the next few years.”

    The key to what these Chinese retailers are doing is the combination of three concepts in one: supermarket, delivery hub, and restaurant. It is a combination that has been resonant with Chinese consumers, and may get more so when combined with new payment processing options, such as the use of facial recognition. While there has been some use of checkout-free technology, the story suggests that Amazon certainly is catching up with its Amazon Go format, which is said to be even more advanced that what Chinese retailers are doing.

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

    Published on: August 7, 2018

    PepsiCo CEO Indra Nooyi said yesterday that she will step down after 12 years in the job, effective October 3; she will remain as chairman of the company through early next year.

    Ramon Laguarta, the company’s president, has been named the company’s new CEO.

    CNBC provides some context for Nooyi’s tenure, writing that Pepsi “faced challenges from upstart brands that continue to threaten its market share, including once-dominant drinks like Gatorade. Pepsi's North American beverage business has been more challenged than its stalwart snacking business, continuing to provoke questions about whether the giant would consider splitting the two … Under Nooyi, Pepsi steadfastly kept the two businesses together, arguing in favor of the combined leverage it gives the company over retailers. It sought to revive its North American drink business by throwing more support behind its core brands. It said it erred in giving up prime shelf space in favor of supporting its younger drinks and lagging behind Coca-Cola in advertising spend.

    “Efforts to reinvigorate its largest brands include its Pepsi Generation advertising campaign, the re-release of Mountain Dew Baja Blast and the launch of calorie-free Gatorade Zero. It has also continued to support its snack business, announcing in May the acquisition of baked fruit and vegetable company Bare Foods. The deal may also serve as a building base for the broader business of plant-based snacks.”
    KC's View:
    I thought it was interesting - though not completely surprising - when the New York Times reported that “only three times in history has a woman succeeded another woman as chief executive at a public traded company.” In other words, there are times that the glass ceiling grows thicker and wider.

    The Wall Street Journal asked Nooyi about this, and she said that it only is temporary …. that “it’s going to take a while to prime the pump. Because you know people like [former Mondelez CEO] Irene Rosenfeld and myself and [former Campbell Soup CEO] Denise Morrison came from the old school. And then what we’re all doing is priming the pump. We’re hiring more people at the entry level. We are accelerating the development. So I think in the next five to 10 years we should see a big cohort of women coming through the C-suite.”

    Hope she’s right.

    Published on: August 7, 2018

    VentureBeat reports that Amazon has announced that its “Echo smart speakers can now use their voice to add Prime Now order items to a Whole Foods cart. Prime Now, available in 24 U.S. markets, ensures two-hour same-day delivery … Prime Now orders are placed in a standalone smartphone app. Say ‘Add steak to my Whole Foods Cart’ and Alexa will note the order. After each exchange, Alexa will confirm what you added to the list, then ask ‘What else?’ until you’re finished … Say something generic like ‘cheese’ or ‘meat’ or ‘milk’ and Alexa will choose one for you based on order history and purchasing behavior of other customers.”
    KC's View:

    Published on: August 7, 2018

    ABC News has a lovely story about how one Walmart cashier in Burton, Michigan, went above and beyond the call of duty.

    What happened was this: Angela Peters, a customer suffering from cerebral palsy and using a wheelchair, was in a nearby nail salon where they refused to do her nails because her hands were shaking too much. When Ebony Harris, the Walmart cashier, found out that one of her store’s regular customers had been treated this way, she decided to do something about it.

    So, she went with Peters to Walmart’s cosmetics department, chose a color she liked, and then used her break to do her nails for her. When another customers saw what was happening, she posted a picture on social media, and the story went viral.
    KC's View:
    A good lesson … no matter how much technology you have, good people and simple kindnesses are the best competitive weapon.

    Published on: August 7, 2018

    Bloomberg reports that Rite Aid yesterday reduced its full-year financial projections, three days before the shareholder vote on whether it should merge with Albertsons.

    The story notes that “Rite Aid investors can’t seem to catch a break. The stock has plummeted 77 percent in the past two years, as its takeover by Walgreens Boots Alliance Inc. fell apart amid antitrust scrutiny. Walgreens eventually agreed to buy 1,932 Rite Aid stores, leaving behind a far smaller company with a now more uncertain future.”

    And now, the story says, “Commentary from the two biggest proxy advisers (has) painted a gloomy picture for the deal vote … as holders typically stick with the adviser recommendations.”


    • The Associated Press reports that multinational agricultural company J.R. Simplot Co. has “acquired gene editing licensing rights that could one day be used to help farmers produce more crops and make grocery store offerings such as strawberries, potatoes and avocados stay fresher longer.

    The agreement is with with DowDuPont Inc. and the Broad Institute of the Massachusetts Institute of Technology and Harvard University, which developed the technology.

    According to the story, “There is no evidence that genetically modified organisms, known as GMOs, are unsafe to eat, but changing the genetic code of foods presents an ethical issue for some. For example McDonald’s had declined to use Simplot’s genetically engineered potatoes for its French fries. The food industry has also faced pressure from retailers as consumer awareness of genetically modified foods has increased.”


    • The Associated Press reports that severely compromised MoviePass - which had to shut down temporarily 10 days ago when it ran out of money - plans to impose a three-movie cap on its subscribers, who pay $10 a month. Previously they could go to one movie a day, but the company has been cutting back on its offering, even putting limits on which movies people can see under its plan.

    According to the story, “Though MoviePass says it’s not raising prices to $15, there’s still a hidden price increase. The company already has a three-movie plan for $8 a month. Now, it will be $10.

    “MoviePass is also rescinding other cost-cutting measures, including surcharges for popular movies and showtimes and requirements to send photographs of ticket stubs to combat fraud. MoviePass says the new cap will affect only about 15 percent of subscribers — those who now watch four or more movies a month.”
    KC's View:

    Published on: August 7, 2018

    French chef Joël Robuchon, who owned and operated restaurants on three continents, mentored a number of prominent and accomplished chefs, was said to be the world’s most Michelin-starred chef, and once was described as the “chef of the century,” has passed away at age 73.

    The cause was cancer.

    In its reminiscence today, The New Yorker writes that “if anyone continued to make the case for classicism, it was Robuchon. It is touching, and typical, that, of all his dishes, his most famous - the one that will be recalled in every instant obituary - was his recipe for purée de pommes de terre. Mashed potatoes. One would have thought that this dish was in no need of improvement, and resistant to any transformation. You take a potato; you boil it; you mash it; you add butter and hot cream or milk. Everyone likes it, except the dieters, who are offended by its very existence. But Robuchon took this simple idea and refined and enriched and ennobled it.”

    You can find the recipe here. (Trust me, it’ll make you hungry.)
    KC's View:

    Published on: August 7, 2018

    Yesterday, we took note of a Wall Street Journal commentary piece by Henry I. Miller - described as “a physician and molecular biologist … a fellow at Stanford University’s Hoover Institution,” and the “founding director of the FDA’s Office of Biotechnology” - in which he attacked the organic food business as being rife with “blatantly false and deceptive advertising claims.”

    I commented:

    On this one, I think I’m going to let members of the MNB community respond. I think that every industry has manipulators and deceivers, but I’m a little surprised that this fellow is using such a broad brush.

    I was not disappointed.

    One MNB reader responded:

    I’ve been in the produce business for 44 years now on both the retail and supply side. It’s a fact that growers of organic produce apply pesticides, fertilizers and fungicides to their crops. The difference between organic produce and conventionally grown produce is that organic produce applications are not supposed to contain any “synthetic” ingredients. Only natural compounds. Additionally, growers of organic produce may have to apply sprays more often than growers of conventional crops because “organic” applications are not as effective. So yes, organic producers use pesticides. So if the great unwashed think that organic means pesticide free, they would be wrong.  I will say this. Applications are expensive for both conventional and organic farmers; therefore they want to use as little as possible to get the job done; not only from a cost standpoint, but from the fact they make their living from the land and the last thing they want to do is abuse it and, they all want to provide food that’s good for folks…like their own families. That said, I’m still confused by organic bacon.

    From MNB reader Liz McMann:

    Oh, jeez, Miller. You might as well be saying, “In fact, all crops are organic because they are carbon-based.”  It’s an argument that just makes you seem stubborn and ignorant. Yes, organic agriculture uses pesticides. Like vinegar.  That’s a pesticide. And antioxidants naturally found in plants are pest-deterrents. But the USDA organic standards give clear and strong restrictions on the pesticides that are allowed within organic agriculture. To claim that organic farmers use pesticides just like conventional farmers do is ludicrous.
     
    As for the non-GMO claims on products that literally could not even be GMO? I’m with you- that’s misleading.  But get a clue, organic and non-GMO are not the same thing. That is not the “organic industry.” Organic means so much more.


    From MNB reader Cindee Lolik:

    I, for one, would be interested to know who funds Mr. Miller's research - it could be quite illuminating.

    My sense, from emails that I have not posted here, is that he has a considerable bias toward the ag-tech business.

    Got another email from MNB reader Carl Jorgensen:

    I’m surprised the WSJ fell for this. There are so many things wrong with this article, it’s hard to know where to start. First, FDA has no role in regulating organic. That’s USDA’s purview. No surprise that FDA is silent! Second, midway through he launches into a legitimate critique of companies that get the non-GMO label on products that are inherently non-GMO to begin with, like orange juice. The clever strategy here is conflating non-GMO with organic, knowing that most consumers don’t know the difference. Finally, while trace amounts of pesticides are found in analyses of organic foods, the levels are orders of magnitude less than found in conventional foods. You can test your own blood, or for that matter your tap water, and find higher levels of pesticides than you will find in organic foods. They have been used on such a scale and for so long, they are now ubiquitous in the environment.

    Misinformation campaigns like this do a great disservice to all the hardworking organic farmers who are following the strict rules of organic production. The benefits of organic farming to the environment are real, and well-documented in the scientific literature. The problem from ag biotech’s perspective is that they don’t have a revenue model for it, so they try to sow doubt and confusion in an attempt to keep it from growing. History has shown that rearguard attempts to stop change fail in the long run!




    On another subject, from MNB reader John Rand:

    Noted the small discussion over the last week about public transit, with the most recent reader comment that it requires public subsidy to be viable, and is not particularly a bargain compared to taking taxis.

    True.  But I think it depends on how you look at both of those facts.

    Public subsidy is not necessarily a failure, it is an admission that something is important enough to the society as a whole to be funded out of public revenues. At the extreme (such as having an effective national military) it may be the only effective way to do something, but history is replete with examples of public subsidy. I do not understand why that is a problem – we need communications, education, public health, courts, fire and safety  departments, law enforcement – and public transit has at least a fair argument to be made that it deserves subsidy. It is called civilization. We get to decide what it should look like.

    Secondly, we have an accounting problem in this country – the inexpensive taxi ride comes with a host of hidden costs – resources extracted for vehicles, roads, and fuel, pollution, traffic, gridlock, and extremely high sunk costs (mostly subsidized) for roads and traffic management. We just put these costs somewhere else on the social balance sheet and they are often overlooked. Until we have end-to-end accounting for every indirect cost as well as direct cost, we don’t make good decisions. That inexpensive taxi ride on vacation gave someone emphysema or lung cancer, contributed to poor air quality, irritated someone else on the same road, cost everyone time and money…on and on.  Public transit has its own set of costs of course – but the point is we often don’t (or can’t) compare apples to apples.

    But this is a place for retail discussions, and let’s bring it back to practicalities – I recently was able to spend some time in Prague, in the Czech Republic, and was able to spend a week enjoying their mass transit system.  And if we had that level of excellence in more places, public transit would be a pretty easy sell, both to taxpayers and to riders. Subway trains, trams and busses are all one system, one interchangeable ticket, no transfer fees or complications. Schedules are tight and reliable, information on arrival and  departure times is digitally available at virtually every stop (I didn’t see any without it but I can’t claim to have seen them all). I never waited more than 10 minutes at any stop, and usually less. Fares are paid electronically at kiosks, ticket are scannable, equipment is clean and well maintained, as are the stations for the underground trains.  The system is dense in the city of course, but runs 30 miles out to the suburbs, on the same equipment.  Admittedly it is a little crowded at peak times on main lines – but no worse than any other urban system, and its very popularity is sort of a standard of excellence.

    Oh, and it runs pretty much all night, as I have to admit being glad it was there after a late evening drinking some most excellent Czech beer.

    In short, a wonderful customer experience, far superior when taken as a whole system to anything New York, Boston, Washington, Atlanta, Chicago, or almost any other American city I have ever traveled (and I have used public transit at all of them). You get what you pay for – but in the end, you also need to pay for what you get. And after wasting I- don’t- know- how- many hours of my life in traffic, I would be pleased to have a more viable alternative.

    And the same is true of retail – we talk a lot about retail experiences, good, bad and ugly. I would argue most of the transformation and angst retail is going through is based on the same thing – retailers are vulnerable when they can’t deliver on time, in-stock, clean, reliable service. People will seek alternatives when the product and its experience is substandard. I see a lot of announcements about stores being remodeled or redeveloped or reimagined over a 4 or 6 or 8 year period – but too little about how to improve basic staff competence, nothing on how to screen out irrelevance, how to stay more responsive to customers (riders, so to speak) than to suppliers with slotting fees for extraneous nonsense.
     
    Dinosaurs walk the earth. Me, I’ll be glad to take the train.


    Thank you for answering the “why do we have to pay for it” argument far more eloquently that I did.



    On the subject of the ongoing Amazon-Walmart conflagration, MNB reader Lisa Bosshard wrote:

    From a consumer viewpoint, because let’s face it, we’re all consumers too – My family is a loyal Cottonelle toilet paper user and we have also been using Walmart on-line grocery ordering with free pick up services at store weekly for well over 6 months now.  But, this is where we have a problem.  I can’t find Cottonelle toilet paper on WM website any longer and have no idea why.  So, we needed to make a Costco run and guess what, no Cottonelle there either.  Next step was Amazon and boom – available, shipped free (yes we are Prime members), delivered two days later.  My first question is why can’t I find it in stores now, to which I have no idea and second, what else should I look for on Amazon, set up as subscribe and save and call it a day?  That’s a staple item we have intention of changing and today, maybe a rare example of being brand loyal.  But let’s face it, it’s not an area I plan to experiment in and TP is expensive.  Amazon just won another monthly ticket purchase from us.

    From another reader:

    I would agree that the good news is that Walmart is nimble as well as willing to admit mistake, unlike many of their major competitors, major being Kroger specifically. For their size, they do not get enough credit for having this in their DNA…thanks Sam! Walmart has done a great job addressing Amazon for wall street, that said, they have quietly kept their eye on the cash cow, there brick and mortar! You can argue that there super centers are running as efficient as ever with variety, in stock and innovation! Grocery has always been a business of attrition, and Walmart has always been the king of last man standing in a market. Something bigger that Amazon and Walmart is going on in grocery, through both their messaging and or spending they are taking their competitors down one at a time. Who can afford to keep up and if you try, you will lose!
     
    Stay tuned it’s a slow bleed, we will wake up one morning and read on the MNB that some giant grocery company is in financial trouble!
     
    Whoever you are in grocery retail, the key is taking care of the cash cow, which is taking care of the customer in your store!


    On this subject, I commented:

    This really isn’t news to anyone who has been reading MNB for any period of time - we’ve been writing here about the coming conflagration between Amazon and Walmart, and the expected (and even unexpected) collateral damage that will result, for years … It is very simple. Everybody has to rethink everything.

    Which prompted MNB reader Rob L Vasseur, Jr. to write:

    Kevin. I have been reading MNB for over a year now. I love the commentary and the news that you bring each and every issue! I have often related news or observations you have made to issues I’m dealing with in my life.

    Today, I believe you made the most profound statement ever in that entire last line about Amazon vs. Walmart. These are indeed words to live by and with your permission I will be posting them in various formats around my house and office as a reminder. Thank you for the inspiration!


    My please, You flatter me. On the other hand, it beats last week, when some guy called me a “prig.”
    KC's View: