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    Published on: August 8, 2018

    by Kevin Coupe

    Bloomberg has a story about how Walmart has come to the conclusion that if it is going to compete with Amazon and prevent it from “ruling the digital galaxy,” it needs to “forge alliances” with a vast network of partners that it believes can help it innovate faster and more effectively.

    Among the entities (and their countries of origin) with which Walmart has developed relationships, or from which it has poached executives : Waymo (US), Rakuten (Japan), Microsoft (US/India), Postmates (US), Flipkart (India), Google (US), Uber (US), (China), Qualcomm (US), Square (U.S.), Rent the Runway (US), Instagram (US), Yahoo! (US), and Baidu (China).

    The story notes that “historically, the massive retailer has been reluctant to cozy up with others, preferring to keep the benefits of any new venture to itself. The company’s track record with partnerships isn’t great: Walmart’s first alliances in the key markets of India and China, for instance, were eventually abandoned.” And, Bloomberg writes, “The anti-Amazon alliance won’t guarantee success against the online giant. But each member of its resistance provides something Walmart can’t do well alone.”

    It is an important and Eye-Opening lesson, I think. If the world’s biggest retailer is willing to strike deals and create alliances in order to gain a competitive advantage, then it seems to me that almost anyone else ought to be willing to engage in a strategic evaluation of how networks can make the parts bigger than the whole.

    It is important, however, to remember that retailers cannot give up their own identities or advantages. Retailers have to remember that the customer is theirs, and the customer experience has to be controlled by the retailer, not by some outsourced company.

    You can’t forfeit your soul.
    KC's View:

    Published on: August 8, 2018

    Amazon said today that it will begin offering grocery pickup from select Whole Foods stores in the Sacramento and Virginia beach markets, with plans to expand elsewhere in the US this year.

    According to the announcement, Amazon Prime members “Prime members can now shop Whole Foods Market’s selection of fresh and organic produce, bakery, dairy, meat and seafood, floral and everyday staples and pick up their order in as little as 30 minutes, all without leaving their car … Prime members place their order via the Prime Now app and choose the pickup option at checkout. Customers can choose free pickup in as little as an hour on orders of $35, or in 30 minutes for $4.99. After arriving at the Whole Foods Market store, customers park in a reserved pickup spot and a Prime Now shopper will place groceries into their car within minutes. For customers who tell us they are on their way in the Prime Now app, groceries will be ready as they arrive.”

    This offering is in addition to a service allowing Prime members in dozens of cities to get grocery delivery from Whole Foods.

    The announcement notes that “customers can also find out if these services are available in their area by saying, ‘Alexa, shop Whole Foods Market’.”

    In its analysis, the Wall Street Journal writes that “about 15% of digital food and beverage sales go to online grocery pickup, according to ratings firm Nielsen. Bulky items like beer, wine, frozen meat and cheese are the most frequently purchased, Nielsen found. ‘Click and collect’ customers tend to be less affluent than those who use online-only grocery services, Nielsen said.”

    Amazon, the Journal reports, is promising that “its service will be faster than those of its competitors.”
    KC's View:
    All of this has been utterly predictable from the moment that Amazon announced it was acquiring Whole Foods, and yet announcements like these remind us of exactly how ambitious Amazon is as it integrates Whole Foods into its ecosystem. And, perhaps more importantly, Amazon continues to add value to Prime membership.

    What was it Jeff Bezos said about Prime? It was something about wanting to make it so attractive, useful and relevant that it would be almost irresponsible not to be a member.

    It is a pretty good bet that however fast analysts expect this service to be rolled out nationwide, it is going to happen faster. I suspect there will be challenges, especially when it comes to fresh foods … but the folks at Whole Foods are likely to be better at picking them than the folks at Amazon Fresh … which, I think, will gradually be merged with all these Whole Foods offerings.

    Published on: August 8, 2018

    Market research company Morning Consult is out with a survey - of 6,600 Americans, it says - concluding that Walmart, Amazon and Target are viewed as the most ethical companies in the US.

    The company said that, based on the number of mentions, the top 10 most ethical companies list is rounded out by Chick-Fil-A, Starbucks, Apple, Costco, Google, Microsoft and McDonald’s.

    MediaPost, in its story about the study, says that as part of the study it also looked at “what consumers expect from brands in this highly charged political era. There are some issues that brands should steer clear of, and talking about President Trump in any context will harm a brand’s reputation … Other topics to be avoided include abortion, anthem-kneeling/protests and immigration. Three issues that aren’t very controversial are civil rights, criminal justice reform and LGBTQ rights. Gun control is somewhere in the middle.”

    The story also notes that a plurality of Americans says that “as corporations have become more political, they've moved in a culturally liberal direction. At the same time, more Americans say corporations have become friendly to congressional Republicans than congressional Democrats.”
    KC's View:
    First of all, I’ll buy the fact that there are some subjects that businesses should avoid talking about, lest they irritate a sizable percentage of their customers. Though I’d also argue that this is not a hard and fast rule - there are times that businesses probably should take positions, especially if they view political positions as antithetical to the interests of their customers. One example - the alliance of retailers trying to fight back against the Trump administration’s criticisms of the US Postal Service.

    As for the list of ethical companies … mine might be a little different and in a different order. But I was trained by Jesuits, and the notion of ethical behavior was taken sort of seriously.

    Published on: August 8, 2018

    MarketWatch has a story about the potential impact of Kroger’s decision to no longer take Visa cards at the 21 stores and five gas stations that are part of its Foods Co chain, a reflection of its frustration with Visa’s interchange or “swipe” fees.

    The story notes that “Kroger has a partnership with Mastercard for its loyalty program, and produces co-branded Mastercards,” and “more Kroger customers could now be encouraged to use Mastercard, he said, or simply turn to debit cards when making purchases.”

    Craig Shearman, vice president for government affairs at the National Retail Federation (NRF), says that “it looks increasingly likely that retailers will feel emboldened by the debacle between Kroger and Visa.” Shearman suggests that banning cards is one of the options available to retailers who “have little ability to negotiate with credit-card companies, who have ‘extreme market power’ when it comes to how customers pay for purchases.”

    “I think retailers are definitely getting more frustrated,” Shearman says.
    KC's View:
    I know Visa says it is open to negotiation, but I think that means it is looking to figure out how to make Kroger an offer it can’t refuse. Though, I’d guess Visa could be a little worried that this attitude might be catching.

    I think it is critical for retailers to find a way to educate consumers about the cost of credit card usage, so they can make intelligent decisions and understand why the retailer is doing certain things; this won’t be easy, because the last thing that credit cards want is any sort of transparency.

    But there’s one other thing. The MarketWatch story points out that “a George Mason University study last year found that retailers don’t typically lower prices when they reduce credit-card swipe fees.” Which strikes me as sort of disingenuous.

    Published on: August 8, 2018

    The Boston Globe has a story about Wayfair, the online home goods seller:

    “Wayfair has become a colossus since it was launched in a spare bedroom of cofounder Steve Conine’s Boston home in 2002: It has five popular branded websites stocked with some 10 million products, sales that are forecast to hit $6.6 billion this year, and a stock market value of $10 billion, making Wayfair one of the largest publicly traded companies in Massachusetts.”

    At the same time, the Globe writes, “Wayfair is … on a shopping spree of its own - for people and for office space. It added about 2,000 employees in the first half of this year, and its headcount is approaching 10,000. The company is rapidly outgrowing its headquarters and next year will expand into a nearby building with space for another 4,000 employees.”

    However … “Wayfair is increasingly vying against some of biggest names in retail,” the Globe writes. “Home Depot last year purchased the Company Store, offering bedding and textiles to complement its vanities and hardware. Walmart’s home offerings online now feature virtual tours and ‘Buy the Room’ options. Target acquired a shipping service for home deliveries, and Houzz, the home-design platform that connects customers with contractors, interior designers, and retailers, bulked up with $400 million in funding last year.

    “And then there is Amazon. The online giant more than tripled its furniture sales to $4 billion from 2015 to 2017, according to One Click Retail. It now has two private-label brands, Rivet and Stone & Beam.”

    There’s another problem: “The more Wayfair sells, the more it loses money. The company reported a net loss of nearly $245 million in 2017, yet is doubling down on a business plan that emphasizes growth over profit.” In other words, Wayfair is looking to approximate the Amazon model. The question is, can it eventually translate growth into profitability?

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

    Published on: August 8, 2018

    The Houston Chronicle has a story that examines why more retailers - and consumers - are not using touchless payment systems such as Apple Pay, Google Pay and Samsung Pay, when it is a “great customer experience - fast, simple and secure” and “much faster and safer than using a credit card.” The answer to the question seems to remain something of a mystery.

    According to the piece, “In some cases, big retailers want to develop their own smartphone payment schemes. Walmart, for example, has its own system called Walmart Pay that uses QR codes generated on the phone for making payments. CVS and 7-11 were using a similar system called CurrentC, but that was sold to JP Morgan Chase.” HEB “has terminals prominently displaying the symbol for NFC payments at many of its checkouts,” and “is testing a self-checkout app called H-E-B Go at two of its stores in San Antonio and one in New Braunfels,” but has not yet rolled the system out chain-wide.

    In the case of Apple Pay, the Chronicle writes that “adoption was slow when it launched in 2014, but it gained momentum as merchants switched over to payment terminals that took cards with built-in security chips. Retailers had to upgrade anyway, and many added terminals that allowed for tap-to-pay systems.

    “During Apple's second-quarter earnings call with analysts last week, CEO Tim Cook said Apple Pay had a record billion-plus transactions during that period. In addition, he said, Apple Pay was coming to two big holdouts - the 7-11 and CVS chains. It will also soon be available in Germany.

    “Why don't more retailers offer it? It's not necessarily more expensive, because Apple takes its reported 0.15 percent cut at the bank level, not from the retailer. Merchants do need to invest in terminals that support it, but many of the chip-reading terminals can handle NFC transactions out of the box.”
    KC's View:

    Published on: August 8, 2018

    • In the story above about Amazon offering various pickup and delivery services from Whole Foods, it is noted that “customers can … find out if these services are available in their area by saying, ‘Alexa, shop Whole Foods Market’.”

    But Tech Crunch reports that new research suggests “that very few owners of Alexa-powered devices use them for shopping. Of about 50 million Alexa users, only about 100,000 reportedly bought something via voice interface more than once. It’s not exactly surprising, but it may still harm the narrative of conversational commerce that Amazon and others are trying to advance … it would be a bit disingenuous to pretend that conversational commerce is anything other than one point in a litany of proposed uses for the likes of Alexa, running the gamut of credibility.”
    KC's View:

    Published on: August 8, 2018

    Business of Fashion reports that Walmart is developing a basics clothing line designed “to rival the likes of Everlane … The yet-to-be named, direct-to-consumer apparel label will come out of the big box behemoth’s brand incubator,” and is likely to be sold primarily - or exclusively - through Walmart’s e-commerce site.

    According to the story, “Andy Dunn, founder and chief executive of men's apparel brand Bonobos, which Walmart acquired in 2017 for $310 million, is leading the charge on the project in his role as svp of digital consumer brands.

    “The new brand will be similar to San Francisco-based Everlane, which sells minimalist staples that start at $15 for a v-neck tee and scale up to $175 for a leather tote. However, Walmart's range will be geared more pointedly toward Gen Z and boast even lower prices. Bonobos designer Dwight Fenton is developing the line, although sources said much of the design and production will be outsourced to a third-party.”
    KC's View:

    Published on: August 8, 2018

    CNBC reports that Kroger “is exploring options, including a potential sale, of its Turkey Hill ice cream brand, the latest of its efforts to pare down its business as it focuses on building a grocery juggernaut to compete with the likes of Amazon and Walmart … The move follows the sale of its convenience store business earlier this year for $2.15 billion and several investments to bulk up the e-commerce end of its grocery business. Those efforts include a stake in British online supermarket Ocado, the acquisition of meal kit company Home Chef and launch of grocery delivery service Kroger Ship.”

    • The South Florida Business Journal reports that Publix plans to open a fourth GreenWise Market, its health-centric natural and organic products brand. The unit will be opened in Boca Raton, Florida, making it the second GreenWise there.

    According to the story, “The branding is part of Publix's goal to compete in a market where demand for natural and organic products is growing. In South Florida, there has been an increase of such grocers in recent years, including Sprouts Farmers Market and Lucky's Market.” Lucky’s is benefitting from an investment by Kroger.
    KC's View:

    Published on: August 8, 2018

    • Kroger announced that Valerie Jabbar, currently president of the Ralphs division, has been named group vice president of merchandising for the company.

    Mike Murphy, currently vice president of operations for the Columbus division, will succeed Jabbar as president of Ralphs.
    KC's View:

    Published on: August 8, 2018

    We had a story the other day about a study into the competitive sets and consumer behaviors seen as having the greatest potential impact on the supermarket industry … and, no surprise, Amazon is at the top of the list. When asked to identify the biggest grocery disruptors, over half of food retail executives (54%) pointed to Amazon, two in five (41%) identified Walmart, and one-quarter (25%) said online food delivery services, while smaller numbers believe it’s Kroger (10%) and Target (8%).

    MNB reader Steve Zimmerman responded:

    You know who loves the outcome of this consumer study? ALDI. I cannot believe ALDI is not seen as more disruptive than Walmart. The days of Walmart disruption (comparable to the late 90's and early 2000's) are over. Being from Northeast Ohio and seeing the transformation of ALDI, they are eating some of everyone's lunch around here. Walmart is doing what it has always been doing (for the most part) with little change in the industry needle (compared to Amazon). With ALDI, they have always managed to fly low and slow, while always making progress with consumers. My opinion is Amazon, ALDI, and probably Walmart.

    But Target? A beer and wine vendor I work with told me this recently: "Target is the new Walmart." And with 8% of the vote? I disagree and would easily put Trader Joe's ahead of Target. Another low-flying and slow-churning competitor that's eating other companies profits for lunch.

    MNB reader Jeff Gartner wanted to chime in on the mass transit conversation:

    Yes, mass transit is dependent on taxpayer subsidies, but then so are the roads on which we drive in our individual cars. And the more that mass transit can move more people, there are fewer individual cars to clog up traffic and reduce the need to spend on wider roads with more lanes. Not to mention the expense of parking in many places.

    As a native of Chicago, I experienced the value of a good bus and el/subway system as a kid and again as a commuter. We visited one of our daughters recently in Seattle and appreciated their good bus system to get around.

    On the subject of Wayfair’s decision to build a bricks-and-mortar store, one MNB reader wrote:

    Wayfair, it seems to me,  is simply replicating the model used by Restoration Hardware Outlets.  Those stores have some impressive deals.

    MNB reader Frank Fay had a thought about the anecdote we ran yesterday about an exceptionally kind Walmart employee:

    Thanks for reporting a story about the kindness that Ebony Harris provided to Angela Peters at Walmart.  It’s a pay it forward moment and it renews my spirit for random acts of kindness.  Walmart, send that superior customer service example employee to Disney for a Wow moment of her own!

    Yesterday’s mention of the death of French chef Joël Robuchon included a link to his famous mashed potatoes recipe, prompting one MNB reader to write:

    As an aspiring cook, I appreciate the recipe share.  If you add enough butter and heavy cream, I’ve found most anything tastes great.

    Finally, about Dorothy Lane Market, celebrating its 70th birthday, one MNB reader wrote:

    I’m lucky enough to live about 10 minutes from one of their stores. Walking into any DLM store is wonderful experience. The wonderful aroma from the bakery (where they always have samples of something delicious) draws you in. Their produce displays are fantastic and they always have large selections of locally grown produce. Their steaks rival any 5-star restaurant’s and they always have fresh samples throughout the store. Go in on a weekend and you’re treated to the sounds of a live piano player. If you don’t feel like cooking, head back to Jack’s Grill, pick out a piece of fresh fish or a cut of meat and they will grill it up for you. They stress courtesy with all of their staff and it shows. We never fail to leave without a huge smile on our face (and an incredible Killer Brownie.)

    And MNB reader George Denman wrote:

    You are absolutely right in your praise of the incredible experience shopping at DLM. I hosted a competitor retailer a year ago and we took a tour of their Centerville store. We were approached no less than 5 times by managers within the store and asked if we needed assistance in finding something within their department. This competitor purchased over $70 in food and beverages that she could not find in her own stores. On another occasion I stopped in the same store to purchase some killer brownies ( to die for) to take up to the family cottage at Indian Lake and Calvin himself came over to say hello and chat. It is quite the experience each and every time.
    KC's View: