business news in context, analysis with attitude

Published on: October 4, 2018

This commentary is available as both text and video; enjoy both or either ... they are similar, but not exactly the same. To see past FaceTime commentaries, go to the MNB Channel on YouTube.

Hi, Kevin Coupe here, and this is FaceTime with the Content Guy.

This morning I want to tell you the story of Monorail Espresso, located on Westlake Avenue in Seattle, located pretty much right in the middle of Amazon’s headquarters campus in South Lake Union. As you can see in the video, it’s pretty busy … and, as also is shown in the video, it is right next door to the new Princi Bakery format that Starbucks has opened here.

When I walked by the other day, I sort of felt bad for the Monorail folks … how awful to be in a position where you’re suddenly competing with a behemoth like Starbucks, and a new format behind which it is throwing a lot of marketing muscle.

I stopped to talk to the folks who were working there - Corey and Michaela - and commiserate with their plight. But they were entirely cheerful about the whole situation.

They told me that, in fact they’d only opened this location last April … and that when they did so, they knew that the Princi Bakery would be opening just a few months later. (This is just Monorail’s third location.) Michaela grinned at me. “It’s okay,” she said. “People go next door for their pastries, and then they come here for their coffee, because they know that Starbucks’ coffee sucks.”

I had to laugh. I admire that sort of competitive moxie. And so I ordered a coffee - a large nonfat latte - and when Michaela gave it to me, it had a heart designed into the foam. She grinned again. “Starbucks wouldn’t give you a heart,” she said.

She’s right. Starbucks wouldn’t. And she and Corey were right about something else - their coffee was better than Starbucks’.

Competitive moxie is great, but it is even better when you deliver on the promise.

I know one thing - next time I visit Seattle, I’m going to Espresso coffee. Corey and Michaela have turned me into a customer, and an advocate.

That’s what is on my mind this morning. As always, I want to hear what is on your mind.

Published on: October 4, 2018

by Kevin Coupe

It had to happen. A loyalty marketing program for marijuana.

Called, inevitably, “WeedPass.”

This is not a joke. And no, I’m not high as I write this.

As I understand it, WeedPass has created a system where it acquires bulk movie, concert and sporting event tickets in bulk, and then distributes them to participating marijuana dispensaries , which then hand out the tickets to people who make purchases of a certain amount (usually $50 to $75).

WeedPass charges the dispensaries a listing fee to list them - and the available rewards - on its site.

The company says that WeedPass is being beta tested in “dozens” of dispensaries in California and Colorado, and is planning to offer it in every state where cannabis has been legalized.

A retailer friend of mine recently made the point that most of the dispensaries he’d visited - for professional research purposes only, of course - were lousy at marketing, merchandising and even customer service; it was as if they were counting on pure novelty to generate business, without thinking about the need for a more sustainable long-term approach.

WeedPass sounds like somebody is trying to address this problem. And, it sounds like an Eye-Opener.

Published on: October 4, 2018

Sedano’s, the 34-store, Florida-based Hispanic grocery store chain, has signed a deal with a company called Takeoff Technologies to build “the world's first robotic supermarket.”

Essentially, the ”robotic supermarket” is a dedicated fulfillment center that will serve the online needs of 14 Sedano’s stores in the Miami market, and offer pickup services at those stores.

According to the announcement, “This groundbreaking technology is expected to launch in the upcoming month, bringing innovative automation and transforming eGrocery economics. Customer orders will be placed via an online app and carried out by Takeoff's automated Micro-Fulfillment Center, with the support of Sedano's employees. AI-enabled robots assemble full supermarket orders of up to 60 items in just a few minutes – a fraction of the speed and cost of current manual picking options.”

Javier Herran, Sedano’s chief marketing officer, says that “this model gives us the ability to leap into the eGrocery industry, develop a new level of employment opportunities and continue meeting the needs of our valued consumers by offering an affordable and convenient online service.”

The story says that “Takeoff's objective is to develop hyperlocal fulfillment centers that have one-eighth the footprint of a typical supermarket thanks to innovative robotics and compact vertical spaces. Takeoff is currently working with five regional and national retail chains in the US and have several sites in development to deploy in 2019.”

Published on: October 4, 2018

Bloomberg reports that as Amazon next month begins offering a $15/hour minimum wage to hourly, part-time and seasonal employees, including those who work at Whole Foods, it will simultaneously begin cutting back on monthly bonuses and stock awards.

According to Bloomberg, “Warehouse workers for the e-commerce giant in the U.S. were eligible in the past for monthly bonuses that could total hundreds of dollars per month as well as stock awards, said two people familiar with Amazon’s pay policies. The company informed those employees Wednesday that it’s eliminating both of those compensation categories to help pay for the raises, the people said.”

Amazon says that for these workers, their total compensation will increase, despite the elimination of bonuses and stock.

Published on: October 4, 2018

The Wall Street Journal has a story about how, “after years of inertia, U.S. supermarket chains are racing to add online options, such as home delivery and in-store and curbside pickup, to keep shoppers from shifting more of the $800 billion in annual food and beverage spending to e-commerce firms such as Amazon.com Inc. The process is spurring retailers and major food brands to change fundamental aspects of their operations - from staffing and supply networks to the way they organize their parking lots and stores … E-commerce represents less than 5% of U.S. grocery sales currently, but food and beverage sales are growing far faster online than in traditional supermarkets. Forrester Analytics predicts that by 2022, the U.S. online grocery market will total $36.5 billion, up from an estimated $26.7 billion this year.”

But, “at the same time, the online shift has created complications for the physical stores,” the story says, noting that “grocers are remodeling their stores and designing new locations to better accommodate online ordering … Many supermarkets are reserving parking spaces where customers and delivery services can quickly pick up online orders bagged at stores. Some stores have designated checkout lines to ring up larger orders from third-party online grocery-delivery services such as Instacart, while others have created separate entrances for delivery pickups.”

Published on: October 4, 2018

The New York Times has a good story about Marks and Spencer in the UK, which is facing nine kilometers of bad road because of heightened competition and, it seems, an inability to keep up with the times.

While “M & S — or Marks and Sparks, as its affectionately called — is now a cultural fixture in the daily lives of millions of Britons,” it is becoming steadily less so: “As profit falls and e-commerce reshapes retail, the company will shut 100 stores by 2022 — a corporate restructuring that will play out in communities.”

Company chairman Archie Norman assesses the situation this way: “We don’t have a God-given right to exist, and unless we change and develop this company the way we want to, in decades to come there will be no M & S.”

The Times notes that “Marks & Spencer is far from the only British retailer experiencing difficulty. House of Fraser collapsed last month, requiring a last-minute bailout. Debenhams looks likely to follow suit. And profit at John Lewis plummeted 99 percent in the first half of the year.

“But M & S is under attack from all sides. Competitors sell cheaper, trendier clothes; supermarkets have raised the quality of their food; and online shopping has become the norm.”

Interesting stuff, and you can read the entire article here.

Published on: October 4, 2018

The Wall Street Journal reports this morning that a new study from PR company Edelman suggests that “people around the world are increasingly taking into account what brands stand for when they buy a product,” and that “almost 40% of people surveyed said they bought a product for the first time for the sole reason that they appreciated the brand’s position on a controversial societal or political issue.”

Indeed, the negative impact of having the “wrong” opinion on an issue is even greater: “About 64% of people polled chose to switch, avoid or boycott a brand based on its stand on social or political issues.”

The story notes that to a great extent, this trend is being driven by “younger generations that expect brands to make a difference in society and take a stand on important issues.” And many brands have responded. Companies such as Nike, Dick’s Sporting Goods, Audi and Levi Strauss have all taken political and cultural positions that their leadership knew had the potential to create controversy.

Published on: October 4, 2018

• Barron’s reports that Walmart is getting into the pop culture collectibles business “in a big way,” creating a section for this category that will be found in 3,500 of its stores as well as making “a deal to be the exclusive in-store seller of boxes from subscription ‘stuff’ company Loot Crate.”

Walmart also is going to stock “some available-nowhere-but-Walmart products,” the story says.

Published on: October 4, 2018

• The New York Times reports that “EBay claims Amazon has illegally tried to lure top sellers off its marketplace by exploiting its internal messaging system.

“The e-commerce site said it was tipped off to the situation last month by an eBay seller who had been contacted by an Amazon representative. An early investigation by eBay found at least 50 Amazon representatives had sent hundreds of solicitation messages over the last several years … EBay sent a cease-and-desist letter to Amazon on Monday outlining its claims.”

Amazon said it is conducting a “thorough investigation” of the claims.

Published on: October 4, 2018

…with brief, occasional, italicized and sometimes gratuitous commentary…

• The National Retail Federation announced that “it expects holiday retail sales in November and December - excluding automobiles, gasoline and restaurants - to increase between 4.3 and 4.8 percent over 2017 for a total of $717.45 billion to $720.89 billion. The forecast compares with an average annual increase of 3.9 percent over the past five years.”

NRF points out that “holiday sales in 2017 totaled $687.87 billion, a 5.3 percent increase over the year before and the largest increase since the 5.2 percent year-over-year gain seen in 2010 after the end of the Great Recession.”


• The Tallahassee Democrat has a story about how a new Public Green Wise store in Tallahassee is working with local breweries there to create special craft/draft beers that they will sell exclusively in its store.

“"The local breweries have been tremendous in our collaborative efforts," says Dwaine Stevens, the company’s Media and Community Relations Manager. "We will continue to partner as we learn more about the local beer scene here in Tallahassee."


• Business Insider reports that “Sears is closing at least six Sears stores and five Kmart stores ahead of the holidays … The newest round of store closings comes as the company battles to stay afloat under mounting pressure from looming debt-repayment deadlines … The company had cut its store count to 866 stores as of September 13, down from 1,980 stores in 2013.”

The story notes that “Sears CEO Eddie Lampert and his hedge fund, ESL Investments, recently submitted a proposal designed to give the company more time to revive its business. Lampert wants creditors to restructure about $1.1 billion of debt coming due in the next two years, according to the proposal. He has also asked Sears' board to sell $1.5 billion worth of real estate and divest itself of $1.75 billion of assets.”

Of course, you have to figure that Lampert has structured such a deal so whatever happens to Sears, he comes out okay. This is just a long, slow, agonizing death for an American icon, presided over by an American version of an oligarch.


• The Wall Street Journal this morning reports that “Barnes & Noble Inc. said it is considering a sale after receiving interest from multiple parties including its executive chairman, Leonard Riggio … The company on Wednesday said it would launch a formal review process to evaluate its strategic options.”

According to the story, “Barnes & Noble also said that it has adopted a short-term shareholder rights plan - also known as a poison pill - meant to fend off an unsolicited acquirer, after observing ‘rapid material accumulations’ of its stock by parties it can’t identify.”

It’s probably Eddie Lampert buying the stock. He knows a good deal when he sees one.

Published on: October 4, 2018

Yesterday, we had a story about how the first Amazon Go store in Seattle has begun charging 99 cents for the orange cloth bags that until recently were being given away for nothing.

I wrote:

You’ll notice that the sign instructs the consumer to “tap the bag icon in the app to buy” a bag.”

Which I did. Though, when I thought about it later, it seemed to me that this sort of was like the honor system. If I’d just taken the bag without tapping the icon, does that mean I wouldn’t have been charged?

More to the point, I wonder why I have to tap the icon at all. After all, you’d think that the same system that allows Amazon to track what I take off the shelves in the store and charge me for what I leave with would also be able to track how many bags I take.

MN reader Linda Ballew-Johnson responded:

I think it’s an honor system. Because you could return with a previously purchased bag. You shouldn’t have to purchase it again.

Good point. Hadn’t thought of that.

MNB reader Rich Richardson wrote:

A colleague recently visited the Amazon Go store in Chicago and picked up two bags during her trip. Ten minutes after leaving the store (when she finally received her receipt), she noticed that she had not been charged for the bags. She then walked back to the store, where they declined to charge her for the bags…

Good to know.

MNB reader Benjamin Brill wrote:

If I were operating a checkout-free store, and I hope someday to do so, I’d be concerned about Loss Prevention and Auditing.  Amazon’s Go Bag routine seems like a great way to get an instant honesty-check of customers, and a sense of what they’re likely to get up to in my store.



On another subject, from MNB reader Jeff Gartner:

A couple of your readers tried to parallel the practices of very large retailers such as Walmart, Kroger and Amazon with Internet telecom companies such as Comcast, AT&T, Time Warner and Verizon. There's a really big difference. A buyer or seller has alternatives to those very large retailers, but in most of the US there are only 1 or 2 telecom providers for residential Internet service because of both municipal licenses and scale to build a viable and profitable network. 

Net neutrality protects not only consumers, but small businesses from telecom's likely predatory pricing. 

Thanks for including this discussion in your column.



On the subject of Amazon’s decision to raise its minimum wage to $15/hour, one MNB reader wrote:

You know…this is where bowing to political pressure from a private, or public company perspective, or from attempting to buy votes when city, state, or federal governments mandated minimum wages is absolutely wrong; in my opinion anyway…and this is why. Any entity that hires and pays wages should pay what their profit structure allows, and if allowed to do so in a society based on competitive capitalism, competition for workers will dictate what wages are for various occupations.

When the economy is booming, and demand for product is high and there is a diminishing number of folks to fill jobs to produce goods and services, then wages will go up, and the converse is also true. This is how cost of goods and revenues stay in balance. However, when wages are raised artificially, prices for goods and services rise without the corresponding demand for those goods or services, revenue generation stalls as does the need for production. But in this artificially created cost increase scenario, reduced demand does not translate into reduced costs to increase demand….it results in inflation, where no one wins.
 
Think about what you noted in your thoughts; that the increase cost Amazon will incur from these wage increases may be distributed among their supplier base. If that’s the case, then Amazon does not believe they have the profit structure in place to absorb these increases, or that they don’t believe there is room in their retail structure to raise retails to offset these raises. Imagine this press release: “We believe that the national minimum wage should be $15.00 per hour and we’re taking the first step by immediately increasing our minimum wage to $15.00  and we encourage the federal government to mandate the same for all companies to do the same. By the way we’ll be increasing all of our retails across the board by 10% to offset our increased operating costs”.

Wonder what such a press release would do to the stock price? Finally, if Amazon does indeed force suppliers to pony up more for the pleasure to do business with them, those costs will find their way to the consumer and Amazon really didn’t do anything but raise costs for everyone. Just my opinion.

And, from MNB reader Terry Halverson:

What really happened…

Jeremy Corbyn, leader of the British opposition Labour Party, was less congratulatory than (Sen. Bernie) Sanders. “Amazon didn’t gift this, workers organized for it,” he said on Twitter. “The fight goes on to improve working conditions and get this company to pay its fair share of taxes.”

Amazon was on its way to succumbing to an organized labor movement that would have provided a minimum living wage and benefit package, reducing its workers dependency on large government subsidies. 

Now Amazon will use its political clout to force all retail competition to raise compensation nationwide and erase their current labor cost disadvantage. The government should save some money at the expense of raising prices to all.

What you could be giving them kudos for is a clever political, financial, and PR move disguised as a care for their employees.

True. Though to be honest, I have nothing against inherently clever political, financial and PR moves that also manage to increase wages for employees.

Published on: October 4, 2018

In last night’s American League Wild Card game, the New York Yankees defeated the Oakland Athletics 7-2, and now will go on the face the Boston Red Sox in a best-of-five AL Divisional Series.