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    Published on: November 2, 2018

    by Kevin Coupe

    USA Today had a story this week about a new study from Third Way - described as “a think tank that advocates center-left ideas” - concluding that “despite an unemployment rate that has reached a 50-year low of 3.7 percent, most jobs across the U.S. don’t support a middle-class or better lifestyle, leaving many Americans struggling … Sixty-two percent of jobs fall short of that middle-class standard when factoring in both wages and the cost of living in the metro area where the job is located.”

    The story also cites a Pew Research Center study with a slightly different conclusion - that “a slight majority of Americans, 52 percent, do live in middle-class households … And another 20 percent or so live in upper income households. But that’s because they’re juggling multiple jobs, for example, or relying on investments, an inheritance or other household members who may have higher-paying jobs.” (In other words, they’re still falling short, but are finding ways to make up the shortfall.)

    Some of this is geographic and situational: “A factory machinist in Cedar Rapids, Iowa, earns an average $45,470 a year, more than enough to meet the $40,046 threshold for a middle-class job in that area. A similar machinist makes more – $57,220 on average – in San Francisco, but that’s far short of the $82,142 minimum for a middle-class job in that area, according to the report. It costs an average $32,440 a year to rent a one-bedroom apartment in San Francisco, compared with $7,368 in Cedar Rapids.”

    Jim Kessler, Third Wave’s vice president for policy, suggests that the nation, despite an economy that has been growing for six years and has been picking up steam - in some sectors - during the last two, is suffering from what he calls “an opportunity crisis,” which he says “explains some of the economic uneasiness and, frankly, the political uneasiness” playing out across the country.

    The study says that “30 percent of jobs are ‘hardship jobs,’ meaning they don’t allow a single adult to make ends meet … 32 percent are ‘living wage’ jobs, enough to get by but not to take vacations, save for retirement or live in a moderately priced home … (and) 23 percent are middle-class jobs, allowing for dining out, modest vacations and putting some money away for retirement.”

    Even if these percentages are not completely accurate, I’m not sure there are many folks out there who would argue that the improved economy has been felt by everyone, everywhere. That’s clearly not the case, which is also why there is an income disparity problem, and a shrinking middle class.

    All of which should be of grave concern to anyone who is in the business of marketing to these folks. If more than six out of 10 people are in either hardship jobs of living wage jobs, that doesn’t leave a lot of room for aspirational acquisitions. And yet, it is in catering to people’s aspirations that bricks-and-mortar retailers can compete most effectively with online retailers, especially since there also is increased price/value competition coming from the likes of Aldi and Dollar General.

    Scary stuff, if you are a traditional retailer. And at the very least, an Eye-Opener.
    KC's View:

    Published on: November 2, 2018

    Business Insider reports that there is a familiar feel to Kroger’s toy displays, being set up for the near-imminent end-of-year holiday shopping season.

    They feature a giraffe. Specifically, Geoffrey the Giraffe, who used to be the mascot for Toys R Us.

    The story notes that when Toys R Us went into bankruptcy, the “controlling interests” decided to hold onto some intellectual property and consolidate it into a holding company called Geoffrey LLC. Among those assets were names like Imaginarium, Koala Baby, Fastlane, and Journey Girls … and Geoffrey.

    Now, the giraffe is popping up in the form of pop-up stores that are being opened in Kroger stores around the country.
    KC's View:
    I was a longtime critic of the Toys R Us experience, which I always thought of as being somewhat less appealing than a colonoscopy; after all, at least with a colonoscopy, you lose a little weight, at least temporarily. At Toys R Us, I just thought I was losing my mind.

    Geoffrey has absolutely no appeal to me, but I cannot say that its presence in a pop-up store would have any impact on my buying toys in a Kroger or another pop-up store. (Probably because I already bought them on Amazon.) But it’ll be interesting to see if it has any residual brand equity that helps grow some sales.

    Published on: November 2, 2018

    Business Insider reports that Walmart-owned Jet is looking to demonstrate its upmarket bona fides by selling products from Nike and Bonobos on its site. “The new additions to Jet's site are part of an effort by Walmart to broaden the fashion assortments on both and," the story says, as well as a way of getting manufacturers comfortable to the point where they will allow Walmart to sell their upmarket brands on its own site.

    According to the story, “The new Bonobos-dedicated shop on Jet features $98 slim-fit pants, $118 button-down shirts, and $198 bomber jackets. Jet is offering two-day delivery on Bonobos items and free returns. The dedicated Nike shop on Jet's site now features ‘hundreds’ of Nike products including clothing, footwear, and accessories.”
    KC's View:
    Walmart, of course, owns Bonobos, so there probably wasn’t a lot of persuasion needed there. Nike was a different story … but the argument, I’m sure, is that as the retail world quickly is reshaped and recast, it is critical to have facings wherever and whenever you can. I don’t think this hurts Nike … the question is whether all this upmarket positioning damages Walmart’s essential value proposition over time, or just broadens it in a way that helps it. I’m guessing the latter.

    Published on: November 2, 2018

    The News & Observer reports that Wegmans has identified a location in Wake Forest, North Carolina, that will be where it puts its fifth store in the state.

    The store, according to the story, “is expected to be around 100,000 square feet. No timeline has been given for the project.”

    “Wegmans is in the middle of a large expansion into the North Carolina market,” the writes. “The chain, which is steadily expanding down the East Coast, has already announced plans to build stores in Chapel Hill, Raleigh and two in Cary.”
    KC's View:
    Big commitment, setting up a big battle among Publix, Harris Teeter, and Wegmans, among others.

    Published on: November 2, 2018

    Starbucks has released the designs for its suite of 2018 holiday coffee cups, and this year it seems as if the artwork is less likely than usual to stoke outrage among some of the company’s customers (and people who aren’t customers but just like being outraged).

    According to the Washington Post story, “This year, the coffee-making titan said it wanted to ‘look to the past’ and draw inspiration from its signature Christmas blend.” There’s a cup with red stripes, one with a green argyle pattern, one with red and white flames and one with mistletoe-like coffee cherries in red and green.”

    Starbucks COO Rosalind Brewer tells Business Insider that the company gathered customer feedback in designing the cups, both in person and through various digital means.

    These designs “seem harmless at first,” the Post writes, “granting consumers a festive way to enjoy their favorite sugary — and sometimes over-the-top — beverages. But in recent years, watching some of Starbucks’s seasonal design choices trigger controversy has become a holiday tradition in itself.”
    KC's View:
    This is where the whole “some people just like to be outraged” thing comes in.

    Oy. These manufactured controversies are enough to drive me to drink … and not coffee.

    Starbucks seems to have lost some of its mojo, and so a cup controversy probably was the last thing it needed or wanted. So mission accomplished on that score … until someone decides that they are offended by something and want to get a headline. Be better for them, I think, to just get a life.

    Published on: November 2, 2018

    CNN has a story about Amazon’s venture into the home services business, noting that “while Amazon has been trying to make hiring help as easy as ordering paper towels, services are a much more complex market than physical goods. Parameters aren't always clear, labor can't be shipped instantly wherever it's needed, and purchases can't be returned.” Still, Amazon says it “now offers a range of home services — everything from pressure washing to iPhone repair — in 45,000 US zip codes and parts of India and Europe. It says that in the ‘low tens of thousands’ of businesses operate on the services platform, and that customer ratings are high.”

    But … little else is known about the division's performance,” CNN reports. “Amazon has declined to disclose other metrics, such as revenue for the fledgling business or average service provider income. It also hasn't spoken much about the division during earnings calls. RJ Hottovy, a retail analyst at Morningstar, says it seems that Amazon is still trying to figure out the market.”
    KC's View:
    One of the things that CNN correctly suggests is that “Amazon's competitive advantage lies in offering services bundled with other products. For example, if you order a widescreen TV or Weber gas grill on Amazon, you can also find someone who can come install it. Lately, they've been offering $30 discounts on home cleaning services. But to consistently deliver on that promise, Amazon has to attract people to perform the services, many of whom have varying levels of availability and are already overwhelmed by the number of platforms to choose from.”

    I totally agree with that, but would observe that I don’t think Amazon does a particularly good job of marketing these services. For example, I actually need to buy a grill … but it never occurred to me a) to buy it on Amazon (not sure why it didn’t), and b) that I could get someone via Amazon to put it together (which apparently I can).

    Published on: November 2, 2018

    The Wall Street Journal has a story about how Starbucks had its best quarter in a year, posting same store sales that were up four percent in the US … though it appears that the growth came almost entirely from a five percent increase in transaction sizes, which came from price increases. Actual transactions, it seems, were down one percent.

    Some excerpts from the story:

    • “Pressure to improve customer traffic is mounting as the Seattle-based chain finds itself between lower-priced rivals like Dunkin’ Brands Group Inc. and higher-priced specialty coffee shops.” Meanwhile, the Journal points out, this was “the first full quarter that Chief Executive Kevin Johnson led the company without the presence of longtime leader Howard Schultz, who stepped down as chairman in June.”

    • “Under Mr. Johnson, the company is focusing on knowing the preferences of more visitors so it can better target them with offers that appeal to their ordering behavior. Starbucks recently opened its mobile order app to everyone—not just to customers signed up for its rewards program - and brought in 4 million new digitally registered customers in the past quarter.”

    • “The number of guests in its loyalty program is also growing, with 15.3 million active members in the U.S., up 15% from a year ago.”

    The story notes that Starbucks also is introducing new products, like healthier Frappuccinos … installing more drive-through windows that seem to generate more traffic and transactions … and “is also testing delivery in Miami.”
    KC's View:
    One of the things that COO Rosalind Brewer says is that Starbucks needs to work on growing transactions and transaction sizes … which sort of works against my general feeling that progressive retailers need to be less transaction-driven and more focused on lifetime customer value. But this may actually be the exception that proves the rule, because Starbucks, through its digital app and loyalty program, has been doing an excellent job for years at connecting with its customers and establishing relationships.

    I’m not really sure what the problem is … though I do think that maybe there is less surprise and delight than there used to be.

    Published on: November 2, 2018

    • The Associated Press reports that Amazon has launched a program “that aims to teach more than 10 million students a year how to code. Amazon said it will pay for summer camps, teacher training and other initiatives to benefit kids and young adults from low-income families who might not have learned to code otherwise. It hopes the programs spur more black, Hispanic and female students to study computer science.

    “Amazon declined to put a price tag on the program, called Amazon Future Engineer, but said it will take up a big chunk of the $50 million that it committed to spend on computer science education last year.”
    KC's View:

    Published on: November 2, 2018

    • Albertsons announced yesterday that it is expanding its Signature Reserve premium private label line.

    According to the announcement, “The company announced the initial launch of the top-shelf label in May with seven decadent flavors of ice cream, with award-winning Brazilian Guava Cheesecake emerging as a particular customer favorite. Today, the company offers a curated selection of Signature Reserve products, including ice cream, pasta and pasta sauce, single origin whole bean coffee, loose leaf tea, confectionery, and pie filling.”

    • Cadent Consulting Group is out with its 2018 Private Label Industry Study, concluding that while “private Label is growing at 3X the rate of national brands,” and is projected to have a 25 percent market share in the next decade, a good deal of that growth will be attributable to millennials.

    “Millennials, long considered the shoppers of the future, have arrived, and they are heavy shoppers of Private Label,” the study says. “One-third of their cart is already filled with Private Label, and virtually all millennials state that they will buy at least as much Private Label in the future, with half saying they will buy even more … Store Brands are driving store choice, with 54% of millennials saying that their store choice is driven by their retailer’s Private Label.”

    • The New York Times reports that Netflix, with a goal of producing a movie that wins an Academy Award, has decided to reverse its previous policy of streaming its movies online even as they are released in theaters - an approach that earned the enmity of the traditional film business.

    This year, the company said, it will release three films in theaters for a brief but exclusive period before they go online - Alfonso Cuarón’s Roma, described as “a black-and-white drama hailed as a masterpiece by critics who have seen it at festivals” … The Ballad of Buster Scruggs, a six-part frontier anthology written and directed by Ethan and Joel Coen … and Bird Box, a thriller starring Sandra Bullock and Sarah Paulson.

    While big movie theater chains are likely to continue to resist Netflix’s entreaties - they hate the idea of product they’re exhibiting also being available at home at the same time, the Times writes that “Netflix’s modified distribution approach should persuade more theaters to participate. But the move is really about winning Oscars and wooing Hollywood talent.”
    KC's View:

    Published on: November 2, 2018

    On the subject of companies taking political positions, MNB reader Jimmy Ducey wrote:

    It’s OK to have differing views but the danger is in discounting everything a person, a group, a company, or a politician says or does.

    Unfortunately that seems to be the new norm. With regard to President Trump, he drives me nuts, but I support some of the things he has done, not all, but some.

    Because of my independent thinking the Right thinks I’m stupid, and the Left, they know I’m stupid.

    I’ve got to tell you, I’m not a big fan of companies that choose sides, even if they share my views.
    I like companies, products, and people that make me feel good.

    Now it’s up to me to decide how Ben & Jerry’s and Unilever made me feel today.

    I’m thinking the ice cream from a less polarizing company would taste better. But what do I know, I’m stupid.

    MNB reader Emily Notrica had a different take:

    Thank goodness a company like Ben & Jerry’s is willing to make a stand and have the balls to take the chance! How many companies worry about the consumer turn off and lost revenues when taking a stand for what is right and what should be said/done—way too many won’t risk it! Love that Ben & Jerry’s continues to do what’s right for the people and for a better life for all!

    Yesterday we took note of a CNBC report on how CVS is testing a new service, CarePass, in Boston, that sounds an awful lot like Amazon Prime. This prompted one MNB reader to write:

    I like the idea KC, but it should be free with the prices they charge on non - CVS branded items. Markups much higher than a traditional grocery store, and they(as well as Walgreens) are both 100 billion dollar companies. Just something they should look at, IMO.
    KC's View:

    Published on: November 2, 2018

    In Thursday Night Football, the San Francisco 49ers defeated the Oakland Raiders 34-3.
    KC's View:

    Published on: November 2, 2018

    Novelist Michael Connelly, known for his Harry Bosch series of novels, has been firing on all cylinders lately. Not only has he continued writing Bosch novels, which are so good that they transcend the genre, but he’s also one of the executive producers of the excellent “Bosch” series on Amazon Prime Video. (The fifth season will be out early next year, if the past pattern is any indication.) And then, more than a year ago, he wrote “The Late Show,” the first book in what promised to be a new series about a young woman LAPD detective named Renée Ballard.

    Now, he’s out with a new novel, “Dark Sacred Night,” which teams Bosch and Ballard up in the search for in the search for the killer of a 15-year-old girl almost a decade earlier. Bosch has a personal reason for being interested in the case, and Ballard’s curiosity - after she finds Bosch, long retired from the LAPD, looking through some old files - turns into the kind of “everybody counts or nobody counts” mission in which Connelly specializes.

    “Dark Sacred Night,” like so much of Connelly’s work, is a page-turner … once I started it, I had trouble putting it down. (Thank goodness for a cross-country flight this week.) The book alternates between Bosch’s and Ballard’s points of view, which actually gives the reader a different angle on these two compelling characters … vastly different in age and gender and experience, but similar in being just damaged enough to have an enormous capacity for compassion and a driving sense of justice. It is a good match, made even better b y the fact that Ballard is still early in her career, and Bosch is facing the end of it, feeling his mortality, questioning his decisions, and yet propelled by something deep inside him that demands justice, whether inside or outside the lines.

    “Dark Sacred Night” is a terrific book. I heartily recommend it.

    My wine of the week is, in a word, wonderful - the 2016 Neyers Vineyards from California, which was absolutely delicious with a ribeye steak I had the other night. I don’t eat a lot of steak, but I might change my habits if I could have a wine this good with it all the time. (Actually, I still prefer salmon to steak, but this was pretty amazing, at a Boston steakhouse called, appropriately enough, Mooo.)

    That’s it for this week.

    Have a great weekend, and I’ll see you Monday.

    KC's View: