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    Published on: November 5, 2018

    by Kevin Coupe

    KCBS-TV has the remarkable story of how customers of a Seal Beach, California, doughnut shop have gone to bat for the store’s owners in a time of desperate need.

    John and Stella Chhan immigrated to the US from Cambodia in 1979, and have been operating Donut City in Seal Beach for more than three decades. They are fixtures in the area.

    Recently, Stella Chhan suffered an aneurysm, and has been recovering in rehab. John Chhan would like to spend more time with her, but he can’t leave his shop until he sells out of doughnuts - his wife may be ill, but he still has to make a living, and it is just him.

    Chhan’s customers wanted to set up a GoFundMe account to help him and his wife during their time of need, but Chhan refused. And so, these regular customers have done the next best thing - they come in early in each day and buy at least a dozen doughnuts each, quickly wiping out the inventory so Chhan can go be with his wife. They drummed up support for the tactic via a newsletter and word of mouth, the story says.

    “Hey come and support this guy’s doughnuts,” one customer said, outside Chhan’s shop. “He’s a great man, great cause.”

    This Eye-Opening story made me feel so good when I read it. It says so much about America’s best qualities - the immigrant work ethic that helped build it, the entrepreneurial spirit that can make a small business so consequential to its customers, and the basic human compassion that lead some people to believe and act like kindness and generosity are far more important than greed and meanness and a me-first sensibility.

    I am touched by these people. I just wish I lived somewhere near Seal Beach, so I could go buy a couple of dozen doughnuts. (Plus, I’d be living near Seal Beach...)
    KC's View:

    Published on: November 5, 2018

    The Washington Post reports that Amazon is close to announcing that it plans to put its second North American headquarters city - dubbed HQ2 when it announced its intentions and set off a competition among hundreds of communities - in Northern Virginia, across the Potomac River from Washington, DC.

    According to the Post the company “has held advanced discussions about the possibility of opening its highly sought-after second headquarters in Crystal City, including how quickly it would move employees there, which buildings it would occupy and how an announcement about the move would be made to the public, according to people close to the process.

    “The discussions were more detailed than those the company has had regarding other locations in Northern Virginia and some other cities nationally, adding to speculation that the site in Arlington County is a front-runner to land the online retail giant’s second North American headquarters and its 50,000 jobs,” not to mention the $5 billion investment that Amazon has pledged to make in whatever community it chooses.

    However, the Wall Street Journal reporting on the story is different, saying that Amazon “has progressed to late-stage talks on its planned second headquarters with a small handful of communities including northern Virginia’s Crystal City, Dallas and New York City … The ongoing talks with some local officials come as discussions appear to have cooled in some of the other 20 cities on Amazon’s shortlist, including Denver, Toronto, Atlanta, Nashville, Tenn., and Raleigh, N.C., according to people familiar with those situations.”

    The Post notes that adding to the speculation about Northern Virginia is the fact that several buildings that had space for rent have pulled that space off the market.

    To be clear, the developer of those buildings has not commented about the speculation on the record, and Mike Grella, director of economic development for Amazon, posted the following message on Twitter:

    “Memo to the genius leaking info about Crystal City, VA as #HQ2 selection. You’re not doing Crystal City, VA any favors. And stop treating the NDA you signed like a used napkin.” (Amazon required nondisclosure agreements of all the finalist communities.)

    Amazon founder/CEO Jeff Bezos is quoted in the story as having told a conference last week that “ultimately the decision will be made with intuition after gathering and studying a lot of data — for a decision like that, as far as I know, the best way to make it is you collect as much data as you can, you immerse yourself in that data but then you make the decision with your heart.”

    The Post - which, of course, is owned by Bezos in a private investment - has another story in which the reports examined where Bezos’ private has traveled recently as a way of figuring out the likely winner:

    “The jet has touched down in the Los Angeles area more than a dozen times and made multiple trips to Boston, Dallas, Miami, the D.C. area and the New York City area. Amazon named three D.C. area locations (the District, Northern Virginia and Montgomery County, Md.) finalists and two in the New York area (New York City and Newark).

    “The plane has not been to 11 other finalist cities. Some of those were considered long shots from the outset, among them Columbus, Ohio; and Indianapolis.

    “But experts say it could signal disappointment for other cities that were considered strong possibilities, such as Chicago, Atlanta and Austin, if Bezos did not travel to those places some other way. They say it is very rare to see a chief executive choose a new headquarters site without looking at it personally, even if he or she is not involved in the early or middle stages of the project.”
    KC's View:
    First of all, let’s be clear - this could all be a head fake. I’ll believe it when I see it officially announced.

    I do wish that all of the cities involved in the hunt had been more open about the kinds of financial/tax/infrastructure incentives that they were offering Amazon. In fact, I wish Amazon had required the communities to be transparent about their pitches … it would’ve been nice if political leaders had enough confidence in their constituents that they wanted to explain their offers, put them in context, and define the long-term benefits, all as a way of getting taxpayer buy-in and enthusiasm.

    Whoever gets the deal is suddenly going to see a lot of pressure put on its infrastructure, but there also are going to be enormous benefits, and a balance will have to be sought - and explained - in a nuanced sort of way.

    At the same time, I’d expect that a number of the cities that don’t win the contest will still see plenty of investment from Amazon in coming years. Boston, for example, already is. Amazon has a very clear sense of place and time and potential in all of these markets, and I’d expect it to use that information.

    I do think that whatever community gets HQ2, they should look to Toronto for inspiration about how public-private partnerships can reframe the discussion and move a community forward in a bold and progressive way. I’ve thought for a while that Toronto would’ve been the perfect place for Amazon’s North American HQ2, save for the political distress it probably would’ve created in some circles by going outside the US.

    One thing is for sure. Amazon’s HQ2 will move whatever community lands it forward. There will be bumps and bruises and surprises both welcome and unwelcome. But this is all about embracing the future, and it is going to be exciting.

    Published on: November 5, 2018

    The New York Times has a story about how Coca-Cola, PepsiCo and other US soft drink manufacturers are funding - to the tune of $25 million - initiatives in Oregon and Washington State that “would prohibit municipalities from taxing food sales,” hoping to “choke off a growing movement to tax sugary drinks.”

    The story notes that “at a time of soaring childhood obesity, and with more than one in three adults overweight, health advocates say that soda taxes are an effective way to dampen consumption of sugar-sweetened beverages. Nearly 40 countries now have them, along with seven cities in the United States, including Philadelphia, San Francisco and Boulder, Colo.

    “Towns and cities across the country have been mulling similar moves as a way to reduce sugary drink sales while raising revenue for programs that aim to blunt the public health impact of heart disease, hypertension and Type 2 diabetes, conditions that have been linked to diets heavy in sugar.”

    The Times writes that the soft drink manufacturers are “pushing sweeping ballot measures and statewide legislation that would permanently deny municipalities the ability to impose taxes on a broad range of goods and services. The initiatives are packaged and sold as citizen revolts against tax-happy politicians. None of them explicitly mention soda taxes.” And the marketing efforts behind the initiatives also don’t mention where the funding is coming from.

    The story suggests that “the industry has momentum — and money — on its side. Here in Washington, the industry has spent over $20 million to promote Initiative 1634, according to state finance filings. Those fighting the ballot measure have raised $100,000.” Lawmakers in Michigan California and Arizona all have passed bills preventing localities from imposing such taxes, and Oregon and Washington are seen as critical tests of whether the manufacturers will continue to embrace ballot measures as a tactic.
    KC's View:
    The phrase that really irks me in this story is where it points out that “most voters don’t know” who is funding these initiatives.

    Let’s put aside for the moment the fact that I fundamentally disagree with the idea that state lawmakers, their palms no doubt greased with lobbying money from corporate interests, ought to be able to “choke off” discussions of these kinds of issues at the local level. What annoys me even more is the lack of transparency about who is funding these efforts - if companies aren’t being up front about their involvement and financial commitment, it is because a) they don’t have to, and b) they don’t want it known.

    As citizens we may not be able to do much about the latter (though we can hope that corporate interests would have the courage of their convictions and be honest about their lobbying efforts), but we certainly can do something about the former. We can require that the funders behind these marketing efforts (whether they be supporting referenda or candidates) be disclosed anytime the funding they are providing goes above a certain number. I’m thinking $1,000.

    Of course, someone - who probably has cashed a nice fat check from some lobbyist will probably get the bright idea to introduce a bill that would prevent the requirement or even a debate about requiring such transparency. And citizens will continue to get the best damned government money can buy.

    Published on: November 5, 2018

    The New York Times “Corner Office” column yesterday had an interview with Jeff Raider, co-founder of both Warby Parker, the “direct-to-consumer eyeglasses company with a social mission” (now worth $1.75 billion) and Harry’s, the direct-to-consumer men’s shaving business.

    Raider explains to the Times that Warby Parker essentially started as a rolling project at Wharton in which the founders were able to access professors for help as they developed their business plan, and even got seed money and office space where they could start the business; as it happened, though, they didn’t win the business plan competition. Not that it mattered in the end.

    “You’ve got to be all in, and you’ve got to love it,” Raider tells the Times. “Those two things are two sides of the same coin. And then, be humble enough to learn along the way. When we started Warby Parker, we asked all of our friends, ‘What do you think, would you buy glasses online?’ They were like, ‘No, I don’t think I would. I’ve got to kind of touch them and feel them and experience them in person before I buy.’

    “At that point, we could have just said, ‘That feedback doesn’t make sense.’ But instead we said, ‘That’s a really important thing that we just learned. How can we evolve our business model to account for that?’ And so we ended up with this home try-on program where we let people try on glasses at home for free and then send them back to us.”

    Raider notes that “when we launched Warby Parker, we were still graduating from business school. It was just four of us, and we were working part time. When we turned the site on, we thought we’d get 20 or 30 orders, but we were getting hundreds and thousands of orders. We’d get as many glasses in as we could, sell them all, go out of stock, take the money and buy a bunch more, sell them, and go out of stock again. We didn’t presume a lot of success, and had to play catch-up. It was frenetic.

    “At Harry’s we presumed more success. We raised a bunch of capital ahead of our launch. We built a team of 11 people before we launched. We made our own custom razor handles, custom blades with a factory in Germany, made our own shave cream. We had forecast more sales at Harry’s than we did at Warby Parker, and we still sold out. But we were better prepared to absorb the shock.”

    Here’s the must-read punch line from Raider:

    I think that the world’s going to change a lot faster than most people do, that disruption happens at a geometric pace as opposed to a linear pace, and that pace is only going to increase. If you think about our industry, a couple years ago it was 0 percent online. Now our market is 10 to 20 percent online and growing really fast. People incrementalize change when actually, change happens exponentially.
    KC's View:
    One of the interesting things about this last observation from Raider is that he says the pace of change keeps him up at night. Which makes me wonder if the business leaders who get long, restful nights’ sleep are in denial about how fast the world is changing, and how they’re going to be affected.

    Published on: November 5, 2018

    The Brick Meets Click consultancy is out with a new analysis of the Amazon Go stores, concluding that:

    • “Amazon has designed a store that maximizes customer throughput and sales to produce exceptional results. In fact, AmazonGo stores produce more sales per square foot than virtually any other retailer except Apple and a few other specialty stores.” Brick Meets Click put the annual sales per square foot of the selling area number at $2,700, and says it expects the number to increase.

    • “AmazonGo also outperforms on inventory turns … we estimate that the Seatle AmazonGo store is generating about 50 inventory turns per year – 4 to 5 times what’s typical in other retail operations. Expect inventory turns to increase also as more customers shop the store.”

    • “The exceptionally high performance of both of these retail productivity metrics makes it clear that Amazon has succeeded in disrupting the established self-service model by developing a model that makes much more efficient use of inventory and the retail footprint … Since there’s nothing similar operating at the same level in the US, Amazon is now free to roll these stores out with no direct competition – and that’s exactly what Amazon looks for and needs to continue to drive the very rapid growth of their enterprise.”
    KC's View:
    I’ve read some analysis of these numbers from outside sources that suggest that because the Amazon Go is coming at the shopping experience from a different angle than traditional supermarkets, these stores should not feel threatened by Amazon Go at this time and that it is not likely a head-on competitor to grocery stores.

    Which strikes me as a fundamental lack of understanding of what Amazon Go is and does.

    Sure, Amazon Go is at this point a very specific kind of store offering a very specific kind of shopping experience. But the model is mostly exciting/threatening/unnerving/ as an idea and for all its potential … and to suggest that any retailer should not be worried about it is to commit a kind of punditry malpractice.

    I’m not even sure that the most disruptive thing about Amazon Go is the possibility that some 3,000 of them could be opened in the next few years around the country - a number that has been floated by outside analysts, not by Amazon.

    (I confess to having been mildly skeptical about this number, saying that I thought have as many stores would still be a colossal achievement. But then an MNB reader pointed out to me just how many college campuses there are in the US, and that just one on each of them - which would be great targeting, by the way - would get Amazon a long way toward that 3,000 number. Plus, Dollar General has gone on record as saying that it wants to increase its store count from 15,000 to 28,000 in the next few years, which is a helluva lot more than is being speculated about Amazon Go’s growth. So I withdraw my mild speculation.)

    The point of Amazon - and this kind of technology - is not that it comes at you head-on with an apples-to-apples equivalent shopping experience. (It isn’t even apples-to-oranges … it isn’t even in the produce family.)

    The point is that Amazon has the ability to short-circuit traditional thinking and behavior and presents shoppers with options they didn’t know they had, which turn - sometimes with amazing velocity - into options that they don’t how how they lived without.

    Amazon Go doesn’t have to compete directly with the traditional grocery shopping experience in order to have a profound impact on traditional grocers. All it has to do is change the perception of what is possible, which raises the bar for consumer expectations in a way that many retailers can compete against. And all it has to do is steal a little bit of market share here and little bit of business there, seducing shoppers deeper and deeper into its ecosystem until severe and lasting damage has been done to traditional models.

    And, by the way, it isn’t just Amazon … it is companies like Walmart and Target and Kroger and some progressive and ambitious independents and regionals that are rising up to meet the challenge to varying degrees and with a variety of different approaches, sometimes enabled by tech companies that also are changing the shape of the landscape.

    Not creating head-on competition to traditional retailers? Give me a break.

    Published on: November 5, 2018

    The Wall Street Journal has a really interesting story that starts this way:

    “To survive in today’s fast changing marketplace, every business--large or small, startup or long established--must be capable of a continual process of transformation and renewal. Surveys show that most executives agree, and in fact, many believe that business model innovation is even more important to their company’s success than product or service innovation. But other studies have determined that no more than 10% of innovation investments at established companies are focused on creating transformative business models.”

    The argument is that “new technology alone, no matter how transformative, is not enough to propel a business into the future. Nor, for that matter, can past success justify existing business models. The business model wrapped around the technology is the key to its success or failure…”

    Totally worth reading, especially for business executives who are immersed in legacy/traditional business models and who think that a little bit of technology here and some new products and services there are enough to guarantee survival.

    And the thing is, nothing guarantees survival.

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

    Published on: November 5, 2018

    • Amazon announced this morning that beginning today “and for a limited time, all Amazon customers can enjoy free shipping with no minimum purchase amount on orders that will arrive in time for the Christmas holiday. This offer applies to hundreds of millions of items – the largest free shipping selection in the country. Plus, tens of millions of Prime members can shop with Free Same-Day Delivery, now available on more than three million items – the largest same-day selection in the U.S. including the best gifts like toys and electronics, as well as home, fashion and everything you need to enjoy the holidays.”

    TechSpot reports that Amazon plans to begin offering a new shipping option that “will let Prime members set a specific day that they'd like a given week's deliveries to arrive on … For example, if you bought a bag of cat food, a few computer components, and a bag of Doritos during the week, you may be able to schedule all of those deliveries to arrive over the weekend.”

    There are, the story points out, “quite a few scenarios where that sort of shipping control could be helpful. If you have an important package arriving during the week, but you work during the day and won't be around to receive it, this new option should help. Similarly, if you're a regular victim of package theft -- perhaps you live in a crowded apartment complex -- ensuring your purchases will only arrive when you or a family member are around could alleviate some stress.”

    This option won’t replace any of the existing options, but rather will just be a supplement that Amazon believes will hold some appeal.
    KC's View:

    Published on: November 5, 2018

    • The Orlando Sentinel reports that “Publix Supermarkets made $8.8 billion in the third quarter, even though it struggled to match big sales from Hurricane Irma last year … Sales increased 3.2 percent, but same-store sales were up just 0.6 percent because the company saw a massive boost last year from high demand because of the storm.”

    The story notes that “even so, net earnings soared for the Lakeland-based supermarket chain to $677.7 million, up 42.7 percent from last year’s third quarter. Much of the sales increases came from new stores opened over the last year. It also benefited from lower corporate income tax rates passed last year.”

    • In Minnesota, the Star Tribune reports that United Natural Foods Inc.-owned Supervalu has no intention of closing its Cub Foods chain, though it is on the sales block: “The process of finding a buyer is likely to take several months, but executives at Cub, Supervalu and United Natural Foods have started. They aim to sell the 78-store chain as one unit rather than in pieces.”

    Engadget reports that Sears is asking the bankruptcy court overseeing its operations for permission to sell its home improvement business to, an Airbnb-like service that helps home owners find contractors, for $60 million.
    KC's View:

    Published on: November 5, 2018

    Most of the email I got over the weekend from MNB readers consisted of birthday wishes, for which I am grateful and humbled … I cannot imagine having another job in which a community of users would be so caring. I have 30,000+ friends, many of whom I’ve never met but many of whom I feel like I know, and who know me. It is extraordinary.

    There’s only one concern that I have … which is whether Mrs. Content Guy will still need me, still feed me, or will she lock the door.
    KC's View:

    Published on: November 5, 2018

    In Week Nine of National Football League play…

    Atlanta 38
    Washington 14

    Detroit 9
    Minnesota 24

    Pittsburgh 23
    Baltimore 16

    Kansas City 37
    Cleveland 21

    NY Jets 6
    Miami 13

    Chicago 41
    Buffalo 9

    Tampa Bay 28
    Carolina 42

    LA Chargers 25
    Seattle 17

    Houston 19
    Denver 17

    LA Rams 35
    New Orleans 45

    Green Bay 17
    New England 31

    In the New York City Marathon, Lelisa Desisa of Ethiopia won the men’s race with a time of 2 hours 5 minutes 59 seconds, while Mary Keitany of Kenya won the women’s race with a time of 2:22:48, the fourth time she has won in New York.

    In other race results, Ryan Hopkins placed 459th with a time of 2:49:25, while TJ Hopkins finished 1224th with a time of 3:00:14 … this was out of a total field of than 52,812 runners who finished the race. Both Ryan and TJ are my nephews, and I am immensely impressed with and proud of both of them and their achievements yesterday.
    KC's View: