business news in context, analysis with attitude

Published on: January 3, 2019

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

While I was taking time off during the holidays, I decided to do something that I’d not had the opportunity to do before vacation - I went into New York City to visit the new Amazon 4 Star store, where everything they sell, across a wide variety of categories, has been rated with four or more stars in this particular section of downtown Manhattan. While we’ve had numerous reports about it on MNB, I hadn’t had the chance to see it personally because of my travel schedule.

So, we took the train into the city on a cold but crisp winter day to see it … as well as have lunch with relatives in Chinatown and visit the 9-11 memorial downtown. A full day, doing things we hadn’t done before.

(A brief digression here. I found the 9-11 memorial toi be deeply moving, especially when we found the name of a friend and neighbor who was killed while working in the World Trade Center. For some reason, though, the memorial does not evoke the same sort of solemnity among visitors as, say the Vietnam Wall in Washington, DC … people are laughing and taking selfies, and you;’d never see that in DC. I’m not sure why this is so, but I am sure I found it unnerving.)

I felt much the same way about the Amazon 4 Star store as Kate did when she wrote about it before the holidays. It is sort of a mess, like an upscale flea market with a good selection and, I must admit, a lot of shoppers. But there seemed to be no unifying theme to the store, which kind of bothered me … though I admit that I may make the trip to the 4 Star store next year before I go to the annual Coupe family Yankee Swap; it is designed for just such an event.

One thing that did strike me as fascinating was the extent to which Amazon is using the store to market its Amazon basic private label products. I didn’t know, for example, that Amazon sells a pretty fair facsimile of Le Creuset cast iron Dutch ovens under its Basics brand; I found it online after visiting the store, but didn’t know about it until visiting the bricks-and-mortar unit. It says something, I think, about both Amazon’s online and physical approaches.

After leaving the store, though, I began to think that maybe there is, after all, a unifying theme - “We’re Amazon, and we can do whatever we want.”

I don’t mean that to be as obnoxious as it sounds. I began to think about all the malls around the country that are suffering from too little traffic and retailers doing too few sales. It occurred to me that Amazon could reach out to all of them and offer to build pop-up versions of the 4-Star store in vacant space in the malls (of which there is much), and market it aggressively in local markets … and all the malls have to do is provide free space in exchange for a likely traffic generator.

Amazon could do that. Because it can. And in doing so, it can learn a lot about shopper preferences, how they can be influenced, and about the intersection between digital and bricks-and-mortar retailing.

That’s the unifying theme, and in some ways, it should concern anyone competing with Amazon.

That’s what is on my mind this morning. As always - in this new year, and in any year - I want to hear what is on your mind.

Published on: January 3, 2019

by Kevin Coupe

Axios has a story about a new Gallup poll concluding that “Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%).” This survey result reflects “a 12-point decline in young adults' positive views of capitalism in just the past two years and a marked shift since 2010, when 68% viewed it positively.”

The story says that it isn’t just young people - there also is a growing list of analysts and academics that is “connecting the dots of what we all realize by now: Flaws in the system - including forgetting about so much of society - are largely to blame for widespread disaffection with establishment institutions, leaders and answers.” The evidence of these flaws, Axios writes, includes “almost four decades of largely flat wages for the vast majority of workers” and “four decades of meager productivity gains.”

Now, I don’t particularly want to get into a political debate about the whys and hows of these opinions, and whether they reflect any sort of long-term trend, as opposed to a short-term aberration that will resolve itself sooner rather than later.

But this story does make me wonder about whether these shifts - whether long-term or short-term - will be reflected in any sort of change in consumption habits.

It is, I think, something that retailers and suppliers have to think about, a potential challenge to which they have to pay attention. Could be an Eye-Opener.

Published on: January 3, 2019

The New York Times “Corner Office” column has an interview with Julie Sweet, CEO for North America at consulting firm Accenture, in which she talks about, among other issues, diversity.

Sweet started out as a lawyer, working for the old-school law firm, Cravath, Swaine & Moore, where there were just two women partners when she started; eventually, she became the ninth woman partner at the firm. (Now, Cravath has 25 percent women partners.)

"I don’t think it’s rocket science,” she says. “ You first have to decide if diversity is a business priority. If it is, then you need to treat it like a business priority. You set goals, have accountable leaders, you measure progress, and you have an action plan. If you do those four things, you will make progress. We did a recent study and the stats were pretty shocking. Forty percent of companies don’t even have a plan to advance leadership. Less than 40 percent look at attrition between men and women. They’re not collecting data. You can look at that with disappointment, or you can say there’s a huge opportunity here. By putting in place pretty basic things, you should be able to make progress … At Accenture, we set goals. We set our first goal in 2015 to hire 40 percent women. In 2025, our goal is to be at 50/50 gender parity across the organization and then, for the managing director level, it’s 25 percent women. That’s a pretty big shift in 10 years.”

Published on: January 3, 2019

Bloomberg quotes analyst Tom Forte of DA Davidson - described as a longtime Amazon enthusiast - as saying that Amazon’s next target for business disruption should be the gas station business.

Adding gas stations would “provide the company thousands of commercial locations to advance its delivery efforts,” he wrote in a note to clients, suggesting that “such outposts could be used for Amazon Locker -- the company’s centralized package pick-up locations -- or to utilize Amazon Go, its cashier-free checkout technology. In addition, selling gas would provide another revenue source; Forte noted that Costco Wholesale derived 10 percent of its revenue from gasoline sales.”

And, the story says, “Gas stations would also ‘provide the company additional data on the physical whereabouts of consumers,’ as it would have ‘thousands more locations where it would know where consumers were shopping’.”

The story comes amid reports that Amazon has big plans for its Whole Foods business - it wants to open stores in areas of the US where it currently does not operate, include facilities in those stores that will allow for pickup and delivery of Amazon orders, and also enable it to extend its Prime Now two-hour delivery service to new regions of the country.

Published on: January 3, 2019

Fast Company has a story about Swedish retailer Ikea, for years seen as a “dependable big blue box giant” that didn’t make headlines but also didn’t innovate much outside its lane - while it may have been recognizable and dependable, it also saw a nearly 40 percent drop in profits between 2017 and 2018, which pointed to the need for change.

“Gone are the days of making a day-trip out of the city and to the big box store, with plans to get everything in a one-shop stop, Swedish meatballs and hot dog lunch included,” Fast Company writes. “The outdated draw of big-box convenience has been trumped by the speed and ease of online shopping, and the retail game has gotten more competitive as a result … Ikea’s product line has long catered to small, urban living spaces; the scale and location of its physical stores have not. Next year, Ikea plans to roll out 30 new Ikea stores in urban markets–including one in Manhattan. This transformation has already begun in London and Warsaw.”

At the same time, the story says, “It’s no secret that Ikea’s online shopping experience is in dire need of improvement. Other big retailers, like Target, are in the same boat. Ikea’s struggles to master digital platforms reflect larger shifts in the mass retail sector, and all of the top players recognize the investments they’ll need to make to stay in the game.”

And, Ikea is trying to rethink its approach to design - again, because the market is forcing it to: “In the age of Amazon and social media - where every consumer desire can be planted and satisfied with a series of clicks - originally crafted, handmade designs are the new luxury: an artful antidote to the serialized, industrially produced cookie-cutter items and startup goods that are likely to end up in everyone’s homes. The resurgence of ceramics among makers and independent product and furniture designers—as well as the high-end collectibles art market—is no fluke.”

Published on: January 3, 2019

The Wall Street Journal reports that Sears Chairman Eddie Lampert’s hedge fund, ESL Investments, has come up with a backup plan in case its $4.4 billion offer to acquire the retailer’s operating assets - it would keep about 425 stores open - is not accepted by the bankruptcy court.

According to the story, Lampert “is interested in scooping up Sears Holdings Corp.’s real estate for $1.8 billion, as well as some other assets.”

The Journal writes that “Sears and its independent board members have to determine by Friday if ESL’s bid is ‘qualified’ under the sale procedures approved by the bankruptcy court. If the bid passes muster, Sears and its independent board members will then have to determine if the ESL offer is a better outcome for the company and its creditors than either of the offers from liquidators.”

One reason that the acquisition bid may not succeed is that Sears owes billions of dollars to a wide variety of creditors, some of whom believe that it makes more sense to shut down the company and auction off its assets.

Published on: January 3, 2019

• CNN reports that “brick-and-mortar retailers like Walmart, Target, and Best Buy found an advantage over Amazon this holiday: Store pickups on online orders.

“Offering customers free pickups for digital orders has become a key part of these retailers' strategy to compete against Amazon's rapid and extensive home delivery network. Retailers have blanketed the country with store pickup options in recent years, and those investments paid off during the holidays.

“Buy online, pickup-in-store spending increased 47% from November 1 to December 19 compared to a year ago, according to data from Adobe Analytics. Adobe said it was the biggest holiday on record for online pickups. Customers have been quick to embrace online pickups from stores. Analysts say it appeals to shoppers who want to grab their stuff and go without waiting in checkout lines or interacting with sales workers on the floor.”

Published on: January 3, 2019

• The Times Republican reports that Quad Cities grocer Fareway Stores has instituted a program “to assist employees with student loan payments. Fareway official Chad Carter, vice president of benefits, said the … grocery chain will provide full-time employees $100 a month toward student loan costs, or up to a total of $5,000.”

Some 3,000 employees will be eligible for the benefit, the story says, noting that experts say that helping employees pay off student loans is seen as an important a benefit as contributing to retirement savings.


• Business Insider reports that fast food chain Chipotle is rolling out a new series of “lifestyle bowls” aimed at customers on specific diets - the new offerings include “the Whole30 Salad Bowl, the Paleo Salad Bowl, the Keto Salad Bowl, and the Double Protein Bowl,” which each one “made up of ingredients already available at Chipotle.”

Published on: January 3, 2019

• Associated Wholesale Grocers (AWG) announced that Dan Funk, he company’s Executive Vice President, Merchandising and Marketing, has been promoted to the new role of Chief Supply Chain & Merchandising Officer.

At the same time, Jeff Pedersen, Executive Vice President of Division Operations, has been promoted to role of Executive Vice President and Chief Sales & Support Officer.

The company said that the changes also include the creation of “a more cohesive ‘Supply Chain’ alignment within the company to deliver on its primary objective of providing its member’s best-in-class wholesale supply. This will be accomplished by bringing together Division Operations, Merchandising, and Distribution / Logistics functions. The overarching mission of this Supply Chain function is to provide its members what they need, when they need it, at the best possible cost.”

Published on: January 3, 2019

Blake Nordstrom, co-president of the iconic retailer that bears his family’s name, died yesterday at age 58, just a month after he told employees that he had been diagnosed with a treatable form of lymphoma and would be cutting back his schedule to undergo treatment.

"It is with deep sadness that we announce the unexpected passing of Blake Nordstrom," the company said in a statement. "Blake died in Seattle early this morning, January 2, 2019, at the age of 58. Executive leadership of Nordstrom will continue under company co-presidents Pete and Erik Nordstrom. We appreciate your respect for the privacy of the family during this difficult time.”

Blake Nordstrom had been operating as co-president with his brothers Erik and Pete since May 2015. The company was founded by their great-grandfather John W. Nordstrom; while publicly traded, it remains controlled by the family.

Published on: January 3, 2019

MNB reader Phil Herr had a thought about yesterday’s podcast about convenience:

In my opinion, this is the point where convenience goes sideways rather than forward. Are we just a generation (or less) removed from the people depicted in Wall-E?



Regarding a possible Amazon expansion of its Whole Foods fleet, MNB reader Dan Jones wrote:

If I am Amazon I offer a discount to Prime if you agree to having all packages delivered to Whole Foods instead of to your home.  Think of the benefits: more efficient distribution for Amazon, more trips to Whole Foods for Amazon, and more security for customer (no porch pirates).

So more Whole Foods stores makes a more powerful infrastructure.  This does not feel like “doubling down” on a Whole Foods bet – if feels more like a customer-focused option to drive even more business with greater efficiency.



Responding to yesterday’s story about private equity’s indifference to employee pension funds, MNB reader Joe Ciccarelli wrote:

I have seen so many of these situations. First, we need better legislation that gives the Government Pension Guarantee Corp more authority that forces companies to give a higher priority to pensions before they can take dividends or “upstream” money to equity funds. Marsh had unfunded liabilities for years as do many companies including a majority of retailers. But to get Congress to act is a whole other story especially with the hedge funds making the big donations to politicians – both sides of the aisle.

MNB reader Lisa Malmarowski added:

They did nothing wrong, legally or technically, but morally - that’s a different story. Until the laws are changed big business will continue to operate for the top executives and share holders, ensuring that the low and middle class folks are kept in their place.



On another subject, from MNB reader Sue Fitzsimmons:

Your article on retailers looking to gain efficiencies struck a chord with me.

Surprisingly  after decades of use there are still  many Retailers and Vendors who are not using EDI, Electronic Data Interchange. EDI allows for fast, efficient and accurate method of sending and receiving business documents. From the Purchase Order to Invoice to the benefits brought by Advanced Ship Notices.

Take the next step and integrate these documents into the ERP.  That’s how to make your process more efficient.